Oireachtas Joint and Select Committees
Tuesday, 22 July 2025
Joint Oireachtas Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation, and Taoiseach
Engagement with the NTMA on Matters Relating to its Operation
2:00 am
Mairéad Farrell (Galway West, Sinn Fein)
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Níl aon leithscéalta faighte againn. We have received apologies from Deputy Ged Nash. Is mian liom na riachtanais bhunreachtúla seo a leanas a mheabhrú do chomhaltaí agus páirt á glacadh acu i gcruinnithe poiblí. Caithfidh comhaltaí a bheith i láthair go fisiciúil laistigh de theorainneacha shuíomh Theach Laighean. Ní cheadóidh mé do chomhaltaí páirt a ghlacadh i gcruinnithe poiblí nuair nach bhfuil siad ag cloí leis an riachtanas bunreachtúil seo. Mar sin, má dhéanann aon chomhalta iarracht páirt a ghlacadh ó lasmuigh den suíomh, iarrfaidh mé orthu an cruinniú a fhágáil. Maidir leis seo, iarraim ar chomhaltaí a dheimhniú go bhfuil siad i láthair laistigh de phurlán Theach Laighean sula ndéanann siad aon ionchur sa chruinniú ar MS Teams.
Fiafraítear de chomhaltaí cleachtadh parlaiminte a urramú, nár chóir, más féidir, daoine nó eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainmneacha ar shlí a bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear díobh gan aon rud a rá a d’fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfadh a ráitis a bheith clúmhillteach do dhuine nó d'eintiteas aitheanta, ordóidh mé dóibh éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéillfidh siad don ordú sin láithreach.
I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate when he or she is not adhering to this constitutional requirement. Therefore, members who attempt to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member participating via MS Teams to confirm that he or she is on the grounds of the Leinster House campus prior to making a contribution to the meeting.
Members and witnesses are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks and it is imperative that they comply with any such direction.
The joint committee is engaging with the National Treasury Management Agency, NTMA, to discuss matters relating to its operation. The committee has invited the NTMA in to discuss its roles with NAMA, specifically: the special liquidation of the Irish Bank Resolution Corporation, IBRC; the dissolution of NAMA; the retention and-or destruction of the records of the IBRC and NAMA; the ongoing unresolved cases within NAMA; the staffing arrangements following the dissolution of NAMA; the current assets under NAMA's ownership; and to receive an update on NAMA's commission of investigation report. Additionally, the committee has an interest in the NTMA's just published annual report 2024 and the recent issues relating to fraud and phishing, including policy and procedures around the detection and prevention of fraud. At this juncture, it is important to note that there are substantial grounds to recommend that the committee does not discuss the broader case and circumstances where there is an ongoing Garda investigation. We spoke about this earlier. Members can, however, examine the processes and practices that lead to the situation where such a fraud could occur.
In this context, I welcome to the meeting Mr. Frank O'Connor, chief executive; Mr. Ian Black, chief financial and operating officer; Mr. Nick Ashmore, director, Ireland Strategic Investment Fund; and Mr. Ciarán Breen, director, State Claims Agency. I invite Mr. O'Connor to make his opening statement.
Mr. Frank O'Connor:
I thank the Chair and members of the committee. I will not repeat the introduction of my colleagues. We submitted our opening remarks yesterday, but, with the Cathaoirleach's permission, I suggest we take them as read to allow more for questions for the committee. However, I would like to make three brief points. First, I would like to begin by expressing the respect my colleagues and I have for this committee. It was regrettable that I was unable to attend back in May despite having been invited. My absence was due to a number of demanding schedule prior engagements throughout that week and should not be seen as a lack of willingness on my part to engage; on the contrary, we value the work of the committee, and I and my colleagues are here today to assist it
Second, I know the members will have questions about our annual report, which we published recently. For our part, the main message from our annual report is that Ireland is well positioned against the backdrop of uncertain markets. However, with a substantial amount of debt to manage, at €218 billion at the end of last year, there is no room for complacency.
Third, I reassure the committee that the NTMA has taken the fraudulent matter seriously. To that end, we have appointed Deloitte to carry out a full and independent investigation to thoroughly examine what occurred. While we will endeavour to answer as many questions as possible, there are limitations to what we can say. The members will appreciate, as the Cathaoirleach said, that the matter is being investigated by the Garda. In addition, it is essential that we do not bring issues into the public domain during the discussion that would help any fraudulent actors or jeopardise the recovery process. To that end, I can give an important update to the committee on our recovery efforts. I can confirm that we have recovered €1.52 million back to the NTMA accounts and recovery efforts will continue in that regard.
Mairéad Farrell (Galway West, Sinn Fein)
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I have four members indicating so far. I will begin with an Teachta Timmins, then na Teachtaí Brennan and O'Callaghan and Senator Murphy.
Edward Timmins (Wicklow, Fine Gael)
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I thank the Chair, and I thank the witnesses for coming before us. I have four questions. The first relates to fraud generally. Mr. O'Connor can decide whether it is answerable. My question comes from my own work experience dealing with transfers of funds. Does the NTMA have a system of making telephone call confirmations in all cases of drawdown requests? I know it is often done by US banks. If you control a US bank and are based in Ireland, when a transfer request is made, the bank will phone to ask if you requested the transfer of €20,000, for example. Does the NTMA has a similar system whereby if someone makes a drawdown request for the transfer of €5 million, it automatically triggers a phone call to the requesting party it believes the email or other form of correspondence was sent by? Does the NTMA do a phone call check before the transfer is made?
Edward Timmins (Wicklow, Fine Gael)
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That is the first one. We will do them one by one.
Mairéad Farrell (Galway West, Sinn Fein)
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Absolutely, we are aware of the limitations on both sides. If Mr. O'Connor is uncomfortable, he should just tell us.
Mr. Frank O'Connor:
I really appreciate it. We do want to give the committee as much information as possible. I will address Deputy Timmins's question, but I reiterate this is a very serious matter for us. It is important to state that there is no suggestion of a breach of the IT systems at the NTMA. The other thing is, the minute it was discovered by staff, it was reported to An Garda Síochána, the Department of Finance and all the other stakeholders. Of course, the recovery efforts are very important as well as fully investigating the matter. That is why we have appointed Deloitte to do the full investigation.
In essence, what happened was that we had one payment of €5 million to one Ireland Strategic Investment Fund, ISIF, investee company, which was an existing investee company. It was actually its second capital call. We will happily go through that. A capital call is the way one makes an investment commitment over a period of time. It could be several capital calls. The first capital call to this entity was last year and this was its second capital call. That is important. The fraudulent actor was able to design it, in some detail and to time, to make the capital call look like a legitimate capital call.
We could talk a little bit about overall controls but, again, if we go through our controls in detail, then we are providing information to the next person, so-----
Edward Timmins (Wicklow, Fine Gael)
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I have just one simple question.
Edward Timmins (Wicklow, Fine Gael)
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When someone makes a capital call or a request for funds to be transferred from the NTMA to a third party, does someone pick up the phone and ask the question, "Was it you who made that request?" This is a simple control.
Edward Timmins (Wicklow, Fine Gael)
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Is it not done as a rule?
Edward Timmins (Wicklow, Fine Gael)
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I would suggest that it is a very simple and a very effective control to be done 100% of times, certainly over values of €5,000.
Edward Timmins (Wicklow, Fine Gael)
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That is not a clear answer but I understand what Mr. O'Connor is saying.
Edward Timmins (Wicklow, Fine Gael)
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A "Yes" or a "No". In 100% of cases where someone does a transfer request - let us say over €10,000 - does that trigger a phone call from the NTMA to that supplier, yes or no?
Edward Timmins (Wicklow, Fine Gael)
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My next question pertains to interest charges and how we are trying to reduce the national debt. We are trying to reduce interest charges over the coming years. When the Minister for Finance was here a few weeks back I pointed out that in the multi-year expenditure plan 2030 prepared by the Government, the interest charge for 2030 was €5.3 billion compared to €3.1 billion in 2024. This is obviously to do with higher interest rates and the refinancing. From reading the NTMA reports the implication is almost as if we are going to be dropping interest payments. The national debt is dropping slowly but surely, and this is very welcome and very good. Does Mr. O'Connor agree with the figure that the interest rate charge up to 2023 will be €5.3 billion versus €3.1 billion last year?
Mr. Frank O'Connor:
Any number in the views is a forecast and will depend on assumptions. As we said in the annual report, we have just hit our lowest level of interest per annum. Members might remember that it was €3.2 billion for 2024. It peaked at €7.8 billion in 2013, which is a decline of 60%. This is reflective of the strategy to lock in fixed rates and lower rates for an extended period of time. We expect the interest bill to gradually increase into the end of the decade. Why is that? It is a natural consequence that some of this cheaper debt would start to mature and one would have to fund it. If it is based off current rates it would gradually have to be funded at the higher rate. The average rate would start to increase but the increase would be more gradual. At the turn of the decade, however, one would definitely start seeing it. It is no surprise that one would start to see forecasts showing an increase from what probably might be the lowest charge at around €3.2 billion. It is a forecast and it would have assumptions. I do not have to hand what assumptions they use.
Edward Timmins (Wicklow, Fine Gael)
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I understand that. They might be slightly different from what we were led to believe but Mr. O'Connor does not disagree with the €5.3 billion to 2030.
Mr. Frank O'Connor:
I am not confirming the €5.3 billion because it is a forecast and would be based on assumptions. I am saying that based on current interest rates one would expect a gradual increase in the interest bill as we replace that lower-cost debt we borrowed during previous periods into the end of the last decade and during Covid when rates were lower.
Edward Timmins (Wicklow, Fine Gael)
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Generally, Mr. O'Connor talks about long-term investments. One of the weaknesses of our infrastructure plans is that a lot of State bodies require certainty on long-term capital projects of ten or 20 years. Can the NTMA contribute to giving certainty on the financing of infrastructure projects for the long term of five, ten or 15 years?
Mr. Frank O'Connor:
I will ask Mr. Ashmore to comment on what the ISIF does within its mandate, but with regard to NTMA the Deputy may be familiar with the National Development Finance Agency, NDFA, and may have seen in the slides we provided that the NDFA helps on giving financial advice and procurement advice on a number of infrastructure projects. Where it is a public-private partnership, PPP, that is an element of what the NDFA does. It gets involved in that side. A number of other infrastructure projects are done directly by the Exchequer or by Transport Infrastructure Ireland. The NDFA plays a role to that extent and PPPs are probably 5% of the overall infrastructure model. Sometimes it is more advice, or projects are done by the Exchequer. ISIF has an element of a role so Mr. Ashmore may comment on what ISIF does in that space.
Mr. Nick Ashmore:
Within its full thematic strategic areas of investment ISIF has climate investing, of which a large component is renewable infrastructure and renewable power generation. In our housing and enabling investments team we also do small-scale infrastructure financing, but very much on a commercial basis. We will step in where market finance is required, maybe where the market is not stepping up, where it may be a slightly higher risk, or where it may be at a slightly earlier stage. The longevity and persistence of ISIF means there is always going to be a commercial offering there to provide finance to small scale infrastructure but it is not a replacement necessarily for Exchequer funding of infrastructure. It is more complementary to this, to make sure that where market funding can deliver infrastructure there is a market and that we can support and encourage that market.
Edward Timmins (Wicklow, Fine Gael)
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Reference was made to the State Claims Agency and the number of cases outstanding - some 15,000 or thereabouts - with 4,000 being resolved in one year. This just seems quite slow. Is there a way of expediting these? Does the NTMA have any strategies to expedite the processing of claims?
Mr. Ciarán Breen:
I thank Deputy Timmins. It is extremely difficult in the system to hurry things up. One is largely dependent on how the plaintiff takes their case and then there is the courts and the normal delays there. One thing we are doing, and we have increased the figure substantially over the years, is the number of cases we are doing by mediation. We have moved to mediate most of our clinical negligence cases at this stage. Last year we had 46% of cases where damages were paid or resolved through mediation. It is a so much quicker, effective and better process for everybody but particularly for the families of clinical negligence victims.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I thank the witnesses for joining us today. I have a number of questions. I might not get through them all but maybe if we get brief answers we have a chance of doing that. The NTMA obviously takes a view of the markets and what is going on in the national economy, or more importantly the global economy. Has the NTMA done any modelling on the impact of tariffs or the impact of Ireland's actions or potential actions in relation to Israel and on what that may do? Has the NTMA looked at that or done modelling on that and what has it considered?
Mr. Frank O'Connor:
With regard to modelling the tariffs, in a lot of cases our economics unit would take from any estimates done by the Department of Finance. One would also see some publications around the ESRI and what it says about the impact of tariffs. Of course there is a lot of speculation on the levels of tariffs. We would really work from that basis. When we are on the road talking to bond investors what one does not want is a forecast from the Department of Finance and then a separate forecast from the economics team in the NTMA. We would take any estimates from the Department and reflect on that in any modelling.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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So the NTMA takes the Department of Finance forecasting modelling.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Great. I am just trying to understand the net debt figure. This is €157 billion and it is based off €218 billion debt and whatever is in our two sovereign wealth funds.
That still leaves a gap of between €40 billion and €50 billion. What is that? Is that short-term cash?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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How is that cash managed?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Okay. That is a substantial short-term cash balance. How is that managed? Where is it kept? Is it liquid cash? How is return versus liquidity balanced?
Mr. Frank O'Connor:
Predominately, that cash is held by the Central Bank of Ireland. That is one example. Another example is sovereign treasury bills across European jurisdictions, such as Germany, France, Belgium and an array of others, if they all fit within our credit policy. Those two examples hold the majority of it. In fact, we do a small amount of lending to other debt offices, such as overnight liquidity, etc. The Central Bank of Ireland and sovereign treasury bills are the two main components.
With regard to the return, the Deputy is absolutely right. With a cash buffer, one thing we are conscious of at any time is borrowing at higher rates and putting down a deposit at lower rates. The Deputy might remember that although we did not need the funds during quantitative easing and Covid, we decided to continue borrowing more than we needed. We prefunded the State because rates were particularly low. The Deputy might remember that, in some cases, the rates became negative. Some of that money was borrowed at 0%, 0.5% or 1%. Considering short-term interest rates are approximately 2%, the Deputy will find we have a positive contribution.
With regard to recent borrowings, we initiated a 30-year bond for the long term at approximately 3.15% earlier this year. If you were to go to the market now, you would be paying approximately 3.75%. Obviously, if those funds were borrowed at 3% and a short-term deposit is being placed until the cash is used by the Exchequer, that comes at a cost. Overall, given where we have funded everything else, the cost of carry is rather negligible or on the positive side. That changes over time, however. We are conscious of it. I always recommend having a sufficient cash buffer. It is just elevated at the moment post the Apple decision in Europe. Obviously, the Government will make decisions in due course as to how to spend that money.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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What is the broad investment strategy for the two sovereign wealth funds? Will Mr. O’Connor comment on the targeted percentage return? How liquid are those investments?
Mairéad Farrell (Galway West, Sinn Fein)
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It is the Deputy’s time so whatever suits him.
Mr. Frank O'Connor:
There are two new funds. There is the Future Ireland Fund, FIF, which will put away 0.8% of GDP until 2041, if possible. That will be invested long term. There is then the Infrastructure, Climate and Nature Fund, ICNF, which is more of counter-cyclical fund to help with climate. Those are the two funds. Basically, the money that is due by the end of the year means, as per the slides, there will be approximately €16.5 billion in those funds, with €12 billion in the FIF and €4 billion in the ICNF. Currently, those funds are invested in an interim strategy which is a conservative, fixed income strategy in Europe until we get the approval of the long-term strategy. We have established an investment committee, consisting of two boards members of the agency and four international experts from around the world, as the Deputy may have seen. The long-term strategy has been approved by that committee and the agency board. It is now with the Government for consultation and we wait to hear back. That is per the legislation. Right now, it is operating an interim strategy. It is invested in conservative low-risk, fixed-income ways in Europe, pending approval from the Government. There will then be a transition phase to invest it.
Briefly, to give the Deputy a sense of the strategy, without getting into the details, broadly the long-term fund to 2041 is expected to have a long investment horizon. That predominately will have a lot more equity risk and less bond risk. It is for the long term. With the ICNF, liquidity can be drawn per the legislation soon. In fact, the €3.15 billion allocated for climate can be drawn down in the near term regardless of economic conditions. We will keep that money in much more conservative liquid, short-term horizon investments because it may be called upon soon. That is the FIF. I tried to be as short as I could. Mr. Ashmore will explain the strategy of the ISIF.
Mr. Nick Ashmore:
The key co-strategy for ISIF is to make commercial investments that have a positive economic and employment impact in the State. We have two portfolios. We have a portfolio of Irish impact investments, where we have done that, and then we have a reserve global portfolio which is held in low-risk, liquid, global securities around the world. The Irish strategy focuses on four key themes that are designed to help the State to meet key challenges where commercial investment can make a difference. The first theme is climate, with both near-term and long-term investments to help the State to meet its climate targets. The second theme is housing and enabling infrastructure. That consists of a lot of finance for housing development for mass-market housing on a commercial basis. It also consists of regional infrastructure. We are focused on five key regional cities and doing urban regeneration and commercial real estate in those areas, as well as small-scale infrastructure. The third focus is on scaling Irish businesses. That is a whole spectrum of funding from seed capital, venture capital, growth capital to private credit, direct and indirect. The fourth theme relates to food, agriculture and the marine where we are looking firstly to help that sector to decarbonise and secondly to avail of the opportunity around housing the market for sustainable food systems globally.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Is the ISIF now fully divested from the companies on the UN Human Rights Council’s database?
Mr. Nick Ashmore:
In April 2024, we divested from a number of companies which, at the start of 2024, were valued at approximately €2.947 million. They were largely local banks in Israel. We retain a number of companies that are on the list, but they are not necessarily as deeply exposed to the Israeli local economy and the risks in that region. At the end of 2024, those holdings across six securities totalled €7.764 million.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Are there plans to continue with those holdings?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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With regard to the fraud case, it was mentioned that €1.54 million was recovered. How can money be partially recovered? Is it the bank in question that contributed to that? Should it not be fully recovered or not recovered at all?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Okay. That is fair enough. Has there been any other such fraud in any of the NTMA bodies or NewERA companies in recent years?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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While I am conscious there is no one from NewERA present, of the 24 companies, from looking at the balance sheets, it seems that there is a substantial amount of cash and debt. Has any thought ever been given to an inter-company centralised treasury operation to offset one against the other across the companies?
Mairéad Farrell (Galway West, Sinn Fein)
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First, the invitation from the committee stipulated three members. We also brought Mr. Breen to this committee from the State Claims Agency and I thank the committee for allowing that. The NTMA has six mandates now and a lot of staff. When it comes to NewERA, it gives advice to the Government. It is a policy matter for the Government whether to look at that matter.
There is an advantage to the Deputy’s point, however. NewERA was established in early 2011 and got up and running in 2013 with six designated companies. It now has 24 designated companies, which gives the Government a sight of the whole portfolio. As the Deputy will probably have seen from the annual report, that portfolio of companies is generating close to €2 billion in profits. Its dividend is approximately €375 million, with €321 million of that going back to the Exchequer. There are exactly those kinds of questions. What I often see and hear from the team is that they can look into different cases, pension schemes and entities and can advise the Government with that holistic view. While questions like that may arise, ultimately it will be a policy matter for the line Department.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Staff bonuses rose 13% to €3.22 million. What KPIs drive variable pay?
Mr. Frank O'Connor:
Generally, performance-related pay is not uncommon in the market where we compete for talent and expertise. Generally, it is down to the individual’s performance, their unit’s performance and the NTMA’s performance overall. That is the nature of the performance metrics. Of course, it will not surprise the Deputy to hear that those recommendations come in to be reviewed by me, the chief legal officer, the chief people officer, the remuneration committee and the subcommittee of the board.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the witnesses for coming in and for their help in answering these questions. On the fraudulent payments, is it correct that Mr O'Connor is declining to answer whether or not a phone call was part of the check process?
Mr. Frank O'Connor:
I am not declining; I am trying to be very careful as I list off our controls. With very large bond payments in the market, delivery versus payment is a common feature. Money does not go out until you get the bonds. That is an example. That does not mean it is in every process. I did not want to mislead the committee or have to come back and correct my statement. A phone call back to an entity can be part of the payment process and it is one of our controls. I do not want to mislead the committee. I am not declining to answer the question.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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In this instance was it part of the controls process?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It was part of several controls in this instance.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Have the control processes been strengthened since this incident?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will turn to the Ireland Strategic Investment Fund. What date were the Israeli bonds disposed of?
Mr. Frank O'Connor:
The Israeli investment occurred on 1 August. It was assessed by the team per. Mr. Ashmore mentioned the review, which took place on de-escalation in June. That was recommended per the Government's process to the investment committee. We had an investment committee of ISIF on 30 June. It had to go through the ISIF team, I think on 25 June. The date of 30 June was already in the diary. There were a number of investment proposals and the recommendation to divest went to that committee. We had a board agency meeting on 8 July, which was set probably a year in advance and that was one item that was brought to them for recommendation. The board approved the divestment decision and the divestment took place on 10 July.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Were additional Israeli bonds purchased in 2024?
Mr. Frank O'Connor:
As the Deputy can see from the annual report, and Mr. Ashmore may be able to give more detail, in essence the balance, if I recall correctly, was €2.6 million in 2023 and went up to €3.6 million at the end of 2024. What that reflects is the global portfolio that feeds investment in Ireland. It is a pool of liquidity and it is invested globally throughout the world like other sovereign wealth funds. It is equities and bonds and is very much passive investment tracking an index. What happened in 2024 was the bigger balance in equities and decision to take some of that risk off the table and put more in fixed income at a macro level trickled down through the index. The same weighting would have occurred for Israel or Egypt or Jordan and that is what caused the increase.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is it correct that more Israeli bonds were purchased in 2024?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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What Mr. O'Connor is saying in terms of the decision-making process is that it was done across the board on the whole set of bonds and it was not specific to the Israeli bonds
Mr. Frank O'Connor:
Lots of securities. If the Deputy can imagine €3 billion in fixed-income globally increased to €3.3 million or €3.2 million because it has been taken out of equities or cash, it trickles down through the passive mandate. It is not a deliberate decision to buy more of one country or another, it is the index weights.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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.Given that Israel was explicit that its bonds were used to part finance what it refers to as its war campaign but what across the political spectrum, including the Taoiseach and Tánaiste recognises as genocide, why was public Irish money used to buy additional Israeli bonds in 2024?
Mr. Frank O'Connor:
The ISIF operates as a commercial remit within the legislation laid down by the Oireachtas. We take all investment decisions with that in mind. As I said, the global portfolio is the ultimate pool of liquidity for the Irish portfolio. That is the way investment decisions are taken and the team continues to monitor those investments. The decision to go into any jurisdiction is a matter of the index; it is not an endorsement or political statement on any of the countries involved. It is more about the broader risk parameters laid down for the ISIF.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is there no consideration given to war and genocide? I appreciate it is not an endorsement but the Israeli Government was quite clear that these funds are being used in part to massacre people in Gaza. Is there no consideration given to that? Is no one saying this is a bad idea because these funds are being used in an appalling way and humans are being massacred? Does that and should that not enter the equation at all given that this is public money? ISIF is not a private investment firm; it uses money that belongs to the public. The vast majority of the Irish public do not want money used in this way.
Mr. Frank O'Connor:
I respect there are a lot of considerations. At a personal level what we are seeing reported every day on our television screens is an awful situation that is occurring. I do not want to be incongruous talking about investment mandates, risk parameters and financial factors but we operate within the mandate laid down by the Oireachtas and that leads to the investment decisions we discussed, whether macro or specific to Ireland, partnering funds throughout the world for that double bottom line for ISIF commercial return and economic impact for Ireland is the framework we work against. We can see what is happening but as I said, we have to operate within that mandate and stay within our risk parameters.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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In Mr. O'Connor's view if the Oireachtas does not want to see this happen it has to be explicit in its legislation. Does he believe the Oireachtas or the Government needs to be explicit in its instruction this should not happen?
Mr. Frank O'Connor:
I cannot speak for the Oireachtas. It is up to the Oireachtas to decide what it wants to do. The Deputy will remember the Fossil Fuel Divestment Act and cluster munitions. ISIF aligns with all of that. There is legislation being discussed and whatever legislation comes through, we will align with it as we have always done in the past.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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How much of ISIF funds are invested directly or indirectly in occupied Palestinian territories?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Given that the largest displacement of Palestinian people in the West Bank since 1967 is happening now according to the United Nations, does that not influence any decisions that we should divest on those holdings straightaway?
Mairéad Farrell (Galway West, Sinn Fein)
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I understand Senator Murphy and an Teachta Doherty have swapped positions. I call an Teachta Doherty. Then we will have an Teachta Burke and Senators Murphy and O'Reilly to conclude.
Pearse Doherty (Donegal, Sinn Fein)
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I thank our witnesses and welcome them to the committee. I wish to clarify a couple of issues. I will start with the fraudulent transfer. On mature reflection was there not a red flag in relation to that transaction the NTMA should have noticed? In respect of the second capital call was there not a red flag on how that was being asked for that should have triggered something in the NTMA because it was not in keeping with how the original call happened?
Mr. Frank O'Connor:
That is why we are investigating to have the full facts. I said it before I was asked this question. Apart from what the fraudulent actor did to design and time it to look like a legitimate request, we will look hard at our own controls; the rigidity of the controls we applied and whether there were shortcomings or things we could have seen. The investigation will look at all of that. We will not be shy about admitting it if we have shortcomings. We need the investigation to find the full facts.
Pearse Doherty (Donegal, Sinn Fein)
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At this stage I am sure Mr. O’Connor as CEO can see that there should have been a trigger. Given how that call happened and that he now knows that the request and how it was requested was not in keeping with previous requests-----
Pearse Doherty (Donegal, Sinn Fein)
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At this stage is Mr. O’Connor saying he has no concerns regarding what should have been a red flag?
Pearse Doherty (Donegal, Sinn Fein)
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Would Mr. O'Connor describe this as a sophisticated or quite a basic scam?
Mairéad Farrell (Galway West, Sinn Fein)
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Mr. O'Connor can go ahead with what he can say.
Mr. Frank O'Connor:
Different people will opine on different things. When you have all the facts, you can decide.
I would not put the term "sophisticated" on somebody getting information and how they get information. I would let others who are experts on this say whether it is sophisticated. The one thing I would say is that once someone got their hands on money, the indications are that people knew what they were doing and tried to move money and move it at speed but I cannot go any further than that.
Pearse Doherty (Donegal, Sinn Fein)
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If you are scammed for €1,000, the scammers know what they are doing and they move the money very quickly. Some of this money has been recovered. They stole €5 million of taxpayers' money that was under the NTMA's control. At what level of authority in the NTMA is somebody able to release a capital call of that nature?
Pearse Doherty (Donegal, Sinn Fein)
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My question concerns the €5 million payment.
Pearse Doherty (Donegal, Sinn Fein)
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What level of authority does it involve?
Pearse Doherty (Donegal, Sinn Fein)
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What is the senior level?
Pearse Doherty (Donegal, Sinn Fein)
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I do not want Mr. Black to identify individuals, assign any blame or cast aspersions but I think it is a fair question. We are talking about taxpayers' money and we want to make sure it does not happen again. At what level can €5 million be authorised as a capital call? Is is at CEO level or assistant level? Is that one of the concerns - that there should be more checks?
Pearse Doherty (Donegal, Sinn Fein)
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I do not want to identify anybody. That is a fair point. When a capital call comes in regarding a drawdown, which may not be in keeping with the previous one and may or may not have raised a red flag, I presume that individual does not have the authority to make the capital call. There is somebody else. Is there another rung after that? I want to know whether it is one more step, two more steps or three more steps.
Pearse Doherty (Donegal, Sinn Fein)
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The process can be dealt with by one individual. I want to know how many steps are involved.
Pearse Doherty (Donegal, Sinn Fein)
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Would it involve three or four signatures?
Pearse Doherty (Donegal, Sinn Fein)
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That is fair enough. Will the Comptroller and Auditor General be asked to look at this?
Pearse Doherty (Donegal, Sinn Fein)
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Excellent. On what date did the NTMA notice the €5 million was stolen?
Pearse Doherty (Donegal, Sinn Fein)
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Fair play to the staff who identified that and the recovery efforts so far. Did the NTMA contact An Garda Síochána on 8 July?
Pearse Doherty (Donegal, Sinn Fein)
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Did it contact the Department of Finance?
Pearse Doherty (Donegal, Sinn Fein)
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It was reported on 12 July that the Department of Finance did not know anything until-----
Mr. Frank O'Connor:
I saw the report but we reported. What is important is the staff member and the culture and that if they see the mistake, they put their hand up, even if it involves them. That is step one. Step two involves An Garda Síochána, while step three involves the Department of Finance, the Central Bank of Ireland, the National Cyber Security Centre and the Comptroller and Auditor General.
Pearse Doherty (Donegal, Sinn Fein)
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All the steps have been fulfilled. How do we know it will not happen today? We are two weeks on and the NTMA has not been able to confirm whether or not there should have been a red flag. These are international criminals. In some cases, they are syndicates. How do we know that the procedures are robust enough now?
Pearse Doherty (Donegal, Sinn Fein)
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Has the NTMA put steps in place? I know all of that and I appreciate it but has the NTMA done something since then? Are there now two more layers? If a call comes through that is not similar to the first call, is it a case of "red flags please all around and let's escalate this"? Has the NTMA done anything in the past two weeks as the investigation is ongoing to ensure we are not vulnerable again?
Pearse Doherty (Donegal, Sinn Fein)
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Does the NTMA have an interim report?
Pearse Doherty (Donegal, Sinn Fein)
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I have raised the issue of Israeli war bonds with the NTMA for a number of years. I know it invested in an index fund. Last year, it held nine Israeli war bonds. It has increased that investment. How many did it hold at the highest point last year?
Pearse Doherty (Donegal, Sinn Fein)
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I understand that but the NTMA still has to buy the bond. At the end of 2023, the NTMA held nine Israeli war bonds.
Pearse Doherty (Donegal, Sinn Fein)
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So the NTMA bought two more.
Pearse Doherty (Donegal, Sinn Fein)
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A decision was taken on 10 July to divest, just as the NTMA was going to release its annual report - to save face. That is the reality. Mr. O'Connor will get a chance to rebut that but that is exactly what the NTMA did - to save face - because the Irish public is disgusted that the NTMA is investing its money into buying war bonds. Kids are being ripped apart by these bullets and bombs and we cannot say we did not fund them, or at least the NTMA did not fund them on behalf of the Irish State. What has happened is shameful - the fact that the NTMA increased its investment. It could have divested at any time. Even if it bought the index fund, it could have sold them the next morning, second or hour, as it did after 10 July. Is that not the case?
Pearse Doherty (Donegal, Sinn Fein)
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So the fact that kids were being slaughtered as they were queuing for water and flour was not the concern in the NTMA. This is the thing that really angers me. The reason the NTMA sold these is because of Iran and possibly Israel not being able pay out on the bonds. The NTMA did not sell them because of the genocide. I do not understand what is going on in the NTMA. I have huge respect for the NTMA in terms of its debt management but it is so off the wall on this issue. It is appalling that at a senior level, and it does have to fall at Mr. O'Connor's doorstep, the NTMA has allowed the State to continue to invest, support and fund a genocide. That is what it has done. There are no ifs, buts or maybes. I cannot say it any other way. The NTMA is making a decision to give millions of taxpayers' money to Israel, which is advertising to fund its war effort, and the only reason it stopped it is that it is worried that the escalation with Iran might mean that Israel is unable to pay the money back to the NTMA. I find that mind-boggling.
At the start of this process in June, Mr. O'Connor spoke about Government strategy. Can he explain what role the Government had in respect of this divestment?
Mr. Nick Ashmore:
The Deputy is absolutely right in terms of the risk decision that was taken. The Government has no role in ISIF decisions. We have a governance structure that includes our investment committee and our agency board, so that is the decision-making process that was undertaken. On the escalation of the conflict-----
Pearse Doherty (Donegal, Sinn Fein)
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The Government was represented at the committee that decided to divest. Is that correct?
Pearse Doherty (Donegal, Sinn Fein)
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Was it them who recommended the divestment?
Pearse Doherty (Donegal, Sinn Fein)
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Could the minutes of those meetings be provided to the committee?
Mairéad Farrell (Galway West, Sinn Fein)
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The NTMA can provide it to the secretariat.
Colm Burke (Cork North-Central, Fine Gael)
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Could I get clarification regarding the process? We are talking about €5 million. Would the same process have been available for the payment of €20 million?
Colm Burke (Cork North-Central, Fine Gael)
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A process is in place relating to the payment of moneys. In this case, it was a payment of €5 million. I am asking if the same process would be in place were a €20 million call for funds to be paid out.
Colm Burke (Cork North-Central, Fine Gael)
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In other words, this could have been €20 million as much as it could have been €5 million.
Mr. Ian Black:
It can be higher than €5 million, but the average is €5 million. We have carried out a look-back review to ensure that we are satisfied with the previous capital call payments. To give the Deputy context, we have never experienced this type of issue with our payments before. It is an isolated event. In 2024, we made payments of €500 billion and received €500 billion to keep the account at zero. We had zero errors in those payments. That is going back all the way and up until now.
Colm Burke (Cork North-Central, Fine Gael)
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I come from a legal background, so I would have been involved in drawing down loans on a constant basis, both commercial loans and housing loans. There was a whole series of checks and balances, particularly in relation to documentation. I am concerned about how, with the process the NTMA has, something like this was allowed to slip through without the process being triggered.
Was the problem identified when the genuine call came for the draw-down of that €5 million or was that call made at any time within the following 48 hours?
Colm Burke (Cork North-Central, Fine Gael)
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What I am asking is whether the problem was identified when the genuine call came in for the €5 million.
Colm Burke (Cork North-Central, Fine Gael)
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I am asking how it was identified. Was it identified once the genuine call came in and it was suddenly realised that the €5 million was already paid out?
Colm Burke (Cork North-Central, Fine Gael)
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So in other words, if that genuine call was not made, it might not have been identified for a further week.
Colm Burke (Cork North-Central, Fine Gael)
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One of the issues the witnesses raised earlier was that a number of people were involved in this process. Are there too many people dealing with a particular process and confusion can arise as a result?
Mr. Frank O'Connor:
That is a fair question. We need to look at all steps, as there are steps in the process where the piece that somebody is looking at looks perfect but if there was a shortcoming in an earlier piece, that is where it should have been spotted. When we go through it all, we will have to look at this. One criticism could be that there are not enough people whereas we have many steps in the process. As a result, do people rely on it further along? That goes back to looking hard at the controls that we have.
Colm Burke (Cork North-Central, Fine Gael)
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Moving away from that, I will discuss the payments from the State Claims Agency. If we settled every claim in the morning that was currently pending, what kind of money would we be talking about?
Colm Burke (Cork North-Central, Fine Gael)
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Of that €5.3 billion, how much do medical negligence claims make up?
Colm Burke (Cork North-Central, Fine Gael)
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Talking about medical negligence claims and ignoring all the other claims against the State, where do we stand with regard to the level of claims compared with other European countries? Are we currently ahead of the United States?
Mr. Ciarán Breen:
I do not think we are ahead of the United States. Our best compass point, because they comprise a common law jurisdiction, are England and Wales and their scheme, NHS Resolution. To give the Deputy an idea, I was looking at their outstanding liability, which is £58.5 billion. Last year, we paid out €460 million in respect of our schemes and they paid out £2.3 billion.
Colm Burke (Cork North-Central, Fine Gael)
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Does that €460 million include costs?
Colm Burke (Cork North-Central, Fine Gael)
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All aspects of it.
Colm Burke (Cork North-Central, Fine Gael)
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The level of claims is at €4.3 billion. Is there now a need to look at whether we can do this in a better way? I know we did a review before. The review was to bring in savings but that has not happened. Other countries have a different structure for how they manage claims. Is there not a need now to look again at and revisit how we go forward over the next ten to 15 years? There has obviously been a huge increase in Ireland's population, with 40% more people living in the country now than we had 20-odd years ago. Therefore, the numbers going through our hospitals and other medical services will be increased and the level of claims will increase, too. Is it not now time to look at how we deal with this issue?
Mr. Ciarán Breen:
I agree and I have said at both this committee and at the Committee of Public Accounts - the Deputy will probably have heard me saying this over the years - that we really need the reforms that we are awaiting, particularly in clinical negligence cases. We need the pre-action protocol. We need it not least for the families, because these are very tragic cases, with the idea of having to go to court every time even though we try to mitigate the worst aspects of it by trying to get cases to mediation. If we had a pre-action protocol, there is no doubt that that behavioural model, which is radically different to the current tort system model, would bring relief all around, even in front-loading decisions that both parties are required to make within that protocol in the shortest period of time, and get to mediation much more quickly. One of the real advantages of the pre-action protocol is the narrowing of the window between the making of the claim and, ultimately, the family getting their settlement. That would be a far better process.
Colm Burke (Cork North-Central, Fine Gael)
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Is that not one of the problems, especially with regard to HSE facilities? Due to the whole medical-admin separation, there seems to be a far slower process for dealing with concerns that are genuinely raised by patients or patients' families, with delays in them getting responses, leading to frustration and a legal consultation? Have we actually made any progress on that in the last five years?
Colm Burke (Cork North-Central, Fine Gael)
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I think Mr. Breen accepts that if that was done at a faster pace, we might have a better outcome.
Mr. Ciarán Breen:
Yes, I do. Obviously, we initiated and fully supported open disclosure way back. I think that has to be a much more developed and better process. Telling people when things go wrong is the right thing to do.
I agree with the Deputy.
People are very often frustrated - plaintiffs tell us this - by the fact that their concerns have not been heeded when they made them at an earlier time.
Colm Burke (Cork North-Central, Fine Gael)
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Is it not a problem that we have a challenge whereby there is a reluctance among people to stay in the particular areas of medicine they want to focus on because of the level of claims and the risks involved?
Joe O'Reilly (Fine Gael)
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I welcome our guests. Despite the ginormous figures we deal with these days, the loss of €5 million of taxpayers’ money is very serious, as the witnesses accept, when there are so many socially reforming things it could achieve that would matter to people. The NTMA said in its opening statement that this was not an IT issue, so it was obviously a governance issue. Without going into names, did the person who made the error make it without reference to another person?
Mairéad Farrell (Galway West, Sinn Fein)
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The Senator should be very careful with identifiable groups and-----
Mr. Frank O'Connor:
On the main point, the criminal investigation overall is with the Garda. I do not think we could start to speak about individuals or errors. It has not been fully investigated yet. The starting process was the threat actor getting enough information to design and time the capital call to look like a legitimate capital call. I cannot really go into-----
Joe O'Reilly (Fine Gael)
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There should be some way that an individual would have to go to a second person.
Mr. Frank O'Connor:
Yes, there are many layers, etc. We will look at all of those. I said it when I was asked. Despite what the threat actor was able to do, we will look at our own controls. We will look at them hard, including their rigidity, levels of control, how they were applied and could we have seen something. We will look at all of that.
Joe O'Reilly (Fine Gael)
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That is reassuring. Mr. O'Connor is assuring the taxpayers, through this meeting, that there will be new governance structures, with new checks and balances.
Mr. Frank O'Connor:
To be honest, we designed our controls to have the checks and balances. We will look at them. We may find issues with the way we applied our own controls - I am only giving an analogy - and that there were shortcomings, or we might say that we need to add X, Y or Z. Until we see all that, there could be many aspects to it.
Joe O'Reilly (Fine Gael)
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Even in a very small business, a system of checks and balances is needed. There cannot be the one person. That would make it subject to human error.
Joe O'Reilly (Fine Gael)
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Moving on to the good news, that being, the 70% debt-to-GNI* ratio. In simple terms for those watching and listening, will Mr. O’Connor quantify what this means for taxpayers in terms of prospective reduced interest and potential investment?
Joe O'Reilly (Fine Gael)
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What is the general accepted ratio? Is 65% the ideal?
Mr. Frank O'Connor:
If one were a debt manager, one would say as low a level as possible, but we need to invest in our economy and grow it for the future. One would have to look at all the statistics but, generally, a number of countries’ debt levels have increased since the global financial crisis and Covid. For example, many of the European countries that were below 100% debt-to-GDP are now above 100%. Below 70% is good for Ireland and we compare very favourably, but we should remember that debt to GNI* hit 166% at its peak. That is a very heavy debt burden. It was down to about 102% in 2021 at the time of Covid and it is now below 70%. As I said in our remarks on the annual report, we cannot be complacent, given the uncertain backdrop and the fact that this is still a substantial amount of debt, but if there were to be a fiscal shock or Ireland needed to do something, the starting position would be better.
We do not really talk about GDP because it flatters Ireland a bit, but that peaked at 120%. It is now back in the 40s. We like to focus with investors on the GNI*.
Joe O'Reilly (Fine Gael)
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We should be seeing declining interest rates.
Mr. Frank O'Connor:
No. I will explain. Ireland’s interest bill has come down. It was €3.2 billion. That benefited from a number of things, including our strategy of pre-funding the country and borrowing when rates were lower. We borrowed more than we needed because it was an opportunity. The cost of insurance, let us say, was low. Therefore, we benefited. We lengthened and smoothened the maturity profile, we did 30-year debt, etc. Allied to the Government's success in terms of a fiscal surplus, this meant the interest bill came down. The interest bill was almost €8 billion. A forecast of €5 billion in 2030 was mentioned. In 2014, during the crisis, it was forecast to go up to €10 billion per annum, yet it is down around €3 billion now. It will gradually increase, though. We have got to be realistic. Interest rates are higher now than during Covid and our bill will increase, but more gradually because of the benefit of locking in rates for longer. That is what we are trying to do. It is to try to not have a sudden change in policymakers’ decisions. We are well placed but it all depends on the path of interest rates. However, we have locked it down so that it will be gradual.
Joe O'Reilly (Fine Gael)
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I will move on to housing. The NTMA invests in housing through the Ireland Strategic Investment Fund. Does the NTMA have a policy input? There are not radically good outcomes in housing at the moment. Will Mr. O’Connor comment? Is the NTMA investing in a good strategic ways, is that done at the agency's discretion or could it improve on that? How does the NTMA break between private and public and whatever?
Mr. Nick Ashmore:
ISIF’s focus is on working on the commercial side of the line. A lot of Government programmes are focused on the non-commercial provision of low-cost, affordable, cost-rental and social housing. We tend to work more in terms of trying to enhance the market for the private sector provision of mass market housing. We invest up and down the capital structure. We have a large-scale programme with Activate Capital of approximately €500 million to put into senior debt. It competes with the banks to provide senior debt for developers. We have a programme around mezzanine debt with a firm called Cardinal. We also have equity provision with the likes of Pearl, which does small-scale equity for small-to-mid-sized developments.
Joe O'Reilly (Fine Gael)
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Is ISIF getting optimum results or could it be better?
Mr. Nick Ashmore:
A lot of factors go into the success of the housing market. Sourcing finance at the right rate and the right level of risk is one of those components, but it is one of many components. The appetite of the financial markets to invest in the development of Irish housing is there but there are constraints that prevent that market from working as optimally as we would like.
Joe O'Reilly (Fine Gael)
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Is the big constraint capacity or infrastructure?
Joe O'Reilly (Fine Gael)
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Hopefully, they are in the control of the Government.
Joe O'Reilly (Fine Gael)
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May I ask about the NTMA’s investment in wave energy? There was a great belief that it would be the new gold for Ireland. It was going to feed the grid and be like Norwegian oil, manna from heaven or whatever. Is it too expensive to invest in or are we going ahead in a satisfactory way?
Joe O'Reilly (Fine Gael)
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However, the NTMA does invest in offshore wind.
Joe O'Reilly (Fine Gael)
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The NTMA does not think it is a great thing to invest in.
Regarding NewERA, RTÉ is listed in that ambit in the NTMA’s briefing to us. How does the NTMA respond to the fact that RTÉ has not implemented its reforms, or so we are told?
Mr. Frank O'Connor:
With regard to NewERA, as the Senator stated, in the past few years RTÉ was designated along with 24 others. However, NewERA was not party to the two reports that were commissioned and completed. There are review groups looking at those reports and at the progress made. One of them had 90 recommendations, 78 in respect of RTÉ and 12 that were linked elsewhere outside of RTÉ. There was a second report - I am trying to remember the numbers – but NewERA was not party to either of those reports. There is a review group with the relevant Departments and RTÉ, and NewERA has since been designated and will sit in on that. Other than that, I would not have a comment to make. It is a matter for the Department.
Joe O'Reilly (Fine Gael)
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My final comment relates to Deputy Doherty's question. I agree that under no condition should we be investing in the murder of people on a mass scale. Obviously, the NTMA has stopped that. Does it have a general policy in that sphere? Just as it will have new governance structures in relation to the risk arising in the €5 million fraud, does it have a structure or a philosophical or visionary view that it will not invest in that because it is criminal in one fashion or another?
Joe O'Reilly (Fine Gael)
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Therefore, the social impact of mass murder would rule it out.
Joe O'Reilly (Fine Gael)
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It would look similarly at rogue regimes and whatever might arise apart from what is happening with Israel, such as what somebody was going to use it for.
Joe O'Reilly (Fine Gael)
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The NTMA does not lend to governments, but-----
Conor Murphy (Sinn Fein)
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I thank the witnesses for their presentation. The news in relation to debt has been good. Debt appears to have been very well-managed in recent years.
I want to follow on from the questions put by Senator O'Reilly. It is evident that there is no moral compass element. The witnesses said that the investment remit for the taxpayers’ money of this State is within set parameters. I presume that within those parameters, the NTMA has a significant range of options in terms of where it might invest. Is that the case?
Conor Murphy (Sinn Fein)
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In that context, why did the NTMA choose to invest in Israeli war bonds?
Mr. Nick Ashmore:
We did not make an active decision to invest in Israeli bonds. We made a decision to invest in a global bond index - in this case, it was linked to bonds - in order to construct the right risk-adjusted return portfolio of investments to achieve the objectives of the global portfolio. There is no active decision around selecting Israel specifically. It is a byproduct of investing in a bond index to achieve the commercial return that we are looking to achieve.
Conor Murphy (Sinn Fein)
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The NTMA could end up investing in something that it has not taken an active decision to invest in.
Conor Murphy (Sinn Fein)
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The NTMA is a State body investing on behalf of the people of the State and the taxpayers of the State. It could end up investing in things that are morally reprehensible, illegal and counter to the foreign policy of the State itself. They would certainly be counter to the wishes of the Oireachtas and the wishes expressed broadly by the Irish people, and the NTMA has no ability to make a decision as to whether it invests in that area or not.
Mr. Nick Ashmore:
We are accountable to invest in the context of the legislative mandate under which we operate. The choice of passive investing is a highly cost-efficient way of investing. Instead of trying to pick thousands of individual investments, you select an index, you want exposure to the risk that that index represents and the return it can generate and you buy exposure to that index wholesale. It is done on a very cost-efficient basis. You are not paying a large number of investment managers to make a lot of decisions that do not necessarily add value. That is how we end up making investments.
Conor Murphy (Sinn Fein)
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Yet the NTMA took a decision to disinvest. That was a proactive decision.
Mr. Nick Ashmore:
That was a proactive decision that was based on a change in the risk profile of the countries and sovereign issuers in the Middle East. We had a look at the Middle East in the context of what was emerging as a major conflagration of conflict, and that presented a risk to a number of those geographies. We took a decision that the most involved and the most adjacent countries were most at risk. We do not have any exposure to Iraq or Iran. We did have exposure to Egypt, Jordan and Israel, and we also have exposure to wider Middle East sovereign bonds in Saudi Arabia, Oman and that kind of thing. We categorise those risks into two levels, a high level and a lower level. We decided to divest the higher-risk three, Egypt, Jordan and Israel, and we are keeping the rest of the region on watch for further divestment if we think things are going to get worse. It was ultimately a risk-based decision that we took.
Conor Murphy (Sinn Fein)
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By that logic, if the threats regarding Iran receded, the NTMA could be back in the business of investing in Israeli war bonds again.
Conor Murphy (Sinn Fein)
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Mr. Ashmore said it was not an active choice to invest in Israeli war bonds. However, under the formula whereby the NTMA originally invested, before it divested because of a change of circumstances, if that threat recedes, we could be back there in the foreseeable future, with the taxpayers’ money of the Irish State being invested in Israeli war bonds.
Conor Murphy (Sinn Fein)
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Yes, but what the witnesses have been telling this committee is that the choices made were simply on the risk to finances and have nothing to do with what is going on in the country. If the risk to finances in terms of the political developments between Israel and Iran receded, and that was resolved or hostilities ended in some way, the NTMA would be back in the space where the possibility of investing in Israeli war bonds is once again a live option.
Conor Murphy (Sinn Fein)
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What does it take to have the parameters of the State changed so that what the NTMA does with the citizens’ money reflects the broad view of the Oireachtas and the people of the country?
Conor Murphy (Sinn Fein)
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It would take some political intervention, whether that is through legislation or through a Government direction. I presume the NTMA got some Government direction to the effect that Russia was out of bounds.
Conor Murphy (Sinn Fein)
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Even though the European Union, of which Ireland is a member state, had decided-----
Conor Murphy (Sinn Fein)
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What would it take for the NTMA to have similar consideration in respect of Israel, which has been in breach of international law for decades and which is currently committing genocide against people in Palestine?
Conor Murphy (Sinn Fein)
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Does the chief executive officer wish to comment?
Conor Murphy (Sinn Fein)
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It is very clear from the evidence to the committee that the decision to divest from Israeli war bonds was to do with an ongoing political development in relation to Iran, and there has not been a decision by this State that investment in Israeli war bonds is a bad thing per se.
William Aird (Laois, Fine Gael)
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Does the NTMA lend money to the approved housing bodies?
William Aird (Laois, Fine Gael)
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The NTMA does lend to the Housing Finance Agency.
William Aird (Laois, Fine Gael)
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Does it have any say then in the AHBs?
William Aird (Laois, Fine Gael)
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Does Mr. O'Connor see a situation arising whereby there has been a decline in AHBs getting involved with local authorities? I am told it can be as a result of them not getting proper funding. Mr. O'Connor would be the person who would be giving the money to them.
Mairéad Farrell (Galway West, Sinn Fein)
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That is fair. It was not stated in the invitation to appear today, so the witnesses may not have the information available to them.
William Aird (Laois, Fine Gael)
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Does the NTMA lend money to them?
Mr. Frank O'Connor:
We do not. We lend money to the Housing Finance Agency. We do our best, wherever the Oireachtas asks us to be mandated, to fund - in various different ways, including the ISIF - and to invest in the Irish economy, but we do not invest directly in the AHBs. If I am wrong, I will correct the position for the committee, but-----
Mairéad Farrell (Galway West, Sinn Fein)
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Yes, AHBs get funding from the agency. Gabhaim buíochas leis an Teachta. I thank him for joining the committee.
I will touch on a few things. An awful lot has come up in the past hour and a half, so there are a few things I want to ask about in the interests of obtaining clarity. Mr. Ashmore mentioned that there is still investment in six securities that are based in Israel. Did I understand the correctly?
Mairéad Farrell (Galway West, Sinn Fein)
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Is Mr. Ashmore able to disclose which securities they are?
Mairéad Farrell (Galway West, Sinn Fein)
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I had understood it to mean that, but then-----
Mairéad Farrell (Galway West, Sinn Fein)
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We had an awful lot of discussion about what prohibits and does not prohibit the NTMA investing. It is on the basis of return. There has been a huge amount of debate regarding the occupied territories Bill and whether services will be included within it. If services were to be included in the Bill as it stands, would that preclude the NTMA from investing in those six companies or would such a move not have an impact?
Mairéad Farrell (Galway West, Sinn Fein)
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The NTMA would have to look at the detail.
The legislative mandate was mentioned, and that is what defines the NTMA's approach. How would that need to change in order to that there would - Senator O'Reilly described it well - be an ethical approach. I understand that this is not within the NTMA's remit at present. Would that need to be very clearly laid out and then done at Oireachtas level? I understand that would be our responsibility.
Mairéad Farrell (Galway West, Sinn Fein)
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Is that in terms of return?
Mr. Nick Ashmore:
That is in terms of risk-adjusted returns. If we feel a company is at risk of underperforming as an investment because it is conducting activities that could be sanctioned or that could lead to a material underperformance of the investment, we will choose to exclude or will come up with an exclusion decision. In the case of the remaining companies on the list, they are all multinational companies with, in some cases, almost infinitesimal exposure to those activities. The risk pertaining to those investments as a result of the companies' activities in the occupied territories is very low. The database was formulated and was updated once. It has not been updated since. As a result, we also get situations where some of those companies are claiming they should no longer be on the list.
Mairéad Farrell (Galway West, Sinn Fein)
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Those six are on the list as things stand, however.
Mr. Nick Ashmore:
They are on the list. As part of our ESG responsible investment strategy, we use a third party to engage with companies that are in these situations. There is a stage before divestment when we ask Hermes EOS, our service provider, which aggregates influence on behalf of many investors across the market and engages directly with these businesses, to focus them on better conduct-----
Mairéad Farrell (Galway West, Sinn Fein)
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Is there a bit of wriggle room then?
Mairéad Farrell (Galway West, Sinn Fein)
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I get that. I take it that there is a legislative basis on which the NTMA invests, even if I have a different view on it and would like us to change that legislative mandate. Mr. Ashmore is saying that it uses third-party support or information to try to deal with the companies involved. For me, it is either black and white or it is not. Will Mr. Ashmore explain how that-----
Mairéad Farrell (Galway West, Sinn Fein)
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Mr. Ashmore mentioned that there was an examination of the environmental aspect as regards the NTMA's approach. Obviously, that is a good thing. Will he explain how the environmental aspect - when the bombing of an entire area obviously has huge environmental implications - is assessed at the point when Israeli bonds were being invested in? How does its environmental assessment work? War is one of the biggest environmental issues.
Mairéad Farrell (Galway West, Sinn Fein)
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How does the environmental aspect come into it?
Mairéad Farrell (Galway West, Sinn Fein)
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So it would be more if there was-----
Mr. Nick Ashmore:
-----would factor into the decision. We have a situation, under the legislation, we cannot invest in companies that are significantly exposed to fossil fuel activity, whether that be exploration or mining. We also have an exclusion in the context of carbon-intensive activity. This is an administrative exclusion where we are avoiding companies engaged in coal mining and so forth.
Mairéad Farrell (Galway West, Sinn Fein)
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Yes, but that is separate. The environmental assessment, so to speak, does not relate to the environmental impact of where the money is going. It is simply on how the return would be-----
Mairéad Farrell (Galway West, Sinn Fein)
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My view is that we need to do awful lot of work as regards the legislative mandate. Did Mr. Ashmore outline what the exact figures are for those six securities? I do not have the exact figures.
Mairéad Farrell (Galway West, Sinn Fein)
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I just wanted to get that right.
On the fraud that occurred, the witnesses can tell me which questions they can answer and which they cannot. We want to be kept in check here. Previously, I worked in different banks, in collateral management and in confirmation settlements in derivative trades. There was checking and double-checking, and I was a low-level employee. We were triple-checking. Nothing could really happen without IT issues. I am at a bit of a loss about what happened. Obviously, the witnesses cannot tell me at this point, but they mentioned that nothing like this has happened before. Will part of the remit be to look back at transactions in respect of which there is a risk that fraud happened previously but which maybe were not flagged? Fair play to whoever flagged what happened in this case. I know what it is like when a mistake is made and alarm bells are ringing everywhere. It is a big thing to step up and say that.
Mr. Frank O'Connor:
Genuinely, we will look hard at our own controls. Even to describe our controls, which would be a reasonable ask, every control we have mentioned involves giving information. We will look and report. We will look at root-cause analysis, at our audit and risk committees and at matters that go all the way to the C and AG. Like the Cathaoirleach, I have 35 years' experience in markets.
The segregation of duties means it is not on one person. It would not be fair to put the sign-off on one person.
Mr. Frank O'Connor:
Deputy Doherty spoke about seniority. There were different levels of people involved at different stages. There was a very fair question from Deputy Burke, I think, about whether, if there are too many people involved, people think it is being done at that level. We really have to look at that.
Mairéad Farrell (Galway West, Sinn Fein)
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It was signed off in Mr. O'Connor's name, so I do not know if people would.
Mr. Frank O'Connor:
Exactly, and it is very important. We have just had a €5 million payment. This is a very rare event - there has been nothing comparable to it - and we have put in place systems, processes, etc., to try to mitigate this. We are a very large organisation with large payments. It is hard then to say "Go through all of the controls", but there are controls there and we will look at them. I think the Cathaoirleach's analysis is very fair. There was a second part to her question about having a look-back.
Mairéad Farrell (Galway West, Sinn Fein)
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Will there be a look-back?
Mairéad Farrell (Galway West, Sinn Fein)
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Mr. O'Connor mentioned it.
Mr. Frank O'Connor:
I will just say one thing regarding when we discovered it and day one. I spoke about transparency and everybody being told but there were three strands to it, namely, immediate recovery efforts, who needs to be informed and continuously informed, and then investigation. Of course, that first meeting was about what we needed to do to elevate this until we discovered more. We might want other controls and then when we look at it we could start to take those back, depending on what was observed. Those were the immediate concerns. One of the actions - and there were many, as one can imagine - was to go back and look at all capital controls that had happened. The team went back all the way to the start of the year and looked through all capital calls in ISIF to make sure there was nothing untoward because that is important. There is obviously a large volume of capital calls throughout the year.
Mairéad Farrell (Galway West, Sinn Fein)
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My time is up but I am conscious Mr. O'Connor wanted to say a few things at the beginning of the meeting. I think it was in regard to an Teachta Timmins's questions. Would Mr. O'Connor like to add anything else before we wrap up the meeting?
Mr. Frank O'Connor:
I do not think so, other than to thank the committee and make three points. First, as I said, my opening remarks were to explain the background. The committee had kindly invited the NTMA previously and unfortunately I was unable to attend. We respect the work of the committee. Second, the message on the debt overall is that, as debt managers, we do not like to be complacent but Ireland is in a better position, one that leaves the State well placed if there are to be uncertain events. The third point was to give the committee as much information as possible on the fraudulent event. We will investigate it fully and look at everything on our side, as the committee would expect. That is why we have the independent investigation. I thank the committee for its time.
Mairéad Farrell (Galway West, Sinn Fein)
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I thank Mr. O'Connor. Go raibh míle maith agaibh as teacht chur an coiste agus as labhairt sinn inniú. That concludes the joint committee's business today. We will next meet, in private session, at 11.30 a.m. on Wednesday, 23 July. Go raibh maith agaibh.