John Perry (Sligo-North Leitrim, Fine Gael)
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Question 104: To ask the Minister for Finance if he is monitoring charges made to bank customers over inter-bank rates set by the European Central Bank; and if he will make a statement on the matter. [6282/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy may wish to note that the decision whether an institution operating in Ireland passes on ECB interest rate reductions to customers is primarily a commercial decision for the institution concerned. However, as the Deputy will be aware, I have publicly indicated that I expect institutions to pass on funding cost reductions to their customers as appropriate, including in particular to those purchasing properties on variable mortgages and to small and medium-sized enterprises. This is important to help support sustainable growth and employment in line with the objectives of the Government guarantee scheme and the Government's recapitalisation programme.

My Department has been informed by the Financial Regulator that all of the covered institutions, have fully passed on each ECB interest rate cut since the bank guarantee scheme was introduced. The Deputy will appreciate that there are also implications for the deposit rates paid by banks. My Department will continue to work closely with the Financial Regulator to ensure that those institutions covered by the bank guarantee scheme do not pass on the costs of the bank guarantee to their customers in an unwarranted manner. However, it must be borne in mind that credit institutions are not primarily funded from the ECB but from a variety of sources and the cost of much of their funding has been significantly above ECB rates over the last year.

Liz McManus (Wicklow, Labour)
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Question 105: To ask the Minister for Finance his views on whether one of the biggest mistakes made by the Japanese authorities in the face of their banking crisis in the 1990s was to delay and prevaricate over the identification and write-down of impaired assets on banks balance sheets; if he is committed to avoiding repeating this mistake in the context of the ongoing banking crisis here; and if he will make a statement on the matter. [6321/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would like to state from the outset that while there are undoubtedly lessons to be learned from the experience of other countries, the situation that Ireland faces today take place against the background of a global financial crisis, which has affected all the major world economies, whereas the Japanese crisis was not part of a global phenomenon. That said, one of the lessons of the Japanese experience is the need to respond in a timely and effective manner and to establish the extent of impaired assets. The Deputy will be aware that the level of impairment of assets in financial institutions has been a key consideration in the assessment of the risks and the appropriate interventions by Government required to address and correct the particular difficulties being faced by financial institutions in Ireland.

The Financial Regulator engaged PricewaterhouseCoopers to examine the capital position of the institutions covered under the Guarantee Scheme. This examination included an assessment of the level of impairment of assets under various stress scenarios. A further assessment of market values of land and development assets was carried out by Jones Lang LaSalle to complement this work. It is clear from international experience, including the Japanese experience, and from our understanding of the issues in the national context, that there is no single solution to the problems faced by financial institutions.

In Ireland the Government moved quickly to provide a guarantee that stabilised the liquidity position for the covered institutions and provided confidence to depositors in the institutions. The recapitalisation of AIB and BOI addresses both the expectations of international markets on the Irish banks' capital levels, and strengthens the ability of institutions to cope with impaired loans in conjunction existing reserves and retained profit from performing loans and other trading activities.

I will continue to examine various proposals, including risk insurance, for the management and reduction of risks within financial institutions with respect to these specific exposures, having regard to international developments and to the best interest of taxpayers. Ongoing work at the level of the European Central Bank and in the EU will inform the process. I will be carrying forward this work to produce proposals as a matter of priority. Furthermore, in the context of the six month review of the guarantee Scheme to be completed by mid-April 2009 the Government will examine how the Scheme could be revised subject to European Commission approval and consistent with EU State aid requirements, in ways which include supporting longer-term bond issuance by the covered institutions. This would be in line with international and EU trends where the average term of State cover for bond issues extends beyond 2010.