the scale of liquidity outflows was such that some of our institutions had acute liquidity risks. the concentrated nature of the irish banking system meant that there was a high risk of contagion in the event of an individual bank encountering difficulties. there was no impending pan - european initiative to address these international pressures at that time, although it was to emerge subsequently. our own government decision to guarantee key liabilities of the banking sector was taken at that time to protect the stability of the domestic financial system by ensuring renewed access to funding for irish financial institutions. a success of this measure was evident by the immediate improvement in the liquidity situation, including a substantial net inflow of funds in the days after the guarantee was introduced, and the ability of a number of the covered institutions subsequently to raise longer - term finance on the international markets. in the subsequent weeks, most other european countries moved to introduce some form of guarantee arrangements. it was recognised at the time that it would also be necessary to determine if additional capital was required, particularly in the context of demands for higher tier 1 capital by international investors and pressure on property valuations in the context of a much more significant downturn. accordingly, after consultation with the central bank and the financial regulator, the government announced details last month of its capitalisation scheme. the risk for banks that do not meet higher market standards is that they face a much more difficult environment for raising funds. it was not acceptable to the authorities that banks would attempt to achieve these higher ratios by curtailing credit to the real economy. a very important aspect of the capitalisation scheme is the agreement of the participating banks to develop specific credit policies targeted at small and medium sized enterprises, first time buyers and consumers generally. as part of the response of the authorities to ongoing events, the government last week made its decision to bring anglo irish bank into full public ownership in order to secure the bank ’ s continued viability. the action was in response to a weakened funding position and the reputational damage to the bank arising from unacceptable practices that took place within it at a time when overall market sentiment was already negative towards the institution. it meant that recapitalisation was no longer the appropriate and effective way to secure its continued viability. so far as allied irish banks and bank of ireland are concerned, the government has reiterated that it sees these banks as central to the irish financial system and essential to the proper functioning of the economy. it has also indicated its intention that both banks remain

soundness work is routine in character, requiring precision, predictability and efficiency : for example the authorisation of investment fund prospectuses. many thousands of such funds are given a standardised vetting by our staff before they can be listed, and in this way some degree of protection is provided to the investors in these funds. other parts of what i call the safety - and - soundness work is more qualitative and judgmental. regulation attempts to limit reckless or self - dealing behaviour by financial firms both ( i ) ex ante in advance by vetting the persons in charge for their fitness and propriety, and by checking on compliance with clear rules of behaviour and ( ii ) ex post by means of penalties if it is discovered that violations have been committed. we are on the lookout for ways of improving both dimensions. ( i ) thousands of financial firms in ireland are regulated entities. experience worldwide shows how hard it is for regulators to detect all fraudulent behaviour on the part of financial firm management. very often important breakthroughs are made thanks to the revelations of whistleblowers. transparency international, for example, has in a recent report highlighted this issue for our financial system. we are seeking the introduction of a statutory regime to encourage whistleblowers and to provide a specific process for them. ( ii ) enforcement of clear rules is crucial and i am determined that there will not be any reluctance on the part of the regulatory staff to pursue violations. there will of course be full cooperation with any criminal prosecutions, where they arise, and ( otherwise ) impose the appropriate administrative sanctions. for this reason, following discussions with matthew elderfield, the new head of financial supervision, who will be starting in a few weeks, we have decided to make a senior appointment to take charge of enforcement. as you know there have been high - profile allegations of wrongdoing in the context of the banking crisis. i do not wish to talk in any detail about these ( indeed i cannot do so ) beyond saying that, detailed investigations of these are in progress and the regulatory staff have contributed vigorously to this process. more generally, there will be an increase in staffing and the introduction of new internal structures in what is rapidly becoming a unitary central banking organisation without artificial and unnecessary internal barriers. with matthew elderfield, who brings his own considerable experience and skills to upgrading and restructuring regulation in ireland, we have been planning details of the new structures and approaches that will be adopted. as far as structures are concerned