Brian Lenihan Jnr (Dublin West, Fianna Fail)

——and I agree with him on this matter. However, it is a fact established by the Financial Regulator to his complete satisfaction that the Irish banks do not have a substantial exposure to such instruments. Members referred to the possible exposure of the banks in connection with the property sector in Ireland. It is undeniable and all of the analysts have pointed out the exposure. However, this is not toxic in the same sense as the exposure of derivative instruments. The whole point of derivative instruments is that they are now worthless. They were paper to which a value was attached and the paper subsequently became worthless. The promise to pay embodied in the instrument became illusory in the hands of the holder. That is the position on derivative instruments and this is what has caused so much of the difficulty in the United States of America.

The danger for the Irish banking system is that, because some of these instruments were described as sub-prime mortgage instruments, they are somehow connected with the difficulties in the property sector in Ireland and they are not. Many derivative instruments derived from the purchasing and trafficking of mortgages. Eventually these instruments lost their value dramatically as we saw in the United States of America. However, the position is not the same for the Irish banks, which hold underlying securities to land. The land may have fallen in value and there may be exposures that the banks need to work through, but there is still a security of value underlying the loan they have advanced.

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