As the Deputy will be aware the level of impairment of assets in financial institutions has, from the outset, been a key consideration in the assessment of the risks and the appropriate interventions by Government required to address and correct the particular difficulties being faced by financial institutions in Ireland. The Financial Regulator engaged PricewaterhouseCoopers to examine the capital position of the institutions covered under the Guarantee Scheme. This examination included an assessment of the level of impairment of assets under various stress scenarios. A further assessment of the market values of land and development assets was carried out by Jones Lang LaSalle to complement this work.
It is clear from international experience and from our knowledge of the issues in the national context, that there is no single solution to the problems faced by financial institutions. The provision of the Guarantee stabilised the liquidity position for the covered institutions and provided confidence to depositors in the institutions. The recapitalisation of AIB and BOI addresses both the expectations of international markets on the Irish bank's capital levels, and strengthens the ability of the institutions to cope with impaired loans in conjunction existing reserves and retained profit from performing loans and other trading activities.
I will examine various proposals, such as risk insurance, for the management and reduction of risks within financial institutions with respect to these specific exposures, having regard to international developments and to the best interest of taxpayers. Ongoing work at the level of the European Central Bank and in the EU will inform the process. I will be carrying forward this work to produce proposals as a matter of priority.
Furthermore, in the context of the six month review of the guarantee Scheme to be completed by mid-April 2009 the Government will examine how the Scheme could be revised subject to European Commission approval and consistent with EU State aid requirements, in ways which include supporting longer-term bond issuance by the covered institutions. This would be in line with international and EU trends where the average term of State cover for bond issues extends beyond 2010.