A bill published this afternoon gives Finance Minister Brian Lenihan wider powers to deal with the problems in the banking sector.
The Credit Institutions (Stabilisation) Bill 2010 provides for the reorganisation and restructuring of the banking system agreed in the joint European Union-International Monetary Fund programme for Ireland.
It provides broad powers to the Minister for Finance, in consultation with the Governor of the Central Bank, to act on financial stability grounds.
The Bill gives the minister the power to appoint a 'special manager' to an institution if its financial stability or that of the State is under threat. It will apply to banks, building societies and credit unions who have received financial support from the state.
Read the Bill in full here
It will allow for the injection of capital into AIB before the end of the year to make sure that the bank is compliant with the Central Bank's regulatory capital requirements. It will also facilitate the planned restructuring of Anglo Irish Bank and Irish Nationwide Building Society.
It contains provisions that underpin the Minister's decision that financial support for AIB will be conditional on the non-payment of bonuses regardless of when they are awarded. It will also allow for the imposition of losses on subordinated bondholders in state-supported lenders on a case-by-case basis.
'This bill will allow the Minister to take the actions required to bring about a domestic retail banking system that is proportionate to and focused on the Irish economy,' commented Finance Minister Brian Lenihan.
'The banking system must play its role in providing the credit to the real economy to support our recovery,' he added.
Mr Lenihan said that given the exceptional nature of its powers, the bill is time limited and is scheduled to expire on December 31, 2012.
The bill will be debated in the Dáil tomorrow and is expected to be enacted by the end of the week.
