Denis Naughten (Roscommon-South Leitrim, Fine Gael)

There is a lack of international confidence in our banks and our economy for two reasons, namely, a lack of credibility in our banking system and, a lack of any economic strategy to get us out the situation in which we currently find ourselves. This was articulated last Sunday week in some of the newspapers by the former chief economist of the International Monetary Fund and is leading to an enormous degree of international concern.

Deputy Bruton set out earlier what needs to be done if we are to get out of the mess into which this Government has got us. As part of that plan we need far-reaching reform in every sector of the economy, starting with our banking sector. First, we must urgently review the banking bonus structure which incentivised irresponsible lending within the banking system. It seems nothing has been learned by the banking sector. Recently, the Bank of Ireland announced a special 2.45% one-year rate for first time buyers. Prior to this Anglo Irish Bank announced at 2.49% one-year special rate. The idea behind this is the bank's belief that once a person takes out a mortgage it may be too costly or too much hassle for him or her to switch to another lender, thus ensuring borrowers remain with their initial lender for many years. The difficulty is that the maths does not add up. Currently, the European Central Bank rate is 2%. The average rates for mortgages here for first or second time buyers is approximately 2% above the European Central Bank rate. The bargain rates for one year are being offered to young couples, but they will be hiked by at least 1.5% subsequently, over-extending many young families again. This is the same practice which got us into the problems and the situation we face at the moment. It is clear nothing has changed.

We urgently need responsible banking. The pool of skilled personnel within the regulatory and financial services sectors is far too small. People move from the Department of Finance to the Central Bank to the Financial Regulator, or from the banking sector into that chain of supervision. We need a regulator from outside the current gene pool. This Pat, John, Mary and Willie atmosphere must be broken up once and for all. This was articulated very well in an article in The Sunday Tribune last Sunday. Mr. Willie McAteer recalled an exchange with Mr. Pat Neary in which he told Mr. Neary that the bank would manage the balance sheet at the end of the year, in other words, it would cook the books. Mr. Neary reportedly replied, "Fair play to you". This is not light touch regulation, but slap-on-the-back regulation. The attitude within the banks was to present the issue of the day in a manner which would gain the rubber stamp of the regulator. However, if that did not work a bank would go cap in hand to the Department of Finance to get its blessing for the same cock and bull story. This took place continually in the regulatory sector.

The difficulty is far too many businesses, jobs and homes depend on a properly functioning banking system. The continuous drip feeding of information from the Government is damaging the perception of our banking system internationally and in the country. In tandem with the changes outlined by Deputy Richard Bruton, we urgently require the publication of the reports by "An Bord Snip" and the Commission on Taxation. The Government said it will not fast track these reports. It has not approached either of the authors of the reports, but we must have these reports published now. We also need a new budget now. There is no confidence in the Government either in the country or internationally. We urgently need a responsible and accountable Government that will make the decisions to get us out of the mess into which this Government has landed us. I commend the motion to the House.

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