Michael McGrath (Cork South Central, Fianna Fail)

I welcome the opportunity to speak on this Bill. Last week, it was refreshing to see Brendan McDonagh, the chief executive of NAMA, and Matthew Elderfield the new Financial Regulator appearing before the Joint Committee on Finance and the Public Service and the Joint Committee on Economic Regulatory Affairs, respectively. It is clear that their approach will be in stark contrast to that of their predecessors. They spoke in clear and simple language and they will hold no hostages to fortune. We can have confidence that they will carry out their important functions with the level of integrity and professionalism that is required.

I also commend the appointment by the Minister for Finance of Professor Patrick Honohan as the new Governor of the Central Bank. As the Minister said last night, these appointments have brought credibility and professionalism to the various offices they hold. They hold critically important offices as we seek to rebuild some degree of public confidence in the banking sector and the regulatory system.

Some of the evidence we heard last week from Mr. McDonagh was not very comforting concerning the work of NAMA and particularly the quality of loan documentation that NAMA has encountered when it went into the detailed, loan by loan, due diligence analysis. However, I am confident that NAMA will work over the course of its lifetime, which is estimated at seven to ten years. At the end of that process it will have been successful. By imposing a higher haircut on the purchase of the loans, it is pushing a lot of the cost of rescuing the banking system directly into recapitalisation. We saw the outcome of that in the Minister's speech before Easter whereby the total cost for each of the institutions was clearly outlined.

Overall, the choices the Government has made to rescue the banking system have been the right ones. The overriding requirement is to maintain financial stability for us as a country. Those decisions have been supported internationally by all the essential stakeholders, including the IMF, the ECB and the European Commission among others.

Economically we are heading in the right direction and there are some positive and encouraging indications on the progress we are making to bring this country firmly out of recession - not least the recent reports from the Central Bank and the ESRI. Both reports confirmed the Government's target that by the second half of this year the recession will have formally ended and the country will begin to grow again. Once people begin to see growth in the economy, confidence will re-emerge and consumer spending will improve. In addition, sentiment will help to rebuild confidence in the economy and growth will take root once again.

In recent days the pension top-up for Richie Boucher, group chief executive of the Bank of Ireland has rightly taken centre stage in the media. I would ask a number of questions of those in charge of Bank of Ireland. Who had oversight and who was involved in negotiating the new contract with the new chief executive, which allows him to retire in four years' time at 55 years of age? According to media reports, his pension will be just under €370,000 per annum. The facilitation of that package has required an investment into the pension fund of €1.5 million by the bank so that Mr. Boucher can retire in four years' time. How the board could have signed off on the that contract, if it did so, is beyond me. The board members need to come clean as to their involvement. Did the public interest directors have an involvement and, if so, what level of oversight did they have? I agree with Kieran Mulvey, the chief executive of the Labour Relations Commission, that this could jeopardise the passage of the public sector pay and reform deal, which was agreed at Croke Park in recent weeks. If Richie Boucher has any respect for the Irish people he should refuse to accept the pension top-up. I believe he should reject it on the basis of the level of commitment and sacrifice the Irish people have demonstrated to bail out his bank and the other financial institutions.

I listened carefully to the Taoiseach earlier today during Leaders' Questions when he said the Government sought advice from the Attorney General on the issue. I have no doubt therefore that the Government does not believe that the pension top-up payment should have been made. Every day the Taoiseach has to answer questions here about some indefensible decisions that senior bankers are making, but he should not be afraid to represent and express the public's anger over the breathtaking arrogance of senior bankers who time and time again recently have shown two fingers to the democratically elected Government and the people. Enough is enough. The banks owe their very existence of the Irish people and they need to show some degree of sensitivity concerning ordinary people's daily lives and the impact of the recession, as well as the impact the reckless management of the banks has had on people. They need to show some common sense, which is sadly lacking at the higher echelons of our banks. Regrettably, that is a damning indictment of them.

While I accept that we need to allow the banks to operate commercially, they must have regard to the impact and perception of their decisions on the public and the wider economy. How can Mr. Boucher accept that top-up? How can Mr. Fingleton not return the €1 million bonus he received from the Irish Nationwide Building Society at a time when people are in dire straits, partly because of the reckless management of the banks? It is beyond me.

Turning to the issue at the heart of this Bill, it is clear, to say the least, that the regulatory system we have in this country to date was simply not fit for purpose. It was a shambles. We did not have the right people in charge and it is clear now that the structure itself was not designed to meet the needs of a banking system that was running rampant in the economy. Time and time again, like Deputy Morgan, I sat at meetings of the Oireachtas Joint Committee on Finance and the Public Service which were attended by the former head of the Central Bank, senior bankers and the former Financial Regulator. Looking back, the evidence we were hearing was farcical. One could not expect a primary schoolchild to believe some of the evidence that was put forward. It is clear that they had the evidence, which demonstrated that what they were telling us was incorrect. That is regrettable, to say that least, and it has put us in an invidious position today. Let me give an example. When the regulator's office came before the Oireachtas committee on the issue of the Seán FitzPatrick loan scandal, it was quite clear, despite the fact that members of staff at the authority had a series of meetings with key personnel in Anglo Irish Bank as far back as January 2008, that we were being led to believe that neither the chief executive of the authority at the time nor any member of the board was aware until December 2008 of the directors' loans, or until the Minister informed the regulator as soon as he became aware of the information. The authority investigated itself in that regard and the resulting report was, unsurprisingly, a complete whitewash.

It is for this reason that the Minister had to say last night that we need a system where the overreaching objective of the stability of the overall financial system directly informs the supervision of individual firms, while at the same time safeguarding the interests of consumers and investors. Many times during the Celtic tiger boom years, the Central Bank highlighted the risks for the economy arising from excessive lending, particularly in the property market, but the advice it provided was not implemented by the regulator in its dealings with individual financial institutions. I believe that is why the Minister has taken the decision to consolidate the functions of the regulator and the Central Bank so that they speak with one voice on the key issues of the stability of the financial system overall, the prudential regulation of financial institutions and for the protection of consumer interests.

I agree with Deputy Costello that this Bill is part of an overall jigsaw of regulation, both in European terms and globally, into which Irish reform must fit. The Chair, in his contribution, referred to the work of the credit review office and the need to ensure that the €12 billion of lending which AIB and Bank of Ireland is required to engage in between now and the end of next year is delivered. That is a key issue. I support the Bill and commend the Minister for bringing it forward. Obviously, the full effect of the Bill will not take root until the three pieces of legislation are implemented, but I look forward to it happening so that we can have a new robust, independent and tough financial regulatory regime once again.

See this speech in context