Terence Flanagan (Dublin North East, Fine Gael)

I take this opportunity to congratulate the Minister of State on his new appointment. I wish him well in the role for many years ahead. I also welcome the opportunity to speak on this Bill which is part of an EU-wide regulation of financial services.

Undoubtedly, the International Financial Services Centre is one of the great success stories of the Irish economy in the past 20 years. Its success has benefitted the economy and the many people who work there. The financial services industry is built on confidence, trust and a good reputation and it is important that it is sufficiently regulated. Its good reputation is the guarantee of future expansion and growth.

The reputation of the British banking industry has been severely dented, with the Northern Rock case highlighting the threats we might face if we are unlucky. We must learn from that experience to ensure such an event does not occur here. We must enhance the protection scheme for savers and depositors in Irish financial institutions. Our scheme is currently limited to 10% of deposits, with an upper limit of €20,000, which is completely out of sync with other European countries. We must protect depositors and ensure that banks do not take inappropriate risks. I welcome the fact that the EU is examining the Irish deposit protection scheme.

As with previous speakers, I have major concerns about sub-prime lending in Ireland. Lenders sell on a door-to-door basis, attempting to persuade people to roll up their loans and remortgage their homes. Such practices take place in my constituency of Dublin North-East. The lenders talk about easy borrowing while making huge commission by pressurising vulnerable people into taking out loans. There are applicants who lie on the application forms about their capacity to make repayments so they can secure loans. Irish regulation is too lax. It is estimated that sub-prime lending in Ireland amounts to over €1 billion. The Financial Regulator must have greater control of this market to ensure operations by these companies are robust and that they apply proper selling practices.

The regulation of complex securities and their rating agencies must also be reviewed. This process currently lacks transparency, particularly the uncertain valuation of securities which lies at the heart of the present credit crunch. In recent years many Irish people have been enticed to buy second properties abroad by freeing up equity in their homes. It is questionable if those selling properties are providing buyers with the necessary consumer information. These properties are being marketed as having rents guaranteed for many years to come but it is obvious that wages in those countries cannot support those rent guarantees. This area must be thoroughly examined by the Department.

The economic challenges we face are more serious than the Government would have us believe. We now face a much larger budget deficit, around €1 billion, as the Minister for Finance advised recently. Important lessons must be learned from recent developments in global financial markets. The Irish economy is beginning to slow and we clearly face more economic challenges. Our economy is vulnerable to a slow down because of our over-reliance on property lending. The property market is over-valued and confidence is falling as a result. We are one of the most indebted countries in Europe, with private debt two and a half times greater than our GNP. The warning signs have appeared in the newspapers and in announcements by the Central Bank in recent years but they have been ignored by the Government. With the budget on the way, the ordinary people of the country face difficult times. I call on the Minister of Finance to think of the neediest in society, the homeless, when framing the budget.

I welcome this Bill, which aims to increase the transparency of quotations for financial instruments by standardising them. This will help to reduce costs for users of financial instruments such as equities and shares, bonds and derivatives. It is to be welcomed that the new financial instruments, such as derivatives, are being brought within the scope of this legislation. I welcome section 14 of the Bill, which will extend the National Treasury Management Agency deposit and borrowing facilities to non-commercial bodies such as the Courts Service, universities, the RPA and the Housing Finance Agency. The extension of treasury services to the HFA will allow the National Treasury Management Agency to provide it more efficiently with short-term funds needed to manage its cashflow requirements.

I hope that the House's endorsement of the Bill will yield significant benefits to both Irish investors and investment firms. I look forward to debating the Bill on Committee Stage.

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