Eric Byrne (Dublin South Central, Labour)
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Question 113: To ask the Minister for Finance if during the course of his negotiations the ECB was made aware that Anglo Irish Bank and Irish Nationwide Building Society were both solvent; and if the Central Bank of Ireland communicated the full and frank financial picture to the ECB during the course of negotiations and specifically in the run up to the bank guarantee in 2008. [25952/11]

Michael Noonan (Limerick City, Fine Gael)
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Ireland has a good cordial and professional relationship with both the ECB and the European Commission. The relationships are built on mutual trust, openness and a cooperative and collegiate approach to issues that arise.

In relation to the Bank Guarantee I understand that in September 2008, the then Minister for Finance, after consulting with the Governor and the Regulatory Authority, had formed the opinion that there was a serious threat to the stability of credit institutions generally, and that the provision of financial support was necessary, in the public interest, for maintaining the stability of the financial system in the State and to remedy a serious disturbance in the economy of the State. In his report on events at that time Professor Honohan states "It is hard to argue with the view that an extensive guarantee needed to be put in place, since all participants (rightly) felt that they faced the likely collapse of the Irish banking system within days in the absence of decisive immediate action. Given the hysterical state of global financial markets in those weeks, failure to avoid this outcome would have resulted in immediate and lasting damage to the economy and society. There would have been additional lost income and employment surely amounting, if it could be quantified, to tens of billions of euros."

The Governor's report contains a detailed account of event leading up to the provision of the Guarantee including in relation to the advice that would have been received by the Minister from the Central Bank and Financial Regulator. Paragraph 8.19 of the report in which the Governor states that the clear consensus of those bodies was that the problem being experienced by the domestic credit institutions was essentially one of liquidity rather than solvency as a consequence of a world-wide "financial tsunami". In addition in his discussions with the Joint Oireachtas Committee on Finance and the Public Service on 15 June 2010 the Governor stated that the Minister would not have been aware of solvency concerns relating to the banking system because the Financial Regulator did not have solvency concerns.

As the Deputy is aware the Central Bank is independent in the performance of its functions and in its dealings with the ECB. I can not comment on what was communicated between the Central Bank and the ECB.