Michael McGrath (Cork South Central, Fianna Fail)

This debate is timely, particularly against the backdrop of significant volatility on the international markets arising from the uncertainty of the Greek financial crisis. Greece today will pay over 11% on its bonds while Spanish bonds were downgraded by a credit ratings agency. The head of the IMF said the fate of the single currency is at stake because of the cracks in the solidarity of the eurozone system.

No one knows where this crisis will lead. Ireland needs to learn the lessons from Greece and the other eurozone countries in serious financial trouble. It underlines once again the overriding requirement for the Government to ensure the public finances are brought to order by 2014, as agreed with the European Commission, and a working banking system is in place which will meet the needs of the economy, particularly for small and medium-sized enterprises, the backbone of this economy.

All parties are agreed on the central role the adequate flow of credit plays in the economy. Many of the initiatives and measures undertaken by the Government in the past several months are designed to ensure the adequate flow of credit for businesses.

The Minister of State, Deputy Darragh O'Brien referred to the €12 billion lending requirement that Bank of Ireland and AIB must comply with for this and next year under the NAMA legislation. By 12 May 2010, both banks will have to submit detailed proposals, broken down by sector and region, on how they will achieve these lending targets.

This will have to be rigorously monitored because the banks have shown form in the past in their ability to reclassify loans from one category to another. The Minister for Finance has said that if he is not satisfied with the evidence of their lending, he will use the power under the NAMA legislation to issue a statutory instrument to ensure credit flows into the economy.

The banks are rebuilding their balance sheets by restricting the availability of credit to businesses while competing aggressively for depositors. There is a concern that they will react to the recent banking crisis, which we are not out of yet, by being overly cautious and too conservative in lending practices. All Members know of cases where banks at loan reviews have doubled, even trebled, the interest applied to the loan.

Our economic recovery is inextricably linked to the flow of credit which we must ensure. In that regard I welcome the establishment of the credit review office. I would like to see its decisions binding rather than the banks merely explaining why they will not implement them. However, it is a step in the right direction.

The progress made by Bank of Ireland in raising private capital so that it can meet the capital requirements laid out by the Financial Regulator must also be welcomed. AIB will submit its detailed capital plan by the end of April. We need for these banks to be strong with genuine competition in the banking sector.

In the interests of public accountability, once the restructuring plan for Anglo Irish Bank has been finalised, the full file should be published. It is important to show the costs of the different options of winding the bank down gradually, immediately or keeping it as a going concern. This information should be available for all to scrutinise, particularly when we are anticipating an injection of up to €22 billion into the bank. I look forward to discussing this with the bank's chairman, Mike Aynsley, when he attends the Oireachtas finance committee.

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