Éamon Ó Cuív (Galway West, Fianna Fail)

I commend Deputy Michael McGrath on producing the Bill. The economic crisis that hit this country was at its inception and in its horrible manifestation primarily a banking crisis. Banks borrowed too much from continental banks, lent ridiculous sums of money to unscrupulous developers and lent far too much to investors. Banks lent grossly inappropriate sums of money to ordinary decent people. Banks were unrealistic in their investments, naïve in their assessment of securities and criminally immoral and dishonest in their approach to lending.

A culture of greed dominated the banking sector in the Ireland of the Celtic tiger and this culture has since proven itself one of the main causes of our economic woe. A ruthless pursuit of higher and higher profit margins, and the chase for ever increased sales has fundamentally damaged once trusted banks and undermined the whole financial sector in the State. It amazes me that all the focus has been on what was Anglo Irish Bank. People often do not realise or do not want to recognise that the recklessness of institutions such as AIB, which one would have thought was a well established and well run bank, matched anything that happened in Anglo Irish Bank.

Light-touch regulation as an economic theory has proven itself deficient. The approach failed miserably and yet everybody was doing the same thing. Ireland under the previous Government was following best international practice when it came to light-touch regulation of the financial sector. We were returning Exchequer surpluses and the economy was booming, but a rotten disease had started to fester and that disease was banking in Ireland. To return the financial sector to health, it is in need of wholesale reform. Part of this reform must be carried out on an international level and a European level given that Irish banks do not operate in an exclusively Irish-controlled context. Furthermore the currency within which they operate is controlled by bodies beyond the control of this House. Nonetheless we can still do our part and this Bill represents one small step towards renewal of our financial sector. It is in no way a substitution for other necessary reforming initiatives.

It is a fundamental concept in democratic states, that the laws of the land must be obeyed and respected by all, if they are just. If somebody breaks the law and has no good reason or defence for doing so, he or she must face the penalties that the State provides for such actions. Hopefully the time will come when we shall see those members of the banking fraternity who broke the laws being prosecuted and punished by the courts. I believe most of us look forward to that day and I hope it arrives sooner rather than later.

In June 2009, the then Financial Services Ombudsman, Joe Meade, wrote to the Minister for Finance to request that he be given the option, if he considered it to be in the public interest, to name an institution that had been subject to one of his decisions. This Bill, the Central Bank and Financial Services Authority of Ireland (Amendment) Bill would give the Financial Services Ombudsman the power he requested nearly three years ago. The Government has promised to produce a Bill but as we discovered yesterday the Government promises more than it delivers. It was with shock that people heard that only three of the 26 Bills on the A list have been published so far in this session.

Since 2005 there has been a steady rise in complaints across the banking, insurance and investment sectors. At present there is no legal mechanism to allow the ombudsman to name and shame financial service providers when serious complaints against them are upheld by the Financial Services Ombudsman. Currently the information published in the twice-yearly FSO report is aggregated so that no individual provider can be identified and while the report includes case summaries, they are always anonymous. The ombudsman received nearly 7,500 complaints last year. Nearly 2,000 of those complaints were upheld with more than €2.2 million being repaid or awarded in compensation to customers of financial institutions. It is interesting to note that there was a 41% increase in mortgage related complaints during the second half of 2010.

It is clear that there has been a huge level of abuse of position across the financial sector. Clients were sold inappropriate products. Banks, investors and brokers effectively hoodwinked ordinary decent citizens into buying financial products that were more than unsuitable. All this was done for the sake of sales, sales and more sales. The greed of some unscrupulous individuals in Celtic tiger Ireland who abused positions of trust is probably best exemplified by particular unnamed bodies who advised elderly couples to put their savings into long-term investment products. In one particularly obscene case, a husband and wife aged 85 and 84, respectively, were sold a six-year term investment product with hefty penalties for early encashment. Everybody would agree this was crazy and sad. It is time for people who engage in that type of practice to be named and shamed. Other abuses include the changing of the terms of loans without reference to the borrower; the sale of payment protection insurance on loans that did not need them; overcharging of fees by banks; exposing vulnerable clients to high-risk investment products - how many people have lived to rue them; and the incorrect application of break fees when moving from a fixed-rate to a variable-rate mortgage.

The benefits of this legislation are threefold. First, giving the Financial Services Ombudsman the power to name offenders increases the penalty in having a complaint upheld against them by the Financial Services Ombudsman. It is a preventative measure that increases the power of the ombudsman and should result in financial institutions having more respect for the ombudsman given that he has the power to make known to the world their misdeeds.

Second, by allowing the Financial Ombudsman to publish the details of upheld complaints, if he deems it in the public interest, we are strengthening trust in our financial institutions. The risk of wrongdoing being aired publicly would, once identified, lead to it being resolved more quickly. For any institution, brand, reputation and image are everything. If they are aware that any possible mistreatment or wrongful treatment of customers could be made public it then becomes economically sensible to prevent situations arising when clients feel that they have been let down. This damages the name, brand and image of the institution and in short, it makes wrongful actions uneconomic.

Third, this legislation will benefit consumers by empowering them to make an informed choice with regard to where they bring their business. Successive reports from the FSO indicate that complaints are on the increase and, more tellingly, that there is a consistency running through the case studies contained in the reports, which suggests very strongly that financial institutions are not mending their ways. However, if certain institutions had a high level of complaints made public against them, it would inform the public that those institutions were not to be trusted. There would be a double-whammy in terms of gain in that the consumer would know which institutions to trust and we would also find that the number of institutions we could trust would rise exponentially because the institutions would know it would be the death knell for their businesses if they were not to honour that trust.

I welcome that the Government is not opposing the Bill. However, in the past, including when we were in government, I have seen a Bill agreed on Second Stage but the amendments did not come forward swiftly enough to allow the Bill to proceed to Committee Stage. When in opposition the resources to complete a Bill to the satisfaction of the drafters of legislation on the Government side are difficult to come by. I hope this will not be put on the shelf. We can do this with something simple. If the Bill needs amendments then let us make the amendments but let us keep the thrust of the Bill.

I note that if it gets to the House this week the Construction Contracts Bill will be introduced with amendments. It was going through the Seanad when we were in government more than one year ago. It is badly needed. I accept amendments are needed to reduce the thresholds but we must bring in consumer protection legislation and we must protect small businesses from the depredations of large businesses. We must ensure that we have a society in which, whether one is an individual or a small business, one's interests are protected from those who are powerful or who might seek to abuse their power. Ba mhaith liom moladh a thabhairt don Teachta Mícheál Mac Craith. Creidim gur lá maith é an lá seo. Molaim an Rialtas as ucht glacadh leis an mBille seo. Tá súil agam go mbeidh an reachtaíocht seo á phlé againn ar Chéim an Choiste go luath.

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