Eamon Ryan (Dublin South, Green Party)

As I understand it - I will be happy to hear Deputy Noonan argue another view - contracts were entered into giving the depositors the exact same rights as the bondholders. Those rights cannot be taken away retrospectively. A court challenge from a bondholder would contend the deposit holder has the exact same rights as a bondholder and that one could not just attack a bondholder without attacking the deposit holder. In Anglo Irish Bank, the main deposit holder is the European Central Bank. That is one of the realities we face. The advice one receives pertains to the consequences of taking on the European Central Bank, which is acting as a central bank of last resort, and correctly recognises that the European banking system let us down also by allowing bad lending to the Irish market and that it also should have been on guard against and preventing this.

One should recognise that if others try to target the bondholders - perhaps the Deputies opposite will have the potential to do so at some stage - they will, I am certain, receive the same advice that we have had, namely that the risk attached to such an approach, which approach would affect our ability to hold emergency and other deposits in the banking system that are needed to surmount this difficulty, would result in a higher cost for the Irish taxpayer. Even a small increase accruing from the taking of such an action continually would lead to an interest charge for the Irish people that would be greater than the savings made.

It must be recognised that the Anglo Irish Bank model, having been so fundamentally unsound and dependent on short-term deposits, was such that, of the approximately €70 billion liability on the balance sheet, only approximately €4 billion pertained to senior bonds, as opposed to the vast sums in short-term cash deposits which are now in short-term emergency cash deposits. This is hard to explain to the Irish people and hard to talk about in public. Over the past year or two, because there were market sensitivities, one could not talk about AIB. It is very difficult to talk about bondholders within the guarantee period but that was the reality we were faced with. Those were some of the options we were faced with. Any party in government will face them.

When the banking system changes - I do not believe it will change very much - perhaps we will see that easy options, which may give real encouragement to the public, should carry a health warning because, unfortunately, there is no easy way out of the problem. We will make our way out of it. We are a capable, skilled trading country. Having a balance-of-payment surplus again will help us out of our difficulties. I regret deeply the banking legacy we have had to manage but our broad approach was the correct one. The alternatives would have been more expensive and less effective.

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