TUARASCÁIL ón gComhchoiste Fiosrúcháin i dtaobh na Géarchéime Baincéireachta An tAcht um Thithe an Oireachtais (Fiosrúcháin, Pribhléidí agus Nósanna Imeachta), 2013 REPORT of the Joint Committee of Inquiry into the Banking Crisis Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act, 2013 Volume 1: Report Volume 2: Inquiry Framework Volume 3: Evidence Dept. of Finance DOF: Core Book 25 January 2016 Table of contents – by line of inquiry R2: Effectiveness of the Supervisory Practice (Central Bank, Regulator and Department of Finance) R2a: The effectiveness of the use of supervisory powers Bates Number Description Page [Relevant Pages] PUB00431 European Press Release 2011 2-3 [001-002] R2b: Nature and effectiveness of the operational implementation of the macro economic and prudential policy Bates Number Description Page [Relevant Pages] Comment on ESRI Spring 2009 Quarterly Economic Commentary DOF00971 5-8 28 Apr 09 [001-004] Summary of the Central Bank Spring 2005 (Number 2) Bulletin DOF01010 9 (Extract) [001] DOF01062 Note on ESRI Budget Perspectives Conference Oct 2003 10-13 [001-004] DOF01100 OECD Autumn 2005 Economic Forecasts and house price paper 14-16 [001-003] DOF01104 IMF: Report for the 2003 Article IV Consultation 17-19 [001-003] DOF01105 Comment on OECD Autumn forecast - 26.11.03 20-22 [001-003] DOF01134 Note on ESRI Quarterly Commentary Dec 2004 23-25 [001-003] JMO00001 Statement of John Moran (Extract) 26 [001] DOF02392 Staffing Issues 27-28 [001-002] DOF02233 Long Term Issues, risks, early warning reviews (Extract) [020,024,034,051, 29-34 053-054] DOF07407 MAC Minutes 04-12-2006 (Extract) 35 [001] DOF06613 Meeting notes from review of Department of Finance 36-63 [001-028] JBE00007 Nyberg Report on tax incentive consultants (Extract) [001,005-014,085- 64-79 089] INQ00070 Narrative R2b re: Central Bank Pre-Budget Letters 80-82 [001-003] Review of staffing implications for set up of the Single Regulatory DOF06787 83-88 Authority [001-006] PUB00259 Economic paper on the housing boom, 9 June 2006 89-114 [001-026] PUB00287 Context Phase Hearing Professor John Fitzgerald 11 Feb 2016 [001-010,012- 115-137 (Extract) 014,016,022- 025,033-036,052] Risk 34. 2013.07.10 Meeting between NTMA Risk Unit and NTMA00286 138-139 Department of Finance Fiscal Policy Division – Minutes [001-002] JMH00001 John McHale Witness Statement (Extract) 140-141 [004,005] DOF02844 DoF Summary on Wright Report Recommendations January 2015 142-162 [001-021] Department of Finance correspondence on S & P Rating action on 6 DOF03269 163-173 Irish banks 30 June 2008 [001-011] ‘Irish economy mirrors Asia's before the bust’, Irish Times, 16 Jan, PUB00406 174 1998 (Extract) [001] PUB00400 GDP at market prices 175 [001] PUB00398 CSO / StatBank Table QNQ24 176 [001] PUB00401 CSO / Components of population change 177 [001] Department of Finance, Summary of the Central Bank Autumn DOF01034 178 Bulletin – 3rd October 2002 (Extract) [002] Department of Finance Summary OECD Autumn 2002 Economic DOF01066 179-180 Forecasts [001-002] Capital Gains Tax increased from €245m in 1998 to over €3.0 bn in 2006 and 2007 while Stamp Duty increased from €622m in 1998 PUB00402 181 to over €3.5 billion in 2006 OECD statistics – Dataset: Details of [001] Tax Revenue Ireland See ‘Taxation measures’ under ‘Certain Tax Capital Allowances and Tax Incentive Schemes’, Budget 2003, PUB00393 182-183 http://budget.gov.ie/Budgets/2003/Summary.aspx Budget 2003 [001-002] Extracts of taxation measures CSO Database ‘Average Industrial wage compared to house price PUB00392 184 inflation 1998-2006 [001] ‘Irish House Prices: Will the Roof Cave In?’ The Economic and PUB00396 185 Social Review, Vol. 30, No. 4, October, 1999, pp. 343-362 (Extract) [015] R2c: Adequacy of the assessment and communication of both solvency and liquidity risks in the banking institutions and sector Bates Number Description Page [Relevant Pages] DOF03396 Briefing on shortage of credit available to banks 187-188 [001-002] WBE00019 Draft Government press release re Government Guarantee 189-190 [001-002] THEME: R2 Effectiveness of the supervisory practice (Central Bank, Financial Regulator and Department of Finance) LINE OF INQUIRY: R2a The effectiveness of the use of supervisory powers 1 EUROPEAN COMMISSION - PRESS RELEASE State aid: Commission approves restructuring plan of Hypo Real Estate and clears the aid Brussels, 18 July 2011 – The European Commission has approved under EU state aid rules restructuring aid consisting of capital injections of € 10 billion, an asset relief measure with an aid element of about € 20 billion, as well as liquidity guarantees amounting to €145 billion for the banking group Hypo Real Estate. The Commission concluded that the restructuring plan of HRE and its core bank pbb Deutsche Pfandbriefbank (pbb) is liable to restore pbb's long-term viability while ensuring that the bank and its former owners adequately contribute to the restructuring costs and that the distortions of competition created by the aid are mitigated. All business activities of the HRE group will be phased out, except for the activities of pbb. At the end of 2011, pbb's adjusted balance sheet size will be around 85% smaller than HRE group's balance sheet size at the end of 2008. This will adequately address the distortions of competition created by the massive state support received by the German banking group during the financial crisis. Commission Vice President in charge of competition policy Joaquín Almunia said: "Today's decision brings one of the most significant financial crisis state aid cases to a constructive close. HRE and its core bank pbb Deutsche Pfandbriefbank are significantly downsizing to limit the competition distortions caused by the huge state support they needed to survive the crisis. The restructuring plan seeks to ensure that the serious liquidity problems which threatened HRE's existence some years ago cannot be repeated, so as to ensure the future viability of pbb." The cornerstones of the restructuring plan are: - Only the core bank pbb will be active in the markets; with two strategic business lines: real estate finance and public investment finance, both targeting assets eligible for German covered bonds, either in the form of mortgage or of public sector bonds. All other activities, in particular budget finance, infrastructure finance, capital markets and asset management activities, will be phased out. - The other main subsidiary of HRE Holding, DEPFA Bank plc., is to be run- down and will not generate any new business. - Impaired assets transferred to HRE's winding-up institution FMS-WM (FMS Wertmanagement AöR) will be wound down. - pbb's future activities are of considerably smaller scale than HRE's activities before the crisis, in terms of balance sheet size, volume of new business, workforce, branch network and geographical scope. - pbb will carry out its activities based on a stable funding approach and improved internal control systems. PUB01B58-P IP/11/898 2 PUB00431-001 The Commission found the restructuring aid to be in line with its guidelines on restructuring aid for banks (see IP/09/1180) and its guidance for the treatment of impaired assets (see IP/09/322); subject to the implementation of the restructuring plan and the fulfilment of the commitments provided by Germany regarding HRE's restructuring. Background In September 2008, HRE faced a severe liquidity shortage after the interbank lending markets dried up in the aftermath of the Lehman Brothers bankruptcy. Subsequently, HRE benefitted from nearly €10 billion of capital from Germany (FMS-WM, the winding-up institution of HRE, is recipient of a part of that capital). In addition Germany provided liquidity guarantees of €145 billion. HRE also benefitted from an asset relief measure, provided by Germany, with an aid element of about €20 billion. HRE was nationalised by Germany in 2009. On 1 April 2009, the German authorities notified the first version of the restructuring plan for HRE. On 7 May 2009, the Commission opened an in-depth investigation because it had doubts about the bank's viability and the adequacy of the measures aimed at burden sharing and minimising distortions of competition (see IP/09/712). The in-depth investigation was extended on 13 November 2009 (see IP/09/1708) and again on 24 September 2010 (see IP/10/1172), in order to cover additional aid measures. The restructuring plan of 1 April 2009 was finally updated on 14 June 2011. The non-confidential version of the decision will be made available under the case number SA.28264 in the State Aid Register on the DG Competition website once any confidentiality issues are resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News. Contacts : Amelia Torres (+32 2 295 46 29) Maria Madrid Pina (+32 2 295 45 30) PUB01B58-P 2 3 PUB00431-002 THEME: R2 Effectiveness of the supervisory practice (Central Bank, Financial Regulator and Department of Finance) LINE OF INQUIRY: R2b Nature and effectiveness of the operational implementation of the macro economic and prudential policy 4 Minister, for information from John McCarthy 28th April 2009 ESRI Spring 2009 Quarterly Economic Commentary Summary: the ESRI will publish revised economic forecasts tomorrow. GDP is projected to contract by 8.3 per cent (GNP by 9.2 per cent) this year. This is one of the most negative set of forecasts, although the projections are not dissimilar to the Departments forecasts which underpin the Budget. A further year of small negative growth is expected next year. The Institute make a number of comments on fiscal policy, most of which are positive. In relation to banking developments, the Institute indicate that it is too early to comment with certainty as to whether Government policy with respect to NAMA is appropriate.