Kieran O'Donnell (Limerick City, Fine Gael)

I am delighted to contribute to this debate. The Nyberg report is very wide-ranging and has much in common with the previous reports but it has also dealt with new areas. It goes over old ground which was also dealt with in the other reports. The lack of proper regulation was probably the most critical factor in the banking crisis. Proper regulation from the regulatory authorities would have ensured that banks would not have been able to go mad in their lending practices and would have ensured proper capital adequacy ratios and the type of stress test to be applied to mortgage applicants. It was madness that mortgages of 100% were given to first-time buyers. Some people were even given mortgages higher than 100%. This is a result of lack of proper regulation.

The banks lost sight of their business. The Nyberg report states that providing credit is not a sale of bank services but rather is the acquisition of a risky asset. This is a fundamental rule and the banks lost sight of it. They concentrated on sales and took no notice of the risk. The taxpayer and the ordinary citizen paid the price. Not only taxpayers but also those on social welfare have been affected. The use of the term, "taxpayer" is not correct because the banking crisis has affected every person living in Ireland.

The Nyberg report highlights the lack of proper planning. In mid-2007, post-Northern Rock, the planning was inadequate. Deputy Brian Lenihan referred to the scoping exercise carried out by the Department of Finance in early 2008. It carried out further exercises in February and April 2008. A domestic standing group met from June 2008 onwards. The special resolution regime was examined but it was stated it might undermine the market. However, Mr. Nyberg is of the view it could have been carried out in a confidential manner and it could have been parked, so to speak.

I refer to the Watson and Regling report and the Honohan report and the troika. The Honohan and Nyberg reports are ad idem that the records are sketchy with regard to the decision on the bank guarantee when Deputy Lenihan was Minister for Finance. We do not know what happened or who made the decisions. Mr. Nyberg states the absence of a paper trail is perhaps understandable but it seriously complicates the allocation of specific responsibility with respect to a major policy decision with far-reaching financial consequences for Ireland. Why was a temporary measure such as a six-month guarantee not introduced? Why was a blanket guarantee given that was twice our gross domestic product, a total of €275 billion? Mr. Nyberg refers to the guarantee being an initial success but this was a pyrrhic victory.

The Government was indecisive thereafter and it undermined Ireland's credibility in the eyes of the market. It was a dreadful decision in the way it came about. The Government took the opposite decisions to what should have been decided. It is critical now to have a comprehensive, accurate picture of what happened when this guarantee was put in place. The consequences of the Abbeylara decision should be dealt with by referendum in order that an Oireachtas committee could examine all of the issues involved.

At the time of the guarantee it was clear that Ireland was not alone as this was a European-wide problem of varying degree requiring a European solution. It would be interesting to hear Deputy Brian Lenihan's thoughts on why, at the time he put the guarantee in place, he did not seek to discuss with our European partners precisely what could be put in place on a structured basis. The horse had bolted by the time the banking guarantee had been in place. That issue needs to be dealt with.

I would like to refer to how the report deals with some issues other than the guarantee. It is quite critical of the Department of Finance. It claims that departmental officials sometimes sat back and waited to see what way the Minister was jumping. I note that in 2004, the Department of Finance prepared a memorandum for the incoming Minister - former Deputy Brian Cowen - requesting, in effect, that tax-driven property reliefs be pulled back. That did not happen, however. If one examines the history of our property bubble, one will appreciate that it took off with a vengeance in the 2002-03 period. Ireland was an export-driven nation until 2002. Exports dropped in volume terms from 2003 onwards, with property going up. That created a property bubble.

The report is highly critical of the role played by the Financial Regulator. It refers to the lack of expertise in that office, the Department of Finance and the Central Bank. I welcome the decision of the Minister for Finance to establish a dedicated unit in the Department to deal with bank restructuring. The report suggests that the Financial Regulator's officials engaged in light touch regulation of the banks but seemed to be quite heavy-handed in terms of consumer affairs. Did they feel comfortable in that area? Did they not have the skill sets to deal with the banks?

I will conclude on a positive note. I welcome the Minister's intention to expand the role of the auditors. In America, the auditors have a far wider remit, which involves expressing their views on whether CEOs and financial controllers are engaging in reckless activities. That has led to people being held accountable. I welcome the Garda investigation into Anglo Irish Bank. I am pleased that the Director of Corporate Enforcement is reaching conclusions and intends to go to the Director of Public Prosecutions. This report indicates that we are through the process and need to get conclusions. I suggest a public inquiry by the Oireachtas, after the Abbeylara restrictions have been overcome, is needed.

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