Brian Lenihan Jnr (Dublin West, Fianna Fail)

However, I would like to outline to the Deputies the Government's approach to date regarding inappropriate practices at Anglo Irish Bank. The obligations and requirements contained in the guarantee scheme gave rise to increased engagement with the covered institutions, which included an assessment of the loan book for the Financial Regulator and capital position of all covered institutions by PricewaterhouseCoopers. This initial assessment was received towards the end of October. The question of financial transactions between Anglo Irish Bank and Irish Life & Permanent was included in the report. The Department of Finance drew this specific matter to the attention of the Financial Regulator when reviewing that report. The circumstances of that transaction remain under review by the regulator. I also understand that the newly appointed board of Anglo Irish Bank is reviewing this matter in the context of finalising the accounts for the year ending 30 September 2008.

As part of the planned recapitalisation of Anglo Irish Bank, a further due diligence exercise was undertaken. Further information was also supplied to my Department by the Financial Regulator and the Central Bank as part of detailed consultations with these bodies regarding the implementation of the scheme and in negotiations on recapitalisation proposals.

As a result of this increased level of engagement with the banks and Anglo Irish Bank in particular, I became aware of certain unacceptable practices at the bank. Those issues include loans to directors and a transaction in September between Anglo Irish Bank and Irish Life & Permanent. Regarding the transaction with Irish Life & Permanent, I am advised that Anglo Irish Bank placed funds with Irish Life & Permanent. A non-bank subsidiary company of Irish Life & Permanent then deposited a similar amount in Anglo Irish Bank as a customer deposit.

The Government made it clear when nationalising Anglo Irish Bank that an important factor in reaching this decision related to concerns over corporate governance issues which were undermining confidence in the bank. The information already in the public domain regarding loans to directors at the bank, and information available to me in the first half of January on the transaction involving Irish Life & Permanent reinforced this decision.

Deputies should note that the bank's annual accounts will be published in the coming weeks and will provide further details on directors' loans as well as the transaction involving Irish Life & Permanent. Matters at Anglo Irish Bank are now the subject of a number of investigations and reviews including those being undertaken by the Financial Regulator and the Office of the Director of Corporate Enforcement. These investigations must be followed up both by the regulatory authorities, which have extensive powers, and by the bank itself. As Minister for Finance and shareholder of the bank, I will ensure, where appropriate, that any issues identified on foot of these investigations are fully addressed and any misconduct of a criminal or civil character is brought to justice or appropriate compensation is received.

The new board is reviewing all the corporate governance practices at the bank and will put arrangements in place to guide Anglo Irish Bank in the future. I have every confidence that this new board will pursue the necessary changes in this regard. In all of this it is important to note that the Government is committed to the stability of the Irish banking system. Depositors and creditors with Irish banks, including those within the full ownership of the State, must be and will be protected.

Naturally Deputies will be anxious to know when exactly I learned of the Anglo Irish Bank — ILP transaction. The matter of financial transactions between Anglo Irish Bank and Irish Life & Permanent was an issue in the PricewaterhouseCoopers report, which was received at the end of October. The Department drew this specific matter to the attention of the Financial Regulator when reviewing the report. The circumstances of that transaction remain under review by the regulator. The matter was one of the corporate governance issues at Anglo Irish Bank, which were an important part of the Government's decision to take the bank into public ownership, to ensure the instability such corporate governance issues can cause would not threaten the stability of our financial system, generally.

I made it clear at the time of the announcement of the decision to take Anglo Irish Bank into public ownership that a key element of the Government's decision was concern that corporate governance issues at Anglo Irish Bank could destabilise the bank and threaten the stability of the financial system. This transaction was one of those corporate governance issues. It would not have been appropriate for me to publicly disclose partial information which was and remains the subject of an investigation by the responsible statutory authority, the Financial Regulator. The investigation is ongoing into these matters. It will determine whether legal or regulatory codes were breached. If legal or regulatory issues arise, then due process will be followed in bringing any parties responsible to account.

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