Peter Mathews (Dublin South, Independent) | Oireachtas source

I am sticking to them. All of my points refer to amendments Nos. 1, 11, 13 and 14 directly and indirectly.

I did not get a chance to speak on Second Stage. I have 21 years' experience of working in a bank that was funded by local and regional deposits in Ireland and which lent to SME businesses in Ireland. It had 70 years of uninterrupted, slow-growth profit and it educated people to be the bankers of the late 20th century and early 21st century. That was until Bank of Scotland (Ireland) under its Highland Bank of Scotland, HBOS, ownership trashed it by ballooning its funding and distributing that funding in mad lending. It was one of about ten banks that did it.

This is where the appraisal should start, because it is a practical situation. The Minister mentioned the insolvency legislation, but legislation solves nothing. It does not solve a physical problem, a medical problem or a financial problem. A financial problem is solved financially, by understanding the implications of the physics converted into finances. When the physics of an enterprise make sense, whether it is to manufacture shoes, import machinery, distribute it or whatever, the financials follow. Thirty years of working in financing physical production, marketing, distribution, importing, exporting and performance bond underwriting has taught me this. It is worth listening to the practitioners, but the practitioners' input into this Bill is not apparent.

One such practitioner was here last week to discuss SME lending in Germany through the Sparkhassen banks. Sparkhassen and the co-operative banks, together, provide 67% of all funding and lending to German households and SMEs. It is not done by Deutsche Bank, Commerzbank and other such banks; they have operations and assets created outside of Germany. The Sparkhassen banks are local banks which take local deposits and lend locally. They are staffed by people who are professionally trained to understand business. At present, our two pillar banks are bereft of people who know how to assess businesses. There are very few left and their heads have been done in. They are depressed and demoralised by the experience of the past six years, because they have been told to repair their balance sheets. We must get real.

As I have said, the aspirations are good. I am not being negative, just realistic. There was an unrealistic approach to assessing the provisions needed in the banks. One had to shout to be heard, and then be ignored. They are still short of capital. If they were not and if they had the right management and executives to do the job, they would get on with writing down the old loans from a bloated credit pyramid that was nothing other than a Ponzi scheme. The banking inquiry is going off in all sorts of peculiar directions and does not know where to start, but the banks' balance sheets will explain the story and provide the lessons, if they are properly explained. It is not rocket science. That will show where the accountability and responsibility lie, which is clearly on the desks of all the directors of all the banks between 2001 and 2008. The balance sheets show it. Furthermore, the culpability of the banks' boards for the creation of the asset price bubble is measurable from the balance sheets. On average, the banking sector was 92% culpable for creating the asset price bubble. Why is that? The weighted average of their loan-to-deposit ratios was 173%. That is 83% above the maximum 90% prudential level, and 83% as a proportion of 90% is 92%.

Deputy Boyd Barrett referred to the mortgages that might be included under this new arrangement. One could argue that a whopping proportion of the loan balances the banks say are owed by those customers are not owed by them, because the banks created the asset bubble that disappeared and left the customers with the loans. The same applies to the SMEs. That is really the starting point.

That cascades forward to the question of from where the funds came to bloat the Irish banking sector's balance sheets by such a huge amount. They came from people who invested in the bond offers by those banks, which was a crazy decision by boards that did not understand or if they did were just greedy, stupid and malfeasant in the years between 2001 and 2008. The funds were secured from issues and the subscriptions of the original investors, who might have been the pension funds. Members will recall when we were told we should be careful because we might damage our pension funds if the banks have to take losses. However, all of those original investors had sold into the secondary market, to the guys who take risks. That is why it was wrong that the losses were imposed on our people. It is not the vicious cycle of bank debt and national debt, but the vicious imposition of losses and its conversion into national debt.

Well done to Luke 'Ming' Flanagan, MEP, who, according to today's newspaper, told the new Commission President, Mr. Juncker, that we want our money back. Brian Hayes, MEP, was also credited for his participation in those remarks, but it was Luke 'Ming' Flanagan who made it easily understood.

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