Oireachtas Joint and Select Committees
Wednesday, 22 October 2025
Joint Oireachtas Committee on Finance, Public Expenditure, Public Service Reform and Digitalisation, and Taoiseach
Israeli Bond Programme: Discussion (Resumed)
2:00 am
Mairéad Farrell (Galway West, Sinn Fein)
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Tá leithscéalta faighte againn ón Teachta Pearse Doherty, ón Teachta Edward Timmins agus ón Seanadóir Joe O'Reilly agus ón Seanadóir Conor Murphy. We have received apologies from Deputies Pearse Doherty and Edward Timmins and Senators Joe O'Reilly and Conor Murphy. Deputy Colm Burke has also sent his apologies, but he may be able to join us later.
Is mian liom na riachtanaisí bunreachtúla seo a leanas a mheabhrú do chomhaltaí agus páirt á ghlacadh acu i gcruinnithe poiblí. Caithfidh comhaltaí a bheith i láthair go fisiciúil laistigh de theorainn Theach Laighean. Ní cheadóidh mé do chomhaltaí labhairt ag cruinnithe poiblí nuair nach bhfuil siad ag cloí leis an riachtanas bunreachtúil seo. Mar sin, má dhéanann aon chomhalta iarracht páirt a ghlacadh 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 ar an gcruinniú ar MS Teams. Fíoraítear do chomhaltaí cleachtadh Parlaiminte a urramú nár chóir más féidir daoine ná eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainm ar shlí go bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear dóibh gan aon rud a rá a d'fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfaí ráiteas a bheith clúmhillteach do dhuine nó eintiteas aitheanta, ordóidh mé don duine éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéilleadh comhaltaí don ordú sin láithreach.
I advise members of the constitutional requirement that members must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate where they are 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 via Microsoft Teams that, prior to making their contribution to the meeting, they confirm they are 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 their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.
Chun comhthéacs a thabhairt, for context, the committee is today considering the Israeli bond programme. The committee reported on this topic on 5 August 2025 and the Central Bank announced that the prospectus was transferred to Luxembourg on 1 September 2025. The committee is interested to hear the Central Bank's reaction to our report and to address specific recommendations that have not been actioned in this transfer. These include recommendation 3:
Central Bank as a competent authority shall conduct an immediate internal review in advance of any renewal in September of the Israeli bond prospectus with the intention of determining whether it is in compliance with the prospectus regulation in terms of the required level of disclosure, accuracy and transparency.
Recommendation 5 states:
As part of a review seek supplementary information from the issuer and include an examination of the completeness of the bond prospectus and a request that further information be provided by the issuer with regards to: the nature of the case taken by South Africa against Israel under the Genocide Convention and the interim findings of the ICJ in that regard, the ICJ advisory opinion of July 2024 in respect of the illegal situation created by Israel in the Occupied Palestinian Territories and any other pertinent matters in respect of international law.
Recommendation 7 is, "that any review be conducted in accordance with paragraph 88 of the preamble of the prospectus regulation". These are critical recommendations and the committee would appreciate a discussion on the considerations by the Central Bank of Ireland in the renewal of this prospectus.
In this context, I welcome from the Central Bank of Ireland Mr. Gabriel Makhlouf, Governor, Ms Mary-Elizabeth McMunn, deputy governor, and Mr. Gerry Cross, director of capital and markets and funds. I understand Senator Higgins has some guests in the Gallery and I welcome them also. I now invite Mr. Makhlouf to make his opening statement.
Mr. Gabriel Makhlouf:
I thank the committee for the invitation. Since our first engagement with the committee on this issue over a year ago, we have endeavoured to support the committee's examination of it to the fullest. Our role in this issue is governed by EU law. The EU prospectus regulation sets out harmonised EU laws with respect to securities which are the subject of that regulation. This is a part of the EU capital markets initiative. Each member state of the EU must appoint a competent authority in that jurisdiction. The Central Bank has been appointed as the competent authority in Ireland for the purposes of the prospectus regulation and we must carry out our functions and duties as provided for under that regulation.
At all times, we have been obliged to carry out the statutory tasks and functions which have been assigned to us. We have to work within the law and we have carefully and comprehensively discharged our obligations under the EU prospectus regulation. As set out in my recent letter to the committee, there are a number of important overarching points that I would like to highlight. Specifically, there is the Central Bank’s role in the transfer of approval process, our professional secrecy obligations and the framework of EU regulations within which we operate.
First, Article 20(8) of the EU prospectus regulation provides for the transfer of the approval of a prospectus on the request of an issuer to the competent authority of another member state. Any such transfer is subject to prior notification to the European Securities and Markets Authority, ESMA, and the agreement of the competent authority to whom the approval function is to be transferred. In this process, the competent authority of the home member state only approves the transfer to the competent authority of another member state but does not approve the prospectus that is issued.
The competent authority of the transferee member state reviews and decides whether to approve the prospectus. In this framework, the Central Bank's role was limited to transferring the role of approving the 2025 prospectus to La Commission de Surveillance du Secteur Financier in Luxembourg, the CSSF. The Central Bank did not have any role in the review or approval of the 2025 prospectus and did not receive any draft of that document. It was a matter for the CSSF to independently carry out the review and approval process. There are two distinct and separate steps in the transfer of approval process. The first is the transfer of approval of the prospectus to another competent authority and the second is the review and approval of the prospectus by that other authority. In carrying out its role of reviewing and approving the relevant prospectus, the CSSF is entirely independent of the Central Bank.
Second, the Central Bank is subject to confidentiality obligations pursuant to the EU prospectus regulation and section 33AK of the Central Bank Act 1942. Those obligations restrict us from disclosing confidential information obtained in the performance of our functions. The correspondence between the Central Bank and the State of Israel and between the Central Bank and the CSSF also falls within confidentiality restrictions. Within our legal obligations, we have sought to put as much information as possible with regard to this matter into the public domain.
Third, one of the functions that we are required to carry out under the prospectus regulation is to consider transfer of approval requests. When considering transfer of approval requests, we consider the connectivity of the prospectus with the jurisdiction from which and to which it is seeking a transfer. In the case of the State of Israel transfer of approval request, the issuer decided that it would cease, from 1 September 2025, making offers to the public under its prospectus in Ireland. The bonds to be issued under the 2025 prospectus may only be offered to the public in Austria, France, Germany, Luxembourg and the Netherlands. In circumstances where the State of Israel proposed to discontinue offers to the public under its prospectus in Ireland, the Central Bank approved the transfer of approval of the prospectus under the EU prospectus regulation.
Finally, the Central Bank reviewed the recommendations in the report issued by this committee in the context of its functions and with regard to the prospectus it approved for the State of Israel on 2 September 2024, which expired on 1 September 2025. However, we had no role in the review and approval of the 2025 prospectus. We are happy to answer members' questions.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I welcome back the witnesses and thank them for spending time with us again.
Since we last met, as the Chair alluded to and as Mr. Makhlouf mentioned, the bonds have on this occasion been certified by the CSSF in Luxembourg. Does Mr. Makhlouf have any indication or any feeling as to whether this will be a one-off move or could this lead to something more permanent?
Mr. Gabriel Makhlouf:
We do not have any indication about that. We can only make assumptions. The prospectus is only approved for one year so this time next year the issuer will have to decide if it wants to continue issuing bonds. It will have to decide whether the bonds are going to be of a value below €1,000, which is what they are at the moment. If it wants to issue bonds at a value below €1,000, the issuer will have to ask us again to either approve another prospectus or approve the transfer elsewhere. The fact it has decided this year to offer the bonds in only five jurisdictions in the EU means it is a reasonable assumption the issuer is unlikely to change that view next year, although that is entirely up to the issuer. Of course, if it decides it wants to stop issuing securities of less than €1,000 but does want to issue them above €1,000, it can independently choose whichever state of the EU it wants them issued in without asking us.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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The move came as a surprise, albeit a welcome one. I understand that a level of secrecy and discretion is required here, but would Mr. Makhlouf be able to talk us through what happened? I understand the Israelis would have initiated this, but how did they do that? Were there any detailed communications or conversations with either the Israelis or the CSSF?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I appreciate Mr. Makhlouf cannot go into the specifics. I am more generally asking whether it was a one-line memo, for example, or whether there was detailed communication, without divulging those details, of course.
Shay Brennan (Dublin Rathdown, Fianna Fail)
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In Mr. Makhlouf's view, why did Israel take that initiative?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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I will probably get the same answer, but does Mr. Makhlouf believe there was any awareness among the Israeli financial authorities of the work of the committee and the report published?
Shay Brennan (Dublin Rathdown, Fianna Fail)
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Okay. I thank Mr. Makhlouf.
Gerald Nash (Louth, Labour)
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I understand the constraints under which Mr. Makhlouf is operating. He put on the record that the issuer, meaning the State of Israel, decided that from 1 September 2025 it would cease making offers to the public under its prospectus in Ireland. Moving on from Deputy Brennan's question, precisely when did the Central Bank receive the confirmation from the State of Israel?
Mr. Gabriel Makhlouf:
As I said in my opening statement, it is part of the confidential discussions we had with the issuer and the CSSF. That sort of detail I am not going to get into. I am happy to talk about the process that generally applies in these sorts of cases, but I am not prepared to go into the detail of it.
Gerald Nash (Louth, Labour)
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It is part of the process and it does not necessarily relate to the detail in terms of any commercial or market sensitivity. It is a straightforward question. On what date did the issuer contact the Central Bank to confirm it would no longer be making offers to the public under the prospectus in Ireland?
Gerald Nash (Louth, Labour)
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I find that extraordinary. When the information was forwarded to the witness by the Israeli authorities is a basic matter of fact. I am not trying to be deliberately difficult here. Generally speaking-----
Gerald Nash (Louth, Labour)
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-----when it comes to establishing dates and matters of fact that are not commercially sensitive, I cannot understand why that information is not forthcoming.
Mr. Gabriel Makhlouf:
I am not trying to be deliberately difficult here either but we operate under confidentiality rules and I am afraid there are limits to what I can say and what I think would be helpful to say. As I said, I am happy to explain a process that happens, but I am not prepared to go into the dates as to when things did or did not happen.
Gerald Nash (Louth, Labour)
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It would be helpful if we could establish that, given Mr. Makhlouf said earlier or at least indicated in response to Deputy Brennan, that he would like to think that the work of the committee and so on contributed to a decision made by the Israeli state not to, for want of a better description, re-engage the Central Bank of Ireland in terms of the approval of a new prospectus. That is information that, in my view, Mr. Makhlouf should be freely making available to the committee. It would certainly help us in our deliberations of the value of the work we have done and what impact that may have had on that decision.
It is a straightforward question and I am disappointed Mr. Makhlouf does not seem to be in a position to answer it. It is a straightforward question on when the Central Bank received the information. If Mr. Makhlouf is not prepared to put that information on the record, it is disappointing. I would expect a little more transparency and accountability from the Central Bank on this.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the witnesses for their attendance and opening statement. On what date did Israel submit the application for this transfer?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I am not asking the witness to reveal any confidential information. This is a clear matter of process. On what date was this application for a transfer received?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf has told us the issuer took the initiative.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf has made that statement, so it is appropriate that members ask questions around that statement, which is what I am doing. I am probing him now on what he has said, namely, that the issuer took the initiative. When did the issuer take the initiative?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Were there any discussions with the issuer before it made that request for a transfer?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf made a specific comment and told the committee that the issuer took the initiative. That is what I am trying to explore with him now.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Only the issuer could take initiative.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Central Bank, under no circumstances, could take the initiative.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Were there discussions with the issuer, before it took the initiative, about it possibly taking this initiative?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Yes, and I will make my question clear. Did the Central Bank advise or suggest to the Israeli State to take the initiative of requesting a transfer?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If there were no discussions around that with the issuer, Mr. Makhlouf could simply deny it because it would not break any confidentiality.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Why will Mr. Makhlouf not deny that and say that no discussions took place in which the Central Bank suggested to the State of Israel to request a transfer? Why not simply deny that? That would not break any confidentiality if it did not take place.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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How would that break confidentiality if no such discussions took place?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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So, discussions did take place.
Mr. Gabriel Makhlouf:
They may have taken place on this issue and they may not have taken place. The Deputy can speculate but I am not prepared to comment. My confidentiality obligations are clear and these are important, not just for this case but for our day-to-day work and the relationship we have with the organisations we supervise or regulate.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I am not asking Mr. Makhlouf to disclose any confidential information the Central Bank received from the State of Israel. I am asking him to explain to us, as a committee, the role the Central Bank played. I do not want confidential information on the State of Israel and I am not asking Mr. Makhlouf for it. I am asking whether the Central Bank provide any guidance, advice or suggestions to the State of Israel that it should apply for this transfer.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf will not answer that question and will not let us, as an Oireachtas committee, know.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf will not tell us the date that the issuer-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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He will not tell us what sort of discussions took place beforehand. He will not tell us whether the Central Bank issued advice to the State of Israel to apply for this transfer. He will tell us none of that.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Will Mr. Makhlouf tell us who made this decision on the transfer? This is a function of the Central Bank, so who in the Central Bank made the decision to approve the transfer?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Can Mr. Makhlouf tell us about the decision-making process? Who signed off on it? Were there any dissenting views expressed during that process, and under what criteria was that decision made?
Mr. Gerry Cross:
It was very much in line with our approach. As the Governor said, it is set out in the regulation and supporting guidance what the process is. The issuer can seek a transfer. We can then make a decision on that transfer, subject to two things. One is, in this case, that the Luxembourg authorities are in agreement and that the European Securities and Markets Authority is notified. In our guidance, we set out the conditions, the criteria, that we take into account when deciding these things. There are three set out there, but they include whether or not there is a public offer to be made in the jurisdiction. We were informed by the issuer that it was not proposing to do that. On that basis, the decision was taken in this case, in our normal process, to approve the transfer and that is what is set out in the regulations and in our guidance. That is what we followed.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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To be clear, the Central Bank is under no obligation to approve that transfer. It can make a decision to approve or not. Is that the situation?
Mr. Gerry Cross:
Like all decisions that come to us, we are governed by the criteria that are set out, whether in the regulation or in our guidelines. In other words, we have to reach a reasoned and reasonable decision that is founded in the substance of what we are being asked to decide and what has been set out in the conditions. We made the decision, which was the right one given what had been set out.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Were there any dissenting views in that decision-making process?
Mr. Gerry Cross:
I will set this in the wider context, which is the function of the European economy and the important role the Central Bank of Ireland has as a regulator in the European financial markets. It is really important that we are clear about our confidentiality and it is clear that the Central Bank makes decisions based on the criteria that are established. That is what we did in this case. Of course, we have the appropriate process to do that but, again, it would be incorrect of me to be precise and say "One person said this and one person said that", because that is precisely the type of thing the confidentiality of supervision and regulatory decision-making is designed to ensure we get right.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I am not asking about the discussions the Central Bank had with the State of Israel, on which Mr. Cross is citing confidentiality. I am asking about the Central Bank's decision-making process. Were there any dissenting views? Mr. Cross should be able to give us that information. It does not involve the Central Bank's discussions with the State of Israel.
Mr. Gerry Cross:
It is not a particular person in the Central Bank who was asked by legislation to decide something. The Central Bank is given the authority and the requirement to make these decisions, and it makes those decisions. We have a governance process that is thorough, detailed and comprehensive, and that is what we followed. We will have considered the merits and will have reached a view but, again, it is not appropriate for me to say that someone agreed, someone disagreed or someone took a different view because that is the decision-making process.
With regret, and I understand the frustration Deputy O'Callaghan has, to do our job effectively under the mandate we are given, it is important that we do not disclose things that we fundamentally should not disclose.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Did the Central Bank consider the implications of Ireland's obligations under the Genocide Convention when making a decision to approve this transfer?
Mr. Gerry Cross:
Again, as the Governor said, I am not going to speak to what was said or considered specifically in this case. What I will say, as was discussed at length at this committee in June, is that we considered all of the facts and relevant aspects when we were fulfilling our responsibilities under these provisions.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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This is quite a clear question. Mr. Cross has dodged most of the questions I have asked, citing confidentiality in terms of discussions with the State of Israel. He will not tell me whether there were any dissenting views. I will ask Mr. Cross a clear question now. Did the Central Bank consider Ireland's obligations under the Genocide Convention when making the decision to approve this transfer? It is a straightforward question. The witnesses should be able to answer it.
Mr. Gabriel Makhlouf:
Let me answer that. The answer is no different from when we had the discussion back in June, which is that the framework for the prospectus regulation is pretty clear as to how it works and what it allows and does not allow. The Genocide Convention and the ICJ advisory opinion, etc., do not play a role in how the prospectus regulation needs to be implemented.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Article 88 of the EU prospectus regulation 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.
When the Central Bank was taking this decision to approve this transfer, did it consider Article 88 of the EU prospectus regulation? Did it consider compliance with the Charter of Fundamental Rights of the European Union?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On what basis does Mr. Makhlouf say there was no legal basis? Does the Central Bank have legal advice in that regard?
Mr. Gabriel Makhlouf:
No. As Mr. Cross explained, in line with what the statute and our guidance say, and particularly in line with the fact that the issuer had notified us that it was not going to offer these securities in Ireland but was going to offer them in another jurisdiction to which it was asking that we transfer approval, we concluded, after due consideration, that the transfer should be approved.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The report that we issued recommended that due diligence under international law be carried out before any decisions would be made in respect of these bonds. Why did the Central Bank not follow the recommendation from this committee that due diligence under international law should be carried out?
Mr. Gabriel Makhlouf:
As we told the committee before, we reviewed the various recommendations that committees made in the context of the 2024 prospectus, but we had absolutely nothing to do with the 2025 prospectus. We reviewed it for the first prospectus but not for the one in which we had no role to play.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Central Bank did have a role, however, because it transferred the role of approval for the prospectus to Luxembourg. The Central Bank decided to do that. It did, therefore, have a role.
Mr. Gabriel Makhlouf:
As I made clear in my opening statement, there are two completely separate roles in this regard. One is the transfer of approval, which is a decision we took. The second one is the actual consideration review of the prospectus itself, which we had nothing to do with. That was before the Commission de Surveillance du Secteur Financier to do.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf will not tell us whether the Central Bank had discussions with the State of Israel in advance of that transfer to issue any recommendations or guidance that it should apply for a transfer or to indicate whether the Central Bank would approve such a transfer if it sought one. Mr. Makhlouf will not tell us any of those things.
Ms Mary-Elizabeth McMunn:
To take a step back, in terms of the confidentiality provisions that both the Governor and Mr. Cross have spoken to, I appreciate that the Deputy said that we are dodging answering the questions. We have genuinely tried to be as transparent as we can possibly be with the committee through our appearances and the information we have provided to it, as well as the information we have put in the public domain. If the Deputy could allow me a couple of moments, I will explain the principle because it is important. Anyone who works in the Central Bank signs up to section 38AK of the Central Bank Act 1942 as part of their contract, which contains our confidentiality obligations. EU law has confidentiality obligations and secrecy. Why is that so important? It is so important because institutions, stakeholders, other regulators and An Garda Síochána engage and share confidential information with us, which can be market sensitive or time sensitive. We expect them to do so in a proactive way on the basis that they understand that information is not going to be shared onward. If we fell afoul of those confidentiality obligations, first of all it would be a criminal offence for any of us. It also would have an impact on how we fundamentally operate. The dynamic in which we operate with regulated entities is such that there is a kind of trust there that we will hold information confidentially. It is such a fundamental principle in how we operate. If an entity knew that we were going to share confidential information when we should not, we might not get that information in the first instance. I just wished to come back to the principle and why it is so important. So severe is the sanction that it would be a criminal offence if were to share confidential information. We are trying to be as clear as we can and share as much information with committee members as we can. While it is important to be here in terms of our accountability, we must also preserve the confidentiality obligations we are subject to.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I have more questions but I have taken up a good amount of time. I will respond to Ms McMunn and then I will come back in later.
Mairéad Farrell (Galway West, Sinn Fein)
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We might let people in for a second round. I have to pop out at 5 p.m.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank Ms McMunn for that contribution. I am not asking the Central Bank of Ireland to provide us with any information the State of Israel has given it confidentially. Rather, I am asking it to tell us what information, advice or guidance the Central Bank provided to Israel as to whether it should apply for this transfer. That is all I am asking for. I do not want the witnesses to disclose anything that has come from the State of Israel. I am asking the witnesses to disclose to the committee what the Central Bank did, by way of advice or guidance to the State of Israel, about whether it should apply for this transfer. That is an issue of fundamental public interest. I fundamentally believe the witnesses should be answering that question. I am not asking the Central Bank to divulge any confidential information that is coming from the State of Israel or anything else. I am asking about the Central Bank's role in it. I will come back in later, Chair.
Alice-Mary Higgins (Independent)
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This committee has a function relating to the Central Bank in that we are the committee charged with oversight of the Central Bank and its operations. The witnesses will understand that we also need to ensure we are performing our function and that we are not in any way obstructed in that work. What we are trying to look at is the Central Bank and the performance of its functions.
I will start by going through some of the recommendations we made because it will be useful. I ask the witnesses to provide short and clear answers regarding the actions taken on each recommendation. This process concluded in July and the report was published at the beginning of August. Recommendation No. 3-----
Mairéad Farrell (Galway West, Sinn Fein)
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Sorry, there is a vote in the Seanad. I am not sure whether Senator Higgins is okay to miss that but I wish to make her aware of it.
Alice-Mary Higgins (Independent)
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Perhaps I will go. Can Deputy O'Callaghan continue and I can come back in?
Mairéad Farrell (Galway West, Sinn Fein)
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I have a few questions that I can start with and then Deputy O'Callaghan can come in again if the Senator is not back by then. Is that okay?
Alice-Mary Higgins (Independent)
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Perfect. I have a set of questions I wish to ask.
Mairéad Farrell (Galway West, Sinn Fein)
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I understand the angle the Senator is coming from with her questions. We will try to-----
Mairéad Farrell (Galway West, Sinn Fein)
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Gabhaim buíochas leis an Seanadóir. First, I thank the witnesses for coming before the committee. What I want to try to do, for my own sake and understanding, is to understand where we are at this time.
When the news initially broke, there was a lot of confusion for the general public and for ourselves as to exactly what it meant. I still do not feel fully across it. I want to ask about that specifically first of all. The officials have said we will retain the status as a home member under the prospectus regulation for Israel. The more detail we can have, the better. We can talk about the politics of it but what I would like to know first is what exactly our role is under that.
Alice-Mary Higgins (Independent)
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There is a vote later which I will have to leave for, but I do not have to leave now.
Mairéad Farrell (Galway West, Sinn Fein)
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I might start with these and then we can go back to the Senator. What responsibility does this include exactly?
Mairéad Farrell (Galway West, Sinn Fein)
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Which is Luxembourg, yes.
Mr. Gerry Cross:
No, the third country is Israel, which is issuing. If it was just issuing above €1,000, it could choose any country in Europe to be its home member state. However, Israel is issuing denominations below €1,000, small numbers. Therefore, what the prospectus regulation says is the home member state is the one where it first makes a public offer of those bonds. That was originally the UK. Brexit occurred. Under European Securities and Markets Authority guidelines, effectively it came to us because Israel said it was issuing in Ireland now and it moved its home member state to Ireland. As the prospectus regulation is worded, and the ESMA Q&A supports this, that can never change. It has happened. Ireland became the home member state. That is the case. What the prospectus regulation also says with regard to the competent authority, however, is that the approval of the prospectus for any given year can be transferred. This is subject to what I was describing earlier. When it is transferred, the competent authority to whom it is transferred, in this case Luxembourg, CSSF, becomes the home member state for that prospectus.
Mairéad Farrell (Galway West, Sinn Fein)
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I will explain what I am trying to understand. I remember listening to "Drivetime" when there was a discussion specifically on this. The Central Bank released a statement and it was then that the issue of the €1,000 came into the discussion. What is actually fully different, then? There was reference to the responsibility in terms of non-equity securities for less than €1,000. What is different this year from last year, if they are all under €1,000?
Mairéad Farrell (Galway West, Sinn Fein)
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You are making the issuance in----
Mairéad Farrell (Galway West, Sinn Fein)
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What was the need, then, for the clarification in terms of the €1,000? Is it because we are still the home state?
Mairéad Farrell (Galway West, Sinn Fein)
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That is what I had understood.
Mairéad Farrell (Galway West, Sinn Fein)
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It is important to understand.
Mairéad Farrell (Galway West, Sinn Fein)
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Which they have been doing.
Mairéad Farrell (Galway West, Sinn Fein)
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At that point we cease being the home member state.
Mairéad Farrell (Galway West, Sinn Fein)
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But we would not possibly be able to do it if they did go over €2,000, say, for next year.
Mairéad Farrell (Galway West, Sinn Fein)
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Okay. At this moment in time, what is our current relationship, exactly, with Israel?
Mairéad Farrell (Galway West, Sinn Fein)
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This year, despite it being changed, right now.
Mairéad Farrell (Galway West, Sinn Fein)
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Unless they requested a transfer.
Mairéad Farrell (Galway West, Sinn Fein)
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So that could technically happen at any point.
Mairéad Farrell (Galway West, Sinn Fein)
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But we do not know. The point is, technically. None of us can predict what could be done by any country or any place.
Mairéad Farrell (Galway West, Sinn Fein)
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It is more that I want to understand fully the technical aspect of this. It was something that was continuously confused in the debate, I nearly think, within the media. I really want to understand this fully. I do have very strong views on it but I want to understand the technicalities of it fully. Does that mean that in terms of this year, is there no contact with Israel at all needed, required or happening? Since we are the home state, is there some kind of relationship continuing?
Mr. Gerry Cross:
In the prospectus regulation context, which we discussed the last time we were here, which is in any event a regime whereby there is a huge amount of flow-through of prospectus approvals and final terms, in any event, we would not have much ongoing contact with anyone. In this case it is fair to say that there is nothing now happening because we are not the prospectus approver that would require us to have any ongoing contact.
Mairéad Farrell (Galway West, Sinn Fein)
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One of the big topics we discussed the last time you were here was our ability to end this relationship. I understand from the line of questioning that Senator Higgins will be touching on our report and that kind of thing, so there might be other questions coming out of that. You said something to the effect that there is no way of changing that home member state. Let us ignore Israel right now. Say if we took any state, there must be ways that a state ends up no longer being a home member state. I would find it hard to believe that something continues from now to forever. There must be some ways that a home member state changes.
Mr. Gerry Cross:
We have not found it. We kind of share - in a way, I absolutely understand where you are coming from. It sort of seems, from the way I think about it and the way our lawyers have explained it to us - that it is basically a residual thing in the way that any company in Europe has a home member state. It just does not change. That is what the regulation says.
Mairéad Farrell (Galway West, Sinn Fein)
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I just find it hard to believe that if a country is literally committing genocide, how that does not have an implication, even if it is in the horrific aspect of a financial risk kind of thing, not in terms of the actual genocide. I find that hard to believe. What I might ask on that - this is something I have been wondering - is what I think I understand it to be. If, for example, there was a method of the Central Bank of Ireland saying "No, Ireland can no longer be the home state", would that mean, then, that no other EU state could be the home EU member state?
Mairéad Farrell (Galway West, Sinn Fein)
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In relation to the prospectus regulations.
Mr. Gerry Cross:
-----relation to Brexit. It is Q&A 16.1. There are lots of scenarios given. It states:
In ESMA’s view, the choice of home Member State under PR Article 2(m)(iii) should be made only once. As such, except where either of the specific circumstances described in that provision arises [that is specifically in relation to Brexit], a third country issuer’s choice of home Member State under that provision is definitive.
It is basically saying it has now become part of your DNA.
Mairéad Farrell (Galway West, Sinn Fein)
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Surely to God if Russia came to Ireland and tried to become a home member state, that would not work, under the prospectus regulations. Could it?
Mairéad Farrell (Galway West, Sinn Fein)
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So if there were EU sanctions-----
Mairéad Farrell (Galway West, Sinn Fein)
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-----that would change the whole thing.
Mairéad Farrell (Galway West, Sinn Fein)
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If there were not EU sanctions but there were national sanctions - using Russia for this example, although Israel is the actual question we are talking about - would it be the case that if we refused, no other EU country could be the home state?
Mairéad Farrell (Galway West, Sinn Fein)
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Okay, that is important.
Mr. Gabriel Makhlouf:
To be clear on the Russia example, if everything gets resolved with Ukraine and the sanctions get lifted and all that happens, we are still the home member state and they could come back to us. In practical terms, as Mr. Cross said, right now with the State of Israel prospectus the home member state is Luxembourg. In practical terms, it is now Luxembourg. For the 2025 prospectus, it is Luxembourg.
Mairéad Farrell (Galway West, Sinn Fein)
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If they issue a new type of bond, however-----
Mairéad Farrell (Galway West, Sinn Fein)
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-----under €1,000, then it could.
Mr. Gabriel Makhlouf:
-----but for the last four years that they have been with us, they only issued one prospectus a year. Who knows what will happen in the future? The point I want to be clear on is that based on what has happened in the past, we do not expect to have any involvement with the State of Israel unless they decide to issue further securities below €1,000 after 1 September 2026.
Mairéad Farrell (Galway West, Sinn Fein)
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I am trying to understand this as much as possible because I find it hard to argue in debates unless I have the exact figures.
Mairéad Farrell (Galway West, Sinn Fein)
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I need to know how exactly things work because I am always the one in the debate who doubts myself. I may think the other person is wrong but I am the one who does not push it so I need to fully understand things. The problem here is that they can and they could, so it is not necessarily a done deal for this year. It could be but it might not be, and it is also not dealing with the crux of the issue, which is that huge numbers of people do not want us to be a home member state for Israel.
I have another question. It has been mentioned that the Central Bank received €38,950 from Israel from January 2020 to September 2025. Is there going to be any payment for services to the Central Bank this year if it simply remains in Luxembourg, or are there still fees?
Mairéad Farrell (Galway West, Sinn Fein)
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Please come back with the information.
Mairéad Farrell (Galway West, Sinn Fein)
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Please double-check because this issue is very important. I wanted to mainly get as much factual information as possible. I must say that I find the way it turned out incredibly disappointing. I had hoped when I saw the news that it meant that we, as a State, had stood up to this. I really did. It is incredibly disappointing that that is not the case. I strongly feel that surely there is a way of getting out of this, especially given the genocide. We had a long conversation about genocide in our previous committee meeting. It is awful that we have any hand, act or part in this, as is the fact that this could still potentially be an issue this year and potentially next year. I wanted to understand mainly those few issues and I thank the witnesses from the Central Bank. I will let Senator Higgins back in.
Alice-Mary Higgins (Independent)
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I will probably circle back to similar issues but I will first discuss the recommendations of this committee. On recommendation 3, we had requested and recommended that the Central Bank would conduct an immediate internal review in advance of any renewal. Again, that is not a matter of who renews it. It is in advance of any renewal. We had looked for an immediate internal review to determine the questions of compliance with the prospectus regulation and the required level of disclosure, accuracy and transparency.
We also explicitly requested, under recommendation 5, that there would be an examination of the completeness of the bond prospectuses and made a request for supplementary information. Again, that is completeness of the existing bond prospectus of 2024, and the request that there would be supplementary information, which was identified in the course of our discussions in the committee as information that was not included in the 2024 prospectus, which was approved by the Central Bank. For example, the nature of the case taken by South Africa against Israel under the Genocide Convention, the ICJ advisory opinion of July 2024 and other pertinent matters of international law. These were identified as gaps in the prospectus where supplementary information should be sought, as it is allowed to be sought under the prospectus regulation.
Before we go into the examination of the transfer of approval, I would like to ask about what happened in July and August. Did the Central Bank conduct an immediate review as we had asked? We had also requested an immediate internal review. Did it examine questions of compliance with international law? Was supplementary information sought from the issuer?
Mr. Gerry Cross:
I thank the committee for the recommendations on the report. As the Governor and the deputy governor have said, it has been really important for us to have had these exchanges. They are very significant to us, as are the recommendations, and we take them very seriously, as members can imagine.
There is a lot in the recommendations and I think there are two aspects to the Senator's question. One is in relation to the review of our processes and approach, etc.
Alice-Mary Higgins (Independent)
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That is recommendation 9. We might come back to that later but right now I am specifically asking about the immediate internal review that we had requested-----
Alice-Mary Higgins (Independent)
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-----and recommendation 5, in relation to the seeking of supplementary information.
Mr. Gerry Cross:
As regards compliance with the review, there are two things. In terms of our own process, throughout this and going right back to the hearing at the end of 2024, our writing to the committee in December 2024 and reviewing our process then and on an ongoing basis, under the challenge that we have had from this committee to make sure that we are getting it right, there is a lot of complexity in all of that. We have continued to do that and we will always continue to do that. That review was absolutely part of how we carried out our practices during the course of the last year and continue to do so.
The Senator asked whether the 2024 bond prospectus was complete and whether we had looked for supplementary information. Again, coming back to what the Governor said earlier, in respect of what we did in our relationship with the issuer and carrying out our functions there, that is subject to confidentiality. I cannot say we did this, that or the other or raised the following issues. What I can say is that in the things we had to think about and we needed to reflect on, we continued to do that at every stage and took this with, as the Senator can imagine, the utmost seriousness to make sure we were getting to the right answer, from our point of view.
Alice-Mary Higgins (Independent)
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I did not really get an answer, frankly. We looked for an immediate internal review on the required level of disclosure, accuracy and transparency again. I am asking if that happened in August. I am also specifically asking whether supplementary information was sought. I am not asking Mr. Cross to outline the details and so forth.
Did the Central Bank act on recommendation 5 and did it seek supplementary information? This is around the Central Bank's relationship with us and its accountability to us as a committee. It is reasonable for us to ask if our recommendation was acted upon.
Alice-Mary Higgins (Independent)
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I am not asking how. I am asking, if.
Alice-Mary Higgins (Independent)
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So Mr. Cross will not tell us if the Central Bank sought supplementary information. I am not even asking for the detail of that communication.
Alice-Mary Higgins (Independent)
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It is concerning, if the committee is making recommendations, that Central Bank will not tell us if it acted on our recommendations. I am framing it in relation to the recommendation made to the Central Bank. I am not look for its communications with others. It is about whether it acted on what we recommended. We will park recommendations 3 and 5. We have not been told if there was an immediate review as was requested. We have not been told if supplementary information was sought. The framing of the responses suggests that it does not seem likely.
Alice-Mary Higgins (Independent)
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Mr. Cross is not disclosing whether or not the Central Bank sought supplementary information as requested.
Alice-Mary Higgins (Independent)
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Going back to some of the questions around the approval of the approval point, and this is the other piece - I would ask Mr. Cross about the review - in the approval of the approval, to be clear, we heard Ireland is the home state and is the home state on an ongoing basis-----
Alice-Mary Higgins (Independent)
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The approval of the transfer of the responsibility for approval. As Ireland is the home state and because the issuer has requested permission to transfer the approval process to Luxembourg and the authority there, is it not the case that the Central Bank could have refused or agreed to approve that transfer of approval?
Alice-Mary Higgins (Independent)
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The Central Bank could have said yes or no.
Alice-Mary Higgins (Independent)
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I am going to come in to some of the guidance for the prospectus regulation.
Alice-Mary Higgins (Independent)
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I am going to be going through those.
Alice-Mary Higgins (Independent)
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The Central Bank decided that it did not have the basis to refuse. Can I just confirm? I want to get the facts clear. The Central Bank could have said yes or no, but then we go to the basis on which it decided to do so or not do so. If the Central Bank had said no, if Ireland had denied approval for the transfer of approval, is it not the case that it could not have happened and Israel would not have been able to have its bonds issued for 2025 by the Luxembourg authority?
Alice-Mary Higgins (Independent)
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Going into the process around the approval of the approval, Mr. Cross mentioned the prospectus regulation. According to Article 28 of the prospectus regulation, subject to various things, the competent authority may transfer. It is not an obligation. Going to the Central Bank's own guidance on the prospectus regulatory framework, and I am reading from the bank's guidance:
The Central Bank may accept or reject, in its sole and absolute discretion, any such request for transfer received. Factors taken into account in considering a transfer request may include [and the bank lists them in its letter to us] the domicile of the issuer, the country where the issuer’s securities are admitted to trading and the location of any offer proposed by the issuer. This is not an exhaustive list and each transfer request is considered by the Central Bank on a case-by-case basis.
Is it not the case that the Central Bank has absolute discretion and that, on a case-by-case basis, the bank can look to considering factors beyond the three factors it indicated in its written correspondence, because that is not an exhaustive list?
Alice-Mary Higgins (Independent)
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And they are not exhaustive.
Mr. Gerry Cross:
They also reflect, and this goes back to the Chair's question, the criteria that are inherent in the prospectus regulation when it comes to where the home member state is originally decided. There is a coherence there. Fundamentally, as a public authority, we have to look at the decision that is put to us. We have to ask what is reasoned, proportionate and the correct decision for us to make in this case. Where we have set out criteria - yes, they are not exhaustive; there could be other ones - one of those criteria clearly states it is the public offer that is a key factor in determining this. That is effectively constraining our determination.
Moreover, those criteria are not criteria that we simply said we would write them in when we were writing these guidelines. They reflect the criteria in the prospectus regulation itself in relation to how to think about the connectivity between a prospectus and a jurisdiction. When you think about it, the State of Israel had been offering bonds in this jurisdiction. Now it was not going to be offering bonds in this jurisdiction and it requested a transfer. Strictly speaking, the Senator is right in that it was a decision for us - of course, it was - but clearly we did not have a legal basis to say no, we are not going to transfer this.
Alice-Mary Higgins (Independent)
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We will come back to that legal basis because I would disagree with Mr. Cross. I do not believe that is clear at all. For the record, we should be clear that it nowhere says that the domicile of the issuer and so forth are the key factors. That is not stated in the prospectus regulatory framework. It simply says that these are factors which may include those listed, and then it says that it is not an exhaustive list. Mr. Cross mentioned the question of the legal issues and the legal compliance. Going back to the prospectus regulation, which the bank is considering, one of the things that is in the prospectus regulation, which my colleague, Deputy O'Callaghan, read out, as specifically being one of the factors that needs to be considered is paragraph 88 of the preamble, which refers to the compliance with fundamental rights and principles and the Charter of Fundamental Rights. That is a basis within the prospectus regulation that can be drawn on as one of the factors that maybe should be considered by the Central Bank when making a transfer request. What is not clear to me is how that has actually been, or whether it was, considered.
We have had contradictions. We have been told in one of the written replies that the bank considers national and international law and so forth in, I think, its approvals. In our last engagement, Mr. Makhlouf said that actually it was the regulations the Central Bank looked to rather than the preamble when making the decisions and that they were the relevant basis. He also stated, in a later exchange with me, that the fundamental point and question we need to ask ourselves is whether, at that end of the day, the State of Israel is able to repay these bonds. I said, no, the fundamental question is whether there are risks to investors, including financial and other risks. Mr. Makhlouf replied, no, it is financial risks. We will come back to the financial risks in a moment. Just a few moments ago, Mr. Makhlouf also said that the Genocide Convention and the ICJ do not play a role. That was his language from 15 or 20 minutes ago. Where was the consideration of international law that we would argue and I would argue and believe is required under paragraph 88 of the prospectus? Where was that considered in the Central Bank's process for the approval of the transfer of approval?
Mr. Gabriel Makhlouf:
As Mr. Cross explained, the discretion we have is fettered by statute. We have to operate within the framework that is presented to us. We took the view that, at the end of the day, if these securities were no longer going to be offered in Ireland, we had no substantive legal standing to refuse the transfer-of-approval request. We thought about the issues but in the end we came to the conclusion that there was no reasonable, proportionate argument that would justify our refusing the transfer of approval.
Alice-Mary Higgins (Independent)
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To be clear, Mr. Makhlouf is arguing that the Central Bank was fettered, that it was unable-----
Mr. Gabriel Makhlouf:
Sorry. Let me be clear. The Senator implied earlier that we had absolute discretion on this. I am saying our discretion needs to operate within a legal framework, and that legal framework essentially meant - or we concluded that it meant - that there was no basis for us to refuse the transfer of the approval.
Alice-Mary Higgins (Independent)
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To be very clear, the language "sole and absolute discretion" is not my language.
Alice-Mary Higgins (Independent)
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That language is from the Central Bank's guidance-----
Alice-Mary Higgins (Independent)
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-----so it is its guidance that states the Central Bank may accept or reject in "sole and absolute discretion".
Alice-Mary Higgins (Independent)
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That is the Central Bank's language-----
Alice-Mary Higgins (Independent)
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-----so, to be clear, I am not putting words or phrases-----
Alice-Mary Higgins (Independent)
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This is the Central Bank's language. Mr. Makhlouf has told us he believes the Central Bank was "fettered". I am not clear what it is fettered by. It is not fettered by, as we have put forward, the prospectus regulation, which allows it to consider matters and principles of international law.
Alice-Mary Higgins (Independent)
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Mr. Makhlouf believes the bank is fettered by-----
Mairéad Farrell (Galway West, Sinn Fein)
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Could we have one person at a time?
Alice-Mary Higgins (Independent)
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So Mr. Makhlouf fundamentally believes that the bank is not able to consider matters of international law, as set out in paragraph 88 of the preamble to the prospectus regulation, when considering a request for approval of a transfer of approval.
Alice-Mary Higgins (Independent)
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The witnesses have spoken about connectivity but have not addressed the other concerns.
I just want to finish this line of questioning, Chair. I will come back then-----
Mairéad Farrell (Galway West, Sinn Fein)
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Then we will do the second round.
Alice-Mary Higgins (Independent)
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I will ask my other questions in the second round.
If I may, I will ask about due diligence. Did the witnesses feel that responsibility and due diligence were or are a factor in relation to the transfer of approval of this process to the relevant authority in Luxembourg? Were the considerations of due diligence the bank would have to a fellow body in that? In addition, did the bank give information or communicate - I know the witnesses will tell me it cannot for this - in relation to the authority in Luxembourg the concerns that had been raised, including the concerns in relation to risks associated with international law? Was that conveyed to the authority in Luxembourg, and did the bank consider that it had a due diligence duty in that transfer?
Lastly, tying back to that same point, I refer to the EU legal principle of consistent interpretation, whereby legal provisions must, as far as possible, be interpreted in a manner that is consistent with international law. Will the witnesses confirm to me whether there was a due diligence consideration? I have been speaking to the finance committee in Luxembourg, by the way, and it is not happy about having been placed in this position or about its authority having been placed in this position. Was there a consideration of due diligence in transferring in that regard, in placing the committee in that position, and was there a consideration of the EU legal principle of consistent interpretation?
I will finish with those questions-----
Mairéad Farrell (Galway West, Sinn Fein)
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And then it will be the-----
Alice-Mary Higgins (Independent)
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-----and then I will come back in again.
Alice-Mary Higgins (Independent)
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And the principle of consistent interpretation-----
Alice-Mary Higgins (Independent)
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Just to be clear, Mr. Makhlouf thinks the principle of consistent interpretation, which requires that the enactment of EU laws be consistent with international law, sits alongside his having said that the Genocide Convention and the ICJ do not play a role in relation to this process.
Mr. Gabriel Makhlouf:
My point about the Genocide Convention and the ICJ advisory opinion is that, in the context of the transfer of approval, they are not determinative. At the end of the day - and I think we discussed this back in June - no final decision has been made by any court on the existence of genocide.
Alice-Mary Higgins (Independent)
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I will hold the rest of my questions.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will come in with a few questions and then it will be back to you, Senator Higgins, and then to the Chair.
I want to follow up on a few of the answers the witnesses have given and a few of the issues. They said a key consideration for the Central Bank in this was connectivity. Can they explain why connectivity is so important? What is that about?
Mr. Gerry Cross:
It follows on from the line of exchange with the Chair a few moments ago. What is the substance of what is going on in the transfer context? The prospectus regulation allows for the issuer to apply to transfer the prospectus approval to another authority and for that other authority to become the home member state authority for that prospectus. The question we asked ourselves a long time ago is what that means. The criteria are the domicile of the issuer; the country where the issuer's securities are admitted to trading, which does not apply in this case because they are not admitted to trading, at least in the European Union; and the location of any offer proposed by the issuer. Dare I say, it is the principle that is also embedded in the prospectus regulation itself, which is, what is the connection? Where there is a third country issuing debt in the European Union, where should that prospectus be approved? It should at least be in the places where it is making the offers. It is not making offers in Ireland any more, so it does not make sense that the approval would remain with us. That is what they were asking us. As is required under the regulation, the issuer can ask to move the authority, and that is the basis on which we have looked at this.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Cross said the Central Bank's decision-making needs to be reasoned and proportionate. Given what has been taking place in Gaza, given our obligations under international law, given that there is a genocide taking place against the Palestinian people - I note that the Governor seems to dispute the fact that there is a genocide and says that it has not been determined yet in international courts, which seems to dispute the views of the Irish Government, the Taoiseach and the Tánaiste, who are all on the record as saying there is a genocide taking place - and given the gravity of what is happening in Gaza, why are those issues, in terms of a reasoned and proportionate decision-making process, not taking precedence over the bank's concerns about connectivity?
Mr. Gerry Cross:
As the Governor has explained, there is a mechanism whereby international developments, geopolitical developments and acts of war can be reflected in the prospectus regulation. That mechanism is sanctions. We have seen that being done with Russia. One has to approach the prospectus regulation and ask what we are being asked to do here. I know the facts around this are extremely difficult, distressing and traumatising for all of us and, of course, for the people of Gaza, but the Central Bank, as a creature of law, has to ask itself what it is empowered to do. If we look at the prospectus regulation, it is there to say what is required if a country, that has not been prevented by sanctions, wishes to issue debt in the European Union. What is required is that the country issues a prospectus that is complete, consistent and comprehensible. A competent authority, as in the prospectus regulations, will be asked to make that judgment. However, that is all that is being asked. The authority that will be asked to make the judgment in terms of a third country issue which has not been sanctioned is the prospectus. This brings us back to the discussion we had the last day as regards it being complete, consistent and comprehensible. If that is the context, of course the recitals talk about the importance of human rights but it is in that construct. Similarly, when we come to our transfer decision, it is in that construct that we have to weigh that. It breaks down when we start to say we will actually do something we would prefer to do. That is where it breaks down.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Central Bank was empowered by this committee and the report it issued with respect to these issues to carry out due diligence with respect to international law. Did it do that?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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With respect to international law?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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How can the Central Bank stand over its decision in terms of international law and our obligations under the Genocide Convention?
Mr. Gerry Cross:
As the Governor has explained it, you have to see how this fits within what we are legally empowered and allowed to do. We are not allowed to have regard to what we simply choose to have regard to. We have to have regard to what we are required to have regard to under the regulation and the legislation.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Central Bank has a legal obligation under international law to have regard to the genocide taking place. It has chosen not to do so even though under its own frameworks, it has "sole and absolute discretion" in this area. I am making a comment there. The Governor has told us that the bank thought about all the issues. Did it not think about the obligations under international law and the genocide taking place? Given that the Central Bank has "sole and absolute discretion" in this decision-making process - according to itself - how could it have not given those sufficient consideration to think that it would not be the thing to do to approve this transfer in terms of the genocide taking place and the report this committee issued?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is a question.
Mr. Gabriel Makhlouf:
We took into account EU law and international law. We took into account what the prospectus regulation says and we came to a judgment that, in our view, is completely supported by law. What we could not do is to simply ignore all that and just come up with some other view. I suspect we are going to be in disagreement on this but the idea that we have ignored and dismissed other legal requirements, etc., is incorrect. As the Deputy can imagine, we have been thinking about this issue extremely carefully for some time and, on the transfer, we came to the view that we did. Just in case there is any avoidance implied, we have not ignored the committee's report at all. We have been doing the diligence we need to do in respect of the prospectus that we approved and were responsible for. We have not done that in the context of the next prospectus, which is for the authorities in Luxembourg to do.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf is telling us the Central Bank has done its due diligence under international law to ensure its decision-making on this matter respects international law and our obligations under the Genocide Convention. Will Mr. Makhlouf tell us about this due diligence and how, under that due diligence, the Central Bank came to the conclusion that it was meeting its obligations under the Genocide Convention and international law?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Will Mr. Makhlouf share that analysis and that internal and external legal advice with the committee?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf will not share it even though this is an area of public interest. He is defending his actions-----
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Mr. Makhlouf is defending his decision-making here on the basis of the analysis and the internal and external legal advice received. The committee has made recommendations about due diligence under international law. He is assuring us the bank did do its due diligence under international law. We are asking for details about that and for him to share that analysis. Even if he will not share the legal advice, will he share the analysis?
Mr. Gabriel Makhlouf:
We have shared a lot of the analysis already, including at this committee in the last half hour. However, I am quite happy to share it again. Fundamentally, as Mr. Cross explained a minute ago, as far as the transfer of approvals is concerned, we looked at what the prospectus says and what the EU regulations say, we thought about what other obligations we may have and in the end we concluded there was no legal basis for us to refuse the transfer.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Will Mr. Makhlouf provide detailed written analysis as to how that conclusion was arrived at?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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When Mr. Makhlouf was before the committee on 11 June on these issues, we had an extensive engagement then and we subsequently published our report. He will not tell us the date when Israel made its request for a transfer but can he tell us that when he was with us in that committee on 11 June he had not received any request for a transfer at that point?
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is of key public interest and key interest to this committee. If that request had been received by the Central Bank and Mr. Makhlouf had not shared that information with us on 11 June, that would be very significant.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Therefore, it could well be the case that when Mr. Makhlouf was with us in June he had already received a request for that transfer and he had not let us know but we will never know. We will never know the situation on that. He is not going to tell us. He is not going to provide any information on that at all - even about the broad timeframe as to when he received the request for a transfer.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Well, it is a question
Alice-Mary Higgins (Independent)
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I will just come in there although I know there may be a third round. One thing I am a bit concerned about is that I have been hearing statements from Mr. Cross to the effect that we cannot just do something we would like to do. We cannot just do it because we want to unless there are sanctions. I feel this is muddying the waters because what we are discussing is law. We are discussing law.
We are not discussing sanctions or the imposition of sanctions. That is a separate discussion. We are discussing questions of law and compliance with law. I will come back to it because there are some fundamental pieces here. I just do not see how Mr. Makhlouf can have come to the conclusion that there was, as he said, no legal basis to refuse.
The Genocide Convention has been mentioned but I want to speak on the advisory opinion from July 2024. As Mr. Makhlouf will be aware, the committee made very specific recommendations. Recommendation 10, for example, and a number of other recommendations specifically and explicitly mentioned the July 2024 advisory opinion of the International Court of Justice. That advisory opinion is not law but it is from the highest level in the world. It is the highest authority’s interpretation of what the existing, already applicable law is. It is a definitive interpretation of what law applies in relation to a specific situation. Paragraph 278 of that advisory opinion speaks about the obligations on states and other actors, which we will come back to in a moment, to “prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the Occupied Palestinian Territory”. That is an obligation not simply to consider or think about trade or investment relations but to prevent them.
We know how these bonds have been used. We know they have been used in relation to military actions, in relation to the actions that have been taking place in Gaza and in relation to the Israeli exchequer, which has expended money on supporting the expansion of settlements in the West Bank and so forth. If there are investment relations that will directly contribute to the maintenance of the illegal situation created by Israel in the occupied Palestinian territory, how is that consistent and how is it possible for the Central Bank to say it is being consistent with international law and the EU legal principle of consistent interpretation, which says legal provisions should be interpreted in a manner that is consistent with international law? The EU collectively is also bound by the ICJ. How does that add up? I am not clear what the basis is for saying that the part of international law that basically states that self-determination should not be trampled on – the direct language is that trade and investor relations should be prevented - is reflected. I just do not see how that is reflected with the facilitation of investment relations.
Alice-Mary Higgins (Independent)
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It is the highest interpretation of applicable law.
Alice-Mary Higgins (Independent)
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Mr. Makhlouf has just said that does not apply to or impact, even, on his decision. That is a very interesting thing to have said. The International Court of Justice ruling is law; it is telling the Central Bank what the law is. Is there another space for interpretation of international law that Mr. Makhlouf regards as taking precedence over the ICJ’s interpretation of international law-
Alice-Mary Higgins (Independent)
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No. It is not simply a matter of disagreement because there is a legal issue here, which is fundamental. Mr. Makhlouf has said there is no legal basis to refuse. Is he going to go further and say the International Court of Justice advisory opinion, which informs us, as a fact, that international law obliges states and organs of the state, such as the Central Bank, to prevent trade or investment relations that contribute to the maintenance of an illegal situation in relation to occupation, is not a legal basis to refuse? He is not just saying that he does not believe it was a relevant legal basis but that it does not even have an impact on the decision of the Central Bank.
Alice-Mary Higgins (Independent)
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That contradicts what Mr. Makhlouf said a moment ago.
Alice-Mary Higgins (Independent)
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Does Mr. Makhlouf not agree that the Central Bank has the capacity, under paragraph 88, to consider international law and to bring those criteria into play in the performance of the bank’s function? That is what the bank’s guidance is. It is very clear that it does not say the Central Bank is tied to the connectivity question solely. It says it is at the absolute discretion-----
Alice-Mary Higgins (Independent)
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So, it is a choice fundamentally.
Alice-Mary Higgins (Independent)
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This comes into another wider question. Is Mr. Makhlouf speaking solely about the prospectus regulation when he talks about the law the bank has to operate in?
Alice-Mary Higgins (Independent)
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The Central Bank needs to operate within all law but its interpretation of the law in this regard is taking precedence over the International Court of Justice’s interpretation of that law. Is that the case?
Mr. Gabriel Makhlouf:
-----so we have to make the decision. We take into account the law as we see it. We have to operate, just to repeat what Mr. Cross said, within a framework that requires us ultimately to also be proportionate and to be reasonable. In the end, the key factor was that, as these securities were no longer to be offered in Ireland, we decided we would approve the transfer of approval of the prospectus - the step which is just the transfer - to the CSSF.
Alice-Mary Higgins (Independent)
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The Central Bank chose to give that factor precedence in its process. That is, as Mr. Makhlouf says, at the Central Bank's discretion. It is what it has chosen.
I will go to the reports recommendations 9 and 10 and the very wide concerns Mr. Makhlouf is hearing from us. This does not cut across anything about the particular. Recommendation No. 9 was:
The Joint Committee recommends that the Central Bank of Ireland reviews its process for assessment of a prospectus and ensures that due diligence is discharged by the Central Bank including appropriate consideration of national and international law.
From our perspective as a committee, it seems that the process, as Mr. Makhlouf outlined it, does not seem to give appropriate weighting to certain aspects of international law. The committee asked if there would be a review in general, not solely in this specific instance, of the bank’s processes.
Mr. Makhlouf answered the question on seeking legal advice. Has the Central Bank examined that process? Is it in the process of a review in relation to these matters?
Alice-Mary Higgins (Independent)
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Is Mr. Makhlouf satisfied with this process, as he outlined it? He can hear the frustration among members about the Central Bank’s process in terms of the assessment of prospectuses. For example, in the case of the bank's approval of four prospectuses in a row, the committee put forward that key information was not included in the prospectuses. The committee raised concerns about this in terms of completeness. At a minimum, concerns are being raised about how the Central Bank chooses to apply and consider national and international law. Is there any review of its processes under way in relation to this, in general?
Alice-Mary Higgins (Independent)
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Are there any changes in general in the process that have emerged from that consideration?
Mr. Gabriel Makhlouf:
I do not think anything specific has emerged. There may have been points of detail as to how things were done, but in terms of the transfer of approval, that has only happened once. I am talking about the approval of the prospectus, which is a completely separate issue to the transfer of approval. As far as the 2025 prospectus is concerned, we have not reviewed that at all because it is nothing to do with us.
Alice-Mary Higgins (Independent)
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I will finish on this point. In reviewing the processes, there is a clear tension and difficulty on the question of international law in terms of-----
Alice-Mary Higgins (Independent)
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Mr. Makhlouf said we are certainly at a point of disagreement. The interpretation he has applied is different from how the ICJ has been interpreted. Does he accept that the Central Bank is a public authority of the Irish State and, as such, it needs to consider the legal obligations on the Irish State in its actions?
Alice-Mary Higgins (Independent)
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Does he have to consider the obligations of the Irish State in the performance of his functions?
Alice-Mary Higgins (Independent)
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The Government itself has been very clear about the applicability of the ICJ ruling.
Alice-Mary Higgins (Independent)
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When the International Court of Justice talks about the law, the international law is law. The Genocide Convention is law. There seems to be some idea that there are real laws, which we look to such as for prospectuses and regulations, and then there is aspirational law that is somehow aspirational. An advisory opinion from the International Court of Justice is a definitive interpretation of what international law already applies. It is not an aspirational document. It is not requesting that future laws would be made. It is telling states what laws apply to them. Mr. Makhlouf said we cannot just deal in statements and abstract pieces. Does he recognise that the advisory opinion of the International Court of Justice is a definitive interpretation of applicable international law?
Alice-Mary Higgins (Independent)
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With respect, I believe that expertise may be needed by the Central Bank and perhaps that should be part of the review process internally.
I am going to conclude on this point. I imagine Mr. Makhlouf will not be in a position to tell us if concerns have been raised by the authority in Luxembourg or if he had communicated to it the concerns that we had raised. Does that come under privileged information? He can just say "Yes" or "No". I imagine it does.
Alice-Mary Higgins (Independent)
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Then, very finally, one of the questions we raised in our exchange goes back to the fundamental point about the State of Israel and the repayment of the bonds. This applies as a concern about the bonds that were issued under Mr. Makhlouf's watch in 2023 and 2024. Has there been further examination of the concerns that were relayed about the repayment of those bonds to bondholders who purchased bonds during the period of the Central Bank's approval of those prospectuses? There is a single line in the Israeli budget referring to the repayment of bondholders. We know the Israeli central budget draws on VAT and other moneys that are gathered from illegally occupied territories. Has there been any consideration of the concerns under money laundering legislation, which is the responsibility of the Central Bank, given the fact that the bondholders who have purchased bonds, including those offered under Ireland's watch and that of the Central Bank, may be repaid from moneys which are not properly and appropriately lawfully sourced?
Ms Mary-Elizabeth McMunn:
That was something Senator Higgins raised with us when we were here in June in relation to our role in anti-money laundering and terrorist financing. It is something that we set out for her in our subsequent letter. I am going to be very clear from that perspective. We are the competent authority in terms of the compliance of institutions with money laundering and terrorist financing. We do not investigate actual money laundering or terrorist financing activities. Our role is to ensure the institutions that are under our remit have the right controls and systems in place from that perspective. We are also obliged to report to the Garda if we have any knowledge or suspicion that a person has engaged in money laundering or terrorist financing activity. We do not monitor the source of funds for holders of bonds approved under prospectus regulations. That is not part of our remit in terms of anti-money laundering and terrorist financing.
Alice-Mary Higgins (Independent)
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Given that the Central Bank was informed about concerns, while it was not investigating it, the information was brought to its attention in regard to concerns being raised at that public session, was there a subsequent examination in relation to that question, based on the obligation under the prospectus regulations to look at relevant risk factors and so forth for investors? That is part of the obligation. They dovetail. The Central Bank has obligations under the money laundering legislation but it also has obligations on the assessment of risk, under the prospectus regulation. In that regard, was there an examination of the consideration of the risks in respect of money laundering and was that potential risk a factor in the decision to approve the transfer of approval?
Mr. Gerry Cross:
As Senator Higgins says, we have gone into the decision to transfer in depth. When we look at the recommendations in the report and their context, we were not involved in the decision to approve or not the 2025 prospectus. From that context, that is a null set, if you like.
In general terms, as we discussed here the last day, we did keep all relevant factors under review during the period. We discussed that with this committee the last day. Deputy governor McMunn accurately described our role in money laundering. That is as much as I can say.
Alice-Mary Higgins (Independent)
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The specific question I asked was not about the approval of the 2025 prospectus. Subsequent to that issue being raised, was that specific factor considered in relation to the 2024 prospectuses, of which the Central Bank still had oversight when we had that hearing in June? Was there a consideration of potential concerns about money laundering, not solely under the money laundering legislation but under the risk component of the prospectus regulation? Was this considered as a fact or an important matter to be reflected or conveyed in any way in the decision to approve the transfer of approval?
Mr. Gerry Cross:
I apologise. I am not trying to frustrate the Senator but, as we discussed, I cannot share with her the things we considered and asked or did not ask as part of our ongoing oversight in the carrying out of our supervisory and regulatory responsibilities. When it comes to the transfer, I described in detail the things that we have taken into account.
Alice-Mary Higgins (Independent)
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I am going to finish, Chair, but could I ask for a written document, as that may be useful? I accept that the Central Bank may not give us the detail in relation to this process.
However, would it be possible to have something from the Central Bank that outlines in general what the due diligence process looks like in terms of these considerations of national and international law? That is not to effect disclosure in relation to how they have been applied to this particular request for the transfer of approval and so forth but about that process because we have a duty and an obligation under the law. Under the founding documents of the Central Bank, we have a rule and an oversight role, where there has to be accountability. A very minimal thing would be that the relevant Oireachtas joint committee would be able to have oversight of what the due diligence process being applied by the bank in general to the prospectus and the application of the prospectus-laying regulation looks like. Perhaps that is something we could have. I am happy to get that in writing, Chair. I know my time is expiring.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Just a short response from the Governor on that request, please.
Mr. Gabriel Makhlouf:
As I said, we have tried to put as much information as possible in the public domain to help the committee's considerations. I will have a look at what it is we can let the Senator have to add to that. It may look similar to what we have already given the committee but we will certainly try to address the Senator's request.
Colm Burke (Cork North-Central, Fine Gael)
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I will be very brief. I do not want to go back over what has been raised. I apologise for being late. Unfortunately, I had an event in Cork today I had to come back up from.
On the EU prospectus regulation, as a result of this issue with Israel coming up, has there been any discussion at European level? This same issue could arise with another country in 12 months' or two years' time. Has there been any review or discussion at EU level about how the regulations need to be tightened up? We seem to have a free hand here in that central banks are obliged to comply and are complying with the regulation, without question, but is the regulation too open? Should far stricter criteria be set out on that? Has there been any discussion at EU level about looking at this?
Mr. Gabriel Makhlouf:
I was going to say I am not aware of specific discussions on this particular regulation. There is a lot of discussion taking place on whether EU regulations in general, be they financial sector regulations or industrial regulations, etc., should be simplified so as to reduce the burden of regulation. That is the theme of a lot of-----
Colm Burke (Cork North-Central, Fine Gael)
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The whole issue is about not having restrictions. What occurred in the country in question was appalling. It is genocide and there is no question about that. That state is able to borrow money to continue on. It will argue it was not used for the war itself but it is being used in the occupied territories, etc. Is there not now an obligation from a European point of view? The whole purpose of the EU was to eliminate conflict and to move down the road of peace. Is there now a role for Europe to continue with that process, with part of that process being the limitation of the availability of money for a state that is carrying out this type of activity, which has in this case led to over 70,000 deaths?
Colm Burke (Cork North-Central, Fine Gael)
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What I am asking is whether there has been a discussion on the need-----
Colm Burke (Cork North-Central, Fine Gael)
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-----in the sense that when the EU process was established, it was about bringing peace and restoring peace.
Colm Burke (Cork North-Central, Fine Gael)
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It has been a huge achievement over the last 45 to 50 years, but it is then about trying to convey that to other parts of the world. Part of that process would be making sure the countries that are carrying out these atrocities do not use the EU or its member states to avail of funding and avail of people who are prepared to invest.
Colm Burke (Cork North-Central, Fine Gael)
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But can central banks not-----
Colm Burke (Cork North-Central, Fine Gael)
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Yes, but can central banks not look at this from their own point of view, because the process has to come through one of their units in whichever country it is? Is there then not a role for the central banks to play their part and maybe influence people from a political point of view as well?
Colm Burke (Cork North-Central, Fine Gael)
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Would it be worth the Irish Central Bank raising it at EU level to have this whole issue looked at?
Colm Burke (Cork North-Central, Fine Gael)
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Is there not a need for feedback because of what occurred here? We were signing off on the approval so the moneys could be borrowed and the loans made available. I know quite clearly Israel is saying the money is not being used for the war effort but at the same time it is being used to sustain the economy so the war effort can continue. What I am asking the Governor, therefore, is whether there is now a role for the Central Bank in going back at European level. Is there is a role for the central banks at European level in making the view known that they are being put in a very difficult position on this?
Colm Burke (Cork North-Central, Fine Gael)
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Specifically, has the bank contributed on this particular issue of the obligation on central banks at a European level to sign off on a prospectus when they have very serious concerns even though, as I said, the money is not being-----
Mr. Gabriel Makhlouf:
I apologise to the Deputy. I have discussed it informally with some of my colleagues but the issue itself, to my knowledge, has not been discussed in the forums where the decisions are actually made. It may have been but I have not been involved in those. I have had informal discussions with some of my colleagues about the issues.
Colm Burke (Cork North-Central, Fine Gael)
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The bank is part of the feeding-in of information to the decision-makers, however. Is it not time to start that feeding-in of information, with a stricter set of rules put in place to address states carrying out these acts? As the Governor pointed out, we were able to do it with Russia but we were not with Israel.
Colm Burke (Cork North-Central, Fine Gael)
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The Governor will accept there is very little difference between what Russia did and what Israel did. In fact, there is no difference.
What is worse in the whole Gaza effort is that there is no national army, there is a terrorist organisation, which is fighting against a really well-equipped army, but no effort being made to protect the innocent civilians in that process. Therefore, there is no difference between what Russia did and what Israel did. Would Mr. Makhlouf not accept that there is a need for further discussions on this issue at a European level?
Alice-Mary Higgins (Independent)
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I thank Deputy Burke because he brought up the international piece, which needed to be done. For clarification on the record, Israel has not denied that they have been used for war purposes. "Israel is at War" was one of the advertisements for the bonds. I say this just for clarification.
Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Just for the record, yes, and senior figures to that effect from Israel.
I thank the Central Bank representatives for their attendance. Go raibh míle maith agaibh go léir. That concludes the joint committee business in public session for today. We will adjourn the committee. Members are reminded that the select committee will meet on 5 November for Third Stage consideration of the Finance Bill.