Joan Burton (Dublin West, Labour)
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I move amendmentNo. 1:

In page 3, subsection (1)(a), to delete line 29.

This is a technical amendment which will delete the reference to "an Act". Irish investment services law is defined as measures specified or enacted by an Act or any other enactment. This seems circular and repetitious so why not just say "an Act or any statute or enactment". This is the case in section 3, subsection (1)(a)(iii) which refers to "any other enactment".

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have consulted the Office of the Parliamentary counsel and it has advised that it could be unsound to delete this term. Accordingly we cannot support the Deputy's amendment.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 2:

In page 5, subsection (4)(a), line 8, after "offence," to insert the following:

"in particular any penalty provided by regulation 188 of the European Communities (Markets in Financial Instruments) Regulations 2007 (S.I. No. 60 of 2007),".

This area of the Bill provides for a €10 million fine for failing to retain records and other offences, some of which could be quite minor. The amendment seeks to clarify that all of these offences are summary offences under Regulation No. 188 of the 2007 regulations. There is also an inconsistency in the wording of section 9(3), which mentions summary penalties under the regulation referred to in section 9.

As we discussed previously regarding this Bill, a fine of €10 million could be regarded as very small in the realm of financial services. The Minister glossed over some facts when he said our reputation concerning the financial services centre is very good and I remind him that the Ormond investment vehicle went down for several billion euro due to the type of loan it had accumulated. Were it not for German state banks, such as Sachsen, I am not sure what might have happened but the entire affair was questionable.

Mr. Michael McDowell chaired the committee that brought in the report that led to the initiation of the Financial Services Regulatory Authority. The report referred to regulation with a light hand and the issue here is the Minister's approach to regulation. In terms of the kind of money deposited in the financial services centre the fines mentioned in the Bill are in one sense very small, however, for a small Irish operator they could be very large. We have no indication of how the Minister is thinking in this regard. I remind him that in recent years we saw the issue of reinsurance as it related to Swiss Re and that Ireland featured prominently in several Wall Street Journal stories on how regulation did not work in the financial services centre.

What is the Minister's approach to regulation? Does he speak to the Governor of the Central Bank or do his officials speak to representatives of the Central Bank? Does the Minister or do his officials liaise with the Financial services regulator? We are trying to compete in a globalised financial services market and we want long-term stability and employment and a good reputation, rather than hot money that comes and goes with spectacular crashes. Can the Minister indicate what his thinking is in this regard? He is normally given to expressing himself clearly but is very coy, almost shy, with regard to this topic and that is most out of character for him.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Can the Tánaiste alleviate his shyness?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Regarding the amendment before us, the definition of Irish investment services law in section 3 already includes the specific regulations referred to in the Deputy's proposed amendment so there is no need to refer to that part of the regulations, namely Regulation No. 188, which deals with summary offences. The Office of the Parliamentary Counsel agrees with this analysis and we are, therefore, not in a position to support the Deputy's proposal.

Regarding the wider issues raised by the Deputy, section 5 provides that a person guilty of an offence under certain provisions of these regulations, such as operating without authorisation, is liable on conviction on indictment to a maximum penalty of €10 million and-or imprisonment for a period not exceeding ten years. I would regard such a penalty as a serious outcome for any person.

It is considered in Regulation No. 7(1) that operating without authorisation, under the new Markets in Financial Instruments Directive, MiFID, regime as set out in SI No. 60 of 2007, should be an indictable offence to have sufficient deterrent effect. There are other proposed indictable offences in section 5. Regulation No. 40(1) relates to failure to keep records for the minimum time period. Regulation No. 109(6) relates to appointing a tithe agent who is not entered in a public register to be maintained by the bank. Regulation No. 112(1) relates to failure to keep proper books and records. Regulation No. 19 relates to providing false or misleading information in an application for investment firm authorisation. Regulation No. 52 relates to providing false or misleading information in an application to operate as a regulated market. Regulation No. 152(1) relates to advertising investment services and so on where not authorised. Also covered as indictable offences are misappropriation by an investment firm, obstructing an authorised officer, failing to comply without reasonable excuse with the instruction of an authorised officer, providing misleading information to an authorised officer where the person knows or ought to know that the information is false and misleading or wilfully or knowingly obstructing inquiries by the bank relating to acquiring transactions or knowingly or recklessly providing false and misleading information.

Subsection 4 provides that the conviction on indictment provision does not affect any penalty already provided for by Irish investment services law in respect of a summary conviction for that offence. The section is also without prejudice to the right to bring summary proceedings in respect of any offence. Subsection 5 provides that the section comes into operation on 1 November 2007 in tandem with the introduction of the other MiFID obligations.

Regarding the question of Ormond Quay, that bank was regulated by the German regulator.

Joan Burton (Dublin West, Labour)
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It was based here, though.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Special investment vehicles are not regulated anywhere. Ireland has a good reputation for its financial services sector. The Deputy mentioned the importance of providing long-term employment in top quality jobs and I am glad to say that as a result of creating the financial services centre, an innovation this party was maligned for at the time, there are more than 25,000 well-paid jobs in the area and Ireland has become a centre of international financial services of high reputation as a result. Moreover, Ireland is a centre of financial services that meets all of its international obligations and requirements.

The issue mentioned by the Deputy that arose around a subsidiary of a German bank that was dealt with by the parent bank is a matter for the German regulator. This is the law and I do not feel that people should infer from this that we were somehow remiss. It has never been suggested by anyone that we were remiss and it is important that it not be suggested in this House.

These are the basic points I seek to make in response to the Deputy's contribution.

Kieran O'Donnell (Limerick East, Fine Gael)
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Section 5(5) states that the section will come into operation on 1 November. Will existing regulations be kept in operation until MiFID is transposed to other countries? Some investment houses operate in Ireland without having a branch here.

Richard Bruton (Dublin North Central, Fine Gael)
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Why, in setting out the fines and penalties due for offences, was it decided to choose a flat rate maximum penalty rather than ad valorem or based on turnover or assets? Some large financial institutions will find penalties of this nature easier to bear than others. Is there a reason fines are not somehow related to the size of the operation?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I referred to acts of dishonesty by individuals who interact with the regulatory regime through authorised officers and others. The €10 million fine and-or imprisonment of ten years and making it an indictable offence are of sufficient deterrent effect to ensure people comply with the regulations as we set them out. On the situation in respect of those who do not comply with the MiFID directive on time, the pre-MiFID arrangements and legal provisions will apply, pending transposition.

Joan Burton (Dublin West, Labour)
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I do not know if the Minister ever had the opportunity in his spare time to watch the film "Wall Street" or read the book Bonfire of the Vanities. If he did, he would know that €10 million is nothing to these people. In an operation where losses are being piled up, as in the Ormond Quay investment vehicle, this is just a pittance.

There is no evidence so far that the Irish Financial Services Regulatory Authority has taken action against anyone, other than it has suspended a number of operations which have seemed to operate outside of the regulations. The Minister's colleague, the Minister for Health and Children, Deputy Harney, famously once said that she would prefer Ireland to be closer to Boston than Berlin. I can only say that our Government and the financial services centre must be thanking God that Berlin came to the rescue in the case of Ormond Quay Funding whose exposure was over €20 billion.

The Minister may shake his head and be in denial, but we still do not know what happened. In this situation, where we have a globalised market in securities and improper dealing or excessive risk taking has taken place, it is worth asking whether the Minister has made any inquiries. Whether he likes it or not, that vehicle operated from this jurisdiction and went down here. Just as with the reinsurance episode two and a half years previously, we have had a narrow escape.

The issue remains. In practice, in areas that have come to light for investigation by the Financial Services Regulator with regard to banks overcharging or mis-selling products, the cost of the financial investigations has far outweighed any penalties levied. I am not aware that any penalties have been levied. It is foolish not to provide a regime of penalties which is proportionate to the amounts of money involved because, while for some people €10 million would be an enormous sum, for others it would not. Many of these financial derivative products are based on risk, basically on playing poker and having the nerve to take the risk and live with it. In that case, a fine of €10 million for the kind of sums involved is only peanuts.

I note the ultra-conservative approach the Minister has taken to regulation, which is to regulate as lightly as possible. However, in a falling market where a credit crunch is developing and where we have financial products that people do not understand well — many in the financial markets do not understand them well — the risk of a collapse and the consequent damage to the general economy from it is enormous. People heading out to buy a house will face higher interest rates and charges because of the credit crunch. Although this issue does not seem to have much direct impact on routine financial service provision, it is something that drives up interest costs. If banks are unwilling to lend on the inter-bank market, the effect will be felt within a couple of weeks by young couples trying to buy their first home.

Much of the material in the Bill relates to financial services with which many ordinary people are not involved. However, if they go wrong, there is significant impact on them and our economy.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Ormond Quay Funding was not regulated in this country and there was no liability, potential or otherwise, imposed on the Irish regulatory regime.

Joan Burton (Dublin West, Labour)
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Is the Minister not concerned about the worldwide publicity on the matter?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am concerned about people giving publicity to suggesting there was some problem for the Irish regulatory regime. There was not. Yesterday, I answered this question by way of a parliamentary question put by Deputy Costello and my response explained the factual situation on that matter. The fact is that structured investment vehicles, SIVs, and conduits are not regulated. However, as a result of recent market turbulence the EU, ECOFIN, the European Economic and Financial Centre, EEFC, central banks and experts in the area are examining what lessons can be learned for the future and how we can ensure we have regulation where required. We are also trying to ensure we have functioning markets that are at the forefront of innovation and which will acquire business and ensure business is conducted. Ireland has been able to achieve that.

When and if an issue arises, this does not mean we should clamp down on everything on the basis of the Deputy's view that we had a near miss. We did not have a near miss. The financial framework of this country is strong and liquid if one listens to what the Central Bank governor has to say. I am glad we have an influential governor who is held in high esteem by the industry generally, here, internationally and within the corridors of the ECB.

It is not a question of being complacent, dismissive or conservative, but of facts. The last thing we want is to have fictional information in the public domain suggesting we are at risk. Of course, we are not immune from the turbulence which has taken place, but we are in a good position. If the Central Bank governor can state this, I should also be able to do so.

On the question of the regulatory impacts for the future, these are being considered in the proper and appropriate manner by those committees answerable to ECOFIN, the Eurogroup and within the European Central Bank area. When they have properly considered and taken into account all the issues and observed the subsidence of the turbulence and its long-term impact, lessons can be drawn therefrom. I am not prepared to suddenly overturn the regulatory regime we have on the basis of what happened in the past number of weeks. That would not be a responsible or sensible thing to do. It would not be sensible to do it prior to the full collaborative effort by people far more expert than I, from other countries and markets, who share the Eurogroup area with us. That is my position. It is not about Berlin, Boston, Bangkok or anywhere else. When a report is produced in mid-2008 by those looking at the area, that will be the time to draw conclusions. I will take the advice of these people who are far more expert than I and on whose advice I rely.

On the issue of fines, where there are breaches of Irish investment services law in interactions where people who want to get into the market provide the wrong information, those people will be subject to a fine of €10 million and-or ten years in prison. That seems to me a serious deterrent for anyone who wants to interact with the financial regulatory agencies here from providing wrong information. Such breaches will not be tolerated and there is a heavy legal sanction in terms of both criminal law and a financial fine for the individual concerned. If there are wider issues of fraud or if people are engaged in other such activities, I am sure there are other laws and sanctions that apply. However, with regard to the scope of this Bill, we are talking about a fine of €10 million and-or ten years in prison. If those in the market do not keep records for the minimal time period, do not appoint a tied agent under the proper arrangements, do not keep proper books or if they provide false information or advertise their services where they are not authorised to do so, it is a matter for the courts to decide the seriousness of the offence and what should apply on finding them guilty. Our advice on the comparative arrangements being made regarding the transposition of this directive is that we are in line with international practice.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Is Deputy Burton pressing the amendment?

Joan Burton (Dublin West, Labour)
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No.

John O'Donoghue (Kerry South, Ceann Comhairle)
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Amendment No. 4 is cognate to amendment No. 3 and both may be discussed together.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 3:

In page 5, line 13, after "1942" to insert the following:

"(inserted by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003)".

This is a drafting amendment to correct an inconsistency in drafting between this section and section 11. Section 11 refers to a 1995 Act, as amended in 1998. It is also inconsistent with the drafting of section 16, which also lists specific amendments.

Regarding what the Minister said earlier, he still has not outlined his fundamental take on the matter. He cannot have woken up a happy man when he saw the Ormond vehicle going under, having been bailed out to the tune of €17 billion to €27 billion, depending on which financial journalist he reads. He cannot tell me he was delighted or did he just say: "There we go again, what is a couple of billion among friends?" The Minister said it has had no impact on his thinking. On the other hand, I am sure the Minister, Deputy Harney, will be surprised to hear that he is relying, probably sensibly, on the advice of people in the European Central Bank but what does that mean?

Do we take a position where we examine what is happening? We are all agreed that the financial services centre is an important source of jobs and in a globalised economy financial services will remain one of the biggest outlets for employment, particularly for graduates and post-graduates,. Therefore, the way we regulate and the extent to which we know what is going on in the International Financial Services Centre is important in terms of our reputation. The Minister's attitude is disappointing. He is waiting for some wise group from Frankfurt to come forward with proposals but there is a general consensus that the development of complex financial products, which very few people can fully understand, is an area whereby if people take ridiculous risks we may all end up paying the price for that excessive risk taking and gambling by the people playing those markets.

This is an important issue for us. I presume people from our Central Bank visit the European Central Bank. Do they go with some kind of remit from the Minister's Department? Are they examining the issue? Are they taking part in these discussions or do we just get a note from Frankfurt telling us what we are to do and the Minister will comply with it? I am a little taken aback by the Minister's description that there are wiser people available in the European Central Bank to whom he will listen. Are we not part of this process? Do we not have a role to play in it? Do the Minister's officials put forward points of view?

The Minister should remember that the scene in the Ormond Hotel in "Ulysses" was the siren scene. The Ceann Comhairle will know that from his previous stint as the Minister with responsibility for the arts. We know that sirens enticed men onto the rocks where they perished. That is the issue with the financial services market and the Ormond experience. People should not be enticed into excessively risky situations which,in turn, has a bearing on the rest of theeconomy.

Richard Bruton (Dublin North Central, Fine Gael)
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For the sake of clarification, my understanding from the regulator is as the Minister describes, namely, that this was a company wholly regulated in Germany with certain minimum licensing requirements in Ireland. Will the Minister set out clearly, in the case of companies like Ormond Quay which I understand was wholly owned by a German bank, the remit of the Irish regulator and the remit of the non-Irish regulator? I understand that the Irish regulator was not given some information on which they failed to act, as a newspaper report suggested, and that they were fully co-operating with the Germans who had the primary role in regulation. That would be worth clarifying because it is important that there is general confidence in the way we regulate.

Will the Minister clarify where the lines of responsibility fall in cases like this, the requirements in regard to an Irish regulator of a company like Ormond Quay and how they were fulfilled? My understanding is that the problems were entirely the responsibility of the Germans to regulate but what was the Irish role? It is important we know that because at least one newspaper article suggested there was something remiss in the way it was being overseen in Ireland. It would be worthwhile for the Minister to set out clearly the lines of responsibility in an authoritative way as he is undoubtedly in a position to do.

On section 6 and the application of fees, with which I have no problem in principle, in other parts of the financial services regulatory Bill, as far as I can recall, the setting of fees involved some type of consultation with an industry panel. There was a loop where people at least saw that the fees were reasonable and related to something fair. Is there a structure like that regarding the setting of fees?

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have moved far from the section at this stage but I have given a full reply to a parliamentary question on Ormond Quay which sets out the position and there is no point in adding to or retracting from it. Ormond Quay was not a complex product. They borrowed short and invested long and the short-term borrowing was straight up, as it were.

Joan Burton (Dublin West, Labour)
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Were they regulated in Ireland?

Brian Cowen (Laois-Offaly, Fianna Fail)
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No. The position is——

Joan Burton (Dublin West, Labour)
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Were they registered in Ireland?

John O'Donoghue (Kerry South, Ceann Comhairle)
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We cannot have a discussion on it, Deputy Burton, and, as the Tánaiste has pointed off, we have moved on from the section.

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is important to be clear that the Ormond Quay vehicle was an off balance sheet investment vehicle. It was a conduit of Sachsen LB, which is a German savings bank. That German savings bank, Sachsen LB, provided a guaranteed line of credit to Ormond Quay and some other conduits it had established in Dublin. Ormond Quay called on that line of credit as the prevailing market conditions were such that it was unable to raise the short-term funding it required. Sachsen LB was unable to meet its obligations to Ormond Quay and, as a result, liquidity arrangements were agreed with an association of German savings banks. That Sachsen LB parent was subsequently bought by LBBW, another German savings bank, and as a German bank, Sachsen LB was regulated by the German financial regulator.

Those are the facts. I have given a detailed answer to the question and there is no need for any confusion about it. What concerns me is the continuing indication that we were remiss in some way or that we did something wrong. I do not like to see any bank get into trouble but none of these conduits are regulated. The lessons we learn from market turbulence is to examine all of these for the future and how they should or should not be brought within the regulatory remit, which will be done in a collaborative way within the European Union. Thankfully, we have a financial services industry of high reputation, professionalism and liquidity that is well capitalised and very profitable. Those are the facts. One would have thought that should be the case anyway, given that we have been the best run economy in Europe for the past ten or 15 years. When an economy is growing at 7% annually, one would have thought that banks make money. They have made a great deal of money. The enterprise economy we have built enabled such liquidity in the market. As a result, we have seen unprecedented expansion and development. That is the background — an economy with good economic fundamentals and a well regulated financial industry where those in authority know whose statutory responsibility it is to check on these matters. What I am saying will send the right signals to the markets and those interested in the financial health of the country and its system of financial regulation

As I have said in reply to parliamentary questions, the issue that arose in the other case had nothing to do with the regulatory regime here or its adequacy. The other issue about turbulence as a result of the sub-prime market in the United States which has had effects is being considered by EU and Irish experts because we have a well developed financial services industry. Those who advise us are held in high regard by those operating in the area internationally. If there is an external shock, we must consider how we will deal with it. We are not immune from such trends but we are in a much better position than others might be.

The fact that someone else has a problem does not mean we have the same one. There are effects but we are handling the situation well and must maintain confidence in the economy. We should not let the idea spread that we somehow avoided a serious catastrophe. I do not say that in an adversarial way; it is a true reflection of the situation.

I keep in touch with the Governor of the Central Bank. We spent a weekend in Lisbon discussing these issues, including the Northern Rock issue that Friday morning. The general consensus was informed by the conclusion reached at that meeting, a consensus which is at variance with some of the assertions being made here.

John O'Donoghue (Kerry South, Ceann Comhairle)
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I will call Deputy O'Donnell and then Deputy Flanagan but we must consider this according to the sections. Section 6 relates to fees payable under section 33(k) of the Central Bank Act 1942, while section 7 relates to amendments to that Act.

Kieran O'Donnell (Limerick East, Fine Gael)
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I take on board what the Minister has said but does it not point to a weakness in the regulatory environment across Europe that there was a case such as the Ormond Quay case? Everyone wants a system in which we can be confident but we must also take account of situations that arise. Clearly, in this case there was a lack of regulation, be it in Germany or elsewhere, but we must take it on board. We are moving into a Europe-wide regulatory environment under MiFID. We should take cognisance of this and be absolutely certain that the regulatory environments in other EU states are as good as our own. We must prize the regulatory environment we have built over many years.

Brian Cowen (Laois-Offaly, Fianna Fail)
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No one takes pleasure from any financial institution getting into difficulty. Lessons will be learned from the turbulence by finding out what caused the problem and what practices were allowed. We have already seen US Treasury Secretary Paulson commenting on what he felt were lax regulatory standards, the need to review the regime in the United States and how it operates in regional markets within the United States and a range of issues on which he is far more expert than me. Obviously, adjustments are made and lessons learned.

The first priority when there is turbulence is to provide for stability and restore confidence. The inter-bank market dried up because of a lack of trust uncharacteristic of how banks operate where people started to look again at risk and ask if the loan books were as robust as was thought. Of course, when they see a problem, people start to adjust to see if those with whom they are dealing are in as good health as they thought. The cost of providing short-term or longer-term money goes up as a result of the reluctance of many to provide that level of liquidity given what has happened. These matters must be adjusted and lessons learned but as we try to do this and improve the regulatory system, there will be a warning light before issues reach the stage where customer confidence is lost.

In the interests of financial and market stability, a high priority will be given to any recommendations that derive from the collective and expert consideration being given to these matters, particularly given the complexity of the products available, the level of product innovation, the freeing of markets and the ability of capital to cross frontiers in a way that was unthinkable 15 years ago. These factors bring with them attendant risks, as well as attendant benefits in terms of access to capital and the ability to fund enterprise and growth and create jobs and wealth. That is the case in any capitalist society.

I am not dismissive of these issues but we must maintain perspective and provide for a calm and sensible approach in order that people do not start to draw unjustified conclusions and cause further problems.

Joan Burton (Dublin West, Labour)
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I am glad the Minister has given us his view of the general financial crisis because this is the first opportunity we have had to hear him talk about it. We started by praising his decision to introduce the late amendment to include certain products such as reversionary products in the legislation. I repeatedly raised sub-prime lending with him a year ago and he said the same as he is saying now, that there was no need to do anything about it. That can be seen in the record of the Oireachtas Joint Committee on Finance and the Public Service and the Dáil. The Minister did not see a compelling case for dealing with these issues. I pointed out to him that every day people listening to the radio or watching television were being sold expensive financial products in a very hard sell. The people in question can be vulnerable, not least because of the state of the health service. They must borrow to fund private treatment because they cannot wait for the public system to provide a service. The Minister may shake his head.

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have gone a long way from the amendment now.

Joan Burton (Dublin West, Labour)
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No. This is about the general section.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not underestimate the Deputy's versatility.

Joan Burton (Dublin West, Labour)
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The point is that these products are being sold to vulnerable people.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I call on the Deputy to conclude.

Joan Burton (Dublin West, Labour)
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Please let me finish. Such vulnerable people include those in the acting chairman's constituency.

Brian Cowen (Laois-Offaly, Fianna Fail)
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That will keep him quiet.

Joan Burton (Dublin West, Labour)
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They are buying products by remortgaging their homes for high prices. Eighteen months after being initially asked about this matter, the Minister is now saying that some regulation is needed. While that is to be welcomed, some of these products are excessively risky. I hope all the wonderful people in the European Central Bank and beyond who are advising the Minister can come down to the level of ordinary people's experiences. In the long run, there is no such thing as money for nothing when it comes to financial services. In the end it is a question of balance. People make money from financial services but long term they must provide a decent service at reasonable prices. That is what this is about. If they over-egg the pudding and take stupid risks on which they make short-term billions, we will be left holding the baby.

Brian Cowen (Laois-Offaly, Fianna Fail)
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We are not necessarily left holding the baby. These are commercial issues and, in many cases, the moral hazard must be considered in that context. The assumption that the State automatically comes in to cover everyone else's mistakes is not necessarily the case, although I take the point that the overall impact on market stability will always have to be considered depending on the scale and scope of what we are talking about. The other point is that the Governor of the Central Bank is one of the most grounded people I know. He is a very down-to-earth man.

Joan Burton (Dublin West, Labour)
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I am sure he is.

Brian Cowen (Laois-Offaly, Fianna Fail)
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He is a former Secretary General of the Department of Health and Children and the Department of Finance. I have listened to others who hold similar views on this issue. In the context of having a discussion on any of these issues, we need to preface our remarks not simply by empty flag-waving, but by stating that we have a good financial system that is well capitalised, liquid and profitable. It has withstood the recent turbulence as well as if not better than most. There is a professionalised regulatory authority which is active and expert in this area and which is held in high regard by its peers in other parts of the European Union. In addition, the authority will make its contribution in a calm, sensible and authoritative way with a view to getting us through this difficulty as quickly as possible for everyone's sake. It will restore confidence in the market, learning lessons, drawing conclusions and supporting whatever proactive efforts must be taken to ensure that such a risk or problem can be alleviated, mitigated or eliminated in future. That is my basic point.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 5:

In page 7, subsection (1), line 4, to delete "38(4), 58(9), 59(8), 60(6), 61(3)," and substitute "58(9), 59(8), 60(6),".

In the Bill as published, regulations 38(4) and 61(3) were included in the list in section 9 dealing with penalties for conviction on indictment of the Reinsurance Regulations 2006. The severe nature of the penalties for indictable offences in the financial services industry are such that they should only be applied in circumstances where it is clear that the offence being committed is of a serious nature. As that is not always the case concerning regulations 38(4) and 61(3), it was felt that a summary prosecution for the application of the administrative sanctions process would be more appropriate in such circumstances. The Financial Regulator has no objections to such an amendment and is satisfied that the key offences for which there is a need to have an indictment provision option are captured in section 9.

Richard Bruton (Dublin North Central, Fine Gael)
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What exactly is being dropped and what offence will no longer be an offence? Is the amendment's import that the Minister is dropping certain offences and, if so, to what do they refer?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Regulation 38(4) is for the failure of a special purpose reinsurance vehicle to comply with certain requirements. Regulation 61(3) refers to the failure of a reinsurance undertaking to comply with the solvency rules made by the bank. The Financial Regulator suggests they should be treated in that way.

Richard Bruton (Dublin North Central, Fine Gael)
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They no longer require a penalty?

Brian Cowen (Laois-Offaly, Fianna Fail)
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On summary conviction rather than an indictable offence.

Richard Bruton (Dublin North Central, Fine Gael)
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All right.

Joan Burton (Dublin West, Labour)
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Will the Minister comment on the problems a couple of years ago in the reinsurance market concerning the financial services sector? We never got information from the Financial Regulator or from the Minister. The problems that arose in Dublin concerning vehicles associated with a number of reinsurance companies were widely publicised, particularly in The Wall Street Journal. That newspaper is widely read by investors, including those investing in Ireland. As regards reputational issues, will the Minister comment on whether his stance is influenced in any way by what happened in the financial services sector then? We in opposition are unclear as to whether regulations were located here which affected these cases. It is a bit like the Ormond Quay situation — it is not clear to what extent, if any, the Irish regulatory authorities, such as the Central Bank or other regulatory agencies, have capacity to make an impact on these affairs. They had major financial implications for the reinsurance companies involved as well as having serious consequences for a number of senior executives associated with those companies, including people who were employed in Ireland. Some of the operations here subsequently closed down. All this happened behind closed doors, however, and it is difficult to have a debate here when we do not have the facts. We are all trying to be positive but nobody ever thought Barings Bank would go under. One day it did so because of weaknesses in financial structures and regulations allied to somebody taking excessive risks. The history of financial markets shows that collapses occur when people take excessive risks and the whole deck of cards comes falling down. Will the Minister comment on that?

Charlie O'Connor (Dublin South West, Fianna Fail)
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We have now discussed section 9 as well, but I call the Minister on amendment No. 5.

Joan Burton (Dublin West, Labour)
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Maybe it relates to the section.

Brian Cowen (Laois-Offaly, Fianna Fail)
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We have already discussed section 9 and I have explained the background to all of this. These are technical areas and from time to time we can all be at a disadvantage in some respects as regards these matters. I take the Deputy's point. The ambit and scope of this section indicates that this is the way to deal with these particular areas, as the Financial Regulator has suggested. We are prepared to follow the Financial Regulator's advice on this matter. I am not vesting in this Bill a range of issues concerning the reinsurance industry generally. This relates to convictions and how we proceed with seeking a conviction in respect of a range of non-compliance items raised by this directive, which is detailed and technical. I am taking on board this recommendation by the Financial Regulator in respect of how one can proceed with this case.

Richard Bruton (Dublin North Central, Fine Gael)
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What are the implications of what the Minister is trying to achieve by extending the Netting of Financial Contracts Act?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 10 is essentially a technical amendment to update the Netting of Financial Contracts Act 1995 to provide for the extension of the protection afforded by that Act by expanding the range of financial contracts that may be encompassed. The Netting of Financial Contracts Act 1995 provides protection for netting or set-off arrangements between parties to contracts involving certain financial instruments in the event of an insolvency. As financial markets continue to develop so too does the available range of products. As the financial contracts that may be encompassed are restricted to those specified in the Act, and the existing ministerial regulations, the definition of financial contracts needs to be updated periodically. This is a review of practice since the last Act to cover this area. We believe we should broaden its scope to ensure that our law covers the way in which these products are provided.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister must forgive my ignorance of this area but what is he talking about? Is this protecting hedge funds?

Brian Cowen (Laois-Offaly, Fianna Fail)
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It remains a definition of a financial contract by expanding the range of financial contracts that may be covered by the Netting of Financial Contracts Act. I do not have a more detailed note on this but can get one for the Deputy on Report Stage.

Richard Bruton (Dublin North Central, Fine Gael)
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So it is a good thing.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am reliably advised that it is.

Joan Burton (Dublin West, Labour)
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Does this include, for instance, financial derivative products such as contracts for difference as well as hedge funds? The Minister said that from 1 November some regulation will come in for contracts for difference. These contracts constituted more than 50% of the business on the Stock Exchange here until it crashed. Is it intended to extend the remit of the Act in respect of that type of financial product?

We are all at a disadvantage because financial products are developing at such an extraordinary pace that it is difficult for most Deputies, particularly those on the Opposition benches, to follow the development of the markets. It would be helpful to get a brief on the position here in respect of these products. The International Financial Services Centre is attractive and we welcome the jobs it provides but we need ways and means for ordinary Deputies, not to mention ordinary Ministers, to keep abreast of what is happening.

The flow of information to us is limited. Neither the Central Bank nor the Financial Regulator provides an information service, apart from generalised consumer advice or tables about insurance costs and so on. Maybe we all need information on these products. Does the Act include contracts for difference and similar products?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The financial contracts now incorporated by way of updating our definitions under the Netting of Financial Contracts Act 1995 are set out in the section. That is only ten years old. There has been significant innovation in this area such as interest rate contracts, which are one or more of single currency interest rate swaps, forward rate agreements, and interest rate futures. There is a range of financial contracts for which we need to update our definition to ensure the 1995 Act covers them. Under the directive we are required to do that and we are doing so.

I take the point that these are specialised technical financial instruments whose detail and scope would be known only by those who daily engage in this sort of work. If the Deputy wishes I will try to get a more detailed brief of what these contracts do for Report Stage. The section basically aims to update our definition under the 1995 Act to ensure we cover those areas.

Charlie O'Connor (Dublin South West, Fianna Fail)
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Amendments Nos. 6 and 7 are related and will be taken together by agreement.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 6:

In page 11, paragraph (a), line 33, to delete "after section 3" and substitute "before section 4".

These amendments contain two technical drafting corrections which are required in section 12.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 7:

In page 12, line 2, to delete "subsection (3)" and substitute "subsection (1)".

Richard Bruton (Dublin North Central, Fine Gael)
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Will the Minister explain what he seeks to achieve in this section? I understand this relates to Icarom, the former ICI, and removes a holding company. Why does the need for this arise? Is this the company that gave rise to the 2% levy on insurance policies, which appears to be still in place? If we are making provision for winding up companies are we presenting insurance policy holders with the gift that they no longer need to pay a 2% levy? Or am I being too optimistic about the Minister's largesse?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 12 is a technical amendment to secure Oireachtas approval for a simplification of the State ownership structure of Icarom plc, under administration, by removing the holding company Sealúchais Árachais Teoranta, SAT, from the structure. When the Insurance Corporation of Ireland, ICI, got into difficulties in March 1985 an administrator was appointed to place the company on a sound commercial and financial footing in order to separate the affairs of ICI from AIB. The shareholding of AIB in ICI was transferred to a new holding company, SAT.

In 1990 the High Court approved the sale of the direct insurance business of ICI. Thereafter the rump of ICI became known as Icarom plc. That is under the ownership of the Minister for Finance, through this holding company, SAT, and under the administration of the High Court. The main role of Icarom plc is to run off ICI's pre-1985 liabilities, mainly in respect of its US risks. The simplification of the ownership structure is being undertaken on the recommendation of the administrator and is to provide legal certainty in respect of Icarom's access to the federal court system in the US in respect of liability claims.

Richard Bruton (Dublin North Central, Fine Gael)
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I do not wish to get bogged down in something that may be off the main point, although maybe I could be forgiven for that. Is it not the case that the 2% insurance levy came in under an Act that provided for the establishment of an insurance compensation fund and that vehicle was used to support this company? This money, which was legally assigned to an insurance compensation fund, is now being used entirely for Exchequer purposes. Where did the change occur such that something that was intended for a specific requirement was diverted into general Exchequer-raising revenue? I am sure it was convenient for the Minister's predecessors to keep this going as a source of revenue but was there ever a conscious decision, debate and approval of this change? This was introduced for a specific purpose.

Kieran O'Donnell (Limerick East, Fine Gael)
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Why did it take so long for this transfer to take place? What are the assets of the company? Why is it happening now?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The purpose of the change is to allow for a rationalisation of the current structure under which the remaining business of ICI is administered. The direct effect of the inclusion of this amendment would be to allow me to wind up the SAT holding company. That acts as a holding company for another company called Icarom, which in turn administers the remaining insurance business of the former ICI. The directors and shareholders of SAT and shareholders of Icarom are officials from the Department of Finance. The proposal provides that the Minister can wind up SAT, and Icarom can then be reincorporated as a single member company.

The most significant benefit arising from this change will relate to proof of state ownership. The argument has been made that because Icarom is held through a holding company it is not entitled to be treated as an entity owned by a foreign state and thus entitled to have cases in which it is involved heard in American federal courts. Despite the fact that appropriate proofs have been provided, such proofs have not always been accepted as sufficient. The winding up of SAT and the reincorporation of Icarom as a single member company vested in the Minister for Finance will simplify the proofs required and eliminate this problem.

Subsection (a) provides for the winding up of the SAT company and the transfer of the Icarom shares held by SAT to the Minister, and that any assets remaining after the wind up of SAT would be transferred to the Exchequer. Subsection (b) requires SAT shareholders to provide their shares to the Minister when required by the Minister and provides that Icarom may be converted into a single member company with the Minister as sole member.

With regard to the 2% levy that was used to fund the administration, I do not have a briefing on that aspect. I will have to check whether it is relevant in respect of this issue and get back to the Deputy on Report Stage.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 8:

In page 12, line 31, after "1942" to insert the following:

"(as amended by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003)".

This is a technical amendment, but I would like the Minister to comment on the section.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The amendment seeks to insert "section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003" after the words "Central Bank Act 1942". I have already stated that I have been advised that amendments such as these are unnecessary. The Central Bank Act 1942 was amended on numerous occasions, not just by section 26 of the Central Bank and Financial Services Authority of Ireland Act 2003. Therefore, we cannot support the proposal.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 13(a) and (b) will give the Financial Regulator a legal right, subject to EU confidentiality constraints, to disclose confidential information to the National Consumer Agency for the performance of the agency's functions as provided for in the Consumer Protection Act 2007. Section 13(c) extends the deadline for submission of its annual budget by the Financial Regulator from the end of September to the end of October each year. Given the complexity of the process for establishing the Financial Regulator's budget, it is felt that the Financial Regulator should be given a more extensive period for preparation.

Section 13(d) extends the immunity from costs arising from the discharge of their duties to members of the Financial Services Ombudsman Council. It will ensure that members of the council are not liable for damages arising from the discharge in good faith of their statutory duties. The Financial Services Ombudsman was established as an independent body in its own right. The existing provision may give the impression of an element of accountability to the Financial Regulator which was never intended. Section 13(e) will clarify the Financial Services Ombudsman's independence. Section 13(f) will reduce the number of required compulsory retirements from the board of the Financial Regulator by the number, if any, of voluntary resignations which may have occurred between the relevant anniversary dates so as to ensure continuity of membership and minimise any potential disruption to the official working of the Financial Regulator.

Richard Bruton (Dublin North Central, Fine Gael)
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I have no profound objection to these provisions. I would like the Minister to clarify the point about the Financial Services Ombudsman not having to report when he decides not to investigate or to discontinue an investigation. I understand the Minister's point that if he must give his reasons to the regulator, it reduces his independence to some extent. Presumably he will still be under some general obligation to report to the regulator on cases in which he discontinues an investigation or decides not to investigate. Will there be some public policy element from the Financial Services Ombudsman on the strategy? There needs to be consistency about these decisions. I presume that this reporting was seen as some advantage in the original draft. Are we losing anything by going down this road on the consistency of regulation and the consistency of the treatment of complaints by individuals?

The other parts of the section do not seem unreasonable. The Minister is giving the Financial Regulator more time to produce reports, which I presume is for good reason.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am providing for one month extra, given the complexities involved.

Richard Bruton (Dublin North Central, Fine Gael)
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That is fine. Will the Minister clarify the relationship between the Financial Services Ombudsman and the Financial Regulator?

Brian Cowen (Laois-Offaly, Fianna Fail)
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It is true that they have a good relationship. If an issue arose in the normal course of events that the ombudsman felt the regulator should know about, the ombudsman would inform him. This section seeks to underpin his independence. It is not a question that he be spoken to by the Financial Regulator. It is part of the need to reinforce the independence of these ombudsmen from other people in the apparatus. It is not that there is a problem out there, but we are trying to reconfirm what was intended originally, which is his statutory independence.

Joan Burton (Dublin West, Labour)
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The Financial Services Ombudsman has provided a mechanism for people who have been badly treated by banks, financial institutions and insurance institutions to seek to have consumer issues redressed. Is the Minister aware that the Financial Services Ombudsman has recently withdrawn from an investigation that he had undertaken on people transferring insurance products? The suggestion is that the legislation has been deemed to be inadequate. For people who shop around for insurance services, some insurance companies levy charges for changing service providers. That constitutes an inhibition on people transferring services.

If the Minister has had an opportunity in this section to consider the relationship between the ombudsman and the Financial Regulator, does this imply he has had, or his officials have had, an opportunity to undertake a review of how the Financial Services Ombudsman is operating? A number of comments have appeared in the financial press reporting that he has undertaken investigations. While he has been successful in getting redress and satisfaction for customers of financial and insurance institutions in some cases, in others he has suggested strongly that the legislation has been inadequate. Has the Minister had an opportunity to be briefed on this issue?

Richard Bruton (Dublin North Central, Fine Gael)
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I have read of another case, which I believe differs from that to which Deputy Burton refers, in which an individual finding was made to the effect that a financial institution had not treated an individual fairly and the same treatment was being meted out to thousands of others. It was found that the Financial Services Ombudsman could not impose a requirement on that company that would relate to all 1,000 affected people. Instead, he would be obliged to deal with each of the other 999 cases individually before they would get their refunds. If this case as reported in the newspapers constitutes a defect in the legislation, Members should include something to correct it before passing this legislation. A scenario in which a malpractice is unearthed but one is obliged to have hundreds of cases taken individually sounds like an extraordinary hole in the system.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I cannot accommodate this suggestion at such short notice. I have not yet received any correspondence from the Financial Services Ombudsman on this issue. However, I also read the reports in question and it is clear a judicial review took place of a decision made by the ombudsman as to how wide an application a recommendation in respect of a specific incident he investigated would have. Like the Deputy, I know no more of this issue than that. I am sure the Financial Services Ombudsman will communicate formally with my Department if he has issues in this regard. We will study the judgment, assess what is involved and ascertain the exact position. However, I cannot make such a commitment at short notice based on the information available to me. We must wait and see what the ombudsman has to say to me formally in this regard.

Richard Bruton (Dublin North Central, Fine Gael)
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Perhaps someone should contact the Financial Services Ombudsman informally to ascertain whether it is a matter that is sufficiently simple — as it sounds to a lay person — to enable the Minister to accommodate it. A Bill such as this, in which it could be included, may not come before the House for months. Perhaps contact should be made to clarify the point at issue and whether Members should take this opportunity to deal with it.

Brian Cowen (Laois-Offaly, Fianna Fail)
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All actions are subject to judicial review, if necessary, by affected parties. They go before the courts, which decide on what is the issue on the merit of the case.

Richard Bruton (Dublin North Central, Fine Gael)
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Is this issue still sub judice?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Many decisions go in favour of the ombudsman, while others may not. In fairness, not many are challenged. As Deputy Burton noted, he has been highly active and has been building a good reputation regarding the assiduousness with which he follows up cases on behalf of citizens. I have much time for the gentleman personally.

This issue must be looked into and checked carefully before one can state that I could simply make a telephone call to sort it out tomorrow. The matter must be reflected on and the position must be ascertained. However, I appreciate the Deputies' point. If this is an issue of major import from the ombudsman's perspective, I am sure the Department will be hearing from him. However, I will try to find out what is the exact situation.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I am advised that amendments Nos. 9 to 15, inclusive, in the name of Deputy Burton, may be discussed together.

Joan Burton (Dublin West, Labour)
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I move amendment No. 9:

In page 14, lines 11 and 12, to delete "Acts 1990 and 2000" and substitute "(Amendment) Act 2000".

These are technical amendments in respect of the proposed amendment to the Act. It is unorthodox drafting practice to amend a collective citation rather than a specific Act. The Act being amended by this section is the National Treasury Management Agency (Amendment) Act 2000 and this group of amendments is designed to make this clear.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take amendments Nos. 9 to 15, inclusive, together and to accept them, thereby amending section 14 of the Bill, which provides for a number of amendments to the legislation covering the National Treasury Management Agency. The amendments change the technical legal references to the legislation being amended and I am advised they are acceptable.

As for acceptance of these amendments, another item should be added to amendment No. 9. I ask the Cathaoirleach to direct the Clerk to change the word "are" to "is" on page 14, line 12. This also constitutes part of my acceptance of this amendment in order that the words will read grammatically correctly.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I so direct. Is that agreed? Agreed.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 10:

In page 14, paragraph (a), lines 13 and 14, to delete all words from and including "of" in line 13 down to and including "2000" in line 14.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 11:

In page 14, paragraph (b), lines 19 and 20, to delete all words from and including "of" in line 19 down to and including "2000" in line 20.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 12:

In page 14, paragraph (c), lines 25 and 26, to delete all words from and including "of" in line 25 down to and including "2000" in line 26.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 13:

In page 14, paragraph (d), lines 38 and 39, to delete all words from and including "of" in line 38 down to and including "2000" in line 39.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 14:

In page 15, paragraph (e), lines 11 and 12, to delete all words from and including "of" in line 11 down to and including "2000" in line 12.

Joan Burton (Dublin West, Labour)
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I move amendmentNo. 15:

In page 15, paragraph (f), lines 15 and 16, to delete all words from and including "of" in line 15 down to and including "2000" in line 16.

Richard Bruton (Dublin North Central, Fine Gael)
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I seek clarity from the Minister. Essentially this amendment extends the National Treasury Management Agency to become a form of bank to State bodies and Departments. I have no problem in principle with the NTMA so doing as it can achieve economies in providing, for example, foreign exchange services. However, does it raise a bigger issue if Members allow deposit-taking and lending facilities by the NTMA to bodies such as the HSE and so on? It seems to be a significant step forward. I presume the HSE has its own lines of credit, bridging finance and so on that it uses to manage its affairs. Has the Government decided it would be better to see the NTMA become more of a bank that offers active services to public service bodies, rather than my understanding of its original purpose, which was simply to manage public debt and achieve economies in that area?

I am aware of and welcome the development of other activities within the same group, such as the State Claims Agency and the National Pensions Reserve Fund, as economies of scale may be gained by having them managed under the same roof. However, is this a significant new departure on which the NTMA is embarking? What are the implications for wider public policy? Perhaps this is a wide and far-seeing measure. However, it seems strange for it to be slipped into this Bill as one amendment among 100 others. It seems to be a significant initiative in respect of public policy on banking by public bodies.

Brian Cowen (Laois-Offaly, Fianna Fail)
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As the Deputy noted, sections 14(a) to 14(c) amend section 18 of the Act under which the National Treasury Management Agency provides a deposit-taking and lending facility known as the central treasury service to local authorities and non-commercial semi-State bodies, which are designated by the Minister for Finance with the approval of the relevant Minister. The purpose of the central treasury service is to make competitive banking facilities available to public bodies. This facility is being extended now to the Courts Service, certain third level colleges, the Railway Procurement Agency and the Housing Finance Agency. Section 14(d) will allow the NTMA to engage in transactions of a normal banking nature in respect of its central treasury service activities. This will, for example, allow the use of Internet rate swaps to hedge interest rate risk where fixed-rate loans are provided through the central treasury service.

Section 14(e) is a technical and consequential amendment arising from the previous subsection which amends references to take account of the new subsections in section 22 of the National Treasury Management Agency Act 2000. Section 14(f) inserts a new section 25A into the National Treasury Management Agency (Amendment) Act 2000. This will allow the NTMA to provide foreign exchange services to Government Departments and to bodies which can avail of the NTMA's central treasury service, such as local authorities and non-commercial State-sponsored bodies. Giving the NTMA this power could yield savings of between €500,000 and €700,000 for the Department of Foreign Affairs alone in respect of transfers of moneys to the overseas development aid programme and so on. It builds on an existing facility provided by the NTMA for non-commercial State and semi-State bodies and local authorities which provides for more competitive banking facilities. We wish to make it available to the Courts Service, where developments have been taking place recently, and to third-level colleges, the Railway Procurement Agency and the Housing Finance Agency. We want to make sure we use the central treasury service to obtain the best possible banking services for these agencies in addition to the agencies being served already.

Joan Burton (Dublin West, Labour)
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I agree with the Tánaiste that the NTMA has been a successful public body. Its operations have enabled us to obtain good value in managing the national debt and have brought the cost of servicing and managing the national debt down considerably. I notice that in recent times the National Pensions Reserve Fund, which is one of the agencies under the umbrella of the NTMA, has taken a position on the matter of investing in equity funds, including some Irish funds. What is the risk profile of the NTMA?

I have no problem with extending the agency's powers to give it more general banking powers for specific State agencies, particularly when it concerns investment in infrastructure such as rail. Is there a policy or are there guidelines from the Central Bank or, more probably, the Department of Finance, the parent Department, which deal with risk, particularly in the area of new financial products such as derivatives? What is the position of the NTMA and of funds such as the NPRF from this point of view? In general, I welcome the addition of section 14 and the extension of the powers of the agency, particularly in the matters of investment capacity and the ability to invest in key infrastructural areas such as the Railway Procurement Agency.

Brian Cowen (Laois-Offaly, Fianna Fail)
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The section deals with the fact that we are extending existing treasury services to these public bodies in addition to bodies that have already benefitted from them. The question being raised now is a wider policy issue. The NTMA has statutory independence under its own Acts and was removed from the aegis of the Department and given operational autonomy. This was for a good reason and its record proves that this was the correct decision. The NPRF is also independent in its investment strategy and it operates under the relevant Act. It is not subject to amendment by me as Minister for Finance. I believe that its independence is critical in terms of allowing it to maximise its returns on the funds it invests, which cannot be touched, statutorily, until 2025.

The philosophy behind our dealings with the NTMA and the NPRF has been to respect their statutory independence and allow them to get on with the remit with which they were provided under statute. It was a wise decision to avoid duplication within the Department of Finance of the effort made by these agencies. Obviously, the NTMA reports to the Minister, has an annual reporting mechanism, and is answerable to the committees in terms of its operations. However, I do not give operational guidelines on a regular basis to the NTMA or the NPRF. They act under statute and derive their powers from that. The record of the NTMA proves that its independence has been fundamental to its success.

Kieran O'Donnell (Limerick East, Fine Gael)
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Can the Minister clarify the type of facilities the NTMA could provide, for example, to the HSE? Could it give day-to-day revenue borrowings or capital? What are the lengths of time and rates of interest involved? This is currently a grey area. What is the position in the context of the budget overruns being experienced by the HSE at the moment? This should be clarified, as we are dealing with mainstream Government bodies such as the HSE.

Richard Bruton (Dublin North Central, Fine Gael)
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There is the potential for significant savings of public money if this can be developed into a shared service that yields returns. Has the Minister considered the potential for better treasury management in individual bodies due to use of the NTMA? If this generates savings, would it be reflected in terms of a reduction in the number of bureaucrats involved in treasury management and an increase in front-line staff, or is this left to the agency? Is there a driving philosophy to utilise shared services to reduce bureaucracy and overheads in the management of these bodies? One of the things that frustrated people, particularly when the HSE was set up, was the sense that bureaucracies were being built upon bureaucracies and that economies due to shared services could not be achieved because there was no reduction in the numbers involved in the HR departments, for example, of the individual health boards. While this is clearly an interesting area in which economies may be achieved, I am anxious to ensure the economies are utilised at the front line and that duplication is reduced. Perhaps there is still a treasury or foreign exchange management unit in the Department of Foreign Affairs that continues merrily as it always did even though it is now availing of the services of the NTMA.

Given that this is a single body, is there a tendering process for business of this nature? When bodies make use of the NTMA, is there an obligation for them to tender if the value of the work exceeds a certain amount, or is this simply a relationship that develops between bodies without an obligation to tender? While the NTMA may genuinely offer economies, I would like to see an opportunity for others to tender. The pressure to be competitive is always greater if there is an obligation to tender down the line. I would be interested to hear the Minister's general comments on how initiatives such as this can affect front-line public services.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I will give a detailed reply to the Deputy's points on Report Stage. The point is to provide competitive banking services. There are local authorities which bank outside the NTMA. The State bodies that have already made use of these facilities have seen that it is a good way of providing these services. Many of them find it more comfortable to deal with the NTMA, as the philosophy and ethos of the agency are consistent with their own. Therefore, on the question of having a relationship with the NTMA and providing a competitive service, if the service it was providing was less competitive than where one was getting it already I presume one would not go there. Given the complexity of public finances, however, having the NTMA in charge of these arrangements, where they are relevant to non-commercial State bodies, or indeed Departments or local authorities, would provide a far greater degree of comfort for those authorities than would be the case otherwise. Perhaps it would be best to get the Deputy a more detailed note on the practicalities of this for Report Stage.

Joan Burton (Dublin West, Labour)
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On the same subject, I would feel relieved if the NTMA were taking charge of some of the treasury functions of the HSE. Compared to what is happening at present, it might be for the better. The Minister might let us have a note on the issue.

Given the changes in the financial markets and the risk factors that are now much higher because of the turbulence in the markets, as the Minister acknowledged, is risk profiling done on how the NTMA deals with these issues or is that left entirely to the NTMA? This is a technical and skilled area of banking and treasury management, but it is important to know what is the risk profiling.

Another area under the NTMA's management which is also subject to specific legislation is the National Development Finance Agency, NDFA. I recall, as I am sure Deputy Bruton probably does, that the NDFA and a number of its then key executives came in to the Committee on Finance and the Public Service and, if I recall correctly, the Committee of Public Accounts. We heard an interesting presentation on its purchasing for the HSE and a number of visits it made to centres of excellence in cancer treatment technology, including linear accelerators, in the US and in a number of other locations. As I understood their presentations, they had brought forward a plan to invest in linear accelerators for a number of centres of excellence for cancer treatment in Dublin and around the country. However, subsequently I saw a good deal of material in the media suggesting that the HSE had a different viewpoint, which seemed to be broadly that it would be much better to purchase these linear accelerators by traditional direct procurement methods of direct State purchase, presumably through the HSE.

Can the Minister offer any insight, if not now directly then maybe by way of a note, as to what exactly happened because in the presentations we heard in the Committee on Finance and the Public Service, and indeed in the Committee of Public Accounts, in the last Dáil the strong suggestion from the NTMA following visits it had made to a number of centres of excellence in the US — there was a Powerpoint presentation on this — was that it had a model on the procurement of the latest top-of-the-range equipment but subsequently the HSE appeared to disagree with this approach.

These were very significant investments by the State as part of the NDP in improving our technology in cancer treatment and I never really heard what happened. Is it all part of some ongoing dispute on how these matters are financed or will some of these additional powers here give the NTMA more authority in decisions like this? I would be grateful if the Minister elaborated on what this means in terms of the relationship between the HSE and the NTMA.

Brian Cowen (Laois-Offaly, Fianna Fail)
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While a request for an update on the health capital programme would be best directed to the Minister for Health and Children, we passed legislation a couple of years ago at my initiative where the NDFA became the centre of excellence for PPP provision across Departments, and it is interesting that Deputy Burton is supportive of that PPP proposal. At the end of the day the NDFA gives the financial advice and suggests ways and means by which these things can be done. I do not know the position beyond that other than that obviously they have been looking at that in the area of health in the same way as they have been doing in housing, on the environment and in projects in other Departments.

The decision to centralise a centre of excellence within the NDFA in terms of trying to promote PPP provision and ensuring that Departments did not have their own PPP units, which was the case, goes back to the shared service idea which Deputy Bruton mentioned in his contribution. The benefit of that is clear for all to see. It helps to take the matter from within Departments and to have people specialise in that particular area because of the complexity and the amount of work and detailed preparation that must go into ensuring that it is done in the appropriate fashion, meeting the public service benchmarks that are also set out as part of ensuring value for money in the application of PPPs. I cannot say anything more than that on the issue. Given the Deputy's interest in this area, it would be best to see if I can get a more detailed note for Report Stage and Deputies might be able to talk about it at that stage.

Joan Burton (Dublin West, Labour)
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I would appreciate a note because the difficulty for people in opposition is that if one asks the Minister for Health and Children about anything, it is referred to the HSE, from which many months later some responses arrive. Sometimes it would be easier to understand ancient calligraphy than to understand the responses of the HSE in any meaningful ordinary sense of the word.

I have an open mind about PPPs. PPPs are not an issue of ideology, they are an issue of cost, service provision, time taken etc. I do not know whether Deputy Bruton recalls, but I attended several presentations and listened intently to the presentation of a significant plan to acquire major investments like linear accelerators for cancer treatment for several locations around the country, including at least two locations in Dublin and one in Limerick. It then emerged through discussion in the media that the HSE was of a different point of view and, if I remember, the net point was that the powers that be in the HSE felt that traditional State procurement methods were cheaper. Possibly that is correct, but the problem is that Deputies cannot get answers from the Minister for Health and Children or, indeed, the HSE. Maybe the Government cannot get answers either because sometimes that is the way it seems to us on the Opposition benches. I would be grateful if the Minister could tell us what happened the idea of providing top-of-the-range technology following studies in places like the Mayo Clinic in the US. I am fully supportive of the acquisition of this technology, however, it then fell into the mists of time and subsequently the Minister for Health and Children stated the timelines for the provision of this technology would be much longer than had been indicated in the original NTMA presentations. I would appreciate if the Minister would enlighten us. It would be helpful to try to understand the ongoing mysteries of the Health Service Executive.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I can enlighten the Deputy in the House in how it is expected these amendments will work in terms of enhancing or widening the numbers of bodies to which the central treasury service of the NTMA will apply in the future. The opportunity cannot be used for me to reply to a parliamentary question.

Joan Burton (Dublin West, Labour)
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This section deals with changes in the ministerial pension legislation. Currently a pension is payable if the former office holder applies for it within six months of becoming eligible for it, otherwise it is payable from the date of application. This amendment will allow for payment of a ministerial pension to be backdated to a date not earlier than the date of entitlement.

Did somebody forget to apply for a ministerial pension so as to warrant the introduction of this change to the legislation? Does it relate to a specific individual? All politicians are very bad at looking after their entitlements. The matter is rather intriguing. Does the amendment relate to a specific case and can the Minister perhaps enlighten us as to what gave rise to this amendment?

Brian Cowen (Laois-Offaly, Fianna Fail)
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What is intriguing is that the requirement to apply within six months does not apply to any other public service pension. If a person other than a Minister were to apply for a pension after the initial six month period, he or she would not be disbarred from receiving the pension back to the date of entitlement. For some reason it was felt in previous legislation that we should be treated differently, but we should be treated the same as everybody else. That requirement will no longer exist. There was somebody who failed to apply in time.

Joan Burton (Dublin West, Labour)
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There was.

Brian Cowen (Laois-Offaly, Fianna Fail)
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This led to the anomaly being pointed out to me so it can be rectified as quickly as possible.

Charlie O'Connor (Dublin South West, Fianna Fail)
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Does that make the Deputy happy?

Joan Burton (Dublin West, Labour)
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I am always happy.

Charlie O'Connor (Dublin South West, Fianna Fail)
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The Chair is advised that amendments Nos. 16 and 17 may be discussed together.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 16:

In page 17, line 44, after "union," to insert the following:

"or 40 per cent of the total gross loan book balance outstanding at that time in respect of all loans made by the credit union where written approval is received from the Bank,".

Section 17 of the Bill as published amends section 35(2) of the Credit Union Act 1997 so as to allow a practical interpretation of the lending limits which apply to the making of loans. For instance, prior to this reform a five-year loan continued to be counted as such even when the repayments term outstanding had fallen below five years. The same applied to ten-year loans. This change was already implemented at the request of the credit union movement by way of SI 193 of 2007. The Attorney General has advised that the reform should be confirmed in primary legislation at the earliest opportunity and hence section 17 as published.

I also propose to avail of the opportunity afforded by Committee Stage to make a further reform in regard to the lending limits of the credit union. These two amendments to section 17 will extend the amount of long-term loans from 20% of the loan book for five-year loans to 40% for five-year loans and for ten-year loans from 10% to 15%. These further reforms could not be included in the Bill as published as a report of the review group on long-term lending limits for credit unions had not been published at that time. A further Committee Stage amendment, No. 21, will be necessary in order to formally revoke SI 193 of 2007 which will be redundant once this section is commenced.

Richard Bruton (Dublin North Central, Fine Gael)
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I welcome these amendments. The credit union movement has been unique in offering loans to people at affordable rates. They assist many people who would not normally be banking in the general run of things.

When we are debating credit unions it is important to raise some of the other issues that arise. The deposit protection scheme to which I referred earlier is one where continuing issues need to be resolved. I get the impression it is a very slow bicycle race in terms of getting to a point where there is a savings protection scheme that has the confidence of the regulator, which is transparent and where we know there is certainty in regard to how it works. We have been fortunate in that there have been no cases where the system has not been able to cope but we have been given warnings that we need a robust scheme. The Minister needs to inject some urgency in getting to a conclusion.

In recent years credit unions have been moving out of traditional financial vehicles, namely, granting loans to their members. They are buying new financial instruments and we are now extending their remit to new loan vehicles, which is welcome. The other side of that issue is whether credit unions have the management skills to deal with longer-term loans and having more loans of that nature on their balance sheet. This will put new stresses and strains on the management of credit unions. There has always been a debate between the voluntary ethos of the credit unions and the pressure from regulation to become more professional and have higher levels of management skill and supervisory levels.

While I welcome the extension of credit limits announced by the Minister, has he or the Financial Regulator introduced any new reporting or supervisory requirements? Questions have been asked at times about the ability of some credit unions to evaluate risks they take on. It is important that as we make this welcome decision to allow credit unions greater freedom we do the other two things that are needed to underpin that, namely, make sure we are satisfied there is good management of these new responsibilities and opportunities and that savers within the credit union movement are well protected. It would be good for their long-term future and the strength of the movement if we ensure all these measures move in harness together. I am interested in the Minister's comments on the direction of development for the credit union and whether he considers we are close to achieving a solid basis in the future on all these fronts which have been somewhat fraught in the past.

Joan Burton (Dublin West, Labour)
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Has the Minister or the regulator of credit unions examined the types of investments credit unions have been making in the context of the turbulence in financial markets? I do not know whether guidance has been given to credit unions or whether there is any oversight in regard to investments in financial derivatives by credit unions. The regulations require that credit unions have to hold a very high level of investment on their balance sheets, which is fair enough. Credit unions have lobbied to be allowed to lend more. The increase in the loan capacity introduced by the Minister has been good but in regard to the investment side of their balance sheet, some broking firms have been heavily selling to credit unions with other institutions' financial derivative products. Has the Minister an insight into what the extent of this might be or has the regulator of the credit unions investigated the matter?

There has been heavy advertising with regard to financial investment products in Ireland and, particularly in recent months, investments in international property developments, particularly in Europe and slightly further afield. Very often, the entry point is €5,000 or above. Again, we do not want a regulatory structure that is too intense — we cannot save people from themselves. However, there is a balance to be struck.

In recent years, a number of investment vehicles where the base of the investment was overseas property have run into trouble. For example, in recent months changes to Spanish planning laws have caused significant problems in the Spanish property market. Are Irish people borrowing from their credit unions to invest in overseas properties? While we do not want to over-regulate, people are now buying into overseas financial investments and the issue arises as to whether they are properly advised and what we can do to give them better advice. At the end of the day, they are free agents and are entitled to borrow money to invest in overseas property. However, we should advise them to exercise due caution with regard to such investments because the advertising of some of those investments is incredibly seductive — I am sure the odd Deputy feels like investing although, luckily, we are not paid enough to do that.

Has the Minister given any thought to this area? If the credit crunch and scaling down of the property market are set to continue, and interest rates stay higher than previously, some who have borrowed a lot of money from credit unions may find that the overseas property they have bought or committed to does not provide as a good a return as they expected when originally investing.

Charlie O'Connor (Dublin South West, Fianna Fail)
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I did not think there were any odd Deputies.

Kieran O'Donnell (Limerick East, Fine Gael)
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I welcome the section. I have dealt with credit unions over many years and know a huge debt of gratitude is due to the credit union movement. Before the advent of the Celtic tiger in the 1990s, many small businesses would have gone under but for credit unions. Banks were not providing overdraft facilities and people had to go to the local credit union to get a draft to keep them going for the week or month.

Notwithstanding that debt of gratitude, I welcome that we are allowing credit unions to lend over longer periods and also that we are introducing controls at the same time. However, I take on board the points made by Deputy Bruton, particularly with regard to the investments credit unions are making. A wide range of products is available and, while credit unions obviously try to maximise returns for deposit holders and members, control mechanisms or other guidance should be put in place with regard to the type of investments credit unions should make.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I agree there is always a need to strike an appropriate balance between allowing the credit unions to expand the range of services as they would wish while at the same time ensuring members' savings are not put at undue risk — that is the balance we are attempting to strike. As progress was not being made on long-running issues, since I became Minister for Finance I have instigated a process of discussion and engagement. This has brought us a long way down the road by building a consensus and building confidence in the system between credit unions, which vary in scale and size, the Irish League of Credit Unions and the Registrar of Credit Unions, and by understanding how the registrar, as an authorised officer, interfaces within the Financial Regulator's office. We need to avoid misunderstandings and get on with the agenda, which is a manifestation of the success we are having in this respect.

While respecting the ethos of credit unions, they have been given the funds that are under their care and management and it is necessary for them to be part of the regulatory regime in the interests of all, including the credit unions themselves. At the same time, we will improve the range of services, the type of loans and the number of loans over a certain period that credit unions can provide, as I outlined in my previous contribution.

On the investment side, the Registrar of Credit Unions took steps to limit the exposure of credit unions and the investment market by issuing a guidance note on investments in October 2006. This guidance note sets out the framework within which credit unions should maintain their investments and it is subject to regular review by the registrar in consultation with the sector.

The board of directors of each individual credit union is responsible for managing the funds and setting the investment policy of that credit union — this is the individual autonomy they exercise. However, the registrar expects credit unions to comply with this guidance in order to avoid undue risk to members' savings and will monitor credit unions' investments against this guidance.

The guidance note sets out a list of authorised investments for credit unions and within this list there are limits for each class of investment instrument in which credit unions can invest. While they are not precluded from investing in non-capital guaranteed products under current legislation or guidance, and they can invest in equities, under the terms of the investment framework investment in equities, for example, is not to exceed 5% of the total of the credit union's investment portfolio. My point is that guidance is available and action and monitoring is taking place with a view to providing the appropriate balance to which I referred.

With regard to the savings protection scheme, ongoing discussions are making progress subject to the various legal advices. While some of the issues are long-running and little progress was made in the past, I am confident we are set fair to address them in a way that meets the requirements of all involved, despite a background of past suspicion and lack of trust.

Charlie O'Connor (Dublin South West, Fianna Fail)
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As there will be more latitude to make general comments when we deal with the section, I will put the amendments.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 17:

In page 18, line 7, to delete "union, or" and substitute the following:

"union, or 15 per cent of the total gross loan book balance outstanding at that time in respect of all loans made by the credit union where written approval is received from the Bank, or".

Richard Bruton (Dublin North Central, Fine Gael)
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I am surprised the Minister has not commented on the savings protection scheme, which is topical. During the week the Minister stated that, with his EU colleagues, he is examining the deposit protection scheme that applies to other financial institutions. My understanding is that the credit union savings protection scheme does not even go as far as the deposit protection scheme we are proposing to improve. The upper limit of 90% up to €20,000 applies to savings generally whereas the upper limit in the credit unions savings protection scheme is €12,700, again at 90%.

There are reasonable grounds for concern that the system is not transparent — the note I read described it as discretionary, so there is an element of discretion as to whether or when the protection scheme kicks in. It is not a satisfactory position for credit union members that uncertainty persists regarding the savings protection scheme available to them, even in terms of whether 90% of their savings up to a value of €12,700 would be guaranteed in the event that a credit union were to get into difficulties. We should try to ensure credit union savers are offered the same protection as other savers. There should be no uncertainty as to the savings protection scheme's ability to deliver if a credit union were to encounter problems.

I am aware that discussions have been held on this important issue and that the Minister is trying to coax various parties to arrive at a solution that would satisfy the regulator, the Irish League of Credit Unions, which manages the savings protection scheme, and the breakaway group of credit unions, which may be more progressive or larger than the ILCU. While I understand that this creates difficulties and historical and other issues need to be managed, the Minister must signal to all parties that a prompt resolution to this problem is required, particularly given that the Oireachtas, in good faith, is proposing to give additional powers to credit unions to enable them to develop and expand. In return, we want the credit unions to offer protection to their savers and members. I ask the Minister to comment. He has indicated that progress has been made on the issue.

I have not had sight of the guidance note the Minister read. Equities are clearly a risky product, particularly for those who have invested in financial equities or Irish financial stocks, and securitised instruments have become a source of significant concern. Does the guidance note address other, perhaps even more risky vehicles in which credit unions might consider investing? In light of the experience of recent months, is there a case for issuing a revised guidance note to ensure credit unions have the best information available to the Minister and his advisers on these types of vehicles? It has transpired that these instruments and vehicles are not as they were described by the rating agencies. I understand, for example, that Ormond Quay was rated AAA, a better rating than that given to AIB or any other Irish bank. It might be worth considering issuing revised guidance to credit unions.

Joan Burton (Dublin West, Labour)
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In the context of events on the financial markets in recent months, why is it not appropriate to ask the Financial Regulator to check that the credit unions have, where necessary, responded appropriately to any exposure they may have had to investments? The credit unions have had an extraordinary inflow of funds, particularly from SSIAs. Many of them, specifically those associated with public services such as the Garda Síochána, Revenue Commissioners and so forth, are large, well-run institutions. However, smaller, local credit unions in towns, districts and parishes may not have available to them the same level of financial expertise available to the larger public service credit unions. It is important, therefore, that all credit unions have access to the best possible advice on prudential matters, particularly as they are required to have high reserves and levels of investments and these must find a home.

Various brokers have been engaged in intensive efforts to sell some of their products to credit unions. Savers in credit unions should be given savings protection equal to that available to savers in commercial banks. It is time the Minister arranged a review of the deposit and savings protection schemes. This would strengthen our financial services regime and reduce the risk of savers having a bad experience.

The credit unions provide a great service and it is important that they maintain their strong role in future. However, some of the change and turbulence in financial markets may expose a small number of them to excessive risk. I hope the regulator of credit unions is in a position to offer up-to-date advice to the various credit unions. Updating the guidance note issued at this time last year and introducing stronger protection schemes for savers and depositors would be an appropriate start.

Brian Cowen (Laois-Offaly, Fianna Fail)
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As I indicated, the guidance note was issued in October 2006 because the regulator is mindful of all these issues. The note is subject to regular review and consultation with the credit unions. Each individual credit union is answerable to its membership through its board. Annual meetings are held, financial reports are examined and approved and properly run credit unions confirm that they are in compliance with all aspects of the guidance and have a good relationship with the regulator. From time to time, the Financial Regulator discusses the position in the credit union sector with me and the subject is one of the items on the agenda when the chairman of the Irish Financial Services Regulatory Authority, Mr. Patterson, comes to see me. I am engaged in a process with the credit unions which is delivering progress and addressing long-standing issues.

Regarding the question of the savings protection scheme, the credit unions point out that the ethos and philosophy of solidarity, which extends from one union to another and one set of members to another, will always ensure savings are covered. By the same token, the regulator is anxious to ensure full legal clarity is brought to bear in respect of the scheme and that an appropriate response would emerge in the event that it was triggered. As one will often hear from representatives of the credit unions, this is not an issue.

Joan Burton (Dublin West, Labour)
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It has not been an issue thus far.

Brian Cowen (Laois-Offaly, Fianna Fail)
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It may not have been a problem but it has become an issue. A common approach must be adopted to ensure all parties are satisfied. This is an ever-changing financial environment. The reason the guidance was issued by the registrar in the first instance was that credit unions need to find an outlet for loans for the savings lodged with them, while ensuring the investments entered into are sensible and not subject to undue risk. It emerged from dialogue with the credit unions — we did not take a top-down approach — that they believed that since the establishment of the Irish Financial Services Regulatory Authority a one-size-fits-all approach had been adopted which did not taken into account the diversity and difference in scale and scope of these autonomous organisations. It is to deal with the sensitivity of these issues that a dialogue has been established. My Department and I have been engaged in this process and progress is being made. While I would like the process to reach a conclusion, the approach we have adopted is much better than all the other options.

The amendments in this section have been proposed as a result of a review of long-term lending. The Department listened to the views of the Credit Union Advisory Committee, which is statutorily required to advise me in these matters. Dialogue conducted between the Department, the credit union representative bodies and the Financial Regulator through the Registrar of Credit Unions is providing us with structured responses which show goodwill and will secure buy-in and ownership of the solutions to the problems as well as providing an agenda for expansion. I have always made the point that I will show form where I must to bring about a greater sense of confidence to the effect that we are on the same page while insisting that the prudential issues be addressed. This is the understanding in respect of our progress and the agenda items being ticked off.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 18:

In page 18, after line 15, to insert the following new section:

18.—(1) The Insurance Act 1936 is amended by repealing sections 9 and 10.

(2) The European Communities (Non-Life Insurance) Regulations 1976 (S.I. 115 of 1976) are consequentially amended by revoking paragraph (5) of Regulation 4.

(3) The European Communities (Life Assurance) Regulations 1984 (S.I. 57 of 1984) are consequentially amended by revoking paragraph (4) of Regulation 4.

As I explained in the course of the instruction to committee motion, the provisions we propose to amend have no relevance to the current business environment and should be repealed. I trust Deputies can accept the amendment. Section 9 of the 1936 Act makes it an offence for a person to effect an insurance contract with a company not in the possession of an insurance licence. Section 10 of the Act deems certain foreign companies and persons to be carrying on insurance business in Ireland in specified circumstances.

Insurance industry representatives have brought to our attention their concerns about these provisions and their negative impact on the operation of international companies in Ireland. Some of the negative impacts highlighted by industry include where a person returning to Ireland from outside the EU, but continuing to contribute to a savings product structured as a life insurance policy outside the EU, would commit an offence under section 9 as it stands.

There are difficulties for international companies that wish to, for example, put together groupwide insurance policies for professional indemnity insurance, which raises the risk of an offence being committed through the application of section 10. Section 10 has the unintended result of hampering the issuance of certain securities and excluding Irish investors from investing in securities in Ireland backed by monocline insurers. Statutory provisions of 70 years standing are precluding people from doing their business in the normal way.

Richard Bruton (Dublin North Central, Fine Gael)
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I have no objection to the amendment. Is the Tánaiste removing the requirement of an insurance licence or is he making changes to accommodate the described anomalies, such as the person returning who is unable to continue with a savings product? I presume there is still a requirement that the insurance company must be licensed somewhere.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Yes. We are repealing sections 9 and 10 of the 1936 Act, the rest of which remains intact.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I move amendmentNo. 19:

In page 18, after line 15, to insert the following new section:

19.—The Central Bank Act 1997 is amended—

(a) in section 28, by adding the following definitions:

"'credit' includes any deferred payment, cash loan or other form of financial accommodation, such as—

(a) consumer credit, hire purchase or mortgage credit,

(b) factoring, with or without recourse,

(c) financial leasing, or

(d) financing of commercial transactions;

'home reversion agreement' means an agreement between a vendor and a home reversion firm that provides—

(a) for the conveyance by the vendor to the home reversion firm of an estate or interest in land (which includes the principal residence of the vendor or of the vendor's dependants) for a discounted sum or an income (or both), and

(b) for the vendor to retain the right to live in the residence until the occurrence of one or more events specified in the agreement;

'home reversion firm' means a person carrying on a business of entering into home reversion agreements;

'leasing agreement' means an agreement of more than 3 months duration for the bailment of goods to a hirer under which the property in the goods remains with the owner, and includes a consumer-hire agreement within the meaning of the Consumer Credit Act 1995;

'hire-purchase' means a bailment of goods—

(a) under which—

(i) the hirer may buy the goods, or

(ii) if the agreement is complied with, the property in the goods will pass to the hirer, in return for periodical payments, or

(b) in which, by virtue of 2 or more agreements, none of which by itself constitutes a hire-purchase agreement, there is a bailment of goods and either—

(i) the hirer may buy the goods, or

(ii) if the agreements are complied with, the property in the goods will pass to the hirer;

'mortgage credit' means an agreement for the provision of credit to a person on the security of a mortgage of a freehold or leasehold estate or interest in land;

'retail credit firm' means a person whose business consists wholly or partly of the provision of credit to—

(a) a consumer within the meaning of the Consumer Credit Act 1995,

(b) a person (whether or not that person is an incorporated body) but excluding any incorporated body that has an annual turnover in excess of €3,000,000,

(c) any unincorporated group of persons, or

(d) an incorporated body that—

(i) has an annual turnover of €3,000,000 or less in the financial year preceding that in which the credit is granted, and

(ii) is not a member of a group of companies that has a combined turnover greater than €3,000,000,

but does not include—

(e) a person who, in respect of such a business—

(i) is a regulated financial service provider within the meaning of the Central Bank Act 1942, or

(ii) is the holder of a licence under section 8 of the Pawnbrokers Act 1964, or

(f) a company that, being a member of a group of companies, provideds credit only to one or more other companies that are members of the group;";

(b) in section 28, by substituting the following definition for the definition of "regulated business":

"'regulated business' means a bureau de change business, a money transmission business, a home reversion firm or a retail credit firm;";

(c) immediately before section 29, by substituting for the Chapter heading the following:

"CHAPTER 2

Carrying on regulated business without authorisation prohibited";

(d) by inserting the following section after section 31:

"31A.—For the purposes of section 31(2)(b), in order to obtain and retain authorisation, a retail credit firm or home reversion firm shall satisfy the Bank—

(a) that, where applicable, the memorandum and articles of association of the firm will enable it to operate in accordance with this Act, and any condition or requirement that the Bank may impose,

(b) as to the probity and competence of each of the firm's directors and managers,

(c) as to the suitability of each of the firm's qualifying shareholders or partners,

(d) as to the organisational structure and management skills of the firm and that adequate levels of staff and expertise will be employed to carry out its activities,

(e) that the firm has and will follow procedures that will enable the Bank to be supplied with all information necessary for the performance of the Bank's supervisory functions and to enable the public to be supplied with information that the Bank specifies,

(f) that the organisation of the firm's business structure is such that it, and any of its associated or related undertakings, (so far as appropriate and practicable) are capable of being supervised adequately by the Bank, and

(g) as to the conduct of the firm's business, financial resources and any other matters that the Bank considers necessary in the interests of the proper and orderly regulation and supervision of authorised firms or in the interests of the protection of customers or potential customers.";

(e) by inserting the following section after section 32:

32A.—(1) An authorisation granted by the Bank under section 31 to a retail credit or home reversion firm may specify classes of services, and additional services, that the firm may provide.

(2) An authorisation granted by the Bank under section 31 of this Act to a retail credit firm may include an authorisation to act as a home reversion firm.

(3) The Bank may amend—

(a) the classes of retail credit services or other services that may be provided in accordance with subsections (1) or (2), or

(b) the designation or classification of firms or services.

(4) For the purposes of subsections (1) to (3), the Bank may use such designation or classification of firms or services as the Bank considers appropriate to describe the services provided.

(5) At any time before granting or refusing an authorisation to a firm, the Bank may—

(a) request such further information from the firm, or

(b) instruct an authorised officer to make such inquiries, or carry out such investigations,

as it considers necessary for the purpose of properly evaluating an application. Any such inquiries or investigations shall be carried out in accordance with this Act.

(6) In the case of a retail credit or home reversion firm authorised in another EEA Country, the Bank—

(a) shall have regard to any requirements imposed on the firm by an authority of that country that appears to the Bank to exercise a regulatory or supervisory role similar to that of the Bank in relation to the firm, and

(b) may exchange with that authority information relevant to the carrying out of the Bank's functions under this Act or the functions of that authority under the laws of that country.";

(f) by inserting the following section after section 33:

"33A.—(1) Without limiting section 33, the Bank may do all or any of the following in respect of an authorised retail credit firm or an authorised home reversion firm:

(a) make the firm's authorisation subject to such conditions or requirements, or both, as it considers appropriate, relating to—

(i) the proper and orderly regulation and supervision of retail credit firms or authorised home reversion firms, and

(ii) the protection of their customers or potential customers;

(b) impose conditions or requirements, or both, relating to the affairs or activities in an associated undertaking or a related undertaking;

(c) require the display on a credit agreement or home reversion agreement, or on any other relevant document, of a notice in a form provided or prescribed by the Bank of any information relevant to the agreement;

(d) at any time, impose conditions or requirements, or both, on an authorised firm and either amend or revoke any condition or requirement imposed under this paragraph or under paragraph (a), (b) or (c).

(2) A condition or requirement referred to in subsection (1) may be imposed in relation to any or all of the following:

(a) an authorised firm;

(b) all authorised firms;

(c) a class or classes of authorised firms;

(d) a specified period of time or times;

(e) an associated undertaking or related undertaking;

(f) such matters relating to the proper and orderly regulation and supervision of authorised firms, and the protection of their customers or potential customers, as the Bank considers appropriate.

(3) Without limiting subsections (1) and (2), the Bank may impose conditions or requirements on an authorised firm, or a class of authorised firms concerning—

(a) the level of training, qualifications or professional competence of managers, officers or employees,

(b) the provision of information to the Bank or to a person specified by the Bank, and

(c) the application of a prescribed code of practice relating to—

(i) regulated financial service providers within the meaning of the Central Bank Act 1942, or

(ii) a class of regulated financial service providers whose business appears to be comparable to that of an authorised firm or a class of authorised firms.";

(g) by inserting the following section after section 34B:

"34C.—(1) Despite section 29, a person carrying on the business of a retail credit firm, or a home reversion firm, immediately before the commencement of Part 2 of the Markets in Financial Instruments and Miscellaneous Provisions Act 2007 is taken to be authorised as a regulated business until the Bank has granted or refused authorisation to the person, provided the person applies to the Bank under section 30 for authorisation no later than 3 months after that commencement.

(2) If a person is taken to be authorised as a regulated business under subsection (1), the Bank may do either or both of the following:

(a) impose on that person such conditions or requirements or both as the Bank considers appropriate relating to the proper and orderly regulation and supervision of a regulated business;

(b) direct that person not to carry on the business of a retail credit firm, or the business of a home reversion firm, for such period (not exceeding 3 months) as is specified in the direction.

(3) A condition or requirement imposed, or a direction given, under this section is an appealable decision for the purposes of Part VIIA of the Central Bank Act 1942.".

The primary purpose of the substituted amendment to section 19 is to enable the Financial Regulator to regulate and oversee the conduct of business by firms in the non-deposit-taking lending sector that lend to the general public and small businesses. Home reversion providers who provide funds in exchange for a future interest in property will be included in the regulatory regime. Customers of these firms, which include those in the subprime consumer credit and mortgage lending markets, will benefit from the additional safeguards that the regulator's consumer protection code provides in the same as if they dealt with a regulated financial service provider.

Under the proposed changes, all non-deposit-taking lenders engaged in retail lending will be brought within the regulator's authorisation and ongoing supervision regime by way of an amendment to Part V of the Central Bank Act 1997. Any firm with business including lending to the public, that is, individuals and small firms, will be required to obtain an authorisation from the regulator. This regime will apply to providers of finance based on home reversion agreements, which is not a form of credit but is similar in effect and purpose to a lifetime mortgage.

I am conscious that the definition of a "retail credit firm" in this part of the amendment has the potential to create overlapping regulatory requirements for social finance lenders in view of the proposed regulation of charitable organisations under the Charities Bill 2007. I intend to examine how to address this issue in the context of that Bill.

Richard Bruton (Dublin North Central, Fine Gael)
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This is the core of the Tánaiste's new elements and warrants study. Regarding the issue of being engaged in retail lending, would hedge funds be regulated? Generally, they would purchase financial instruments that would not be deemed retail.

Brian Cowen (Laois-Offaly, Fianna Fail)
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Yes.

Richard Bruton (Dublin North Central, Fine Gael)
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I presume the Tánaiste's argument is that he is awaiting European legislation before regulating people who deal in securitised instruments of one sort or another that may be subject to questionable ratings. Should people running hedge funds be authorised under some of the proposed elements, namely, probity, competence and adequate levels of experience and skill? While the products might not be regulated or supervised and while we may be waiting for Europe and our colleagues to make a decision on regulating complex instruments, should we ensure people in the business of packaging or repackaging various instruments for resale or in the business of finding people to take them are supervised by some of theseelements?

The regulation envisaged relates to probity, adequate skill levels among staff, the requirement to provide information and the conduct of business, but is there a prudential oversight? As businesses will be under the credit control, their suitability must be tested, but how does the regulation in question compare to the regulation of a deposit-taking financial institution, what has been left out and why? I would like to see the checklist of what will and will not apply so I might understand the reasoning behind the obligations imposed or not imposed on non-deposit institutions or required of banks.

We should not revisit this matter in some years time. As this Bill has been introduced as a resubmit to committee, there has not been an opportunity for the Opposition and certainly me to avail of external expertise in considering these issues. I will take many of the provisions on faith and we are dealing with the Bill rapidly. Will the Minister expand further on the form of regulation, what he believes is important and vice versa?

It is natural that there are transitional arrangements, but has the Tánaiste assessed how quickly the various new authorisation requirements can be rolled out under these arrangements? Has planning been started to ensure there is no hiatus in respect of the institutions during the transitional period? I am conscious of time.

Joan Burton (Dublin West, Labour)
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The amendment does not refer to farms, farmland or borrowing through non-regulated companies. These are significant issues for many farming families. Through inappropriate borrowing and vehicles, they can lose their farms. The reversion provision mentions individual domestic homes, but not farms or farmlands.

Some years ago, it emerged that a company called Chesterton Finance had a chequered history. The Tánaiste's note refers to individuals and small firms, but I do not know whether people engaged in agricultural trades and farming fall under that category. It is important that farmers are protected by this legislation.