Noel O'Flynn (Cork North Central, Fianna Fail)

I propose to share time with Deputy Edward O'Keeffe by agreement of the House.

I am delighted to be able to say a few words on the Bill today. There has been much debate and analysis of what went wrong in the country's banking system in the past few years. The catastrophic failure of regulation is one issue upon which nearly everyone agrees. One simply could not make up the kind of cowboy lending practices that went on in some of our institutions.

This week it was revealed that some people were getting 120% loans in Irish Nationwide Building Society. This is truly shocking, as is the scale of the losses they incurred. We also learned that Irish Nationwide losses exceed the combined profits made in its history, and it now seems that Irish Nationwide Building Society was run as Mr. Michael Fingleton's personal fiefdom. I am not alone in being outraged by his failure to return his €1 million bonus last year, and the new chief executive there has described what went on as "an outrage".

The same can be said of Anglo Irish Bank and Mr. Sean FitzPatrick. The more they lent, the bigger the risks they took. Not only did they breach the rules but they made up their own rules, which were morally wrong and in some instances illegal. It begs the questions of where was the former regulator, Mr. Patrick Neary, when all this was going on? It seems the regulator was asleep at the wheel, happy to cruise along and ask no awkward or difficult questions.

This era of light touch regulation has been disastrous for the Irish economy and the Irish taxpayer. This Bill will bring an end to that disastrous era in Irish life. It will overhaul regulation in this country and ensure the regulator has real teeth. The appointment of Matthew Elderfield and Patrick Honohan has impressed Members from all sides of the House. They are doing a good job and I commend the Minister, Deputy Lenihan, on appointing them.

Under the new structures outlined in the Bill, the failed entity that is the Irish Financial Services Regulatory Authority will be abolished. Under the new structure the Central Bank commission will be established, chaired by the well respected Professor Patrick Honohan. This new board will be not only responsible for financial stability in general but also for the interests of consumers in particular.

It is these people, the ordinary consumer, who will be obliged to live with and pay for the excesses of an elite few. I welcome the statements made by Matthew Elderfield before the Joint Committee on Finance and the Public Service last week that those who hold new key positions in banks will be quizzed on their fitness to practice and their suitability. This Bill puts these commitments on a statutory footing and gives them the necessary powers. I hope this provision will be an important step towards changing the banking culture in this country. The actions of an elite few have nearly brought this country to its knees. Since the financial crisis began almost two years ago, there has been widespread change of key personnel in the banks, which is vital if the culture is to be changed. We have new chief executive officers and chairmen in AIB, Bank of Ireland, Anglo Irish Bank and Irish Nationwide. Likewise there are new faces at board level.

I welcome robust legislation on banking regulation and the bank inquiry is a vital part of the exercise of fixing the banking system. Members need to know the systemic failures that have brought us here and, as legislators, it is their responsibility and duty to know what went wrong. Similarly, the public and the taxpayers who will shoulder this burden and this debt for years to come have a right to answers. I agree with the comments of the Governor of the Central Bank, Professor Patrick Honohan, when he stated:

A witch-hunt is no good to anybody. What we want to do is go behind the glib statements that are made about why things happened in the way they did and really try to dig and put the finger on any processes, any structures, in our whole system that really contributed to this [that is, the banking crisis].

No one wants a long-drawn out and expensive inquiry and the last thing that is needed is to replicate the tribunal process. The Oireachtas clearly has a role to play in this regard. To date, the Joint Committee on Finance and the Public Service has already met both the Governor and the independent expert at the outset of their work to be briefed on the members' priorities for investigation. Once the two preliminary reports have been completed and the terms of reference have been established, the commission's reports will be laid before the Oireachtas.

It is open to the committee to hold public hearings on the report. While the court judgment following the Abbeylara inquiry appears to make a DIRT-type inquiry impossible, I note that constitutional law expert Gerald Hogan SC has stated an inquiry into the banking system could comfortably operate provided it was not making findings that "somebody engaged in "nefarious criminal conduct". While there are limits to the findings a Dáil committee can make, he believes it still could censure someone for failing in his or her duty.

My preference is for as big an Oireachtas involvement as possible. On 22 January 2009, I wrote to the Chairman of the Joint Committee on Finance and the Public Service, Deputy Michael Ahern, asking him whether the aforementioned joint committee

would investigate the circumstances and failures of the banking and financial systems regarding Anglo Irish Bank, the role of Central Bank, that role of the Financial Regulator... the role of the Director of Corporate Enforcement, the role of the Department of Finance and any other State bodies and the bank auditors associated with the bank.

In the letter, I stated:

confidence in the banking system has been seriously undermined by the revelations which have emerged from Anglo Irish Bank in recent months. Confidence must be restored in our banking system and in us as legislators who make the laws to regulate banks and financial services in Ireland. I would urge your Committee to use the powers to compel witnesses and discovery of documents under the compatibility legislation which was used in the DIRT enquiry.

I was referring to the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act. This letter, which I also sent to all my colleagues at the time, is dated 22 January 2009. Other people may be giving credit for such a suggestion on setting up a committee to someone else. I also tabled a motion before the Fianna Fáil Parliamentary Party asking the party to consider this matter and to consider an inquiry. The Minister made it clear that he had plans to do so, which I of course accepted that evening, and he has brought forward his own proposals.

The Minister for Finance, Deputy Brian Lenihan, has acted decisively and responsibly in dealing with the financial crisis. Indeed the decisions taken by the Government have been widely praised by the European Central Bank, the European Commission, The Wall Street Journal, the Financial Times and by the Minister's contemporaries in Europe, which is vital. Ministers in governments throughout Europe have commended him on the action he and the Government have taken. The only people who have not acknowledged the Government's commitment to resolving the financial crisis have been Members of the Opposition, who appear determined to oppose every decision the Government has made to return Ireland to growth. On September 17 last, Deputy Kenny stated the Government was supposed to ask the right questions to ensure the banking system was properly regulated, to prevent the build up of risk in the banking system and it failed in that duty. However, at his party's conference last week he warned about the dangers of over-regulation and stated: "I do have a concern here that I think the move from having effectively no regulation at all to over-regulation." It strikes me as strange that such a statement would be made a couple of months after making the other statement.

Reports of the €1.5 million being paid towards the pension of Richie Boucher in the Bank of Ireland have incensed people. This news is hard to take as families and young people around the country struggle to stay afloat. It is also particularly galling for those who have seen their overdrafts withdrawn by the bank or the terms of their loans changed. I accept as a legislator that one has no option but to support the banks as without a banking sector one has no economy. However, it up to the heads of such financial institutions to show the people they are grateful for their support. Mr. Boucher should act accordingly as a gesture of goodwill and should do the right thing. If there is to be a change in the culture in the banks, it must start now. I must conclude by asking who sanctioned this payment.

See this speech in context