The Government has widened the inquiry into the Irish Bank Resolution Corporationto investigate whether preferential interest rate deals were given some large borrowers.

A proposal to establish a Commission of Investigation was brought to Cabinet today by Minister for Finance Michael Noonan, using existing 2004 legislation.

The Cabinet published the terms of reference of the investigation tonight. It will investigate any transactions by IBRC involving a loss to the taxpayer of €10 million or more; or any transaction likely to cause public concern in respect of the ultimate return to taxpayers.

The comission will produce a report which will “set out the scope and findings of the review in fulfilment of the purposes; and is to respect obligations of confidentiality and to respect commercial sensitivity where those are not incompatible with the public interest”.

Government sources said it is hoped the commission will report its findings by Christmas.

Mr Noonan brought his proposal on the basis of new allegations that have emerged in recent weeks in relation to IBRC, including the circumstances of the sale of Siteserv to a company controlled by businessman Denis O’Brien.

Sources said the new allegations made by Independent TD Catherine Murphy in the Dáil on the issue of interest rates had led to increased public concern in recent days.

Ms Murphy claimed in the Dáil last week that Mr O’Brien was paying a 1.25 per cent interest rate to IBRC when he could have been expected to pay a 7.5 per cent rate. Mr O’Brien denies this, and says Ms Murphy is “peddling” false material.

The inquiry will examine whether “the interest rates or any extension to interest rates or any periods for re-payments were given by IBRC on preferential terms”.

This will only include changes which resulted in a difference of €4 million in interest due when compared with standard rates for similar loans.

Mr Noonan said ordinary mortgages and small and medium business loans will be excluded from the inquiry, with the focus on 32 large borrowers.

The commission will also cover similar ground to the previous inquiry carried out by IBRC liquidators, which was announced following controversy over the sale of Siteserv to a company owned by Mr O’Brien.

This includes “transactions, activities and management decisions” which resulted in a loss of €10 million or more for the taxpayer.

However, the Commission of Investigation will be further widened to cover “internal IBRC governance procedures and controls” and whether these “were fit for purpose”.

The Government had previously asked IBRC special liquidators, Kieran Wallace and Eamonn Richardson to review various IBRC transactions which involved a cost to the Exchequer of at least €10 million or were seen to involve other matters of public interest.

A retired High Court Judge, Mr Justice Iarfhlaith O’Neill, was subsequently appointed to monitor conflicts of interest in the IBRC transaction review, given KPMG’s previous role in advising on the Siteserv sale.

The establishment of a Commission of Investigation means there is no longer a need for KPMG’s involvement in any inquiry into IBRC. A negative public perception or disquiet about KPMG’s involvement in the Siteserv deal and potential conflicts of interest meant any inquiry with the auditing firm involved would not command confidence, it was felt.

Speaking on RTÉ’s Six One News, Mr Noonan said “there are so many allegations now and so many reputations that have been challenged” that a Commission of Investigation is warranted.

Mr Noonan said that when the initial review by the IBRC liquidators was established, the Government committed to further investigations “if something untoward was found”.

Fianna Fáil had previously accused the Government of performing a u-turn after ruling a commission out. Mr Noonan said allegations by Ms Murphy in recent days had changed his mind.

“What has changed my mind on the process is that since then new allegations have been made, there is no evidence underpinning any allegations but the allegations are now causing public concern and the review in my view was insufficient to deal with the allegations,” he said.

He rejected the suggestion of a conflict of interest on behalf of KPMG, who were involved in the sale of Siterserv and were carrying out the initial review.

“There may be wrongdoing but if there is there is no evidence of it in any set of allegations. There is public disquiet, it is increasing, it is in the public interest to have these matters fully investigated.

“We can’t have a belief going around that there was actions that were improper and that somehow or another the taxpayer lost our. I believe the board of IBRC at the time were very dedicated people.”

Meanwhile, the Department of Finance has also discovered the minutes of IRBC board meetings which it was not previously aware it had received.

Mr Noonan is to correct the Dáil record, having previously told the House he had not received the records.

The minutes concern a meeting where the sale of Siteserv to a company owned by Denis O’Brien was discussed. However, sources said the documents do not outline the details of the sale.

They are understood to have mistakenly filed in the department, and secretary general Derek Moran will also go before the Public Accounts Committee to correct statements he made before the committee.

The documents are expected to be published shortly.

Ms Murphy this evening welcomed the commission. “From the very outset I have said that the proposed KPMG review was fundamentally flawed by virtue of the conflicts of interest regarding the appointment of Kieran Wallace from KPMG to conduct the review. KPMG had specific involvement in the Siteserv deal and other transactions within the IBRC,” she said.

“I also had significant concerns regarding the relationship between Kieran Wallace and some of the senior debtors of IBRC and its impact on the independence of such a review,” the Kildare North TD said. “The information that is now in the public domain regarding the dysfunctional relationship between the Department of Finance and the IBRC senior management team; the irregular relationships between some senior managers of IBRC and senior debtors; and the circumstances of some large transactions within IBRC, has raised serious concerns in the public interest and there can be no doubt that a full, independent, and credible investigation is the only appropriate course of action.”

Earlier, Tánaiste Joan Burton characterised the examination being conducted by liquidators as akin to a scoping exercise.

Asked was there a case for wider inquiry into IBRC’s sale of Siterserv in the light of Ms Murphy’s comments in the Dáil, Ms Burton said: “The history of inquiries in Ireland has been marked by those inquiries that have been subject to scoping work which outlined the issues and the parameters of the inquiry have been among the most successful.

“People will recall the work done by Seán Guerin SC in relation to scoping out what might be examined in respect of matters pertaining to the Garda Síochána.

“Since we have had public tribunals in Ireland those that have had scoping exercises have generally been able to proceed with much greater speed. With open-ended inquiries, we have memories of Moriarty and the Beef Tribunal,” she said.

Ms Burton was speaking on Wednesday at the launch of #TalkToJoan, an online initiative by the Labour Party to engage with party members and the general public ahead of the general election.

She was asked if the allegedly lower interest rates that were extended by IBRC to Mr O’Brien should now be examined by the special liquidators, as well as ascertaining were other borrowers offered similar rates of interest.

Ms Bruton replied that those questions went to the heart of the remit that was specifically given by the Government to Judge Iarlfhlaith O’Neill to identify any areas where there conflicts or questions arising.

“I would anticipate that matters like that can be addressed by the judge as appropriate,” she said.

“I want the examination into site serve to proceed as quickly as possible and Judge Iarfhlaith O’Neill is fully empowered to deal with any of the questions where difficulties arise.”

On the broader question surrounding Oireachtas privilege she said: “I have to say in relation to yesterday’s comments that I am really pleased that the judge has absolutely clarified protects absolutely the privilege and the right to comment of member of the Oireachtas.

“Equally as the article sets out he reiterated the fact that the privilege extends to media that cover any such comments by members of the Oireachtas.

“It’s probably unfortunate that we had to wait until the end of a long bank holiday weekend when in fact the court were on their Whitsun holiday that there was a delay in the capacity to make that clear.”