Brian Lenihan Jnr (Dublin West, Fianna Fail)

The credit institutions financial support scheme provides a guarantee for covered institutions until 29 September 2010. I have been advised by the Financial Regulator that it recently commissioned PriceWaterhouseCoopers to conduct a review of loan portfolios of the covered credit institutions. PriceWaterhouseCoopers is currently progressing with this work and the Financial Regulator will keep me advised of progress as appropriate. Deputy Burton will appreciate this review is highly commercially sensitive.

Given the general deterioration in the economic conditions, both national and international, the Financial Regulator has advised that he would expect the current levels of impairment in covered institutions to increase over the next few years. The expected levels of impairment charges for particular institutions will be dependent on borrowers' financial position and the level of collateral provided. The regulator's review of the loan books of the covered banks has shown that the covered institutions did not hold any exposures to the US sub-prime mortgages and also they have limited exposures to banks which have recently been liquidated or encountered difficulties, including Lehman's and the Icelandic banks. It is also important to note that the covered banks continue to be profitable.

With regard to the availability of credit, the extended international credit crunch we have experienced has brought home to all of us the pivotal role of the financial system in the economy and in the day to day lives of ordinary people. One of the stated objectives of the scheme is to maintain financial stability, not for its own sake but in the best interests of the public and the economy of the State. The scheme helps the banks access additional liquidity which will allow the banks to continue to lend in a sustainable manner, supporting the appropriate availability of credit and favouring business activity in the wider economy of the State, especially trading activities. The scheme therefore includes the application of strict terms and conditions on covered institutions to ensure the public interest, which includes the general consumer and small business sector, is paramount.

It is the responsibility of the covered institutions to ensure they meet capital requirements and I expect covered institutions to take appropriate steps to ensure their levels of capital are aligned to their needs. My Department, the Central Bank and the Financial Regulator will be in continuing contact with the covered institutions on their business plans, liquidity and capital position.

The Deputy inquired about the estimated contingent liability of the scheme. As previously stated by me it is estimated the scheme will cover liabilities of approximately €440 billion.

See this speech in context