Brian Cowen (Laois-Offaly, Fianna Fail)

It is important to be clear that the Ormond Quay vehicle was an off balance sheet investment vehicle. It was a conduit of Sachsen LB, which is a German savings bank. That German savings bank, Sachsen LB, provided a guaranteed line of credit to Ormond Quay and some other conduits it had established in Dublin. Ormond Quay called on that line of credit as the prevailing market conditions were such that it was unable to raise the short-term funding it required. Sachsen LB was unable to meet its obligations to Ormond Quay and, as a result, liquidity arrangements were agreed with an association of German savings banks. That Sachsen LB parent was subsequently bought by LBBW, another German savings bank, and as a German bank, Sachsen LB was regulated by the German financial regulator.

Those are the facts. I have given a detailed answer to the question and there is no need for any confusion about it. What concerns me is the continuing indication that we were remiss in some way or that we did something wrong. I do not like to see any bank get into trouble but none of these conduits are regulated. The lessons we learn from market turbulence is to examine all of these for the future and how they should or should not be brought within the regulatory remit, which will be done in a collaborative way within the European Union. Thankfully, we have a financial services industry of high reputation, professionalism and liquidity that is well capitalised and very profitable. Those are the facts. One would have thought that should be the case anyway, given that we have been the best run economy in Europe for the past ten or 15 years. When an economy is growing at 7% annually, one would have thought that banks make money. They have made a great deal of money. The enterprise economy we have built enabled such liquidity in the market. As a result, we have seen unprecedented expansion and development. That is the background — an economy with good economic fundamentals and a well regulated financial industry where those in authority know whose statutory responsibility it is to check on these matters. What I am saying will send the right signals to the markets and those interested in the financial health of the country and its system of financial regulation

As I have said in reply to parliamentary questions, the issue that arose in the other case had nothing to do with the regulatory regime here or its adequacy. The other issue about turbulence as a result of the sub-prime market in the United States which has had effects is being considered by EU and Irish experts because we have a well developed financial services industry. Those who advise us are held in high regard by those operating in the area internationally. If there is an external shock, we must consider how we will deal with it. We are not immune from such trends but we are in a much better position than others might be.

The fact that someone else has a problem does not mean we have the same one. There are effects but we are handling the situation well and must maintain confidence in the economy. We should not let the idea spread that we somehow avoided a serious catastrophe. I do not say that in an adversarial way; it is a true reflection of the situation.

I keep in touch with the Governor of the Central Bank. We spent a weekend in Lisbon discussing these issues, including the Northern Rock issue that Friday morning. The general consensus was informed by the conclusion reached at that meeting, a consensus which is at variance with some of the assertions being made here.

See this speech in context