Opening remarks by the Taoiseach
First of all can I say that in terms of the job losses that we’ve seen announced today, I think it reinforces just how important the work that we are doing is for the benefit of the wider economy, and the capitalisation of the banks has to been seen in that context.
There are many families this evening who unfortunately have been told that their jobs are going and that’s always a very difficult time for them. I would very mindful of that and I think that in the context of the challenge to maintain jobs in this economy, we have to keep our eye on the big picture - and the big picture is the need for a functioning economy, a functioning banking system.
We have been very careful and cautious in the fact that we are investing taxpayers’ money, to find the terms and conditions necessary to enable the banks to be supportive not because they are simply banks but because they are fundamental to the life blood of commerce in any modern economy. We have to do so in a way which protects the taxpayers’ interest and also contributes positively in trying to improve credit availability in the real economy so that businesses can continue to strive to maintain jobs and maintain trade in what is a very difficult trading environment.
Question by reporter: Minister Gormley said in the Dáil that there will be resignations in relation to the transaction involving Irish Life and Permanent and Anglo Irish Bank, is that going to happen that there will be somebody is going to take responsibility for this irregular transaction?
Taoiseach: Well I can’t comment on that. At the moment I understand that the Minister for Finance will be meeting the Chairman and Chief Executive of Irish Life and Permanent. That particular transaction is still under investigation with the Financial Regulator – that is the status of it at the moment. I think it’s important that at the end of the day, in respect of all issues in the past that have arisen regarding governance issues in any banks that they will be dealt with in the appropriate manner. The important point that I’m trying to make in this context is - mindful of that and the importance of that [proper investigation] being done - it raises the issue of the need for improved regulation in our banking system. That is something now to which we accord top priority. The whole question also in the aftermath of this capitalisation is of managing risk, of how we can ensure that risks are managed in the future in a way which underpins the stability of the system. This is another important action and work that has to be undertaken by Government in the immediate weeks ahead. I would also make the point that the big picture at all times here is to ensure that we try to maintain the maximum number of jobs in this economy in the mist of a very deep recession. We have to have a functioning banking system for that to happen, and that is the reason, that is the motivation and that is the thinking behind what Government has been seeking to achieve every since the occurrence of serious turbulence in financial markets, for some months now.
Reporter: Richard Bruton said in the Dáil today that the €7billion being made available to AIB and Bank of Ireland may not be enough. How confident are you of the fact that it will help to swing things round?
Taoiseach : Well you know the determination of the amounts that were to be part of the capitalisation package for these two banks, for the two biggest lenders in the Irish economy at the moment, is on the basis of a very considered analysis that has taken place. It is on the basis of advice from within the Department of Finance itself, the Central Bank and obviously advisors who have assisted us in assessing what in fact would be required. So therefore these are not figures that we have plucked from the air. These are figures that are regarded as taking into account what the real situation is in these banks and how they can manage the risk going forward. These are the amounts that we believe are required on the basis of the evidence before us at the moment.
Reporter: What is your view of opposition calls for the resignation of the Finance Minister over this revelation yesterday; that he didn’t read the entire report?
Taoiseach : Well I think it’s important to say that Brian Lenihan enjoys my full confidence and the confidence of the Government. In relation to this, this is a matter which was a prudential matter that was referred by the Department of Finance to the Financial Regulator and that is still being examined and investigated there. The issue here was, and is, that the loss of market confidence arising out of governance issues that were emanating from the Anglo Irish Bank during the course of that period, meant that we had to move to nationalise that bank. We had to bring it into effective public ownership in the interest of protecting the deposits, because it is a bank of systemic importance in the Irish economy. Our approach to all of these issues is the fact that these institutions are of systemic importance. The failure of any of those banks with systemic importance would have a contagion effect right across the financial institutions generally in the country. So therefore it is absolutely vital that people understand that it is on that basis that we were approaching this issue.
Reporter: Taoiseach are you confident that a line can be drawn under these controversies in Anglo Irish Bank and the other banks at this stage and that these, as they’ve been described by the opposition and others, as cooking the books etc, that no more scandals will emerge?
Taoiseach : There must be accountability, and there will accountability in respect of any issues which arise which show that there weren’t good governance, principles or practices in financial institutions in the past. That is clear - it has to happen. It’s important for public confidence that it happens and there is a process by which that is happening. There is a person who has a statutory authority in these matters, the Director of Corporate Enforcement - he’s in there doing his job. The Financial Regulator has to do their job and also, in addition to that, the experience tells us that we must now move to regulatory reform.
We must improve the regulatory system in Ireland so that people can see that it works properly. Not only people at home, but people aboard. Because the reputational impact of these issues is not helpful in the context of trying to maintain stability in our financial system domestically at the moment. That is what the principles of accountability are about. Where there is any wrong doing proven as a result of an investigation it has to be dealt with. Dealt with by the appropriate authorities in the appropriate way and in accordance with the law.
And in relation to the job that Government must do (and in ensuring that that happens by the way) we must also ensure that we don’t, in terms of dealing with that, put at risk the stability of the banking system that has to go on in order to ensure that we have a functioning economy as well. So these are not neutrally exclusive objectives - I’m just saying they should be dealt with the same - with equal robustness and with equal emphasis. Because there are people going home from work this evening or going back into work tomorrow and they are hoping that their jobs can be maintained, and that there livelihoods can be maintained, in the midst of this recession. So lets make sure we can do the job.
The job is - where there is any wrong doing, identify it, deal with it, have it dealt with; obviously improve the regulatory system because it clearly hasn’t been working sufficiently to inspire public confidence in recent times. We must also maintain a banking system through the recapitalisation we have seen in the two banks today and also the need now is to manage risk in the months ahead. That will be the task of Government working with those institutions and using the people that we will be now putting into those banks to assist us in doing that.
Reporter: Do you accept that the public confidence that you were referring to a minute ago has been damaged in the last 24 hours? That the Minister didn’t read the report?
Taoiseach : Just to make the point there are six volumes in this report. In the overview report there is no mention of this issue, there was no mention of this issue in the detailed briefings by Price Waterhouse Coopers to the Minister and the Department regarding risk factors because it wasn’t identified as a risk factor. It was an issue which was identified by the Department of Finance officials when they went through the detailed report themselves and referred to the Financial Regulator themselves. It is been dealt with by the Financial Regulator. So it did not impinge on the decision that had to be taken by Government in any event - this is the important point - and in relation to anything that arises as a result of that particular interbank transaction, once that investigation is completed and dealt with, if there are issues arising out of it, they will have to dealt with in the appropriate way. But the important point here is that it doesn’t affect the decision that had to be taken in any event because of the governance issues that were arising.
Reporter: How long will that process last (ie the Financial Regulator looking into that transaction)?
Taoiseach : Well I would hope that it would be brought to a conclusion absolutely as quickly as possible. As far as I’m concerned I’d like to see that dealt with and clarity brought to it. As I say the Minister for Finance is having a meeting with one of the entities concerned with that this evening ….We’ll decide what emerges from that.
Reporter: Do you have a timeframe in which you would like to see the regulatory reform concluded?
Taoiseach : It’s a matter of top priority for Government now. We have been working on it in recent times and I would like to see it brought to conclusion in the coming weeks and months. It is a very important piece of work that has to be done, lessons have to be learned from what has happened and we need to make changes - and we will make those changes.
Reporter: The opposition is calling for the establishment of what they call a toxic bank, this idea that a dedicated bank would deal with all the bad debts and leave the operational loans functioning with BoI and AI. Is that a runner in this country?
Taoiseach : Well let’s be clear about this word toxic - there is no sub-prime paper which is regarded as toxic in Irish banks. In relation to bad debts they are provided for in the accounts. What you’re really asking for is - can you make an accurate prediction as to what assets would come under stress for the next two, three or four years. Now the banks - and the Minister has indicated - what the land and property and development portfolios of the two banks concerned, having been capitalised are.
He has indicated, as they have indicated, that they can work through that portfolio allowing for various stress tests that were undertaken by advisors to Government which enabled us to come to a conclusion as to what capital was required to assist them in achieving that. What we’re also saying after yesterday’s decision is, that the question of managing risk - how we manage the risks that would be associated with those portfolios - is now an issue to be dealt with by Government. We will examine all options and we are been very careful in this respect. And we have learned from other jurisdictions - some of whom have made various moves and are now having to change or adapt those decisions because of the way things developed.
So my attitude on this matter is - your talking about taxpayers money, if you are setting up a bank, as with this bad bank idea and if you were able to make an accurate prediction at this point (which I don’t think is prudently possible) as to what assets would revolve into bad debts over that period of time (some of which are performing presently) - you would have to pay for that. You can’t just simply load off assets to the tune of billions of euro into a bad bank. Someone has to pay for it and I don’t believe that is the best option in Irish circumstances. Before the taxpayer is asked to deal with that scenario, we would want to make very careful consideration.
We will look at all options regarding how we manage risk best and we will take our decisions on that matter - as we have take this decision on capitalisation and recapitalisation - after very due and careful deliberation and based on the facts. Not on some views which are not as well informed frankly, as to what the future liabilities or future stress tests of those banks’ assets might be.