Mr. Pádraig Ó Ríordáin:

Thank you, Mr. Chairman, and, I'm pleased to be here with my colleague, Mr. McCague, to assist the committee in its work today. I would like to start by giving an overview of Arthur Cox's role in addressing the issues which arose in the banking sector.

Arthur Cox was engaged by the Department of Finance on the morning of Wednesday, 24 September 2008, to advise in respect of the emerging banking crisis. Prior to that I had no involvement in the banking crisis and was not aware of its depth. I understand that the Department contacted me as it was familiar with my role ... with my work, through my role as chairman of the financial legislation advisory forum, which I had undertaken at the Department's request on a pro bonobasis from 2007. I led the Arthur Cox team throughout this period. Arthur Cox was engaged to act as external corporate legal adviser to the Department and its agencies. In executing our role we worked closely with the Department, the NTMA, the Office of the Attorney General, as well as other Department advisers, including Merrill Lynch, PwC, and later, Rothschild.

Over the seven years since the onset of the crisis, Arthur Cox's role has included advising on and helping manage legal risks relating to the State following the guarantee, assisting the Department of Finance and its agencies to map out the legal landscape applicable to the banking sector, undertaking legal due diligence exercises in respect of a number of the banks which the State was supporting, identifying legal obstacles and risks, as well as potential solutions to them in policy under development by the Department, contributing to the design of legislation being prepared by the Office of the Attorney General, helping execute policy decisions by legally implementing banking sector transactions and undertaking the High Court applications required to effect Government policy, working with the Department to satisfy the requirements of external agencies such as EC Directorate General for Competition, and finally, defending the State in litigation taken against it arising out of the execution of its policy. The legal work required to perform this role was uniquely complex and extensive, with each legal action or solution integrally connected with all others over the years of the crisis. In summary, Arthur Cox's job was to help design the legal architecture required to support policy decisions made by Government, and then help provide the legal engineering required to implement those decisions.

At the beginning of the crisis, in 2008, in common with many European countries, the Irish Government had available to it no specifically designed legal infrastructure or powers currently in law to intervene in, or resolve, banks in financial difficulty. Indeed, EU-wide legislation dealing with bank recovery and resolution has only been implemented this year, in 2015. As a consequence, this legal infrastructure had to be built, often under intense time pressure, from the ground up, as the crisis progressed. This was a very extensive and complicated exercise, combining statutory, contractual and judicial avenues with the major milestones being the Credit Institutions (Financial Support) Act 2008, the Anglo Irish Bank Corporation Act 2009, the National Asset Management Agency Act 2009, the Credit Institutions (Stabilisation) Act 2010 and the Irish Bank Resolution Corporation Act 2013.

The common threads running through all of the work in the design and implementation of the required legal infrastructure were to enable the Government to take the actions it deemed necessary to ensure financial stability, while observing the legal integrity of the banks and their stakeholders, and ensuring the central objective that there be no default by any of the banks in relation to any of their obligations which could impact the guarantee. Any default by the banks, even inadvertent, could have triggered cross-defaults on their financial instruments, leading to a failure of a bank and a call on the guarantee. This risk became most pronounced in the first half of 2011, when the banking sector was substantially reorganised in accordance with the troika programme. Each action taken by the State, therefore, had to be robustly designed to implement policy measures, legally and effectively, while ensuring banker sector ... banking sector stability. This was legally challenging in circumstances in which the State was required to intervene strongly to maintain financial stability, even where that required the alteration of other stakeholders' rights. The legal solutions adopted by the State in response to issues caused by the banking crisis navigated a narrow path demarcated by the Constitution, European law, IFSRA, which was later the Central Bank, and banking regulation generally, ECB requirements, stock exchange rules and the EU Commission's Directorate General for Competition, as well, of course, as the legal rights of depositors, bondholders, shareholders, derivative counterparties, bank boards and employees. These solutions had to legally optimise the position of the State, comply with the requirements of the troika programme from 2011 onwards and take into account the responses of rating agencies and sovereign bond markets. Over the period of our engagement, more than 120 Arthur Cox lawyers in total worked for the Department and its agencies on this crisis, with specialist teams required in corporate, litigation, capital markets, finance, financial regulation and insolvency-restructuring.

The direction I've received from the committee directs me to provide evidence on 13 lines of inquiry relating to themes of crisis management system and policy response and regulatory, supervisory and Government. I look forward to answering your questions on these themes, following Mr. McCague's opening statement. Thank you, Mr. Chairman,