Wednesday, 18 February 2009
Banking Sector Regulation.
Brian Lenihan Jnr (Minister, Department of Finance; Dublin West, Fianna Fail)
In recent months, international markets have experienced turmoil and this has resulted in significant pressure on sources of funding for all banks globally. The Government has adopted a measured approach to this, pursuing a comprehensive strategy to ensure that funds are available for sound businesses and entrepreneurs to enable them to provide the employment and the output which will be the basis of our economic recovery.
The Government moved quickly last September to introduce the guarantee of Irish bank liabilities, which has provided certainty to depositors and investors alike in the Irish banks. The recapitalisation programme announced in December addresses both the expectations of international markets on the capital levels and the needs of our major financial institutions to cover potential loan losses in the years ahead.
In January, against a background of concerns about governance issues and market confidence in Anglo Irish Bank, the Government, following consultation with the Central Bank, the NTMA and the Financial Regulator, decided to take Anglo Irish Bank into public ownership. This decisive step was taken to safeguard the interest of the depositors of Anglo Irish Bank and the stability of the economy. I want to assure the House that this decisive step was taken to ensure the new nationalised bank will collect all debts due from persons who owe moneys to the institution.
Following the announcement of the recapitalisation programme the Government initiated further intensive discussions with Allied Irish Banks and Bank of Ireland with a view to securing the position of these, our two largest banks. As a result of these discussions, the Government decided on a comprehensive recapitalisation package which will reinforce the stability of these two banks as core elements in our financial system, increase confidence in the banking system here and facilitate the banks involved in lending to the economy.
I will continue to examine various proposals, including risk insurance, for the management and reduction of risks within financial institutions, having regard to international developments and to the best interest of taxpayers. Ongoing work at the level of the European Central Bank and in the European Union will inform the process.
In the context of the six month review of the guarantee scheme to be completed by the middle of April, the Government will examine how the scheme could be revised consistent with European Commission approval and EU State aid requirements in ways which include supporting longer-term bond issues by the covered institutions. This would be in line with international and EU trends where the average term of State cover for bond issues now extends well beyond 2010. Overall, the Government's approach is structured and incremental and designed to ensure the interests of the banks, their customers and the State are protected.