Terence Flanagan (Dublin North East, Fine Gael)

I welcome the opportunity to speak on this Bill, part of an EU-wide regulation of financial services. Undoubtedly, one of the great success stories of the past 20 years has been the IFSC. Its success has been good for our economy and for the many people who work there daily. The financial services industry is built on confidence, trust and reputation and it is important for us that it is regulated sufficiently. A good reputation is the guarantee of future expansion and growth. Recently, the reputation of the UK banking industry was put under the microscope. Confidence in it was severely dented due to the Northern Rock case, which was spoken of by Deputy O'Donnell and highlights the threat we could face without proper regulation. We must learn from this case and move forward.

We must enhance the depositors' protection scheme for savers and depositors in financial institutions. Our scheme is limited to 10% of deposits with an upper limit of €20,000, which is out of sync with the UK and other European countries. We must know how to be balanced in protecting depositors and ensure that banks are not encouraged to take inappropriate risks. I welcome the EU's examination of our deposit protection scheme with a view to advising us on necessary changes.

I have significant concerns about sub-prime lending. I know of sales people who knock on doors, primarily in local authority areas, and attempt to persuade people to roll up their loans and remortgage their homes for high levels of debt. Preying on the vulnerable and getting them to take out loans is unacceptable. There are cases of applicants lying on their application forms about their capacity to make repayments in order to secure financing. It is estimated that the Irish sub-prime lending market is worth more than €1 billion. The Financial Regulator must take more control of this market to ensure the robustness of operations and that selling practices are proper.

I am aware that provision is being made in the Bill to ensure people's rights are protected. They need to know the full facts when they enter into sub-prime lending contracts. A review is needed of the regulation of complex securities and rating agencies because the lack of transparency in this process and the uncertain valuation of securities is at the heart of the current credit crunch.

Over the past number of years, many Irish people have been enticed at property exhibitions into buying second properties abroad by freeing up equity in their homes. The question arises as to whether those selling properties are providing buyers with the consumer information they require. These properties are sold with rent guarantees even though it is obvious that the wages in the countries concerned cannot support the promised rents.

The challenges faced by the economy are more serious than the Government admits. The Minister recently advised that the budget deficit will be €1 billion, which is much larger than previously expected. I hope we can be more prudent with our money while continuing to look after the neediest, such as those with medical cards and the thousands of homeless people throughout the country.

Important lessons need to be learned from the recent developments in global financial markets. The economy is slowing and we face economic challenges. We need to ensure that warning signs are heeded in the future. Therefore, while I welcome the Bill, I hope the Minister will take account of the issues I raised.

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