Brian Cowen (Laois-Offaly, Fianna Fail)

I thank Deputy Kenny for his offer of co-operation on this important matter and I also thank all Members who have been briefed about the situation which has arisen. The action taken by the Government last night was necessary based on the advice available to us from the Central Bank and regulatory authorities. This action was to ensure we maintain the stability of the Irish financial system and has been taken in response to the severe dislocation in the international credit markets which has impacted both in the United States and in the European Union. Throughout the current period of turmoil, the Government has stressed its commitment to the stability of the Irish financial system and in particular to ensuring that money placed with an Irish credit institution would not be put at risk. This Government action is first and foremost in the interest of the stability of the Irish economy and the long-term interests of the taxpayer. A secure and stable financial sector is essential for the Irish economy and is obviously in the best interests of the Irish people.

With regard to the guarantee there have been what I regard as misleading indications as to the exposure being placed on the taxpayer. We are providing a guarantee as a means of dealing with the basic problem for the banks which has occurred over some time, the question of accessing liquidity in the form of cash in order to conduct their business. The banking system in Ireland has assets which exceed its liabilities. The assets of the Irish banking system amount to approximately €500 billion and the guarantee liabilities are approximately €400 billion. The first call on the funds of a bank will be on shareholders, on their assets, capital and funds. The Irish banking sector has very well secured loans and loans which are underwritten by the European Central Bank. It is important to make the point that in the event of any further call, it is my intention to ensure the Irish taxpayer will not be held liable in any way for any deficit that might occur in the event of there being a problem in the future. I intend that the sector will have to discharge any liability that may arise.

The Government is simply providing a State guarantee to those banks incorporated in the State. It is for the purpose of ensuring those banks have access to liquidity and funds to conduct their business on the basis that they are banking institutions which have assets that exceed their liabilities. The warranty behind that, provided by the Government on behalf of the people, is to ensure a stable financial system and sector. That is the reason we took this action in the unprecedented situation that presents itself and on the basis of the advice available to us. I want that to be very clear.

The State guarantee is provided at a price. It is not for free. The State guarantee will have a mechanism whereby a fee reflecting commercial realities will have to be paid by those banks which may access the liquidity provided by the Central Bank.

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