Eugene Regan (Fine Gael)

We are learning more each day about the banks and their nefarious activities, such as directors' loans and how transfers are classified in accounts. We are also learning more about how the financial system is regulated and the failures in the system. In particular, we are learning about the failures of Government and the Cabinet, of which the Minister here present, Deputy O'Dea, is a member.

We have a situation where the Minister for Finance has endeavoured to explain not having read a fundamental report on the banking system commissioned by him from PricewaterhouseCoopers. He said his officials did not bring it to his attention, dumping on them. On the radio this morning he said he did not believe his officials should be scapegoated on the matter, but that is what he did. I do not know whether the Minister needs to be spoon fed on financial matters, but he also made another extraordinary statement this morning. He said he was not convinced that if he had read the passage, its significance would have jumped out at him at that stage.

I do not know if we have a competent Minister for Finance, but that statement tells us a lot. His statement that if he read the report and the sections of it relating to the transfer between Anglo Irish Bank and Irish Life & Permanent, he would not have recognised its significance says much for our Minister. This is worrying when we are taking decisions on the basis of his advice and recommendations.

With regard to the proposed recapitalisation of the banks, this is something the Minister rejected some months ago when the Opposition pointed out that the State guarantee introduced by the Government was insufficient. The Opposition argued the guarantee only helped to resolve the liquidity problem, but the issue of recapitalisation should be addressed. The Minister and the Government went into denial on the issue, ultimately leading to the nationalisation of one bank.

In making his announcement on the recapitalisation of AIB and Bank of Ireland, the Minister stated the plan is based on the best information available. Apart from the fact that when information becomes available to the Minister he does not necessarily read it, there is a qualification in that remark. He is only acting on the information that is currently available and does not say the information is sufficient to know the true financial position of the banks in which he is investing so much money.

There is something contradictory in the Minister's statement. He says the Government examined the loan books of Bank of Ireland and AIB before deciding that each required €3.5 billion. He says it looked to where the exposures are and applied to those exposures the negative trends that apply to the economy and had come to a conclusion relating to how much capital was required. However, in the same breath he says that one of the conditions of the recapitalisation was that the Bank of Ireland and AIB should come clean about their future losses. Does the Minister know the true position or not?

The issue of recapitalisation has been a feature of international banking in the US and Europe for the past six months, but it was only towards the end of last year that the Minister indicated it might be required in the Irish banking system. We were assured by the regulator and the banks it was not required. All involved in the banking structure, particularly the Minister, denied recapitalisation was necessary. Now we have the proposal before us, but none of the legislation required is before the Houses. All we have in this proposal is an elaboration on the thinking the Minister outlined in December on what was required in terms of recapitalisation.

The position of Deputy Richard Bruton, the Fine Gael spokesperson on finance, is that the Minister has gone in the wrong direction. Let us hope the Minister succeeds with his recapitalisation project, but it is his scheme and he is putting the finances of the country at risk in terms of the manner in which he has gone about it.

There was an acknowledgment in the presentation made earlier by the Minister of State, Deputy Mansergh, with regard to the State guarantee system. He said this is being reviewed in terms of supporting longer-term bond issuance by the banks. This points to a defect in the scheme originally introduced because, clearly, a guarantee for only two years on borrowings and transfers to the Irish banks is inadequate.

The speech of the Minister of State, Deputy Mansergh, also contains the suggestion that greater certainty and transparency needs to be brought to the operations of systemically important financial institutions. With regard to regulation, we have had a sequence of events and disclosures over recent months. It is only today that the Minister is suggesting that badly needed reform of the regulation of the financial system is required. The Government is in power. The Minister is in a position to introduce legislation on regulation. Now, he is stating, as if he has no responsibility for the matter, that reform of the regulatory system is required. He should just get on and do it.