Pat Rabbitte (Dublin South West, Labour)

I am grateful, Sir.

I want to take on the central point about us all sheltering behind the Governor of the Central Bank — do not hit me now with the governor in my arms — the misquoting of his report and the misassertion that the guarantee was the same as the guarantee in every other country, and the quickest way I can do that is by referring to an article by Karl Whelan. It states:

. . . the Irish guarantee differed from the approach followed by almost every other country in also guaranteeing the full stock of existing debts for two years.

This part of the guarantee did not help deal with the crisis at hand. Honohan's report [said that the] "inclusion of existing long-term bonds and some subordinated debt ... was not necessary in order to protect the immediate liquidity position. These investments were in effect locked-in."

Honohan went on to say: "In contrast to most of the interventions by other countries, in which more or less complicated risk-sharing mechanisms of one sort or another were introduced, the blanket cover offered by the Irish guarantee pre-judged that all losses in any bank becoming insolvent during the guarantee period — beyond those absorbed by some of the providers of capital — would fall on the State."

He noted:

"the extent of the cover provided (including to outstanding long-term bonds) can — even without the benefit of hindsight — be criticised inasmuch as it complicated and narrowed the eventual resolution options for the failing institutions and increased the State's potential share of the losses".

See this speech in context