Brian Lenihan Jnr (Dublin West, Fianna Fail)

This is an interesting proposal and was tabled in the Dáil. The State intends to draw up the scheme, have it approved by each House of the Oireachtas and then conclude individual arrangements with each financial institution. The terms of the arrangements will be confidential because they are commercial documents.

The guarantee referred to in the Senators' amendment is an entirely different matter. The Bill contains provisions to deal with a deeper emergency of a temporary or permanent shortage of liquidity. In the event of a temporary shortage, the Minister has power under this legislation to require the NTMA to come to some commercial or other arrangement with the party concerned or to make provision by way of funding. Were the Minister to do so, there would have to be a vote in Dáil Éireann sanctioning the expenditure and appropriation of the amount. Under this legislation, the Minister has the power to subscribe for shares in the credit institutions. The amendment seeks to make this share subscription mandatory in all cases where financial support is granted. In the case of the guarantee arrangement proposed, the State proposes to get cash, which is far superior to a share, for this guarantee.

It may be that the credit institutions would prefer to give equity or participation in their risk rather than the most valuable item of all, cash. I do not see how giving shares strengthens the guarantee but I appreciate why the Senators tabled the amendment. It deals with a grave scenario for a financial institution and there is the power to take shares. Preference or ordinary shares could be taken to take control of the company. To make it mandatory is not a desirable idea.

In Sweden it was made mandatory and there has been much talk of that model. Let us be clear about the Swedish model. The Swedes suffered a complete meltdown of their banking system and their gross domestic product fell 10%. The matter was tackled very well by the Government in Sweden. We are not there yet and the Swedish model appears always to appeal to our social democratic consciences. The Swedish Government at the time did a very good job but let us not forget the catastrophe with which it was struck. We have studied the Swedish model in our contingency planning and some of this legislation reflects it but we are not there yet.