Noel Ahern (Dublin North West, Fianna Fail)

The UK authorities have made it clear that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book. The UK Chancellor's statement that all deposits are safe was obviously welcome and was successful in reassuring savers in Northern Rock, including those in Ireland. The Tánaiste would note that the Central Bank and Financial Services Authority of Ireland, CBFSAI, operates within the overall context of the euro system and the European Central Bank.

It is obvious that there are important lessons to be learned from all of this, including the effectiveness of deposit protection arrangements across the EU. The European Commission recently concluded a review of the deposit protection schemes directive, which sets the framework for national schemes in the EU. It will be necessary to re-examine this work and, in light of recent developments, to ensure that deposit guarantees strike the right balance between protecting depositors and seeing to it that banks are not encouraged to take inappropriate risks. If the system provides total protection, banks will not be encouraged to play ball and be responsible.

The performance of the global economy will be an important factor in restoring confidence among investors and in financial markets. In that regard, growth internationally remains relatively robust despite continued uncertainty in financial markets. As far as the national picture is concerned, prospects for the economy are very favourable by international standards. A clear focus on our competitiveness and on a prudent and responsible approach in respect of the public finances will contribute in that regard.

I assure the Deputy that the Tánaiste has his eye on the ball. The proposed legislation to which I refer will provide us with the opportunity to debate this matter. When I held my previous portfolio, I spoke on many occasions about financial institutions, one to two years ago, being over-generous as regards mortgages. At the time, I did not receive a great deal of support. Some people in the media and elsewhere rubbished what I had to say. Many individuals could see that a problem was coming down the tracks. It is fine to give a 100% mortgage to someone who has major potential and who has left college to take up an extremely lucrative career. However, some people were handing out leaflets relating to lending on Grafton Street as if they were advertising pizzas for lunch. Some irresponsible lending activities were engaged in. The Tánaiste's proposed legislation will provide us with ample opportunity to discuss this matter.

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