Dáil debates

Wednesday, 21 April 2010

Central Bank Reform Bill 2010: Second Stage (Resumed)

 

6:00 pm

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)

I welcome the Bill. I would always wish to welcome a new structure in regard to the head of the Central Bank and the head of financial regulation, which this Bill is, and to give them a statutory basis is very welcome. I pay tribute to the contributions of the governor of the Central Bank, Professor Honohan, the Financial Regulator, Mr. Matthew Elderfield, and the chief executive of NAMA, Mr. Brendan McDonagh, in recent weeks. They have brought great credibility and a new professionalism to the new structures the Government has put in place to deal with the banking crisis. I understand the situation is very serious. I would hope the work they do will be recognised, as it has been, not only by commentators in this country but also by the members of the European Union.

This Bill is part of a three-stage legislative process, with another Bill coming to the House in the autumn in regard to the overall stability of the financial system, and a third Bill to consolidate the existing statutory arrangements for the Central Bank and financial regulation in the State. My particular concern is in regard to mortgages, on which the Minister touched, and I welcome the measures that have been taken. I understand the mortgage interest subsidy scheme has been of great benefit to 15,000 families and that extra resources have been made available to the Money Advice and Budgeting Service, MABS, which is also significant.

I hope we will never have a high rate of repossessions of property, as has been seen in the UK, the US and other countries. There were 29 forced repossessions of homes by legal process by State-guaranteed lending institutions in 2009. While I hope we do not see that happen again, it is an issue that is to the forefront of our minds and constituents have had much to say on it. The more help we can give to people who are in financial difficulty, the better for them. Taking away homes is the last thing that should happen.

Much comment has been made in recent times on the insurance industry, particularly in regard to the Quinn Group. The Minister referred to this and to the fact the Financial Regulator has been very clear about what he is trying to do in restoring financial health to the insurance sector. Obviously, insurance companies are required to hold sufficient assets to cover their insurance liabilities and those losses have to be dealt with. It is important the Financial Regulator has the support of the Government and the full confidence of the people in what he is doing. There has been a great lobby by all politicians to try to save as many jobs as possible in the Quinn Group. There is great diversity in the Quinn Group, which has many projects, not just in the motor insurance business but also in many other areas such as health insurance and commercial business.

This highlights the point that insurance is becoming a big problem for small business, as noted by many Deputies. This was brought home to me in particular following the flooding in County Galway, which was particularly bad in Ballinasloe town and the south Galway area, where it appears people were refused insurance because it was the second time they were flooded. It has been a serious blow for small business. It amazes me to think €82 million was made available for structural work to tackle flooding, for humanitarian assistance and for fodder grants in the agriculture sector, yet small businesses which wanted to be re-insured fell between every stool.

I hope there may be an opportunity for the county enterprise boards to help small businesses, particularly those companies where fewer than ten people are employed given that the employment subsidy cannot help such businesses. Funding those companies will entail giving at least €500,000 to every county enterprise board to ensure those companies can remain in existence, and I hope this will be done. Where small businesses work together, with perhaps two companies employing five or six people each, this has been one of the great strengths of the small business sector. NAMA has been debated a lot in this House and outside. The Governor of the Central Bank and the Financial Regulator have advised on and supported the Government's approach to resolving the difficulties in the financial sector. The Governor of the Central Bank said the guarantee, even if it had been known how large it would be, would still have had to be provided. It was an extraordinary time involving a large bank, Anglo Irish Bank, that was central to the economy and it had to be done. I endorse that. The Governor also made it clear that the lowest cost solution for the taxpayer was to support it and he backed it. The regulator also said it was systemically important on the night of the guarantee and he backed it.

This Bill will establish new and fully integrated structures. We are replacing the Central Bank and the Irish Financial Services Regulatory Authority. Oireachtas oversight of the Central Bank's regulatory performance will enhance its accountability. This will ensure stability of the financial system, effective regulation of financial institutions and safeguard the interests of consumers and investors.

The new powers give the Central Bank the ability to investigate nominees to key positions within financial institutions. This reinforces the tone of the new regulatory regime. It will help to restore confidence in the management of the banks at home and internationally. The legislation that will be introduced in the autumn will cover enhanced powers and functions for the restructured Central Bank, which is welcome.

There has been much comment about Mr. Boucher's €1.5 million pension top-up from the Bank of Ireland. I hope that will be resolved and another way will be found to deal with it. People are annoyed about this and do not accept this is going into a pension fund. Similarly, Irish Nationwide, which lost €2.5 billion last year after writing off €2.8 billion in loans, is causing outrage, particularly because there was no regulation to prevent it from happening. I hope the banking inquiry will prioritise such issues and ensure it never happens again.

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