Brian Lenihan Jnr (Dublin West, Fianna Fail)

If Deputy Shortall wants to negotiate with her local credit union about a reduction in the amount of deposits and wishes to advise her constituents in Dublin North West of her banking policy, I encourage her to do so immediately. She should see what their reaction will be. This is a fundamental issue for the country. If there is any suggestion the Government would lose the vote tonight and there would be a change of Government in a few days time, it would be extremely serious for this country in light of some of the comments made about bondholders in this country and in current opinion polls. Happily, that will not happen tonight and I hope that by the next election we will realise the realities of this issue.

Deputy Bruton noted that Anglo Irish Bank retains approximately €2 billion in subordinated debt. The vast bulk of these bonds are dated bonds, meaning they are covered by the guarantee scheme until September 2010. The treatment of that remaining subordinated debt in the future will be considered as part of the process for agreeing a restructuring plan for Anglo Irish Bank with the EU Commission over the coming months. In assessing the options to deal with bondholders it is important to note the lending base of the Irish economy. It is 50% funded from international sources and 50% funded from domestic sources. Interestingly, Irish sovereign borrowing is 80% funded from international sources. The Labour Party has not advocated this policy but the suggestion made by Deputy Bruton is that there would be no read through from a default on bank debt to a default on sovereign debt; it is erroneous when 80% of our funding derives from foreign sources. The maintenance of international confidence in the Irish financial system is of critical importance to our economy. Despite the many figures bandied about this afternoon our bond spreads have not moved an inch. This is signal testimony to the international confidence in the common sense of the announcement made today and the capacity we demonstrate to tackle our problems.

Deputy Burton suggested that if we nationalised Allied Irish Banks and Bank of Ireland, it would have eliminated the valuation risk around NAMA, and as a result there would have been no need for the concept of long-term economic value. She suggested the approach the Government followed is more costly. I stress that if we had done this the losses crystallised at Allied Irish Banks and Bank of Ireland would still have to be fully recognised and real capital would been required. It is appropriate that we have an asset management agency going through the banks on a bottom-up basis and establishing where were the vulnerabilites in each institution and the degree of culpability for excessive lending in each institution.

Deputies Bruton and Burton questioned when we would see a revised NAMA business plan and NAMA codes of practice. There are substantial provisions in the Act dealing with transparent reporting by NAMA. The board proposes to review the draft business plan published in October 2009 and will publish a revised business plan by 30 June 2010. NAMA has met its obligation to submit such codes of practice and my Department is working with NAMA to ensure these codes fully meet the standard expected.

Deputies have queried the uplift factor on the assets transferred to NAMA today. The uplift factor reflects the difference between the current market value of the asset and what NAMA believes it can achieve for the asset over time, or the long-term economic value. NAMA reports this was 11.3% in the first tranche. Previous estimates had been that this figure would be approximately 15%, which was based on aggregate data provided by the institutions. There are a number of reasons the initial estimate was reduced massively in subsequent discounts. One was the overoptimistic assumptions by the institutions about the loan to value ratios. A further factor was the bottom-up valuation process and another factor was the securitisation and a degree of securitisation for particular loans. The revised uplift is the result of individual loan valuations following extensive due diligence and individual property valuations.

There has been little comment in the debate on the most important steps I have taken to secure further provision of credit to the business community. The specific lending targets are backed up by legal sanctions. If further legal sanctions are required, they will be insisted upon. I acknowledge the work of all parties on this subject in the course of the debate on NAMA. This represents a considerable increase on lending last year and in particular must include funds for working capital for businesses. The two banks will be required to submit SME lending plans both by geography and sector for each year. Mr. John Trethowan as the new credit reviewer will review bank lending policies as part of his remit.

I again emphasise that there is now a renewed international confidence in Ireland because of our determined moves to place our public finances on a more sustainable footing. Today's actions will place the banking system on a robust footing too. My colleague, the Minister for Foreign Affairs, Deputy Martin, today described to the House the positive international reaction to our fiscal and banking correction matters. Contrary to what the Opposition allege there is no doubt that relative to other countries we have moved speedily to deal with our banking problems. The banks have been forced to recognise their losses and the Government has committed the capital that will ensure we have a banking system to serve our economy as it recovers.

We have many other steps to take. We must work on public sector reform. In this context, I welcome the decision of the public service unions to conclude a public service pay agreement with Government to put those conclusions to their membership. We must continue to address our competitiveness, which has improved in the past year. We must examine every sector of the economy to identify wherein there is scope for growth and stimulus. All of these steps must be taken.

The essential precondition to economic recovery is that we have viable public finances and a viable banking system. We have taken those decisions in the heat of intense battle. The Government will ensure it takes the necessary decisions required to put this country on the road to recovery and to ensure all of the jobs we want to see created again in this economy are created so that every Irish man and woman can have a stake in this country.

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