Brian Lenihan Jnr (Dublin West, Fianna Fail)

Let us be clear about this. When Anglo Irish Bank was nationalised early in 2009, it did not thereafter substantially expand its existing loan book. The question of whether the bank was being downsized did not arise. From the moment of nationalisation, the policy in relation to Anglo Irish Bank has been to downsize it. The idea that somehow I entertained the notion that it could be transformed into a good bank through transferring assets to NAMA is erroneous. That was the premise of the Deputy's question.

As I have made clear at all stages, management made a case for a split of the bank between a good and bad bank. At times, some Deputies in the Fine Gael Party made a similar case regarding the resolution of the Anglo Irish Bank problem. This was a case that I had examined and it was evaluated by my Department. It was eventually dealt with by Department on the second management application and on the submission of the second application to Brussels.

On the Deputy's point about crystallising the debts, the difficulty is that in the Irish banking crisis is clearly related to the fall in asset price values from the peak of the property market in late 2006 and early 2007. The only credible way to deal with a banking crisis of that type and the textbook approach to doing so is to guarantee the liabilities, set up an asset management company and capitalise the institutions concerned. Those are the steps we have taken and completed this morning. The idea that one cannot crystallise the debt and leave these loans lingering on bank balance sheets would lead to a collection of zombie banks which would fail to reform, improve and repair themselves over a long number of years.

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