Martin Mansergh (Tipperary South, Fianna Fail)

In response to Deputy Rabbitte, as I understand it, the Minister made no commitment on the question of possible contributions being in abeyance. Section 6 amends section 18 of the principal Act in a number of respects. It allows the Minister to make the annual contribution to the National Pensions Reserve Fund in one lump sum or in several instalments. It also allows him to pay a sum of money into the fund for the purpose of a directed investment or to transfer shareholdings or other interests he holds into the fund. Such payments or transfers will be treated as advance payments of the statutory annual contribution of 1% of GNP, which the Minister is required to make into the fund. The provision will, for example, allow the Minister to provide the €3 billion from the Exchequer towards the recapitalisation of Allied Irish Bank and Bank of Ireland.

Section 6(a) amends section 18(2) of the principal Act by removing the requirement for the Minister to pay the annual contribution in equal quarterly instalments. The National Pensions Reserve Fund Act 2000 provides for a contribution from the Exchequer to the fund each year of an amount equal to 1% of GNP that was to be paid in equal quarterly instalments. The provision now allows for him to make it in one or more instalments during the year to allow the Minister to make the €3 billion Exchequer payment towards the recapitalisation of the two main banks. Section 6(b) amends section 18(2) of the principal Act to enable the Minister to pay the annual contribution in one lump sum or in two or more instalments which may not be equal.

The Bill does not deal directly with recapitalisation, which was announced separately. However, as part of the recapitalisation package announced on 11 February, Allied Irish Bank and Bank of Ireland reconfirmed their December commitment to increase lending capacity to small and medium enterprises by 10% and to provide an additional 30% capacity for lending to first-time home buyers in 2009. The banks have committed to public campaigns to actively promote their lending to these sectors. If the mortgage lending is not taken up, the extra capacity will be available to SMEs and compliance with this commitment is being monitored by the Financial Regulator.

All financial institutions are required to comply with the code of conduct on business lending published on 13 February last. This code will facilitate access to credit, promote fairness and transparency and ensure that banks will assist borrowers in meeting their obligations or otherwise deal with an arrears situation in an orderly and appropriate manner. The code includes a requirement for banks to offer their business customers annual review meetings, to inform customers of the basis for decisions made and to have written procedures for the proper handling of complaints. Where a customer gets into difficulties, the banks will give the customer reasonable time and seek to agree an approach to resolve problems and to provide appropriate advice.

Under the recapitalisation programme, there will be an independent review of bank lending to provide an accurate picture of the current position on the credit flow to SMEs in Ireland and this will report within a short timeframe. Financial institutions are already obliged to follow instructions of the Central Bank and Financial Services Authority of Ireland in codes of conduct issued under section 117 of the Central Bank Act 1989. Those remarks should adequately meet the issues raised by Deputy O'Donnell.

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