Seán Kenny (Dublin North East, Labour)

I welcome today's indications of very good news which will provide greater sustainability for the Irish economy. The Central Bank and Credit Institutions (Resolution) Bill 2011 is one of the requirements of the EU and IMF programme of financial support for Ireland. The measures in the Bill include what is commonly known as a special resolution regime, SRR. This new legislation originates under the EU and IMF bailout that was negotiated under the previous Fianna Fáil and Green Party Government. While in some ways it is a case of locking the stable door after the horse has bolted, a special resolution regime is an important part of any modern economy's financial regulation. That is one reason the Government is proceeding with it. It is telling that in its 14 years of government, Fianna Fáil never legislated for one. Another reason is that, under the memorandum of understanding agreed by the Fianna Fáil-led Government with the EU-IMF, we must proceed with legislation.

A special resolution regime, SRR, is intended to allow for a more orderly resolution of failing banks and other financial institutions, including building societies and credit unions. In particular, credit unions have been hamstrung by the bailout regulations. The normal winding up procedures available to companies under the Companies Acts are inadequate when it comes to institutions of this kind. In the US where more than 140 banks have failed in the past year or so, the equivalent legislation has been much utilised. Britain hurriedly enacted measures in 2009 in the wake of the Northern Rock failure. Similar regimes are also being created at EU level.

The Bill is intended to come into effect when the interim measures in the Credit Institutions (Stabilisation) Act 2010, the CIS Act, lapse at the end of 2012. When enacted, it will give the Central Bank powers to deal with financial institutions that are failing or likely to fail. The main powers are, first, to establish so-called bridge banks to hold the assets and liabilities of failing institutions temporarily pending transfer to a third party. Second, to make a transfer order to a third party in respect of a failing institution, subject to prior notice to the institution concerned and approval of the order by the High Court. If there is an imminent threat to the financial stability of the institution or of the financial system in the State, there is no obligation to notify the institution in advance. Third, to make a special management order whereby the Central Bank would take over the effective management of an institution that is failing. Subject to an imminent threat to financial stability, any such order would be on prior notice to the financial institution concerned and subject to the approval of the High Court.

Under the legislation, the Minister for Finance has powers to make financial incentives, such as loans or guarantees, available to any proposed acquirer of a financial institution. The Minister will also have powers in respect of the winding up of a financial institution, for example, the requirement that nobody can appoint a liquidator without the Central Bank's approval. The Minister will have the power to direct a financial institution to prepare and implement a recovery plan, together with powers to prepare a resolution plan for that institution.

This legislation serves to reinforce Ireland's commitment to resolve and restore the confidence of the public and greater transparency in the financial services sector. This is to be achieved through the process of open and transparent regulation, an effective and efficient resolution regime for failing institutions and the active process of deleveraging and downsizing some of the existing institutions in an orderly and transparent manner. The proposed changes and the commitment of the Central Bank and the Government to implement them will assist in remedying some of the disparities in the system and, with renewed confidence, lead the institutions into the next decade.

I have criticised the Fianna Fáil-Green Party Government previously and will do so again, because it must be repeated that the former Government left the Irish people an awful legacy. The current Administration is determined to leave Ireland and her people a better legacy by getting on with fulfilling the EU-IMF obligations, such as the legislation before the House, to which the former Administration signed up the State.

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