Brian Lenihan Jnr (Dublin West, Fianna Fail)

We have reviewed arrangements for the State's management of its investments in the banking system in anticipation of the potential changes in the State's interests in the banks. At present, the State's preference share investments in AIB and Bank of Ireland are funded and held on my behalf, as Minister, by the National Pensions Reserve Fund Commission. I have decided that it will be given the ongoing role of managing the State's financial investment in AIB and Bank of Ireland, as two banks listed on a stock exchange and operating at arm's length.

As Anglo Irish Bank is no longer listed, it is in a different position. Its shares are held directly and the NTMA will manage the State's ownership through a relationship framework. As they are not listed, I propose to hold directly any special investment shares in EBS and Irish Nationwide, and the NTMA will manage those interests on the basis of relationship frameworks which will ensure that each institution's board and management team will continue to run its business on an arm's length basis.

In September 2008, in response to the international financial crisis, Ireland introduced a two year blanket guarantee scheme for certain liabilities of covered institutions. A new, more targeted, scheme was introduced in December 2009 in order to facilitate the ability of credit institutions to issue debt securities and take deposits with a maturity post-September 2010 on either a guaranteed or unguaranteed basis. A key feature of the new scheme is access to longer-term funding, which is in line with the approach adopted elsewhere in the European Union and is expected to contribute significantly to supporting the funding needs of the banks and to securing their continued stability. In addition, banks can access unguaranteed funding under the new scheme.

Although the capital injections I am announcing today will greatly strengthen the position of the banks and serve to reassure their depositors, I am satisfied that it would be prudent to seek an extension of the guarantee in a more limited form until this confidence has been reliably restored. I will be seeking the Commission's agreement for a modified extension of the guarantee, consistent with a phasing out over a realistic period of time. As with the extended guarantee scheme, any new scheme will not cover subordinated debt. The existing subordinated debt guarantee will lapse at the end of September. This scheme is due to be reviewed by the Commission before 1 June and I intend to make an announcement about the future of the guarantee in advance of that date. I want to stress that the ordinary deposit guarantee scheme which covers €100,000 per depositor per institution is in place and will continue on a permanent basis. Nothing in today's announcement changes that position.

This evening, I have necessarily concentrated on the costs of resolving the banking crisis. There are upsides for the taxpayer who is funding these measures. First, we now have a clear path to fix the banking system and because of that we have safeguarded our economic future. Second,the aggressive valuations conducted by the National Asset Management Agency increase its prospects of securing a reasonable financial return for the taxpayer. Third, the NPRF will hold valuable shares in our two main banks which can realise gains for the citizens of this country. Fourth, there is the proven gain of €1 billion which will accrue to the taxpayer in six month's time from the bank guarantee scheme, and, finally, if a smaller and good bank can be carved out of Anglo Irish Bank's current loan book, we will recoup some of the taxpayers' assistance to that bank.

I began my statement by pointing out the widespread international confidence engendered by last December's budget. The citizens of this country have shown grit and determination in facing up to our severe budgetary difficulties and it has paid off.

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