Joe Costello (Dublin Central, Labour)

I am delighted to have an opportunity to speak on the Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011. It is very important legislation. Listening to the previous Fianna Fáil speakers, one would imagine they are taking responsibility for the conception and delivery of the Bill and we are merely introducing it after they have done all the work. Our spokesperson on finance in the previous Dáil, Deputy Joan Burton, had sought the Bill for two years and it did not appear. Likewise, it is not true to say the European Commission did not produce a framework document for crisis management in the financial sector. In fact, the Bill is based on such a document which was produced approximately 18 months ago. The previous Government could have produced this long ago and it could have passed prior to the election.

One must recognise that many mistakes were made and that the purpose of the Bill is to look to the future and ensure these mistakes are not made again. This has nothing to do with the ECB good, bad or indifferent. If each nation puts in place a regulatory reform system regarding how the banking sector will operate and if proposals are made for mechanisms that govern a resolution regime in a proper fashion, whether it involves an ailing bank, a failed bank or a bank that can be resuscitated, this issue will be able to be dealt with in the future. If a resolution fund is put in place, as is proposed in the Bill, the matter will be dealt with in advance. In this respect, it prepares for the rainy day. It is better not to introduce irrelevancies that have nothing to do with the legislation in itself.

The Bill is particularly important because of what happened in the past. It is important to ensure the Irish financial institutions which almost ruined the country - and we are not out of the woods by any means - cannot do so again. The mantra was that every bank seemed to be a systemic bank and there was a perception that they could not be allowed to fail. This is what brought us to the present situation. The previous Government handled the economic crisis with this view and in this respect the Irish taxpayer was hung out to dry.

We must remember that banks are like any other private business; they can fail and they must be allowed to do so rather than being propped up if they are not able to survive. When they do fail, they must be properly interred so they cannot spread contagion. The Central Bank and Credit Institutions (Resolution) (No. 2) Bill 2011 provides the statutory mechanism for an effective screening and a decent burial for those failed banks. Where the condition is one of an ailing bank which is not terminal, the Bill also provides for structures and mechanisms for its resuscitating and rehabilitation.

Section 4 clearly states the purpose of the Bill is "(a) To provide an effective and efficient resolution regime for authorised credit institutions" and "(b) To provide for a resolution regime for such credit institutions that is effective in protecting the Exchequer, the stability of the financial system and the economy".

It is difficult to look back nearly three years to a time when the given wisdom was that the failure of a major bank like Anglo Irish Bank could not be contemplated even though it was rotten to the core with debt. The previous Government bought a pig in a poke with regard to the bank guarantee scheme and convinced the other political parties, with the exception of the Labour Party, to follow suit.

It is difficult to look back and envisage an entire private banking system being given a State guarantee of protection by the taxpayer to the tune of €500 billion. If the Sinn Féin Members in particular, whom we hear loudest in the Chamber, knew then what they know now - or if they had thought about it properly - they would scarcely have voted for the taxpayer to bail out the private banks to the scale of €500 billion. That was the time to burn the bondholders and protect the taxpayers. Rather than doing so, Sinn Féin voted for a bailout by the citizens for a private banking system.

The programme for Government makes it quite clear that the old ways are over forever. It states, "We will introduce a comprehensive special resolution regime for dealing with bank insolvencies". Furthermore, the programme for Government makes it clear that the burden of dealing with impaired or failed banks will not be shouldered by the taxpayer. Rather the banking sector, which caused its own failure in the past, should in future contribute to a resolution regime in the coming years.

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