Michael Noonan (Limerick East, Fine Gael)

Yes, from the current 160%. The wholesale money market is effectively shut. Even bankers do not believe bankers. The banks will have to increase deposits and reduce lending. They are currently not increasing deposits, therefore, they will have to reduce lending. The recapitalisation programme, for structural reasons within the banks, will not provide the credit flows the economy currently needs. I advise the Minister there is a danger that the banks will use the money provided by the NTMA pension fund to strengthen their own positions and to provide for their own jobs and, if they can, for their shareholders, whose interests are being wiped out, but they will not provide the credit lines the economy needs.

The Minister for Finance outlined the various agreements and protocols he has with the banks in return for the recapitalisation plan, but the inadequate credit lines available to businesses and consumers are not loosening up. Nobody believes the banks. Furthermore, nobody believes the Minister has the authority — given that he did not take it under legislative form — to instruct the banks to lend in a particular way. Therefore, the commitments they have made do not amount to very much.

In the Government announcement of 11 February 2009 on the recapitalisation of the banks, the Government set out the terms of the agreement. In the section headed "Bank Customers Package", there is a commitment to increase by 10% lending to small and medium-sized enterprises and to provide an additional 30% capacity for lending to first-time buyers in 2009. The recapitalised banks have also agreed to work closely with the IDA and Enterprise Ireland to ensure the supply of funds necessary to finance contractors engaged in major projects sponsored by these agencies have the credit facilities they need. To date, nothing seems to be happening.

I listened to the "Today with Pat Kenny" radio programme on my way to these Houses this morning and heard the chief executive of Aer Arann claim his company, which has a turnover of €100 million, could not get a €100 overdraft from the banks. He said that in the aviation business there is a cash starved winter season and a cash rich summer season and that, therefore, airlines need credit lines to tide them over. It is similar to a farmer buying cattle in the spring time and selling them in the autumn. The same principle applies in the aviation business. That chief executive of Aer Arann said on radio this morning that because he could not get €100 in credit from the banks this year he was, effectively, forced into having to let go 70 people. He had 70 redundancies in the company, but if he had a credit line with the banks those redundancies would not have been necessary. When pressed, he said the system would have to change, the banks would have to be nationalised and the Minister for Finance and the Government would have to instruct the banks to provide money in the first instance to stabilise jobs — which in the case of his company would not have been lost if he had access to credit — and to create jobs along the lines of the Minister's intent to fund IDA and Enterprise Ireland projects. However, that is not happening.

I listened to the comments of Mr. McCaughey on "Questions & Answers" last night. He is a well known businessman from Northern Ireland and a man who would be well known to Fianna Fáil. The Government appointed him chairman of the Dublin Docklands Development Authority. He was appointed to boards by the Government previously. He is a respected businessman and I believe he is a good one. He said there was little or no credit available to small and medium-sized businesses. He said the banks are more of a problem than a solution and that they should be nationalised. He said the Government should mandate the banks, when they are under State control, to provide money to the sectors of the economy that intend doing and want to do business and which are providing jobs and will continue to provide jobs.

We have heard anecdote after anecdote from Members of all sides about the experiences of their constituents in failing to get credit lines from the banks. The announcement to recapitalise the banks was made prior to Christmas, the detailed announcements were made on 9 February and it is now 3 March, but nothing has happened to relieve credit lines. This approach is not working. The danger now is that the banks will not be revitalised — as they were in Sweden over a two and half year period in the early 1990s — and that they will become the zombie-type banks which mired Japan in recession for a decade right through the 1990s because it took a different set of options. The Minister's set of options are more in line with those taken in Japan than what the Opposition is advocating, which is to follow what happened in Sweden and Switzerland.

The Bill is largely an enabling one. It enables the Minister to do what he has already announced in using the National Pensions Reserve Fund to recapitalise AIB and Bank of Ireland. It also enables the Minister to do things he has not announced. It enables him to direct the commission under the National Pensions Reserve Fund to take a controlling interest in either or both of the banks. This is very interesting. The Minister has said that he is only inserting the provisions on the basis that while he is making some changes, he might as well make a few more. He has said that he never intends using these powers. The powers he is taking would work as follows. If AIB and Bank of Ireland require more capital and went to the market on a shares issue, they obviously would not get it at the moment. If they approached their own shareholders at 42 cent and 19 cent a share, respectively, I do not believe they would get it either.

The Bill contains an enabling provision allowing the Minister to direct the National Pensions Reserve Fund to take the shares on any public offering made by a publicly-quoted bank, in other words AIB and Bank of Ireland. Of course he claims he will never use these powers. However, he went on to say that if the powers are ever used they will not be subject to reference to the Competition Authority as a financial merger because the Minister is taking to himself the powers of the Competition Authority.

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