State’s sale of Bank of Ireland shares will bolster exchequer, says Noonan
Disposal of shares has yielded almost €2bn to be held initially in the National Pensions Reserve Fund
Minister for Finance Michael Noonan: “Further consideration will be given as to how best to utilise the proceeds having regard to the NTMA’s debt-management plan and the future profile of our cash balances.” Photograph: Francois Lenoir
The cash raised through the sale of the State’s preference shares in Bank of Ireland will be used as a buffer to help fund the exchequer next near following the bailout exit. Minister for Finance Michael Noonan has directed that the near €2 billion received from the sale of its preference shares in Bank of Ireland this month should be held in the National Pensions Reserve Fund until the National Treasury Management Agency has finalised its debt-raising plan for 2014.
This emerged in a reply by the Minister on December 19th to a parliamentary question tabled by Labour Party TD Kevin Humphreys.
“I can confirm to the deputy that I have given instructions that the proceeds arising from the Bank of Ireland preference shares transaction should remain with the National Pensions Reserve Fund for the time being,” Mr Noonan said. “Further consideration will be given as to how best to utilise the proceeds having regard to the NTMA’s debt-management plan and the future profile of our cash balances.”
The preference shares dated back to 2009 and formed part of the €4.7 billion total investment by the State in Bank of Ireland. They were a directed investment held by the NPRF.
Mr Humphreys also asked about the use of the proceeds from the sale in January of the contingent convertible notes, or CoCos as they are better known, held by the State in Bank of Ireland.
The State’s investment in these instruments dated back to the 2011 prudential capital assessment review.
Mr Noonan said the State was paid €1.056 billion from the transaction. This comprised the principal of €1 billion, interest accrued of €46 million and a profit of €10 million.
“We used the proceeds of this sale to reduce the State’s indebtedness. It reduced the critically important debt/GDP ratio by 0.6 per cent,” the Minister said.
Mr Humphreys also asked about the outcome of the recent balance sheet assessments by the Central Bank of Ireland on AIB, Bank of Ireland and Permanent TSB, and why the full results were not published.
It emerged from the banks that none of them require additional capital on foot of the assessments, but that all of them were found to require extra provisioning for bad loans.
In reply, Mr Noonan said the results were communicated by the Department of Finance to the EU-International Monetary Fund troika as per a requirement of our bailout programme.
“The results are very technical in nature and I am under a legal obligation to keep the details confidential.
“The interpretation of the results is a matter for the Central Bank, but I am pleased that the governor has informed me that there will not be an additional regulatory capital requirement in the banks as a result of this process.”
Mr Noonan said it was a “matter for the banks to decide” if they should publish the results.
To date, Bank of Ireland has published an announcement of the results while Permanent TSB told The Irish Times that it was required to take extra provisioning.
AIB has so far remained silent on the provisioning issue.