Michael Ahern (Cork East, Fianna Fail)

This motion and the contributions from the other side of the House go back to the accusations made in the past two years, specifically with regard to the bank guarantee scheme. The credit institutions support scheme introduced in 2008 provided for a blanket guarantee of the deposits and liabilities of Irish institutions. Without that guarantee, the banking system would have collapsed. As the Governor of the Central Bank said in his report on the banking crisis, "An extensive guarantee needed to be put in place". Otherwise, our banks would have run out of money within a matter of days and "would have had to close their doors". The Governor went on to state: "Closure of all, or a large part, of the banking system would have entailed a catastrophic immediate and sustained economy-wide disruption ...".

The bank guarantee provided breathing space to allow necessary measures to fix the banking system be introduced. That included NAMA, the bank recapitalisation, reform of the Central Bank and a new Financial Regulator put in place, and the ongoing restructuring of the individual institutions. As all Members are aware, attracting funding remains difficult for the banks, not least in light of the stress in sovereign debt markets. It is also important to point out that about a dozen other European Union countries also recently extended their bank guarantee schemes to 31 December. They include countries such as Austria, Denmark, Germany, Poland, Spain and Sweden. It is also important to note also that the State has already earned more than €1 billion from guarantee fees in less than two years.

Messrs Klaus Regling and Max Watson, in their report, questioned the fiscal and macro-economic policy of the Government but they went on to state:

... that bank governance and risk management were weak - in some cases disastrously so. This contributed to the crisis through several channels. Credit risk controls failed to prevent severe concentrations in lending on property - including notably on commercial property - as well as high exposures to individual borrowers and a serious overdependence on wholesale funding. It appears that internal procedures were overridden, sometimes systematically. The systemic impact of the governance issues crystallised dramatically with the Government statements that accompanied the nationalisation of [Irish banking].

It has been stated also that the Government has done nothing in recent years to face up to the problem but that is untrue. The creation of a fully integrated Central Bank has been announced. That was recommended in the FRS report of the then finance committee in the 1997-2002 period. We recommended that to the House. It was an outside report which recommended breaking up that body. The wisdom of the House was correct on that occasion. Deputy Noonan was the spokesperson on finance at the time and I was chairman of the committee at that time.

There has also been the replacement of the board of the Central Bank and the Financial Regulator with a new Central Bank Commission chaired by the Governor, Professor Patrick Honohan. Mr. Matthew Elderfíeld was appointed as Head of Financial Regulation, and has been doing tremendous work since he took up office. There has also been provision on a statutory basis for a new regime of fitness and probity for senior management and board members in banks and other financial service providers.

A total of 60% of the members of the boards of the banks have vacated their positions. It is often put forward that there have been no changes in that area but it is clear from the facts that there has been change. Regarding what has been done to make the people answer for what they have been doing in the banks, the Garda Síochána and the Director of Corporate Enforcement have been doing extensive work in that area and from the statement of the Garda Commissioner in recent days it is hoped that work will come to an end in the near future and will go to assuage the anger that exists, and rightly so, among the public.

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