Paul Coghlan (Fine Gael)

I welcome the Minister of State to the House and I thank him for his introduction to the debate. I had to smile when listening to Senator Butler. Some Members find it very difficult not to be blatantly political about the issues of the day. I assure the Senator that he will not get that kind of contribution from me.

I welcome this debate. We are in an appalling mess. We cannot do good for our economy without a properly functioning banking system and the provision of credit to the economy. All of this is vital and the businesses that need this credit are the lifeblood of our economy. I welcome the specific lending targets laid down for AIB and Bank of Ireland of not less than €3 billion for new and increased credit facilities to SMEs in 2010 and 2011. In that respect, I welcome the appointment of my old friend, Mr. John Trethowan, as the credit reviewer. I knew him as a genuinely prudential banker, which is what we need now. He is an honest broker who, I have no doubt, will do a good job and make a good call on the risks involved for any application. There is some puzzlement regarding AIB and Bank of Ireland. The AIB haircut will be 43%, while the Bank of Ireland's will be 35%. As was outlined yesterday, the Minister envisages we will have a minority stake in Bank of Ireland, but a majority stake in AIB. The capital requirements are different in Bank of Ireland where €2.7 billion has been estimated as the additional equity capital requirement, while in AIB it is €7.4 billion. There is a considerable difference therefore. That said, however, AIB has more assets, particularly outside the State in America, Poland and Britain. Bank of Ireland has some assets in Britain.

As I understand it, there will be a conversion of the preference shares to equity. I would like to hear the Minister of State comment on why there is an absolute need for that. Why is that so? The European Commission has not yet ruled on the plans for the individual banks, but I noted from the Minister's speech that an extra plan is required from AIB by the end of April. I would like to hear more detail on that when the Minister of State responds.

Timing and market sentiment are important for these institutions. While we would all welcome the sell-on by both of those systemic banks because they have a large branch network and are so important to the economy, the timing of that is important. Much play has been made of the fact we do not want a fire sale. At the same time, however, the banks need to realise these assets in order to reduce their dependence on the State. In AIB's case, is it an absolute necessity that the State will have to have a majority stake? I would like to hear the Minister of State's view on the conversion of preference shares to ordinary ones in that regard.

I also welcome what has been announced concerning the Central Bank. We were notified of a Bill in that regard yesterday, which is an important step. I never believed in the twin-pillar approach that was adopted in the past. I am not too sure how that policy emanated at the time, but it was probably through the Progressive Democrats. In any event, I am glad that a unified Central Bank is envisaged when we get through the three Bills that have been promised, one of which was published yesterday.

An important aspect of the reforming legislation is the power to ensure the fitness and probity of nominees to key positions within financial institutions. That vetting procedure is important because of what has happened and the mess we are in. There should have been a wholesale clear-out and replacement of the people - both at board and top management level - who made these reckless, appalling property-based lending decisions and who landed us in this mess. It happened at Anglo Irish Bank, but has not yet occurred - or not completely - at the other institutions. I would like to hear the Minister of State's view in his reply. Given that we are putting up all this extra capital, the Minister should have a firmer and steadier hand on the tiller, with more control.

The appointment of more public interest directors is a vital prerequisite if the banks are to reposition themselves properly in order to restore confidence. Once AIB and Bank of Ireland have proceeded with the sale of assets, as they are required to do, I do not see why they cannot go to the market to raise additional capital from investors and run a rights issue. I hope both banks will position themselves to do that.

The provision of a third banking force is also important. Perhaps the Minister of State can comment on what will be possible regarding the problems with the Irish Nationwide Building Society and the EBS, or is anything possible? Will the Department steer through an amalgamation there? That would be in the national interest. Thankfully, Irish Permanent looks all right and is not involved in the recapitalisation process.

Like so many other speakers, I welcome the appointment of Dr. Patrick Honohan as Governor of the Central Bank and Mr. Matthew Elderfield as the Financial Regulator. They are sound individuals who have started very well and hopefully they will continue in that vein. As the chairman-designate of Anglo Irish Bank, Mr. Alan Dukes, has shown the capacity to do a good job of steering it in the right direction. In an orderly fashion, he will get it down to a core, slimmed-down bank, including the asset management recovery division.

It is intended that further down the line, the taxpayer will recoup some of the losses, although certainly not all of them. It seems to be a bottomless pit and we have got ourselves into an appalling situation. Nonetheless, I am confident that with proper management and a firmer hand on the tiller, better direction can be given to the two main banks, so they can steer their way through for the betterment of our economy and everybody involved, including depositors and investors.