Wednesday, 10 June 2009
Will the Taoiseach indicate how many jobs will be saved by the €4 billion injection into Anglo Irish Bank? How much extra lending will be made available to small business arising from the injection of €4 billion that he proposes to put into it?
There is a purpose to the injection into Anglo Irish Bank of up to €4 billion and any alternative approach would be far more negative for the taxpayer. It is important that we ensure this bank, which is of systemic importance in financial terms to the financial system of the country, is allowed to restructure and to de-leverage. We must ensure we minimise the exposure to the taxpayer. Alternative approaches would greatly increase the exposure to the taxpayer in that respect. On the question of jobs being saved, it is important that we have a viable financial system such that we maintain the 1.8 million jobs in this country. This is in the context of Anglo Irish Bank's future, outlined by the executive chairman, and the need to restructure the bank and reduce its costs internally also.
That is typical; the Taoiseach did not answer either question. He was asked how much extra lending would be made available to business as a result of a €4 billion injection into Anglo Irish Bank and how many extra jobs would be saved. The answer, of course, is none. This situation is rotten to the core. The Taoiseach proposes to put in €4 billion, for which taxpayers will pay some levies or charges, to keep the bank alive. The Taoiseach told us this was a systemic failure.
Last September, the Minister for Finance came before the House and stated there was no run on Anglo Irish Bank. We now know that there was a serious run on Anglo Irish Bank. The Taoiseach told the House there were no capital shortages in Anglo Irish Bank. We now know there were serious capital shortages in Anglo Irish Bank. We also know there are ten persons, unnamed, who have loans there of €30 million each. We also know there were serious irregularities in the way business was done. This situation is rotten.
The Taoiseach proposes to seek consent from Europe to put €4 billion into this bank. I speak on behalf of the thousands of businesses all over the country where jobs are being lost this morning, were lost yesterday and will be lost tomorrow, where lending facilities cannot be or are not being made available to them and where jobs are being squeezed as a consequence, and I speak on behalf of the taxpayer. The Taoiseach and his people have sat down with Anglo Irish Bank and discussed the situation with them. He has proposed putting in €4 billion now, to be followed by a further €3 billion at some time in the future. On behalf of the taxpayer, the jobseekers and workers and the business people of the country, I want to know how much lending will be leveraged as a consequence of the €4 billion going into Anglo Irish Bank and how many jobs will be saved as a consequence? He is the Taoiseach and is supposed to know these things. He has the information from his officials, his Ministers and Anglo Irish Bank and I ask him to tell the House what is the situation. What is the story?
What is clear is that on 29 May the bank published its half-yearly accounts for the period to the end of March of this year. These showed a pre-tax loss of over €4 billion, mainly due to a write-off of some of the loan book. That represented a significant deterioration in the bank's position since it was nationalised in January and its assessment has been confirmed by PricewaterhouseCoopers and subject to stress-testing similar to the exercise carried out on Bank of Ireland and AIB.
I remind Deputy Kenny that it is very simple. The question of support for this bank is important in order to minimise the exposure to the taxpayer-----
The decision to nationalise Anglo Irish Bank was a last resort for protecting both customers of Anglo Irish Bank, who were substantial employers in all sections of the economy, and also for ensuring that the remainder of the Irish financial system could access the funding that provides credit to all businesses, including our small and medium-sized enterprises.
Anglo Irish Bank's business customers are in all sectors of our economy, supporting jobs in tourism, retail, commercial and small and medium-sized enterprises. This is the first injection of capital into Anglo Irish Bank and will need EU clearance. That is the position.
The priority with regard to this bank is clearly that it recovers to the greatest extent possible the loans it has advanced. As a nationalised bank, the Government must ensure that it is supported in that effort.
Last Friday week, 29 May, the Friday of the bank holiday weekend and the day after the House adjourned for the break for the elections, and at a time when the country was preoccupied with another matter much in the public domain, the Government decided to put €4 billion into Anglo Irish Bank. The day after, we heard that Anglo Irish Bank was looking for another €3.5 billion on top of that. This is a bank which, frankly, is a financial cesspit. We have already heard about the extent to which this bank gave loans to its own directors and to other people to buy shares in the same bank, and arranged a back-to-back loan with another financial institution to make its financial position look healthy at a time when it was anything but. Yesterday, the current chairperson of the bank told an Oireachtas committee that the bank had given loans to some of its senior managerial staff to become players in the property market.
This bank is now owned by the State and the Government is responsible for it. How much was loaned to the senior managerial staff or does the Taoiseach know? How many senior managerial staff were involved in these loan arrangements? Are they still in place and for what were the loans extended?
What is the Government's bottom line with regard to the bank? It has put in €4 billion now and the bank is looking for another €3.5 billion. Some commentators are saying that the amount the bank may require from the State may be considerably in excess of those figures. This bank is not systemic. It has not lent a cent to anybody, other than its existing clients, since last September. What is the Government's bottom line? How deep is the hole going to be for the taxpayer with regard to this bank?
I remind the Taoiseach that the day the Government made the decision to put €4 billion into Anglo Irish Bank was the same day that every monthly-paid employee in this country had their pay-packet raided with levies, including health levies and so on, to pay for the financial mess that the country is in now. What is the bottom line and how far is this going to go?
We hold no brief for any bad governance in this bank and we have nationalised it as a matter of last resort. We will seek to ensure that it is restructured and will be leveraged over the coming period so that the exposure to the taxpayer is minimised and protected to the greatest extent possible.
With regard to the capital injection of €4 billion by the Government, this was to help the bank's capital position to enable it to buy back certain debt instruments at less than their par value and which will help its capital position. This measure is similar to that announced by a number of banks. Details of the buy-back will be finalised in the coming weeks.
The board is finalising a business plan and this will include scaling down the balance sheet, reducing the cost base and reducing risk concentration. The board is also recruiting a new management team to be led by an externally appointed chief executive officer.
I wish to make an important point that the alternative to the Government's decision would have, in my opinion, left the taxpayer open to a far wider potential exposure. We made those decisions because of the need to provide a capital injection to the bank and they are the right decisions. The reason we should do this is to ensure that the financial system in this country is seen to be operational and working.
On the question of loans to directors, a total of €31 million of the total of €4.3 billion impairment charge in the first half-year accounts was attributed to loans for former directors. There have been no write-offs of these loans and the bank will seek full repayment. Two serving directors have loans from Anglo Irish Bank but they are performing fully. The chairman of the bank has confirmed that senior staff have loans from the bank which are now impaired. Anglo Irish Bank will deal with these impaired loans in exactly the same way as any other customer to ensure maximum recovery of these loans. The bank expects that these loans will be repaid in full. Any conflict of interest will be addressed by the bank's internal decision-making process.
This reply does not answer any of the questions I asked. I suggest the Taoiseach try again with regard to the staff. How many senior staff have loans from this bank? How much are these loans and for what purpose were they to be used? The House is entitled to know this information. If senior managers, who presumably were the people making decisions on a day to day basis about loans and the way in which the bank was being run, had loans extended to them by the same bank in circumstances in which the taxpayers have already committed €4 billion to it, we are entitled to know how many senior managers were involved in this arrangement, what the loans were for and how much they cost.
Second, I wish to know what we are liable for here. The Government does not have money. I was in Crumlin Children's Hospital which has closed a ward and it is the same story in hospitals all over because money cannot be provided to keep essential health services going. Money is not being made available for the building of schools that are needed. There are children in temporary classrooms and children with special needs are having their classes taken away. We are in a set of circumstances where the Government does not have money for anything except, apparently, banks. In that context a sum of €4 billion is a lot of money.
How much more this will cost. We know already that the bank is looking for an additional €3.5 billion on top of the €4 billion and the sum may get bigger. Given the Government decision to put €4 billion into this bank is there a bottom line or will this bank be a bottomless pit for the taxpayer? We should be told.
The decision to put this money into the bank happened on the Friday of a bank holiday weekend and we have not had an opportunity to have any account for it here in the House since then. We need direct answers. I seek factual answers from the Taoiseach but no outline of the alternatives. I am not looking for political roustabout. I want direct answers with regard to the loans made to the senior managers and about the extent to which the public purse, the taxpayer, the people of this country and future taxpayers will be indebted for what went on in this bank.
I indicated to the Deputy it is important to point out that a capital injection of €4 billion into this bank was required in order to ensure that the capital position of the bank was such that it can continue until we can arrange for restructuring and can devise a new business plan for the bank. If the suggestion implied in-----
I wish to answer the question in the following way, if I may, because the suggestion was that there was €4 billion available to go into a bank which might have gone everywhere else. The suggestion was that we just decided to support a bank rather than supporting public services. The answer is that we have to support the financial system in this situation because the alternative of winding up the bank or allowing it to be wound up would expose the taxpayer to a far greater liability.
It would be a far greater liability because the level of deposits in the bank are up to €64 billion. One must understand what the alternatives are in these situations. If the suggestion is, as some people have it, that we should let everyone swing and let the bank go that would leave the State open to a possible exposure of up to €60 billion. That is the situation and we could not contemplate that because that would all crystallise on the basis of such a decision.
There is a great deal of irresponsible talk here, with respect, in order to make the populist contention that in respect of this bank we are trying to prefer powerful interests in banks rather than looking after the affairs of the country.
We want to look after the affairs of the country and we need a financial system and a viable banking system to do so. All decisions we have taken with regard to all banking matters are, first, about protecting the exposure of the taxpayer to the greatest possible extent and ensuring we have a viable banking system for the future.