Clare Daly (Dublin North, Socialist Party)

In essence, this Bill gives the Central Bank more powers to scrutinise the practice of private banks, which everyone will welcome and will not have a great problem with given what the banks got up to in the absence of adequate regulation. That said, I am not sure of the extent of the scope of this Bill in terms of what other institutions are covered. It is not entirely clear to me whether the practices of major players in the financial sector such as, for example, the IFSC, which many people, including myself, consider to be nothing more than a glorified tax haven, are covered by this legislation. My first question to the Minister is if they are not covered by this legislation, why is that the case? What we have witnessed during the past number of years is an explosion of the financial sector. While banking was originally developed to facilitate trade and the distribution of goods and services, whole sectors of the financial market are nothing but glorified gambling institutions given the movement of derivatives and so on, which are toxic products that can impact on the economy proper. Are these organisations and institutions covered and will they be scrutinised under the provisions of this legislation? That is essential.

The Bill provides for the Central Bank to appoint what are deemed skilled persons such as accountants and so on to scrutinise books and to examine the loan capital ratios and transactions which would give an early indication of trouble in a bank. I do not wish to slag anyone off but the record of accountants and auditors - I trained as an accountant - in the current financial crisis does not inspire confidence in their being capable of adequate and independent scrutiny of the private banking systems. They are not the best people to scrutinise bad practices.

While there is nothing per se objectionable in this Bill, the premise of it is inadequate. This legislation aspires to our having a fully functioning privately owned and run banking system. In other words, we are giving the impression that all we need to deal with the current financial crisis is a complex system of external regulation and that had this been in place we would not have had the excesses demonstrated by Anglo Irish Bank or Northern Rock, which captured major market share through lax lending practices, which in turn acted as a type of contagion to other more reputable financial institutions and major banks. I do not buy that argument. It does not stack up. One could possibly argue that had these measures been in place in advance of the current situation the scale of the crash and legacy of bad debt might not have been as severe. However, what is being put forward is not an adequate solution to the problems that exist.

Perhaps the Minister will comment on the following aspect. Currently our banks are largely State owned but continue to be privately run. This Bill makes much play of the fact that we are putting in place substantial fines to deal with bad lending practice, depending on the scale of the wrongdoing, its impact and so on. Is it not the case that we are facilitating a situation whereby the Central Bank could issue banks, which are largely State owned, with substantial fines for which the taxpayer would be asked to foot the bill in order to protect their interest? That is the logic of what we are doing.

The solution in respect of largely State owned banks is not to restore them to private ownership but to have in place a better system of democratic control and accountability in terms of how they are run. There should be a revamping of the boards of the banking sector, incorporating workers and elected representatives of ordinary depositors and customers of those banks whose franchise is not linked to the scale of their deposit balance but to the viewpoint of ordinary depositors. Also, there should be on banking boards representatives of wider society whose job would be to oversee banking policy. Who best to deal with this? It is believed that one needs experts to deal with these situations. The experts have had their day and we are now dealing with the legacy of that.

Despite the billions of our money that has been pumped into the banking sector, small businesses and first time buyers cannot get access to loans to advance their business or put a roof over their heads. We need more democratic accountability which would examine initiatives such as releasing the banks' money and using that wealth to benefit the public interest in a real sense. This, rather than the measures proposed, is a far better way of protecting the public interest.

The system of external scrutiny being proposed will further enrich audit and accountancy firms, including the big four and the very people who were part and parcel of the rubber-stamping ethos that led to the financial crisis. I do not believe we will achieve what the Bill sets out to achieve because the wrong lessons are being drawn from the economic crash. The reality is that it is, and was, an inevitable result of a system based on private ownership of key sections of the economy, including the banks, and the absence of any rational economic planning in society. Rather than addressing these systemic issues, the establishment consensus, which centres around deregulation in the 1970s, is to respond by dealing with aspects of the situation rather than getting to the heart of the problem. For that reason, the measures being put in place through this Bill will be of limited value.

Part 6 empowers the Central Bank to initiate regulations independent of the Minister for Finance, although it provides for or requires a certain element of consultation to take place with the Minister. I would like more detail on that. It is not clear what will be the role of the Oireachtas, Dáil or Opposition in that regard. The Bank of England is cited as a source of inspiration in that it is independent of the British Government. However, I do not foresee any situation wherein the Central Bank, like the European Central Bank or Bank of England, would or should have this type of decision making power. It is fashionable to say that a central bank independent of politicians will lead to independent decision making. While it may be fashionable to say that there is no evidence to support that viewpoint. There is nothing independent whatsoever about a privately owned financial system, as witnessed during the course of the recent crisis. In that scenario, any Government that attempted to marshal the financial resources of the banking system in order to benefit the people would find itself clashing with those at the top of these so-called independent banks, the interests of which would be the feathering of their own nests rather than the good of society as a whole.

While no one will be crying over the banks being subject to more scrutiny, I do not believe this legislation is the panacea because it does not address the root cause of the problem and leaves banking in privately owned hands, which is what caused our problems in the first instance. I do not believe these measures will get us out of the situation we are in.

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