Brian Cowen (Laois-Offaly, Fianna Fail)

It is important to point out that the covered institutions meet the capital adequacy ratios set out under regulatory requirements. In a statement on 28 November last, the Minister for Finance indicated his position and that he was prepared to supplement and encourage private investment in the recapitalisation of credit institutions in Ireland with State participation. On Sunday in a further positive signal to the market, the Government decided either through the National Pensions Reserve Fund or otherwise, and subject to terms and conditions, to support existing shareholders and private investors where appropriate with a recapitalisation programme for credit institutions in Ireland of up to €10 billion. We released a statement on Sunday evening setting out the main principles that would guide us in our approach to recapitalisation of the banking system.

The statement also made clear that the next step was for the Minister for Finance to initiate detailed engagement with the credit institutions in respect of specific proposals. Institutions have been asked to submit their proposals by early January. In the context of a commercial transaction, it would not be appropriate or sensible for the Government to pre-empt the detailed and technical issues that might arise in respect of the design and execution of any recapitalisation of any particular institution. It would certainly not be consistent with ensuring the Government secured the best possible outcome for the State from such a deal. Based on the statements of last Sunday we will move this dossier along as we have indicated. We sent a positive signal to the markets concerning the level of contribution and supplementation that the Government is prepared to make in respect of this issue.

I emphasise that covered institutions meet capital adequacy ratios. There is a perception in the markets internationally of the need for banking institutions to further recapitalise in addition to meeting capital adequacy ratios. It was in that context that we wanted to send a positive signal to the markets. This matter must be taken in the way we have set out.

I refer to the question of the lending criteria of banks. The whole purpose of recapitalisation in the banking sector is to ensure that the real economy is provided with the maximum amount of lending possible in current circumstances. The banks appeared before a committee of the House this morning and outlined their position in detail on this matter. We continue to seek the provision of business plans from the banks as a means of ensuring transparently that they will maximise lending to the small and medium enterprise sector and the Minister for Finance maintains this view. Should recapitalisation take place we will see further confirmation of that fact.

See this speech in context