Ciarán Lynch (Cork South Central, Labour)
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Question 53: To ask the Minister for Finance the action he will take to ensure that the Irish banks covered by the bank guarantee accurately report on the true present value of their property loan books; his views on whether the injection of State capital of some €7 billion into Allied Irish Bank and Bank of Ireland may turn out to be insufficient to meet future capital requirements; if he has proposals to introduce a bad bank or impaired asset insurance scheme to help provide certainty as regards asset quality in the banking system here; his views on both of these models; and if he will make a statement on the matter. [6320/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy will be aware the level of impairment of assets in financial institutions has, from the outset, 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 PriceWaterHouse Coopers 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 the market values of land and development assets was carried out by Jones Lang LaSalle to complement this work.

The provision of the Guarantee 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 bank's 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, such as 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 interests of the taxpayer. Ongoing work at the level of the European Central Bank and in the EU will inform the process.

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. To date the Government's approach is structured and incremental and designed to ensure that the interests of the banks, the financial sector generally and the State are protected.