Andrew Doyle (Wicklow, Fine Gael)

I welcome the opportunity to contribute to this debate. The Short Title refers to an initiative that needs to be taken but it will not deal with the reforms of the Central Bank that are needed for many reasons but, in particular, because it is rushed legislation. Even in the context of what happened over the weekend with the ECB and IMF taking a central role in bailing out the euro because of the weakest link being vulnerable, the reform of the Central Bank and its role, as proposed in the legislation, is ill-informed.

We must face the fact that people have lost faith in the bankers, the regulators of financial institutions and those who established the rules for regulators. They have lost faith in the Government which put in place the powers and rules that govern financial institutions and gave powers of oversight to the Central Bank and the regulator. Some aspects of the Bill are to be welcomed but in order to know where one is going, one must know where one is coming from and there has not been a full and comprehensive report on where the mistakes were made. The Government actively and passively contributed to the rapid expansion of the gambling culture of the banks. When we entered the eurozone and gained easy access to cheap money the bankers increased the availability of credit to all comers and bankers bonuses were a key factor in developing the sales focus of banks instead of prudential loan management and the traditional principles of banking.

It emerged at a meeting of the Oireachtas Joint Committee on Finance and the Public Service that any banker who expressed a concern was sanctioned, moved on or told to shut up. As Deputy Joe Carey outlined, if the performance of a business in another area was in double-digit figures it would be subject to an investigation. Anyone who questioned the banking sector was told that the shareholders and investors demanded that level of performance. Such practices were allowed to continue because everyone was asleep at the wheel. It was said that the practices pertaining in the country were reckless. Large amounts of easy credit due to the financial bubble fuelled developer-led housing bubbles in every town and village in the country. That increased the cost of houses which were paid for by easier personal credit terms.

The Central Bank reported that €118.9 billion was outstanding on residential mortgages in the last quarter of 2008. Many householders were suddenly the owners of unthinkable amounts of debt. A total of €2.8 billion was due in credit card debt alone. According to the Central Bank, in 1995, for every €100 earned, €48 was owed compared with €176 for every €100 earned in 2010. In 1995 we had the lowest debt to income ratio. The level in Spain was 59% and in France it was 66%. We increased by 267%, France by 9% and Spain, a country considered to be a basket case, by 120%. Those countries are in the eurozone and their central banks had the same level of power over the currency and fiscal matters as we did even though we had lost control of certain aspects of our currency to the European Central Bank. However, those countries managed to perform more sensibly than we did.

The knowledgeable voice of the local bank manager was ignored and the sales focus of the bank became a vision of the future. It was similar to casino gambling. The more one lent out as a salesman for a bank, the more one got at the end of the year by way of a bonus. The financial bubble was one of the core effects because it caused such a bubble in the property sector and affected our competitiveness. From our accession to the European Union when markets opened up to us we had spent years fine-tuning our ability to have an efficient, competitive, export-led economy. In the course of a few years we allowed that to completely disappear.

It is difficult to see beyond the banks and the bankers in particular. No one disagrees that we must bail out the banks and that we must have a banking system but it is not correct to say we must bail out the bankers. The same people are still in charge. No effort has been made to issue sanctions or undertake a proper inquiry. That is what upsets people and causes unrest. The Government had better wake up and realise the symbolic importance of the fact that the same people are still in charge. It is hugely important that those who were seen to have been reckless, negligent and to have profited to such an extent from reckless behaviour, facilitated by light touch regulation, are seen to pay the price. We paid them large bonuses for providing big loans. Why are we not able to fine them when the loans default? Why are we not able to go after those people? Those are the questions people are asking. No amount of long-winded speeches in the House about how the fundamentals are being improved will change the perception that exists unless we take direct action.

The Government preached about light touch regulation. The big players in the banks said they could self-regulate and that they needed light touch regulation in order to stimulate the economy. The trend of consumer debt to income did not just suddenly change between 1995 and 2008. A trend was obvious during that period. Why did no one express concern about it? In response to the Taoiseach's first budget in his then role as Minister for Finance in 2004, Deputy Bruton referred to the alarming trend that was developing in terms of property speculation that was threatening our national competitiveness.

Thanks to the light touch, hands-off attitude to the regulation of banks the Government has sold citizens into debt bondage to the tune of €54 billion and that might not be the end of it. That was taxpayers' money which should go into making a better society and creating jobs. What a difference it would make if even €20 billion had been available to invest in job creation initiatives, the protection of jobs and concentrating on what we are good at in this country. A study was published last week by Harvard graduates who work for Bord Bia which indicated that no one was championing the cause of the potential of the food industry to create jobs and to become an even bigger player in our economic recovery.

We still do not know all the details of what happened because the full inquiry into the bank collapse and the Government decisions on the banks has yet to be published. In Iceland last month a report was published into an inquiry on the December 2008 banking collapse. A similar report is not available in this country yet. If one is to reform the Central Bank and the governance and oversight bodies one must know where one is coming from in order to know where one is going. Perhaps some of the existing structures and architecture are suitable but we cannot say that for definite until we know where we have come from. Without the basic facts on the operation of the banking casinos and their nationalisation there will not be a clean sweep of personnel and genuine regime change in the banking culture, both of which need more regulation.

What is known is that the Central Bank is in charge of national financial stability since monetary policy was transferred to the European Central Bank when we joined the eurozone in the same way as happened in France, Spain and the other eurozone countries. The Minister has claimed that in order to make the Central Bank more effective in carrying out its fundamental responsibility the Government is proposing a three-party trilogy of Central Bank reform Bills. It is intended to restructure the organisation of the Central Bank to ensure better regulation and supervision of the banks and financial companies. Where is the bank strategy report that clearly states the new vision and strategy of bank culture so that the casino-style bank system that created a debt of more than €80 billion will never happen again? We need to return to proper prudential banking so that the banks we have capitalised and whose bad loans we have removed can improve their ability to borrow on international markets to lend to small and medium-sized enterprise and operate under conditions set down by the Central Bank.

Where are the powers in this Bill to enable the Central Bank to make those banks make money available to small and medium-sized businesses to protect jobs and not just shore up their balance sheets and give positive returns for investors, who are being protected by the current position. As speculators and investors they were glad to take and not share profits by way of any payback into the system and now they want the taxpayer to guarantee them indefinitely.

In March 2009 I asked the Minister for Finance what his objectives were for the board of management in Anglo Irish Bank and what its strategy was now that it was in public ownership. The Minister's response was to the effect that the bank was being run on an arm's length commercial basis from Government. Does this mean that the self-serving enrichment system for staff and shareholders that has operated within the banks for at least four years is continuing as usual, there is no change and neither the Central Bank nor the Financial Regulator has power to enforce change?

Without new objectives for the bank boards to restore conservative well-regulated banking practices I am seriously worried that the small group of people who have been enriching themselves in the banking property sector will continue as before while the economy continues to wither. Is it not a case of keeping the public paying and us ignorant?

I welcome some parts of the Bill. Other speakers have mentioned the whole issue of the credit unions, which is a welcome amendment. The credit unions have also welcomed it.

When one comes to analyse where we are today regarding the economy being in trouble, it is impossible to get away from the manner in which the banks operated. Professor Patrick Honohan has said that bank regulation, although compliant with international standards, was nonetheless complacent and permissive: "Too much reliance was placed on an international risk model deployed by the regulated entities." Even the Financial Regulator's consumer consultative panel found that the regulator was far too lenient when policing the larger players in the financial services sector.

The OECD pointed to the specific issues around Allied Irish Banks in particular and said that the regulator was far too weak in dealing with this bank. That is the nicest thing one could say about the regime that pertained and the way the Financial Regulator performed his duties. It was gross negligence which has amounted to a catastrophe for society, the economy and citizens, with the debt and the bondage of some €54 billion that has been imposed on everyone in the State. We have to change it.

I received an e-mail before I came into the Chamber from a former member of the old consultative group, who said the advisory committee that has been established has no real teeth and will not have any real input into the new Central Bank commission, its findings, determinations, etc., including how it will hand down rules to the banks.

If ever the people at the top needed to listen to what is happening on the street, it is now. I am sure many Deputies on the Government side as well as in Opposition have to listen to the anger and frustration among constituents as well as their total perplexity about how this is being allowed to continue, that is, the State bailing out people who have made a mess and allowing them to continue in office. It is one thing to protect the structure and the banking system, but it is a totally different matter to decide to protect those who made the mess in the first place.

This is at the heart of the Fine Gael amendment to this Bill, on foot of which we oppose giving the Bill a Second Reading, because – the European Central Bank has made this point – it reserves the system of appointment of directors to the new Central Bank exclusively to Government with no proper scrutiny by the Oireachtas or any external body. It is a case of jobs for the boys.

I have just drawn a little diagram with the signs of the Olympic symbol, five rings, all intertwined. It represents the upper strata of society in Ireland in business, banking, accounting, etc. NAMA is now appointing people from the estate agencies, auditors and accountancy firms who promoted the slogan, "Buy now – it is never a bad time to buy a house", and fuelled the price increases. These were the same firms which were in charge of looking after the accounts of some of the banks.

People have the perception that these golden circles are all intertwined and cannot be broken up. If we are going to do this seriously, we have to examine the situation and make root and branch changes to the system. The Central Bank Reform Bill 2010 should be the start of this, but, unfortunately, it is not. I hope that people in Government and in the Department of Finance will take on board the concerns that exist. Some of them are symbolic and in so far as symbolism is important, people have to see changes taking place. However, there is much more that is down to the nuts and bolts, for example, the power of the Central Bank commission where it has concerns. A three-year plan is fine, but an updated report on that plan at least twice a year to the relevant Oireachtas committee has to be part and parcel of its implementation programme to show how the figures are improving and how the banks are behaving and responding.

We have to be able to ensure that the banks that we now support and guarantee by way of sovereign debt report to and are responsible to the citizens of this country. Anything less by way of reform is only using the word as a cover-up. It would mean that people will lose even more faith. We have a long way to go to restore faith in the Government, the banks and the Financial Regulator. I implore the Minister of State to take on board the concerns that have been expressed here by Members of the Opposition who have no interest in seeing the economy going down the Swanee. It is not in anybody's interest. I have four children and I do not want to see them having to emigrate. I am no different from most Members in this House. I ask the Government to listen to what has been said.

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