Joan Burton (Dublin West, Labour)

The date in question was the end of the financial year of the bank I mentioned. As far as I know, none of the Irish banks has the same financial year end date. Is that a significant factor? It seems to me that it may be. Auditors have to undertake valuations at the end of the financial year. The Minister's guarantee may have created a scenario which had obvious implications for the bank.

Paragraph 7.3 of the scheme states that each institution shall "indemnify the Minister in respect of any .... losses" under the guarantee. Under the agreement, losses incurred on a guarantee across the sector will not have to be shared. If a bank fails and cannot pay its debt, is there anything in the agreement that will force the sector to indemnify the State? In such an event, will some vehicle like the National Pensions Reserve Fund have to take responsibility?

Paragraph 8 seems to be unlawful. It purports to permit the Minister to vary the scheme. This cuts across the power of the Oireachtas to approve or disapprove the scheme. In any event, the power to vary the scheme could not be provided for in the scheme itself. It would have to be provided for in the original legislation. As we have already said, there is very little detail of the charging model in the scheme. It is left entirely up to the Minister of the day. I would like the Minister to respond to the points I have made.

One of the elements of the scheme that was mentioned earlier by my party leader, Deputy Gilmore, was the provision that "the Minister shall impose specific restrictions....in respect of dated subordinated debt....to prevent the unwarranted expansion of capital and lending activity". Can the Minister explain the motivation behind that provision? I was surprised the Minister included tier 2 debt in his initial blanket guarantee. He is aware that such debt is, in effect, near-equity debt which is valuable to those who hold it. The people in question tend to be large investors with large amounts of funds at their disposal. I refer to wealthy conglomerates and individuals. He guaranteed such debt the first time. Did he have second thoughts on the matter? Did he decide he had been foolish to guarantee near-equity debt, in respect of which large interest returns are guaranteed, in the first instance? On the night the Bill came into the House, the Labour Party said it might be reasonable to give a 100% guarantee to depositors, ordinary lending institutions and businesses. Has the Minister changed his position on subordinated debt?

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