Dáil debates

Thursday, 27 September 2007

 

Financial Markets.

4:00 pm

Photo of Joan BurtonJoan Burton (Dublin West, Labour)

I apologise for being a little late. I was confused about the timing as a result of all the votes.

With the current turmoil in the financial markets, it is now a matter of urgency that a reformed compensation scheme for depositors and savers with banks should be put in place. We have seen a number of banks experiencing severe financial difficulties in recent weeks and people would have witnessed depositors and savers in Northern Rock queuing outside the bank's headquarters. In Ireland, if the bank was to fail utterly, the maximum compensation currently available to savers and depositors is extremely low. It equates to 90% of savings, with a maximum limit of €20,000.

Despite the introduction of the Irish Financial Services Regulatory Authority, this particular area has yet to be reformed. The British Chancellor of the Exchequer recently announced that the UK system was to be reformed, with the Bank of England and the UK Treasury offering high levels of guarantees to savers and depositors. Northern Rock is an on-line bank without a bank structure here, so it became very difficult for customers to make phone and e-mail contact with the bank in the early days of the panic.

The Minister for Finance must put in place appropriate structures that will protect the integrity of the banking system and bank customers. The integrity of the banking system is fundamental to our economic well-being. Problems in the global credit market will, in turn, impact on those who wish to purchase houses, start businesses or simply ensure that their savings are secure. To date, the Minister for Finance has been astonishingly silent in respect of these issues. There has been no opportunity for any form of Dáil debate, not even at the Joint Committee on Finance and the Public Service, which the Government has not bothered to re-establish since the general election.

The people have a right to know if the Minister for Finance has his eye on the ball in respect of these key issues. He simply cannot hide behind the Financial Regulator. I want the Minister to make an honest statement, setting out clearly the likely impact of the turmoil in the financial markets on the banking sector, in particular, and the economy in general. What response, if any, does he propose to make as regards the clear risks involved for Irish savers and businesses as a result of recent events? Financial services have been a key component of growth in the economy during the past decade. Any difficulties experienced by this sector will, therefore, have a knock-on effect elsewhere.

The Financial Regulator must clearly outline the protections that are in place or indicate the structures that need to be revised in order to protect the customers of banks and credit unions. A full analysis must be made of the sub-prime market in Ireland, both in terms of investments by Irish banks and credit unions in financial derivatives and other new financial products. In addition, there is a need to produce a profile of the lending activities of sub-prime lenders in the economy. I am concerned that a number of such lenders are taking unacceptable risks as regards some of the lending in which they are engaged. The Joint Committee on Finance and the Public Service should be immediately re-established to examine these issues in public.

I want to be assured that the Minister is sending out a clear message that cowboys and unacceptable lending practices on the part of financial institutions in Ireland will not be tolerated. On previous occasions I raised with the Minister of State, Deputy Noel Ahern, the fact that the representatives of sub-prime lenders are calling door to door in local authority housing estates and in areas where people have purchased affordable housing and are offering to roll-up all their debts, including car and holiday loans. They are also placing inflated values on these people's homes and giving some of them more than 100% mortgages. Mr. Des Geraghty, chairman of the affordable housing partnership, recently and correctly stated that this type of behaviour, as it relates to lending, is insane. If the individuals involved default on their new loans, the level of charges and penalties imposed by sub-prime lenders means that many of them stand to lose their homes.

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