Mr. Ray MacSharry:

I thank the Chairman, Deputies and Senators. Both of us will make short introductory remarks and then we will answer any questions the Deputies, Senators and the Chairman may have.

In December 2008, I acceded to a request from the then Minister for Finance, Deputy Brian Lenihan, to put my name on a panel from which he directed that certain Irish financial institutions would each select two individuals to become non-executive directors. Each of the relevant institutions was participating in the Credit Institutions (Financial Support) Scheme and the appointments were made under section 32 of the 2008 Act. In my case, I became a director of what was then called Irish Life & Permanent Group Holdings PLC and which today is Permanent TSB Group Holdings PLC, the holding company for Permanent TSB bank.

At the time of these appointments it was very clear that the banking and financial infrastructure of this country was in grave crisis and there was a complete absence of trust in the management and leadership of the various banking institutions in the State. In that context I viewed my responsibilities on my appointment as being twofold: first, to represent, in so far as I could, the wider public interest in the deliberations of the board during this crisis; and, second, to help challenge the culture which had so clearly taken over the boardrooms of our financial institutions. At the same time I and my colleagues in similar positions with other institutions acknowledge that while the circumstances of our appointments may have been unusual, we share the same legal and fiduciary responsibilities as the other directors of those institutions. Ultimately, we can only seek to influence, as opposed to dictate, the policy of the boards on which we sit.

In the case of Irish Life & Permanent Group Holdings PLC, the focus between the end of 2008 and the spring of 2011 was on trying to advise on and help shape the response of the company to the crisis. There were many reasons that this was desirable, including the fact that we were conscious of the already difficult challenges facing the Exchequer at the time. In March 2011 it became clear that it was not going to be possible to secure this. At the end of month new requirements for capital for all banks, including Permanent TSB, were set down by the Central Bank and these meant that the bank would be required to take €4 billion in additional capital from the Exchequer, becoming effectively nationalised in the process, as there was no possibility of raising the money from other sources.

Following that the bank was the subject of a number of direction orders from the Minister which directed the institution, among other things, to facilitate the sale of the life and pensions business of Irish Life by the group to the Minister for Finance for €1.3 billion as part of that recapitalisation exercise. The Minister intends to sell that business on to the private sector and I believe he will recoup that amount in full at that time.

In the year to date our objective has been to try to secure the return of Permanent TSB bank to financial stability and strength. This has been and continues to be a very difficult challenge. Unfortunately, like many other banks in Ireland and elsewhere, Permanent TSB made a series of unwise decisions late in the last decade. Together those decisions brought the bank to the brink of collapse and it will require enormous effort, sacrifice and pain to restore it to health. However, I believe we are making progress in this regard. In March the bank secured the support of the troika for a restructuring plan to be submitted to the European authorities and that plan has now been submitted. While we await the formal response of the authorities to that plan, the bank is already making substantial progress on its implementation. In recent months in particular, the bank has addressed the problem of its outlier status in respect of the standard variable rate which it charges its residential mortgage customers and that rate has now been brought into line with the market. The bank has invested in a state-of-the-art arrears management service which is already enabling us to work much more constructively with customers to help them manage their mortgage repayments.

Significantly, and correctly I should say, there has been a fundamental overhaul of the group board over the last number of years to the extent that nocurrent director of the group was a director at the time of the introduction of the bank guarantee in 2008. In the same vein, there has been a fundamental overhaul of the senior management team at the bank. Key posts have now been filled with candidates who never worked in the Irish banking sector before, including the new chief executive officer, the new financial officer, the new chief operations officer and the new head of strategy and planning. I do not believe there is any financial institution in the country where there has been such significant change and renewal at senior management and board level after the crisis hit.

The bank has also seen a very significant reduction in the numbers employed - down to 1,800 from some 2,400 a few years ago - as it adjusts its cost base to reflect its smaller scale. It has undertaken a series of liability management exercises in which it bought back debt in the market at a very significant discount, benefiting the position of the bank and ultimately the Irish taxpayer by approximately €1.2 billion to date. We are about to oversee the return of Permanent TSB to the lending market in the new year when we will unveil significant lending targets for the bank in each of its key product lines for 2013.

I believe we are now demonstrating that there is real benefit for this economy in preserving Permanent TSB bank as a competitive force, that doing so presents the best way of managing the investment which the Exchequer has made in the bank and that the bank is capable of restoring itself to stability and resuming its place in the country's financial infrastructure.