Noonan says EU bank resolution fund would have to act retrospectively

MINISTER FOR Finance Michael Noonan has said any EU bank resolution fund would have to work retrospectively or otherwise Ireland will lose out.

Mr Noonan said yesterday there would not be much point in Ireland making large contributions to cover future recapitalisation for struggling banks in Europe after its own banking crisis had been resolved.

“If it kicks back on the sovereign it’s not worth having,” he told the Oireachtas Committee on Finance. “A mutual bank resolution fund would have to work retrospectively to cover the recapitalisation of the Irish banks.

“There’s not much of a point if we are contributing to a resolution fund by means of a levy when we have already resolved our bad banks . . . It needs to be retrospective.”

Mr Noonan was briefing the committee on the agenda of this week’s meetings of euro zone and EU finance ministers in Luxembourg. It included discussion on a European Commission proposal to establish a banking union.

The Minister said the proposals for such a union involved three elements: an integrated system for supervision; a single deposit-guarantee scheme; and a single European resolution fund.

He said Germany was very cautious about a banking union, adding the “Bundestag has warned about a banking union without fiscal union”.

The fact that the commission has taken four years to bring the proposal to this stage attracted very sharp criticism from members of the committee, chaired by Labour TD Alex White.

The TDs and Senators broadened their criticism to attacks on the EU institutions in the face of the overwhelming crisis it has faced. Independent Senator Seán Barrett described the response as “dithering” and “foostering”.

Fianna Fáil TD Michael McGrath said: “It has taken four years for the commission to come forward with realistic policy solutions. It is a prime example of how inadequate the response has been and is characteristic of the inertia.”

Mr Noonan’s Fine Gael colleague Peter Mathews urged him to grab the microphone at this week’s meetings and take the initiative. “Do a Khrushchev on it and take your shoe off and bang it on the table,” he urged, in a reference to the then Soviet leader’s famous intervention during a United Nations debate in 1960.

Mr Noonan replied that rhetoric could sometimes work but most of the best work was achieved in bilaterals at the margins of such meetings.

Separately, Taoiseach Enda Kenny told the Dáil yesterday he remained unhappy at the way Ireland’s banking debt was structured and he wanted changes.

He added that he did not expect a solution to emerge at next week’s EU summit in Brussels.

Mr Kenny said the Government continued to seek a re-engineering of the promissory note devised to deal with the banking debt. Earlier yesterday, Mr Noonan told reporters Ireland would focus on the promissory note issue in the autumn.

During the committee meeting, the Minister was also criticised for comments that Europe had had a “good month”. United Left Alliance TD Richard Boyd Barrett was one of those who challenged the assertion. Mr Noonan argued that the consequences would have been very serious had events gone differently in Ireland, Greece, Spain and France.

The Government was not opposed to a financial transaction tax per se, the Minster told the committee, but he said it was cautious about such a move. He cited Britain’s resistance to it, the fact that the sector employed 30,000 in Ireland and that the introduction of such a tax in Sweden had triggered an exodus of companies to London.

He also said two-thirds of the tax raised would go to the EU, which did not adhere to Ireland’s view that the union should be funded by contributions from the sovereigns and not from EU-wide central taxes.