Seán Connick (Wexford, Fianna Fail)

When one considers the scale of what happened and of what had to be dealt with, Ireland has done quite well. On 20 September 2008, the statutory limit for the deposit guarantee was increased. At the time, this measure was necessary to prevent a run on or collapse of any Irish financial institutions. On 30 September 2008, the State guarantee was put in place. Smaller countries such as Ireland and Denmark opted for State guarantees. It was easier for bigger countries to apply their own solutions as did Germany and the United Kingdom. On 3 December 2008, the names panel was set up for the purpose of selecting additional board members to the various banks. Each bank had to appoint two members to that. The members were also named for the covered institution remuneration oversight committee. These were important steps. On 21 December 2008, we had decisions on recapitalisation of the three major banks. In January 2009, we had the Government nationalisation of Anglo Irish Bank and, on 11 February 2009, the recapitalisation terms for AIB and Bank of Ireland. In April 2009, the establishment of NAMA was announced in the supplementary budget and in June 2009 the Central Bank of Ireland Commission was set up, with the reform of institutional structures of financial services in Ireland at the top of its agenda. The Government also established a single and fully integrated regulator. In November 2009, the NAMA Bill was passed and it was followed on 11 December by the revised State guarantee. On 22 December 2009, the NAMA board members were announced. This brings us up to date, to 19 January when we saw the framework for the banking inquiry approved by the Government.

All of these welcome and necessary measures were taken by the Irish Parliament in the national interest. However, we are not alone in this crisis. We were subject to what was happening in the wider world, including the European Union. The initiatives I have mentioned were taken with the support of international funding markets - we saw the effect of that in the context of the interest rates we are charged on our bonds - and the European Central Bank.

I would like to mention two of the major factors that affected the crisis in the Irish banking system. The international credit crunch was a key factor that created severe liquidity issues in Ireland and across the world. We are a small open economy and we were impacted on very badly in that regard. Another factor was that markets were concerned with asset quality and the over exposure of the Irish banking and financial system with regard to property loans, particularly in Ireland and the United Kingdom. However, I would be critical of the EU response. I felt it was slow and left us floundering. The US response seemed to be faster and more co-ordinated. Therefore, I welcome any European initiatives that will see an improvement in that area.

In 2008, interest rates could have moved quicker and we should have had more joined up thinking on coping and dealing with the financial crisis on a European-wide scale. At the time it was as if we were watching a car crash about to happen. Each country was watching every other country, banks were looking to governments and governments were looking at other governments to see how they were going to fix their particular financial difficulties.

It is with that in mind that I particularly welcome the draft legislative proposals which will reform the EU financial supervisory and regulatory framework. I welcome two proposals that have come forward from that and I also welcome the de Larosière report and its recommendations. The first proposal arising from proposed EU financial regulatory reform is the setting up of the European systemic risk board, ESRB, which will have responsibility for oversight of the financial system, particularly at the macro level. The second is the setting up of the European system of financial services, ESFS, which will involve national financial supervisors working with the European supervisory authority, ESA. It will comprise three authorities, the European banking authority, the European securities and markets authority and the European insurance and occupational pensions authority, the three ESAs.

It is important the proposed powers of the ESAs are examined and reviewed on a constant basis. The need for review has emerged from the reform process and is welcome. The rulemaking power, for example, proposes the establishment of one harmonised rulebook, which is very important. Enforcement is also important and the ESAs will ensure the coherent application of EU legislation. ESAs will also have emergency powers so that we are never again left in a position where we are seen to be floundering. They will have a large role to play in dispute resolution and peer review will play an important role.

As someone from the private sector who has discussed these issues with many others, I am aware the banking sector, through the early and mid noughties was all about competition. Bank of Ireland and AIB had the run of the markets for many years, but when Anglo Irish Bank entered the scene it was more inclined to take risks and provided many people with the opportunity to commence businesses who might not have got funding from the other banks. This created a situation where banks became competitive. They were joined by the likes of Rabobank, which took over ACC and the Royal Bank of Scotland. The frenzy then began towards the end of the noughties and the banks were chasing and competing for business.

I support all of the committee's recommendations. We live in a different world now. If we turned on our televisions we would see the American markets have already opened and later we see the Asian markets open. The Irish and European markets open on the back of what has happened in Asia the previous night and everybody waits for Wall Street to open. We live in a small world and economy now in terms of technology. Therefore, it is vital we are in a position to react as a group in a unified way. That is the reason the European Union has such an important role to play in the future development and regulation of the financial sector throughout the European Union. I welcome this particular initiative.

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