Tom Hayes (Tipperary South, Fine Gael)

I am pleased to have an opportunity to speak on the important Bill before the House. From listening to Deputy Ross there is no doubt that what happened in the banks was truly unbelievable to all citizens. People are at a loss as to how it all happened. It is a huge problem not alone for this generation but it will have an impact on the country, the economy and the lives of many. People have had to leave our shores and get jobs overseas. They are suffering. In the same way as everyone else, I am amazed that this was allowed to happen and that it did happen. Questions must be asked. However, we are where we are and we must deal with the situation. That is why I welcome the opportunity to say a few words on the Bill. I commend the Government on introducing it and the seriousness with which it is going about its business in terms of solving the problem or avoiding problems in future.

The Bill provides the Central Bank with the necessary powers to take swift and effective action in credit institutions including building societies and credit unions that are failing or are likely to fail. It will also protect the stability of the financial system and the economy. The Bill has followed best international practice in other jurisdictions that have introduced special resolution regimes. The Bill has two main powers - first, the power to transfer assets and liabilities of a credit institution to a third party or pending a transfer to a bridge bank. Second, the Central Bank will have the power to make a special management order appointing a special manager to run an authorised credit institution. The purpose of the special manager is to manage the business of an institution to facilitate the development of recovery and resolution plans or to wind down the institution.

The Bill also provides for the establishment of a resolution fund to minimise the exposure of taxpayers to future financial sector difficulties which would be funded by contributions from the credit institutions. The rate of contribution will be prescribed by the Minister for Finance in respect of each institution.

We only have to look at what has happened internationally to assess the impact this type of legislation will have. Special resolution regime measures were used last year in the United States where 151 banks failed. In Britain a similar type of legislation was enacted in 2009. Even though it was too late for the collapse of Northern Rock it was in place in time for the Dunfermline Building Society, which many commentators believe was a successful example of a special resolution regime exercise. The Dunfermline Building Society was once the largest building society in Scotland and the 12th largest in the United Kingdom. In March 2009, reports indicated the society was no longer viable, and it was put up for public sale to be managed by the Bank of England, which transferred the core parts of the society to the Nationwide building society. This followed a sale process conducted by the Bank of England under its special resolution power. The social housing loans of Dunfermline's customers were transferred temporarily to the DBS Bridge Bank limited, which was owned and controlled by the Bank of England. This allowed the Bank of England to support the social housing portfolio and provided time to secure a permanent solution.

It is business as usual for all the customers of Dunfermline Building Society. Their deposits continue to operate normally. Branches and telephone banking continue to operate during their normal hours, and customers can deposit and withdraw their money in the usual way. Savers can be assured that their money is safe. Loan and mortgage customers continue to contact the bank in the usual way and to make payments as normal. All of the staff in the bank were transferred to Nationwide.

This Bill is a necessary measure to ensure a systematic process is in place if a bank, building society or credit union should fail or appear likely to fail. However, we must make every effort to ensure this situation does not arise. I would like to echo what I have said in this House in the past about the power of the local bank manager. Many years ago, branch managers knew what was happening in each part of the areas they controlled. They knew their individual customers; they knew the local shopkeeper, the local farmer, the local blacksmith and all the various areas of business across the county. However, modern banking practices have changed all that. In recent years, when people went to the local bank manager, he would say their applications had been sent to the head office and that more information was required or an issue had been raised. In the last 12 months in particular, dealing with many small businesses in my own constituency, I have seen the frustration caused by these head offices and the pressure they are putting people under.

I question the way banks have done their business. It is all about doing one's best for the customer. I appeal to the banking institutions, which are subject to regulations to improve their business practices, to consider the way they deal with their customers. I appeal to them to think back to how things used to be and give the local bank manager more of a say. That alone would restore major confidence among the community of small business owners who are struggling, day in day out, to create jobs for people. There is major potential for job creation, but the one big obstacle is the bank manager. The way banks should do business in the future is to be more in touch with what is happening on the ground. It would be better for this country, for the Government and for the many people who are unemployed.

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