Róisín Shortall (Dublin North West, Social Democrats) | Oireachtas source

I want to start by welcoming this long overdue Bill, which the Central Bank first called for in 2018. It is clear from recent history that the senior executive accountability framework is sorely needed, along with the enhanced Central Bank powers, so that the wrongdoings of the past are not repeated. Why has it taken over four years to progress this Bill? We have the very same Minister for Finance that we had when the Central Bank first called for this framework. The Minister is at pains to stress that the Bill has always been a priority, but if that is the case I wonder why it has taken four years to produce and publish it. Given the costs and misery caused by the banking crisis, it is hard to know why there was such a delay.

The delay has obviously been in producing the legislation but that, in turn, will delay the implementation of what is a much-needed new framework.

I accept that engagements with the Central Bank and other relevant stakeholders were needed to iron out the details of this new framework but this legislation is not exactly inventing the wheel. The UK has had very similar legislation in place for years along with other countries such as Australia and Singapore. It would have been preferable if we had debated this legislation a couple of years ago, but it is welcome nonetheless. I am pleased this reform is finally taking place because trust in Irish retail banks is on the floor, as I think most people would agree. It is understandable that it is so.

In July, a report on public trust in banking from the Irish Banking Culture Board found that almost 80% of people still do not trust bank bosses to act with integrity, especially when things go wrong. Although the board bizarrely tried to dress its findings up as a positive result for the sector, it is blatantly obvious that the banks have failed to build any social capital since the crash. That is no surprise in many ways, given the scale of destruction that domestic banks have caused in this country.

It is now 15 years since the then Fianna Fáil-Green Party coalition gave a blanket guarantee to cover nearly all the liabilities of the six main domestic financial institutions. With that decision, the Government walked blindly into unknown and rapidly escalating commitments that would amount to the Irish public bailing out the banks to the tune of more than €60 billion. While there were undoubtedly global influences on our banking crisis, the core characteristics of the problem were home-made. The root cause can be found in a domestic property bubble that was fuelled by an under-regulated banking sector that was over-reliant on property-related lending both at home and abroad.

Unfortunately, this catastrophe for the State and its citizens was not followed by the kind of root-and-branch reform which is still desperately needed. The interests of the financial sector continue to trump good governance. One can see this in the tracker mortgage scandal and the Davy bond scandal. The latter is the most recent scandal in Irish financial services and it drives home the need for individual accountability in the upper echelons of the sector. Is it any wonder the public does not trust these people when there seems to be a litany of impropriety and rogue personal gain at the heart of some financial institutions?

This is the type of conduct that must be rooted out and tackled. The repercussions must be felt by the individuals involved. Imposing fines on institutions that amount to little more than a slap on the wrist just does not cut it and does not change the culture. That is exactly why the Central Bank identified the need for the framework we are discussing here today.

In June 2018, the Central Bank published its report, Behaviour and Culture of the Irish Retail Banks, following a request from the Minister to examine significant cultural failings within Ireland's banking sector. It focused primarily on the behaviour of the executive leadership teams of the five main Irish retail banks: AIB, Bank of Ireland, Permanent TSB, Ulster Bank and KBC Bank. It also looked at the interplay of senior executives and internal stakeholders in the context of strategic decision-making.

Importantly there was also a clear focus on the key decision-makers in each firm and the tone they set from the top. One of the key recommendations from the Central Bank was on the need for legislation to introduce an enhanced individual accountability framework, which I am pleased to see forms a key part of the legislation before us. As the report outlines, every single member of an organisation should be clear as to what is expected of him or her and the consequences of deviating from such standards. This is especially pertinent when we are talking about senior executives among whom clearer accountability is undoubtedly needed.

Other aspects of the Bill are also very welcome, such as the duty of responsibility provision which would impose a legal obligation on senior executives to ensure their area of responsibility within the company is compliant with the law. Measures such as this, which underpin accountability and are in the interests of consumers, will always have the support of my party and, I am sure, all parties in this House. However, it will take much more than this legislation to restore trust in the banking sector. While the arguments in favour of these changes are undeniably true, perceptions will not change until customers can see positive changes on the ground. Unfortunately there is no sign of that in our towns and cities. The only changes we see are regressive ones.

While we must ensure the era of light-touch regulation is behind us and there is never a repeat of the kind of circumstances and the culture associated with the period up to 2008, we must also ensure the remaining banks that now enjoy a powerful monopoly are not allowed to cut services to the bone. Cultural and behavioural changes in the sector, without a commitment to reinstating services, will not put a stop to the erosion of trust that is evident in survey after survey.

In the 2022 trust survey, the highest-scoring attribute of banks was high-quality and competent staff. It is clear that staff in branches are very much valued locally and are key drivers of trust, as they understand their customers and their communities. The rush to adopt digital services has underestimated that vital human element. There is no doubt that online services will continue to grow in popularity but when people need advice or find themselves in financial difficulties, most will still want to speak with a trusted staff member in their local branch. That is something that retail banks have yet to fully grasp. I hope that the outcry in respect of AIB's botched decision to remove cash services from 70 branches was a wake-up call for the sector.

I will take this opportunity to make the case once again for a public banking model. The Social Democrats have been calling for this since 2016 and with trust in retail banks shattered and the exodus of providers from the market, the case for a public model has never been more compelling. We know that people have lost faith in private banking institutions and they are seeking alternatives to the pillar banks. The creation of a publicly owned community banking system, as operates successfully in many other European countries, would give people an option to manage their finances in a way that is not entirely about making profits for banks. Instead, they could bank with an institution with a social conscience and with a primary remit of ensuring local banking facilities and services are available to local people.

The Social Democrats have long proposed an ambitious project whereby the State and the Central Bank would work with credit unions and post offices to build a strong community banking sector. Not only would this create much-needed competition in the banking sector, but it would also support financial inclusion. It is very disappointing, but not surprising, that successive Governments have chosen not to proceed with such a model. We have heard much about banking culture during this debate but unless we become culture makers, we will continue to be culture takers who put up with people being treated badly by the banks that we bailed out.

During the current cost-of-living crisis, improving access to local finance through publicly owned institutions that can be trusted, would be a considerable value to customers and, indeed, to small businesses.

Otherwise, many vulnerable customers will continue to rely on high-cost and often shady sources of credit. The pillar banks have shown themselves not to be especially interested in low-income customers and have made it difficult to have any interface with staff in the bank. It is important, therefore, that there is an option for low-income communities to access financial services to avoid the high risk of people being driven into the hands of moneylenders, legal or illegal.

There is also a sense across the board that people have really had it with Irish banks. They have had it with the dismissive attitude the banks show to regular domestic customers. Services are being cut back all the time, it is virtually impossible now to speak to somebody even on the phone and it is quite clear our pillar banks are only interested in bigger and business customers. In circumstances such as this it is a real sickener for people who have managed to survive through what have been 12 very difficult years since the bank bailout to be treated with such disdain and disrespect. The public is definitely seeking an alternative type of banking, a conscientious type of banking that is not all about profit-making and where there is a return to the local community. It stands to reason that we should be doing that.

I have serious concerns about the extent to which Government policy over many years has been propping up our banks. An example of that is the insistence on credit unions placing the bulk of their deposits with the two pillar banks, which is a real obstacle to them playing a more active role and providing a wider range of banking services. The same applies to property prices. It is in the interests of the banks that property prices are maintained at a high level given the debts the banks incurred, but there has been very little sharing of the burden there. To a large extent, the rest of the ordinary people in this country continue to pay higher interest rates, high house prices and high charges in order to continue to prop up the banks. That is just not acceptable to the public. I have no doubt that if there was a public option available to people, it would be in enormous demand. I for one would change account in the morning if such an option was available. An awful lot of people feel likewise.

I reiterate my support for the changes proposed in this legislation. As I have said, much more is needed from the banks and this Government to restore trust and fundamentally change the Irish banking landscape but the Bill is certainly a step in the right direction. The retail banking sector is changing at an extraordinary rate but we must ensure it shows a willingness to change course. Ordinary workers should not have to accept a banking system that puts the needs of its shareholders above those of its customers. The reforms set out in this legislation will address some of the shortcomings in the retail banking sector but competition is urgently required. A strong, not-for-profit banking sector would achieve this and ensure local banking facilities in our communities. Ultimately, the State should not be afraid to intervene in a market that is utterly failing so many of its citizens.

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