Martin Mansergh (Tipperary South, Fianna Fail)

I thank Senators for contributing to this debate and dealing with it fairly expeditiously. It is important to emphasise that the ELG scheme will be a somewhat more targeted an approach than the CIFS scheme and that it is not a blanket extension of the guarantee. It will allow for greater and longer-term debt issuance under the guarantee, moving it towards the European model and consistent with EU State aid rules.

Senator Twomey asked if we are premature in doing this. I do not believe we are. In regard to Government policy and intentions, it is important to give adequate notice of that in order to allow longer-term planning. A key feature of this is that it allows the participating institutions to access unguaranteed funding and to issue unguaranteed deposits, which will help reduce their reliance on State support over time in line with improving market conditions and, as said in recent weeks, certain Irish institutions have successfully issued partially guaranteed longer-term debt and this positive trend is welcome. It represents the necessary first step in the exit strategy for the State, which I am sure we would all support, from the blanket guarantee offered in September 2008, consistent with the maintenance of financial stability and ensuring the funding needs of the banking system in Ireland are met. As Senator Boyle pointed out, this is not being done free of charge. The institutions are required to pay a fee to the Minister in respect of all liabilities guaranteed.

Statements made by the outgoing chief executive of AIB before the Joint Committee on Finance and the Public Service committee, at which I was not present, should not be misinterpreted. The banks have to try to maintain - perhaps the right word in the current circumstances is "restore" - their reputations. As we know, the crisis was partly brought about by a great deal of imprudent lending and they have to engage in prudent lending from here on in.

There is some limit to the extent to which the State can push the banks into socially desirable but financially imprudent lending. We are unfortunately in a situation where the number of buoyant and financially sound businesses are much fewer than appeared to be the case.