Mr. Kevin Cardiff:

Thanks, Chairman. Good morning, members of the committee. Well, the crisis in our banking sector that emerged in 2008 leading to significant Government intervention and ultimately international assistance was the worst in our modern history and, indeed, much of the same is true for much of Europe. I was involved in many and, indeed, most of the aspects of the management of that crisis and I hope my evidence to the joint committee will give a helpful insight into the challenges faced and the difficult decisions made during this unprecedented period in our recent history.

As you probably know members, civil servants in most committees are precluded from entering into certain areas of debate.So it's a pleasure to be here to be able to answer questions where there is less restriction where we can discuss policy, we can discuss all that needs to be discussed. And I have tried quite politely to wait for this committee before entering into public discussion. People have asked me over the last couple of years why am I not talking. It's because I have been waiting for this committee and it's a pleasure to be here to do this.

I have prepared a comprehensive report but my comprehensive report only really deals with about in total 20 weeks of the crisis. It's because I just ran out of steam. But I expect, I fully expect that you'll ask questions in relation to other parts because there was an awful lot that happened leading up, afterwards and so forth and I'm anxious to help with those issues too.

By way of background, I should outline the positions that I held in the Department of Finance and at what times because it affects a little bit the story I can give you. And it falls neatly in half years. Second half of 2001, 2002, 2003, 2004, give or take a month or so, I was assistant secretary general in charge of the unit in the Department of Finance dealing with financial legislation, including the Central Bank Acts 2003 and 2004. For 2005, broadly speaking, I was dealing with tax issues including evaluation of the various property tax incentives and so forth. And then for 2007, 2008 and 2009, I was a division head known as a second secretary general and for part of that time, headed what was known as the tax and financial services division. When the crisis intensified in autumn 2008, the tax element of that was taken away so that I could concentrate on the financial services matters. And obviously that was almost at that stage, entirely a crisis management job.

When the then Secretary General resigned at the very beginning of 2010, the Government asked me to take his position, which again, remained principally a crisis management job. And I did that job for 2010 and 2011, broadly speaking. I left just after the Troika mission of January 2012.

So as the crisis broke in September 2008, I became the de factopublic sector co-ordinator for all the banking interventions reporting to the Secretary General and the Minister obviously, sometimes the Taoiseach. During this period, I tried and did provide options and advice for the Minister and the Government and leadership to my smallish team and to other parts of the public service in relation to the liquidity crisis, the recapitalisation process, the nationalisation of Anglo and the NAMA legislative process. Later the Government, by then quite familiar with me and my work, decided to appoint me Secretary General as I have said, to deal with the crisis.

As Secretary General, during the initiation and settling in of the EU-IMF programme, I was again the de factoco-ordinator and manager on the Irish side for the programme negotiations and for programme implementation working for the Minister, the Taoiseach and the Government.

I had the opportunity to introduce a number of significant initiatives in my two years as Secretary General. One of the most telling was the four year plan or national recovery plan, as it became known, which in turn formed the basis of much of the EU-IMF programme, the non-banking elements, and it allowed us, I hope, to deal with Irish problems on an Irish basis, albeit not a very pleasant basis.

On the guarantee, and I run the risk of duplicating a little bit what's been in the papers but if you don't mind, my statement and report deal in a lot of detail with the run up to the Government guarantee for the banking system. The big question for many people is, was the guarantee necessary, was there not something we could have done differently that would have, in sort of one elegant manoeuvre, taken ourselves out of the line of fire? The answer to that is, is "No". I'm clear in my own mind that on the night of the guarantee, and we can go on to discuss why, but something had to be done. Whatever was to be done had to be very significant, so significant as to change the otherwise very negative trend in events. Intervention was, to my mind, very urgent to avert the potential for a real disaster for the many people who saved with and relied on these banks in our economic system. There was a range of options available to the Government. Considerable had been work been done ... work had been done by my team at the Department of Finance, by the NTMA and the NPRF, by the Central Bank and Financial Regulator, by the Attorney General's office and our various advisers, to ensure that these options were ready on the night. Options included: loans in huge amounts for the banking system - cash had been stored up for that purpose or for ... against a rainy day for some time; a special collateralised swop arrangement was ready to provide the banks with a new mode of access to ECB cash - European Central Bank cash; documentation and collateral had been prepared to allow for emergency liquidity assistance, detailed legislative provisions were ready to allow for a nationalisation of a bank or indeed a building society, so allow ... so as to allow for its control or resolution; legislation was also ready to provide for guarantees and other supports. But it was up to the Government to decide on the options it wanted and there were no ... there were no costless options.

Now I know some genuinely clever people, people I respect, will tell you with great certainty that things should indeed have been done very differently that evening. A different type of intervention or a delay until a European rescue might become available with the use of emergency liquidity assistance in the meanwhile. You can make that case but to my mind there is, even now, no real reason to believe that waiting a few more days, and in the meanwhile engaging with European partners, would have changed the situation much. The granting of ELA would not have reversed the trend towards very large outflows of funds from Anglo, in some ways it would have facilitated it. As news of Anglo's difficulty circulated, and you remember from evidence you've already had that they were going from place to place telling everybody about their difficulties, there was every possibility of a run on that bank. And not just a wholesale run, a good old-fashioned, queues in the street bank run, sometime in the next day or two. ILP, Irish Life & Permanent, was also nearly out of cash that week and was, in fact, expected to run out of cash that Thursday, give or take a day, exacerbating the systemic impact of the liquidity crisis. So even if we had leaped into the weekend on ELA, was there really any prospect of a European solution? The answer to that is two weeks later, two weeks after our guarantee, most of the leadership of the EU came together, all the eurozone Heads of State and Government plus Gordon Brown, and they agreed a common approach - but it was a common approach to national level rescues, there was no European solution. Each member state for itself, albeit following a similar intervention design. And remember, if the Government was plainly not behind the banks at the time of the guarantee, the ECB might not have allowed ELA so this theoretical view that ELA might have done something good for us, it's a reasonable view but it might not have been able to happen. The ECB certainly would not have opened the purse strings for a banking system which was waiting for a European rescue to come along when there was no immediate prospect of that. So of course things could have been different but they might have been a lot worse and it would have been a big gamble to wait a few more days.

And maybe having waited, if we would then try to play the guarantee card, the market and the public simply wouldn't have accepted it. I think the point I'll try to get through in my whole evidence is there were no certainties. This was a most complex situation in which it was extraordinarily difficult to predict the future and which the ... the main point of decision was not to get the ... exactly the right solution, it was to get the one that was least likely to lead to a disaster.

Specific issues around ... about the guarantee. Let me try to answer some specific questions that ... that I think have arisen in the course of your inquiry to date, to the best of my recollection. Yes, the banks did seek a broad guarantee, including for themselves. Some people say it was four banks, some people say it was six, but if you nationalise two, then you have to look after them ... it's the same thing. Yes, they did provide a draft. Only one version so far as I can recall, though I know you ... you had in evidence someone suggest that there was a second version somewhere in the building. Yes, they did provide other documents. In particular, they provided to Eugene McCague, who was there as a solicitor acting with the Government, a list of the subsidiaries to which they wanted the guarantee to apply and I believe he passed that list on a couple of days later, in writing. They also discussed the pricing structure that they would wish to apply to the guarantee and, yes, I understood that they wanted Anglo nationalised or otherwise in some way dealt with. There were other views on the night. Minister Lenihan and I advocated consideration of other options. Later, the Minister changed his view and I discussed the reasons for that in my statement and report. I advocated a nationalisation or a ... with a guarantee for Anglo, and a strong public statement, amounting to a political guarantee, for the other banks. I think in doing so I was in line with the advice of Merrill Lynch and the NTMA. And it's a wonderful thing to be here and say I advocated something differently but I don't know that I was right. I don't know, still, that the guarantee was the wrong option. I'm not convinced it was. But certainly there had to be some guarantees that night, there was no doubt about that at all. No official adviser advocated a liquidation of Anglo at that point. Even now I think that would have been too dangerous to contemplate.

The guarantee was immediately quite well accepted in the market but it was a much more fragile edifice, even in the very first day ... very first week or so, than is now realised. There was a great deal of work behind the scenes required to make it acceptable with the European ... European Commission, whose word is law on this stuff, with the ECB, and with other governments and financial institutions. Apart from the people in the room, I don't know who else was advising the Government. I know Alan Gray spoke to the Taoiseach and I read that certain Ministers had contact with ... with Mr. McWilliams. And I know, too, that there'd been a discussion at Government ... some discussion the previous day, the implications of which I deal with again in the report. There is absolutely nothing incorrect or untoward about a Taoiseach or a Minister taking advice beyond the Civil Service. It would probably be negligent if they didn't do so but I just don't know exactly what the ... the full range of people in the mix were. As you've already heard, there was no information to say that any of the banks were solvent on ... on some definitions of that, at least, on the usual meaning for this kind of discussion, on the night of the guarantee ... were insolvent, rather.

There were reasons, explicitly ... there were reason to wonder about their future business model, their resilience to shocks, their potential for future losses and these things were considered both ... both that night and, more importantly, I suppose, in previous discussions. The scale of future loan losses was not known on the night, of course. I see the Chairman is a little worried, am I going too slowly?