Joan Burton (Dublin West, Labour)

The Department issued a statement that the Minister has indicated that he will consider applications to join the guarantee scheme from financial subsidiaries with a significant high street retail presence, and that they will be considered on a case-by-case basis. With regard to the extension of the scheme, does the Minister have a position at this stage on financial institutions based in the IFSC? What is the status of those institutions? The Labour Party is trying to get at the parameters of this guarantee as far as the taxpayers of Ireland are concerned. I have already spoken about the law of unintended consequences, and the Minister has already indicated that he is moving on to consider other applicants that want to join the scheme. I understand that the guarantees for one of those applicants would amount to €60 billion. This is why we want this scheme to come before the House before the Bill is enacted, and at least we should know the shape of it.

My understanding of what the Minister said was that he was specifically excluding questions of bank capital. He said that this was a liquidity rather than a solvency issue. His description tonight begs the question that while liquidity is the driving issue, what is underlying liquidity is the issue of the capitalisation of banks. Given that he has responded to other Members of the House, will the Minister indicate to me if he proposes to include capitalisation and recapitalisation by some of the banks included in the scheme to address what would appear to be impairment of assets, due in particular to their exposure to lending for land acquisition and construction? While most of us know about the construction impairment due to the bursting of the construction bubble, most people in Ireland do not know the extent of the exposure within these banks or their subsidiaries, be it here or abroad. Some of their lending has concerned property abroad, but some of them have also been involved in trading in complex financial instruments such as derivatives. We do not know if there are SIVs involved. In his earlier comments the Minister seemed to imply — later I thought he contradicted himself — that recapitalisation was not a feature in his view. Is that factor to be included in the scheme that he has others working on, such as the Central Bank and the Financial Regulator?

The Minister did not mention either whether he valued the guarantee. There have been many estimates today ranging from a cheap €1 billion to €10 billion to €15 billion for a two-year guarantee at rates that apply for credit default swaps of a minimum of approximately 2%. I priced it earlier this morning at 1.5% in view of the favoured status of our own banks. Since then, many economists have said that it must be at 2% to 2.5% due to credit default swap rates. Can the Minister comment on this?

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