Seán Sherlock (Cork East, Labour)

It is vital that we view this legislation in the context of Directive 2009/14/EC. The changes incorporated within this directive form the basis of the Bill before us. The purpose of the legislation is to mitigate risk, the risk faced by small depositors or working people who rely heavily on the banking system to assist them in their daily lives. It is vital at this time that we insure depositors against a run on a bank or financial institution. Therefore, the provision within the Bill that increases the statutory limit from €20,000 to €100,000 is to be welcomed and necessary, given that a vast number of depositors within a certain age bracket who have contributed to the economy throughout their working lives would have deposits within this range.

The fact that the guarantee scheme is to be extended to include the credit unions is also to be welcomed. However, I too have questions about the credit union movement because the Minister states the current level of contribution is set at 0.2% of the prescribed deposit base. He went on to say there would be further discussions with the credit union movement as regards admission to the scheme from an administrative perspective. Will the Minister, please, tell the House what the nature of the discussions with the credit union movement has been so far? Will he inform us how this will pan out in practical terms for the credit union movement? Because of the disparate nature of credit unions, some practical difficulties will emerge and I am sure they have questions about the Bill which they will expect us, as legislators, to reflect. It is easy to forget, too, that a considerable amount of money is held within credit unions. It would not be equitable, therefore, to exclude them from the ambit of the Bill.

The current economic environment is uncertain. Thankfully, thus far we have not seen a stampede by ordinary depositors to extract their savings from financial institutions. We must guard against this possibility as the last thing the State needs is a run on the banking system. It is vital, therefore, that a measure of guarantee is provided by the State so as to ensure ordinary people who are normally casualties in any downturn do not stop putting money into the banks. By increasing the deposit protection limit from €20,000 to €100,000 we are at least ensuring individual savings will not be split disproportionately between a wider range of institutions. Liquidity must be preserved within the system. The only way to do this is to ensure there is sufficient money on deposit.

On the matter of moral hazard, the movement of responsibility for this area from the Financial Regulator to the Central Bank has to be explained in greater detail. I have certain reservations about the role of the Central Bank in the last 12 months in overseeing the banking crisis. I remain to be convinced that its warnings, issued in quarterly reports, were adequately articulated. Perhaps it was the case that it was just not being listened to, or perhaps it was not shouting loudly enough about what was going on. Some, more cynically minded, might suggest there was an air of complicity in terms of what was happening throughout the economy for a number of years. The Central Bank, with the Financial Regulator, has been diminished in its role in overseeing the banking structure. However, I am hopeful the Minister will ensure their role in the future will involve vigorous policing of the scheme once it comes into being.

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