This morning the Government announced its decision to give a guarantee regarding the country's financial institutions. In response to this decision I made the point that this party would respond in the interests of the country, in the interests of protecting our economy and to protect the interests of our taxpayers. The actions of the Government since then do not inspire great confidence. This is a wholly new situation and it requires a wholly new response. The Government is effectively asking the taxpayers of Ireland to underwrite a €400 billion guarantee so that banks can chase their own losses. This sum is the equivalent of up to €250,000 per taxpayer.

The Taoiseach has stated on behalf of the Government that normal regulatory requirements will apply but this is completely insufficient and completely unacceptable. When banks approve credit or loans for small business, they will inevitably appoint persons to oversee the progress of the business in question. Will the Taoiseach confirm that his Government will appoint personnel to the risk management committees of every bank involved in order to protect the interests of the taxpayer? The Irish taxpayer cannot be expected to underwrite a guarantee of €400 billion without strings attached.

I thank Deputy Kenny for his offer of co-operation on this important matter and I also thank all Members who have been briefed about the situation which has arisen. The action taken by the Government last night was necessary based on the advice available to us from the Central Bank and regulatory authorities. This action was to ensure we maintain the stability of the Irish financial system and has been taken in response to the severe dislocation in the international credit markets which has impacted both in the United States and in the European Union. Throughout the current period of turmoil, the Government has stressed its commitment to the stability of the Irish financial system and in particular to ensuring that money placed with an Irish credit institution would not be put at risk. This Government action is first and foremost in the interest of the stability of the Irish economy and the long-term interests of the taxpayer. A secure and stable financial sector is essential for the Irish economy and is obviously in the best interests of the Irish people.

With regard to the guarantee there have been what I regard as misleading indications as to the exposure being placed on the taxpayer. We are providing a guarantee as a means of dealing with the basic problem for the banks which has occurred over some time, the question of accessing liquidity in the form of cash in order to conduct their business. The banking system in Ireland has assets which exceed its liabilities. The assets of the Irish banking system amount to approximately €500 billion and the guarantee liabilities are approximately €400 billion. The first call on the funds of a bank will be on shareholders, on their assets, capital and funds. The Irish banking sector has very well secured loans and loans which are underwritten by the European Central Bank. It is important to make the point that in the event of any further call, it is my intention to ensure the Irish taxpayer will not be held liable in any way for any deficit that might occur in the event of there being a problem in the future. I intend that the sector will have to discharge any liability that may arise.

The Government is simply providing a State guarantee to those banks incorporated in the State. It is for the purpose of ensuring those banks have access to liquidity and funds to conduct their business on the basis that they are banking institutions which have assets that exceed their liabilities. The warranty behind that, provided by the Government on behalf of the people, is to ensure a stable financial system and sector. That is the reason we took this action in the unprecedented situation that presents itself and on the basis of the advice available to us. I want that to be very clear.

The State guarantee is provided at a price. It is not for free. The State guarantee will have a mechanism whereby a fee reflecting commercial realities will have to be paid by those banks which may access the liquidity provided by the Central Bank.

We intend to act responsibly regarding this very serious matter in terms of protecting the economy and taxpayers' interests. However, the Taoiseach did not answer my question. In respect of regulatory oversight and increased scrutiny, will the Government appoint personnel to the risk management committees of every bank involved so taxpayers can see those banks which involved themselves in profligate and risky lending will not double their bets guaranteed by them? I want the Taoiseach to answer this question so as to reassure taxpayers that nothing untoward will happen as a consequence of this guarantee.

I made the point that this deal is not without strings attached. What is in this for the taxpayer? What equity will he or she get? Will the Taoiseach say that for the duration of this guarantee there will be no more bonuses, dividends or derivative trading? We do not want a situation where the gains are privatised and the losses are socialised.

Hear, hear.

Will the Taoiseach confirm if the Government has fully briefed the European Commission on this guarantee? Will he confirm to the House that the deal will receive confirmation from the Commission that it is in compliance with EU competition law and directives?

Regarding protections to be put in place for taxpayers and the regulatory situation, I stress this guarantee was not given lightly. It was informed by the strong advice of the Central Bank and the Financial Regulator that, on account of unprecedented disruption in international financial markets, a system-wide State guarantee was required to ensure Irish financial institutions have access to the normal liquidity and funding to effectively operate their day-to-day business. It will also provide confidence to depositors and wholesale lenders that they can continue to transact their business as usual with the institutions concerned.

The interests of taxpayers will be very firmly safeguarded from any risk of loss from the very substantial warranty the State is providing. Legislation, which will be brought forward to underpin this guarantee, will provide for specific terms and conditions, including fees, for the guarantee provided. It will provide a useful mechanism alongside existing regulatory powers to ensure Irish financial institutions are managed and operated in a manner which is fully consistent with their long-term sustainability. The intensified scrutiny and oversight of financial institutions, which has been put in place since the onset of the current turmoil, will be maintained and strengthened further to ensure high regulatory standards are achieved in Ireland and the quality of corporate governance in these institutions is a bulwark against any risk of loss for the State.

As far as the question of moral hazard is concerned, it will be a priority for the Government to ensure the highest regulatory standards and standards of corporate governance apply in all the institutions concerned, including regarding lending practices, to safeguard the interests of taxpayers against any risk of financial loss. The Financial Regulator has the statutory responsibility to monitor, evaluate and provide whatever conditionality is required by him to ensure he is satisfied in these matters.

What about appointing officials of the Financial Regulator to the banks' risk management committees?

The Government has not taken equity in these banking institutions. It has provided a State guarantee to deal with liquidity which was critical to the continuation and health of the financial system. By doing so, we are not exposing taxpayers' money to the provision of that equity. The equity issue does not address the liquidity one.

How will the Taoiseach strengthen the regulatory regime?

Only one supplementary question is allowed.

I have just outlined that, by reason of the arrangements put in place for the terms and conditionality that will apply in respect of financial institutions if they seek this money to maintain their liquid position, the Financial Regulator has the powers to provide whatever conditionality is required to ensure he is satisfied that it is being used for the purpose for which it is being sought.

The regulator is not renowned for his performance to date.