Brian Lenihan Jnr (Dublin West, Fianna Fail)

When I introduced the Credit Institutions (Financial Support) Act to this House, I made it clear the disruption in international financial markets required a strong and decisive response by the Government to underpin the commitment of the authorities to Ireland's financial stability. This Government moved swiftly to put in place a guarantee to ensure Irish financial institutions' access to the normal liquidity and funding for their day to day business, and to give confidence to depositors and wholesale lenders. The Government quickly demonstrated its resolve to support the financial system in order to support in turn the economy and society, enterprises and families.

In tandem with the guarantee, the intensified scrutiny and oversight of financial institutions put in place since the onset of the turmoil in financial markets has been maintained and further strengthened to ensure that high standards of regulation are achieved in Ireland and that the quality of corporate governance applying in all institutions, including lending practices, safeguards the interests of taxpayers. The goal at the end of this process is a banking system that is fit for purpose for the transformed financial environment in which it will find itself operating in the coming decades.

The Government continues to work closely with the Financial Regulator and the Central Bank to monitor, assess and ensure the stability of the system and flow of credit. The functions set out in the legislation, following consultation with the Central Bank and the Financial Regulator, are specifically provided to protect the stability of credit institutions and maintain the financial stability of the State. The legislation provides a detailed framework for the authorities to oversee and guide the assessment of strategic options by the banks themselves. The Irish scheme is firmly aligned with the main themes of the euro group plan, which contains an option to provide additional capital resources where appropriate to the banks. The position is being assessed and monitored on an ongoing basis.

Each institution must take appropriate steps to ensure their levels of capital are aligned with their needs. The State has a keen interest in the health and security of the banking institutions because of their role in the economy. My Department, the Central Bank and the Financial Regulator will be in continuing contact with the institutions on their business plans, capital position and liquidity. If it is the case that an assessment is made by a particular institution, or by the regulator, that higher capitalisation would be appropriate, the first step is for the institution itself to consider all possible options to meet this requirement.

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