Michael McGrath (Cork South Central, Fianna Fail)

I welcome the opportunity to comment briefly on the motion. The reckless management of our banks in recent years is a national scandal and a bitter pill for taxpayers and Irish citizens generally. It was difficult to hear today the level of bailout required by the Government and the State in respect of our financial institutions. The reality is that we may not like banks or senior bankers but we need them to meet the needs of the economy and if we are to have any prospect of coming out of this recession and, in line with forecasts, begin to grow the economy again later this year.

When families get into financial difficulty one of the first pieces of advice MABS gives is the need to face up to their problems, to confront their loans and to deal with the reality of their situation. The bottom line is that in recent months the Irish banks have not been facing up to the extent of the losses they face. Today, we witnessed a comprehensive package of measures which forced the banks, once and for all, to face up to the extent of losses with which they must deal. The Minister and the Financial Regulator showed clearly today who is in charge. The Financial Regulator set a very high level of capital requirement for the banks, in line with best international practice, and did the State some service by requiring the banks to impose a level of capital far beyond the level of anticipated losses and NAMA loans. He has factored in losses on non-NAMA loans, both commercial and personal.

One of the criticisms of NAMA when it was introduced was that it would somehow go soft on the banks and let them off the hook. Today, we have seen evidence that this is not the case. NAMA has imposed a high level of discount, at an average of 47% across the loan book, which, in fact, improves its capacity to at least break even and, one hopes, make some money for the taxpayer over the ten-year period.

What we saw also today is a clear commitment on behalf of the Minister and the Government to compel the banks to provide an adequate level of lending to the economy, in particular to SMEs. We will see €12 billion worth of lending to SMEs by AIB and Bank of Ireland between now and the end of 2011, and that is a particularly welcome development. The regulator and the Government must be rigorous in ensuring such level of credit is extended because the banks will endeavour not to provide the level of required lending to the economy. It will be rigorously monitored.

The success of NAMA and recapitalisation will be judged ultimately on the basis of whether the banks meet the credit needs of the economy. The measures which have been taken today are necessary and unpalatable, as the Minister stated and as they undoubtedly are. They will put the economy in a position where it is served by a banking system which, once and for all, has faced up in an honest way to the extent of its losses and to the recent reckless and irresponsible management of its banks which now must be bailed out by the taxpayer but which will meet the needs of the economy in the future. I note that both ISME and Chambers Ireland have welcomed today's package of measures as an essential step by the Government in dealing with the banking crisis.

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