The Role and Contribution of Public Interest Directors in Financial Institutions: Discussion (Continued)

Thursday, 20 December 2012

Joint Committee on Finance, Public Expenditure and Reform Debate

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(Speaker Continuing)

[Deputy Peter Mathews: Information on Deputy Peter Mathews Zoom on Deputy Peter Mathews] This would mean the promissory notes could be torn up. In the case of AIB - and the Bank of Ireland may be too foggy-headed at the moment to articulate it - it can do it. AIB can articulate that for the triangle of banks - the two big remainder banks and Permanent TSB as a smaller add on - to get the indigenous national economy going, there will be a need to write off debts for households and businesses which are otherwise viable but are smothered in legacy debt which weighs down their existing good businesses. This would enable them to get off the ground.

In addition, the insolvency legislation will put a line through this matter of the banks having a veto on insolvency. That is like trying to sail a boat with the anchor down. It is just silly.

Dr. Michael Somers: Allied Irish Banks has issued a statement saying that it will fully co-operate.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews Yes but I am saying to spread that and make it contagious.

Dr. Michael Somers: We deal with what we can. Obviously, we have no influence over the other banks but certainly our intention is that this should work properly. We have no interest in seeing people being slung out of houses or anything like that.

In my last job, when we were trying to invest some of the pension fund, a property company in the United States told us about repossessions of houses there, which was a disaster. First of all, people did not want to buy the houses and by the time they paid for maintenance and insurance, they reckoned they got back about 40% of what the houses were worth. It is a disaster.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews Yes, Dr. Somers is quite right. Some 99% of people are honourable and decent and want to pay back what they can. It is therefore up to both parties to sit down and work out what can honourably be repaid over income expectations. We are all agreed on that.

However, as the bank with which we have met and conversed, I am asking AIB to spearhead the requirement of the effort in that negotiation with the banking sector's creditors, because we have run out of money. As Dr. Somers said, the pension fund that was built up for the people of Ireland has decreased. They stupidly raided it. They gave Wilbur Ross 35% of the other bank for €1 billion, when our State paid €5 billion for 15% of the bank. A junior certificate student would know that is stupid.

Dr. Michael Somers: Obviously, I do not know exactly who it was. I would have had to swallow very hard to do a deal like that, but anyway the deal was done.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews I can read between the lines. It is an idiotic deal.

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch Can Dr. Somers respond to some of the issues raised by Deputy Mathews?

Dr. Michael Somers: Which one, specifically?

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews This is it. Dr. Somers's style is different from ours.

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch I struggle myself, at times.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews My conversation may have been a bit one-sided but both witnesses are nodding, so I sense that there is not much disagreement.

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch As I pointed out to Deputy Mathews in the past, if one goes to confession and a priest is nodding, it does not necessarily mean that he is agreeing.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews This is not confession. Did you notice the difference, Chairman?

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch Yes.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews This is what I call a view.

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch Nodding is not a conversation.

Mr. Dick Spring: Just to add to what Dr. Somers said, I certainly welcome the Deputy's remarks. I am glad that the insolvency legislation is eventually getting through this House. I was hoping it would have happened a lot earlier because that is obviously the ultimate denouement of solving a lot of the problems which we are facing. As I said in my opening remarks, we now have 2,000 people addressing this situation. Given the combination of the public insolvency legislation and the forbearance that is on offer from the banks, we will get to grips with a very difficult problem.

We are starting on a second journey but we are now in a far better position. Our numbers are going in the right direction and, even if one looks at the losses over recent years, we are going in the right direction.

As regards the bigger issues the Deputy raised, I am not sure that Mr. Draghi would be overly impressed if I asked to meet him, but that is for another day. I accept that there are bigger questions to which the State must respond, as well.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews I think the survivor bank system needs further capitalisation. In the case of Bank of Ireland it could be €10 billion minimally to get its provisions right so that it can start the sort of work that would follow from the insolvency stuff. I think that AIB will need more, too, as will Permanent TSB. The IBRC issue is being lumped onto the main national debt. In all, we are talking about a minimum of about €60 billion. However, we need people who really understand it and who can, without having to shuffle through opening statements with simultaneous translation, get it across, eye to eye with the other person.

Dr. Michael Somers: As regards needing more cash, we have been through numerous stress tests on the future of AIB and have looked at different scenarios, including interest rates moving and economies not growing. In other than extreme circumstances, the expectation is that we will not need any more capital from the State. I hope that is correct and that we do not have to come back looking for any more capital, but one can never be absolutely certain.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews If that is the case, why is the bank's management - and AIB has 10,000 or 11,000 staff at different levels - not getting on with the job of writing down collectable amounts one by one with customers? Is it because the capital or the people are not there, or is it both?

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch A final response from Dr. Somers.

Dr. Michael Somers: As Mr. Spring said, there are 2,000 people in AIB who are trying to deal specifically with mortgages that are in distress.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews They are also dealing with-----

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch Deputy Mathews will behave like every other member of this committee. He has time allotted to him and he is now out of time.

Deputy Peter Mathews: Information on Peter Mathews Zoom on Peter Mathews Can I have my uniform after lunch, please?

Chairman: Information on Ciarán Lynch Zoom on Ciarán Lynch If you would only be good. I call on Deputy Doherty.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I welcome our guests to the committee. In response to the Chairman's questions, Mr. Spring talked about the time involved in taking up the position as a public interest director. He estimated that would be 40 days and then indicated to the bank that he would be available for 60 days. Is that a figure for days attending meetings or is there other work involved?

Mr. Dick Spring: It would be both in the sense that there is a lot of work in preparing for meetings, including briefing oneself. Then there are meetings and also there is a lot of work currently in terms of what I would call continuous education and training which we are now undergoing. I will give an example. Last week, we had our board risk meeting at 2 o'clock on Wednesday afternoon, which lasted for four hours. We then had a working dinner with the board of the bank. We started our board meeting at 8 o'clock on Thursday morning and that lasted until 2.30 p.m. We then went into a training session which lasted until 6.30 p.m. that day. On Friday we resumed the training session which lasted from 8.30 a.m. to 1 p.m. That is the bank's working week and there are obviously other meetings in between.

The figure of 40 days was indicated as the Central Bank's requirement. One would want to commit oneself to being available, which I was in a position to do. I saw, however, that there was extra work involved and I put it in writing to the chairman that I was quite prepared to do extra days.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I note the number of meetings Mr. Spring attended last year was 24, while Dr. Somers attended 22. Of the four public interest directors who are former Ministers, Mr. Spring is in receipt of the highest Government pension. He is in receipt of €121,108 per annum. Last year, for example, his fees were €59,000. Excluding last year, he has received fees of €132,000 since the time of his appointment. That is on top of the fact that he has got what I think is a lavish pension. I genuinely do not believe that any public servant should be in receipt of pensions of €121,000 - never mind the fact that they are getting fees of €59,000. The 60 days to which Mr. Spring referred, equates to €1,000 per day. That is his fee as a public interest director on the board of AIB. That is a very heavy fee for his involvement, given the fact that this State is already paying him €121,000. I know that everybody pays tax on their incomes. Mr. Spring has said before that he is a socialist. Does he believe it is appropriate that people like himself who are serving in the public interest are claiming such an extraordinary amount of money from the taxpayer?

Mr. Dick Spring: I think the fees which I have outlined are reasonable for the effort and time that I put into working at Allied Irish Banks. My pension is as a former Deputy - which Deputy Doherty will be entitled to in time - and as a Minister. Deputy Doherty will obviously get a ministerial pension if he ever achieves ministerial office and I think he will be perfectly entitled to it.

There is another way of looking at this. I have turned down numerous invitations to take up other positions, which would be equally if not more lucrative than working for Allied Irish Banks. In fact, I have turned down two in recent months because I do not have the time and am not available. I think the payments are reasonable for the time and effort put in.

Deputy Pearse Doherty: Information on Pearse Doherty Zoom on Pearse Doherty I think Mr. Spring's answer to whether he is worth the €1,000 per day fee on top of his pension, rings similar to Dr. Somers's answer - if he does not mind me saying so - when he was receiving more than €1 million in payment as chief executive of the NTMA.
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