Little consensus on retrospective Irish bank aid - Regling

There has ‘already been special consideration given to Ireland by the ECB’

Klaus Regling, head of the European Stability Mechanism, has reiterated his belief that there is no political consensus within the euro group to grant retroactive direct recapitalisation to Ireland.

Klaus Regling, head of the European Stability Mechanism, has reiterated his belief that there is no political consensus within the euro group to grant retroactive direct recapitalisation to Ireland.

 

Klaus Regling

Stability Mechanism, has reiterated his belief that there is no political consensus within the euro group to grant retroactive direct recapitalisation to Ireland.

Addressing the economic and monetary affairs committee in Strasbourg yesterday, Mr Regling said that while there was agreement to look at retroactive direct recapitalisation on a case-by-case basis, there was “no consensus to do this retroactively”.

“I don’t see that consensus to be there,” he said in response to a question by Irish MEP Emer Costello, noting that under the ESM treaty a decision required unanimity from member states.

Mr Regling said he agreed that certain instruments being developed by the euro group under the bank resolution and recovery directive (BRRD) were not available to Ireland three years ago “If it [BRRB] were, certain things could have been done differently.”

However, he pointed out that there has “already been special consideration given to Ireland by the ECB”.

Government bonds
“One should keep in mind that Ireland has received particular benefits from the ECB,” he said, citing generous refinancing of certain government bonds that were issued in the context of bank restructuring, and an extension of interest rate maturities.“That already goes some way in breaking the link between sovereign and banking debt.”

His comments, which come on the eve of the European Parliament’s Econ committee visit to Ireland, echoed similar comments by Mr Regling following December’s euro group meeting, when he said that retroactive recapitalisation of the Irish banks “doesn’t seem very likely”.

The head of the euro zone’s rescue fund said in December that, while the mechanism would not require treaty change, it was a “very complicated process” which required unanimity by member states.

“In exceptional cases, and by unanimous votes, there may be retroactive recapitalisation, but it doesn’t seem very likely.”

His position also chimes with that of European Commission president Jose Manuel Barroso, who last month appeared to question whether Ireland qualified for further relief on its bank debt.

Retrospective aid
The Government is hoping to receive retrospective aid for AIB and Bank of Ireland through the ESM’s direct recapitalisation instrument which will be in place once the Single Supervisory Mechanism is up and running.

In a letter to the European Parliament’s Econ committee on December 20th, Minister for Finance Michael Noonan pointed out that the option of bailing in senior bondholders now being considered by law makers was not open to Ireland. Ireland would continue to explore ways of reducing its legacy bank debt, he said, pointing out that 30 per cent of the Republic’s debt to GDP ratio was legacy bank debt.

At the Econ committee yesterday Mr Regling said the ESM fund would continue to monitor developments in programme countries even after the end of programmes “to have certainty that we are being repaid in order for us to protect our shareholders, which, of course, are the member states”.