Kieran O'Donnell (Limerick East, Fine Gael)

Today was supposed to be the Holy Grail but instead we got a document, the bulk of which is already in the public domain. I find it amazing that the Minister, Deputy Eamon Ryan, referred to the fact that he is happy. In the presentation made by the Minister for Finance today there is no breakdown between the institutions themselves and how much capital will be required by the banks in total. I have no doubt that was not given because we would have some idea of the individual banks. There is no detail about what date will be used to determine the market valuation. I note the report itself, in terms of valuation, states that land will be valued at its long-term useful economic value.

How can one have a situation where land which has reduced in value by up to 70% will suddenly be assessed in terms of its long-term economic value? All other assets will be valued at market value. I note page 11 of the document refers to property yields which, I have no doubt, the Government has used for the valuation of the market value of investment assets. It is effectively stated that the property market has bottomed out and the prime yield is at 7.25% compared to 5.56% for a long term average. It has not bottomed out.

We are being told by various businesses that the amount of rent being paid is going down and that the value of commercial property is falling and will continue to fall. The Government is basing the figures on the assumption that the market has bottomed out and prices will now increase. That will not happen. Prices will continue to fall.

I am sorry the Green Party Ministers have left the Chamber. The Minister has too much control in terms of the valuation process. Section 77 states that the Minister for Finance can effectively use adjusting factors and take them into account. I would be very interested to see what analysis the Minister, Deputy John Gormley, would provide in terms of the section that states the Minister for Finance, in looking at the adjusting factors, must examine the analysis presented by the Minister for the Environment, Heritage and Local Government on the extent to which existing land zoning and planning permission is granted and enforce or exceed projected growth requirements.

The Department of the Environment, Heritage and Local Government states that currently land is zoned for residential developed for the building of approximately 1 million units. At 50,000 units a year that is 20 years' supply. It does not add up. The Green Party is bluffing. Its rank and file members feel the same way. There is a 30% haircut. We are not being given a breakdown in terms of the individual banks because if one looks at the situation, the largest amount of loans being taken over are those of Anglo Irish Bank, some €28 billion which makes up 36%.

Are the discounts being skewed towards Anglo Irish Bank so the other banks take less of a write down, and once the process begins will the Government commence the winding-down of Anglo Irish Bank, which is currently being wound down anyway? Some €28 billion of taxpayers' money is going into Anglo Irish Bank, which has not lent a red cent since it was nationalised. The Government wants to put €28 billion into that bank.

I will ask the Minister to give us a breakdown of the write-downs for all the banks - AIB, Anglo Irish Bank, Bank of Ireland, EBS and Irish Nationwide Building Society. He also needs to tell us how much he expects, based on the write-downs, to be required to put into the individual banks. The Minister's claim that there will be an average loan-to-value ratio of 77% does not stand up. The development loans of some of the banks were doubled, in effect, between 2005 and 2006. Once again, that does not add up. The assumptions on which the Minister for Finance has based his projections do not add up. I refer to rental yields, for example. He believes rental yields will fall as property prices rise, but I do not think property prices will rise in the short term.

I would like to speak about the whole issue of risk sharing. Reference was made to Professor Honohan, whose model is based, in effect, on buying assets at their current market value and giving a shareholding to the shareholders in the bank for any upside. The Minister has said that 5% of the total amount will be in the form of subordinated debt. I would like to know about the risk that will be put on the balance sheet of the bank. The legislation says that the banks will not be repaid unless a profit is made. I expect the banks to continue to provide capital. They will have to make some provision if there is a default in respect of the subordinated loans that would stop lending from taking place. I will ask the Minister to tell us what rate of interest will be paid on the subordinated debts. Has agreement been reached to provide for the subordinated debts to be given as security to the European Central Bank when funding is being sought? If that is the case, the repayment of the debt will be guaranteed and, therefore, any question of any form of risk-sharing does not arise. These extremely important issues need to be clarified.

I would like to comment on the references to credit flowing to small business in the Minister's speech and the document he provided to us. He referred to what was done during the previous recapitalisation scheme and to the Mazars report. There is nothing in the NAMA legislation to compel the banks to lend. I suggest that the banks will choose to hold onto their money, for example, by way of Government bonds on their balance sheets or by way of deposits. They need to increase their deposit-to-loan ratios, which are low by international standards. What measures will the Minister for Finance introduce to ensure that rather than merely finding their way into the banks, funds are loaned to small businesses? We are all looking for a financial system that works. The problem with the system being proposed by the Government is that the only person to take a downside risk will be the taxpayer. From the point of view of the banks, it is a win-win proposal. It gives no guarantee that funds will flow to small business. It is clear that assets are being over-valued. That is why I want the Minister to give the House an indication of the write-downs, in terms of percentage and value, that apply to each bank. I want a breakdown of the €23 billion figure - the haircut of €77 billion, less €54 billion - across the banks. That will clearly show what is going on in the respective banks. I want to know the precise amount the Minister will be required to invest in the individual banks. I want to know if Anglo Irish Bank will be purely in a wind-down situation.

Deputy Fleming has suggested that the Minister should not take part in any appeals mechanism when there is a dispute about valuations. I suggest it is critical that the Minister should have no involvement in the valuation process, from start to finish. It is clear that section 77 of the Bill provides for what can be called the Lenihan law of valuations. The Minister is assumed to have a secret ingredient that enables him to value assets. That leaves the process open to corruption, in the form of the massaging of the amount that needs to be paid to particular developers, or in respect of particular assets. Fine Gael's policy would minimise the cost to the taxpayer by sharing the risk with the bondholders. Its effect would be to ensure that funds flow to small businesses through the proposed national recovery bank. I commend that policy to the House.

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