Brian Cowen (Laois-Offaly, Fianna Fail)

Regarding protections to be put in place for taxpayers and the regulatory situation, I stress this guarantee was not given lightly. It was informed by the strong advice of the Central Bank and the Financial Regulator that, on account of unprecedented disruption in international financial markets, a system-wide State guarantee was required to ensure Irish financial institutions have access to the normal liquidity and funding to effectively operate their day-to-day business. It will also provide confidence to depositors and wholesale lenders that they can continue to transact their business as usual with the institutions concerned.

The interests of taxpayers will be very firmly safeguarded from any risk of loss from the very substantial warranty the State is providing. Legislation, which will be brought forward to underpin this guarantee, will provide for specific terms and conditions, including fees, for the guarantee provided. It will provide a useful mechanism alongside existing regulatory powers to ensure Irish financial institutions are managed and operated in a manner which is fully consistent with their long-term sustainability. The intensified scrutiny and oversight of financial institutions, which has been put in place since the onset of the current turmoil, will be maintained and strengthened further to ensure high regulatory standards are achieved in Ireland and the quality of corporate governance in these institutions is a bulwark against any risk of loss for the State.

As far as the question of moral hazard is concerned, it will be a priority for the Government to ensure the highest regulatory standards and standards of corporate governance apply in all the institutions concerned, including regarding lending practices, to safeguard the interests of taxpayers against any risk of financial loss. The Financial Regulator has the statutory responsibility to monitor, evaluate and provide whatever conditionality is required by him to ensure he is satisfied in these matters.

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