Brian Lenihan Jnr (Dublin West, Fianna Fail)

However, notwithstanding very substantial work under way on the bank's restructuring plan, there are still significant uncertainties about this figure, including the size of the discount on all of its loans transferring to NAMA, the scale of future losses on its loans that are not transferred to NAMA and the exact nature and scope of any split of the bank under its plans and the EU Commission decision on the plan.

It is because of the heavy loan losses already incurred on a loan book of €72 billion and those in prospect that the injection of resources in this bank is so large. There is simply no alternative that meets the bank's unavoidable obligations at a lower cost consistent with the maintenance of the hard-won stability of the banking system in Ireland. The bank is expected to transfer approximately €10 billion of loans to NAMA in the first tranche. This tranche will not transfer until early April as the valuations have not been finalised. The latest available unaudited estimate of the discount is in the order of 50%.

The bank's capital support is being provided by the State in a way which spreads the cash requirements over an extended period. I am this week injecting the capital in the form of a promissory note payable over a number of years into the future. In essence, this means the amount will be paid over a period of ten to 15 years, thereby reducing the impact on the Exchequer this year and stretching the payments into the future.

Since nationalisation of the bank on 21 January 2009 there has been a wholesale replacement of key top executives and the board. The new chief executive and new senior management team have implemented rigorous and robust risk management processes and controls. There have been cost base reductions following a detailed cost review and a voluntary redundancy scheme. As part of this recapitalisation, the bank will reduce costs further. The bank's new senior management team is working closely with my Department to update and strengthen its restructuring plan as submitted to the EU Commission last November. Following a comprehensive evaluation of strategic restructuring options, the bank has identified as its preferred option, in terms of minimising the future cost to the taxpayer, to carve out a smaller and stronger bank, leaving the remainder in the form of an asset management and recovery company.

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