Eamon Ryan (Dublin Bay South, Green Party) | Oireachtas source

If Deputy Donnelly joins us, I will share my time with him. He may have been caught out by the early end to the previous debate.

I support the Bill before us. I realise it is largely technical in nature, but it provides an opportunity for consideration of the wider banking strategy in which we are engaged. I am happy to support something that arises from the lessons learnt from the financial crash and the need to have a common European mechanism to deal with the inherent instability that exists in our banking and financial system. The technical provision of this loan facility agreement is one of the mechanisms we need to ensure that if there is a similar crash in future, we would be able to cope in a better way than happened in our own circumstances.

I use the occasion to broaden out the consideration and look back to the management of the financial crash in that period. I presume officials from the Department of Finance are in the Chamber. I commend the Department officials on the work they did throughout that period. They took a remarkably dedicated, hard-working and, in the end, effective approach to the financial crash. We got ourselves into a deep hole, but we managed to get ourselves out of it.

One of the books on the issue, I believe it was Too Big to Failby Anthony Sorkin, gave a blow-by-blow account of what happened in the Lehman Brothers crash. There was also Timothy Geithner's book on the stress test. It was a fascinating period in history. Too Big to Failmentions that a number of commentators argued that in the management of a bank financial crash, such as the one we saw, there is a standard operating procedure to provide a guarantee, manage the assets and then capitalise. The expert commentary suggests an approach of halting a crash, trying to provide some certainty, managing the assets and then looking to recapitalise.

We are still not yet out of that process. The political crisis in our neighbouring island will probably affect the proposed sale of AIB. We should have a debate, which could be very interesting, on what we intend to do with AIB. In a sense the management of this process is not finished. We will clearly not sell a bank into a market where bank shares have fallen by 20% to 30% in the past week.

I put it to the Department that we should consider options in terms of changing, adapting and improving our banking system. The former Governor of the Central Bank, Professor Patrick Honohan, recognised that having managed our way through the process, we still have a gap in our banking system. We cannot go back to the three banks, AIB, Bank of Ireland and Anglo Irish Bank at the time having €300 billion or €400 billion in capitalisation. We are not going to go back to having banks of that scale. Therefore, there is still a gap in our banking system.

The most astute closing of that gap and in a sense the adaption and development of our banking system would be to run with a model of banking similar to what Germany has - the Sparkassen banking model, public banking system. The Government's partnership document refers to this, so clearly the Government sees it as providing a real opportunity. What I like about it and what would benefit us particularly is that it goes back to the core skills of banking with banks knowing their customers, business lending which is slightly above that in which a credit union would specialise and below that in which the big commercial and merchant investment banks would engage.

That is the core for regional Irish development, for small town development and for development of our indigenous small businesses. It is a form of public banking involving a new ownership system, possibly local authorities. It is a model that works elsewhere that would be much less risky than what we have seen with the development of other banking models here and elsewhere. It would bring real economic benefits.

If we developed a system whereby deposit rates in a certain region were reinvested in that area, using a professional bank management system with a centralised IT system to keep costs down, it would have particular economic benefits for the region in question. That would be one of the best ways of closing the gap that has opened up because of our banking crash. It would allow us to develop local enterprise in a way that is necessary for regional development and for a broad-based recovery in our system.

We are currently engaged in a heated debate on the EU in the context of what is going on in Britain. As the general secretary of ICTU, Patricia King, said at the National Economic Dialogue on Tuesday, there is widespread understanding that "social Europe" was sacrificed at the altar of "finance Europe". I think that is true. Across the western world, it was the excessive power of capital to move very fast that undid the EU and the US. Undue respect was given to the market banking, or capital finance, system. It was put ahead of other political priorities. A change is needed in that regard.

We have to be careful not to paint the EU as being the worst character in this period of recent history. It is true that the European Central Bank got it wrong in the first period. It was unable to recognise the nature of the crisis. It was excessively worried about the scale of its balance sheet. It was not initially willing to do what Mario Draghi ultimately did, which was to say the crash would be stopped at all costs. Both Mr. Draghi and Mr. Geithner recognised that trust and confidence are important. More than anything else, banking is about trust. People have to trust that they will be repaid. The skill in banking is lending in a way that will result in the repayment of money. Depositors must have trust that they will not lose their deposits. The European Central Bank got it wrong because its approach in the initial stages was wrong in macroeconomic terms and undermined trust in the overall system. We did not have a central bank of last resort, in effect. It took the development of the crisis, to the extent that it happened in Italy and Cyprus, for lessons to be learned and for a different approach to be taken.

There are lessons to be learned from the approach that was taken by the European Commission and the European Council. As I said here last week during a debate on the Brexit issue, I would argue that the biggest failing was the lack of solidarity and the lack of community management. It was not that Europe let us down - it was that a lack of Europe let us down. I will give an example. When Chancellor Merkel and the then President of France, Mr. Sarkozy, suggested in Deauville that the bonds of smaller states like Ireland might not be honoured in the medium term, they did so without telling anyone in advance. They had not discussed or debated it with anyone. That is an example of the lack of European checks and the lack of European integration. Those who say the European Commission is not democratic and is the worst of the European institutions need to bear in mind that it was not the Commission that let us down, rather it was the lack of Council engagement The creation here of a European system that stitches in co-operation and provides for cross-reliance and cover for other banking systems is what is needed and makes a lot of sense.

I would like to mention an interesting technical detail with regard to the banking inquiry. Deputy Donnelly was not on the inquiry. I think Deputy Michael McGrath was on it.

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