Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I welcome the opportunity to speak on the motion. In particular, I want to support the amendment put forward by Deputy Michael McGrath and Fianna Fáil, which states that Dáil Éireann:

"recognises that the replacement of the promissory notes provided to the Irish Bank Resolution Corporation (IBRC) with long-term Government bonds announced by an Taoiseach on Thursday, 7th February, 2013 provides important benefits to the State including:— a reduction in the general Government deficit of approximately €1 billion per annum over the coming years...— calls on the Government to use the €1 billion gain on the general Government deficit to ease the planned budget adjustments and to invest further in job creation measures without compromising the achievement of the 3% deficit target by 2015;

— notes that the Government has not sought or received any write down whatsoever of the legacy debt associated with the rescue of the former Anglo Irish Bank and Irish Nationwide Building Society;

— calls on the Government to publish a detailed analysis of the full impact of the deal on Ireland's debt and deficit figures over the full course of the deal...

— believes that the justice of Ireland's case deserves further relief from the impact of bank-related debt and, in particular, that the Government should be seeking to have the cost of bailing out AIB, Bank of Ireland and Permanent TSB lifted from the shoulders of the State through the European Stability Mechanism."

A key element of this whole process is the liquidation of IBRC, formerly Anglo Irish Bank and Irish Nationwide. Personally, I believe this is a good, practical, businesslike, common-sense decision as well as being a good legal decision and in the best interests of the Irish taxpayer. I say that because NAMA and IBRC have essentially been in the same space over the past couple of years. They are dealing with various high-worth individuals who are involved in development loans and some property portfolios, and in many cases they are dealing with the same individuals. NAMA and IBRC have separate mandates, however, and they each seek the best return for their own organisation. On occasions, as I have pointed out, the overall interest of the State was not served by their objective to receive funds for their separate organisations, sometimes compromising the debt of the other State organisation.

I believe the decision to liquidate IBRC is long overdue and it is a good decision in its own right, regardless of the bigger issue of the promissory note deal. Although I know the two are inextricably linked, it is the right thing to do. I personally called for this bank to be liquidated years ago, initially when it was Anglo Irish Bank. On 7 November 2012, speaking at the Oireachtas Committee on Finance, Public Expenditure and Reform when we met the gentlemen from NAMA, I specifically said: "I think NAMA and the IBRC are in a similar space from the point of view of the Irish taxpayer and I believe if would be better ... if the two organisations were under the one umbrella and working together rather than, on occasion, working to separate agendas." In the Dáil Chamber on 2 November 2011, I said "the liquidator should be called in". In 2010, while we were in government, I personally called for this, and I know the then Minister, the late Brian Lenihan, considered this as an option when considering nationalising or liquidating the bank. He chose the nationalisation approach because he obviously felt the risk of liquidation, at that stage, would have been too severe. As time has passed, however, and the bank situation has become more clear, I think it right that we have now come to this place.

It is good that there is a consensus on this issue at last and that the right decision has been made. However, it is important that we learn lessons for corporate governance. With regard to what went wrong in Ireland, three names stand out in the public mind - Seán Fitzpatrick, Michael Fingleton and Seán Quinn. While they are separate people, they were three powerful men who had absolute, complete and total control over their organisations. Nobody dared question their authority. When one person has absolute control of a multi-billion euro industry or organisation, the outcome can in some cases be catastrophic, as we saw in regard to the three organisations those people absolutely controlled. That is the lesson. People, including the regulators, should have seen there is a risk in such situations.

The gross value of the loan book of IBRC is €25 billion but there are impairments of 44% already provided for in its accounts, and the value that is now showing in its balance sheet is €14 billion. The big question of the valuation of the loan book has now to be dealt with because, ultimately, it will be sold or transferred to NAMA. Section 14 of the IBRC Bill, "Determination of consideration for bank assets to be acquired by NAMA", states: "For the purposes of the valuation ... loan assets shall be valued using discounted cash flow analysis". While we all understand this, it is not the valuation method that was used by all of the other banks, including Anglo Irish Bank, when they were transferring their earlier loans to NAMA. Instead, the method used was long-term economic value rather than the market value or current value, and this was approved by the EU in order to assist those transfers. In effect, NAMA will end up with some loan assets valued under this discounted cashflow method and others valued under long-term economic value, which could mean a difference of 20%. Will NAMA have a veto over these new values? The Minister must clarify this point.

NAMA will inevitably want the lowest value so the amount it pays will be low, but the lower the value it accepts, the greater the amount local creditors will be left short, while bondholder payments are guaranteed by the Minister and some are even being brought forward from 2014 and 2015. As we speak, this includes all unsecured bondholders, who will be paid - the Minister will ensure that.

However, there was no guarantee for local Irish suppliers of goods and services to IBRC when it went into liquidation last week. The value of the loans has been transferred from IBRC to NAMA. If there is a further write-down when they are revalued, it will have implications for other NAMA loans and the pillar banks. In a nutshell, if it transpires that the figure showing in its balance sheet is not €14 billion but turns out to be €11 billion or €12 billion and there is a write-down by 10% or 20%, it will call into question how assets are valued on the balance sheets of the pillar banks and in NAMA. If we see a loan book of this size in the economy which needed a write-down having to be forensically examined again, one cannot say it has no bearing on every other institution. I worry that the new values will cause knock-on problems. This issue must be looked at.

On page 17 of the most recently published financial statement by IBRC, its interim report for the six months to 30 June 2012, published in August, the directors talk about the risks associated with IBRC and Government policy and restructuring as a possible risk. They also say that "if new governmental policies were to require the Bank to resolve its position over a shorter than expected time frame, projected asset recovery values could be negatively impacted". Clearly, the fact that we are now to telescope the closing down of the bank will have a negative impact. On page 20, it is stated:

As NAMA reserves the right to adjust the consideration paid for assets previously transferred when the due diligence is completed, the final adjustment to transfer values will only be determined when full due diligence in respect of the assets has been completed. These adjustments have the potential to be either positive or negative, depending on the assessment of the underlying loans.

What IBRC is confirming is that if NAMA believes what it paid for the loans already transferred in the past couple of years worth tens of billions of euro has been overstated, it can come back to the original transferring institution to make an adjustment. My question is how this can happen if IBRC no longer exists? NAMA must reassess and revalue everything it has taken from Anglo Irish Bank in the past couple of years, not just what it is taking now. This is because that if there is a shortfall when NAMA comes to realise the value of these assets in the year or two ahead, it will not be able to go back to IBRC in the way it can with AIB or Bank of Ireland because IBRC will not exist and it will be left with the shortfall. It is up to NAMA to assess any potential shortfall. I am not saying there is one, but it would be a crazy risk to take without examining the matter and it could have further implications in terms of the actual cost involved.

A few issues arise from the liquidation, one of which is the question of legal actions involving IBRC. I do not know what is going to happen with pending legal actions and legal actions in train, but I want the Minister to look at this issue. We are all aware that the Director of Corporate Enforcement is looking at former directors and the Minister, in reply to a parliamentary question last year, said that as a result of investigations carried out on behalf of the Central Bank, information on Irish Nationwide Building Society had been relayed to the Garda. The Office of the Director of Corporate Enforcement cannot look at Irish Nationwide Building Society because it was not covered under the Companies Act as it was a building society; therefore, the issue must be dealt with by the Garda. I am not saying there will be legal challenges, but I want to ensure the passing of the legislation will not compromise that process. Those watching "Primetime" the other night will have been shocked and I want the Minister to re-examine the matter. When everyone in the country was affected by the 2% pension levy in 2011, approved retirement funds were excluded from it. This specifically includes the pension pot of €27 million for Mr. Michael Fingleton. The Minister specifically allowed that to happen and we discussed the issue. These issues must be revisited because people would have been aghast had they been told on television that Mr. Fingleton's pension pot had been exempted from the pension levy everyone else paid.

We must try to secure a deal with the ESM for the other banks. The IMF-EU-ECB deal was a three-year programme from the end of 2010 to the end of 2013. We are nearing the end of that programme. The troika has told the Fianna Fáil delegation that at this stage it is looking at exit strategies. It is essential, therefore, that no action is taken by the Government which will prevent the orderly exit from the programme at the end of 2013, a date established prior to the Government coming to office.

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