Irish finance minister Brian Lenihan has defended the country’s emergency banking measures passed yesterday and said while there were “large costs involved” there would ultimately be a net gain for Irish tax payers.

The measures passed yesterday by the Irish parliament will see €16bn of loans transferred to the country’s “bad bank” – the National Asset Management Agency (NAMA) and potentially up to €32bn of further state aid pumped into the country’s main banks.

Lenihan said the strategy and the set up of NAMA would provide advantages for the Irish taxpayer by:

  • fixing the banking system and “safeguarding” the country’ economic future
  • providing an increased chance of securing a “reasonable financial return” for the taxpayer through NAMA’s aggressive valuations
  • realising gains for Irish citizens through holding “valuable shares in our two main banks”
  • providing a €1bn gain accruable to the taxpayer in six month’s time from the bank guarantee scheme.
  • recouping some of the taxpayer’s assistance to Anglo Irish Bank

Lenihan, who has also ordered AIB and Bank of Ireland to lend €3bn each to businesses this year and next year, said the Irish banking sector should be “grateful” for the support from the state.

He said: “Some institutions were worse than others. But the fact is that our banking system, to a greater or lesser extent, engaged in reckless property development lending. In too many cases there were also shoddy banking practices. The banks played fast and loose with the economic interests of this country.

“Yes, our previous regulatory system failed abysmally and it is right that the role of the regulator, the Central Bank and the Government is now the subject of independent inquiry. But the fact remains that senior figures in Irish banking made appalling lending decisions that will cost the taxpayer dearly for years to come. As I said in this House last September during the debate on the NAMA legislation: the banks should be extremely grateful for the continued support and forbearance extended by the citizens.

“They must now repay that debt by facilitating the economic recovery which is widely forecast to get underway in the second half of this year. The government will insist that they do so by supplying credit to viable businesses and households in this state.”

Lenihan said he was aware of the onus these new measures placed on the Irish taxpayer but there was no alternative.

He said: “The burden on taxpayers stemming from the losses incurred in our banking system is horrifying. Unless we face up to these losses now, we will not have a functioning banking system and the economy will not recover.

“The citizens of this country have shown grit and determination in facing up to our severe budgetary difficulties and it has paid off. We are facing up to our banking difficulties. We have acknowledged the scale of our problems and we have taken the necessary actions to solve them.

“The steps we are taking today will provide certainty to the people from whom we must borrow, certainty among our trading partners, and certainty to investors, both at home and overseas, who look to this country for opportunities.”