Michael Moynihan (Cork North West, Fianna Fail)

I welcome the opportunity to speak on the Bill. In the past 18 months to two years the spotlight has been directed in a serious way on the banking system, how it worked during the boom years and how the regulatory framework for the banking system operated. The principal aim of the Bill is the appointment of a new Central Bank structure and a new regulatory structure. Two appointments have been universally welcomed and applauded, namely, that of Professor Honohan as Governor of the Central Bank and Mr. Matthew Elderfield as Financial Regulator.

Before I speak about the direction in which they are going, we must look back at what was allowed to happen in the banking sector during the past ten years and especially during the past five or six years. In the Anglo-Saxon world in particular what was allowed to happen in banks and financial institutions worldwide is a significant issue. However, we must deal with the situation in this country and try to pick up the pieces in that regard. Reference has been made to light touch regulation. The reality is that there was no regulation at all. The incentivised lending of money by financial institutions was probably the root cause of much that has happened. The aim was to lend money out and those who approved the lending were paid according to the amount of money they lent. That was the fundamental mistake that was made in the banking system.

Long-serving Members of the House will recall the previous time money was given out so freely was after we joined the European Union and in the late 1970s up to 1979. There was a credit squeeze when the oil crisis occurred in the spring of 1979. The agricultural community in particular had borrowed heavily at that time to buy land at hugely inflated prices. Neighbouring farmers were loaned the same amounts of money to bid on the same parcel of land. It took many farmers who had borrowed heavily when money was freely available ten or 12 years to trade their way out of difficulty. Some farmers were not able to do so with significant consequences for them and their families' livelihood. One cannot say that the crash or the level of credit available was unprecedented. When one considers the system operating in the late 1920s prior to the Wall Street crash in October 1929, again, what is evident is the considerable availability of credit, driving up share prices, and the unsustainable herd instinct that sent everybody in the one direction. In Ireland, the herd instinct influenced the property market.

It is untrue to say what has occurred is unprecedented. The Central Bank Reform Bill 2010 and the associated measures being taken by the Government are to ensure the new regulatory framework that is to be given legislative effect will prevent a recurrence of what has happened. This involves a considerable change in the thinking on how financial institutions and systems work, a change in how financial services are being governed and a change in how we, as a nation, view these matters. Everybody has been screaming and roaring about what has been allowed in banks, particularly the major ones in serious trouble. Everybody speaks about what has happened in Irish Nationwide and Anglo Irish Bank.

I want to confine my remarks to the general issues but must state it would have been much easier, in Cork North-West or elsewhere, to sell the idea of winding down Anglo Irish Bank in an orderly fashion than the idea of adopting the current arrangement. Unfortunately, the advice received, not only from experts in Ireland but also from the European Central Bank and others, is that we must manage the debt Anglo Irish Bank has accumulated. It beggars belief that the management of the bank attempted to contact the Department of Finance, including the Minister, as late as August 2008 on further acquisitions in regard to the financial system or other financial houses. From perhaps the spring of 2008 onwards, it seems management believed it had enough people to back it or enough money to resolve the problem. What occurred beggars belief.

Unfortunately, the difficult political position is that we must manage Anglo Irish Bank in an orderly fashion in the best interest of the taxpayer. Unfortunately, huge sums of taxpayers' money are required but far more would be required if we were to go another route. Very serious concerns are expressed on this matter. It would be far easier to sell the concept of a wind-down to the public, who are quite rightly enraged over what has happened. We must consider those affected by this issue.

We should bear in mind the activities of sub-prime lenders, institutions that offered 30-year and 40-year mortgages and those that gave out credit without sufficient controls. Everybody has been seeking competition in the financial system and in every other sector in the best interest of the consumer but some of the financial institutions were offering credit more freely than others and on a more long-term basis. All the others followed suit and this led to the considerable problems we now face.

We must respect that this Bill provides a legislative framework for the new Central Bank and regulatory regimes. Credit will and should no longer be made available with the ease with which it had been made available. If we have learned anything in the past few years and months, it is that we must have draconian measures. Wherever there is an easy way to make money or a quick profit to be made, there will be imaginative systems designed to facilitate one's doing so. That is the nature of the capitalist system but we must ensure we never allow the bubble go so far as to explode in our faces.

Commentators recognise that the Anglo-Saxon model, which was developed from 1980 under Ms Thatcher and Mr. Reagan and replicated in various countries, was the model that was worst hit. There is a very significant lesson to be learned from this. We must tailor our policies to ensure we will never again have an economic bubble of the kind we experienced.

With regard to regulation, we must consider the mis-selling of products to individuals, companies and some financial institutions by people aligned to the stock exchange. We have all seen the headlines about a 74 or 75 year old being sold a 30-year product by a major stockbroking firm. The extent of such practices must be examined. In the past ten to 15 years, there has been major emphasis on tribunals on foot of certain financial transactions and planning issues.

Consider the money being spent on tribunals. They are now being challenged regarding issues and decisions they take. Money was completely wasted on very eloquent members of the law fraternity, who have been very well able to spin stories and carry on investigations for years. When engaging in investigations, future Governments must never go down the route of the tribunals because of their cost.

We have heard media debates on certain payments, politicians' earnings and pensions but we must acknowledge the amount of money earned by some people associated with the tribunals has been obscene. I question the position on the tribunals. What good can come of prolonging this saga, which should had been limited by a timeframe of nine or 12 months at the very beginning? Irrespective of the crises or issues in the public domain that need to be examined, we must learn a lesson from the tribunals.

Individuals in SMEs and agriculture are constantly talking about over-regulation. Through various Departments and organisations, such as the National Employment Rights Authority and the Health and Safety Authority, we seem to have become very adept at regulating the activities of people running small businesses with three to four staff. I refer to those in the food industry in particular and to SMEs. A massive number of regulatory measures from the European Union have been adopted to monitor these firms and ensure conformity. Subsequent to our adoption of the euro, we forgot about regulation in regard to money available on the wholesale money markets. We forgot to ensure proper regulatory arrangements were put in place.

The Bill should be clear and direct and should ensure people in financial houses in Ireland and the world over will never again be allowed to gamble the country's future with a view to making a quick buck, thus requiring the taxpayer to bail them out. People sometimes query why all this should not be left to the banks to sort out but for the sake of the economy we have to do this.

We are also dealing with the regulation of the credit unions, as Deputy Sherlock knows, as a member of the Joint Committee on Economic and Regulatory Affairs, and all the stakeholders are involved. The credit union movement has been a fantastic initiative the length and breadth of the country. Its benefits have been seen in both urban and rural Ireland. We have seen a very innovative idea being put forward in terms of one of the Dublin credit unions and development boards are to be put in place as well to help small to medium-sized businesses, which is to be welcomed.

The future regulation of credit unions is provided for in this Bill. Section 35 looks at ways of allowing people to restructure loans. That is a difficulty within the credit union movement at the moment. I am aware that as we speak new regulations are being discussed between the partners within the credit union movement, the Department of Finance and the Financial Regulator. It is important we ensure that while credit unions have to be regulated, as with all other financial institutions, there has to be confidence in the quality of all such regulation, not just in Ireland, but internationally.

Credit unions, however, have been very good about keeping credit lines open in their local communities and can, perhaps, be looked at separately from the major banks. We have seen the new Financial Regulator and the new Governor of the Central Bank being very surefooted in their approach to the business we have to deal with. We need them to be very clear about what they are looking for and will accept. They also have to be very thorough about even the smallest of issues. We have seen documentation on loans being added onto existing deeds and so forth just to ensure that people got money. I have even seen signed documents which did not contain the signatures of the purported signatories, that cost the latter money down the line. We have to be very clear about investigating such cases to ensure that the individuals involved get the answers they need from the Financial Regulator and the Central Bank on such matters. The ordinary individual who is out of pocket can face a regulatory framework within the State being set up by this Bill with confidence knowing that the issues he or she raises will be dealt with for his or her benefit and indeed, that of the wider community. I welcome the Bill and commend the Minister, Deputy Brian Lenihan on it. There is a need for the public to believe passionately in the regulation that we are putting in place, and to have confidence in the legislation. I commend the Bill to the House.

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