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A Cheann Comhairle,

At the outset I would like to thank Deputies for their considered and useful contributions to this debate.  I would also like to thank Mr. Nyberg for his extensive and in-depth analysis of the crisis.

The inquiry that was started last year by the previous Minister for Finance, has led to the publication of three very comprehensive Reports, each covering particular elements of the crisis:

· the macro-level investigation into the causes of the crisis carried out by Messrs. Regling and Watson;

· the investigation into the regulatory and financial and stability policy of the Central Bank and Financial Services Authority of Ireland between 2003 and 2008 carried out by the Governor of the Central Bank, Professor Patrick Honohan; and

· the Report of the Commission of Investigation into the Banking Sector in Ireland by Mr. Peter Nyberg.

As the Minister said earlier this afternoon, this report requires careful and measured consideration by all of us in the House because we have to learn the lessons from these events, about how we got here, how we managed during the period; and how we dealt with the crisis as it was developing.

People are asking why the Commission did not name individuals.  While this is a matter for Mr. Nyberg, the Commission states in its report that it could not assess the actions or inactions of single individuals in organisations and it did not think it was appropriate or fair to do so.

The Commission also states in the Report that during the period covered by its investigation, leadership as well as lower-level management and advisors changed repeatedly in most of the private and public institutions.  This makes apportioning individual responsibility for strategic or longer term developments impractical.

The nature of systemic banking crises rarely allows blame and responsibility to be confidently allocated: since all contributors to systemic crises need to be present to generate a systemic crisis, stressing the impact of only one or two contributors would lack balance. The Commission’s remit was to identify the causes of failures, rather than to assign individual blame or responsibility.

In the debate today, Deputy Lenihan and Minister Burton raised a number of points in relation to the role of the ECB in the Irish banking crisis.  One should note that according to the ECB, the Eurosystem contributes in several ways to the smooth conduct of policies by the competent national authorities relating to the prudential supervision of credit institutions and the stability of the financial system.  To be precise, the Eurosystem:

monitors and assesses the stability of the financial system as a whole, not individual banks, in the euro area;

provides advice on issues relating to financial regulation and financial supervision which are discussed at EU and international level;

promotes crisis management arrangements within the euro area and in the European Union more generally; and it

promotes cooperation between central banks and supervisory authorities in the European Union.

Notwithstanding the role of the ECB over the years in relation to financial stability, it is important to recall that the ECB is central to its financial stability today.  Members will be aware that the ECB has welcomed the recent stress tests assessing the capital needs of Irish banks and indicated its support for the government’s commitment to ensure that the capital needs of the institutions are met in a timely manner.   It was further announced that the ECB had decided to suspend the application of the minimum credit rating threshold in the collateral eligibility requirements for Irish Government or Irish Government-guaranteed debt instruments.   In addition, the ECB committed to continuing provide liquidity to banks in Ireland.  This continuing and ongoing liquidity support from the Eurosystem will be critical in safeguarding the stability of the banking system and its capacity to support economic recovery over the period that it will take to return the banking system to health and to sustainable sources of stable market funding.

Deputy Fleming referred to the need for European supervision of the banking system in Europe.  The new European bodies- European Systemic Risk Board (ESRB) and three new European Supervisory Authorities are important for the future monitoring of financial stability and the regulation of the European Banking sector.

The ESRB monitors and assesses risks to the stability of the financial system as a whole ("macro-prudential supervision"). The ESRB provides early warning of systemic risks that may be building up and, where necessary, recommendations for action to deal with these risks.

Three new European Supervisory Authorities have been established for the banking (European Banking Authority), insurance and pensions (European Insurance and Occupational Pensions Authority) and securities (European Securities and Markets Authority) sectors.  These are also important in ensuring effective oversight.

I would like to touch on the decision to introduce the Guarantee.  Its introduction, the Report says, was based on “very deficient information” and a lack of suspicion.  The Commission finds that crisis management in Ireland was rendered less than fully effective by insufficient appreciation of bank exposures on the part of all the relevant authorities and that decision-makers and their advisors in autumn 2008 still maintained the view that the only relevant problem was a threat to the liquidity position of the banks - no major solvency issues were expected to arise and the Guarantee would not be called upon. The possibility that banks might experience disastrous losses in asset values did not appear to have been seriously considered. If accurate information on the banks’ exposures had been available it seems to the Commission that a more limited guarantee combined with a state take-over of at least one bank might have been more seriously contemplated. Clearly we need to ensure that in the future the Authorities will have access to up-to-date and comprehensive information and that this is shared appropriately amongst the relevant authorities so they do not end up effectively ‘flying blind’.

The Commission’s Report notes that the authorities had developed, in line with EU requirements, a framework for information exchange, crisis management and contingency planning in a Domestic Standing Group on Financial Stability. This provided a structure for ongoing cooperation between the Department, the Central Bank and the Financial Regulator and also the NTMA. In light of the Commission’s findings on an evident information deficit we will need to look closely at how the arrangements for information gathering and exchange can be improved. The structure of our domestic regulatory and central banking system has changed significantly in the years since the crisis hit and the Government will be presenting legislation later this year to further enhance our regulatory and supervisory regime system.

In relation to the Deputies’ points on the pay of senior bankers, particularly in reference to Colm Doherty of AIB, as Minister Noonan stated, we have a lot of legacy issues to deal with. There was nothing that the current Government could do about Mr. Doherty’s payment because he stood down in November and he was given the remuneration that he was legally entitled to at that time.  This all occurred before we arrived in office.

There may be other senior Banking executives who have legal entitlements to similar kind of deals. The Department of Finance is examining the situation. Going forward we will be looking at new remuneration arrangements, certainly new attitudes to bonuses.

There are similar developments in Europe, where there are now European directives on the remuneration of senior bankers, where the bonus culture is being addressed head on.

We will be moving to have the new regime to replace the old regime. But the Minister is conscious of the fact there are still people who have legal entitlements that we will find it difficult to disentangle. But we will examine all of that.

Deputy Ross raised concerns in relation to the public interest directors and the boards in the covered institutions.  As a result of recent events the Government now has or will have a substantial stake or a full controlling interest in six credit institutions.  The Government is determined that proper governance arrangements should apply, and that the Board of each institution should continue to be responsible for management and policy within the institutions.

As part of this programme the Central Bank launched further proposals for consultation on 22 March 2011 for a new fitness and probity regime for board members and ‘controlled functions’ in banks and other financial sector institutions.

Significantly, the Central Bank also plans to conduct a review of the fitness and probity of all existing executive and non-executive directors at the Irish banks which have received Government support. The Central Bank will assess the incumbent directors against the new statutory fitness and probity Standards, including, where it is relevant, their competence and track record in the period leading up to the financial crisis.

This is in addition to the statements made by the Minister earlier this afternoon in relation to the Board and Management Renewal Plans

Deputies Lenihan and McDonald raised the issue of auditors.  The Minister stated that the Report’s conclusions in relation to auditors do generally accord with the widespread view that auditors may be able to take on a more enhanced role in cooperation with supervisory authorities, while recognising their specific statutory functions.  The Central Bank is already engaging with the audit profession to explore how it can assist the Bank in exercising its supervisory functions.  The Minister will be keen to see progress and developments here.

Deputy McDonald raised a question with regard to auditors and mentioned specifically about their use by NAMA.  I am informed by the Department of Finance that in relation to the service contracts provided by major accounting firms, NAMA has at all times acted in accordance with public procurement procedures.  Under public procurement procedures, a firm or company cannot be excluded from the process unless that firm is conflicted or has been convicted of an offence in relation to professional misconduct or otherwise been guilty of proven grave professional misconduct.   To exclude any firm on grounds that are not in accord with procurement regulations could result in sanction from the EU Commission or lead to the excluded firm taking legal action on foot of the exclusion.

In any case, while NAMA has certain contracts with the major accounting firms to provide a number of services for them it should be pointed out that NAMA are in fact audited by the Comptroller and Auditor General. 

Deputies Lenihan, Doherty, Ross raised questions in relation to the role of the Department of Finance.  As the Minister stated earlier today, the Report contains important messages and conclusions for the Department of Finance. While this Report relates principally to banking matters, some of these messages will also be examined by me in my role as Minister for Public Expenditure and Reform.  This Report, in conjunction with the Wright Report, shall inform the future direction of the Department.  Deputies will recall that the recommendations set out in the Wright Report cover a wide range of issues regarding organisational structures, skills, staffing and procedures. 

The exact reconfiguration of the banking division within the Department will be developed over the coming weeks.

It is important that the Oireachtas has a role in considering this Report.   As Deputies will be aware, the Oireachtas has been involved in the stages of the process to date.  It is important to recall that:

· the Finance and Public Service Committee met both the Governor and Messrs. Regling and Watson at the outset of their work to be briefed on the members’ priorities for investigation and again when their reports were completed;

· the two preliminary reports, when completed, were debated in both houses of the Oireachtas;

· the terms of reference and draft Government Order to establish the statutory Commission of Investigation were discussed by both Houses of the Oireachtas;

· the Joint Oireachtas Committee on Finance and the Public Service’s reported on the policy lessons on macroeconomic management arising from the preliminary reports into the banking crisis.  This Report was published in November 2010 and its recommendations are currently being implemented though the new Programme for Government;

· The Public Accounts Committee held a series of meetings between May and October 2010 with the Secretary General of the Department of Finance in his capacity as the Accounting Officer in relation to banking stabilisation measures; and

· the Nyberg Report has been laid before the Oireachtas.  Today’s debate is part of that process. 

The Government wishes to refer the Nyberg report to an effective Oireachtas Committee for consideration and to allow it to make recommendations that will improve the financial system in the future.  Unfortunately, due to the Abbeylara judgement, the Attorney General has advised that it is not possible for Oireachtas Committees to effectively fulfil its important oversight role.  This is because an Oireachtas Committee cannot be a Court of Judgement on private individuals and cannot find on matters of fact.

Therefore, the Government proposes to hold a referendum to address the consequences of the Abbeylara judgement and will bring forward these proposals in due course.

In conclusion, Ceann Comhairle, the Nyberg Report provides a expert, authoritative and structured examination of the crisis in the banking sector in Ireland.  It identifies the causes of the crisis in the Banking Sector and also the wider financial impact on this economy.  It enables us to understand the origins of the crisis and help us to learn lessons which will inform our future management of the banking sector.  It has been efficient and cost-effective. 

The big challenge facing the Government is to put in place the necessary steps to get the economy growing that generates job creation.  An important part of this is to restore the Irish banking system to its core function in the economy.  It will do this by:-

•           providing loans to support sustainable business and jobs;

•           providing a secure and safe place for savings

•           lending to good customers for household needs and

•           lending to entrepreneurs to invest in the future of this economy.  

It is important that we all work together with our international counterparts to get this done as quickly as possible.  We are facing a big task but one that we will have to meet and overcome so we can resume the path of sustainable economic growth and job creation.  This Report is helpful in identifying the lessons but we still need to focus on the main job to be done.