Conor Lenihan (Dublin South West, Fianna Fail)

The officials at the Department of Finance are to be complimented, as are those at the National Treasury Management Agency, the Central Bank and the Financial Regulator. I compliment those public officials who also played a sterling part in bringing this guarantee scheme into being. There is a stark contrast between the human capacity available to Ireland today and what was available in the past. It is quite clear that in the current situation the Minister has enormous resources available to him in terms of advice, both from the public and private sectors, which was not the case in 1984 when the then Government came to the rescue of ICI, a subsidiary of AIB in London. What has helped us to come through this particular liquidity crisis is the fact that there are many Irish people well practised in the financial markets who can give good advice, whether from a private or public perspective.

Issues of systemic integrity remain and some Opposition Deputies have referred to this in terms of the recapitalisation of Irish banks and banks outside Ireland. The restoration of day-to-day lending is also hugely important. I draw the Minister's attention to the fact that we need to see a return to what I would call "old-fashioned" lending principles. There have been serious breaches of the lending code of practice that had developed over many years. This needs to be addressed. We must get back to old-fashioned lending that has a strong link to security and the asset values that underpin loans of any kind.

The Financial Regulator has an enormous role to play in terms of how the commissions, bonuses and rewards systems work in individual banks. It is absolutely clear that some of the incentives currently in place for bank executives are constructed in such a way as to encourage recklessness and blind disobedience of the old-fashioned norms of banking. That must and will change as a result of this crisis.

In recent years we have seen an enormous strengthening of the internal audit function in banks and other businesses. We have also seen, due to problems associated with the globalisation of risk and global capital movement, new roles emerging in banks. Of particular importance in this context is the risk officer, who balances the risk that a bank is carrying between the lending and treasury sides of its operations. It is very important that the role of individual risk officers in banks be strengthened, in a regulatory or legal fashion. The role of a risk officer is enormously important but it is still open to senior management in banks to ignore the advice of internal auditors or risk officers. We must create a system whereby the risk officer's function and position is strengthened. Such officers must be given greater independence in coming to their decisions and enabled to give warnings to senior bank executives, board members and the regulatory authorities when they consider that a level of inappropriate risk is being entertained or carried by banks in their lending and treasury operations.

The issue of the independent advisers the Minister for Finance intends to appoint to the banks brings to mind an anecdote relating to Mr. Joe Kennedy, who became the first chairman of the Securities and Exchange Commission following the 1929 crash. An east coast economist was tipped to become the new chairman of the SEC, but Franklin D. Roosevelt chose to appoint Mr. Joe Kennedy instead of the highly respected economist. Mr. Roosevelt was subsequently asked why he had picked Mr. Kennedy, who had an unenviable reputation as one of the great experts of shorting the market prior to the 1929 collapse.

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