Joan Burton (Dublin West, Labour)

It is now some weeks since the enactment of the Credit Institutions (Financial Support) Bill 2008, which was introduced to rescue the banks, and it has been some days since the publication of the guarantee scheme. This Act has given extraordinary unilateral powers to the Minister for Finance, basically to do what he likes. Although he set out certain conditions which were to apply to banks joining the scheme, it would appear from notices on his own Department's website that those conditions have changed. He told us in the House that in the event of a bank going under, the first recourse would be to the bank itself, followed by the other banks in the scheme, and that there would be no recourse to the taxpayer. He repeatedly told us the scheme would be cost free as far as the Irish taxpayer was concerned. However, a notice on the Department's website indicates that apparently, arising from understandable objections by some of the bigger banks in the scheme, the banks entering the scheme were advised they would not have to unilaterally guarantee defaults by other banks in the scheme. Other Members of the House have mentioned a report to that effect in the Financial Times.

The Minister's depiction of the scheme was that it was cost free. The market take on the scheme can be seen from the fact that Irish bank shares are still tanking and have lost tremendous value. We should remember these institutions are the lifeblood of most businesses and, indeed, most house purchasers in this country. I draw to the Minister's attention the fact that NIB, which is a Danske Bank subsidiary, has written off a significant amount of bad debt. NIB added €69 million to its impairment charge in its third quarter accounts following a review by Danske Bank. While NIB holds 4% of the total amount of Danske Bank group loans, it represents 30% of its impaired loans. This raises major concerns about banks in the scheme which have more aggressive lending practices and risk having more toxic debts, particularly with regard to the construction sector.

What is the situation now? Is there a recourse to the Irish taxpayer, or are all the banks in the scheme essentially guaranteeing that any bank in the scheme will have second recourse to the other banks in the scheme? Is the Irish taxpayer now carrying the can, as stated in the note on the Department's website, for the financial markets? Will the Minister publish the terms of reference of the appointment of PricewaterhouseCoopers and the review it is conducting for IFSRA? I repeat the question I asked previously — what is the review considering? Is it examining the issue of the accounting treatment of possibly impaired bank loans given for construction purposes, in which the interest has been rolled up or expressed in shares in the company?

My next question is about the disclosure at the weekend of possible directors' loans of €288 million given by Quinn Insurance to a related company within the group which, in turn, may have been used either by individuals or by related companies to purchase or pay for shares in Anglo Irish Bank which were being acquired through contracts for difference. Anglo Irish Bank is one of the companies included in the credit institutions scheme. I called publicly for the Minister to make a statement on this at the weekend. When did he know about this? It appears the regulator has known about it for months as a consequence of the work of the auditors. Is the regulator only now requiring monthly financial stability reports from insurance companies? Insurance companies are similar to banks and need to carry very large reserves of cash in order to pay claims.

I remember the Minister telling me when he was appointed Minister for Finance that he had a qualification in company and commercial law as part of his barrister's training. He told me he was quite expert in commercial law. Irish company law frowns heavily on the device of directors' loans. They are subject to special disclosure requirements and may also give rise to benefit-in-kind issues from a tax point of view. The Minister needs to make the position clear in the House because ultimately it is the Irish taxpayer who is underwriting all of this.

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