A NEW Bill giving the Central Bank wide-ranging tools will ensure it has appropriate powers to deal “promptly and effectively” with institutions that pose a risk to financial stability, Minister for Finance Michael Noonan has said.

The Government published the Central Bank and Credit Institutions (Resolution) (No 2) Bill 2011, which will create a special resolution regime to deal with banks, building societies or credit unions that “are failing or likely to fail”.

The Bill is the same as the legislation published in the Seanad last February following the dissolution of the last Dáil ahead of the February 25th general election.

The legislation had to be published before the end of February under the terms of the bailout deal with the EU and IMF. Mr Noonan said the publication of the Bill was an “important step” to deal with failing institutions.

He is preparing amendments to the Bill to enhance the “resolution toolset” in line with evolving EU principles on crisis resolution and in light of discussions with external partners.

Under the legislation, the Central Bank can, through the High Court, transfer a bank’s loans and other assets or deposits and other liabilities to another institution.

The Bill also allows for the establishment of a “bridge bank” to hold some or all of a failing institution’s assets or liabilities temporarily pending their transfer.

The Central Bank will also be able to appoint a special manager to take control of a lender and to plan its recovery or put in place resolution plans to wind it down.

The legislation will enable the Central Bank to modify the liquidation process to protect depositors first and then to ensure the best outcome for other creditors.

The Bill is a permanent replacement for emergency legislation introduced last year.