Kieran O'Donnell (Limerick East, Fine Gael)

This Bill is being introduced against the backdrop of the increase in the deposit protection levels last September in the wake of a failure in bank regulation worldwide and more particularly in Ireland. I welcome this deposit protection scheme because only seven covered institutions are provided for in terms of the overall deposit guarantee as well as certain loans for banks. I welcome that this legislation extends the scheme to credit union savers.

This legislation is being introduced because regulation has failed. People expected to be able to trust the Central Bank, the Financial Regulator and the Government on how the banking system was being regulated. However, that did not come to pass. The Central Bank's role was to examine, as Deputy Bruton said, any systemic threats to the State, our finances, to the way the economy functions and to our monetary stability. If one reads the Central Bank reports dating back many years, certainly in terms of the housing market, it mentioned a problem with the property bubble, but it never said stop and someone needed to say that. It was within the powers of the Governor of the Central Bank to bring in higher capital ratio weighting requirements for loans, particularly developer and housing loans, to ensure that money was loaned prudently. Money was loaned in a fashion such that with any variation in the way the economy was performing the banks would be in trouble. Effectively, banks were getting short-term lending for long-term lending to customers. Once the well dried up on short-term lending, they could not function. The tsunami came with what happened to some of the banks in America but of all the economies in Europe our economy was completely exposed in terms of the way our banking system worked.

When our banking system failed last September the Government put across the key point that it was seeking to increase the flow of credit for small businesses and mortgage holders, but that has not happened. Matters have worsened. Credit has dried up for small businesses and people cannot get mortgages. The Government is now saying that the panacea for all the ills of the banking system is NAMA, which will provide that the Government will take over all the toxic debts of the banks, the related development loans. I have quoted the relevant figures previously. The Minister of State with responsible for housing, Deputy Finneran is present, but it is a disgrace that the Minister for Finance is not. Our banking system is in crisis and the Minister is not here to deliberate.

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