Pearse Doherty (Donegal South West, Sinn Fein)
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Reading through this and given our own experience when we started to examine COM (2013) 615 more closely, it was surprising, looking at it from a very basic perspective, that the Department of Finance was raising a red flag and objecting to the idea that major financial institutions - shadow banking which accounts for billions of euro in the State - would not have a reserve - a regulator buffer of 3%. I was just thinking that if we were to forget about the term "shadow banking" and simply use the term "banking" as most of us do - it is just a matter of different products - it would not be high street banking. If one were to look at the solutions being offered, instead of having a capital reserve or buffer, the solutions the Department is suggesting are that there be liquidity fees and redemption gates. To consider this in terms of ordinary banks and apply what the Department thinks should be applied to shadow banking, there would be no capital reserves in the banks. If people wanted to withdraw money and the banks did not have it available as their assets had declined in value, there would be redemption fees. That means I would be charged more by the bank to withdraw my own money or that the redemption gates would apply and there would be a complete ban on withdrawals where assets had declined to a certain level. I find this extraordinary. I understand completely the fact that Ireland has the bulk of the market in a European context, but we must deal with the consequences.

I want the Department to look at the solutions it and the industry are putting forward. The industry has a vested interest and is making huge profits on these billion euro shadow banking funds. The Department is mirroring the industry's proposals. If the Commission were to agree with liquidity fees, for example, if a fund's liquid assets fell below a given percentage, liquidity fees could be imposed. If liquidity fees were to be imposed on a fund operating in the State, would it not send a signal to others who had invested in other funds? Could it potentially escalate a run where one manager had imposed liquidity fees? There is a similar issue with redemption gates. Some of the funds entail €120 billion worth of assets. If a fund at that level managed in the State were to trigger redemption gates and forbid anyone to redeem from the fund for a certain period, would it not cause an escalation of events and trigger problems in other shadow banking funds? Would it potentially cause problems within the wider banking sector?