Kieran O'Donnell (Limerick East, Fine Gael)

We support recapitalisation but in a different form. This House is charged with ensuring value for taxpayers' money. The Bill facilitates the allocation of €3.5 billion to both AIB and Bank of Ireland. To compare, the pension levy will yield €1.4 billion in a year, according to the Minister's figure, and the income levy will provide €2 billion. The Taoiseach indicated in the House earlier that some €2 billion to €3 billion will have to be raised by way of additional taxes or reductions in expenditure. Taken together, these measures will produce almost €7 billion for the Exchequer. This helps to illustrate the scale of the allocation of taxpayers' money from the National Pensions Reserve Fund to the banks.

We all agree that the banks must be recapitalised. We all agree there are problems in terms of liquidity and solvency. However, we must ensure value for money and we must ensure the scheme is effective. The results announced yesterday by AIB show that with the €3.5 billion recapitalisation from the State, its tier one capital ratio would be in the order of 8.5%. Without the recapitalisation, however, it is below the minimum level of 4%. Looking forward to 2009, the bank foresees a bad debt write-off of between €2.9 billion and €4 billion and an operating loss for this year of some €121 million. In addition, each bank will have to pay €280 million in terms of the preference coupon. We are looking at a situation where, unless international markets change significantly, the banks may well be obliged to turn again to the State in search of additional funding. This is the reality.

Fine Gael has argued for a "good bank" model. The Minister has acknowledged the issue of toxic debts and so on and has indicated a willingness to look at this type of model in the future. Our proposal is very straightforward. Under our model, AIB and Bank of Ireland would each retain their toxic debt, but two new banks, New AIB and New Bank of Ireland, would be established, each of which would take all its parent bank's deposit liabilities and good assets in terms of commercial and residential loans. The newly created good banks would help to inspire confidence in the international markets. The problem is that the banks are retaining——

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