Permanent TSB Group Holdings plc – Application for the setting aside, pursuant to Section 11 of the Credit Institutions (Stabilisation) Act 2010, of the Direction Order of the High Court providing for the recapitalisation of Permanent TSB Group Holdings plc and Permanent TSB plc The Minister for Finance notes the decision of the High Court today in proceedings brought by a number of shareholders in Irish Life and Permanent Group Holdings plc (now Permanent TSB Group Holdings plc) which sought to set aside the Direction Order of the High Court made on 26 July 2011 (the “Direction Order”).
The Direction Order provided for the investment of €2.7 billion by the Minister for Finance in Permanent TSB Group Holdings plc (“Permanent TSB Group”) so that its banking subsidiary Irish Life and Permanent plc (now Permanent TSB plc) could meet its minimum capital requirements.
The High Court has decided to seek a preliminary ruling from the Court of Justice of the European Union on certain distinct matters of European Law which were raised in the case.
The Minister for Finance is confident of a successful outcome when the proceedings on those distinct matters of European law come before the Court of Justice of the European Union. The Minister will also continue to vigorously defend all proceedings relating to the recapitalisation of the Permanent TSB Group.
The Minister notes that the High Court has decided to base its request for a preliminary ruling on a number of important findings of law and fact including the following:
1. In entering into the Programme of Support in November 2010, the Irish State entered into binding legal commitments to the European Commission, the European Central Bank and the International Monetary Fund, including a commitment to recapitalise viable Irish banks.
2. The decision by the State to invest in the recapitalisation was made in fulfilment of its legal obligations and in the interests of the State’s financial system, the citizens of the State and the citizens of the European Union.
3. On the balance of probabilities:
a. the required capital could not have been raised from private investors; and
b. the required capital could not have been raised from existing shareholders.
4. On the balance of probabilities, failure to recapitalise by the deadline would have led to a failure of the bank, whether by reason of a run on the bank by depositors, revocation of its licence, a call for repayment of the various Notes, a cessation of funding under the ELA scheme or a combination of some or all of these possibilities.
5. The failure of ILP would, as a matter of probability, have had extreme, adverse consequences for the Irish State, whether by reason of a run on the bank and subsequent calls on the State guarantee of up to c. €26 billion, the contagion effects in relation to the other banks, a full or partial withdrawal of funding to the State under the Programme of Support for non-compliance with its terms, sanctions imposed under the Treaty, or a combination of some or all of these possibilities.
6. The adverse consequences for the State would, as a matter of probability, have worsened the threat to the financial stability of other Member States and of the European Union.
In its judgment today the High Court has recognised the importance of the 2011 recapitalisation of Permanent TSB Group not just to the financial stability of Ireland but also to the financial stability of the European Union as a whole.
The business of Permanent TSB is unaffected by today’s High Court decision.