Private Members’ Business.

Banking System: Motion.

Deputy Richard Bruton

I move:

That Dáil Éireann, recognising that:

reckless and incompetent management, regulation and oversight of the domestic Irish banking system has damaged domestic and international confidence in Ireland's economy;

the Irish economy cannot recover from the deepening economic depression without a functioning banking system that enjoys the trust of depositors, international markets and the community at large;

there is growing market scepticism that the recently announced €7 billion recapitalisation plan for AIB and Bank of Ireland has been designed in a way that can restore the health of the Irish financial system and credit availability to Irish businesses and families; and

there is a public perception that the resolution of this banking crisis is being manipulated in the interests of powerful and wealthy elites and that unless the Government addresses this suspicion in an open and transparent manner, it will not have the legitimacy needed to gain the necessary support for the painful measures needed to put our public finances and economy back on a sounder footing;

calls on the Government to:

take more decisive action to restore the financial health and reputation of the Irish banking system as a prudent and responsible manager of investors' capital and depositors' savings and as a reliable source of credit for Irish businesses;

engage more decisively with other EU governments to agree a common EU model of bank recapitalisation and bad debt resolution that ensures that losses are absorbed first and foremost not by taxpayers but by those who took on the risk of funding the risky lending policies of the banks;

replace the current board and senior management team of the Irish Financial Services Regulatory Authority, IFSRA;

give the Office of the Director of Corporate Enforcement the lead role in all investigations into recent transactions by banks and their investors and directors who may have breached both company law and financial regulation, given that IFSRA itself was at the centre of many of these transactions;

reveal the names of the "golden circle" of ten investors in Anglo Irish Bank, and outline what steps the Government and the bank are now taking to recover the associated €300 million in debts on behalf of the taxpayer;

open up the appointment of the next Governor of the Central Bank to open international competition and scrutiny by the Oireachtas;

set a cap of €250,000 on the salaries (including bonuses and share options) of senior managers of financial institutions whose liabilities have been guaranteed by the State and/or in which the State has invested, until the guarantee has expired and the State investment has been repaid;

publish an abridged version of the PricewaterhouseCoopers report into the loan exposures of all the banks whose liabilities have been guaranteed by the State; and

insist that the banks provide a more credible estimate of their likely loan losses over the coming years prior to any form of State recapitalisation.

I wish to share my time with Deputies Coveney, Naughten, McHugh and D'Arcy.

Acting Chairman

Is that agreed? Agreed. We will interrupt the Deputy in 20 minutes.

Deputy Richard Bruton

I moved this motion in the names of the members of the Fine Gael Parliamentary Party. It does not need telling either to the Acting Chairman or to the rest of the House that we are in deep crisis. The time for denial of the extent of the crisis is past. The pretence that Government has a strategy adequate to address that crisis is also totally inadequate. We are now in a serious situation in which not only is the credibility of Ireland's public finances at stake, but the credibility of the banking system and our ability to get it going again is intimately tied up with the state of the public finances. It will be impossible to rebuild public confidence in our banks — for which the State has offered a guarantee, recapitalisation, and the development of a new insurance-based model to deal with risky management — unless there is belief, internationally and domestically, that this Government has a coherent strategy to tackle the public finances.

We learned in January the parlous state of the public finances in a brief document presented by the Department of Finance. It acknowledges that over the next five years we must correct a problem to the extent of €16.5 billion. Since that document was produced, the scale of the problem has got worse. All the Government has done to date is to introduce one set of measures, primarily focused on a public service pension levy, which will generate €2 billion. If the Government believes that is a credible five-year fiscal strategy, we are in a very serious position. It does not constitute a credible fiscal strategy. We will only have a credible strategy under a number of conditions. The first is that it must be comprehensive. People must know what is expected of them and what will be expected of others. It must be sufficiently specific for people to know, for example, the balance between spending and tax revenue and that people know the types of tax to be applied. People must know that the Government will move beyond simple rules of thumb to try to find savings in public spending, to forensically examine public spending and to change the way we spend money so we get value for money. Another requirement — let us be blunt about it — is to front-load the decisions to restore international confidence that we are capable of managing our own affairs.

The Government was in denial for a great deal of last year. It has come to the pace of the game far too slowly and has arrived out of breath and inadequately prepared. It must recognise that many of the problems we now face are not ones that came miraculously from abroad but were created over years by a style of government that met difficult problems by buying people off, that ducked tough decisions about reform, that did not apply proper scrutiny or standards in regulation, and that allowed a cosy circle to develop whose members had too much access, so that when things went wrong they were not held accountable. We are now living with the reality of that style of government. Until the Government recognises that to change the way Ireland develops it must change all the things that led to this, we will not see the sort of reform that is required and we will not see international confidence rebuilt.

To pretend the banking system is simply an independent problem, divorced from the public finances, is a mistake. The credibility of the Government's guarantee is linked to people's belief that it can honour that guarantee, and that in turn is linked to their perception of whether the Government is in control of public finances — whether it has a strategy that is credible, well constructed, sound and able to meet the challenges. Unfortunately, the Government has failed on all these counts. That is the broader context in which I move this motion. Yes, we must tidy up our banking system and have an entirely fresh start, but we must also address our serious wider economic problems to restore credibility.

I listened to the Taoiseach today and I found his remarks deeply dispiriting. He could not resist denigrating the efforts of other parties to offer constructive solutions. He dwelt in half-truths, trying to run down what other people had suggested. Parties such as mine have consistently pointed out the necessity of a different way. We have done that for years. As recently as last October we said the budget was wrongly constructed and we could not afford the pay increases to which the Government was committing. We were scoffed at, and the Government has not moved beyond that. The Taoiseach seemed to welcome a degree of consensus, but the only consensus acceptable to him would be the Opposition's signing up to Government proposals——

Deputies

Hear, hear.

Deputy Richard Bruton

——which would be introduced by way of a guillotine, as we have seen time and again, with no opportunity for debate about the options. That is what the Taoiseach sees as the role of this House. The House is facing a crisis, as is the whole country, and unless Government can be open to new ideas we will go down the tubes. That is the state of affairs. This Government has shown that it cannot fix the crisis we are in and it has not been capable of addressing the scale of the crisis.

I do not need to tell Members that the banking sector is of core importance. It is the oil that keeps the engine of the economy ticking over. Households could not survive without it; businesses cannot survive without it. Businesses and households are already seeing the consequences of the interruption in the flow of credit. The problems that many businesses are now facing are made greatly worse by their inability to obtain funding to tide them over more difficult trading periods. We do not have a banking system that is adequate for the challenge this economy faces. We must see Government respond much more decisively to this challenge than has been the case so far. The tragedy is that there has been a consistent failure of the regulators either to understand the information presented to them, to pass it up the line or to act on it. This has been of major damage to our international reputation. If we persist with a regulatory system that has failed in such an appalling way — that is still struggling to come to terms with conflicting evidence about what it knew and what it failed to do — we will make our financial crisis greater. We must now make a clean break as far as the regulator is concerned. We must sack or remove the entire regulatory authority and, along with it, the senior management. We must establish a new regulatory authority with the power and the ability to bring in a new regime based on a much sterner ethic than we have ever seen before. It is not acceptable that the body investigating misdemeanours in the regulatory system is the regulatory authority itself. We cannot expect an authority to be judge and jury in its own case and provide the proper investigation that we need.

We can now get rid of the existing authority and bring in a new one that includes international representatives. Over a short space of time, such as three or six months, we should require that new authority to establish a Q mark of internationally sound regulatory standards. If the Government agrees to this, I would take heart that Members on the benches opposite understand the depths of the problems we currently face.

We must also recognise that the present relationship between the Central Bank and the Department of Finance is not acceptable. The notion that Secretaries General of the Department can seamlessly become Governors of the Central Bank is not an acceptable way to manage our affairs because those with the responsibility of calling halt in respect of policies on credit and fiscal strategy are compromised. We must move to a new style of appointing governors through competitions which are open to all comers, including international applicants.

Banks are in a unique position of trust because not only do they have similarly limited liabilities to all other companies but, effectively, they also have an implicit guarantee that the taxpayer will step in when difficulties arise. That puts a huge burden of responsibility on those who manage our banks because the privilege conferred by the underwriting of banks by taxpayers comes with a duty of care. The truth is, however, that banks and their managers abused this privilege for their own enrichment. The boards, which shareholders would have expected to supervise banks' activities, failed in their duty of governance. The regulators, whom we appointed to ride shotgun, failed to recognise the flaws and, even when they came into the possession of information, did not understand its seriousness.

We need a comprehensive clean out in the management of banks. The minimum we require are fresh boards and new executives in the banks that are being recapitalised by the State. These people should be on salaries which are commensurate with the compensation paid to someone running a public service operation. They should not receive the commissions which led us into the difficulties we currently face or bonuses that are linked to profitability. Their salaries have to be capped, in which regard we have proposed a figure of €250,000. The auditors, on whom we depended for overseeing the performance of the banking system, have also let us down. We need to appoint new auditors to all the banks to demonstrate a fresh start. We should look beyond the charmed circle of international names to other auditors who may be more probing and have a better understanding of how to conduct an audit. Perhaps such an auditing firm would not assign junior staff to crucial elements of scrutiny. A fresh start is needed in all aspects of banks' operations if we are to restore confidence. That is not asking too much because, as taxpayers, we are now standing in the breach. We will have to guarantee all the liabilities, offer solutions to some of the huge holes that exist in the loan books and recapitalise the banks. We are entitled, therefore, to see these radical changes in our banking system.

We must also address the wrongdoing that has taken place. The public rightly wants wrongdoing relentlessly pursued. I share the view of one Minister who has described these events as economic treason but we require action that is commensurate with such a level of wrongdoing. We are not seeing the wholesale changes that are needed in response to a Minister's belief that economic treason has been perpetrated. I do not impugn the values or intentions of the Government but the public sees people who had extraordinary access to those in authority and a regulatory system comprising officials drawn from the same circles as the executives they regulated. The public's confidence has been decimated by what has happened in Anglo Irish Bank and other institutions. The concealment of directors' loans seriously damages shareholders' interests. We now know it probably represents a breach of company law and we hope this will be pursued. We are also aware that the unwinding of the major shareholding held by the Quinn Group in Anglo Irish Bank was orchestrated by people within the bank. That suggests prima facie evidence of serious breaches of company law. A company cannot orchestrate the purchase of its own shares and fund them on a charmed basis or in a way that preserves the anonymity of those who benefitted from the deal.

People have a right to know how these decisions were reached and who was involved. As we saw in the report published last week on Anglo Irish Bank, the taxpayer is going to pick up the bill at the end of the day. Not only was this loan delivered in such a way that 75% of the money was without recourse because it was secured on the shareholdings themselves but we now learn that the bank believes it will be unable to recover the remaining 25% in full. Those who are on this list have not even honoured the small element expected of them. The taxpayer, who is left to bear the burden of what a Minister has described as economic treason, has the right to know who was involved. I believe there are many on the Government benches who want these people to be named. While this is not the core issue, it would be a symbol of the Government's determination to introduce change. The failure to use the powers granted by the Central Bank Act or the Companies Act 1990 to put these names in the public domain sends the signal that this Government is not determined to make a clean sweep. The message which has to be sent is that the Government intends to turn over every stone in its determination to ensure wrongdoing is not sheltered.

Rhetoric is no longer of any value. International observers, on whom the success of our banking system and our ability to borrow depend, are not interested in rhetoric. They want action rather than tough talk from Ministers. Until we present convincing evidence that everything has changed in terms of regulation, a fresh approach to banking and the public finances and credible proposals which can be delivered within timescales that will impact on the public finances, we will continue to labour without international confidence. If we cannot rebuild international confidence in our capacity to manage our own affairs, we will run into difficulties in funding our finances and the guarantees and capital commitments we have made to the banks. If this happens, our economic independence will be undermined. Many people fought long and hard to secure our economic independence. The successful economic model created by many people on all sides of this House has been hugely damaged. We now need to have confidence that the Government is willing to take the actions necessary to resolve the problems and to meet the challenges we face.

An Ceann Comhairle

I call Deputy Simon Coveney, who has seven minutes to make his contribution.

Deputy Simon Coveney

This motion is a constructive contribution towards putting in place an appropriate and decisive response to our current banking crisis. Each week, the Government calls on Opposition parties to support its proposals in the national interest, to make constructive contributions and to put forward new ideas. That is exactly what this motion, through a list of specific actions, seeks to do.

Light-handed regulation and cosy relationships between senior bankers, the Financial Regulator's office, the Central Bank, the Department of Finance and, ultimately, Government has resulted in misinformation, market deception and deliberate concealment of vital information from shareholders, the markets and the public relating to the financial health of certain banks. The consequence of this failure is enormous. As the Taoiseach correctly stated this afternoon, we are now battling for the very viability of our economy. The reputation of Ireland's banking system and financial sector generally is in tatters internationally and must be rebuilt. The ability of our surviving banks to access capital is compromised and exposure to bad debt is being upgraded by the day. Also, our banking model for business is not working thus frustrating viable trading opportunities. More important, the prospect of the State being exposed to an actual call on the bank guarantee is now a real consideration at a time when it is increasingly difficult for the State to raise funds and when the deficit between revenue and expenditure is out of control.

There is no point in not talking about the gravity of the fiscal situation in an effort not to undermine already shaky confidence. The Fianna Fáil way is to tell people only what the have to know and to keep bad news from the public, as if people cannot handle the truth. It is the kind of thinking that resulted in this Government not telling this House the full facts before asking us to make enormous decisions around bank recapitalisation or the nationalisation of Anglo Irish Bank. All of the proposals in the Fine Gael motion will need to be implemented if we are to expose the truth, prosecute bankers who have broken the law, remove regulators who have failed in their responsibilities and put in place new structures upon which we can build a new tough, but fair, regulatory system.

Along with the recommendations outlined in this motion we need a new type of politics with people taking responsibility for their actions and failures rather than trying to cover their tracks in a dishonest way. This fiasco is a monumental failure of governance and a catalogue of unacceptable practices in Irish banking. This failure of Government must also result in scrutiny, exposure and reform, which is the primary job of this Opposition. The Government's explanations of who knew what and when are, to me, simply not credible. There is no point in my saying otherwise in this House if I believe it not to be so.

I wish now to focus on the back-to-back dealings between Anglo Irish Bank and Irish life & Permanent in September 2008 and the further revelations in last Sunday's edition of The Sunday Tribune. This is not the first time I have heard the suggestion that the regulator knew about Anglo’s arrangements to give a false impression of its deposit base. I ask the Minister of State present in the House this evening, is it credible that the Department of Finance knew nothing of what Anglo Irish Bank was doing if the Financial Regulator was clearly aware of it? Let us not forget the Department was at that time preparing legislation to nationalise Anglo Irish Bank and would have been monitoring the bank closely and communicating almost on a daily basis with the bank and the Regulator. In that context, is it credible that the Minister for Finance and his Department were not tracking closely what was happening to Anglo’s deposit base and would not have noticed €7 billion being deposited into the bank and taken out less than a week later, after the financial year end? Is it credible that in late September, before the bank guarantee scheme was announced, when the Minister for Finance took a hands on approach and was personally leaning on other Irish banks — Bank of Ireland and Allied Irish Banks — to source up to €5 billion each to make available to Anglo because it needed capital, that the Minister was not up to speed with the mechanisms Anglo Irish Bank was using to source funds and shore up its deposit base? Is it credible that when the bank guarantee scheme was in place, when the Minister commissioned and received a copy of the PricewaterhouseCoopers report, that he did not read all the detail relating to Anglo Irish Bank, the one bank his Department was so worried about it and was going to nationalise weeks earlier? The Minister for Finance is one of the leading legal brains in the country, a top senior counsel, yet we in this House are being asked to accept that he did not read the most important brief ever laid on his desk? I cannot accept this as credible.

We are also asked to believe that the Minister was not informed by his officials of an issue of this consequence. Is it credible that the Taoiseach and former Minister for Finance for four years did not receive a copy of the PwC report, conveniently absolving him from any knowledge of its contents? Our Taoiseach is entrusted with making decisions that may literally make or break our country and we are expected to believe he did not read this report commissioned by Government to examine the health of our banks. I could go on and on and try to further unravel the story that Government expects us to accept and believe in respect of this one incident between Anglo Irish Bank and Irish Life & Permanent, but I do not have time.

The political claim that Government knew nothing about the wheeling and dealing that was going on in an effort to prop up a collapsing banking model in Ireland, linked to property exposure, is about as credible as making the case that the regulator knew nothing either.

An Ceann Comhairle

The Deputy's time has expired.

Deputy Simon Coveney

Unfortunately, as long as the full truth is not revealed, politically and from within the regulator's office, we will see broken, week-on-week, scandals which continue to undermine the very credibility of governance and the financial sector in Ireland.

An Ceann Comhairle

I call Deputy Naughten, who has five minutes to make his contribution.

Deputy Denis Naughten

There is a lack of international confidence in our banks and our economy for two reasons, namely, a lack of credibility in our banking system and, a lack of any economic strategy to get us out the situation in which we currently find ourselves. This was articulated last Sunday week in some of the newspapers by the former chief economist of the International Monetary Fund and is leading to an enormous degree of international concern.

Deputy Bruton set out earlier what needs to be done if we are to get out of the mess into which this Government has got us. As part of that plan we need far-reaching reform in every sector of the economy, starting with our banking sector. First, we must urgently review the banking bonus structure which incentivised irresponsible lending within the banking system. It seems nothing has been learned by the banking sector. Recently, the Bank of Ireland announced a special 2.45% one-year rate for first time buyers. Prior to this Anglo Irish Bank announced at 2.49% one-year special rate. The idea behind this is the bank's belief that once a person takes out a mortgage it may be too costly or too much hassle for him or her to switch to another lender, thus ensuring borrowers remain with their initial lender for many years. The difficulty is that the maths does not add up. Currently, the European Central Bank rate is 2%. The average rates for mortgages here for first or second time buyers is approximately 2% above the European Central Bank rate. The bargain rates for one year are being offered to young couples, but they will be hiked by at least 1.5% subsequently, over-extending many young families again. This is the same practice which got us into the problems and the situation we face at the moment. It is clear nothing has changed.

We urgently need responsible banking. The pool of skilled personnel within the regulatory and financial services sectors is far too small. People move from the Department of Finance to the Central Bank to the Financial Regulator, or from the banking sector into that chain of supervision. We need a regulator from outside the current gene pool. This Pat, John, Mary and Willie atmosphere must be broken up once and for all. This was articulated very well in an article in The Sunday Tribune last Sunday. Mr. Willie McAteer recalled an exchange with Mr. Pat Neary in which he told Mr. Neary that the bank would manage the balance sheet at the end of the year, in other words, it would cook the books. Mr. Neary reportedly replied, “Fair play to you”. This is not light touch regulation, but slap-on-the-back regulation. The attitude within the banks was to present the issue of the day in a manner which would gain the rubber stamp of the regulator. However, if that did not work a bank would go cap in hand to the Department of Finance to get its blessing for the same cock and bull story. This took place continually in the regulatory sector.

The difficulty is far too many businesses, jobs and homes depend on a properly functioning banking system. The continuous drip feeding of information from the Government is damaging the perception of our banking system internationally and in the country. In tandem with the changes outlined by Deputy Richard Bruton, we urgently require the publication of the reports by "An Bord Snip" and the Commission on Taxation. The Government said it will not fast track these reports. It has not approached either of the authors of the reports, but we must have these reports published now. We also need a new budget now. There is no confidence in the Government either in the country or internationally. We urgently need a responsible and accountable Government that will make the decisions to get us out of the mess into which this Government has landed us. I commend the motion to the House.

Deputy Joe McHugh

I welcome the Minister for Finance, Deputy Lenihan, to the House. I welcome the opportunity to speak on the motion and I wish to discuss one aspect in which we may move forward. Those of us on this side of the House are proactive. We provide ideas and we fulfil our national obligation in doing so. As far as banking is concerned, we are in an era which is totally unscripted. All manuals can be burned and all principles have been undermined. The underlying principle for banking and credit extension to small businesses was that the banks had a monopoly on wisdom. There has been intellectual snobbery whereby it was assumed the man in the swivel chair knew more than the man in the wooden chair. The notion that the businessman would approach his local bank manager with his cap in his hand seeking a loan or an extension to an overdraft was a matter of course. Recession 2009 offers us a chance to change this notion.

I welcome the proposals from Deputy Richard Bruton seeking a fresh start, which is where we must look for the answers. It offers us a chance to replace the existing model with a very different one. The tragic collapse of the economy and the banking system demonstrates that the long-standing guiding principle does not work. The thinking which landed us in this mess will not get us out of it. We must engage at two levels. We must engage with those in the financial sector and with those under pressure who are concerned at what will happen next week, rather than next month or in six months time.

There is talk of Ireland reaching out to Europe. The thinking within the financial institutions at present is that a plan should be in place. At present there is no such plan. We must have a plan to anticipate what will occur. Events are changing rapidly in the financial sector. In the small and medium sized enterprise, SME, sector there is frustration because of the lack of credit flowing. There was an advertisement two weeks ago in broadsheet newspapers from a bank, indicating it wished to get credit moving again, to lend money to SMEs and to issue mortgages. However, this is still not taking place because of a vacuum between the banking and SME sectors. We must reshape the current model and the way in which we bank. It is not a question of the man in the swivel chair holding a monopoly on wisdom and the man on the wooden chair with a business idea. There is a vacuum in that interface. This is where the Government has an opportunity. The Minister is aware of enterprise boards throughout the length and breadth of the country and different agencies which can be utilised in the interface between businesses and the banking sector. We are at a crossroads in terms of the way in which to get things moving.

My clinics are attended by young and old people. They are attended by people who wish to continue with their business but who still cannot access credit. There must be change in this regard. Those in the SME sector will drive us out of the recession and will create jobs at local level. People from my constituency contact me on a daily basis with business ideas. However, the Minister for Finance and the Governments of the past ten years have stifled and crippled small business through red tape and bureaucracy. We must work to improve matters on a cross-departmental level.

Deputy Michael D’Arcy

Who would have believed only two years ago that the nation would find itself in this position today? On each occasion the Government has intervened in the banking difficulties it has made matters worse. It is beyond my comprehension how it can get it wrong time after time. I held the Minister, Deputy Lenihan, in high regard during his time as Minister for Justice, Equality and Law Reform. However good he was in that portfolio, he has not been good in the Department of Finance.

Deputy Brian Lenihan

Is the Deputy looking at events around the world?

Deputy Michael D’Arcy

I say that without gladness. Part of the problem is that we have had a single party State. For 20 of the past 22 years the Minister's party has been in Government. How could a supposedly independent financial regulator criticise the Government for the actions it took in recent years? We will pay for the excesses of the past ten, 12 and 14 years in decades to come. Of that there is no question or doubt. Children not yet born will pay tax in years to come to tidy up this mess.

The €7 billion placed into Allied Irish Banks and Bank of Ireland has been consumed by the market. At present, Bank of Ireland shares are worth 30 cent and Allied Irish Banks shares are worth less than 40 cent, an indication of the confidence of the international markets. We find ourselves in a position in which we face economic catastrophe. It is a case of Armageddon in terms of what will happen to us in the short term, let alone the medium term.

Businesses require cash flow and funds and these are not being provided at present. The banks may meet the Minister and claim this is the case, but it is not so. Without jobs the economy will falter ever further. As Deputy McHugh stated, jobs can only be facilitated with funds. Business can only be facilitated through the availability of funds. There are a remarkable number of viable businesses which need to overcome the difficulty of a cash flow hump and the banks are not providing the necessary help.

I refer to remuneration and pay in the higher echelons of banking. Remarkably, a reduction in the pay of such people has been discussed in terms equivalent to almost twice the amount that President Obama is considering for the directors of banks in the United States. These banks are many times larger than ours. I do not know how we can consider paying this sum; €250,000, or €20,000 per month is equivalent to the Minister's salary. It is a fortune and the most that should be ever considered.

Minister for Finance (Deputy Brian Lenihan)

I regret to say President Obama has backed off that proposal already.

I move amendment No. 1:

To delete all words after "That" and substitute the following:

Dáil Éireann:

notes that the Government has taken determined and decisive action to restore, through the bank guarantee scheme, recapitalisation and otherwise, the health and reputation of the financial system;

notes that the Government has engaged with the European Commission and the ECB on the development of a common framework on recapitalisation and has contributed to the development of a common approach to bad debt resolution;

notes that the Current Board of IFSRA is engaged in an extensive and personnel intensive investigation of issues which have arisen in Anglo Irish Bank in co-operation with the Office of the Director of Corporate Enforcement and the Garda authorities;

notes that the ongoing investigation has a criminal dimension and urges all Deputies to exercise the restraint essential to any successful prosecution as appropriate and otherwise;

affirms that the Irish economy needs a functioning banking system that enjoys the trust of depositors, international markets and the community at large in order to withstand the current economic and financial position; and

supports the Government's structured and measured approach to the issues facing the financial sector and represents the best way to secure the position of the financial services sector generally while keeping in mind the requirements of the EU and the interests of the State.

This approach includes:

the guarantee on deposits up to September 2010 to stabilise the funding position of the banks and add a further level of protection for depositors;

the recapitalisation programme of Allied Irish Banks and Bank of Ireland and the commitment to look at the needs of other institutions;

the nationalisation of Anglo Irish Bank, necessitated by particular circumstances at the time, to provide protection and support;

consideration of further interventions, including possible extension of the guarantee for limited purposes and the reduction of risk associated with assets;

review and reform of the structures, role and functioning of the Financial Regulator and the relationship with the Central Bank in light of the current situation.

The stated intention of the Minister for Finance is:

to bring proposals in this regard to Government as a matter of urgency;

the ongoing commitment to work with the EU to frame a common approach to the issues faced by the financial services sector; and

to progress work already commenced in relation to remuneration of senior executives and board members in Allied Irish Banks and Bank of Ireland in light of the report of the Committee (CIROC), headed by Mr Eddie Sullivan, which is due to report on this matter by 5 March 2009, and which will include a cap on the salaries of senior executives.

Dáil Éireann:

expresses its confidence in the Government's measures to stabilise and revitalise the banking system.

In proposing the amendment to the motion, I am pleased to present to the House the Government's measured and structured approach to issues facing the financial sector. This strategy is the best way to secure the position of the financial services sector while keeping in mind the requirements of the European Union and the interests of the State and the taxpayer.

While commentators here are naturally very focused on our internal problems and we are all focused on them by the difficulties in accessing credit, it is important to put the banking crisis in a global context. Governments across the world are grappling with the collapsing confidence in the global financial system and are intervening in various ways to try to achieve the best possible outcomes for their countries. It is important therefore to understand what I see as the Irish strategy.

I am keen to ensure there is an independent banking sector in Ireland. That requires us to protect systemically important banks and avoid nationalisation of these institutions if at all possible. My aim is to ensure there continues to be competition in the Irish market for consumers. To that end, we are seeking to ensure that Bank of Ireland and Allied Irish Banks continue as a strong and competitive banking presence in the marketplace. Given the uncertain position of the UK and foreign owned banks, we would ideally like to see a third significant Irish player in the banking sector.

The prerequisites for the success of this strategy are sufficient liquidity in the system and adequate capitalisation of our banks. The Government guarantee scheme introduced in 2008 was designed to ensure that the banks would have sufficient liquidity to operate on a day-to-day basis. This move has since been followed by many other countries.

Market expectations with regard to the capital that banks hold have altered significantly. As a result banks have had to compete vigorously for deposits and other forms of funding in a weakening economic environment. Banks have been also forced to seek capital in an unwilling and unfriendly market, resulting in an array of State recapitalisation programmes across the developed world. It is in this context that we have announced our plans to capitalise the two main banks. In due course, we will examine the remaining institutions.

In this challenging period for the banking sector, when investors dealing with banks are even more risk conscious, the good standing of a bank, its reputation and a strong ethos of corporate governance through its board and senior management becomes even more important. There have been important issues for the Government to address in taking on this role, at a time when we have also to ensure fiscal prudence, taking difficult decisions to ensure our competitiveness internationally.

The Government is providing €3.5 billion in core Tier 1 capital for each of the two main banks. The capital to be provided to each was determined following detailed engagement with the banks themselves, and with the benefit of survey information of the bank's loan books, which was conducted for the Financial Regulator by PricewaterhouseCoopers. A careful assessment was made of the potential losses that the banks face on their loan books in the coming years, taking into account the impact of likely trends in property values and various stress scenarios for the economy. I was criticised in some quarters for being slow to proceed with a recapitalisation of our major financial institutions, but I strongly believe that the time spent on assessing as accurately as possible the capital requirements of each bank, was worthwhile in terms of the assurance that can now be offered to the markets on the levels of capital in the two largest banks.

The level of capital being provided by the State will boost the core Tier 1 capital ratio of AIB to 8.5% and that of Bank of Ireland to 9%. It is important to note that these are high capital ratios by international standards. The banks will therefore be in a strong position to raise the funding they require on international markets and withstand loan losses arising.

The continued flow of credit is vital for our economy. To establish the exact position regarding the availability of credit, the recapitalised banks have agreed to fund, and co-operate with, an independent review of credit availability which will be managed jointly by the banks, Government and business representatives. The recapitalised banks have also agreed to work closely with the IDA, Enterprise Ireland and with State agencies to ensure the supply of appropriate finance to contractors engaged on major projects sponsored by them. They have also agreed to engage in a clearing group to identify specific patterns of events or cases where the flow of credit to viable projects appears to be blocked and to seek to identify credit supply solutions. The two banks have also agreed to provide €15 million each to a new seed capital fund.

The international credit crunch is severely limiting the availability of credit to sound businesses and thereby doing severe damage to our economy. The bank customer package announced as part of the recapitalisation programme addresses this problem in several ways. First, the banks have agreed to make additional funds available for lending. Second, a statutory code of conduct for small and medium sized enterprise, SME, lending has been devised to help create a better balance for such lending and to give potential borrowers greater confidence. This covers all banks, not just those recapitalised. Third, the independent review of credit availability will give a definite picture of the current supply, demand and conditions for business lending.

In addition, on 13 February 2009 the Financial Regulator published statutory codes of practice on business lending and mortgage arrears and these apply to all banks. The business lending code includes a requirement for banks to offer their business customers annual review meetings, to inform them of the basis for decisions in relation to their accounts and to have written procedures for the proper handling of complaints. Decisions to grant, refuse or alter credit must be taken on a case by case basis. Where a customer gets into difficulty the banks will allow reasonable time to seek to agree an approach to resolve problems and to provide appropriate advice. I stress that this is a statutory code and banks will be required to demonstrate compliance.

The code of practice on mortgage arrears applies to all mortgage lending on a customer's principal private residence. A lender may not seek repossession until every reasonable effort has been made to agree an alternative repayment schedule with the borrower. The code will ensure that mortgage lenders can commence legal action for repossession only six months from the time arrears first arise.

I want to address issues relating to Anglo Irish Bank. In January, against a background of concerns about governance issues and market confidence in Anglo Irish Bank, the Government, following consultation with the Central Bank, the National Treasury Management Agency and the Financial Regulator, decided to take Anglo into public ownership. This decisive step was taken to safeguard the interest of the depositors of Anglo, and the stability of the economy.

The Government, along with the entire country, has been shocked by the revelations of practices in Anglo Irish Bank and, as I have said time and again, we are fully committed to getting to the bottom of the position and ensuring that the full rigours of the law are applied to anyone who is found to have abused the system. We will fully investigate the loans to Seán FitzPatrick, the Seán Quinn share transaction and the Irish Life & Permanent deposit arrangement. Any further issues that may emerge will also be dealt with by appropriate action but we remain fully cognisant of, and committed to, upholding the principle of natural justice.

It is now vitally important that the country regains confidence in its banking system. There are many thousands of loyal and hard-working banking staff who are shocked at recent revelations. It is important that they, and the public, can be reassured about the long-term future of the financial sector in Ireland. Collectively, we need to give the international markets confidence in the long-term future of Ireland's financial sector. Continued revelations of alleged malfeasance damage us individually and collectively. Above all else, they cast a severe slur on the reputation of the country overseas. It is incumbent on all of us, including the media, to ensure a balance is struck between the exposition of past wrongdoing and the solidity and proper functioning of a significant and important part of the country's infrastructure.

There is no doubt that we inherited problems in the banking sector. There has been much comment about how they might be resolved. Deputy Bruton referred to it as a legacy issue. As I said in my recapitalisation statement, the Government is prepared to examine proposals, such as the establishment of an insurance scheme or the creation of a bad bank. Other innovative Irish solutions may be needed to deal with the problem. As Deputies may know, I have appointed Dr. Peter Bacon to work in conjunction with the National Treasury Management Agency to compile a report and to advise me on suitable options in this area. Members should not be under any illusions — the option that has been canvassed in this House and elsewhere is an expensive one. Giving the guarantee may result in a payment being made back to the State and the decision to recapitalise may result in the State obtaining a return on its investment, but the decision to provide some form of protection in regard to risk assets in the banks will inform a substantial up front commitment, or deferred commitment, on the part of the State.

There was considerable debate and discussion on this topic at a recent meeting of the Economic and Financial Affairs Council of the EU. Member states expressed a desire for an EU-wide response. Deputies will be aware that the British Government has examined many possible options in this area. It may announce a scheme in the coming weeks. I firmly believe there is no huge benefit to being first out of the traps with a solution on this issue. The best approach is to learn from other experiences and to move as quickly as possible when a scheme has been devised that uniquely suits the Irish circumstances.

It is universally accepted that bank regulation on a global scale has been too lax. Ireland is no exception in this regard. It is clear that a new structure is required. I am committed to its implementation. I have already indicated in the House that this may involve the merger of the Financial Regulator and the Central Bank. I am close to securing international expertise to advise me further on this matter. While such expertise might guide me, it will not take the form of a consultancy. Decisions must be made by the Government. I will bring proposals to the Government in that regard. As the House will appreciate, the oversight of the banks has been greatly intensified since the introduction of the credit institutions financial support scheme. The new regime provides for heightened direct engagement with each of the covered institutions. It also provides for new reporting arrangements, including the provision of scheme compliance certificates by the covered institutions and their external auditors.

The requirements and conditions of the bank guarantee scheme represent the first step in a new system of financial regulation and supervision. The joint boards of the Central Bank and the Irish Financial Services Regulatory Authority are considering further reform measures. I have received a report in that regard. I will examine it closely. Other regulatory considerations, domestically and at international level, are under way. The Financial Regulator is reviewing its overall strategic regulatory approach to ensure it meets its statutory mandate and responds to EU developments in financial regulation. The regulator's business process review, which is designed to improve the effectiveness and value for money of the regulator, is close to conclusion. The Financial Regulator is processing its strategic plan for 2009. At EU level, new regulatory proposals, including improvements to the Capital Requirements Directive, are due for adoption in early 2009. More generally, the Economic and Financial Affairs Council will incorporate the work being carried out at a wider international level.

The roles and mandates of national regulators are the subject of deep consideration. Proposals will be made on matters such as prudential soundness, the orderly functioning of markets and stronger European co-operation on financial stability oversight. There is no doubt that there needs to be accountability in the financial sector for what has happened. That is not an issue in this House. A number of senior personnel have stood down for various reasons. I have made it clear that more will follow when appropriate. The EU has been consulted at all stages regarding any involvement in the banking sector. In the next few days, an EU high level group will unveil its blueprint for reforming the financial system. This is one of several topics I will discuss with the president of the European Central Bank, Jean-Claude Trichet, when he visits Ireland on Thursday. It is essential that we work with our EU counterparts, the European Central Bank and the European Commission to ensure that a consistent and decisive approach is adopted to allow us to emerge from this difficult time with a strong and well-regulated banking system.

I have made it clear that there will be a new pay regime in the Irish banking sector. It is imperative that this regime is organised in a way that ensures that rewards in the sector are structured to meet the long-term objectives of the banking institutions and the overall health of the Irish financial system. The banks have accepted this in principle. Firm commitments to abolish bonuses and to reduce substantially the salaries of senior executives and directors have been made by Allied Irish Banks and the Bank of Ireland in the context of the recapitalisation scheme. The Government awaits the findings of the committee on remuneration, which was set up under the guarantee scheme at the prompting of many Members of the Oireachtas from all parties. The committee's findings will help us to flesh out and implement these principles. I am advised that the committee, which is led by Mr. Eddie Sullivan, will publish its report on 5 March 2009. I understand the report may recommend that the salaries of senior executives be capped. It is clear that remuneration in the Irish banking sector should not incentivise the kind of conduct we saw in the past, such as excessive lending. I am satisfied that bonuses have been eliminated during the guarantee period. Such abuses can be eliminated if there is a careful review of any incentivisation. It is clear that the salaries of many executives are way out of line with the salaries of comparable executives in Irish companies of a similar size and scale. In that context, it is essential that Mr. Sullivan's report will be brought to the Government for consideration at the earliest opportunity.

The Government recognises that the future prosperity of the country will be determined by the actions we take now. We have a strategy to deal with the complex problems in the banking sector. We have acted firmly and fairly in the national interest. The Government's approach to the banking system has been structured and measured. A priority for the Government has been to ensure that all interventions in the banking sector have as their ultimate goal the benefit to the taxpayer of ensuring stability and securing the position of the customers of the banks — account holders, mortgage holders, businesses and enterprises. I ask the House to support the amended motion and to provide the leadership needed to see us through this crisis. I ask Dáil Éireann to affirm its support for the Government's amendment.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy Billy Kelleher)

I welcome the opportunity to speak on this motion. The amendment that has been moved by the Minister for Finance "notes that the Government has taken determined and decisive action to restore, through the Bank Guarantee Scheme, Recapitalisation and otherwise, the health and reputation of the financial system". In recent weeks and months, the Government has been deeply involved at every level in trying to ensure the financial viability of this country and the strength of its banking system. Some of the commentary from outside and inside the House has been unhelpful. There has been a change in that regard lately, however. People have started to realise that as we are in this together, we need to address these problems in a coherent manner. We need to pull together to put measures in place to stabilise this country's financial system.

Some of the commentary on the problems in Ireland has been inward-looking. Some comments have been made solely in the context of the Irish situation. This is an international problem, however. It originated in the sub-prime market in the United States and has spread across the whole world. Every country with a modern financial system is creaking under the pressure. Ireland is no different. When people criticise the actions that are being taken, they should do so on the basis of facts rather than in the context of a partisan approach that involves trying to undermine the Government's credibility. People are speaking about Ireland's financial difficulties without reflecting on the global challenges that are visiting these shores. They are talking about coming together in a bipartisan spirit, but I wish their deeds would reflect their words and commentaries. Over the next few weeks, I urge everybody to be supportive during what is a fundamentally difficult time not just for the Government but also for every man, woman and child in the country. There is a great deal of fear. People are worrying about their jobs and the potential loss of their homes. That is why Deputies on this side of the House are trying to ensure there is integrity in the banking system. The Minister for Finance spoke about regulation in that context.

Fundamentally and importantly, the most immediate issue we face is the need to bring stability to our financial and banking systems. The first decision that was taken involved the introduction of the bank guarantee scheme. That was a very brave and historic decision, because if we did not do it, there could have been a big fall back in Irish banking. Every outside commentator recognises that. It was disappointing that we did not get full support in the House, but I believe that as time goes on, it will be shown to have been the right decision. It gave the Government the opportunity and the breathing space to deal with the banks in a structured manner with regard to recapitalisation and risk management. Time was needed for this, and the bank guarantee allowed that time.

There are myths and rumours which claim that the Government is shoring up the banks. The Government is ensuring that we have a viable banking sector that can ensure a flow of credit to small and medium-sized businesses. We now have a code of practice in that area and in the area of mortgage arrears. Equally, we have ensured an availability of credit to first-time buyers, so that there might be some stimulation of the economy. These are critically important issues.

It was very interesting to listen to Mr. Peter Sutherland today, a man who everybody in this House would hold in very high esteem. He brought some sense and reality to the debate on the challenges facing Ireland. I urge others to listen to his views and his expressions of concern that we could undermine the credibility of the country by inflammatory comment and by the partisan approach that is doing nothing for the credibility of the banking system in this country.

There is much anger out there about the remuneration of bank executives. I accept that is something which is causing great concern among the public. It is causing anger, hurt and betrayal. We cannot prejudice the outcome of any investigations of wrongdoing or perceived wrongdoing. We must leave the law of the land, as passed by these Houses, to take its course. Those that are charged with the responsibility of enforcement should be allowed the freedom to do so without any interference or commentary that could jeopardise those investigations. I urge others not to use that in order to beat up the Government. They are doing themselves and the people they represent a disservice. The economy will slow down, there will be job losses, and we will find it difficult to resurrect it.

There is no doubt that being in the eurozone has helped us weather the storm so far. The fact that we are at the heart of Europe has assisted us in being part of a stable currency. The other challenges that people conveniently forget is the pressure on our exporters into the sterling and dollar areas. These problems have put us at a huge financial disadvantage. The commentary is a little simplistic, distilling the debate down to a few people in the banking system who are alleged to be the cause of all difficulties. There is anger at those bankers, and rightly so, but the solution is not there. The solution is for this House to pull together, make sure we all wear the green jersey and put forward a positive view that Ireland is dealing with its challenges. We need bipartisanship in one area of fundamental national interest, which is to resolve the financial difficulties of the banking situation.

Deputy Michael McGrath

I welcome the opportunity to speak in support of the Government amendment to this motion.

Those responsible for inflicting such serious damage on the Irish banking system in recent times must be held to account before the full rigours of the law. Based on what has been publicly disclosed, the events at Anglo Irish Bank are nothing short of a national scandal. These events included the concealment of the directors' loans, the deliberate propping up of the share price following the unwinding of the contracts for difference, as well as the €7 billion window dressing of its customer deposit base at year end. During the Celtic tiger years, the Irish banking system was run by a small number of elite executives, who often put self-interest ahead of the country's interests. In refusing to accept the resignation of its chief executive following exposure of the bank's role in boosting the deposit base of Anglo Irish Bank, the board of Irish Life & Permanent displayed the type of gross arrogance and appalling lack of judgment which has characterised the top echelons of our banking system in recent times.

It is essential that the investigations being undertaken by the Office of the Director of Corporate Enforcement and the Financial Regulator are completed as a matter of absolute priority. The only way national and international confidence can be restored in our banking system is if there is full accountability for the actions of senior executives involved. I welcome today's searches by gardaí attached to the Office of the Director of Corporate Enforcement and I look forward to the completion of these investigations and appropriate action being taken. Deputy Thomas Byrne and I recently wrote to the Garda Commissioner asking that additional resources be made available to assist the director, and I am pleased that eight additional officers have been made available.

It is clear that some of the transactions at Anglo Irish Bank were completely unethical and, in my view, fraudulent and illegal. Those responsible must be pursued vigorously. The competent authorities must do the job they are empowered to do and conclude definitively on these matters. One measure that would help rebuild confidence in the banking system would be to take a tough line on the level of executive pay. Imposing a 33% reduction does not go far enough; the Minister must impose an actual cap in pay at a level to which people can relate. It is not acceptable that senior banking executives are allowed to live in a parallel universe and earn extraordinary amounts of money at a time when the Irish people have come to the rescue of the banks. The oversight committee is reporting on 5 March and I look forward to the recommendation of the committee and the Minister's final decision on the issue of executive pay. I am sure he will apply common sense to the level of executive pay and bonuses, which will be capped following the deliberations of the committee.

It is clear that there needs to be a fundamental overhaul of our regulation system. The reform of the regulation system needs to be brought forward urgently. The current system has been exposed as flawed and inadequate. For example, the Financial Regulator's office seriously mishandled the Seán Fitzpatrick loan scandal at Anglo Irish Bank. In spite of the fact that members of the authority had a series of meetings with Anglo Irish Bank in January 2008, we are led to believe that the chief executive of the authority or any member of the board was not made aware until December 2008 when the Minister informed him. That is completely unacceptable and shows a serious lack of controls and procedures in place at the offices of the Financial Regulator. The authority investigated this itself and the resulting report was a whitewash. I welcome the Minister's intention to bring plans for regulatory reform to the Cabinet, and I believe that the board should be removed as part of that reform.

During the Celtic tiger years, the Central Bank time and again highlighted the risks for the Irish economy arising from excessive lending, particularly in the property market, yet the advice provided by the Central Bank was not implemented by the Financial Regulator in its dealings with individual financial institutions. The role of the regulatory authority is to ensure consumer protection and to foster sound, growing and solvent financial institutions. The regulator has clearly not implemented the economic policy advice from the Central Bank. The answer lies in consolidating the functions of the Central Bank and the regulatory authority under a new financial watchdog. I look forward to reading the Minister's proposals on reform of the regulation system.

Ireland needs to have a strong banking system in order to come through this economic recession. A new banking system needs to emerge from this crisis, and that system needs to be led by executives who recognise their responsibilities to their company, their community and their country. We need people of principle and conviction at the top echelons of our banking system. The banks and the Irish economy have a mutually reliant relationship. We need to get credit back flowing through our economy, and we need to restore trust and confidence in our banking and regulation system as a national priority. I fully support the Minister in his efforts to achieve that end.

Deputy Joan Burton

I wish to share time with Deputies Rabbitte and Morgan.

The speech we just heard from the Minister for Finance was, to use an American term, a vanilla ice-cream speech. It was a vanilla ice-cream speech on banking in which everything is for the best in the best of all possible worlds. To add to the sense we have from this Government of panic, dread and confusion, we also have a very valiant attempt by the last three speakers to rewrite history. How can we have confidence in a Government which brought forward a guarantee at the end of September and the beginning of October at the core of which was the protection of Anglo Irish Bank and which failed, as it confessed, to carry out any due diligence or examination of the bank?

It was just a guarantee thrown out there and now we are running away from it. On that and subsequent nights, I recall Fianna Fáil people saying that Ireland being a first mover on the guarantee was a wonder and a clever move. We were the smartest kids on the block. Tonight, the Minister said: "I am firmly of the belief that there is no huge benefit to being first out of the traps with a solution on this issue." The guarantee at the end of September calls to mind Georgia's invasion of Russia, with the same disastrous consequences for the Irish economy that the invasion had for the Georgians. The kind of backtracking we have heard from the Fianna Fáil speakers here would be laughable if it were not so serious for the tens of thousands of people losing their jobs, the businesses that cannot get credit and those who remain in work in the public or private sector but must pay extra charges, levies and taxes to rescue us form the appalling mess Fianna Fáil has made of our economy and the achievements from which so many of us took pleasure.

Regarding the toxic ten — the golden circle of the ten people whose names we are not permitted to know — from the various reports over the weekend we know they had loans of €450 million and were given a 25% personal guarantee on that money. For tax purposes, they will also be able to claim 22% in losses, although we do not know if that is on the entire €451 million or maybe a little less. I estimate they will get at least €80 million in tax losses, which they can carry forward over the next ten or 20 years or whenever the property market recovers. The four people named in The Sunday Times, if their names were correct, are prominent people in the property business, three of them in my constituency and, therefore, well known to members of the Minister’s party. It was most interesting to see that.

Deputy Billy Kelleher

Deputy Burton also knows them.

Deputy Joan Burton

I do not know if those names were correct. They were published in The Sunday Times and would be familiar to most people who have been involved in battling against some bad rezonings on the green belt in my constituency. If those names are correct they would be better known to members of Fianna Fáil. The Government has put up a straw man argument on why we are not entitled to know those names. The only argument it has advanced is that they are customers as well as shareholders, and there is a sacred confidentiality between a bank and its customers. However, the Supreme Court has clearly ruled that where there is any suggestion of wrongdoing, this confidentiality does not apply. In this case the wrongdoing is that we had to nationalise the bank, making the taxpayer liable for an incredible amount of guarantee for it. We have also put our two bigger, essential banks, Allied Irish Banks and Bank of Ireland, in mortal danger; witness what has happened to the share price today yet again. However, we are told we must have confidentiality regarding Anglo Irish Bank. There was no due diligence before the guarantee and we are then told we cannot have the names.

Deputy Billy Kelleher

One could not perform due diligence in three or four days.

Deputy Joan Burton

This deal on the toxic ten or golden circle of people apparently familiar with the Fianna Fáil tent at the Galway races was a serious misrepresentation regarding other shareholders, the market and the general public who are carrying the can for this toxic golden circle. Protestations of banker-client confidentiality do not arise in this context and the Minister for Finance, as sole shareholder in the bank, should insist this is so. I draw the attention of the House to section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003 which specifies that certain persons, including the chief executive of the Financial Regulator and the Governor of the Central Bank, can be required to attend proceedings of relevant Oireachtas committee meetings and provide the committee with such information as it requires in so far as it does not contravene EU legislation.

On 11 November I had, at my request, a meeting with the then Financial Regulator, Mr. Patrick Neary. I followed this up because I was very unhappy with the outcome of the meeting and the information. By then the information about Mr. Quinn was in the public domain. We now know that throughout 2008 and possibly late 2007 the regulator, the Central Bank, the Department of Finance, the then Taoiseach, Deputy Bertie Ahern, and the then Minister for Finance, Deputy Brian Cowen, knew there were serious problems with Anglo Irish Bank. I asked Mr. Neary if he could explain the role of his office regarding these matters, particularly the insurance company and Anglo Irish Bank. On 11 November I was told regarding the Quinn insurance company that a comprehensive and detailed investigation of the matter "was undertaken prior to the conclusion being reached that a fine was warranted". So the regulator and, presumably, whoever he communicated with, knew all about it. When the Government members offered the guarantee in this House they were either fools or knaves because they and their Taoiseach could not have known that there were serious problems in Anglo Irish Bank, yet they chose not to exercise any due diligence.

Deputy Billy Kelleher

How could one use due diligence in a few hours?

What would the Deputy do?

Acting Chairman

I will not ask the Minister of State again.

Deputy Arthur Morgan

I thank the Labour Party, and Deputy Burton, for sharing time with me.

Deputy Billy Kelleher

The Ard-Fheis is working already.

Deputy Arthur Morgan

It would work more effectively than the current one and that would not be a big challenge to any of us.

I do not doubt for a moment that economic students of the future will look back with dismay at this period of Irish history, especially when they see that the Government had this report in its possession for five months before the Garda raided this bank to gather evidence before it was all removed or destroyed. In such circumstances anyone out who has self-incriminating evidence and five months to clear it would be very foolish to be caught. However, it is good to see that at long last some movement has occurred, but it is bizarre in the extreme.

The reason the Garda, and all these corporate enforcement officials such as the Financial Regulator, did not act until now is that the prevailing assumption was that one should not touch the banks. There was an assumption that these were the gods of the Celtic tiger and they cannot be seized upon and must be allowed do whatever they want. This really was amazing because everybody on this side of the House has stated for some considerable time that Anglo Irish Bank was a toxic bank. Even before we knew the detail of the toxic loans, and some of the surrounding activities, we were saying that a receiver should have been sent in to the bank.

Some on this side of the House also stated that it may take a period of five years to address the situation but the Government did not listen. The Government knew more about this than we did. The Government had information about the toxic loans, and yet sat on its hands. I find that bizarre in the extreme.

The public is punch drunk with this entire episode. An article last Sunday in The Sunday Tribune reported that the then Regulator, the person in charge of ensuring that the banks were honest and acted with proper probity, told the bank, when advise it would be engaging ins some creative accounting practices, to continue with its operations. That is bizarre in the extreme.

What happened to the Financial Regulator? Rather than being called in and carpeted, rather than be told that he was a disgrace and have him sacked he was sent off with a golden handshake of €630,000 and given an annual pension of €142,000. Many people are asking me was that golden handshake a reward to keep him quiet and not to disclose other pieces of information in his possession, and to keep him from putting them into the public domain. I do not know but people are well justified in asking those questions. It looks odd, to say the least.

There have been other details. There is the €450 million that was given out to the six customers, the €6 billion transfers between Anglo Irish Bank and Irish Life & Permanent, which was very dubious activity and the €180 million in loans to directors. The report, I understand, stated that the bank has very large exposures, an understatement if ever there was one. That information should have been given to those of us on this side of House before we voted on the nationalisation of the bank last January.

With regard to the nationalisation of the bank, is the Government aware of any Members of this House, including Ministers, who had shares in Anglo Irish Bank and who did not declare them before voting on the nationalisation Bill in January and if so, does that represent a conflict of interest?

Deputy Billy Kelleher

It was a conflict of interest all right, they lost a great deal of money.

Deputy Arthur Morgan

If it emerges somebody here had shares in Anglo Irish Bank, does that mean that their vote on the Bill was null and void? I am no lawyer but it looks deeply suspicious. I find it strange that nobody here had any shares in the bank. I can assure the House that none of my colleagues holding the Sinn Féin seats here had shares in it or any other bank. The Government should have told us the true state of this bank before we voted and then we would have been able to represent much more constructively those taxpayers and members of society who we are sent here to represent.

The 120,000 people who marched in this city on Saturday afternoon last did not just march against the pension levy and the wage cut. They marched to impress upon the Government to move away from its carry-on of protecting the speculators, the corrupt bankers and that strata of society, and ignoring people. It is fair to bring all the toxic information regarding the banks before the House. Whatever about the markets, the bankers, the Government policies and the speculators are the people who have destroyed our reputation internationally. It was not Opposition Members who are trying to hold the Government to account, as they are not only entitled, but obliged, to do in this House.

Those people were marching on Saturday afternoon last to change Government policy back to a position where there is some kind of a caring society created, where this is not all faced in the direction of the filthy rich and of that culture of corruption with the elite, and rather to turn it round to deal with those workers on low and middle incomes, for example, to deal with the cervical cancer immunisation programme costing approximately €9 million and which has been abandoned. It looks to society that the only people benefiting here are the bankers and the filthy rich, and as for the rest of society, they can go to heck and do not matter. That is grossly unfair.

The banks lending policy was a joke. The regulator, the Central Bank and the Government should have reined in this but not one of them did. I had a case in my constituency office a few weeks ago of a 54 year old man in very poor health who went to a bank at 50 years of age and was given a 20 year mortgage. He was a tradesman in the construction sector and was expected to work until he was 70 years of age to pay back that loan. He is now about to lose his home and he is distraught. In my book, the lending institution was at least as culpable as the man was foolish for taking out such a huge loan. It is a disgrace that the banks are getting away with that.

There is an absolute necessity to create a credit stream that will run from the banks to small and medium enterprises. Not only do viable businesses depend on that, the jobs therein are also crucial. We know the cost of unemployment to the Exchequer and the business case that can be made for a credit stream without any of the social issues being included, so I hope the Government will recognise that and put something in place.

Debate adjourned.

Dáil Éireann debate - Tuesday, 24 Feb 2009