Lucinda Creighton (Dublin South East, Fine Gael)

Yet. I understand the Minister of State's point but we have to be mindful of the fact that we are not immune and are exposed to the international problems and we also have our own home-grown problems in the banking system. We need to think outside the box and not make the same mistakes which have been made in other jurisdictions.

The legacy bank which Deputy Bruton spoke about would be prevented from engaging in any form of lending in the traditional sense and it would be there essentially to manage the remainder of the loan book and try to recoup the maximum value even though we all know that the capital value has been reduced significantly over the past six or 12 months or longer. It would be separated from the recapitalised banks which would be in a position to provide some form of cash flow to businesses and so open up opportunities to keep businesses alive, open and maintaining employment which is what many of us wish. It would also make it easier for first-time buyers and young couples to obtain mortgages and get onto the property ladder. The credit flow would be freed up. This is one solution.

I listened to Deputy Gogarty and I have heard the Minister for Finance and every other Minister and Government backbencher calling on the Opposition to show patriotism and to co-operate with the Government. However it is unfortunate that when we put forward solutions they are pooh-poohed and we are told they will do it their way, as the Taoiseach famously told us a few weeks' ago on the Order of Business. There needs to be a willingness on the Government benches to co-operate with the Opposition because we are genuinely making some proposals.

On other aspects of the scheme, I have a concern about the preference shares proposal which is of questionable benefit. This is another aspect of the scheme which has thrown up problems, particularly last autumn in the United Kingdom where a similar system was introduced and, to be blunt, it failed. The dividend of 8% proposed under the scheme, although less than the 12% proposed in Britain, could well prove to be penalising for banks. The estimate is that it could amount to about €300 million a year for each of the banks, or approximately €600 million, which would eat into their profits. There is major concern that this would limit their ability to free moneys for lending to businesses and inhibit the required credit flow. It is something that could reduce bank lending because of the restrictions being placed on them in having to pay the dividend to the State. I am not 100% convinced that this aspect has been well thought out since we have seen it fail already in the United Kingdom. We are in a climate where businesses are closing daily because of their inability to borrow from banks and I am not certain that this proposal will help in that regard, notwithstanding the commitment to lend to a figure of 10% lending to SMEs, as set out in the scheme. I am not certain how this will add up and believe it might prove to be very difficult. As Deputy Noonan pointed out, we have seen little evidence of credit being freed in recent weeks. In fact, the credit flow from banks is tightening on a weekly basis, as Deputies will be very much aware at constituency level.

I have other concerns, too, in relation to the legislation which is scant in detail. We do not know to what extent the Minister will be restricted in how much ultimately will be paid out. We are told the figure is €7 billion, but there is nothing to suggest it cannot increase. I am not certain what the State will get in return. We have an 8% dividend figure but do not know whether this will work out in practice. I am not sure the Minister knows either. We do not know what caps will be imposed on bank executives' pay. We are not sure what the assurances are as regards credit availability and, in general, I am concerned about the terms and conditions for the banking sector as regards the return for the State and the concessions to be made or demanded. There is nothing in the scheme in terms of detail.

We know the State is proposing to invest €3.5 billion in Bank of Ireland and €3.5 billion in AIB. There will be an option to buy ordinary shares at a later stage. It is inadequate that there is only a 25% share of directors on the boards of the banks. Also inadequate is the 25% share of voting rights as regards control of the banks. My view and that of the general public is that there should have been a total clear-out of executives within the banks. I do not know whether the Government's response has been tough or hard enough or whether the Government is demanding sufficient say in how the banks will be reformed and restructured in response to the current crisis. Neither do I have a sense that it is demanding accountability from the banks.

While the Government assures us that these capital investments in AIB and Bank of Ireland will be considered by the Financial Regulator to be tier 1 capital investments, the crux of the issue is what matters in the international marketplace. Do we have any assurances that international markets will see these investments as additions to the banks' core capital? We have seen no response from the international markets in recent weeks, notwithstanding the announcement of the scheme, as set out by the Minister. There are certain question marks in that regard also.

A particular problem I have with the Bill relates to the continuing cosy arrangements for executives. I point to the article we read in the Sunday newspapers which is of particular significance to me in my constituency. I am concerned about the appointment of the new chief executive of Bank of Ireland who clearly has very close links with significant players in the property sector which have very direct links with Fianna Fáil. I am perturbed about the continuation of this cosy cartel of bankers, builders and Fianna Fáil personalities. The decision making process that led to this appointment was extraordinary. This shows there is still a lack of realisation within the Fianna Fáil-led Government that such cosy relationships are no longer acceptable. The people are fed up and tired of them and want to see fresh faces and new personalities not connected to this cosy circle of Fianna Fáil buddies in the building and banking sectors. Unfortunately, we have not seen a clear intention from the Minister or the Government in ensuring such a shift occurs.

Section 8 of the Bill gives enormous powers to the Minister to essentially do what he wants. Deputy Noonan alluded to this issue also. The Minister is being enabled to take a controlling interest in the banks and nationalise them without recourse to Dáil Éireann which I find extraordinary. He would generate much more confidence among the public if he were to make it clear that this option was being left open to him in the Bill.

I shall conclude by saying we are in challenging times and need to get this right. While I have concerns about the Bill, I genuinely hope it will set the banking system and the economy on the right track. We all know people who are losing their jobs and facing financial crises in their personal lives. It behoves all of us as elected public representatives to work together in so far as we can to try to get the economy back on the road to recovery.

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