Brian Lenihan Jnr (Dublin West, Fianna Fail)

In accordance with the terms defined in the warrant, which the Deputy will appreciate I do not have to hand, the loss to the State caused by non-payment will be compensated for by the allocation to the State of an appropriate amount of ordinary shares from the institution, above and beyond the allocation already envisaged in the share warrant arrangement. As Deputy Bruton knows, this arrangement assures the State of a 25% stake in the institutions, exercisable at the option of the State after five years.

On the capitalisation announcement, the question of liquidity and the provision of funds to the Irish banks is still very difficult. As I stated in my reply, it is difficult for all institutions worldwide, as is the case with many of the measures that had to be taken to stabilise our banking system, including the guarantee, the nationalisation of Anglo Irish Bank and capitalisation. These are not options available to us but essential steps necessary if we are to secure the stability of our financial institutions. The share prices of Allied Irish Bank and Bank of Ireland have remained low and have been such for some time. To sustain international confidence in these institutions, it was essential that capitalisation take place, such that markets would be assured there was adequate capital and that the institutions would be in a position to meet potential losses. I do not refer to an adequate position but to a full position. Capitalisation has generated this confidence and this has been commented on by reputable commentators on banking matters.

On the question on the boards and executives of the two capitalised institutions, as Deputy Bruton is aware, the chief executive of the Bank of Ireland has announced his intentions. I understand from the governor and the board that it is intended to replace the executive in a matter of three weeks.

With regard to the chairman and the chief executive of Allied Irish Bank, the State will obtain not only four directors, appointed directly by the preferential shareholder, the Minister, but also 25% of the voting rights at the annual meeting. At that stage, the Minister can exercise voting rights and influence in regard to the composition of the boards——

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