The State's move to initiate the sale of a 25 per cent stake in AIB to market investors is a "a significant milestone'' for the Irish banking sector, Minister for Finance Michael Noonan has said.
Mr Noonan told the Seanad much work had been conducted at European level to break the link between the State and the banking system and ensure that instances of taxpayer funded bailouts did not happen again in the future.
“Exiting our equity investments in the banks is a natural part of this process and will reduce contingency liabilities for the State,” he added.
“These disposals will also help reduce our elevated national debt and can foster further competition in the Irish banking sector by removing any perception of State interference that might dissuade new entrants.”
Mr Noonan said he had previously made the case, and it was the Government’s firm view, that the State should not own and support banks when the capital markets were willing and capable of carrying out that function.
“Equity investments in any sector are risky propositions and the State’s resources are better allocated to more appropriate areas,’’ he added.
Mr Noonan said the issuing of an ITF (Intention to Float) reaffirmed the Government’s commitment to recovering its investment in AIB for the benefit of the Irish public.
During the financial crisis, he added, the State was forced to make significant investments in AIB to protect the wider economy, reaching a total of €20.8 billion.
Some €6.6 billion of this had been recouped through disposals, interest charges, coupons and fees, he said.
Mr Noonan said the Department of Finance, supported by advice received during 2015 and last year from financial advisors Rothschild and, previously, Goldman Sachs, did considerable work to identify the optimal route to maximise the value of the investment over time.
It was clear from the analysis, given the size of the State’s investment, that an initial public offering followed by the gradual sell down of the remaining shareholding over time, represented the best opportunity to achieve that, he added.
Fianna Fáil Senator Gerry Horkan said his party agreed with the sale.
Its position, he said, relied on market conditions being sufficient to secure the best return for the taxpayer. The Government had access to expert advice and the sale would be a positive development, he added.
Sinn Féin Senator Rose Conway-Walsh said AIB should be retained as a State bank.
“It is a very profitable asset for us to have as a State,’’ she added.
Labour Senator Kevin Humphreys said it was not the time to sell, adding the matter could be looked at again in the autumn.
