Dr. Michael Somers:

I am pleased to have this opportunity to meet with the Chairman and other members of the joint committee and to discuss any aspect of my role as a Government-appointed director of the board of AIB.

The committee has already heard details of the functions and duties of public interest directors. Even though I am not a public interest director, as such, my position with AIB does not differ from that of my colleague Mr. Dick Spring. I have carried exactly the same fiduciary responsibilities and onus of trust since I was appointed to the board in January 2010 as a Government nominee under the terms of the National Pension Reserve Fund Commission's preference share investment. I am also deputy chairman of the AIB board and chairman of its risk committee since November 2010. In this particular role I lead questioning of, and challenges to, the bank's risk tolerances levels, risk appetite on lending, and internal controls and procedures. For my own part, I am clear that significant progress has been made in these areas since I joined the board.

In addition to the clear legal imperatives that govern our functions, I am very much aware of the weight of expectation among the public that banks, particularly those in receipt of such large State support, should apply the utmost stringency and pragmatism to all their decision-making. We have two critical goals here - to turn AIB around and restore it to viability, whilst ensuring that the bank contributes to economic recovery, both in terms of new lending and in resolving the significant challenges of customers in difficulty. I believe that, as these goals are fully achieved over time, public sentiment will change and we will convert negative perception into positive reality.

There is no clear definition of what is in the public interest at any given point in time. Critically, however, the public interest can be served by ensuring the achievement of a sound, prudently-run banking system that can drive economic recovery through appropriate lending and offering security for deposit holders. The duty of all of the board's directors is to safeguard the shareholder's interest which is, by definition, the Irish taxpayer who has supported this bank to such an enormous degree. Without a return to viability and the reduction of dependency on the State, the common good will not be well served.

I joined the AIB board almost three years ago, two years after the economic crisis broke. In my time on the board I, too, have seen significant stabilisation and recovery in the bank and the pursuit of policies that will enable recovery: reduced funding costs; the aligning of loan pricing to funding costs; the reduction of bad debt provision levels; putting in place processes to allow for the systematic tackling of the mortgage arrears crisis, while assisting large numbers of customers in difficulty; and the achievement of lending to business targets, as set out internally and by the Government.

Following the banking collapse and the unfolding financial crisis that businesses, individuals and families confronted, AIB has had to mobilise significant resources by way of response. Untangling debt issues for businesses and home-owners does take time and the bank is coming to grips with the complexity of these problems and expediting an appropriate response.

I acknowledge that the bank has more to do in these areas. However, the complexity and scale of the problems cannot be underestimated and there is no simple and easy solution to these issues. The bank must continue to work diligently, methodically and as expeditiously as possible to ensure viable long-terms solutions are put in place.

Perception is a powerful force and AIB is also battling against the widespread view that it is still not lending to business. However, the reality is that AlB's SME and mortgage-lending targets are being met and exceeded. The perception that exists will, in large part, be changed by the continued focus of our staff in engaging positively with customers as they make formal applications for credit. After almost three years on the board of this bank, I am confident that in time it will reach the objective of making a return to the Irish taxpayer while ensuring economic recovery.

Since my appointment to the board in January 2010 there have been 102 meetings of the main board where I serve as deputy chairman. There have also been 25 meetings of the board risk committee of which I am chairman.

I gather that the committee is interested in my background, as well as that of Mr. Spring, so I will briefly go through that. I joined the civil service in 1960 as an executive officer. I was appointed to the Department of Industry and Commerce and was immediately sent to an outfit called An Foras Tionscal, which at that stage was the grant-giving agency of the IDA. In mid-1963, I was successful in a competition for administrative officer in the Department of Finance. I was assigned there to what was regarded at the time as one of the worst sections - the pensions section - which actually turned out to be quite interesting.

When Dr. Ken Whitaker was appointed governor of the Central Bank he invited me down and I spent two years there which gave me some knowledge of monetary policy. I then came back to the Department of Finance and was in the finance division, which dealt with all the financial affairs of the State. I was also involved with the EU when we joined in 1972. In 1985, I was appointed secretary of the Department of Defence when these positions were opened up to people generally in the public service. On the change of Government in 1987, I was brought back to the Department of Finance by the then Taoiseach. I was appointed as secretary of national debt management there, with a view to doing something about the national debt, which was a huge issue at the time.

In 1990, under legislation passed by the Oireachtas, I was asked to establish the NTMA, which I did. The aim was to try to get debt service costs down. At the time, the debt-service was a huge burden on the Exchequer. It was a question of whether to cut health, social welfare and education or the debt service costs. Politically, the debt service costs were obviously much more acceptable. That was the main reason for setting up the NTMA. It went on to establish the State Pension Fund which at its peak had €25 billion in it. We also set up the State Claims Agency which dealt with anybody who wanted to sue the State or hospitals. We also set up the National Development Finance Agency. I ran that organisation for 19 years. I retired, or resigned, just over three years ago.

During the course of my career I was a member of the EU monetary committee in Brussels and was on the board of the European Investment Bank. I was on other committees. I was a member of the OECD's capital markets committee. I was also part of the delegation to the IMF and World Bank boards. I was chairman of the group that set up the European Bank for Reconstruction and Development, EBRD, to bail out the countries of the former Soviet Union when it broke up.

I have a diploma in public administration, a B.Com, a master of Economic Science and a PhD in Economics from UCD. The President of France made me a Chevalier of the Légion d'honneur for my efforts in setting the European Bank for Reconstruction and Development, EBRD. At present, apart from the board of AIB, I am on a number of other boards, both pro bono and others. In terms of remuneration, which is available in the bank's annual reports, I received the following amounts in the execution of my various roles. In 2010, I received €98,000; in 2011 I received €150,000. I should add, as Dick Spring has said, roughly half of that amount goes back to the State and I never see it, the differential in the amounts between the two years is due to my appointment as deputy chairman and chairman of the risk committee with effect from 1 June 2010.

I am happy to answer any questions.