Batt O'Keeffe (Cork North West, Fianna Fail)

I thank all the Deputies who attended for this debate. I particularly thank the Whips for agreeing to give priority to this Bill, in recognition of the requirement to activate some of its provisions from 1 November next.

Deputies raised many interesting points, some of which were of a general nature rather than specific to the provisions of this Bill. I shall try, nevertheless, to respond to the significant points. Deputy Burton made many references to so-called "light" financial regulation in Ireland indicating that our regulatory system is somehow inadequate or ineffective. This characterisation of the quality of Ireland's financial regulatory regime is wide of the mark and does not stand up to scrutiny.

The reputation of Ireland as a suitable base for international financial services activity is a key element within our overall competitiveness and something we have a common interest in maintaining. The IMF, a reputable international authority competent to assess the standing of our system of financial regulation, conducted a comprehensive on-site assessment of IFSRA and declared that our Financial Regulator was well up to international norms. The Comptroller and Auditor General also carried out a recent value-for-money assessment of the Financial Regulator. Overall, the report presents a positive picture of the financial services regulatory environment in Ireland and it is evident that the Financial Regulator is operating to a high standard.

The chairman and the chief executive officer of the Financial Regulator recently set out in detail the regulatory approach that guides the conduct of its activities. I refer Deputies to these speeches and the Financial Regulator's strategic plan for a very clear explanation of its regulatory principles. It is essential that public comment and discussion is accurate and properly informed by the factual position in an area of strong interest to consumers which is also an important strategic and highly competitive sector of our economy internationally.

Some Deputies said that the Minister for Finance should be playing a more prominent role in managing the response to the current turmoil affecting the global financial services sector. This is based on a misconception of the role of the Irish Minister for Finance in the area of financial regulation. His role is to bring forward proposals to the Oireachtas for the regulation of the financial services sector. Once that legislation has been enacted, the task of implementing it on a day-to-day basis rests with the Financial Regulator. Neither the Minister nor the Department exercises legal powers or responsibilities in the area of financial regulation and the Financial Regulator is independent of the Minister in the exercise of its statutory functions. Various accountability mechanisms are in place for the Financial Regulator, including obligations on specified officers, including the chief executive, to appear before an Oireachtas committee on request.

Several Deputies commented on contracts for difference and the need to regulate them. Spread betting has become popular of late in virtually any activity, from sports results to weather predictions, and even election results. Financial contracts for difference, or FCDs, are used in spread betting and involve taking a position on the future movement of a price, either up or down, of a share, a commodity or an index such as a stock market index.

As from 1 November next, FCDs will be regulated under the markets in financial instruments directive regime as they are classified as "financial instruments" under Part 3 of Schedule 1 to SI 60 of 2007. Therefore, from that date, financial spread contracts, for instance, on specific shares, bonds or indices of shares, will become a regulated activity, and firms providing this service will have to be authorised. As part of their authorisation, firms will have to comply with all the requirements, including the rigorous client protection requirements, set down in SI 60 of 2007. Spread betting on matters other than financial instruments, such as sporting events, is not covered by the directive or the transposing regulations.

Deputies were interested too in whether credit unions were precluded from investing in non-capital-guaranteed products or savings for client moneys they have on deposit. The Registrar of Credit Unions took steps to limit the exposure of credit unions in the investment market by issuing a guidance note on investments in October 2006. This guidance note sets out the framework within which credit unions should maintain their investments. The guidance note is subject to regular review by the registrar in consultation with the sector. The board of directors of each individual credit union is responsible for managing the funds and setting the investment policy of that credit union. However, the registrar expects credit unions to comply with this guidance to avoid undue risk to members' savings and will monitor credit unions' investments against this guidance.

The legislation and the guidance in place at present do not prohibit explicitly credit unions from investing in financial derivative products. However, the guidance note sets out a list of authorised investments for credit unions and within this list there are limits for each class of investment instrument in which credit unions can invest. Credit unions are not precluded from investing in non-capital guaranteed products under current legislation or guidance. For instance, while they can invest in equities, under the terms of the investment framework, investment in equities is not to exceed 5% of the total of a credit union's investment portfolio.

Deputy Burton referred to the need for legislation to regulate the sub-prime lending sector that will enable borrowers to be protected. The measures the Minister proposes to bring forward as outlined in the consultation paper will provide for a robust legislative framework to address this concern and other regulatory issues in respect of the non-deposit lending sector in general.

Under these proposals, all non-deposit-taking lenders engaged in retail lending will be brought within the Financial Regulator's authorisation and ongoing supervision regime. In this context, retail lending means lending to all natural persons and to companies with a turnover not exceeding €3 million or, in other words, lending to all those who would benefit from the consumer protection code and the Financial Services Ombudsman scheme in their dealings with any other regulated provider.

It is important to note that notwithstanding the growth of what is described as sub-prime lending in Ireland in recent years, it still comprises a very small share, namely, approximately 2% of overall lending. A significant proportion of this lending is for borrowers who, owing to the atypical nature of their employment or income, would not have access to loan finance otherwise. It allows such people build up a credit record which, in time, will enable them to access mainstream finance.

While Ireland was one of the earlier movers in transposing this directive, there was some interest among Deputies as to the number of member states that have yet to transpose the Markets in Financial Instruments Directive, MiFID, and what might be the implications of their delay. The latest information I have to hand is that ten member states have yet to notify the European Commission that they have transposed the MiFID. While a number of them are expected to meet the deadline, it is likely that some will not.

As for the firms established in member states that fail to meet the 1 November deadline, it is likely they will be allowed to continue to operate on the basis of their existing authorisation. However, they would not be allowed to provide the new MiFID activities such as the provision of investment advice until such time as the directive was fully transposed in their home state.

Once again, I thank Members for their contributions to this debate and express appreciation for their input

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