The following arrangements apply pursuant to today's order of the Dáil: a Minister or Minister of State shall take questions and the proceedings, if not previously concluded, shall be brought to a conclusion after 80 minutes.
Statements re Minister for Finance’s announcement on banking of 30 September 2010: Questions
We would all like to sympathise with the Minister on his recent sad bereavement on the death of his uncle.
There are a number of questions I would like to put to the Minister arising from the discussions since the announcement on "Black Thursday" of the level of the banking crisis. I will begin with my first question. On yesterday's Dáil record, the Taoiseach referred to the €31 billion in promissory notes, which the Minister initiated in respect of Anglo Irish Bank on his announcement on the Tuesday before Easter last, and which in the case of Anglo Irish Bank now amounts to €25 billion.
Or will amount to that.
Or will amount to that. I understand that €6.4 billion of that will be listed before the end of the year. The amount in the case of Irish Nationwide Building Society is €5.3 billion of which, I understand, €2.7 billion will be announced before the end of the year. The amount in the case of the EBS is €250,000. The Taoiseach referred to this as a mortgage. At the time of the Minister's announcement of these as promissory notes, it was not absolutely clear what their impact would be on Government accounting. When I visited the Department of Finance——
I am anxious to accommodate as many Deputies as I can and if they ask succinct questions rather than make long preambles, we can have can have a dialogue across the House.
I now understand that this is the equivalent of a national mortgage of €31 billion and that these mortgages have been negotiated at loan rates of current market rates, which at the time they were issued, and will be issued, run between 4% and, unfortunately, 6% plus. Therefore, that means that the €31 billion will carry an annual interest charge of €1.5 billion. Does the Minister accept that there will now be an annual charge of €1 billion to €1.5 billion in our national budget statements for the next ten to 15 years? Can he confirm that?
I understand that the adjustment or the interest charge for this year, which started some time around May when these promissory notes were issued, is €700 million. Has that been included in any revised estimates of the deficit for 2010? Can the Minister tell us how that will be treated in the final 2010 accounts?
I have a number of other short questions.
I will call Members a few times if they——-
I want to give the Minister notice of my second question.
I will call the Deputy later to ask her second question.
It is a very important one.
If the Deputy does not simply give notice of the question, she is asking the question.
I want the Minister to be put on notice that I want to ask about the directors and executives of the banks. I want a comprehensive statement from him about the situation regarding proceedings, particularly in view of the fact that the former managing director of Anglo Irish Bank has taken refuge in the courts of the United States and on what implications this has for any kind of accountability by this gentleman and others, who have been directors or chief executives of banks. What will the Minister do to ensure that this particular individual is made accountable to the Irish system? He has now got refuge in the United States.
First, in regard to the promissory note, which is an important question, to understand the exact circumstances surrounding the note — Deputy Burton fairly accepted the correction on that — the position is that to date, €18.88 billion in promissory notes have been issued to Anglo Irish Bank in three notes issued on 31 March, 28 May and 23 August. The note issued on 31 March bears an interest rate of 4.1745%; the note issued on 28 May bears an interest rate of 4.5693%; and the note issued on 23 August bears an interest rate of 5.1316%. The outstanding note will have a value of €6.4 billion. It will be issued before the end of the year and the interest rate cannot be fixed for that as of yet.
That amount will represent a sufficient amount to ensure that Anglo Irish Bank can meet its regulatory capital needs. The final value for the note will be settled when the bank's loan transfers to NAMA are complete and the bank's capital requirement can be more fully determined subject to the relevant EU approvals within the context of the restructuring plan for the bank.
The overall final value for the note will be paid to the bank in instalments over an estimated ten to 15 years. The duration of the repayments to Anglo Irish Bank will depend on the final value of the note and any interest rate accrual on the promissory note. It is important to understand that the actual payment of the interest is deferred in cash terms.
I am aware of that.
No, but I refer to the actual payment of the interest not just the capital; the interest also is postponed in cash terms to the end of the repayment term. However, in accountancy terms, the obligation to pay the interest is treated to have arisen when the obligation accrues. The repayments of the note will be made on an annual basis until the final principal value of the promissory note, together with the appropriate interest rate on the note, has been covered.
Take the current €18.88 billion for present purposes, it is expected that note will be paid off over ten to 15 years depending on whether the interest is paid annually or added to the principal. Under the terms of the promissory note, the note will be paid in full at the time of any winding up of the institution. This condition is in line with the required process for the winding up of any business.
An interest rate is included in the terms of the note to enable the bank to value the note at par on its books and therefore achieve the capital benefit the bank requires to meet its regulatory capital requirements. The principal value of the note, together with the appropriate interest rate, will be paid in instalments over ten to 15 years depending on whether the interest rate is paid annually or added to the principal.
Will that be about €3 billion a year——
No, I would not accept that figure.
——when all the notes are issued?
No, but in GGB terms it has been calculated, for example, next year as being a sum of about €1.5 billion for accountancy purposes even though there is no cash sum of that amount transferring.
That is the interest whereas the capital sum is approximately €3 billion a year.
It is €1.5 billion next year.
No, the Minister is wrong.
We are both right and wrong. Deputy Burton is talking accountancy while I am talking money. The capital sum is already paid for general government balance, GGB, purposes. That is why there is a spike in the GGB this year. The interest will be factored into the GGB next year, although the amount actually paid next year will not reflect that.
Yes, but——
Please Deputy Burton, allow the Minister to finish his reply. I also want to open the session to other Members.
We need a PowerPoint presentation on this.
We do not.
We need lots of money for this.
The interest rate of the promissory note is currently fixed according to the ten-year bond yield.
Will the outturn for this year be higher because of the €700 million adjustment in respect of interest this year?
To date in 2010, the Government has committed to giving cash of €31 billion, as I outlined already, in the three promissory notes. As the actual cash is not being paid up-front to the institutions, interest must be paid so the institutions can value the notes at par on their accounts. The terms of the notes allow interest to be rolled out after the principal sums have been repaid. The interest rate is based on the ten-year Government bond yield.
The payment of interest on the promissory note is expected to be rolled forward after the principal payments. For general government accounting purposes, the interest must be accrued to the years in which it arises. The accrued interest, therefore, in 2010 is currently estimated at just over €700 million——
Deputy, please allow the Minister to continue without interruption because we need to progress to other questions.
——even though there is no actual payment reflecting that. This will rise to approximately €1.5 billion next year, but again no actual payment will reflect that, before declining in future years. It is from there I suspect the Taoiseach developed the analogy of the mortgage although I do not think such an analogy is necessarily useful in this context.
Yes, I think it would help——
Deputy, please allow the Minister to address the second question. We have been on only one question for 15 minutes.
The reason the notes carry interest is so they can be valued at par-for-capital purposes.
Not everyone would agree because——
I call the Minister to respond to the second question.
——there is a longer period of zero-rated bonds.
Deputy Burton cannot monopolise the session.
It is estimated the annual debt interest costs on cash borrowings, based on current interest rates, will be approximately €200 million beginning in 2011. The cumulative interest costs on the cash borrowings will increase as the further €3 billion in cash payments are made each year.
Will the Minister respond to the second question?
I want to ask another question.
No, Deputy Burton, please. Other Members are indicating and we have spent 15 minutes on this first question. I call Deputy Noonan.
First, I wish on my behalf and of my party to sympathise with the Minister on the death of his uncle.
To move on to prose after all that poetry. The Minister will appreciate an issue arises concerning the reliability of forecasts by the Department of Finance. The forecast for growth in the last budget transpired to be seriously wrong. The forecast on which all parties relied for their economic policies before the 2007 general election was seriously off-line too.
When the bank guarantee was introduced, the Minister told the Dáil that night that the total liabilities for Anglo Irish Bank would be approximately €1.5 billion. Later on, when Anglo Irish bank was nationalised in January 2009, the Minister's forecast had gone up to €4.5 billion. During 2009 it began to creep up even more with the Minister claiming between €8 billion and €10 billion would be needed. Suddenly, the figure was up to €20 billion, drifting even further to €24 billion. We are now at a range of between €29 billion to €32 billion as being the absolute liability. Who was giving the Minister this information? Was it coming from the Central Bank, the Financial Regulator, or solely from Anglo Irish Bank? Was he relying on information provided by his Department? Will he trace the instalments of the estimates he communicated to the House? Will he explain why his estimates of liability were so wildly wrong?
I thank Deputies Noonan and Burton for their sympathies.
My Department did not get its forecast wrong in last year's budget. Its forecast for growth this year has been substantially correct to date and borne out by events. What has caused our current fiscal difficulties has been a marked deterioration in the general international climate in the years ahead. The difficulty in the current fiscal position——
This is a three-year budget. The Department got it wrong for 2011.
This is important for the country. The Department did not get its forecast wrong for 2010. Yes, there are difficulties with the medium-term forecasts which derive from international factors. Markets are saying that too. If the Deputy has difficulties with the Department's forecasts, he knows with whom he can consult.
Before the nationalisation of Anglo Irish Bank, I relied on information supplied by my Department as supplemented by the exercise conducted by PricewaterhouseCoopers. Immediately prior to nationalisation, an intensive exercise was carried out on Anglo Irish Bank by PricewaterhouseCoopers which made up the framework of the decision to nationalise it.
After nationalisation, I relied on information supplied by my Department, as assisted by the bank's board and management. There was a change in the bank's management upon nationalisation.
For the subsequent information establishing a deteriorated loan book in the bank, I relied on information supplied by my Department, based on the analysis which NAMA had conducted on the bank's books.
When consultants, such as PricewaterhouseCoopers, advise the Minister on matters like this and it subsequently turns out their forecasts are wildly incorrect by large margins, does he still pay them? Does he keep them on his list for subsequent employment? Does he believe a payment system based on accurate results should be introduced? Does he feel those who do not do what is written on the tin should have their invoices honoured?
They promote them instead.
That is the public service approach.
The Minister should read their reports. I do not think he has anyway.
The science of forecasting is a difficult one.
Evidently.
To establish finality in this matter, it was essential to establish the National Asset Management Agency. Accountants examining a bank's books are very dependent on the word of the institution and its officials in arriving at their conclusions. There is no suggestion the accountancy firm in question was in any way conflicted by the institution; I assume it was reliant on information supplied by the bank's own officials and management. Until NAMA was established, it was difficult to get to the bottom of the exposures in the banking system.
The announcement I made last Easter on the preliminary assessment made by NAMA of the banks' exposures was also reliant on information supplied by the institutions themselves. It was only until NAMA, as required by legislation, was able to conduct an individual valuation of each loan that the true extent of the exposures was established.
With regard to the figures that were supplied on 30 September, these were supplied following very detailed consultations regarding Anglo Irish Bank between NAMA and the new board and management in place at Anglo Irish Bank, the regulator's view on the capital required and the National Treasury Management Agency's assessment. All of these bodies participated in the computation of the final figure for NAMA and, as the Deputy knows, the transfer of assets to NAMA was accelerated through an accelerated valuation procedure.
Are there penalties in law for people involved in banking who knowingly supply false information to the Minister, the Department, the regulator's office and the Central Bank? When will we see some action in the pursuit of people who knowingly supplied false information on which major decisions were taken? This is now costing the taxpayer €32 billion, which is seeping back into the national accounts through the promissory note mechanism to which Deputy Burton has drawn attention and magnifying the problems the country is facing at present. Is there law that covers this and does the Minister intend to take action?
One would have to examine the precise circumstances in which information was forwarded, the individuals who forwarded the information, the extent to which they intentionally misled or the extent to which they were guilty of wishful thinking. The Deputy will appreciate that I am not privy to all those facts. If there are matters which require criminal investigation, they will be investigated in that context. It is not clear that there are criminal exposures here.
I call Deputy Morgan.
The fraud squad is in there.
I call Deputy Morgan. We need to have everybody involved.
The fraud squad has been there for almost two years. What is happening? There are 40 people in jail in America.
The Minister is not accountable to the House for the fraud squad.
He is in a Cabinet that includes the Minister for Justice and Law Reform and the Attorney General. On the direction of the Government the Garda Commissioner sent the fraud squad in there in January two years ago. What is happening?
I understand that it is investigating various matters in Anglo Irish Bank, which are not related to the matter which the Deputy questioned me about a minute ago but which relate to matters which occurred at that institution in 2008 and perhaps in previous years. These matters are being investigated and the necessary files will undoubtedly be submitted to the Director of Public Prosecutions in due course.
It is going very slowly.
On my and my party's behalf I offer my condolences to the Minister on his recent family bereavement.
My question relates to the bondholders, both senior and subordinate. Is the Minister aware that the terms of securities allow for the possibility of them not being paid back if a bank is insolvent? Clearly, that was the case here. Is he familiar with the term "the value of your investment can go down as well as up"? We hear it every day on the media. Does that apply in the case of securities other than sovereign debt?
The Deputy correctly distinguished between senior bondholders and junior or subordinated bondholders. As I indicated in my statement on 30 September, much has been said about the various obligations in Anglo Irish Bank with regard to different bonds. The senior debt obligations rank equally with deposits and other creditors under Irish law. The Deputy referred to the terms on which they were issued and the prospect of insolvency for the holders of that debt. Clearly, in the event of the insolvency of an institution, the holders of that debt would be on the same footing as depositors. There would be no distinction between depositors and the holders of that debt.
Does the Minister have a legal opinion on that?
Yes, that is the advice of the Attorney General and they are the terms on which these instruments are issued both——
Can the Minister share it with us?
These instruments are commonly issued under English or Irish law and that is the position in English and Irish law. The Deputy does not need an opinion from the Attorney General. His research assistant should be able to establish that much for him without recourse to an opinion from the Attorney General. That is the position. The Deputy has research assistants in the United Kingdom as well as Ireland so he is in a better position than any other party in the House to determine that issue.
Shame on the Minister for using such terminology.
I simply refer to the existence of an entity called the United Kingdom. I did not refer to its union with any part of Ireland.
Our focus is broad enough with the issues at hand.
I am simply pointing out that the Deputy has the research capacity to check this out without having to trouble the Attorney General further on it. The matter is very clear in law. That is the position with regard to senior debt.
With regard to junior or subordinated debt, it is commonly issued on the express terms that it is deferred in the event of an insolvency as against the claims of the depositors and the senior bondholders. It is in a postponed category in an insolvency. That is the reason the word "subordinated" is commonly used in this context — it is subordinate in an insolvency to the claims of the other instruments. As I made clear in the announcement on 30 September, appropriate burden sharing by holders of subordinated debt is a principle with which I agree. The losses in Anglo Irish Bank and Irish Nationwide Building Society are substantial and those bondholders must accept a very sharp discount in the value of their instruments having regard to the events that have happened, the terms upon which they were issued and the fact that these institutions would not be able to survive in the absence of taxpayer support.
My Department, with the Attorney General, is working on resolution and reorganisation legislation which will enable the implementation of measures which can address the issue of burden sharing by subordinated bondholders in institutions that are not listed on the Stock Exchange and which are wholly nationalised by the State. That legislation will be consistent with the requirements for the measures to be recognised as a reorganisation under the relevant EU directive in other member states. I understand that the management in Anglo Irish Bank will be carrying out an exercise to re-purchase the debt at a very substantial discount. That is the current position.
I had not taken the Minister to be a wee Englander. I always thought he was reasonably sound on the national question but I will watch that space in future.
Does the Minister accept that he could have introduced emergency legislation before he nationalised Anglo Irish Bank to ensure that the taxpayers of this State would not be in hock to the bondholders of Anglo Irish Bank to the tune of €34.3 billion or, as I believe it to be, €37 billion? He could have prevented that if he had acted proactively through emergency legislation. He certainly had enough notice about how bad the bank was.
No, I do not accept that. Were it as simple as that, I would have been advised to do it by the Central Bank, my Department, the Financial Regulator and the National Treasury Management Agency. None of these advised me to take that action; all of them advised me not to take such action.
It is worth noting what has happened in the few weeks since I made the announcement on 30 September with regard to subordinated bondholders. As a result of this and although the Government has made it very clear that it does not apply to banks that are listed on the Stock Exchange, the markets have already read through this decision to the other Irish banks and have categorised their subordinated debt as junk in status. That does not affect the funding position of those banks at present since they are not in the market for subordinated debt and they have carried out substantial liability management exercises. However, it illustrates the dangers of this loose talk about bond default. It is clear that were the question of senior bond default to be even contemplated, it would have created a run on the banks and on the State's funding and a financial collapse for the country.
It is not loose talk; it is public debate.
I call Deputy Higgins.
Public debate has done a great deal of damage to this country and that was confirmed——
I have called Deputy Higgins. The Minister should allow me to conduct business.
I too would like to offer my sympathy to the Minister on the death of his uncle.
I do not regard forecasting as a science, as the Minister has referred to it, nor do I regard his scenarios as any aspect of science. I would like to ask one or two macroeconomic questions. If one takes as a departure point the most benign of the ESRI's models for exiting the recession, which suggests that in 2014 Ireland will have a growth rate of 4%, an unemployment rate of 10% — which depends on sets of assumptions relating to how the deficit is managed — the Minister is dealing with the current deficit and the achievement of targets over four years and, at any given time, the contribution to the deficit by the ghost of Anglo Irish Bank. None of us on this side of the House and in this party ever referred to it as a viable bank present, future or past and I am not sure that many others are hanging on to that illusion now, which is certainly neither scientific nor practical. There is the contribution, therefore, of the €1.15 billion, which people can understand and which will rattle on as the interest on the promissory notes that have been transferred to a different form of liability. The Minister is interesting when he suggests no cash changes in this regard. On the other hand, for European Commission purposes and for reputational purposes, it counts because it affects the figure the Minister throws up.
That leaves us in a position, which I want to put forward out of practical concern. If one takes what is happening in regard to the deficit and the figures published, the greatest disappointment relates to income tax and that is connected to the increasing unemployment figure and the cost of unemployment is related to social welfare expenditure. While the interest rate on the promissory rates will remain a constant, if unemployment increases, the deficit will increase and, therefore, the Minister is speaking of inflicting grief largely sourced from, and facilitating, the legacy of his banking solution, at a cost of rising unemployment.
I hope we have agreed that forecasting is not a science. The Minister has to be able to say what is the connection between the projected deficit, the projected or assumed range of economic growth rates and the unemployment rate. Perhaps he will want to tell us when Ireland envisages returning to the international bond market. Surely a strategy for converting Irish savings, which are at an enormously high proportion at the present, no matter what way they are measured, would be a domestic source of funding for practical spending with the added advantage that it would be retained within the economy and with a high multiplier.
The Deputy asked a wide range of questions. I will begin with a point of agreement before I proceed to the points of disagreement. I agree with him that forecasting is an art rather than a science, although I use the metaphor of meteorology regularly, which is a science.
Weather forecasters are better.
That is not saying much.
Is the Minister sure he does not want to consider astrology?
No, we are not quite in the country of tossing a coin or consulting an astrologer.
The Minister is close.
We are in a considerably more certain country than that.
Some of the Minister's outcomes sound like that.
There are one or two clear matters.
Deputy Higgins asked when we intend to return to the international bond markets. We intend to return in January.
Has the Minister a strategy for handling the savings available to him?
The international bond markets will make a judgment on the credibility of the financial track we adopt in the next few weeks, which is of fundamental importance to the future of the country.
With regard to the question of employment and growth scenarios, clearly, in drawing up the fiscal plan allowance has to be made for growth but we must start by reflecting on the fact that we saw a substantial collapse in our revenues in 2008 and the gap between our receipts, including all the moneys the State receives, and our expenditure has remained substantial in that period. The annual cost of the bank rescue will be between €1.5 billion and €1.7 billion. That was made clear by me in the House last month. That figure is less than 10% of the gap that has opened up between what we bring in as a State and what it costs to run the country day by day——
What is it as a proportion of the growth rate?
——and even if one leaves aside the question of the expenses of the State and considers the interest bill the State has to pay on accumulated debt, the bulk of the interest bill relates to money we have borrowed for capital or current day-to-day purposes and not for banking purposes.
The interest rates relate to the banking crisis. The Minister's analysis is faulty.
The Minister, without interruption.
I agree with the Deputy that the stress the banking system has been under and its fragility has contributed to increased interest rates for Ireland.
The interest rate has doubled.
I do not take issue with the Deputy in that respect.
The Minister wrecked our fiscal position.
He wrecked confidence in Ireland.
If one wants to wreck confidence in Ireland, collapse the banking system altogether.
That is what the Minister did. He collapsed the country.
That is the only policy the Deputy has advocated——
It would be helpful if the Minister did not engage Deputies directly.
I apologise to the Leas-Cheann Comhairle for engaging in any direct conversational way.
I am trying to deal with Deputy Higgins's questions. He raised the macroeconomic forecasts of the ESRI. I understand it will publish a document tomorrow. However, the position is incontestable that there is a substantial gap between what the State receives and what the State spends and that what the State will have to spend in the years ahead on banking is a small fraction of that. There is an obligation, therefore, on all of us in this House to reflect on that gap and to see what we are going to do about it. In reflecting on that, the question of the prospect for growth must be taken into account and, in the original plan submitted to Brussels, clearly, an assumption was made about growth, not this year because this year's forecast has proved to be correct, but next year and next year's forecast and the forecast for the ensuing year are seen at this stage to be on the optimistic side. That is the primary reason a steeper correction will have to be conducted this year and that is the primary reason the markets see.
That is why to return to the markets and to borrow — we all want to borrow on the markets to maintain the State services at a certain reasonable level — it will be essential to have a credible financial track way, not just for next year but for the next four years. That is a current obligation of the Government and not, as the Deputy's leader has suggested, some attempt to usurp the mandate of the people or the mandate of the next government. That is a clear and present duty for an Irish Government to perform and if an Irish Government did not do so, it would be faced with a worse correction to execute immediately and no credible plan for an exit.
I asked about the Minister's strategy for turning the extraordinarily high volume of savings, which is reflecting a fear in the economy, into an available source of funding, which would give him leverage, even with the markets.
I will reflect on the Deputy's suggestion in that regard in the context of the budget.
There is science in forecasting but there is also an opinion. We would value it if we got the Minister's opinion and his call on the forecasting because there will be facts and figures and there will be his version of what he thinks they are. We need it in order to be able to work on the figures so I ask if the Minister could provide it in the near future.
I have a couple of questions for the Minister. The threshold for loans being moved to NAMA started at €5 million and has now increased to €20 million. I ask the Minister to elaborate on the reason for this increase. On the issue of restoring trust in the banks, Deputies were being told by constituents that banks were increasing customers' loans in order to bring them over the threshold of €5 million and so put them into NAMA. Has the Minister any evidence of this practice and if so, is it of concern to him? Could this still happen with regard to the threshold of €20 million? I ask for the Minister's comments on how to ensure this cannot happen. We have to be able to trust banks again.
Anglo Irish Bank will be split into an asset recovery bank and another bank. Is this option being considered by the other banks? Bank of Ireland and Allied Irish Banks will also have loans of €20 million which I thought they would be handing over. Can they handle those loans or will they need to consider some form of asset recovery within their own structures? I am assuming they are not considering this option but I ask if it is being considered.
The head of the credit review board spoke at committee about the loan guarantee scheme and the national recovery bank. We are pursuing the loan guarantee scheme because it should have been done two years ago but it is still being considered. He differed with the Opposition on that point but that is fair enough. I ask for the Minister's opinion on whether there should be a loan guarantee because it is essential to move this along. The Minister gave us a promise that NAMA would deliver credit to business and this has not happened. This is a failure that will probably hang around the Minister's neck for a long time. However, the loan guarantee scheme might be of assistance.
The head of the credit review board agreed with me in committee when I asked him about the need for a State recovery bank. Fine Gael calls this a national recovery bank and we called for its establishment about two years ago. We published details of how it could be established easily. Now that the State nearly owns AIB, this could be done through AIB without having to set up a new bank. The concept of a recovery bank is to get money moving back to business. The head of the credit review board wanted it to be considered from the point of view of competition. I do not really mind what way or for what reason it is established because it will benefit business in any case but I ask for the Minister's opinion. Is there a danger of a lack of competition in the banking sector as a result?
The Deputy has asked a number of questions.
I have two brief questions.
Please.
The Minister recently published a statement on the paid advice and evidence he had sought on the bank guarantee scheme. Did the Minister receive any advice for which he did not pay and which the House should know about? He might wish to share such advice with the House, if it exists, as it might help us. If any advice exists which affected the Minister's decision it would be helpful to share it with the House. My final question is to do with the issue of trust. People were concerned that Deputies might be approached to use their influence with NAMA. The Minister now has a strong influence over the banks because he has invested a lot of our money in them. Has any individual approached the Minister or his office or any other Minister to influence these banks with regard to debt restructuring and such matters?
The Minister to reply to a list of questions.
It is a long list of questions. The opinions of my officials have been conveyed in the form of scenarios to the party spokespersons——
They are paid staff; I asked about unpaid opinions.
As I understand, opinions about the fiscal position have been conveyed and clearly the Government and myself, as Minister, will have to come to a final conclusion on all the opinions in this matter in the context of the formulation of the four-year plan.
I refer to the question of NAMA and why when NAMA individually valued the loans the discount was far higher than that originally envisaged. There are a number of factors, of course, but three in particular have been drawn to my attention. One was the poor level of security obtained by some institutions in respect of assets which should have been secured as part of the loan transaction and I understand that was a particular difficulty in the Irish Nationwide Building Society. A second factor was the optimism, indeed, the recklessness of the original loans themselves, in the context of the estimate which the institutions gave themselves of the loan to value ratio of the loan. A third factor was the extent to which the banks had rolled up interest as part of these loan arrangements. There were also other factors but those three were the significant factors in the deterioration of the original NAMA estimate to the final conclusion of the valuation and the figures given on 30 September.
The plan for Anglo Irish Bank envisages the bank being split into two banks, a savings bank and an assets recovery bank. Clearly, the assets recovery bank will still function as a bank in the sense that it will lend money to enhance the value of its own loan book but it will not engage in substantial additional or other lending. This is not what is envisaged in the case of Bank of Ireland or Allied Irish Banks, although, as the Deputy rightly says, it is the case that the threshold has been amended. It was decided that loans of debtors with a total exposure below a threshold of €20 million in Allied Irish Banks and Bank of Ireland, will not now be determined to NAMA. The threshold had previously been set at €5 million. These account for €6.6 billion of the aggregate €80 billion volume of NAMA eligible loans. The rationale for this new threshold is that loans of this size can be efficiently managed by the banks themselves through their network of local representation and relationships. The regulator will ensure that the banks put in place prudent provisioning for these loans. That is the position with regard to those loans.
The Deputy also discussed the issue of the loan guarantee scheme and the national recovery bank. It is important the Deputy understands what a loan guarantee scheme means.
I understand it.
We are talking about institutions with a proven track record of utter recklessness in the provision of credit and the Deputy is suggesting that the State should give a fresh guarantee to banking institutions in Ireland.
That is not my suggestion. I asked for the Minister's thoughts on the loan guarantee.
I am giving the Deputy my thoughts——
The Minister should not assume what I am thinking.
I am giving the Deputy my thoughts——
Allow the Minister to reply.
If the Deputy is suggesting we should look at the option of guaranteeing the loans, irrespective of the consequences in terms of the repayment of the loan, a guarantee means, of course, just that. I believe we must proceed with great care in this matter. There may be some scope, however, for guaranteeing arrangements which facilitate the flow and repayment of credit. I have asked the credit review office to examine this and I understand it is in discussions with the Department of Enterprise, Trade and Innovation, about the scope for such arrangements.
On the question about the national recovery bank, we would all like to see a national recovery bank but the reality is they are having great difficulty raising money in this State. Our interest rates at one stage, prior to the announcement at the end of September was 6.9% on ten-year money and it has fallen far closer to 6% as of today. It is even at higher rates that the banks must raise money because the cost to the sovereign of raising money is always cheaper than to banks. Clearly, the national recovery bank or any bank, will have great difficulty raising funds at those sorts of levels. This is the reason we have to focus on this important——
I am anxious we make progress with questions.
——fiscal issue. The Deputy has asked a large number of questions and I am trying to conclude. On the question of payment for advice, at the time of the guarantee and of the various banking decisions, the public servants who advised me are not given any specific fee for their advice; they perform their duties as public servants. Various advisers were retained by my officials and they were paid. On the question about representations to NAMA, the position is very clear. From time to time Deputies make representations about banks and these are dealt with in the normal way through the institution but there is certainly no question of using influence or exerting pressure on the banks in that connection.
My question is whether anyone approached the Minister or his office.
No. A Deputy might have a difficulty with a particular loan and I would simply forward the correspondence.
Thank you. I have a brief supplementary question.
I will try to return to the Deputy but he must allow other Members in who have not asked any questions. The Deputy has asked six questions and he should allow other Deputies who have asked none.
I refer to a reply by the Minister to my Parliamentary Question No. 188 of 18 May 2010 in which I asked him to publish the full list of bondholders involved in Anglo Irish Bank, in view of the fact that Anglo Irish Bank is in State ownership and given the extent of the Irish public's exposure. The Minister replied that detailed information on bondholders of domestic credit institutions' senior and subordinated debt is not available. He stated that, unlike in the case of shares, the holders of credit institutions' senior and subordinated debt instruments are not subject to a disclosure regime. Has the Minister taken time to inform himself who are these bondholders? Does he understand the tremendous anxiety on the part of the Irish public to know who is more important than they in the consideration of this Government in respect of what were not gilt-edged or guaranteed investments? They are being treated as such as a result of the Government's decisions and placed above the daily needs of ordinary people who are suffering grievously. In May the Minister indicated he could not say who they are but I have a list of 80 possible suspects and I wonder if the Minister is aware of some of these.
Chelsea.
I will cite a small number of them: Alliance Global Investors France SA, Barclays Wealth Managers France, BlueBay Asset Management Ltd, BNP Paribas Asset Management, Brown, Shipley & Co Ltd, Crédit Suisse Asset Management, Deutsche Asset Management Investmentgesellschaft, European Credit Management Ltd, Frankfurt — Trust Investment, W&W Asset Management and WGZ Asset Bank Luxembourg. I understand this list of 80 contains Anglo Irish Bank bondholders and the composite figure of the face value of the bonds they hold exceeds €4 billion. Can the Minister offer further information to his reply of 18 May? Does he accept at this late stage that these are the people who should take the hit, not ordinary taxpayers? I could not pronounce most of these institutions because they are German. A reasonable question has been put to me and I now put to the Minister. Has the Irish Government been put under specific pressure in regard to bondholders vis-à-vis Anglo Irish Bank from the European Central Bank or German interests in order to protect investors in Anglo Irish Bank, the vast majority of whom are German?
The Government is under no pressure from external influences in that regard. Bondholder instruments are traded on markets so there is no register of the current holders. It cannot be established with reliability at my Department who is the current holder. Deputy Ó Caoláin provided a list of names and I recognise some of the names as institutions that subscribe to Irish State debt. Some of the entities to which Deputy Ó Caoláin refers assist in the payment of our salaries in the House, which in part must be funded by borrowed moneys. Bonds are traded on markets, sometimes at a discount, sometimes at par and sometimes in excess of par. However, they are not instruments in respect of which there is an international register through which I, my Department or the Government of another state can reliably authenticate the current holders.
Does the Minister still not know who they are?
They are crucial in international funding. Ireland is crucially dependent on international funding. I mentioned our salaries in the House. It is a matter of public record that the State requires to be funded on a day-to-day basis with borrowed moneys, the vast majority of which are borrowed from lenders of the character described by Deputy Ó Caoláin. I recognised several of the names read out as names of institutions that continue to express their confidence in this country by subscribing to Irish Government bonds.
We are talking about Anglo Irish Bank bonds.
That is exactly the point. We are also talking about the funding of this State and the funding of the rest of the banking system, which is crucially dependent on bond finance.
The Minister elevated their investment.
We are also discussing the fact that one of the major factors sustaining this economy through this difficult time is the presence of a substantial multinational sector providing much employment and jobs.
Good people fell in with the wrong crowd.
Is this the end of the bad news we have been given for the past two years regarding the transfers, the figures provided at the top, promissory notes and the final €6.6 billion? On "Black Thursday", the Minister entered a process of accelerated transfers. Can we be confident the forensic examination of loans will be such that the Minister will not revert to us with more shocking news? Do we know what we are facing at this stage?
I wrote to the Minister regarding EBS, given its tradition and history of providing housing loans and mortgages, to ask whether the course of action he has embarked on was the only way forward. I speak as one of the 600,000 members of the society in former times before the takeover. I understand we are in the final phase of the sale of the bank and we are down to two bidders. Does the Minister have concerns that one of the bidders was involved in the possibly illegal funding of Anglo Irish Bank? What does the Minister intend to do with regard to the mutual model? Many felt that EBS was dragged into the situation to cover the situation in Irish Nationwide. To return to Deputy Noonan's point, are the fraud squad and the Office of the Director of Corporate Enforcement actively investigating the administration or governance of EBS before 2008?
Regarding private debt, has the Minister given consideration to the suggestions by Dr. Peter Bacon and others with regard to the massive overhang of private debt? I refer to young families in negative equity with huge mortgages.
The Central Bank has identified that the capital needs for Anglo Irish Bank in the proposed restructured state will be €29.3 billion. There will be some reduction in the figure taking into account the contribution to be derived by burden sharing by the holders of subordinated debt. However, we are also conscious that we must agree the final restructuring plan with the European Commission and the figures underpin that. The figure of €34 billion mentioned by the Central Bank refers to an extreme stress scenario and is based on an even more conservative assumption than in the stress cases used for other banks. The central case scenario of €29 billion is the appropriate forecast on the final cost of Anglo Irish Bank. Given the amount of work done by NAMA, Anglo Irish Bank, the National Treasury Management Agency, the Central Bank and the Financial Regulator and the dialogue between these institutions throughout the month of September, this will be the central core case scenario for Anglo Irish Bank.
Given the smaller scale of the institution, I am satisfied the figure for Irish Nationwide Building Society is a final figure. Deputy Broughan asked about the mutual model with regard to EBS. The mutual model failed here and the mechanisms in place, whereby depositors own the society, did not succeed in the sense that the management of the two Irish societies engaged in transactions that, in one case, were wholly discreditable and, in the other, were reckless. The relevant parties at EBS, responsible for the reckless lending, faced up to their responsibilities and resigned some time ago. Those at Irish Nationwide may face certain consequences, which the board must pursue.
Did Educational Building Society executives break the law?
The mutual model therefore does not have a very good record in the context of what we have seen and witnessed in the two institutions.
The directors within the mutual model, not the depositors.
That is correct but whether the model is sustainable in terms of corporate governance to prevent a repetition of that type of activity is an issue on which we will all have to reflect.
In other countries——
The flaws are of individuals not the model.
So be it, but the directors were elected by the depositors. That is the model.
On the interest that has been expressed in the Educational Building Society, I understand the National Treasury Management Agency has finalised a list of two preferred bidders. I have yet to see its submission but I understand it has prepared one in that regard. The Educational Building Society will continue to be examined and benchmarked against the possibility of a straightforward State investment because that is the third option for the society.
What about the two institutions?
I will come to that in a moment.
Briefly.
One of the institutions was referred to by Deputy Broughan. I take it he was referring to Irish Life & Permanent. The matter to which he referred is under investigation by the Garda Síochána. It is far from clear that there was any criminal conduct involved but the matter is under investigation. There is no suggestion that the episode necessarily taints the validity of any bid it might wish to make for the EBS.
On private debt and the proposal by Dr. Bacon which I have examined, it is clear that all those matters are being examined by the working group that has been set up to deal with home owners and borrowers who have difficulties with the banks. I understand a further report from it containing recommendations that will be acted upon will be published in a matter of weeks.
The Minister has told us that the annual cost of the bank rescue will be €1.5 billion to €1.7 billion per annum which is a considerable cost for the foreseeable future to the taxpayer in terms of the fiscal gap. Others have raised the question of whether the people who gave the so-called expert advice which proved so spectacularly wrong are going to be paid for it. Has the Minister sought cuts in terms of the cost of those experts, valuers and legal advisers who are going to make a lot of money out of all of this in the same way as he will be seeking to cut the incomes of lower paid workers in the budget?
Has he received expert advice on how the drop in employment and deflation will affect the outcomes in future years? We know, for example, that the income tax take is considerably down on what was forecast for this year and it is likely to be similarly reduced in the future if the economy remains deflated, people are not working and small businesses are not getting money from banks. Has the Minister received as much advice in that area as he has in the other areas to which he referred?
On the Minister's reply to Deputy Higgins, I understand there may be up to €90 billion in savings in the country, a much higher rate than would be normal. Could the Minister give us more information on how that money might be activated in terms of job creation so that we will have some reasonable tax coming in from income and some chance of recovery in the economy in the future so that we do not reach such a deflationary spiral that we can see no way of recovery?
I agree with Deputy O'Sullivan that €1.3 billion to €1.7 billion a year in cash terms is a significant figure. It is a most regrettable figure. However, apart from that figure, the gap this year is €19 billion. The gap between State receipts and expenditures, leaving the issue of the banks aside, is a very wide one. The figure speaks for itself.
I assure the Deputy that I received plenty of expert advice on all of those matters, both on employment, deflation, inflation and our economic prospects and forecasts. The question of whether an adjustment is required and the impact an adjustment has on growth is a very important one. She should note that the adjustment last year of €4 billion did not lead to a decline in our economy this year. That is striking. Notwithstanding the fact that there was substantial economic decline in 2009 with a 10% drop in GNP, the further €4 billion of cuts that were introduced last year did not cause any economic decline. That was not the position of her party at the time of the last budget. The Labour Party view is that it was a deflationary budget but it did not have that consequence.
I am sorry, but what about the number of unemployed?
The Minister should be allowed to answer the question.
Given that the fundamental issue of confidence that has to be addressed——
Talk about the smart economy, we now have stupid economics.
——in this country is how we recreate confidence in those abroad that we are able to manage our own affairs and that we are not going to have a continuing gap of €20 billion between expenditure and income——
The Minister is not able to do it.
If one is anxious about the release of €90 billion in deposits I suggest that promising marginal tax rates of between 60% and 80% will not procure their release.
The Minister did not answer my question about expert advice.
I did.
The Minister is back to spoofing.
One would not get the ESRI to print that one.
I call Deputy Olivia Mitchell.
The Minister is back to spoofing and bluffing.
There are no answers.
Please Deputies. They should allow others to participate.
I submitted a parliamentary question that was declined either by the Minister or the Department in respect of Anglo Irish Bank bonds. Unlike Deputy Ó Caoláin I was not looking for information on the names of the bondholders but I was anxious to discover the number and value of bonds that matured and were redeemed at face value during the period of the two year guarantee, and also the number and value of bonds for which a negotiated price was achieved, I presume prior to maturity, during that two years. Why could that information not be released? No element of confidentiality is required. I was not looking for the names of the bondholders. That should be public information.
The taxpayers now own Anglo Irish Bank. It is significant information to them in the sense that they paid for those bonds. They are entitled to know how much was paid and how much was forgone by not negotiating a price. I understand why the Minister might not wish to give the information but it is not confidential.
In early September I had information at my disposal and conveyed some of it to the committee on the then outstanding bond liabilities of Anglo Irish Bank, both subordinated and senior. I am happy to provide the Deputy with that information but I believe she is anxious to establish the position on the redemption or repayment of bonds during the guarantee period as a whole. I understand some of that information may be obtained from the annual reports but if it requires to be supplemented I am sure that can be arranged with Anglo Irish Bank.
Will the Minister answer the question if I resubmit it?
Yes, but I presume the question was disallowed for a reason.
The reason might be that the Minister might not like the information to be made public.
The Deputy has got a commitment from the Minister.
Have I?
The information is at the disposal of the bank. I will arrange for the bank to convey the information.
I thank the Minister.
It is not information that is immediately at my disposal.
The first of my two questions relates to the non-NAMA loan book and the quality of it. Is the Minister satisfied that enough work has been carried out by the regulator to rassess the quality of the non-NAMA loan book rigorously, in particular the mortgage book, SME loans, other commercial loans and now loans that had been destined for NAMA, between €5 billion and €20 billion? Is the advice available to the Minister that the banks have adequately provided for the expected losses in the non-NAMA loan book? Is such provision satisfactorily allowed for by the accounting rules? Between now and January, when the NTMA must return to the markets to raise funding, we must demonstrate a credible pathway to achieving the 3% target by 2014. Will the Minister tell the House what advice he has from the NTMA about what he needs to achieve in the budget and the four year plan to demonstrate that credibility to the markets between now and January so we can go back when interest rates have fallen to more sustainable levels?
The non-NAMA book was assessed by the regulator and his independent determination was that the provisioning envisaged in the capital sum is sufficient to cover requirements, which will be the asset of the asset bank in the future.
I welcome the fact that Fine Gael and the Labour Party accept the need to meet the 3% target by 2014. Deputy Morgan has indicated that his party does not, meaning that if we were to persist in that policy we might not be able to raise money in the future, accelerating a severe financial crisis.
The opposite is the case.
That is the advice of the NTMA.
The opposite is the case.
I was asked for the advice of the NTMA and I am giving it. A credible pathway must be demonstrated and that is why it is essential if we are to achieve a target by 2014 that we set out in detail in taxation, expenditure and growth plans how we will meet that target by 2014. On the growth side, whatever estimate we make, it must be realistic and based on existing sectors, while including decisions that will be arrived at by Government in the different sectors of the economy that will stimulate their growth and remove blockages to growth. Allowing for a general calculation on growth and allowing for the 3% we will be permitted to borrow in 2014, the remainder of that sum must be addressed either through increases in tax or reductions in expenditure. The four year plan must set out precisely where those reductions in expenditure can be identified. It is important they are identified so consumers and investors can decide with certainty what their disposable income will be in that period.
Will the Minister cast his mind back to the discussion on the night of the guarantee and, subsequently, with the representatives of the various banks and the governor and regulator? When the Minister agreed to a blanket guarantee and, subsequently, to further bailouts and the nationalisation of Anglo Irish Bank, at any stage did he seek undertakings from the chief executives, senior executives and boards of those institutions that they would stay in the country and undertake to make themselves available to the authorities to account for their actions?
Given the extraordinary size of the banking guarantee, which the Minister knew about and which we have been told to take on, did it never occur to him that there should be an inquiry into why such a catastrophic banking collapse took place? How was it possible that Mr. Drumm and a variety of other bankers and developers have been able to transfer properties and assets to their spouses, establish businesses and go to homes in other parts of the world, locating themselves in other legal systems? There was a lot of talk at the time of the blanket guarantee of due diligence being exercised. Was it not basic due diligence that the Minister for Finance, as the responsible Minister, would ensure that if these executives were to be bailed out, he would seek undertakings from them to remain in the jurisdiction so they would be available to the authorities?
The fact that the former chief executive of Anglo Irish Bank has found refuge in the United State's legal system does extraordinary damage to our reputation. That a central figure involved in the crony capitalism that links Fianna Fáil, the banks and the developers, can find refuge in the legal system of the United System does great harm to us as a country. Irish people have seen people in other jurisdictions go to jail, have seen them come before parliamentary committees to apologise but nothing like that has been possible here because of the way Fianna Fáil has treated this crisis. Ordinary people are as angry as it is possible to be that Fianna Fáil has facilitated this. Did the Minister not look for a single undertaking from Mr. Fingleton, Mr. FitzPatrick, Mr. Drumm and others to stay in the jurisdiction, remaining available at all times for inquiries while keeping their assets in their names, rather than transferring them, as they have done wholesale?
Other Deputies wish to contribute. I call the Minister to answer, the Deputy cannot monopolise all the time available for questions.
A plethora of bankers have transferred millions of euro to their spouses or families.
This time is to facilitate questions, not to make long speeches.
It is a legitimate question.
It is a long speech.
Can the Minister answer this fundamental question? Did he seek any undertaking to protect the interests of our system?
Before the Minister replies, everyone in this House is entitled to fairness.
Deputy Burton did not seek any such undertaking in the past two years by way of legislative amendment or proposal. She has decided to seek this undertaking today and ask why it was not sought two years ago; it was not sought because it is not possible.
I sought a report from the inspector of the courts.
Allow the Minister to reply.
I am allowed to answer a question.
I sought that two years ago. The Minister is telling untruths. This is more barrister bluffing. We want proof, not this codology.
Members will not be shouted down in this House. I will have order, this is a House of Parliament.
Does that entitle the Minister to tell untruths?
The Deputy is not entitled to accuse Ministers of telling untruths.
I looked for an inspector's report.
The inspector would not have been able to incarcerate anyone in Ireland, even if we agreed with Deputy Burton's inquiry. That is the point, citizens of this country have the right to travel overseas and that is why there was no basis for me to seek such an undertaking in the absence of legislative power to detain people here. That is the practical position and the Deputy knows that.
Barristers' bluster.
I do not know that.
She does know that, she knows a great number of things she does not disclose to this House because she wants to make a populist chant, which is easy to do.
It is not a populist chant, and the Minister is well aware of that.
That is a term of abuse.
It is not a term of abuse.
It is hardly a populist chant to seek that boards of management be held to account.
Please, Deputy.
That is not a populist chant. It is a requirement of Government.
Deputy Burton can give it, but she cannot take it.
She is seeking accountability from people who should be accountable.
It is mild compared with some of the suggestions she made to me in the question, for example, that I facilitated the escape of these individuals from the jurisdiction and the concealment of their assets. I assure her that I have been in constant discussion——
The Minister did nothing to stop them going. He looked for no undertaking.
Deputy Burton, please allow someone to speak in the House.
Anglo Irish Bank and the National Asset Management Agency, NAMA, are pursuing all debts owing to them. They are examining spousal transactions and ensuring they are set aside. There is legal provision for setting aside any transaction where assets are transferred to a spouse for the purpose of defeating the rights and just claims of creditors.
Regarding Mr. Drumm, the former CEO of Anglo Irish Bank who was mentioned specifically by the Deputy in terms of recovering outstanding debts, his outstanding liabilities to the bank are €8.5 million. The process has been ongoing for some months, with Anglo Irish Bank having instituted proceedings against him. The bank has sought to maximise the return for it and the taxpayer. The tactics adopted by it and its legal team are a matter for them in the day-to-day operation of the bank. I have been clear that the bank should pursue all debts owing to it and Anglo Irish Bank has instigated proceedings to achieve this.
While Mr. Drumm made settlement proposals, what was offered to the bank would have left a severe shortfall in the region of €4 million to be borne by the taxpayer, which was not acceptable to the bank. Its priority throughout has been to ensure that Mr. Drumm discharges the full amount due, even if that was spread over a number of years.
It is important to note that, beside the settlement of the bank debts, the bank was also seeking to ensure Mr. Drumm's full co-operation with the various investigations ongoing into the previous regime at the bank and was also seeking to ensure that, where there was a shortfall between the value of his assets and the debts outstanding, future earnings could be used to repay those debts. The bank sent its latest offer on 8 October. Mr. Drumm's representatives had not responded to this counter offer when he decided to file for bankruptcy in the US. It is now a matter for the bank and its legal team to assess this latest development and take whatever action is necessary to protect the bank and taxpayers' interests. The bank remains in contact with the National Treasury Management Agency on the issue as it progresses it and is keeping the latter briefed on the various proposals.
Will he be extradited?
Our time——
May I ask the Minister a supplementary question?
Will the Deputy please take her seat?
May I ask a supplementary question?
No, you may not. The Deputy has taken 20 of the 90 minutes so far. The time allocated by the House has expired. If the Minister wishes to propose it, we could continue until the sos at 1.30 p.m.
I so propose. I would be amenable to it if it was amenable to the House.
Is that agreed? Agreed. I will call Deputy Michael Ahern, after whom I will call Deputies Costello and Durkan if they are brief.
I have two questions, one of which relates to senior bondholders. Will the Minister——
If Members would ask brief questions.
Yes. Will the Minister explain what effect defaulting on senior bondholders would have on the nation? We hear many claims by the Opposition and others outside the House that we should default.
Approximately 40,000 people work in the banks. They are not all bank directors, chief executives and so on. Has a study been carried out on the effect of changes in our banking system on these employees? They have mortgages, education debts and so on like everyone else and are concerned about their futures. What are the Minister's opinions on these issues?
Neither Deputy Noonan nor Deputy Burton has ever suggested in express terms that there should be a default on senior bondholders. I am being fair to both of them in that respect.
That is true.
I would like to put that on the record. Given the nature of the banking crisis, it is understandable that commentators and some Deputies would canvass, examine and explore various options. Regarding Deputy Michael Ahern's question, were such a decision taken, someone would need to take responsibility for it. That responsibility would be a grave one. I mentioned the legal issue, in that senior bondholders rank equally in our law with depositors, so any haircut would apply equally to depositors, which would have a significant economic consequence for the State and its reputation abroad. Apart from that, there are practical economic considerations, including the fact that other banks and the NTMA rely on bond finance to fund themselves. All of this finance is accessed on international markets, often from the same borrowers who finance the different institutions. While there is some validity in the distinction drawn between sovereign debt markets and bank debt markets, there is also considerable overlap, including reputational overlap. In addition, Ireland has managed to attract a great deal of international investment in the multinational sector. Were Ireland to default on senior debt, it would raise serious reputational issues within that sector.
Bank employees are making representations about their futures and the viability of the banking sector on a constant basis.
I appreciate the opportunity to contribute briefly. First, putting the issue of Mr. Drumm's personal debts aside, does the Minister intend to pursue him in respect of the collapse of Anglo Irish Bank? If so, will he consider extradition proceedings?
Second, the most striking feature of the financial debacle was the wildly inaccurate information that was forthcoming from the private banking sector and the official government sector. I am sure the information supplied to the Minister on 28 and 29 September differs from how he perceives the situation now, but what of the regulatory system, be it the Financial Regulator, the Central Bank or the banks, and the Department of Finance's figures, which the Minister cited in the House? I will not even mention the glowing concept of NAMA, the figures shown to party spokespersons this week that were close to double the projected figures or the fact that, when the Taoiseach was trying to discuss estimates and projections today, he was all over the shop and did not know whether he was coming or going. The Minister has obviously learned whether to treat the compilation of figures with a grain of salt, but has he put in place any mechanism within his Department and elsewhere to ensure the figures we get stand up?
The Leas-Cheann Comhairle can tell me if my question has already been asked. Do we know who the primary and secondary bondholders are?
That was asked.
Can we be sure there is no relationship between any of the bondholders as investors and those we are bailing out?
I have three supplementary questions. They are short and I would not mind if the Minister answered them later.
Perhaps the Deputy could bank them.
The Minister mentioned he would favour the idea of a State recovery bank. We on this side of the House believe the pension reserve fund could be used in that respect. Has the Minister considered this option? If he answers at a later time, I will not mind.
The Minister also mentioned rolled up interest, an issue I raised with him previously. During the debate on NAMA, there was more than €9 billion in rolled up interest. How stands the interest on those loans? Will the rolled up interest continue, irrespective of whether NAMA owns the debt? Perhaps the Minister could revert to me at a later date.
The Minister explained the reason for the haircuts as being security. The night he announced NAMA, I discussed security with him in the Chamber.
I must call the Minister.
I raised the issue given that, at a committee meeting, Mr. Neary stated the assets were doubly secure in many cases.
There will be no answer if the Deputy does not sit down now.
On the security issue, I asked about some developers borrowing money through special purpose vehicles, SPVs.
Please, Deputy.
This is an important question. The last time I asked it——
I must adjourn the House in 30 seconds.
Borrowing through SPVs meant no security was given, just the initial investment. Were there many such loans and how do they stand?
The Minister will need to answer some of those questions subsequently in writing.
I will proceed with dispatch. To respond to Deputy Costello, extradition proceedings can take place at the conclusion of the Garda inquiry. In the event the Director of Public Prosecutions institutes proceedings against particular individuals, their extradition can be sought in respect of those offences. As to the accuracy of information, Deputy Costello went through a wide canvas, in that he dealt with budgetary projections and banking matters. Regarding the latter, it is a matter——
Financial.
They are all financial matters. It is disturbing that until the establishment and operation of the National Asset Management Agency accurate information was not forthcoming from the institutions in regard to the banks. We can have a political argument about budgetary projection. Deputy Higgins and I argued this earlier.
I refer to Deputy Durkan's question. Bonds are traded so the current identity of the owners is unknown. That is the issue because bonds are traded in markets and there is no public register of bonds on the markets.
Deputy English spoke on the idea of a recovery bank. I asked the National Pensions Reserve Fund to examine what profitable investments it can make in Ireland. The NPRF is open in principle to making a profitable investment. One of the big difficulties in setting up a bank is that with State interest at 6% any bank, whether a new recovery bank or an existing one, that seeks to obtain funds to fund its operation overseas, as it must do on top of the additional risk capital the State puts into it, has great difficulties. We must come back and focus on that issue.
That is a fair point.
I discussed the roll-up of interest with the authorities at the National Asset Management Agency as an issue of particular concern. I assure the House the agency is dealing with the various developers and their arrangements with the institutions in the context of the preparation of business plans. These plans will ensure that a far more rigorous approach will be taken in regard to developers than was taken by many of the financial institutions. The lack of rigour on the part of those institutions in their dealings with individual developers is a matter of serious concern. This applies not only in regard to roll-up of interest, but to the amounts they were permitted to draw down to sustain themselves.
To complete the picture, the question of security was raised. It is primarily in Irish Nationwide that this difficulty has been identified in regard to transactions.
Sitting suspended at 1.32 p.m. and resumed at 2.30 p.m.