Richard Bruton (Dublin North Central, Fine Gael)

I welcome the introduction of this legislation which has been awaited since the Minister originally indicated his intention to take action in this area. The role of taxpayers in the banking system is being extended gradually. They will have a permanent role in the system as a result of this Bill, as their role will not end when the Government guarantee comes to an end in September 2010.

I am sure the Minister will acknowledge that the need for these measures does not primarily result from the crisis that hit banking systems throughout the world last year. The international banking crisis hit the Irish banking system at a time when its house was far from being in order. People are genuinely appalled at what has occurred. I refer to the failure of the regulatory and banking systems to protect us, for example. It is clear that responsibility for systemic risks to our system had been assigned to the Central Bank. It was plainly marked absent when the time came to contain the property bubble, the single sector banking model that was so prevalent in Ireland and the extension of credit far beyond the deposit base. Our ratio of indebtedness to GNP is 270%. I think the nearest to us is approximately half that figure. We are way out in a league of our own. The Central Bank which should be protecting us in a professional manner has been found wanting. The Financial Regulator, to which the Central Bank was joined at the hip, has also been found wanting in meeting its responsibilities in respect of individual institutions. The practices uncovered in the most notable case, that of Anglo Irish Bank, were plainly wrong, by any standard. It appears that the Financial Regulator was fobbed off with legal advice in the case of some of the wrongdoing at that bank. The regulator did not probe the validity of that advice and failed to escalate some of the evidence of wrongdoing that came to its attention. It was not elevated up the scale. The system failed.

The catastrophic failures in the banks and regulatory authorities are having appalling consequences for ordinary people. The Bill represents a further permanent shift in the relationship between the taxpayer and the banking system. It is all bad news for the taxpayer who is having to take on an extra burden. Everyone wants to know what is on the other side. Where is the quid pro quo? People are appalled that such questions have not been answered, more than nine months into the crisis. Ordinary people have not yet seen evidence of new standards, levels of accountability and powers of enforcement. They are frustrated that the Office of the Director of Corporate Enforcement has yet to come to a conclusion on offences that may have occurred. One wonders whether the legislation under which that office operates is up to scratch. As we vote on whether to put another round of responsibilities on the shoulders of taxpayers, we have to ask whether the regulatory system is fit for purpose at this time. Are we able to pursue the wrongdoing that has occurred with sufficient effectiveness? Is our legislation inadequate and in need of change?

I have to say the Government's conclusion on regulation, the sum total of which appears to be that the Central Bank needs to move more centrally into control of regulation, strikes me as totally inadequate. It has come up with institutional change to save everyone's blushes. It was clear that the Central Bank had responsibility for systemic threats. It is now clear to everyone that this was a systemic threat. Everybody knows that the Central Bank did not square up to the threat adequately. We have been told it is to be given a more central role in policing the system, but nothing has happened. It is inadequate that the public has not been honestly told what went wrong. It should be made clear that policies and people failed. We have to be plainer about the fact that these failures were caused by a kind of cosiness. I am sure the Minister will say he has made significant progress in changing the top management and leadership in the banks, but where is the significant change in the Office of the Financial Regulator? I do not think it is sufficient to change the deckchairs on the boat by giving the Central Bank a more central role. As far as I am concerned, the Central Bank was already centrally in charge of these matters. It had a board which was almost common, although it was not entirely so. This response is not adequate. I appreciate that the Minister is mired in the day-to-day management of the issue.

There needs to be a permanent shift in the relationship between the taxpayer and the banking sector. That change should relate not only to the downside, where taxpayers are shouldering the cost, but also to the upside, where taxpayers are shouldering the consequences of the new legal arrangements in place. The public has been appalled by the golden handshakes given to those who have failed. It is frustrated because all it has seen to date is evidence of a cosy system that looks after its own people when they are seen to fail. There is a sense of anger and frustration about the Government's failure to make the sort of changes that are needed. The sort of protection on which we are voting today, like that we agreed last September, was always implicit. The State was always going to come to the rescue of the banking system because it is of such importance to us. However, these commitments go far beyond the protection of limited liability, an enormous and special privilege enjoyed by people in business. We decided that in addition to protecting the people concerned, the taxpayer would, in effect, underpin any bad decisions made by them. The trust implicit in that enormous privilege was plainly abused. Our regulators did not follow the advice of the great Adam Smith who is sometimes credited with being the first economist. I cannot reproduce the exact quote, but he said, in effect, that when business people came together, it was always to conspire against the good of the consumer or the ordinary person. The Financial Regulator did not cotton onto this. It thought the people to whom I have referred were part of a nice cosy club. It did not consider the appalling vista that some elements of the banking system might be rotten. We have been failed in that area.

I would like to speak about some elements of the Bill. I am sure we will return to this topic when the NAMA legislation and the legislation to extend the guarantee are brought before the House. Will the Minister indicate what the cost of the guarantee he provided last September has been? We were told that the calculation of the cost was to be based on the premium imposed on our borrowing. Have the sums been done? Do we now know what the premium is on our borrowing? What proportion will be charged? How, in turn, will this impact on the sort of charge that will permanently be imposed under this legislation? I understand there is provision for a deposit requirement to be made. Will this have an ongoing premium charge? What is the aggregate amount we are guaranteeing in all the institutions covered? What is the aggregate value of the deposits for which we are taking responsibility? This is important legislation and the Government had not envisaged this for a long time. While I do not oppose it, we need to enact it with our eyes open and be aware of its long-term cost. To what extent will it still be a feature of added borrowing costs for the State, even in five years time or whatever and how is it proposed we will recoup that or is it proposed that we will recoup it?

I note from the explanatory memorandum that the relationship between the Central Bank and the Central Fund has been introduced to get around an ECB requirement that this sort of protection can only be provided on a short-term and urgent basis. How does the shifting of that liability to the Central Fund overcome that problem? If the liability lies with the State, whether it is in the Central Bank or the Central Fund, it is still a form of financing that, on the face of it, appears to be in breach of what the ECB allows other than on a temporary basis.

While I welcome this legislation, I must express our continuing concern on this side of the House about the Government's broader approach to purchase, on behalf of the taxpayer, all the impaired loans into which the banks entered at a cost of €90 billion. The scale of that commitment, the nature of that black hole and the costs that are involved are a source of great concern to people. Despite the Government's argument that the setting up of National Asset Management Agency is about getting credit flowing, there is a lingering concern on my side of the House that it will be about the banks getting rid of some of their most toxic loans but they will still be in the business of shrinking their balance sheets to preserve their independence from the State for a long time to come not in the business of extending loans. That is the last thing that will be on their minds. They will try to preserve their independence of operation.

That is reason we have favoured an alternative approach, where the State would intervene first and foremost to get credit flowing. The banks should be forced to face up to their bad borrowing. Irish taxpayers should be given time to consider the terms under which they will become involved in this. I would prefer to use the remaining period of the guarantee to tell the banks that they and their professional investors must face up to their responsibilities. There will be a role for the taxpayer to play in time, but it will not be the role of a patsy, taking on his or her shoulders all the lousy stuff and allowing people simply to walk on. There will have to be a fair sharing of the pain. The approach of rushing to set up NAMA, or in the case of Anglo Irish Bank pretending it is a going concern, gives the impression that the shoulders of the taxpayers are broad enough to save everyone but they are not. Taxpayers are in the mire. With our spending €20 billion or €24 billion more than we are raising in tax, taxpayers face an appalling vista just dealing with our own financial problems, let alone being anything but the most careful and prudent in the way we approach problems generated elsewhere in the banking system.

Admittedly, the taxpayer has to stand ready to make sure the banking system does not fail, but he or she is not in a position of saying to professional investors who took risks that they can walk away from those risks unscathed. I worry about what the Government is doing in this respect. I am sure we will have a much more robust debate on this and perhaps much more information from Government on it. It is frustrating to be so far into this debate, for an interim executive to be established and heaps of information to be flowing between the banks and that body and undoubtedly implicit commitments being made on the part of the taxpayer in that process, and yet have only a flimsy eight or ten pages offering any explanation or justification as to why this is the right course of action. That is not good enough for a decision of such enormous potential importance to the Irish taxpayer.

I genuinely worry that this is being made up as we go along. The Dáil must become involved sooner rather than later to ensure there is a public debate based on the Government's best judgment as to why it is doing this and allow us to tease that out before final commitments are made. I worry that over the summer this process will gain increased momentum and that more and more implicit, if not explicit, commitments will be made while we have not had an opportunity to express views or build in the protections the people would expect us, as representing the taxpayers, to seek to insert.

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