Mary Lou McDonald (Dublin Central, Sinn Fein) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I am very happy to have the opportunity to bring the Bill before the House this evening. It deals with an issue of major social importance, which is a political and economic problem also. The Bill deserves the support of all sides of the House which can play a part in righting a wrong. The Bill would empower the Central Bank to act in the public interest, taking into account economic considerations to set a cap on standard variable rates in the banks bailed out by the people. Recent research from the Central Bank, and the hundreds and thousands of people who contacted our offices in recent months and years, confirm a rip-off is taking place. It shows Irish standard variable rates are way above the EU average. The research shows the average outstanding standard variable rate in Ireland is 4.24% compared to an EU median mortgage rate of 2.8%. The interest rate for new mortgages in Ireland at 4.26% is the highest of all the countries analysed. In Britain, the effective rate is only 2.01% and the eurozone average is 2.1%. In Ireland, it is a staggering 3.42%.

We do not have a functioning market and pretending we do serves no purpose. I note the Minister has left his options open on this question. He has insisted that, "The issue of a penal banking levy in the Budget or powers for the Central Banks to regulate interest rates will be considered at that time if sufficient progress is not made". These are fine sentiments but it is not like this issue has suddenly popped up out of nowhere. For years the Government has been told of this issue. Four years ago, when the Government still spoke of things like democratic revolutions, the then Tánaiste, Deputy Eamon Gilmore, told my colleague, Deputy Doherty, that he need be in no doubt that the Government would act decisively, forcefully and effectively with the banks. This sounds so ridiculous now, after four years of rule by the banks for the banks.

I hope this evening the Government will finally abandon its policy of trusting the banks. Surely at this stage the penny has dropped that the banks are not looking after the people. They are failing society in many ways and need to be brought into line. Talking to the banks does not work. Appealing to their humanity and moral duty does not work. The Government's failure on mortgage arrears, on bankers' pay and on making the banks play ball on insolvency cases is well documented. Its approach is always the same and it always fails. It always put the banks first, and in return the banks pocket the gains and make new demands. This vicious circle of bank rule must end.

The Bill is a measured and appropriate response. It is a major step to take. It is an extraordinary move for extraordinary times. We cannot go on pretending we have a functioning banking system. The market is failing the people and intervention is needed to restore a functioning and fair system. The Bill is short and is designed to lapse by December 2017. This will bring us to almost a decade after the banking crisis began. The criteria proposed on which the Central Bank would make its decision on whether to introduce a cap and at what rate to set this cap is set out in section 2. The range of criteria allows for a balanced view taking into account economic and social factors. The Central Bank would consider the current rate and any justification for this a bank might offer, the ECB rate, the profitability and viability of the bank concerned and, crucially, the impact of current rates on mortgage holders.

Section 3 outlines how any direction on a mortgage cap would be in force for 12 months unless renewed. It would also allow a bank to seek the setting aside of the decision after six months if it could make a case for so doing. The nature of any cap imposed would be a maximum rate, allowing for a bank to decrease it further if it wishes. The Central Bank would give each bank affected a report outlining why it had chosen to act.

Section 4 deals with the relationship between the Minister of the day and the Central Bank. The Central Bank would each year report on the use of this power to the Minister. Additionally, the Minister could seek interim reports on the use or failure to use this power. In this way we believe public concern could be brought to bear on the Central Bank through the Minister while respecting the independence of the Central Bank.

Section 5 would allow the Minister to set down regulations on how these reviews would be carried out, including timeframes for submissions, decisions and implementation. Section 6 would make it an offence for persons not to comply with a direction made by the Central Bank under the Bill. We all know the Government's approach of threatening levies does not scare the banks. They know extra levies or charges can be passed on to the customer. Section 7 deals with the commencement date and includes a clause whereby the Bill would cease to have effect from 31 December 2017.

There are always arguments for doing nothing or hoping things get better by themselves, but there are times when we have to accept that some problems are not going to sort themselves out and that action is justified if taken in a considered and proportionate way. I note the concerns expressed by the Central Bank that they do not want these powers. At a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform, the Governor of the Central Bank, Professor Honohan, raised a couple of objections to the principles behind the Bill. It is worth nothing his comments in a full way. He said among other things that "none of the banks has so far provided what I would regard as a clear and quantified statement of their policy with respect to adjustments of the standard variable interest rate " and "Nonetheless, I would welcome a reduction in bank standard variable rates in current circumstances as a benefit to the economy at large". The concerns he expressed are valid for a man in his position, but I believe the approach taken in the Bill negates much of the logic behind his objections. For example, he says that in the medium term such a move could have a negative chill effect on new competitors weighing up the option of entering the market.

I understand that logic, but by limiting this Bill in its timeframe and limiting it to the covered institutions I believe much of those concerns have been addressed. Fundamentally, doing nothing has failed and is no longer an option. This Bill is not diving in head first - it is simply dipping a toe in the water.

I understand too that some will be unsure about why the Bill is limited to the covered institutions. These are the banks which the people bailed out. They are at least part-owned by the people as a result. The mandate that gives to the Government to act on the people's behalf is significant. It is understood, too, that between them these three banks account for at least 80% of the mortgage market. At its most basic, my argument is that it is time the banks started playing a role in the economic and social regeneration of this country. God knows they have taken enough.

Separately, we have put on record our belief that the Financial Services Ombudsman has taken far too conservative an approach to the powers available to him and that there is more scope for that body to be fighting for mortgage holders who find themselves paying over the odds on their mortgage rates.

I urge all parties to support this Bill. It is an issue of direct relevance to hundreds of thousands of families across this State. We are now at a point at which, after many, many years of brutal, counterproductive and ultimately failed austerity, we have a State with a massive interest in the banking sector. We have a market failure, meaning that the cost of standard variable mortgages to most families is out of sync with the rest of Europe and with normal market laws.

When we look coldly and objectively at two facts, it is inconceivable that the State would not move to use its influence at those banks it owns to make it possible to bring rates down. It makes sense at this point of our economic development to act in the people's interest, finally. There is no reason to delay, no reason to give more time and no reason to be satisfied with some banks' indication that they will reduce rates by the bare minimum.

I am calling on the Government and all other parties to support this Bill and to move swiftly to implement it. The hundreds of thousands of customers at banks owned by the people and bailed out by the people deserve no less. The rip-off must end.

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