Brian Lenihan Jnr (Dublin West, Fianna Fail)

We will not go there now as we will have plenty of time later to do so.

As the House will be aware, the primary elements of the programme include a substantial and immediate recapitalisation of the banks, further recapitalisations, as necessary, based on the outcome of stringent stress testing and rigorous validation of asset valuations and a substantial downsizing of the banking system through the identification of non-core bank assets and their run down or disposal over time. This reshaping of the banking system will be carefully guided by the determination of sustainable long-term funding metrics for the banks which can be met through stable funding sources including deposits and long-term debt. The size of the balance sheets of banks can be reduced to make the institutions more sustainable by asset securitisation or portfolio or division sales, with scope for credit enhancement provided by the State if necessary.

The powers provided in the Bill allow the Minister to implement key aspects of the agreed support programme for bank restructuring as follows: direction orders may be issued to relevant institutions to take or refrain from taking any action in support of the Government's banking strategy; transfer orders may be issued relating to relevant institutions' assets and liabilities to facilitate the restructuring of the banking sector; and consistent with the terms of the support programme, the making of subordinated liabilities orders under particular conditions to achieve appropriate burden sharing by subordinated creditors in relevant institutions which have received State support.

It is clear that the powers being provided under the Bill to the Minister for Finance are extensive and interventionist. They are, however, targeted and proportionate to the scale of the challenge we face. Importantly, they are subject to consultation with the Governor of the Central Bank and within a clear framework for appropriate judicial oversight. I should advise the House that a particular policy priority under the Bill is to ensure that the reorganisation and restructuring measures are recognised in other EU member states through the mechanisms available in the European Communities (Reorganisation and Winding-up of Credit Institutions) Regulations 2004, which implement the relevant directive in Ireland. This is particularly important given that many agreements entered into by Irish credit institutions are governed by the laws of other EU member states. I should also make clear that all the powers provided under the Bill must be executed in a manner fully consistent with EU state aid requirements.

I will now address the key provisions of the Bill. Section 2 sets out the definition of a number of terms used in the Bill. A key definition in this section is that of a relevant institution. Section 3 provides the Minister with the power to prescribe any body corporate with a registered office in the State as a "relevant institution" for the purposes of the Bill. Section 4 sets out the purposes of the Bill, which I have already outlined for the House. Section 5 safeguards the independence of the Governor and the Central Bank and section 6 provides the Minister with the discretion to agree a relationship framework to govern his or her relationship with the Governor in relation to the exercise of powers.

Part 2 of the Bill addresses the making of direction orders under the Bill. While important powers of direction are available to the Minister under the ELG scheme, it is considered important to strengthen under this Bill the legal basis for that power of direction. Section 7 sets out the circumstances under which the Minister can make a proposed direction order. Sections 8 to 11 set out the procedures for the court to make a direction order on the terms of any proposed order, provided that the Minister can apply to the court to vary the direction order and that a relevant institution or its members can apply to the High Court to have such an order set aside. Section 11, in particular, provides that the High Court may set aside, amend or vary the order if it thinks it appropriate. A similar process is provided for the making of special management orders in Part 3, subordinated liabilities orders in Part 4 and transfer orders in Part 5 of the Bill.

Part 3 is an important part of the Bill as it gives the Minister for Finance the power to appoint a special manager with knowledge, expertise and experience of the financial sector to take over the management of a relevant institution where this is necessary for the preservation or restoration of the financial position of that institution. The provision of the power is an important legal innovation as it provides a mechanism that can be used as an alternative to nationalisation. Moreover, in the context of this Bill, the special manager is required to operate the institution in a manner consistent with the objectives of the Bill, helping to ensure that the public interest in the maintenance of financial stability strongly underpins the conduct of the special management.

Section 20 specifies the functions and certain powers of special managers. The special manager will take over the management of the business of the relevant institution and carry on that business as a going concern with a view to preserving and restoring the financial position of the relevant institution. Section 22 is a significant power providing that while a relevant institution is under special management, the Minister's prior consent is required for a number of resolution and restructuring actions concerning the institution, which ensures that no precipitous action can be taken while the special manager is in place which could jeopardise financial stability. Furthermore, once a special manager is appointed, the functions of the directors and, with the Minister's consent, the powers of the relevant institution exercisable by general meeting may only be exercisable by the special manager. Sections 23 and 24 provide that the special manager may, with the consent of the Minister, remove directors, officers or employees from their position and that the special manager will determine the role and remuneration of directors during the special management.

Part 4 gives the Minister for Finance powers to take certain actions in respect of the subordinated liabilities of relevant institutions to which he or she has provided or intends to provide financial support under the Credit Institutions (Financial Support) Act 2008. The purpose of this Part of the Bill is to achieve appropriate burden sharing with holders of subordinated debt in the relevant institutions under the particular circumstances set out in the Bill.

Part 5 confers the power to make a proposed transfer order, which would transfer all or any of the assets and liabilities of a relevant institution where I believe it is necessary for achieving the purposes of the Bill and for the preservation or restoration of the financial position of the relevant institution. Any transfers would, of course, take place in accordance with EU state aid rules following the completion of a market process.

Section 38 provides for the provision by the Minister for Finance of financial incentives to a transferee. However, the Bill is clear that any such financial assistance provided is a debt due and owing to the State by the transferor. Section 41 makes specific provision for the transfer of foreign assets under a transfer order.

Part 6 addresses potential existing administrative and legal requirements whose effect might otherwise impact adversely on the achievement of the aims of the Bill. I especially draw the House's attention to a key section - section 48 - which provides that the overriding duty of directors of relevant institutions will now be to me, as Minister for Finance, on behalf of the State, to have regard to certain purposes of the Bill. Prior to the enactment of the Bill, the primary duty of directors has been to the company.

Part 7 contains a number of miscellaneous provisions necessary to ensure that the powers provided under the legislation are effective. Section 51 provides that nothing in any enactment or rule of law can prevent me from imposing any terms and conditions relating to the provision of financial support which the Minister considers desirable in the public interest. As a result, I can impose terms and conditions that relate to the non-payment of bonuses and the institution concerned must comply with this. The powers set out in this legislation refer to any financial institution which receives State support. Where the taxpayer is providing extensive support for an institution, there would be grounds for the Minister for Finance to impose conditions on that support in regard to bonuses.

Section 52 is an important section the purpose of which is to ensure that orders made under this Bill are consistent with the EU credit institutions winding up directive, as I have previously outlined. Sections 55 and 56 empower the Minister to exclude a particular institution as a relevant institution under some or all of the provisions of the Bill for a specified period or to declare that I will not exercise all or any of the powers conferred under the Bill in respect of a specified institution for a specified period. This could arise where it is believed that this is necessary to facilitate the availability of private investment in the institution that would reduce the amount of public financial support that would otherwise be required.

Section 59 provides that the fact that I have made or propose to make a proposed order under this Bill must be kept confidential. Sections 63 and 64 provide for the limitation of judicial review and of certain rights of appeal to the Supreme Court. Section 67 is required in order to comply with the loan agreements with both the European Financial Stabilisation Mechanism, EFSM, and the European Financial Stability Facility, EFSF, under the EU-IMF support programme. Section 69 provides that the provisions of the Bill, with the exception of sections 67 and 51, cease to have effect from 31 December 2012 or later, if decided by a resolution of both Houses.

The Bill also provides for the amendment of a number of other enactments. The purpose of the amendments to the Building Societies Act 1989 under section 71 is to facilitate the conversion of building societies into private limited companies.

Section 72 amends the Central Bank Act 1942 to ensure the Central Bank is legally able to share confidential information to facilitate the Central Bank, the Minister, the Governor, the head of financial regulation or a special manager appointed under the Bill in the performance of their functions under the Bill.

The amendment of the Central Bank Act 1971 under section 73 is proposed to facilitate a more expeditious transfer of a banking licence holder's business including assets and liabilities not directly associated with its banking business. The purpose of the changes to the Credit Institutions (Financial Support) Act 2008 under section 74 are to ensure I can provide financial support other than by means of direct guarantees and assistance and, in particular, can provide financial support through the normal capital markets structures.

The purpose of the amendments to the National Asset Management Agency Act of 2009 under section 75 is to limit the right of appeal to the points which the High Court certifies for appeal to the Supreme Court. The provision also requires that any appeal be determined by the Supreme Court acting as expeditiously as possible, consistent with the administration of justice.

Section 76 provides for a number of amendments to the National Pensions Reserve Fund Act 2000 to allow the Minister for Finance to suspend or reduce the annual contribution to the fund for the duration of the EU-IMF programme; to direct the NPRF to invest in Government bonds; and to direct the NPRF to make payments to the Exchequer for capital expenditure purposes for

the duration of the programme. The purpose of these amendments is to facilitate the State's own contribution to the programme over the next three years.

The pace at which this legislation has been prepared and the urgency with which it must be enacted by the Oireachtas reflect three separate but related objectives. The first is the real and tangible value of demonstrating to the external parties to the programme, the wider international community and the international markets the strength of the Irish authorities' commitment to the delivery of key elements of the agreement consistent with the ambitious timeframe for implementation. The second is the clear benefit of having the necessary powers available to the Minister for Finance at the earliest possible stage for initiating the profound restructuring of the banking system envisaged under the programme. The reputation of our domestic banking system and its ability to meet its funding needs from market sources will be only be rebuilt by undertaking the concrete measures to bring about a substantial reconfiguration of our banking system. The third is the imperative of empowering the Minister for Finance with the statutory authority to ensure all our institutions are in conformity with regulatory capital requirements set by the Central Bank of Ireland at the end of this year. It is also essential that the Minister is in a position to progress the joint restructuring of Anglo Irish Bank and Irish Nationwide Building Society is progressed expeditiously, while safeguarding the Exchequer.

No Deputy should doubt the importance of ensuring that the Minister for Finance is appropriately equipped with the range of legal powers necessary to continue to maintain financial stability in the State. That is the sole purpose of the legislation before us. I commend the Bill to the House.

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