Banks to pay €350 million into resolution fund

michael-NoonanFollowing the bank bailout which cost tax-payers €64 billion, the Government has signed into law the regulations for a resolution fund which requires credit institutions to pay €350 million by 30 September 2013.

As part of its restructuring of the banking sector, the Central Bank and Credit Institutions (Resolution) Act 2011 allows for the Central Bank to intervene when a credit institution is in difficulty. As well as the resolution fund, its tools include transfer orders, special management orders, the establishment of a ‘bridge bank’, a modified liquidation process and the development of recovery and resolution plans.

In 2011, the Minister contributed €250 million, which provided mainly for the re-capitalisation of the credit unions. The resolution fund will consist of annual payments of €25 million until the €250 million is paid off and a ‘buffer’ of €100 million is in place.

Credit unions, which are undergoing difficult financial circumstances, will pay 0.0511 per cent of the total assets of the credit union concerned i.e. €7 million. IFSC banks, which often pay levies to their parent country, will be expected to pay €1 million.

Domestic banks i.e. AIB, Bank of Ireland, the Irish Bank Resolution Corporation, and Irish Life and Permanent must pay €17 million per annum, but not until 2013. They are currently covered by the Credit Institutions (Stabilisation) Act 2010 (which allowed for them to be bailed out). That Act expires on 31 December 2012, at which time they will be subject to paying the levy.

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