This is all in the national interest. As I said in my opening remarks, it took six years to cook this time bomb and it merits more than a few minutes or even a couple of hours of independent, conscientiously researched and analysed information.
I have given the members of the committee four or five pages of a dossier of summary overview of the recapitalisation requirements of the viable banks. It has become apparent since the meltdown in September 2008 and it should have been anticipated by professional people carrying out their professional duties and professional work competently, that there was going to be very big depletion of capital by way of loan losses on very carelessly increased loan portfolios across the system.
The figures on the first two pages show that between AIB, Bank of Ireland and EBS, which is a viable organisation that took just one step too far and luckily it was a short-time and fairly short step into commercial property lending, the requirement of recapitalisation for those three institutions is about €17.5 billion. It arises from a very simple and a very honest calculation of the loans identified as being badly made and listed for NAMA purposes. In the case of AIB, the figure is €24 billion in loans and in the case of Bank of Ireland, €16 billion of loans. If one applies a fair and accurate — as it turns out and probably maybe even understated — 40% write-off against those loans it results in figures of €9.6 billion and €6.4 billion, respectively, for the two banks which should be rounded to €10 billion and €6.5 billion as their capital replacement requirement now.
We have been fed the story, unfortunately, that in the course of the year up to the end of this current calendar year, by a mixture of asset sales and reorganisation and realisation of assets, such as the sale of a bank or the sale of part of a bank, in the case of AIB, or the sale of a building society in the case of Bank of Ireland, and by way of a placing and a rights issue in the case of Bank of Ireland, they will arrive at what has been declared by them and given the approval — I will not say it was a cheerful or strong approval of the regulator and the Governor of the Central Bank — that it should be all right to have €7.4 billion at the end of a year for AIB and €3.65 or €3.7 billion in the case of Bank of Ireland. We have just seen that those figures do not address what a simple calculation, by reference to simple facts, simple market conditions, indicates.
This question is so big and the clock is ticking and it is 3.10 p.m. We have heard the presentation from Anglo Irish Bank, its chairman, its managing director and its chief financial officer. It was a three-stage introduction. In the first case the chairman said that the credentials of the board were undoubted and that it was an excellent new board with the arrival of three new people who have extensive experience and qualifications. In a subsequent debate Senator Ross pointed out that perhaps the selection criteria were not ideal because of some of the more recent responsibilities of one or two of those board members. I agree with that. One should persist with the argument. Two reports were published last week, one by Professor Honohan, the Governor of the Central Bank, and the other by Klaus Regling and Max Watson, the independent international consultants. In the case of Patrick Honohan's report the conclusions, which have not received much consideration and digestion by the press, are very easy to read and they cover only three pages. They are quite incisive in what they say. In pedestrian-speak they say that governance by directors in the banking sector was pretty appalling and in turn, above that, the supervision by regulation was appalling. Surprisingly, it says also that it would have taken courage for people a little bit removed and lower down the scale to persist in their views or inquiries about whatever they were doing in the course of their work. I found that breath-taking because everyone must be courageous in the course of their duties every day. I refer to policemen, firemen, nurses and doctors. One cannot just sleepwalk during work. That is what happened and that was wrong. That is why, as many of the independent commentators have said, that question marks remain over directors who are still on the boards of those institutions who were there at the time, unless they have evidence that they objected to the strategies and gave them thought and, on balance, gave approval to increase the size of a bank or to increase the loan activities in certain areas at alarming and massive rates by reference to any historical context in banking. Compound growth rates of more than 20% and 30% a year are shocking. They impair and imperil customers' deposits. A flagrant lack of fiduciary responsibility was evident. Auditors who did not see that, draw attention to it and flag it in bold, red typeface in their reports also failed in their professional duty.
This country is in a serious place at the moment. A total of €120 billion in very bad lending took place in approximately four and a half years.
