Thomas Pringle (Donegal South West, Independent)

I welcome the opportunity to contribute. A resolution procedure for financial institutions should always have been an important part of the armoury of the Central Bank and the Government for dealing with financial institutions, even if was never needed. It is amazing that such a procedure was never put in place, particularly given that a number of institutions crashed in the 1980s. It has taken the banking crisis of the past three years and the intervention of the IMF and the ECB to ensure a resolution procedure will be put in place.

I welcome the provisions in the Bill to ensure the State will have mechanisms available to take over the operation of failing institutions. In 2009 the IMF stated that "...keeping afloat failed banks and making good their losses is unjustifiable, because it ultimately transfers commercial losses to the taxpayer, validates poor bank management...". Given this comment, it is amazing that the IMF proceeded in 2010 to force a bailout agreement on the Irish people, which puts all the bank losses on the taxpayer and places us under a huge burden to repay the losses of the banking system that have come to light over the past few years. These losses are not the responsibility of the people or the Government and they should not be taken on by the people or the Government acting on their behalf.

Opposition Deputies have constantly stated there is a need for burden sharing and for bondholders to carry their losses. They were speculators who invested in these businesses, which failed, and they should take their losses. That is the correct and mature way to deal with financial institutions. We have constantly said that we need to default on these loans, burden share and burn the bondholders. I am glad the Government has taken this on board to some extent in regard to unsecured bondholders in AIB by moving to force burden sharing on them. That demonstrates the arguments we made were appropriate and sensible and the Government has acted on them. The ratings agencies have registered this as a default incident and, therefore, the State has started to default on the bondholders. The Government should work harder in this regard and move up the value chain to force burden sharing on bondholders to comply with the IMF statement not to ultimately transfer commercial losses to the taxpayer.

The taxpayer is carrying the losses of all the banks and bonds are being paid. Senior bondholders will be repaid in the coming days, weeks and months by the Government with taxpayers' money borrowed at exorbitant interest rates from the very people who said we should not put these losses on the taxpayer. However, that is what the Government will continue to do.

Other Members have referred to cutbacks throughout the economy and, in particular, in the education sector in recent days. School children will not have transport next September and some who are badly in need of them will not have SNAs. I received a call from a Montessori school in County Donegal earlier. An autistic child will be sent to the school next September but the school has been refused an SNA. That is an example of the impact of this crazy policy the Government is pursuing in ensuring all senior bondholders get paid. Everybody who gambled and put money into the banks will get paid while school children will lose out on SNAs and transport, social welfare rates will be slashed in the budget and the low paid will be forced to carry the burden. The Government needs to continue with the burden sharing it has engaged in with AIB's unsubordinated debt holders and move up the value chain because that will resolve our problems within the State.

I commend the Oireachtas Library and Research Service on its comprehensive digest, which provides a great deal of information on the legislation. There were discussions in 2008 within the Department of Finance and Central Bank about introducing a resolution Bill but it was shelved because officials were afraid it would spook the markets. However, they were spooked at that stage and money was flowing out of Anglo Irish Bank in particular. This led to the crisis and the crazy guarantee in September 2008.

The Bill provides for four conditions that need to be satisfied before the Central Bank can intervene to force a resolution on an institution. Two of the conditions are subjective and the regulator and the Central Bank can decide whether they have been met. They should be tightened up and the subjectivity removed. The reports into the banking crisis have highlighted that the regulator, the Central Bank and the Department of Finance failed to see what was coming down the tracks and they did not act. If too much subjectivity attaches to the conditions provided for in the Bill, the groundwork will be laid for further failures down the road. We must ensure that the conditions in the Bill are clear and if they are not met, a reaction is triggered quickly without subjectivity. Otherwise, the banks could bring undue pressure to bear. If we get to the situation again where we have a weak regulator or Central Bank, or a Department of Finance that is not capable of dealing with the situation, then the financial institutions can place undue pressure on them and delay their reactions to the conditions that are developing in those institutions. This could have catastrophic effects if they do not react quickly enough and implement the measures needed to ensure the wind up of these institutions, or at least have them taken under control, so that losses can be mitigated.

I look forward to seeing ministerial amendments on Committee Stage, and to teasing out this Bill in greater detail.

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