Paul Coghlan (Fine Gael)

I join the Chairman and Senators MacSharry, Bradford and Boyle in welcoming the Minister of State, Deputy Brian Hayes. We enjoyed the five years in which he was a Senator, during which time he demonstrated good leadership, even if we were in opposition.

The Minister of State has outlined very fairly the task facing the Government. He approached the matter very honestly. The task is to fix and help rejuvenate this broken economy. My colleagues have made thoughtful contributions on our problems. Our task is a mammoth one not just because of the banking circumstances but because of the huge deficit resulting from the gap between revenue and money spent running the State. I refer to the fall in our gross domestic product and the resulting decline in living standards.

It was interesting to hear Senator Bradford's comparison with circumstances in the 1980s. The circumstances that now obtain are far worse than those in the 1980s because the problems are greater. The Government in the 1980s sadly postponed decisions that needed to be taken. In fairness to the present Government, it is showing great diligence in tackling and facing head-on the tough decisions that must be made. It is making decisions daily and I hope this will continue to the benefit of the country.

The Minister of State touched upon one of the most essential points, based on the fact that we cannot function without a banking system. A banking system must be in good order and, if not, it must be brought back into order. The restoration of credit lines for businesses is necessary. This is related to confidence, an intangible, nebulous concept. Without confidence, so much cannot be put back in order. I am not saying we should talk up the circumstances that exist because we do not want to do something that is false but we must be realistic and, through the moves the Government is making, restore confidence as soon as possible and get credit flowing again to viable businesses.

The problem in the banking sector was caused by the headlong rush to back practically everybody engaging in property deals, so much of which were false and, I am sad to say, could not stand up. I loved the Minister of State's reference to bank managers. In the old-fashioned system, the bank manager probably did know best. Recently, however, on foot of centralisation in the main banks, atrocious decisions were made. Sadly, individuals chased after Anglo Irish Bank for a greater market share. The banks were selling a false product by chasing property and advancing money for it. Security on credit advances was forgotten and no consideration given to whom they were lending because they were big names. It turned out, however, to be a pillar of sand. We have to get back, as the Minister of State, Deputy Brian Hayes, said, to traditional banking values. Bankers must again be prudential. Advances cannot be made in lending without some level of security offered. It is to be hoped this will happen on the Minister of State's watch. He and the Minister for Finance, Deputy Noonan, enjoy our full confidence and are going in the right direction.

For years I have told the Seanad that those bank directors who steered the banking ship on to the rocks should have been removed when the first appointments of public interest directors to their boards were made. This has not yet happened, however, and I am wondering about regulatory capture. It seems the public interest directors have been captured by the banks' management.

More importantly, individuals at senior managerial level in the two larger banks who made these decisions as to how credit could be advanced and, in turn, created a property bubble are still in charge and still enjoy positions of responsibility. Some of them are even managing agents of impaired loan portfolios for NAMA. When the Government makes more public interest directorship appointments, it will have to insist the individuals in question are not allowed to continue in their positions. It is neither right nor inspires confidence in the sector.

The recent stress test exercises undertaken by the Central Bank have been well-received by both market participants and the public. While they were severe, they were also necessary in our circumstances. There is a growing consensus that a floor has finally been placed under the banking crisis. The objective of the exercise is to deliver a smaller but more robust banking system capable of supporting economic recovery. The approach creates the capacity for the two pillar banks to lend in excess of €30 billion into the economy over the next three years, providing, in turn, a sound foundation for recovery. This is essential. We all know of business people who did not get caught up in the property game but who are having their working capital and advance credit facilities cut by their banks. This should not be tolerated for long-established, profitable and properly audited businesses. I hope Mr. John Trethowan and the Credit Review Office will offer redress in those cases referred to it and assist genuine businesses in regaining access to credit facilities. Without confidence, we will not get through this.