Joe Carey (Clare, Fine Gael)

I welcome the opportunity to speak on the Central Bank Reform Bill 2010. Over recent months, many people have quoted Edmund Burke's remark that "there is a limit at which forbearance ceases to be a virtue". When the Minister for Finance, Deputy Brian Lenihan, presented this legislation to the Dáil, he spoke of the admirable grittiness of the Irish people in dealing with the issues that have come before us in the last two years. He spoke about emergency budgets, actual budgets, bank guarantees, the recapitalisation of the banks, NAMA and the nationalisation of Anglo Irish Bank. What Burke meant over 200 years ago was that there is a tipping point in all matters. When the Minister for Finance came into the House over a month ago to outline Anglo Irish Bank's capital requirement, a tipping point was reached in this case. The sheer size of the requirement is staggering. The capital required by the bank, which has been described by the Minister for Finance as an "institution of systemic importance", is mind boggling.

Despite Anglo Irish Bank's growth of 30%, year-on-year, no alarm bells went off in the Financial Regulator's office in this regard. If this type of growth were associated with gangland activity, the Criminal Assets Bureau would get involved in the issue immediately. If such growth were associated with clients of the Department of Social and Family Affairs, departmental inspectors would be immediately on the scene. Why was such growth allowed to continue when the participants were dressed in pinstripe suits and wore collars and ties? Such questions must be answered in the forthcoming banking inquiry. It is presumptuous to bring this legislation, which is one of three proposed Bills on the Central Bank, before the Oireachtas. What is the point in enacting legislation before one knows exactly what one wants to legislate for? Is something else going on here? Is the Government sincere in its proposed banking inquiry? Is it prepared to present the true and unvarnished story to the Irish people? The nature of the inquiry, along with the period the inquiry deals with and this rush to enact legislation to regulate our banking system, indicates that it will be a whitewash. The establishment of toothless inquiry, designed to appease coalition partners, is another example of what the late Séamus Brennan described as the difference between senior and junior hurling. New legislation for the Central Bank on regulatory affairs should not be drafted and presented until we know the full story.

One of the glaring problems in our economy is the lack of available credit. We have gone from one extreme to another. Money was too freely available without proper regulation, but now businesses are being starved of cash. If one walks down any main street, one will witness the carnage being endured by small retailers. Whited-out windows and lost jobs are the norm. I continue to get postcards from retailers who want the rules governing rents to be reviewed. I call on the Government to amend the existing legislation to ban upward-only rent reviews. Cash flow is the lifeblood of any business. Small and medium sized enterprises, which provide a great deal of employment in this country, need access to credit. The Government has failed miserably on this point to date. As a result, jobs have been lost and businesses have been forced out of existence. If this situation is allowed to continue, the country will never emerge from recession. Every week in my clinics, constituents complain about the lack of credit being made available to them. It is time for the Government to draw a line in the sand and ensure that business people who seek money to run viable businesses have access to credit.

Successive Fianna Fáil Governments have led this country into the financial quagmire in which we now find ourselves. Their failed policies, which poured more fuel on a grossly overheated housing market, have resulted in half finished housing estates and empty hotels all over this country. There is a prime example of this in the village of Clarecastle, County Clare which was reported on by Jerome Reilly in the Sunday Independent last Sunday week. This development was to comprise 25 shop and office units, a crèche and almost 100 homes but today it is surrounded by a 7 ft wooden screening and the site is only occupied by security guards. The community of Clarecastle rightly asks questions. What now for this landmark site? Will it become an eyesore or will it be knocked down and returned to a greenfield site? Will it have a community purpose?

Members of the public are beyond angry as they, together with their children and future generations to come, will have to pay for this mess, which has been created by Fianna Fáil, the banks and the light touch regulation regime they encouraged. At the very least, where a building development has failed and is taken over by the banks or NAMA, the community should have a say in what happens to the site. The "Prime Time Investigates" and "The Frontline" programmes earlier this week highlighted ghost estates, unfinished estates and failed commercial developments throughout the State. These need to be dealt with in the proper manner. Will the Minister of State try to do something in this area?

I welcome the progressive parts of this legislation associated with the changing of the rules for credit unions. This sector of the financial services industry has been a quiet success over the years and as our supposed conventional high street system repairs itself and its balance sheets, with the cost passed on to the taxpayer, credit unions will play a significant part in keeping credit flowing, however limited, in the economy. This supposed conventional high street sector was the historical poster boy but it will become the unglamorous cousin that keeps the show on the road. Section 35 of the Credit Union Act 1997 will be amended by the Bill to add greater flexibility to credit unions' long-term lending arrangements. This is a welcome initiative, which addresses the need for credit unions to be in a position to facilitate rescheduling of loans due to the economic climate. The credit union system and its financial methodology will play a more significant role in years to come.

There have been many changes in our banks over the past two years, which have made it more difficult for the customer, whether individual, business or SME. It came to my attention that one bank in County Clare during the summer of 2008 changed many of its managers. Working relationships that had developed between a customer and bank manager over the years had to be re-established and, in many cases, this was never the bank's intention anyway. To do this when customers needed such a relationship most only shows the cavalier and fundamental attitude of self-interest of our banks.

The banks and the Government up to now have been under the impression that their role is not one of facilitation to an economy but rather in the economy itself. This is deluded thinking and the sooner we retreat from this position the better. We will never recover economically until there is a political shift in emphasis from financial services and banking to producing items for sale, whether that is food, electronics or even intellectual property.

I spoke recently to a man who retired as manager from one of the two big banks. He took early retirement in 2003 mainly because he did not like what he was seeing. He did not like the pressure put on him to sell what he saw as worthless products to customers or the chase for mortgage business with the altering of loan to value ratios. Most of all, he did not like the change in culture that he could see happening. He had spent his career in one institution. He used to have the power to make a lending decision at his desk. This changed and he had to pass all applications, however small, to what he called "group credit control". He saw that the system of placing a loan applicant's details into a computer to make a decision was flawed and it undermined the basic principle of banking that he had followed for 35 years, which is trust and human interaction. The Minister, with his canon of legislation, may think he has the tools to deal with the future but, because of the total breakdown in trust between the consumer and the bank, the fundamental issues have not been dealt with.

It is interesting to see the hand of the European Central Bank come more and more into play in domestic political decisions. For some time, much of our macroeconomic policy has been determined by Frankfurt and Jean-Claude Trichet. However, over the past year, a number of Government decisions relating to the banking crisis have been tempered by Europe. The initial NAMA haircut proposed by the Minister for Finance has been adjusted and, as recently as last week, he became more open to the idea of winding down Anglo Irish Bank for some reason. The ECB has recently expressed its concerns about the transparency of our new proposed Central Bank system's legal structure in the absence of consolidating legislation and the Minister must address this.

This legislation will give rise to a majority of ministerial appointments on the newly proposed Central Bank commission, six to eight out of ten or 12. The ECB has stressed the need for the commission to be independent from the Department of Finance in this regard. It is difficult to see how this can be achieved when these appointments are at the discretion of the Minister. It would be better if appointees such as these appeared before an Oireachtas committee for ratification. This model of appointment would be more transparent and accountable.

A further cause for concern about future independence of the Central Bank is the Minster's powers under section 50 to make regulations. The common theme in financial legislation over the past two years is that many new and significant powers are being vested in the Minister for Finance. That is not particularly healthy for a democracy and I would prefer to see a more robust position developed for the Oireachtas. This could be facilitated with a beefing up of the Oireachtas committee system by introducing more regulatory and oversight powers for committees rather than for the individual. There are good aspects to this legislation but it is presumptuous and it should not be enacted until the inquiry into our banking system concludes its business.

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