Oireachtas Joint and Select Committees
Wednesday, 11 June 2025
Joint Oireachtas Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation, and Taoiseach
Israeli Bond Programme: Central Bank of Ireland
2:00 am
Mairéad Farrell (Galway West, Sinn Fein)
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Níl leithscéaltaí faighte againn inniu. No apologies have been received.
Is mian liom na riachtanais bhunreachtúla seo a leanas a mheabhrú do chomhaltaí. Nuair atá páirt á glacadh acu i gcruinnithe poiblí, caithfidh siad a bheith i láthair go fisiciúil laistigh de theorannacha suímh Theach Laighean. Ní cheadófaí do chomhaltaí páirt a ghlacadh i gcruinnithe poiblí nuair nach bhfuil siad ag cloí leis an riachtanas bunreachtúil seo. Mar sin, má ghlacann aon chomhaltaí páirt ó lasmuigh den suíomh, iarrfaidh mé orthu an cruinniú a fhágáil. Maidir leis seo, iarraim ar chomhaltaí a dheimhniú go bhfuil siad i láthair laistigh de phurláin Theach Laighean sula ndéanann siad aon ionchur sa chruinniú ar Microsoft Teams. Fiafraítear de chomhaltaí cleachtadh parlaiminte a urramú, nár chóir, más féidir, daoine nó eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainmneacha ar shlí a bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear díobh gan aon rud a rá a d’fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfadh a ráitis a bheith clúmhillteach do dhuine nó d'eintiteas aitheanta, ordófar dóibh éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéillfidís don ordú sin láithreach.
I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, a member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member partaking in the meeting via MS Teams to confirm, prior to making a contribution, that he or she is on the grounds of the Leinster House campus.
Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if members' statements are potentially defamatory in respect of an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that members comply with any such direction.
The committee is considering the Israeli bond programme with the Central Bank of Ireland. Given the widespread opposition in Ireland to the policies and actions of the Israeli Government and its military in Gaza, there is concern in the Oireachtas and among the public about any role the Central Bank of Ireland has in facilitating the sale of Israeli bonds and how this complies with Ireland's obligations under the United Nations Genocide Convention. Under the EU prospectus regulation, a prospectus must be drawn up, approved and published when securities are to be offered to the public or admitted to trading on a regulated market in the EU. Third country issuers must choose one of the EU competent authorities as their home member state, subject to certain criteria set out in the EU prospectus regulation. Prior to 2021, the UK was the EU home member state under the regulation for the State of Israel. Ireland was chosen as the new home member state following the UK's departure from the EU. In line with previous engagement with the committee in the previous term, it is the Central Bank's view that it can only refuse the approval of the prospectus where the Central Bank has legal basis to do. Other than insufficient prospectus disclosures, examples of a legal basis for refusal are the existence of EU financial sanctions prohibiting the provision of services or assistance in connection with the issuance of securities by the Israeli Government, and national restrictive measures to the same effect.
In this context, I welcome the Governor of the Central Bank, Mr. Gabriel Makhlouf; deputy governor and financial regulation, Ms Mary-Elizabeth McMunn; and director of capital markets and funds, Mr. Gerry Cross, to our meeting. I invite Mr. Makhlouf to make his opening statement.
Mr. Gabriel Makhlouf:
I thank the committee members for the opportunity to address them. I have been invited to discuss the issue of the Central Bank's role in the approval of prospectuses prepared by the State of Israel. I will start by repeating what I said to this committee last year. I remain absolutely appalled by the horrific loss of life and destruction that we are seeing in Gaza and the occupied Palestinian territories. Like all Members of the Houses of the Oireachtas, I want to see an immediate end to hostilities by all parties.
Before I turn to the approval of prospectuses, let me make a general but important point about the role that central banks play in modern economies and societies. As a body established under statute, we are vested with certain powers and functions that we are required to perform. We are required to perform and exercise these in the manner in which the legislative tasks are assigned to us, following the law and in line with how it frames our responsibilities. To state the obvious, this matters, for we are established by law, we are empowered by law and we must always act in line with the law.
One of the powers that has been assigned to us is to perform the functions of a competent authority under the European prospectus regulation. This means that we must approve a prospectus once certain conditions are met. The prospectus regulation was implemented as one of a number of essential steps towards the completion of Europe's capital markets union. By harmonising the approach of the approval of prospectuses, the regulation seeks to prevent divergent approaches and rules among member states to ensure the proper functioning of the internal market and provide for a high level of consumer and invested protection.
Under the prospectus regulation, a prospectus must be drawn up, approved and published when securities are to be offered to the public or admitted to trading on a regulated market in the EU. As competent authority, the Central Bank is responsible for assessing whether a prospectus has been drawn up in compliance with the disclosure requirements of the prospectus regulation. The specific disclosure requirements and the requirements for the prospectus approval process are specified in a European Commission delegated regulation, which supplements the prospectus regulation. We are required to approve a prospectus where it meets the standards of completeness, consistency and comprehensibility under the legislation. Our legal obligations are clear and we do not need guidance to follow them. The law is also clear that, by approving a prospectus, the Central Bank does not endorse the issuer and does not endorse the securities.
It means the Central Bank is satisfied the issuer has disclosed the required information in the required manner to potential purchasers of securities so that investors can make their own informed investment decision.
For the avoidance of doubt, the Central Bank does not issue, sell, trade or list these bonds. In the case of Israeli sovereign bonds, we do not authorise or supervise them and they are not listed on a stock exchange we regulate. It is also important to be clear that, under the prospectus regulation, it is up to the third country sovereign to choose one EU member state to apply to for approval of its prospectus. The competent authority of the chosen member state is then obliged to discharge the relevant duties within the regulation. In effect, the Central Bank is carrying out a role mandated by European law.
While central banks have many powers and functions, their roles are still limited to their mandate. Under the EU's legal framework, the European Commission is responsible for trade policy and trade relations with third countries. The Central Bank has no mandate to impose sanctions on any state or person for breaches or alleged breaches of international law. The EU implements sanctions adopted by the UN and adopts its own sanctions in certain circumstances. As committee members know, unlike the EU sanctions against Russia after its invasion of Ukraine, the EU has not at this time adopted sanctions against the State of Israel. The Central Bank would, of course, implement any sanctions adopted by the EU that are applicable to the Central Bank's functions, as we have with Russia.
It has been stated the Central Bank could refuse to approve the Israeli bond prospectus on the basis of certain international law rulings and opinions, namely, on the basis of the International Court of Justice provisional rulings in the ongoing case involving South Africa and Israel or on the basis of the ICJ opinion on the occupied Palestinian territory. This is incorrect. The Central Bank cannot decide to impose sanctions for breaches or alleged breaches of international law. The South Africa case against Israel referred to the ICJ in December 2023 alleges breaches of the Genocide Convention with regard to Israel's actions in Gaza. In that case, the ICJ has found that the right to claim by South Africa was plausible. On that basis, the ICJ issued certain provisional measures to Israel between January and May 2024. This case, for which Ireland has now filed a declaration of intervention, is ongoing and remains to be determined. Separately, in an advisory opinion from July 2024, the ICJ found that Israel's continued presence in the occupied Palestinian territory is unlawful. It is for international bodies such as the UN or the EU to determine how to respond to breaches or alleged breaches of international law, including to determine whether sanctions are necessary.
The Central Bank cannot impose sanctions on Israel, for example, by refusing to approve the Israeli bond prospectus, in circumstances where the EU has not imposed any such sanctions itself. The currently approved prospectus will expire on 1 September 2025. Should the State of Israel seek a further approval of its bond prospectus, we will ensure the review process is carried out in line with the requirements of the prospectus regulation.
We must carry out the statutory tasks and functions that have been assigned to us. We have to work within the law, and the prospectus issued by the State of Israel meets the standards of completeness, consistency and comprehensibility required by the law. We will continue to carefully and comprehensively discharge our obligations under the EU prospectus regulation.
I reiterate my own sense of sadness and horror at the continued unconscionable killing and injury of people, the blocking of humanitarian aid and the shocking implications for all involved in this conflict. I speak for everyone at the Central Bank when I say we want to see an immediate end to hostilities by all parties.
Mairéad Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas le Mr. Makhlouf as an ráiteas sin. Anois, osclóidh mé an plé do chomhaltaí. I invite members to discuss, and I remind members participating remotely to use the raise-hand feature, and to cancel it when they have spoken. I also remind members to indicate in order to be taken. Gabhaim buíochas libh. Ar dtús, an Teachta Ó Dochartaigh.
Pearse Doherty (Donegal, Sinn Fein)
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I thank the Governor and his colleagues for coming to the committee. To get his own view and that of the Central Bank, does Mr. Makhlouf believe that what we are seeing in Gaza is a genocide?
Pearse Doherty (Donegal, Sinn Fein)
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That is okay. Mr. Makhlouf has answered that he is not willing or able or does not have the necessary qualifications to call out genocide at this time. I will leave it that.
On the risk, if I was an investor in Israeli war bonds - and I am going to use the term "Israeli war bonds" because that is how they are marketed - would it not be a risk for me that there is what is deemed a plausible case with regard to the breach of the Genocide Convention? Would that be a risk? Would the Central Bank view that as a risk to investors?
Mr. Gerry Cross:
I thank Deputy Doherty for the question. As he asked the question about risk and the protection of investors, it is very important to be clear on the context in which we carry out our function in this regard and what the prospectus regulation seeks to do. It is one of the key pieces of regulation with regard to capital markets union in the European Union, and it is crucial in terms of the ongoing contribution of the economy to the European project that the prospectus regulation is effectively implemented. Very importantly, it is a regulation and not a directive.
Pearse Doherty (Donegal, Sinn Fein)
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With respect, because I am going to run out of time and the Chair is very strict, the question I am going to ask is, as an investor who buys Israeli war bonds and wants to make an informed investment decision, is it a risk, in the view of the Central Bank, that there is a plausible case with regard to a breach of the Genocide Convention by Israel, and therefore, what could materialise after this case concludes is that investors funded breaches of the Genocide Convention or indeed genocide? Is it a risk?
Mr. Gerry Cross:
I am sorry for setting the context a little bit but one more thing that is really important to say is that at the heart of the prospectus regulation is Article 6. It sets out that the core issue we are concerned with under the prospectus regulation is the financial condition of the issuer.
Pearse Doherty (Donegal, Sinn Fein)
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That is fine. Let us get to the risk. There are loads of bonds; we do not have an issue with them being approved through the Central Bank. I want Mr. Cross to please answer the question.
Pearse Doherty (Donegal, Sinn Fein)
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Financial is the main risk. I take that.
Pearse Doherty (Donegal, Sinn Fein)
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Is the fact that there is a statable case with regard to a breach of the Genocide Convention included in the prospectus?
Pearse Doherty (Donegal, Sinn Fein)
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The prospectus is quite long. I do not want Mr. Cross to go through it.
Pearse Doherty (Donegal, Sinn Fein)
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Is that included?
Pearse Doherty (Donegal, Sinn Fein)
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Okay. On that basis, is it the case that Mr. Cross believes the risks are dealt with?
Pearse Doherty (Donegal, Sinn Fein)
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Okay. The Central Bank is an organ of the State but is obviously independent. Does it subscribe to the Genocide Convention or is it separate to that?
Pearse Doherty (Donegal, Sinn Fein)
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Forgetting about the prospectus for a minute-----
Pearse Doherty (Donegal, Sinn Fein)
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Does the Genocide Convention apply to the Central Bank or not?
Pearse Doherty (Donegal, Sinn Fein)
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As Ireland is a signatory since before I was born, does the Genocide Convention apply to the Central Bank or not?
Pearse Doherty (Donegal, Sinn Fein)
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Does it apply to the Central Bank?
Pearse Doherty (Donegal, Sinn Fein)
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It does not apply to the Central Bank, so the Central Bank can ignore the fact that Ireland is a signatory.
Pearse Doherty (Donegal, Sinn Fein)
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Okay, but there are rules here sometimes and then there are other sets of rules and you have to be cognisant of all of them. The Governor is making the point that even though the State is a signatory to the Genocide Convention, the Central Bank does not have to comply with that.
Pearse Doherty (Donegal, Sinn Fein)
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In regard to the provisions related to the prevention of genocide, the Central Bank does not feel it has any obligation to that matter because therefore it would have to examine the prospectus regulation and the Genocide Convention and how they are conflicting and would have to make a call, if the Genocide Convention applied to the Central Bank, which Mr. Makhlouf is saying does not.
Pearse Doherty (Donegal, Sinn Fein)
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How much money, if any, has the Central Bank received for the facilitation of the sale of Israeli war bonds?
Pearse Doherty (Donegal, Sinn Fein)
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Does the Central Bank not facilitate them?
Pearse Doherty (Donegal, Sinn Fein)
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We talked about the prospectus which the Central Bank approved. What does the prospectus law state? What is that law about? It is facilitation to the European market. Is that not the word?
Pearse Doherty (Donegal, Sinn Fein)
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Is that the word that is in the law? It is.
Pearse Doherty (Donegal, Sinn Fein)
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It is the facilitation to European markets.
Pearse Doherty (Donegal, Sinn Fein)
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The prospectus regulation is about facilitating access to the European market, is it not?
Pearse Doherty (Donegal, Sinn Fein)
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I understand. The Central Bank is facilitating war bonds. There are babies being ripped apart as a result of the money that is being generated as a result of the Central Bank facilitating them. I understand Mr. Cross does not want to say that but that is exactly what the prospectus regulation does. It facilitates access to European markets and the Central Bank is the only central bank in Europe - because it was the only one that was asked - that is facilitating access to European markets through this regulation. Those are facts. Let us not deny the undeniable. That was not even the question. The question I asked was, how much money is Israel, as it commits that genocide, paying to the Central Bank for that facilitation?
Pearse Doherty (Donegal, Sinn Fein)
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How often are the fees received? Are they paid once?
Pearse Doherty (Donegal, Sinn Fein)
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The Governor mentioned that the Central Bank cannot impose sanctions against Israel, for example, by refusing to approve the Israeli bond prospectus in circumstances where the EU has not imposed any such sanctions. Why has he changed his tune? He wrote to this committee and said it could be "either EU financial sanctions or [number two] national restrictive measures to the same effect". Is he suggesting now that national restrictive measures to the same effect would not allow the Central Bank to not approve the programme?
Pearse Doherty (Donegal, Sinn Fein)
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That is not what the Governor said. That is not what he said. He came into this committee and said the Central Bank cannot impose sanctions on Israel and went on to say "in circumstances where the EU has not imposed any such sanctions itself". Is that not a false statement?
Pearse Doherty (Donegal, Sinn Fein)
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Can I put it to the Governor, if there were national restrictive measures without the EU imposing sanctions itself, could the Central Bank then impose sanctions on Israel?
Pearse Doherty (Donegal, Sinn Fein)
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Therefore, yes. Therefore, this statement is not true. This annoys me.
Pearse Doherty (Donegal, Sinn Fein)
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It is not true. The Governor is saying the Central Bank cannot do this in circumstances where the EU has not imposed any such sanctions itself. Now the Governor is telling me the Central Bank can do this where the EU has not imposed sanctions if there are national restrictive measures.
Pearse Doherty (Donegal, Sinn Fein)
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Consistent with EU law. That is fine, but the EU does not have to have sanctions so that statement is not true. That is deeply regrettable here because I can see the dance that is played out here between the Government and the Central Bank. I know and respect the independence of the Central Bank but the Governor gave us a different version. He told us exactly what was required and he knows there is legislation before the Dáil relating to national restrictive measures. I think it is really worrying that the Governor came in and tried to suggest otherwise. If I took this at face value, I would basically have to sit back and say there is nothing we can do here in Ireland because we need EU sanctions.
Mr. Gabriel Makhlouf:
I do not think that is correct. The important thing is that EU regulations are designed very deliberately to apply across the whole of the EU. It is not a directive that has to be transposed. These are regulations that are designed to apply across the whole of the European Union. The point I was trying to make in my statement, drawing the distinction with Russia, is that, in the case of Russia, the EU has imposed sanctions which apply automatically. If I was not comprehensive enough, then I was not comprehensive enough.
Pearse Doherty (Donegal, Sinn Fein)
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That is fair enough, but Mr. Makhlouf has clarified it now and is very clear that there are either EU sanctions, which is what has happened in the case of Russia, or national restrictive measures here. The Central Bank has made the point that national restrictive measures are another way that can allow it to stop the approval of a prospectus that is facilitating the sale of Israeli war bonds. What would national restrictive measures look like, in Mr. Makhlouf's view? He was asked, for example, to give a view on the legislation. He is well aware restrictions on movement of capital are permitted under exemptions under Article 63 of the treaty, is he not?
Pearse Doherty (Donegal, Sinn Fein)
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So member states can and have in the past - is that not the case - invoked that exemption under Article 63 to restrict the flow of capital measures even though it is a shared competence with the European Union. Is that the case?
Pearse Doherty (Donegal, Sinn Fein)
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There was Greece, for example, during the financial crisis.
Pearse Doherty (Donegal, Sinn Fein)
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I am not suggesting that. I am talking about European law that governs all of this.
Pearse Doherty (Donegal, Sinn Fein)
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What Mr. Makhlouf has told this committee is that if the national Parliament invokes national restrictive measures, that will allow the Central Bank not to approve-----
Pearse Doherty (Donegal, Sinn Fein)
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That are consistent with EU law. The point I make is that EU law is governed by a set or articles and Article 63-----
Pearse Doherty (Donegal, Sinn Fein)
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I appreciate Mr. Makhlouf saying that because in an amendment that is before the House today, the Minister suggests that Article 63 does not allow us to do what we want to do.
Pearse Doherty (Donegal, Sinn Fein)
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Mr. Makhlouf said it is not relevant. Is he suggesting that member states are not able to impose restrictions on capital in their own jurisdictions?
Pearse Doherty (Donegal, Sinn Fein)
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Let me put it this way.
Pearse Doherty (Donegal, Sinn Fein)
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That is fair enough.
Pearse Doherty (Donegal, Sinn Fein)
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That is fair enough. Mr. Makhlouf put it to the committee that there are three ways to do this. First, the information in the prospectus is not accurate. Second is EU sanctions. Third, is national restrictive measures. Is it the Central Bank's view that national restrictive measures could be brought in that are compliant with EU law?
Pearse Doherty (Donegal, Sinn Fein)
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Why would you say that? Given that-----
Mr. Gabriel Makhlouf:
Because we are talking about a prospectus regulation that works across the EU, for a single member state to decide to do its own thing undermines the whole regulation. That is my view. I have not taken particular legal advice on this. I understand the Attorney General has taken advice on it, from what I read in the debates. The prospectus regulation does not just apply to states. It applies to corporates and to anybody who wants to issue a regulation in certain circumstances. I am not ruling out the possibility some domestic legislation could prevent an individual corporate being able to issue a security in certain circumstances, but this is real hypothetical stuff.
Pearse Doherty (Donegal, Sinn Fein)
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The free movement of capital is a shared competence. The free movement of goods-----
Pearse Doherty (Donegal, Sinn Fein)
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Okay. The free movement of goods in the European Union is an exclusive competence of the European Union, yet we are about to enact our own legislation here - Government and Cabinet have signed off on it - in relation to disrupting that because there is a public policy exemption.
Mr. Gabriel Makhlouf:
Sorry, I do not know enough about that law. In the Central Bank, we assume legislation passed by the Oireachtas and signed by the President is good law and consistent with European law. I cannot comment on what the Deputy just said because I do not know exactly what has happened.
Pearse Doherty (Donegal, Sinn Fein)
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Okay. I would strongly push back. I have gone through this in detail with the witnesses before and there is enough scope, in my view, for the Central Bank, if it is willing, to deal with this issue. This is a point in time about which people will ask which side we were on. Words mean nothing as the bombs are raining down on men, women and children. It is time for action. We will query this in more detail in terms of the Genocide Convention. What Mr. Makhlouf is saying is quite shocking. Is he aware how many millions in war bonds the State has through ISIF? Is he aware of the number? On 1 January, I think it had a couple of million euro of these war bonds. Does Mr. Makhlouf know if that has increased or decreased?
Pearse Doherty (Donegal, Sinn Fein)
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Okay. Has the Central Bank approved the prospectuses of any other dodgy states?
Pearse Doherty (Donegal, Sinn Fein)
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Why has Israel chosen Ireland as the home state?
Pearse Doherty (Donegal, Sinn Fein)
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Do you believe it will apply for a renewal in September?
Pearse Doherty (Donegal, Sinn Fein)
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Will the Central Bank take any additional steps in respect of what has clearly unfolded since the last time it approved? I put it to Mr. Makhlouf on a previous occasion that, for an investor to make clear and conscious financial investment, he should demand the bonds sold here have a warning that they could be funding genocide.
Ms Mary-Elizabeth McMunn:
The Deputy asked about the proceeds and if we are aware of the number. We are not aware of the number because we do not have a monitoring role as we go forward under the legislation. Mr. Cross has referred to what Article 6 does in relation to looking at the prospectus. If we were to receive an application in September 2025 or before that, we would continue to look at it as required under the law.
Pearse Doherty (Donegal, Sinn Fein)
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The Central Bank should look at Article 16 on informed investment decisions and the risks included, should it not?
Ms Mary-Elizabeth McMunn:
We look at all aspects of the prospectus directive that we are required to look at in order to discharge our duties, which are ensuring investors in bonds have a handle on the financial position of the borrower, are clear on the rights underlying the securities and understand the issuance of the proceeds; and, as the Governor said in our opening statement, satisfying ourselves it is complete, comprehensive and consistent. We will do that on each occasion a renewal application is in front of us. We have examined all of our framework and whether there are other aspects under which we would reach a different conclusion. We do not believe we could reach a different conclusion because it satisfies the test of those two things.
Pearse Doherty (Donegal, Sinn Fein)
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The witnesses answered the question on the prospectus's inclusion of the ICJ case by South Africa. Does the word "genocide" appear-----
Colm Burke (Cork North-Central, Fine Gael)
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In fairness, there are other people on the committee as well.
Pearse Doherty (Donegal, Sinn Fein)
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That was my last question, sorry.
Colm Burke (Cork North-Central, Fine Gael)
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We need clarification on what time is being allowed to each speaker.
Mairéad Farrell (Galway West, Sinn Fein)
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We discussed this in private session. Apologies to people who were not at the private committee session a number of weeks ago where we discussed exactly how we would deal with this. It was agreed this would be by indication. At the time, and this is the way it has always been in the finance-----
Colm Burke (Cork North-Central, Fine Gael)
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There has to be a limit.
Mairéad Farrell (Galway West, Sinn Fein)
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The Chair is speaking and will continue to speak and answer the question. Then people can come in. We agreed in the private session to do it by indication, as we have done previously in this committee. The only person who raised an issue with that was Senator Higgins, who suggested we review this in six months' time. We agreed to do that.
Colm Burke (Cork North-Central, Fine Gael)
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In fairness, each person should make a contribution. If we allow someone half an hour to ask questions, that leaves very little time for the rest of us. In every committee I have been on, the normal timescale is ten minutes.
Mairéad Farrell (Galway West, Sinn Fein)
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That is not what was agreed.
Colm Burke (Cork North-Central, Fine Gael)
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Are we not going to comply with that?
Mairéad Farrell (Galway West, Sinn Fein)
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To be very clear, that is not what was agreed at the private meeting.
Colm Burke (Cork North-Central, Fine Gael)
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I do not care what has agreed at the private meeting. I am saying we are all entitled to equal rights. We have a situation where someone has been asking questions for 25 minutes. That is not fair appropriation of time between members. I just want my comments noted.
Mairéad Farrell (Galway West, Sinn Fein)
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Absolutely, no problem. Only Senator Higgins raised an issue at the time. As she said, we can review this in time.
I want to make one note to an tUasal Cross. He said he would provide the committee with some detail. Can he do that in writing? We will also follow up on that at the end.
Mairéad Farrell (Galway West, Sinn Fein)
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Go raibh maith agat. I remind members they are supposed to indicate. Seven people have indicated. Not everybody has indicated. Glaoim ar an Teachta O'Callaghan.
Erin McGreehan (Louth, Fianna Fail)
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It is not about the rota. It was the time allocation that Deputy Burke was speaking about. We have no problems with the iterations of raising the lámha but it cannot be a streamroller and a one-man show.
Mairéad Farrell (Galway West, Sinn Fein)
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The way it works with indication is there is not a time limit. That is the way it has been previously in the finance committee. When I sat on the committee and the Deputy's party colleague was the Chair, that was the way it worked. Senator Higgins raised an issue with it during the private meeting. We can come back to that. Glaoim ar an Teachta O'Callaghan.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the Cathaoirleach and I thank the witnesses for their contributions. Just so I am clear, were the witnesses saying the Genocide Convention does not apply to the Central Bank? Is that the position?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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No problem, I will repeat it. Are the witnesses saying the Genocide Convention does not apply to the Central Bank?
Mr. Gabriel Makhlouf:
I am saying the Central Bank is a creature of law and was set up by law. We are given certain tasks by law and we follow the law in delivering those tasks. The Genocide Convention and some other international judgments are things the State has to take into account but we cannot go beyond the parameters and framework we have been given.
This issue is about the prospectus regulation. We have to follow the regulation, not judgments elsewhere. The case I have just-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Sorry-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Genocide Convention is not a judgment. It is a convention the State has signed up to under Irish law. It applies to the State, including public institutions. Is Mr. Makhlouf saying the Genocide Convention does not apply to the Irish Central Bank? I just want to be clear on that.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It includes public institutions. Is the Central Bank not a public institution?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Ms McMunn is saying that the obligations of the Genocide Convention we are signed up to under Irish law do not apply to the Irish Central Bank. Is there legal advice to this effect that can be shared with the committee?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is the Central Bank not also governed by the Genocide Convention that Ireland is a signatory to?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Does the Central Bank have legal advice to that effect that it can share with the committee?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Sure, but I am asking about-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I am asking whether the Central Bank has legal advice about the question I am asking. Mr. Makhlouf is saying the Central-----
Mr. Gabriel Makhlouf:
I have put in correspondence, although I cannot remember if it was to the committee, that the judgments of the International Court of Justice, etc., are for the State. It is for the State, the EU or United Nations Security Council to decide how those decisions will be implemented. We have to work within the framework that has been established for us and for which we are a competent authority.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Part of the legal framework in Ireland is that it is a signatory to the Genocide Convention.
The EU prospectus was referenced. The preamble to that prospectus makes clear that its regulations be interpreted in accordance with basic human rights principles. Section 88 of the preamble states:
This Regulation respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. Therefore, this Regulation should be interpreted and applied in accordance with those rights and principles.
The Charter of Fundamental Rights states, "the Union is founded on the indivisible, universal values of human dignity, freedom, equality and solidarity; it is based on the principles of democracy and the rule of law." Does this apply to the Irish Central Bank in facilitating or looking at the prospectuses in terms of these bonds?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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So it does apply.
Mr. Gerry Cross:
I am happy to come in on that. I thank the Deputy for his question. This is really important. The context in which the Central Bank seeks to fulfil its mandate is one of the rule of law. The Deputy is asking a question in that space. It is fundamentally important. The massive importance of operating, not in a legalistic way but in a way that implements the rule of law, is something that we cleave very strongly too. When we approach the prospectus regulation, it is not that we come along and say, "Section 8 says this and section 9 says that, so therefore we just do those things". We ask what this regulation is asking us to do. What is the role it is giving us? What is the mandate we are given by law to do on behalf of the citizens of Ireland and more widely in Europe?
It is really important that Article 6, which is at the core of this and is surrounded by a whole set of provisions around ensuring completeness, comprehensibility and consistency, states that what we are looking at in this context is the financial position of the issuer. That is really important in the European context. It is why a regulation was made to replace the directive. In the context of Europe as a place with a rule of law, it is important we are implementing something that is agreed to be the law across all of Europe; not something for member states to implement differently but the law across Europe. Fundamentally, our view is that Article 6 requires us to look at the financial position as articulated in the draft prospectus.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Central Bank is legally required to follow the EU prospectus, or the prospectus regulation, which is clear in terms of the importance of the rule of law and is explicit regarding the Charter of Fundamental Rights of the European Union. Mr. Cross agreed on the matter of the rule of law. Is the Irish Central Bank seriously suggesting that there is not a serious breach of international law in what Israel is doing in Gaza?
Mr. Gerry Cross:
What we do is look at the draft prospectus we get. We ask whether this prospectus discloses the things that investors would need to know to understand their financial risks. As a regulation, it could go further than that. It could put more obligations on us. It could tell us not to do things but this is what the European regulation, to which we are all signed up, asks us to do. I do not think the Deputy would like us to make it up for ourselves. We need to do what the regulation asks to do.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I am not asking the Central Bank to make it up. I am asking it to have regard to international law and the rule of law, and to follow the law. Mr. Cross said we need to follow the law, but he is only citing one aspect of the law and ignoring the rest of it. EU law states that the Central Bank may restrict or prohibit offerings of financial instruments if they provide significant investor protection concern. What is the Central Bank's understanding of what constitutes significant investor protection concern?
Mr. Gerry Cross:
The question fundamentally at the heart of deciding what we have been doing, and do, under the prospectus regulation is what it requires us to do. What it requires us to do is very clear. Article 6 states:
Without prejudice to ... [a couple of things] a prospectus shall contain the necessary information which is material to an investor for making an informed assessment of: (a) the assets and liabilities, profits and losses, financial position, and prospects of the issuer and of any guarantor (b) the rights attaching to the securities; and (c) the reasons for the issuance ...
The constraints within which we are operating are very clear. Of course, around that, we have to make sure it is complete, comprehensible, understandable and consistent. That is our job at the process of approval. We engage with and challenge the issuers. We ask them, "What about this issue? What about that issue?". At the end of day, however, we are mandated to determine whether or not we think the financial risks are appropriately disclosed.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is the Central Bank aware that a corporation or businessperson that knowingly assists a state in violating principles of customary international law, including the prohibition of genocide, may be complicit in such a violation?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is the Central Bank aware of the ongoing investigations of BNP Paribas for a funding link to the genocide in Rwanda?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Is the Central Bank aware of the Taoiseach's comments stating that Israel is committing genocide?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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In the context of those comments, is there any potential implication for significant investor protection concern?
Mr. Gabriel Makhlouf:
I will go back to what Mr. Cross said. In our view, the prospectus meets the standards of completeness, consistency and comprehensibility. Quite clearly, when or if the State of Israel looks to renew its prospectus, we will look extremely carefully at all the facts pertaining at the time and will make a judgment on it. The fact that the Taoiseach said what he said will not change the judgment that we have come to.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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What role does the Central Bank have in probing materiality of risks?
Mr. Gerry Cross:
When we receive the draft prospectus, there is a process we go through that includes determining whether the prospectus is of low, medium or high risk. In other words, we ask whether retail investor exposure is particularly relevant. Then we go through a process of assessing the prospectus for completeness, comprehensibility and consistency. We then engage with the issuer and ask whether various issues have been well enough disclosed. It is important that material risks to the financial position of the issuer be disclosed. Fundamentally, the investor in this context needs to know the financial risks being taken in making the investment. Very much at the heart of our rule is making sure there is sufficient disclosure so that the financial risks can be understood.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I have two more questions. Does the Central Bank apply enhanced scrutiny to sovereign bond issuers involved in an armed conflict or under international investigation?
Mr. Gerry Cross:
We make a judgment as to whether a prospectus is particularly complex and whether there are issues that are challenging to make sure they are well articulated. Of course, these things can be part of the context but, ultimately, we go back to the question of whether we have reached a view that the disclosure is appropriate to the financial risk.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Has the Central Bank considered the risk of investor litigation – for example, claims by institutional bond investors unaware of the legal context?
Mr. Gerry Cross:
We always consider the importance of getting it right. As I stated, the issue of operating not only within but also as a strong pillar of the rule of law is essential to us. Getting that right is fundamental. On whether we are concerned that legal action will be taken against us, we are very confident that the way we are approaching this reflects what we are mandated to do under law, and we are making-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Cross does not think there are any risks the Central Bank or the State.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I welcome the Governor and his senior colleagues. I appreciate their giving of their time here at the committee meeting today. I have a relatively short series of questions, so we might go back and forth on those. First, for what countries is Ireland the home state in terms of the evaluation of bond prospectuses?
Dr. Mary E. McCann:
Mr. Cross has it. While he is looking for the details, may I state that a sovereign country in the EU does not need to designate a home member state. It is only third countries that need to decide a home member state within the EU. Ireland is within the EU and Israel has, for obvious reasons, chosen it as the home member state. I will now hand over to Mr. Cross to deal with the list.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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We inherited Israel as a result of Brexit. Did any of the other countries come along at the same time?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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In general, what criteria do the Central Bank use in assessing a prospectus?
Mr. Gerry Cross:
As I was describing, the core question is as set out in Article 6, which relates to the financial position of the issuer. Delegated legislation passed by the European Commission sets out things in more detail. For example, with regard to an Israeli bond as a third country sovereign bond, Annex 10 of the Commission delegated regulation sets out a list of the things that need to be within the prospectus. We examine the Commission's list of criteria, all of which ultimately relate to the financial position. These include, for example, what is described around the economy of the issuer, the public finances of the issuer and the legal, government and political system of the issuer. I refer to all the things one would expect regarding a sovereign issuer. We do not assess for accuracy. We approve over 650 third country bond prospectuses in a year plus many thousands of final terms. Therefore, there is a very large operation. We are not tasked with assessing the accuracy, nor could we, given all that is to be considered. What we are tasked with is ensuring that what is required to be included under the prospectus regulation and the delegated legislation that the Commission has made, particularly in Annex 10, is included appropriately.
As the Governor referred to, we are also asked to assess whether we believe a prospectus is appropriately complete, comprehensible and consistent. The Commission's delegated regulation will set out in clear terms what it means for a prospectus to be complete, comprehensible and consistent. Legislation on prospectuses has been around for a long time, and the regulation is the culmination of many years of getting it right in Europe. Ensuring risks to the financial position and determining whether there is consistency, completeness and comprehensibility are fundamentals to which we cleave.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Mr. Cross mentioned checking against a comprehensive list of items in Annex 10. Is it generally an exercise that involves through a list and ticking "Yes" or "No"? Is any of it open to interpretation by Central Bank staff?
Mr. Gerry Cross:
I do not believe it is accurate at all to describe it as a box-ticking exercise, nor is it the same as what we have in relation to investment funds, for example. Where investment funds are concerned, we have an authorisation regime and a supervision regime. In the context of investment funds, it is our job to implement the legislation, which is about determining whether the standards required in issuing, managing and administering funds are met. In this context, it is a set of regulated entities and products that we are responsible for, but that is not the case with prospectuses. The prospectus regulation is not about regulated entities but about the simple task of asking whether a document or set of documents is consistent with the requirements in the regulation. It is a very clean, straightforward process. It is not setting up a regulated framework, and it is not about our being expected to follow what is going on in the many thousands of corporates and sovereigns. That is not the task assigned to us to do. To say that there is box-ticking is not quite correct either because we see our role as playing the very important role of the gate. In the context of the latter, I am referring to asking the question at the moment an issuance comes into the market. If you look at the guidance of the European Securities and Markets Authority, ESMA, on this, the word you will see all the time is "challenge". It is about challenge.
At the end of the day, as regulators in this space, we ultimately cannot determine the accuracy of all of the corporates and sovereign issuers' documentation. There is no way to determine the accuracy of everything that is said. However, we can challenge them and ask whether they have disclosed what they need to disclose in given spaces as regards the financial risks and so on. That is what I would say. It is not box ticking. It is a challenge exercise. However, it also absolutely is not a regulatory issue as we would see in, for example, the funds sector.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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The Central Bank is taking what is on the application form or draft prospectus as read. It is not investigating what is behind the information provided. Do I understand that correctly?
Mr. Gerry Cross:
That is absolutely correct. That is not our task. These documents could be hundreds of pages long. If you take any large corporate - Apple might be an example - the responsibility of the prospectus approver is not to say whether the information is all accurate. You would need teams of due diligence lawyers. That is very specifically not what the prospectus regulation is about. The prospectus regulation is about asking whether a prospectus is sufficiently clear, complete and consistent and whether it covers the risks. Ultimately, the liability rests with the issuer. That is really important. We can say "No, we do not think there is enough there" but liability ultimately rests with the issuer. It is very clear that the prospectus regulation does not ask anyone to assess whether the information is correct. As regards the publication, that is a private thing. It is for the issuers to make sure that what they are saying is correct.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I hope Mr. Cross will forgive me but I am struggling a bit with that. Somebody could put in an application that is full of falsehoods and it would make it through the Central Bank prospectus vetting process simply because of something that was written in the box.
Mr. Gerry Cross:
I do not believe it would make it through. In our assessment of whether risks are appropriately disclosed, whether the things that are required to be covered under the regulation are covered and whether there is completeness and consistency, I suspect we would find gaps. However, it is not our job under the regulation to see whether the information is accurate. The regulation is very clear about that. It is very clear that liability ultimately remains with the issuer. In a way, it is a mixed regime. The issuer remains liable to get it right. It is our job to make sure the prospectus is of good quality.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I am at a bit of a loss. The Central Bank of Ireland will say that the form has been filled out correctly but it cannot verify the information on it.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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What is Mr. Cross's own view on that? Does he believe the prospectus regulation is deficient here?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I just wonder what the point of all of this is.
Mr. Gerry Cross:
It is to ensure the quality of the prospectuses. The issuer remains responsible for the accuracy and should not tell lies. The regulator is made responsible for ensuring the quality of the prospectus and that what needs to be there is there, is comprehensible and can be read and understood, is consistent and does not say different things in different places, and is complete. That is really important. That is at the heart of the discussion we are having. Our role is limited.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I fully understand. I am sure the bank can check for consistency across the document but that does not take away from the fact that the underlying information may not be correct.
Ms Mary-Elizabeth McMunn:
I may be able to supplement that a little bit. I believe what Mr. Cross is trying to explain is the level of verification of prospectuses you can actually do. We have to satisfy ourselves. At a very basic level, what are we trying to achieve? We are trying to ensure that investors who want to buy these securities have enough information to be able to make an informed investment. The reason we speak about the financial position of the issuer is that the first thing investors want to know is whether they can get their money back. That is why we speak about investor protection. It is incredibly important. That is why Article 6 refers to the financial position. The second thing Article 6 refers to is the rights of the issuer. If I am going to sign up to these securities, what are my rights? I should know that. The third thing is the reasons for issuance, that is, what the funds are going to be used for. If you think about what we are trying to achieve, at the heart of it, it is about giving investors a reasonable level of information. As Mr. Cross has said, we cannot verify all of those pieces of information because that would slow down what we are trying to achieve in respect of the prospectuses. A distinction should be made between judgment and the level of verification. It is important to go back to what we are actually trying to achieve for investors.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Would it be fair to describe it as regulation light?
Mr. Gerry Cross:
In a way, it is more hybrid. What motivates most of the issuers we deal with? The conversation we often have is that they are very concerned they may ultimately find themselves at the wrong end of a legal suit with their investors. A very significant driving force in how the overall market works is that contractual relationship between the issuer and the investor and the knowledge that, if the issuer said something wrong and money is lost, the issuer can be sued. That is the major context. The regulation inserts us into the middle to make sure that prospectuses meet those quality standards. It is complex for everyone. It is very different from the context of funds. In that case, we are responsible for ensuring that what is coming in is how it should be.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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The witnesses are comfortable that if an investor who bought a bond or whatever off an exchange in Germany lost money on it and decided to take legal action, the Irish Central Bank having approved the initial prospectus, the issuer would be fully covered because the bank carried out its job under the EU prospectus regulation.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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That is understood. I will move on. We talked about the fees the Central Bank receives for its work in this regard. The number the witnesses came back with seemed quite low. Is that in any way a profit centre? I refer both to Israeli bonds and to general prospectuses. Does the Central Bank make money on this or does carrying out this work cost the bank?
Mr. Gabriel Makhlouf:
It is not a profit centre. We are funded in two ways. The first is that we charge out our costs of regulation. Firms, regulated entities and so on pay fees. The policy has been to try to recover 100% of the costs. So far, that has applied to everybody except the credit union sector. We also have our own investments that we make money from. I am hesitant to say what I am about to say because I do not know when we set these particular fees but, as a policy, our objective is to recoup our costs. The term "profit centre" would be a bit of an exaggeration.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Mr. Makhlouf will understand where I am going. I just want to categorically understand that neither the Central Bank nor any other Irish Government body is making any money of this work evaluating Israeli prospectuses.
Ms Mary-Elizabeth McMunn:
To give the Deputy a sense of that, as we have referred to, the costs of regulation and supervision are contained within our annual accounts.
There is a footnote to the accounts which sets out the size of the cost regulation and supervision. What Mr. Cross mentioned here is a much smaller fee, which is in the tens of thousands of euro. It is larger than that. I can come back with that detail if the Deputy wishes.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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There is an implication going around that money is being made off of this work. I want to put that to bed. I thank Ms McMunn. We talked about September as the potential rollover date or next date for issue.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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How much notice does the Central Bank get if Israel is likely to seek to renew? Is it something that just lands in your inbox when the other one expires? Does Israel have to give ten, 20, or 30 days’ notice?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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It generally takes a number of weeks to get from start to finish.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Has the Irish Central Bank ever refused a prospectus for reasons other than insufficient disclosures or existing sanctions?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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From a sovereign country, yes.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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It is generally a matter of working with the issuer to get the prospectus completed, as opposed to sending it back and telling them that the prospectus is null and void.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Have there been any such questions around recent Israeli bond prospectuses?
Mr. Gerry Cross:
It is a bit tricky to talk about specifics of any particular professional relationship we have with entities that fall within our regulatory framework. While I cannot give the Deputy specifics, such as what we said and what they said, it is absolutely the normal course for there to be back-and-forth challenge and questions for a bond issuance such as this.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Do particular areas come up again and again, such as errors or emissions that are made typically, or can it be right across the forums?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Has the Central Bank ever suspected that errors or emissions – let us call them that – have been deliberate by an issuer to try to cover information or put out information that is not-----
Shay Brennan (Dublin Rathdown, Fianna Fail)
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How am I doing on time, Chair?
Mairéad Farrell (Galway West, Sinn Fein)
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As agreed at private committee-----
Colm Burke (Cork North-Central, Fine Gael)
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This is absolutely ridiculous. The last speaker had 21 minutes. Where do the rest of us fit into this committee? Are we entitled to attend here or are we not?
Mairéad Farrell (Galway West, Sinn Fein)
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The way it was agreed in private session-----
Colm Burke (Cork North-Central, Fine Gael)
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I do not care what was agreed. I am saying there must be fairness to every person on this committee. Allowing someone more than 20 minutes means the people at the end will get no time at all.
Mairéad Farrell (Galway West, Sinn Fein)
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As I am the last speaker, I will be the person most impacted.
Colm Burke (Cork North-Central, Fine Gael)
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There has to be fairness here. In fairness, every other committee allows ten minutes. We have spent one hour with three speakers. It is an unfair system and I do not agree with it. I do not agree with the manner in which this matter is being handled.
Mairéad Farrell (Galway West, Sinn Fein)
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That is totally fair. While I am happy to change it, I feel that needs to be changed at our next private meeting for agreement.
Colm Burke (Cork North-Central, Fine Gael)
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I am proposing that it is changed, that the remaining speakers be allowed ten minutes each and that we proceed on that basis.
Mairéad Farrell (Galway West, Sinn Fein)
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I am happy with that proposal, if members agree. I go by what we have agreed in private session. I am happy to agree to that proposal; no problem. Is that agreed? Agreed.
Gerald Nash (Louth, Labour)
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In the interests of the expeditious processing of the meeting and our business, I am happy to comply with that. The currently approved prospectus will expire in September. Deputy Brennan raised some questions about the process. While I would have liked to explore them in some more detail, I will limit my questions and observations. Typically, it seems it takes a number of weeks for the first prospectus, if it is a new prospectus, to be issued. From what I understand from earlier contributions, individually and collectively, there has been no contact from the State of Israel to date regarding the prospect of a request for the renewal of this prospectus.
Gerald Nash (Louth, Labour)
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Okay. To the best of the Governor's recollection, how long did it take the Central Bank to process the application for the first prospectus from Israel?
Gerald Nash (Louth, Labour)
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From initial contact to the approval.
Gerald Nash (Louth, Labour)
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Is a prospectus required to be renewed and refreshed annually?
Gerald Nash (Louth, Labour)
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Okay. There may be some expectation that the Israeli state may be in contact over the next few weeks with the prospect of the prospectus potentially being renewed. Does the Governor wish to put on the record of the committee this afternoon the kinds of questions and issues the Central Bank is likely to raise with the Israeli state in the event it requests the renewal of the prospectus, based on publicly available information put in the public domain by international and multilateral organisations since the prospectus was last renewed?
Gerald Nash (Louth, Labour)
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What does the Governor think those new developments are?
Mr. Gabriel Makhlouf:
While it depends at the moment when Israel actually writes to us, the intensity of the conflict in Gaza probably puts a question mark over whether the financial viability of the state still remains secure. The fact the European Union has indicated that it is going to look at its co-operation agreement with Israel is a factor. The Israeli finance minister being sanctioned by a number of countries may be another factor. There are a number of factors. At this stage, however, we have not drawn up a list of things we expect to see. Clearly you would expect, in view of what has happened in this conflict, that some impact on the financial affairs of the state would be material. In the end, as we all said earlier, it is for the Israeli state to make the judgment whether it affects its financial standing. We do not make that assessment. I expect it to address that manner.
Gerald Nash (Louth, Labour)
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That is a significant statement. The Governor has put on the public record the kinds of questions we expect the Central Bank to ask of the Israeli state if it requests the renewal of the prospectus. I am glad he raised the prospect of the potential viability of the financial system and the public finances of the Israeli state in respect of the genocide that is happening at the moment and the response of the international community and the impact that might have.
As Governor of the Central Bank of Ireland, he is also a member of the governing board of the European Central Bank. Undoubtedly, given the exposure of the European Union financially to Israel, there are concerns. There must be concerns about what is happening in Israel at the moment. That then leads to the concerns we have here as a committee in respect of the completeness of the prospectus and the information that is made available and the information that the Central Bank has required it to make available. We have concerns in that regard. In the context of the Governor's membership of the board of governors of the European Central Bank, has the question of how competent bodies, the Central Bank of Ireland in this case, handle the matter of doing Israel's business been raised, either formally or informally, at ECB board of governors level, especially with regard to how the prospectus is handled and how these matters might be handled going forward?
Mr. Gabriel Makhlouf:
This is not the ECB's domain so we have not had a discussion about this at the governing council. I do not know whether members of the ECB staff themselves have talked about this. I would not expect that to have been a discussion because this is about the prospectus regulations, which are primarily the domain of the European Commission itself and the European Securities and Markets Authority, ESMA.
Gerald Nash (Louth, Labour)
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I say this as somebody who respects the work of the Central Bank and the reforms and the improvements that have been introduced to governance in recent years. Mr. Makhlouf is painting a picture of a prospectus regulatory regime in Europe that we have been obliged to adopt here that is narrow and arguably amoral, to put it mildly, which is Jesuitical in the way that it is interpreted and applied, and which is mindful only of its basic, legalistic obligations in satisfying the regulatory framework that is in place. In a very changed world where we have a genocide happening on our doorstep, being carried out by a country which would argue that it is culturally European, and we have the biggest land war which we have seen on the Continent of Europe since the Second World War, there is a range of security risks that concern us all at the moment. Does Mr. Makhlouf think there is an argument for a change to this regulatory regime and what must be considered, in general terms, not just for the Irish Central Bank but also other central banks across the European Union which are governed by European Union rules and regulations?
Mr. Gabriel Makhlouf:
I do not think I have looked at this in enough depth to answer the Deputy's question but the fact is that in the largest land war in Europe, which is happening in Ukraine, arising from Russia's invasion of Ukraine, the system has allowed essentially for the prospectus regulation and a number of other things to be frozen in the case of Russia. Sanctions have operated. It is not as if the prospectus itself cannot work in the circumstances the Deputy is describing. The prospectus is designed to support the capital markets union. It is focused on disclosure. Clearly, if other events happen that require the prospectus to be suspended or frozen, the powers exist. Could we design a different prospectus and disclosures regime? Probably. Would it take a long time? Probably.
Gerald Nash (Louth, Labour)
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Would Mr. Makhlouf agree, given the challenges we have now, that the regulatory regime speaks to another time, if I can put it like that? Does he think it is fit for purpose now?
Mr. Gabriel Makhlouf:
I would hesitate, without doing a thorough review, to say it is not fit for purpose. It works. We have focused on this particular case for obvious reasons but the regulation is used by companies, corporations and businesses operating within the Single Market. It is used in Europe and has been used for quite some time. It is difficult to say that it is not working. In this particular case, I can understand why people would have certain concerns about it. As I said, the powers exist, as we saw in the case of Russia, for the European Union to take action. I cannot give the Deputy a straightforward answer.
Gerald Nash (Louth, Labour)
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Can I ask one more question?
Mairéad Farrell (Galway West, Sinn Fein)
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Very briefly.
Gerald Nash (Louth, Labour)
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I will be brief. Have staff of the Central Bank come to Mr. Makhlouf or to their line managers to express their concerns or reservations about ethical issues relating to the Central Bank's handling of this issue and the fact that the Central Bank is progressing the prospectus? Have concerns been expressed by staff to Mr. Makhlouf and how has he handled that?
Mr. Gabriel Makhlouf:
We try to have a team of people in the bank that reflects society. The people in the bank have the sorts of views that we are seeing reflected across society on this issue. To be clear, they range from people who are very sympathetic to one side of the debate but also to people who are sympathetic to the other side of the debate. We manage all this with care, empathy and understanding, especially understanding that the people who work for us are experienced, professional and dedicated to public service. We do it with care.
Edward Timmins (Wicklow, Fine Gael)
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I thank the witnesses for coming in at this difficult time. I have a few questions. Is it possible to briefly go through the process of the prospectus approval with Israel in 2024? Was it straightforward? Were issues raised by the Central Bank during that process?
Mr. Gerry Cross:
I thank the Deputy for the question. As I mentioned earlier, in the context of our relationship as a regulator with those entities that fall within our purview, we are bound by professional secrecy, so we cannot talk about the specifics of a particular engagement with any entity for which we have a responsibility. I will say that our normal course, which you would expect to see in many situations, including this one, is that we will engage and challenge. I mentioned earlier that the guidelines from the European Securities and Markets Authority are very much about the challenge. Are we asking the questions and seeing the changes that we think may need to be made or seeking for things to be changed where we think there is an issue that needs to be addressed? That challenge is a very normal part of our engagement. As I mentioned, we have this triage and division that we do, called plain, vanilla, low risk, medium risk and higher risk, which could be higher complexity.
Edward Timmins (Wicklow, Fine Gael)
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It is okay. Mr. Cross has answered the question. He is not going to give any detail on that. I want to explore what ideas Mr. Cross might have for getting out of the situation where we are approving this prospectus. I will ask a specific question. Can the Irish State make moves to change the prospectus regulation, Article 32.1(d), to allow a get-out clause, so to speak?
Mr. Gerry Cross:
I will have to check Article 32.1 to answer the Deputy's question, which I can do as we talk. I see Article 32.1(d) is about our power to suspend an offer. The Governor has explained clearly, both in general terms and specifically about where we are now in the Israel-Gaza context, that if and when Israel seeks to renew its prospectus, there are factors in play now that-----
Edward Timmins (Wicklow, Fine Gael)
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That were not there a year ago?
Edward Timmins (Wicklow, Fine Gael)
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I do not want to put words in the Mr. Cross's mouth, but could they lead to the possibility of the Central Bank having the mechanisms to refuse to endorse this prospectus or a future prospectus?
Edward Timmins (Wicklow, Fine Gael)
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Mr. Cross is giving hope in the sense that the ground rules may have changed since September 2024 to give some window of opportunity or the possibility of a different outcome.
Mr. Gabriel Makhlouf:
I will come in here. I do not want anyone to leave this room thinking the outcome is likely to be different because, at the end of the day, if the issuer discloses everything in a way that satisfies us regarding completeness, consistency and comprehensibility, we are required to approve it.
Edward Timmins (Wicklow, Fine Gael)
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I understand that. Could the Central Bank suspend a prospectus on the basis of a inconsistency between the advertisement material and the prospectus documentation? Is that reviewed on an ongoing basis? Is it that approval is given now for 12 months and you walk away or can it be reviewed constantly?
Mr. Gerry Cross:
As per my engagement with Deputy Brennan a few moments ago, it is a slightly complex picture, so I ask the Deputy to bear with me a little bit. The basic answer to the question is that if we think an advertisement is misleading or inconsistent, we can suspend it for a period of time. Regarding ongoing engagement, in that context, the nature of prospectus-----
Edward Timmins (Wicklow, Fine Gael)
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I am sorry to cut across the witness. Has the Central Bank reviewed the prospectus since it was issued last September? Has it reviewed the conditions, the advertising-----
Edward Timmins (Wicklow, Fine Gael)
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Did the Central Bank do so recently?
Edward Timmins (Wicklow, Fine Gael)
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In fairness, the witness has answered that. I am conscious of the clock and I have two or three more questions. I want to probe what options there are and where we can explore. The Central Bank advised that the International Court of Justice advisory opinion of 19 July 2024, which found that the State of Israel's continued presence in the occupied Palestinian territory is unlawful, is not in itself grounds on which the Israeli bond programme could be refused. That is a very clear statement the Central Bank made last year. Is there anything that could be changed to allow that unlawful presence, as it is generally accepted to be, to become grounds for the Central Bank to refuse? What would have to change to allow the Central Bank to use the decision by the International Court of Justice to facilitate its refusing?
Edward Timmins (Wicklow, Fine Gael)
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I am asking what can be changed to allow that.
Ms Mary-Elizabeth McMunn:
We are charged, under the legislation, with discharging our role relating to the prospectus directive, which is about protecting investors at the end of the day. We are able to discharge our mandate. We are not looking for a change in legislation because we are able to discharge our mandate under the current legislation. The advisory opinion does exist but, as the Deputy rightly noted, is not in itself grounds for refusal of a prospectus.
Edward Timmins (Wicklow, Fine Gael)
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I am trying to explore whether the witnesses could come up with suggestions. If they cannot do so, I understand that.
Ms Mary-Elizabeth McMunn:
I understand that. At the outset, the Governor set out that we operate within the rules of the law. The law expects the Central Bank to discharge its obligations in respect of the prospectus regulation. We are not looking for a change in the law because we are not able to discharge our mandate. We are able to discharge our mandate. The Governor also referred to the case of Russia. That is important. The Central Bank has discharged its mandate relating to the implementation of sanctions which have frozen a number of things.
Edward Timmins (Wicklow, Fine Gael)
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That is fair enough. I am trying to pick the witnesses' brains.
Edward Timmins (Wicklow, Fine Gael)
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I understand. I am conscious of the clock. Are the witnesses aware whether any other EU countries have been asked by Israel to approve a bond prospectus in the past two years? if so, what was the response?
Edward Timmins (Wicklow, Fine Gael)
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Can responsibility for the approval process be transferred to another member state of the EU?
Edward Timmins (Wicklow, Fine Gael)
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Can the Central Bank do that?
Edward Timmins (Wicklow, Fine Gael)
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Can the Central Bank transfer it? If Israel makes the request, can the Central Bank ask Germany to do it?
Edward Timmins (Wicklow, Fine Gael)
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Can the Central Bank take the lead? If Israel asks the Central Bank to do the prospectus, can it refuse but name an EU country that will do so, with agreement from that EU country? Can the Central Bank do that?
Ms Mary-Elizabeth McMunn:
The specific line in the legislation provides:
On request of the issuer, the offeror or the person asking for admission to trading on a regulated market, the competent authority of the home Member State may transfer the approval of a prospectus to the competent authority of another Member State, subject to prior notification to ESMA and the agreement of that competent authority.
Edward Timmins (Wicklow, Fine Gael)
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It appears to me that the Central Bank has the option of looking to do a transfer.
Edward Timmins (Wicklow, Fine Gael)
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On the request of Israel?
Mairéad Farrell (Galway West, Sinn Fein)
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Yes, Ms McMunn said it is on the request of the issuer.
Edward Timmins (Wicklow, Fine Gael)
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The Central Bank does not have the authority itself?
Colm Burke (Cork North-Central, Fine Gael)
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I thank the Governor and his staff for the presentation. The second paragraph and the last paragraph of the written statement clearly sets out the position of the Central Bank in stating that it finds what is going on to be absolutely appalling. In his opening remarks, Mr. Makhlouf stated: "Under the EU prospectus regulation, a prospectus must be drawn up, approved and published when securities are to be offered to the public or admitted to trading on a regulated market in the EU." In the context of securities, what evidence is provided to the Central Bank in respect of those securities? It is a prospectus that the Central Bank is approving but what evidence is provided in respect of the securities?
Colm Burke (Cork North-Central, Fine Gael)
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What evidence that the security is in place is produced to the Central Bank?
Mr. Gerry Cross:
It comes back to this slightly complicated aspect. Our role is to assess the quality of the prospectus. It is not our role to assess the securities. That is what makes it very different from the funds regulation, for example, where we do look at the instrument in question. Here, we are just looking at the prospectus. We must ask whether the prospectus is complete, understandable and-----
Colm Burke (Cork North-Central, Fine Gael)
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Within that context, though, is it not also necessary to see if what is set out in the prospectus is accurate? Does this not also put an obligation on the bank in respect of examining what is being provided as security for raising these moneys? Is this also not a part of the bank's role?
Mr. Gerry Cross:
No, it is not part of it. We tend to think about regulation and supervision in relation, for example, to what we do with banks, insurers and the funds sector, where our regulatory job is to ensure what is offered is of the appropriate quality and reliability. For the prospectus regulation, because it is not about regulated entities but about the whole market, every company that issues shares, we do not have that role of checking the accuracy.
Colm Burke (Cork North-Central, Fine Gael)
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In respect of judging that market, would that market change, for argument's sake, if the United States was not providing support to Israel and its Administration?
Colm Burke (Cork North-Central, Fine Gael)
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In saying that the bank looks at the prospectus, is it being said that it also looks at where Israel was getting support?
Colm Burke (Cork North-Central, Fine Gael)
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If America, though, were to withdraw support for Israel in the morning, would it have the capacity to repay those moneys it gets a loan of under the bonds?
Colm Burke (Cork North-Central, Fine Gael)
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Would Mr. Makhlouf accept there would be a challenge there?
Colm Burke (Cork North-Central, Fine Gael)
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If I can put it another way, if America was not providing support to Israel now, would the Central Bank be able to approve a prospectus?
Colm Burke (Cork North-Central, Fine Gael)
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In the opening statement, it was said the Central Bank was set up by statute. I presume Mr. Makhlouf was talking about the relevant Irish legislation in respect of establishing the Central Bank.
Colm Burke (Cork North-Central, Fine Gael)
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In relation to Irish legislation, if someone in the morning decided to take a challenge to the High Court in relation to the Central Bank and its role in approving a prospectus, where would the Central Bank's position then lie in dealing with that challenge?
Colm Burke (Cork North-Central, Fine Gael)
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Is it not a possibility, however, that someone could decide to take that kind of challenge based on the moneys being raised being used in an ongoing war where atrocities are occurring, including many children being killed? By the way, I have been to Gaza, so I know what it is like. I was there when 1,400 people had been killed, 400 of them children. The sad part of it was no action was taken by the international community at that time. We might not have the problem we have now if it had been. The point I am making to Mr. Makhlouf, however, concerns someone deciding to challenge the right of the Central Bank because when it was established under Irish law by the Oireachtas - and I accept what Mr. Makhlouf said about it also being under EU regulation - it was never intended it should have a role in the approval of prospectuses where someone can raise money to carry on a war and atrocities.
Mr. Gabriel Makhlouf:
I do not know what I can say to the Deputy. When the Central Bank was set up, the EU did not exist. It does exist now, however. There is an EU framework of laws that Ireland has signed up to. Of course, it is open to any citizen to decide they want to take legal action against the Central Bank and we would defend that action because we feel the decisions we have made to date have been ones we were empowered to make by law and we made them consistent with the law.
Colm Burke (Cork North-Central, Fine Gael)
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From his own statement, Mr. Makhlouf accepts that he and all the staff of the Central Bank are appalled by what is now going on-----
Colm Burke (Cork North-Central, Fine Gael)
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-----and do not agree with what is going on. At the same time, however, the money being raised as the result of the prospectus we have approved is being used to carry out those atrocities.
Mr. Gabriel Makhlouf:
The money raised is being used to fund the Israeli Government, so I do not disagree with what the Deputy said. The most important thing that I and the staff of the Central Bank know, however, is that we have to follow the law. We have been following the law and will continue to follow it.
Colm Burke (Cork North-Central, Fine Gael)
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Mr. Makhlouf, however, accepts that when the Central Bank was initially set up by the State it was never with the intention of having a role where someone could use it as a mechanism for getting access to money to carry on the atrocities now occurring. I accept what Mr. Makhlouf is saying about the money going to the Israeli Government in the sense of managing its economy, but a substantial part of the moneys it is raising, whether through taxation or borrowing, is being used to carry out horrendous atrocities in a state sitting defenceless and has no real support in terms of trying to defend its ordinary citizens.
Colm Burke (Cork North-Central, Fine Gael)
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Going back to what Deputy Timmins said in relation to transferring this role the Central Bank has, have any efforts been made at the European level to indicate the bank is not happy about having to do this work and that, if possible, any future request that comes would be managed by another member state?
Colm Burke (Cork North-Central, Fine Gael)
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If a new request was made in the morning by Israel, though-----
Colm Burke (Cork North-Central, Fine Gael)
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If a new request was made in the morning, would the Central Bank not consider making an application at European level to say-----
Mairéad Farrell (Galway West, Sinn Fein)
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I call an Teachta McGreehan.
Erin McGreehan (Louth, Fianna Fail)
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I thank the witnesses for coming in to speak to us. This entire situation is rotten. There are tough lessons for all of us in EU law and in the supremacy of EU law. People are trying to dig down into a piece of regulation that is approximately 70,000 words long. There is an awful lot of detail on it and it is incredibly difficult. This is not simple. If it was simple, we would have it fixed. As the Irish State and the Irish Central Bank, it has clearly been said we do not want to be doing this, but it is out of the hands of the Central Bank and its legal capacity to be able to deny these bonds and the prospectus under the regulation.
I suppose it could be said all this is benefiting two sides. It is benefiting Israel and it is benefiting the Opposition. This is because the country standing up the tallest against Israel, the country seen on the international stage as being the most pro-Palestinian in all of Europe, is seen to be fighting itself and not standing tall against the oppressor. What we have here is civil unrest, political intimidation and intimidation, indeed, I am sure, of the staff of the Central Bank as well. We see political offices and intimidation right around the country. It is all to the benefit of Israel. The bonds too are clearly for the benefit of Israel.
I have a few questions.
We have covered the fact it is not legally permitted to refuse - all the checks and balances are in the regulation - on political or ethical grounds.
As I said, this is an EU competency so we need an EU remedy. When the British left and acted unilaterally, we were all up in arms about unilateral actions on behalf of one member state or whatever. We are all against that, so we need a collective action. Has the Central Bank sought guidance from the European Securities and Markets Authority or European Commission on that legal question and on what can be done? Obviously, this Government and country must continue at a European level to bring in those sanctions, equivalent to the Russian sanctions, but that would end up preventing the Central Bank from being able to do this and that regulation would not even come up in September. What would those sanctions or changes look like at an EU level in order for the Central Bank to stop having to do this? If the Irish Government did pass this law, would sanctions be imposed on the Central Bank for refusing? The Central Bank is obliged under EU law. It still would be even though there would be a national law. EU law is supreme over national law, so where would that leave Central Bank in this entangled affair? If a national law was passed and the Central Bank went against EU law, would it be exposed to legal action by the Commission for infringement, by Israel itself or by the issuer? Is there a contingency? Could there be any contingency or risk planning in the event of that ever happening? We are all in agreement here that we want this to stop but we disagree on the best way to do so.
Mr. Gabriel Makhlouf:
The Deputy's question contains too many hypotheticals for me to answer in a way that she might be satisfied with. As I said earlier, our working assumption is that laws that are passed by the Oireachtas and signed off by the President are laws that are consistent with European law so apply and have effect. That is our working assumption. We would not say, "Well, this can't be consistent and we are going to ignore it or something." We do not do that. If that surprisingly happens, I think the way it would ultimately be established would be from judgment by the European Court of Justice, for example, under an action taken by the European Commission or by somebody else and then, potentially, there would be consequences but we are into hypotheticals now.
I think the Deputy asked the following question before moving to the hypothetical. Russia is the example of how this can be stopped, if that is the objective. Another possibility is that we, collectively, the European Union, decides to change the prospectus regulation in some way but that would probably be a much more complicated way and I would not know if there is even interest in doing that. Those are the two obvious routes because, as the Deputy says, we are dealing with European law here. At the end of the day, it is European law and if the Oireachtas and other member states want to change it, they then need to work together to change it, but we just have to follow whatever it is the law is.
Erin McGreehan (Louth, Fianna Fail)
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Thank you.
Alice-Mary Higgins (Independent)
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I wish to refer to what Deputy Cian O'Callaghan brought forward. The preamble of the prospectus regulation clearly states: "This Regulation respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights". The Charter of Fundamental Rights of the European Union includes the line "the indivisible, universal values of human dignity, freedom, equality and solidarity; it is based on the principles of democracy and the rule of law." In the answer given at the time, you said that is fine but Article 6 is really focused on the financial aspect. Is it not the case that the preamble is in the prospectus regulation for a reason? Very specifically, is it the understanding that the rule of law includes the International Court of Justice?
Alice-Mary Higgins (Independent)
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So the Central Bank has not looked to that preamble in terms of its interpretation?
Alice-Mary Higgins (Independent)
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Article 6, the one you said you were focusing, includes as one of the factors for consideration the reasons for the issuance. This is one of the factors the Central Bank is obliged to consider. It states the regulation should be interpreted and applied in accordance with these rights and principles. When considering the reasons for the issuance in relation to the Central Bank and the impact on the issuer, is it not the case that those clear provisions that have guided the Central Bank in terms of its interpretation and the preamble should be into account?
Alice-Mary Higgins (Independent)
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I have very limited time and understand what is being pointed to.
Alice-Mary Higgins (Independent)
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In looking at the general financing of the State of Israel at this time, and at the time when the bonds are being sought, was much consideration given to the principles of democracy and the rule of law? It states the regulation should be interpreted and applied in respect of those rights and principles.
Alice-Mary Higgins (Independent)
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I will come back to completeness and comprehensibility myself.
Alice-Mary Higgins (Independent)
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Article 10 has a list of things that need to be there but the preamble requires that it all be considered in the context of the rule of law. So that was my question.
On some of the other elements within the prospectus regulation, it has a number of powers. I am curious as to whether consideration has been given to any of the powers. I am surprised that some of the powers have not been activated. It was mentioned that the Central Bank is not obliged to review but has to the power to review. The competent authority, which is the Central Bank, can set the schedule in relation to a review of prospectuses and of powers in terms of an offer of securities.
Alice-Mary Higgins (Independent)
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The Central Bank can set the schedule. It has the power to set the schedule in respect of a review. It does not necessarily have to wait.
Alice-Mary Higgins (Independent)
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I am saying this in the context that some issues have been highlighted over the past year where it seemed there may have been grounds for considering a review. The Central Bank also has the power to require supplementary information if it feels the information provided is incomplete. We have repeatedly heard the words “comprehensible" "consistent" and "complete”. There are some questions with regard to what is comprehensible.. When Mr. Makhlouf spoke to the committee last year, we asked him about war bonds and the fact that these bonds were being marketed as war bonds. He stated that he had not seen the relevant advertisement and could not comment on the matter. That also raises the question of consistency because they are being marketed in one sense as war bonds, but in Mr. Makhlouf’s understanding and perspective, they were not. There are those two issues. The core here is completeness. The Central Bank has the power to request additional and supplementary information if it feels information is missing. Has that been done? Has that power been used?
Alice-Mary Higgins (Independent)
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The competent authority has the power to request information. Has the Central Bank requested supplementary information from Israel as the issuer?
Alice-Mary Higgins (Independent)
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Let us move to the prospectus issued last year. In the core prospectus, I found one reference to the war. It related to unemployment figures in terms of those absent as a result of military duty and during the war for other reasons. That is the 2024 prospectus. There was a supplementary report, which is not the prospectus. It is this quality prospectus we are meant to be hearing about. I do not know whether that counts as part of the prospectus. Is that what the Central Bank is considering? In that report, I saw a single line which stated that South Africa brought a case against Israel in the International Court of Justice. It does not reference what the case is. It does not reference that the case is under the Genocide Convention. It does not include, as far as I can see, any reference at all to the International Court of Justice opinion from July 2024, which is not in respect of the Genocide Convention but in relation to the fact that member states are under an obligation to take steps to prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the occupied Palestinian territory. Is that not supplementary information that should have been in the prospectus or, at minimum, in the annual report?
Mr. Gerry Cross:
To pick up on the first part of the Senator’s question, it is a very important aspect of the EU prospectus regulation that incorporation for the prospectus includes more than one document. The prospectus does include the form the Senator referred to, namely the 18-K form, which is a description of the current-----
Alice-Mary Higgins (Independent)
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The core question, because my time is quite limited-----
Alice-Mary Higgins (Independent)
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I would like to come in for a second round, with the Chair's permission.
Mr. Gerry Cross:
It is very important. What is in the 18-K is in the prospectus, and that is very important. As the Senator said, form 18-K talks about the South African case against Israel. It is correct. It is one sentence. It also talks about, I think it is interesting to say, the fact that Israel withdrew its ambassadors from a number of countries because of the statements made in those countries. The context there is-----
Alice-Mary Higgins (Independent)
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It does not mention the Genocide Convention and it does not mention the ICJ advisory opinion of July 2024.
Alice-Mary Higgins (Independent)
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But the Central Bank could have requested additional information. If that information was not forthcoming, it could have suspended the offer while waiting for it to be provided. Is that correct?
Mairéad Farrell (Galway West, Sinn Fein)
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There is a vótáil.
Alice-Mary Higgins (Independent)
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I need to come back in in the second round.
Mairéad Farrell (Galway West, Sinn Fein)
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Can a Senator take the Chair if it is a vote in the Dáil? We have to suspend because there is vote in the Dáil.
Alice-Mary Higgins (Independent)
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When will we return?
Mairéad Farrell (Galway West, Sinn Fein)
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As soon as the vote is held. The Senator's time is up. It will be back to me initially when we return, and then we can go to her.
Mairéad Farrell (Galway West, Sinn Fein)
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We will resume in public session. I will start with something that was in the news recently, namely the shots fired towards or in the vicinity of Irish soldiers in Lebanon by Israel. The Tánaiste said "It's clear to me that the actions of the IDF were reckless, intimidatory, totally unacceptable and a clear breach of the international rules surrounding peacekeeping.” We know from reporting in The Ditch that the Israeli bonds president and CEO Dani Naveh told potential investors that the best way to support the war campaign was investing in these stocks. Does Mr. Makhlouf think that the fact that we have had a situation where Israeli forces have shot at, towards or whatever the terminology is or should be, Irish soldiers change anything in his position on this issue? I am aware I am short on time.
Mairéad Farrell (Galway West, Sinn Fein)
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I understand-----
Mairéad Farrell (Galway West, Sinn Fein)
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I am stuck for time, but go on.
Mairéad Farrell (Galway West, Sinn Fein)
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Mr. Makhlouf can understand that seems crazy when we have heard from the CEO that this is to support the war effort or what I would call a genocide. Here in this particular instance, we are talking about our own troops being shot at and the fact that these bonds are supposedly helping a war effort. That this prospectus regulation supersedes that makes no sense and is unconscionable to me.
Mairéad Farrell (Galway West, Sinn Fein)
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If a soldier had been killed at that point would it change anything? Is it all still about the prospectus?
Mairéad Farrell (Galway West, Sinn Fein)
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Yes of course, we are talking hypotheticals.
Mr. Gabriel Makhlouf:
-----and I have not taken advice on this but as far as our application of the prospectus is concerned it would not change anything. It would certainly, I suspect, change the motivation of the State and the Government to work with European partners. The situation the Cathaoirleach described would be a direct impact on the UN as well.
Mairéad Farrell (Galway West, Sinn Fein)
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Ultimately, Mr. Makhlouf is saying that the prospectus regulation would still supersede it. That seems-----
Mairéad Farrell (Galway West, Sinn Fein)
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It does.
Mairéad Farrell (Galway West, Sinn Fein)
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Then there is an issue with the way it is meant to work.
Mr. Gerry Cross:
The Governor said something earlier that is also relevant here. There are many ongoing circumstances and developments. We spoke about the intensity of things that are happening now and the enhanced brutality that we are seeing there. We talked about the EU-Israel association agreement and how that is up for question. As a result, there are things happening which can, cumulatively, when the discussion is-----
Mairéad Farrell (Galway West, Sinn Fein)
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The point is it does not change what happened in recent weeks. It does not change what-----
Mairéad Farrell (Galway West, Sinn Fein)
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It can cumulatively change but that is beyond what we are talking about. My direct question was specifically around Irish troops being shot at, and that does not change.
I want to move on to something else, namely the anti-money laundering directive. I understand the Central Bank is the regulator for the anti-money laundering directive. Is that correct? Yes. I understand that war crimes can be and often are covered by anti-money laundering legislation. Is that correct?
Mairéad Farrell (Galway West, Sinn Fein)
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I understand how counter-terrorist financing has been-----
Mairéad Farrell (Galway West, Sinn Fein)
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So as opposed to war crimes, it is counter-terrorist financing.
Mairéad Farrell (Galway West, Sinn Fein)
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I am aware the Irish Strategic Investment Fund's direct holdings of Israeli Government bonds totalled €2.62 million. Mr. Makhlouf stated to my colleague, an Teachta Doherty, that he does not have the information in relation to that. My understanding is that ISIF is required to report its bond holdings and other investment-related information to the Central Bank, ensuring transparency and regulatory compliance. It provides regular financial data and information about these activities. Is that not the case then?
Mairéad Farrell (Galway West, Sinn Fein)
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Please provide it in writing to the committee.
Mairéad Farrell (Galway West, Sinn Fein)
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The UN Special Rapporteur for Palestine pointed out that Israeli bonds sold by the Development Company for Israel, has raised billions, which is helping to fund violent settlement expansion and other international crimes in Palestine. I have had a look at the prospectus on the Central Bank's website and the issuer is listed as the Development Company for Israel. Lydia Ghuman, a legal expert from the Internationalist Law Center, stated that the proceeds of Israeli bonds are inseparable from the funds in Israel's general budget, used to fund human rights violations and war crimes. If it is the case that war crimes are not included in anti-money laundering legislation, there is a fundamental issue, especially given the concern that - and you are going to come back to me - the Irish State may have invested in some of these bonds. It would seem the Irish State is indirectly gaining from potential war crimes but you are saying to me that at this moment, this is not under the anti-money laundering directive and as a result you have no need to investigate it.
Mairéad Farrell (Galway West, Sinn Fein)
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That is fair enough. There is no point in answering and then not being sure and us coming back on it. I might go back to the issue of-----
Mairéad Farrell (Galway West, Sinn Fein)
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Go ahead.
Mr. Gabriel Makhlouf:
The Cathaoirleach referred to somebody talking about the budget proceeds or the proceeds from these sales. I have seen different numbers bandied about. It might help the committee to have a sense of how much money - to the extent that we know, because we do not know a lot - the State of Israel is raising from these sales. The website talks about, I think, since September 2024 five billion - I am not sure if it is euro or dollars - but that sort of number. We do not necessarily know everything, but from what we do know, the vast majority of that is raised in the United States. What is raised in Europe under our authorised prospectus is between €100 million and €130 million. It is not-----
Mairéad Farrell (Galway West, Sinn Fein)
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I understand that but €130 million is still a lot of money and it can still go a long way in terms of the killing of children. We have seen huge issues.
Mairéad Farrell (Galway West, Sinn Fein)
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But I have not.
Mairéad Farrell (Galway West, Sinn Fein)
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That is fair enough, but at the end of the day, I do not think anyone wants any hand, act or part in this. That is the fundamental issue. Whether it was a very small amount or a very large amount, for most people the fundamental issue is that we do not want any Irish involvement in this. I take your point. I am sure you have read things which you think are incorrect or whatever it may be, but that is the fundamental point for most people. Mr. Makhlouf has said that the Central Bank is guided by the EU prospectus regulation, which we have heard a lot of talk about. I am no legal expert but I feel like this is a situation of a conflict of law as to whether the law, in the form of the Genocide Act 1973, takes precedence over the regulation. Is Mr. Makhlouf saying that this prospectus regulation supersedes everything?
Mairéad Farrell (Galway West, Sinn Fein)
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This is my last question.
Ms Mary-Elizabeth McMunn:
I will read the reply because of the accuracy in terms of the notes about the Genocide Convention which we provided in our response to the committee. The UN Convention on the Prevention and Punishment of the Crime of Genocide is an international treaty under which the contracting partners confirm that genocide is a crime under international law and undertake to prevent and punish it. Ireland, as we mentioned earlier, is a contracting party to the convention, having ceded to it in 1976. The convention was originally given its effect in Irish law by the Genocide Act 1976, which was repealed and replaced by the International Criminal Court Act 2006. In accordance with the 2006 Act, it is an offence for any person to commit genocide, or a crime ancillary to genocide, aiding, abetting, assisting, inciting, etc. With respect to the above, it falls outside the competency of the Central Bank to make a determination of genocide under the convention and the ICJ, which we referred to earlier, has not yet made a judgment in relation to genocide. As we know, the South African case being taken against the State of Israel is ongoing.
Mairéad Farrell (Galway West, Sinn Fein)
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We have about nine minutes left. I will give the Senator seven minutes and I will take two. Is that okay?
Alice-Mary Higgins (Independent)
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That is okay. Ms McMunn mentions that it is an offence for any person to aid and abet genocide. This comes to the core point. In that context, there is a risk if there is a case being taken in relation to the Genocide Convention and if the moneys the Central Bank has provided as investment may be found to have contributed to a breach of the Genocide Convention, thereby aiding and abetting. It seems extraordinary what we have just heard, that the prospectus does not mention the Genocide Convention. The supplementary material to the prospectus does not mention the Genocide Convention. It simply mentions that South Africa has taken a case against Israel at the ICJ and it does not mention the Genocide Convention. The Central Bank chose not to require Israel to mention the Genocide Convention. The bank has the power to request supplementary information but the choice was made not to do so and not to exercise all of the ancillary powers if the relevant supplementary information is not provided to suspend sales, advertising and so forth.
Second, the prospectus and the supplementary material to the prospectus does not mention the ICJ advisory opinion of July 2024. The prospectus was approved in September after the ICJ advisory opinion of July. We knew how significant this was because the Government was changing its policy on the occupied territories Bill on the basis of it. It was being highlighted by the Irish Government as a very significant advisory opinion. It is so clear that member states are under an obligation to take steps to prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the occupied Palestinian territories. There is an active duty to prevent investment. It is extraordinary that the Central Bank did not think it was relevant for investors and that they would not have to have this information provided as a relevant risk.
I want to highlight why it is a risk and I would like the witnesses' comments on that. It is a risk in two ways. One, for investors there is the financial risk for investors because it creates a context whereby member states cannot be contributing to investment or trade with the occupied Palestinian territories. Perhaps the witnesses can confirm this. I do not believe that the prospectus differentiates between the occupied Palestinian territories in terms of revenue, trade and investment and Israel's accepted international borders. Is that the case?
Alice-Mary Higgins (Independent)
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If I could have a very quick fact because my time is limited. Is that differentiation made?
Alice-Mary Higgins (Independent)
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Similarly, it was not deemed necessary or relevant by the Central Bank that the prospectus would include a differentiation between illegally occupied territories and the actual borders of Israel. The reason that is particularly relevant comes back to the money laundering point, the breach of the International Court of Justice and the laws under that, and the repayment of bondholders, that is, the risk for bondholders whom the Central Bank was charged with protecting. We heard how onerous it was to go through it but it is reasonable that the Central Bank would protect them. The revenues gathered in the settlements are the proceeds of crimes - not war crimes - related to illegal occupation. They are criminal proceeds. They are not legal proceeds. The revenues gathered there go into the central exchequer of Israel. Within Israel's budget, it is very clear that Israel pays back its bondholders from that central exchequer. We know there are over 500,000 VAT payers within the occupied territories. That money is going into the exchequer and then out of the exchequer to pay back the bondholders. Aside from the fact that it is clearly facilitating the illegal situation created by Israel as the International Court of Justice sanctions say not to, it is also money laundering. The Central Bank is the named authority around the knowing, handling or facilitation of the handling of proceeds of crime. Has there been an assessment into the money laundering legislation? Why was it determined that registering a differentiation between illegally occupied territories and Israel proper was not relevant information for investors?
Mr. Gabriel Makhlouf:
I will take the members right back to the beginning. This is a prospectus for the State of Israel, which wants to raise money to meet its general financial requirements. It is not obvious to me on the basis of the question the Senator has just asked why that would need to be make a distinction between different territories.
Alice-Mary Higgins (Independent)
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Perhaps there could an assurance that the moneys would not be used in respect of the territories. We know the general financing-----
Alice-Mary Higgins (Independent)
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-----of Israel is being used in occupied territories.
Alice-Mary Higgins (Independent)
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No, the fundamental question is whether there are risks to investors, including financial and other risks.
Alice-Mary Higgins (Independent)
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Yes, but is it not the case-----
Alice-Mary Higgins (Independent)
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So, Mr. Makhlouf does not regard potential prosecution in respect of money laundering to be a risk to an investor?
Alice-Mary Higgins (Independent)
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Let us talk about it because when Mr. Makhlouf appeared before the committee last autumn, he was not prepared. Money laundering is extremely relevant in this context. The Central Bank was the competent authority.
Alice-Mary Higgins (Independent)
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Is not the case, nonetheless,-----
Mairéad Farrell (Galway West, Sinn Fein)
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That is fair.
Alice-Mary Higgins (Independent)
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The Central Bank believed it was complete.
Mr. Gabriel Makhlouf:
The Central Bank believed it was complete even though it made no guarantees on the issue of illegally occupied territories and did not include pertinent relevant information regarding the potential fact that bondholders' repayments could be achieved through an illegally money laundering transaction. Leaving aside illegal money laundering, repayments could be coming from illegally occupied territories. That is a known fact. That is clear. Israel is very clear in its budget lines in how it pays back. Does Mr. Makhlouf not think that was relevant? Does he believe it was complete without that information?
Alice-Mary Higgins (Independent)
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It is for the competent authority to assess the risks and ensure appropriate information. That is clearly what the prospectus is for. It is a duty to investors.
Mairéad Farrell (Galway West, Sinn Fein)
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We have to end because the select committee has a meeting as well, but I gave the Senator my additional time.
Go raibh míle maith agaibh go léir. Go raibh maith agaibh as ucht páirt a ghlacadh sa choiste inniu. That concludes the joint committee's business. The meeting now stands adjourned until next Wednesday, 18 June, when the committee will meet in private session at 2.30 p.m. A meeting with the select committee will take place today at 6.30 p.m. in this committee room for Third Stage consideration of the Statute Law Revision Bill 2024. Go raibh maith agaibh.