The Department of Finance has tried to ease serious concerns expressed by the European Central Bank about the Credit Institutions Stabilisation Bill passed by the Dáil and the Seanad last week.
In a position paper posted on its website over the weekend, the ECB said it would have appreciated being consulted about the Bill at an earlier stage.
But a Department of Finance spokesperson said there was 'no question' of the Central Bank, ECB or any other national central bank being exposed financially by the exercise of the Minister's powers under the Bill.
President Mary McAleese has called a special advisory council meeting tomorrow to decide whether the new legislation should be referred to the Supreme Court.
The ECB says the legislation is not legally certain, and that given the short timeframe in which it was consulted, the bank has not been able to check constitutional, legal and other regulatory issues which the draft law 'undoubtedly' raises, and that its own rights could be compromised.
The area of most concern to the ECB is the powers the Bill would give the Finance Minister to transfer assets or liabilities out of a bank to another company. This means the law could usurp the ECB's rights over the collateral given as security for liquidity purposes to banks.
Recent figures show that Irish banks have €136 billion in loans outstanding from the ECB, a quarter of the total in the euro zone. The banks also have €45 billion in emergency liquidity assistance from the Irish Central Bank.
The Department of Finance spokesperson said it was 'inconceivable' that the Minister would make specific directions or implement specific asset transfers unless these were supported by the Central Bank. 'Indeed it is very difficult to see how such measures could be designed and executed without the intimate involvement and very close engagement with the Central Bank,' the spokesperson added.
The spokesperson also said the ECB had seen draft heads of the Bill at the end of November and 'close to a final draft' was made available to the bank on December 11.
The department also referred to specific provisions in previous legislation safeguarding any security held by the Eurosystem of central banks, which it said were complemented by Section 6 of the new bill. This allows the Minister to agree 'a relationship framework' with the Central Bank Governor 'which will provide a structured and systematic basis to the engagement and interaction between them in respect of the exercise of the Minister's powers under the Bill'.
Meanwhile, the ECB said it bought €603m worth of euro zone government bonds last week, down sharply from €2.677 billion one week earlier.
The amount represented the fewest purchases of sovereign debt under the ECB's controversial Securities Markets Programme since late October, when they virtually ceased for three weeks.
