Wednesday, 1 October 2008
Credit Institutions (Financial Support) Bill 2008: Committee Stage (Resumed)
I wish to keep this argument on a practical level because this scheme has to work and failure of this scheme cannot be countenanced. Three elements are necessary for the success of the scheme. It must be transparent, have accountability and the taxpayer must be protected. The Bill as it stands fails on all these three accounts.
If the public are to trust that this Bill will work, it is incumbent on the Minister to take into account the amendments being tabled by the Opposition. If those amendments have validity, the Government must take them on board. We agree with the main proposals but the devil is in the detail. If this Bill and this scheme are to work, those three elements of transparency, accountability and protection for the taxpayer, must be in place.
Fine Gael has proposed three amendments, Nos. 21 to 23, inclusive, to section 6(5). These propose that the scheme would be debated by both Houses of the Oireachtas within three days of it being available. I have asked the Minister to inform us when the scheme will be brought before the House. The Government is proposing to lay the scheme before the House but not to debate it. We agree with the thrust of Deputy Joan Burton's amendment. We accept the financial markets need confidence but this amendment must be accepted.
The Government must obtain EU approval for the scheme. The Minister must consider allowing the guarantee to apply to all UK and other foreign banks operating branches in the State. There has already been a flow of funds from these banks. If he does not extend this, it may jeopardise EU approval for the guarantee.
Protection must be provided for the taxpayer. Last night the Taoiseach gave a commitment in the House to levy the bank sector for any loss incurred by an individual bank. Will the Minister give his view on this commitment? Will he include it in section 6(4)? Fine Gael will decide later if an amendment is required for that section.
This month an extra 10,000 people are on the live register with unemployment at 6.3%. Many of these people's houses are in negative equity, yet they are watching the banks getting a deal from the Government in which they do not have to worry about repaying their debts. Any loan advanced from the guarantee must be at a premium rate. An oversight board must be put in place as outlined in amendment No. 13.
It is important that for any bank that receives funding under this scheme, a due diligence process is carried out on its loan book. A procedure must then be put in place for the bank to clean up its loan book. It is important conditions are laid down for banks to build up their reserves. Spain did not have these problems because its central bank imposed stricter capital ratio requirements. Ireland must now do the same. Restrictions on dividend payments and directors' bonuses must be introduced to help build up banks' reserves.
How does the Government propose to deal with a bank defaulting on loans? Has the Minister considered other measures such as mergers? The banks must be charged for the guarantee.
This is an historic occasion for the DÃ¡il and the country. The Taoiseach and the Minister for Finance last night spoke about all parties working together on this issue. Going by this, the Minister must accept our amendments if they are of benefit in making the scheme viable. I hope the Minister will take this on board.
There is no question that we are living in sensational times. I will vote for the principle of the Credit Institutions (Financial Support) Bill to help ordinary people stay in work, to protect their savings and to ensure the economy recovers. I will not, however, be stampeded into voting for a Bill about which I, and the people, are not sure.
Several times today a certain question has been asked of the Minister for Finance. I will put it a different way. When the bankers crawled into the Minister's office on Monday night, what did they actually say to him? Did they say international bankers would no longer give them any more loans or that they had become insolvent and could no longer continue operating? There is a difference in the world between the two. The Minister has not yet made it clear to the House as to why the bankers were in his office on Monday night.
While we accept the Bill's principle, the Minister cannot expect us to be ecstatic about this scheme with its many restrictions on information. In the past few days the Minister spoke about the exposure of â¬400 billion. Last week, the US Congress debated a package of $700 billion for its financial sector. The US population stands at over 300 million people while Ireland's stands at 4 million. When one considers the difference between the two packages and population sizes, it appears Ireland has a much larger problem than America.
The Taoiseach claims there is no exposure for the taxpayer which I cannot understand. The Minister said on television recently that we can talk about regulation later on. In 30 years as a Member, I always regarded the Central Bank as a sacred cow that no Member or Minister could criticise. Any criticism was taboo. One would be considered a traitor undermining the confidence of the State if one made any derogatory statement made about the Central Bank or the Financial Regulator. However, much of the blame for the current situation must be placed on the Central Bank for the way it did business with the constituent banks. Who else could control a situation in which banks would vie with each other to give out more money in loans to people for houses that were overvalued by 300%? In what democracy would that be allowed to happen? The number of personal credit cards held by people in this country is a world record. Many people are in debt up to their ears.
In order to allow Members to be relatively certain that the taxpayer will have some say in the future of the guarantee, the Minister cannot stampede us into a situation similar to that of the establishment of the HSE. Members cannot even raise the matter of a medical card in the House because the HSE is considered by legislation to be an autonomous body. The banks are even more autonomous.
I agree with the Leas-Cheann Comhairle when he said we have been told in the past 20 years to have less of the Government's heavy hand in our lives.
It is and Deputy RuairÃ Quinn did his best with the banks when he was Minister for Finance. I recall when the levy on the banks was introduced some years ago in a budget. It was to touch their social conscience. While the levy came to between â¬5 million and â¬10 million at the time, it was like pulling teeth from a goose to get it from them.
There was not a single person in public relations in the country who did not come in here and tell us why the levy should not be charged. That culture is still alive and well. Where will the taxpayer, via the Minister, be represented? The culture still persists â those blooming politicians in Kildare Street, how dare they become involved in the financial affairs of the State. How dare they.
Can the Minister guarantee that he is making arrangements that will make things different? If he is able to tell us that today, many people in this country will sleep easy in their beds tonight.
I must make a pitch, as many of my colleagues will do and have done, for the Ulster Bank, which has many customers in the area I represent. I cannot see why it should be disadvantaged to the degree to which it appears it is. I ask the Minister to clarify that issue.
In response to the point made by Deputy Broughan, it is possible to differentiate between criticism of the banks and the intention of this Bill. While many Fine Gael speakers criticised the banks, justifiably, they support the intention of the Bill.
The issue raised by Deputy Burton in her amendment is very important and must be addressed because certainty is needed. However, it could possibly be addressed in the Minister's response or somewhere else in the Bill.
We have placed enormous emphasis on the banks but from the time of Cain and Abel we have had greed, fear and euphoria. From the South Sea bubble to today we have had all the ingredients necessary to create the difficulties we are in today. I am sure that in 100 or 200 years' time the same scenario will repeat itself because it has done so throughout history. I do not see any reason it will not do so again. We talk about historical times and lessons to be learned but I am sure if we checked through the records of the House of Commons over a number of centuries we would find the same script somewhere.
With respect to the amendment itselfââ
The kernel of the issue, as referred to by Deputy O'Donnell, is when the Minister expects the scheme to be made. That is what we need to know. It is important that the scheme is approved by the House. The fundamental importance of this Bill lies in the scheme but we are like a pig in a poke, giving approval to the Government, without seeing the actual contents of the scheme. It is important that the House sees the detail of the scheme and has an opportunity to amend it, should that be necessary. I do not like the emphasis on the negative â it is possible that 90% of the scheme will be fine but parties in the House might wish, by agreement, to change 10% of it.
I ask the Minister to clarify when the scheme will come into operation. The Bill refers to the scheme being made and "laid before each House of the Oireachtas as soon as may be after it is made". It can then be annulled within the next 21 days. Can the scheme be in operation before it is laid before the House? Can the Government implement the scheme before laying it before the Oireachtas? I ask for clarification on that point.
Section 6(5) contains the phrase "without prejudice to the validity of anything previously done under the scheme". Does that just refer to when the scheme is laid before the House until it is annulled, if it is annulled, or does it refer to when the scheme is actually made by the Government?
I agree with many of the points made by speakers today. I hope the Minister will accept the proposal in amendment No.12 for an oversight board. The remit of such a board should include carrying out an analysis of the errors made by the banksââ
I raise it now in case I do not get an opportunity to speak later. Any oversight committee must conduct an examination of what led us to this point. There is no point in simply moving on and starting anew. We must try to learn from the errors of the past, notwithstanding the fact that history will show that such errors will be repeated, time and again, due to the greed, euphoria and fear in all of us. It was aided and abetted by the banks, admittedly, but we partook too.
The net issue of amendment No.1 is that the terms and conditions of the scheme should be published before the Bill comes into operation. I am not singling out Deputy Timmins, but the debate has become very broad-ranging and has gone way beyond that. Were we to continue like that, we would never get to the end of the Bill. I ask that Members confine their contributions to the amendment we are discussing. There are many amendments to be discussed.
I will endeavour to stay within the parameters laid down by the Ceann Comhairle.
I am glad to have the opportunity to speak on this amendment. Some of what I will say is as relevant to amendment No. 1 as it is to other amendments tabled. What encapsulates the concern of Members of this House is that the Bill is essentially a skeleton that must be fleshed out. Other speakers have correctly described it as an "enabling measure". The meat in the measure is in the context of the supports to be provided to banks in circumstances in which we hope liquidity is restored, depositors feel they are no longer at risk and, to use the strange term that is applied to markets, "sentiment" improves, whatever that means.
Deputy Burton's amendment proposes that the legislation will not come into operation "until the Minister has published and laid before each House of the Oireachtas for its approval full particulars of the terms and conditions under section 6(4)". The problem with this legislation is that this House is not party to what terms or conditions the Minister might specify. We are told that a scheme will be laid before each of the Houses and will come into operation, if it is not annulled, within 21 days.
Section 6(6) reads as follows:
Without prejudice to subsection (4), the conditions under which the Minister provides financial support under this section may include conditions regulating the commercial conduct of the credit institution or subsidiary to which the support is provided, and in particular may include conditions to regulate the competitive behaviour of that credit institution or subsidiary.
The difficulty is that the conditions which the Minister can specify are entirely at large and entirely within his discretion. They may be very well advised conditions to protect the taxpayer or to ensure the continued economic good health of a particular banking institution. They may be conditions that relate to the terms under which an institution is entitled to borrow. Indeed, to refer back to an issue raised earlier, they could be terms and conditions which restrain the circumstances in which banks can foreclose on those who owe them money. I do not know the parameters of the terms and conditions.
We should approach this legislation in a responsible manner to try to bring some degree of sanity to what is happening in the markets and to release liquidity to businesses that need it. I do not have any principled objection to this legislation and, like my colleagues, I am prepared to rely on the fact that the Minister has received the best advice possible and that he recommends this legislation to the House. What I am not prepared to do, however, and what is not constitutionally appropriate is to write a blank cheque for the Minister. In circumstances in which a Minister can specify terms and conditions, it is appropriate that the legislation prescribes the parameters within which those terms and conditions may be set outââ
ââor at least delineates what might be better referred to as factors or principles that are applicable to the terms and conditions so that this House exercises some degree of control.
In fairness to the Minister, Deputy Brian Lenihan, he is a fairly rounded and sane individual. If, for example, this legislation must be extended and there is another Minister for Finance who loses his marbles in two or three years' time or is scarified by the board of directors of a bank, I do not know what insane conditions might be laid down. This House is entitled to have some control over that. The amendment tabled by Deputy Burton has given us the opportunity to raise this issue.
I do not think it is correct that we should say the Act should not come into force until the particular scheme is laid before the House. I would have a different view. If this House had the time to do it, there should be a new section put into this Bill which prescribes the factors and principles applicable to the terms and conditions. As a minimum, instead of there being what I describe as the negative procedure applicable to statutory instruments where one is made and is law unless it is annulled, we should have the positive prescriptive provision which is in section 5, which only allows for a statutory instrument, or, in this instance, a scheme, to come into operation when approved by the House. At least then this House, as the Parliament of this State, would exercise some democratic input into it.
Indeed, I would go so far as to suggest that the legislation should include a provision whereby if the scheme, as laid, is not appropriate or is defective, instead of it simply being accepted or rejected, there should be a methodology to allow its amendment.
This is a particularly serious issue and I have some specific questions for the Minister about it. What is the advice of the Attorney General? There is a plethora of case law about the extent to which this House can delegate functions to outside agencies or, indeed, to Ministers which essentially allow Ministers to legislate as opposed to simply make regulations or administrative procedures. I will not delay the House, Sir, by going through all of it, but there are two or three principles which are particularly relevant.
There is a well-known judgment delivered by the Supreme Court in a case called Laurentiu v. the Minister for Justice, Equality and Law Reform. In that case the issue arose regarding the extent to which the Oireachtas could delegate its law-making powers to a Minister or to other subordinate agencies.
Effectively, the court, in referring to the Cityview Press Limited case of 1980, stated:
[I]t was agreed by the parties that under the Constitution (in particular Article 6, s.2, and Article 15, s.2, sub-s.1) there is a limit upon the extent to which legislative power may be delegated to subordinate agencies by the Oireachtas, and that it is not competent for the Oireachtas by such delegation to abdicate its legislative function.
The judgment of Laurentiu goes on to state:
Both sides appear to have been agreed that one way of reconciling the powers of legislature with those of the executive was if the legislature formulated policy and the executive implemented it.
Further down, the court recites:
One of the tasks of legislation is to strike a balance between the rights of individual citizens and the exigencies of the common good. If the legislature can strike a definitive balance in its legislation so much the better. But the problem which confronted the Court in the Cityview Press case is that the facts of modern society are often so complex that the legislature cannot always give a definitive answer to all problems in its legislation. In such a situation the legislature may have to leave complex problems to be worked out on a case by case basis by the executive.
The following is the key point:
But even in such a situation the legislature should not abdicate its position by simply handing over an absolute discretion to the executive. It should set out standards or guidelines to control the executive discretion and should leave to the executive only a residual discretion to deal with matters which the legislature cannot foresee.
This is constitutional guidance from the Supreme Court. I particularly emphasise the need to set out standards or guidelines. There are no standards or guidelines prescribed within this legislation. This is not some sort of lone isolated judgment delivered by the Supreme Court many years ago; this is a decision of May 1999.
More recently, we had the Bupa case on 16 July 2008 in which it was alleged that unconstitutional delegation of powers had taken place. The court never had to determine that because of other technical issues that arose.
I do not like to interrupt Deputy Shatter, but the question of the regulation making authority of the Minister arises under section 5 of the Bill. The net effect of amendment No. 1 relates to the question of the terms and conditions being published prior to the implementation of the legislation and the role of the Oireachtas.
My difficulty is that I have allowed a considerable amount of latitude â I am not just picking on Deputy Shatter â because we are discussing the first amendment. I must point out at this stage that this is amendment No. 1 of 28 amendments. The way we are going, it will take a very long time unless we stay with the parameters, which we are supposed to do.
As you will see, Sir, it will not be when I get to the point I am about to make. I have a genuine concern and am not trying to make a point for the sake of it. This is far-reaching legislation. At present, we see ourselves addressing an immediate issue concerning the functioning of the banks in this State and their capacity to conduct business on a normal basis. We, in this House, need to accept that this legislation gives the banks in this State a substantial competitive advantage over all banks in Europe and over other subsidiaries operating within this State that are not being covered by this legislation. This legislation does not cover Ulster Bank. It does not cover First Active.
It can but, according to the Minister's announcement to date, it will not. If he intends to extend it, as he can, to subsidiaries of banks operating outside the State, there is an even greater reason that we should know what the terms and conditions of that should be to ensure the Irish taxpayer is not left at risk by lending outside this State by banks associated with subsidiaries.
My point is that if we accept that, on a European-wide basis, this gives our banks a competitive advantage, and even within this State it gives the banks, to whom the Minister has expressly stated he will extend this legislation, a competitive advantage over others operating within this State, who is to say in the context of the enactment of this legislation that a bank excluded from its application will not launch a constitutional challenge to itââ
ââon the basis that it has been substantially disadvantaged in the market, that it has been discriminated against, that Article 43 of the Constitution has been violated and, more particularly in this instance, that any scheme the Minister makes goes so far beyond the powers of delegated legislation as to render the legislation invalid or ultra vires.
This is an important issue and it is directly relevant to Deputy Burton's amendment. I already stated I am not an enthusiast of her form of amendment, but I am an enthusiast of ensuring that if the Minister has given the correct advice, and if this legislation will solve the difficulties with which we are confronted, we have a duty to ensure it will not be immediately constitutionally challenged. Although I am not an enthusiast of the amendment, I believe it at least ensures that the scheme will be presented to the House and approved thereby before it comes into operation. This might help to regularise any constitutional infirmity that could arise.
It was in 1999.
I have a preference for doing what the Laurentiu ruling suggested we do, that is, set out specific guidelines and principles that to an extent direct and constrain, on a legislative basis, the manner in which the Minister might exercise his discretion. This is a very important issue and goes to the root of this legislation.
This is legislation produced in haste. Such legislation, no matter how well intended, has a horrible habit of bouncing back into this House and, on occasion, proving to be disastrous. What detailed consideration has been given to this aspect of the legislation? This is relevant to the amendment. What attention has the Office of the Attorney General given to the constitutionality of this legislation? Can we tell the House whether there is a likelihood, in the opinion of the Attorney General or the Government, that it may be challenged? If it is challenged, will the Minister have addressed the possible impact on our banking system of the interregnum between the challenge being launched and the outcome of a court case? Has the Minister considered the possibility of the legislation being referred by the President to the Supreme Court? If so, what are the implications of this? There is no point in our enacting the legislation and waking up on Friday morning to discover a meeting of the Council of State has been called to consider its constitutionality and that no one has prepared for this eventuality.
I am conscious of time and do not want to subject the House to a legal treatise but I have not contributed on this legislation thus far. There is a vast array of case law in this area. One particular case of relevance, O'Neill v. the Minister for Agriculture and Food, dates from 1998. Somewhat esoterically or exotically in the context of this Bill, it dealt with an entirely different area, namely, controlling the practice of artificial insemination of animals.
It is the bulls that have caused some of the problem, it is the bears that are now taking over and we are all in difficulty because of it.
In the context of the 1998 case, the scheme developed by the then Minister for Agriculture and Food by way of delegated legislation, that is, dividing the country into particular regions with regard to the artificial insemination of cows, an area in which I have no particular expertise, was found to be beyond his powers. During the case, the Laurentiu case was quoted: "The increasing recourse to delegated legislation throughout this century in this and the neighbouring jurisdictions has given rise to an understandable concern that parliamentary democracy is being stealthily subverted and crucial decision-making powers vested in un-elected officials." The Minister is of course an elected official but the court struck down the scheme developed by the Minister for Agriculture and Food because the legislation under which he operated did not expressly permit him to do what he was doing.
I would not personally cast any aspersions on the probity or decency of the Minister for Finance but have considerable doubts about the Government's capacity to make the correct decisions in the context of the terms and conditions. This is so because, in so far as the Government will now have to impose terms and conditions on banks, it is as clear as crystal that in the past 11 years the Minister and his colleagues in Government failed utterly to ensure that the banks were properly regulated and that the terms and conditions that should have been imposed were imposed.
A litany of warnings came from respected financial institutions across the world, as well as from our own Central Bank, which bleated every so often about the extent of borrowing but, as a regulatory force, went back to sleep until the next report was published. Regardless of the terms and conditions, the taxpayer and economy must be protected. The Minister should ensure that banks do not go off on the insane adventures in which they have engaged for far too long under the benign eye of the Government.
The Government, the banks and the construction industry have been engaged in the most startling example of pyramid selling ever seen in this State. Banks have been lending excessive sums of money to first-time home buyers and so-called investors to purchase grossly overpriced properties. In many instances, the properties were being purchased from developers to whom the same banks had originally lent money. The Government did absolutely nothing about it because of what it was accruing through stamp duty.
The Government is not guilt-free in respect of where we now find ourselves in so far as the problem derives from concerns about the banks' lending practices and the value of the assets they retain by way of security. The Government does not come to this House with clean hands in respect of this issue; until this week, it had shown itself to be incapable of addressing the issue of conditions and regulation with regard to bank expenditure. I am not confident, despite my personal liking for the Minister, that he and his Government colleagues will get it right. This House should be approving and not simply sitting back with the possibility of nullifying any scheme produced to ensure it will achieve what we require it to do. While I accept the principle of this legislation, I am not satisfied it properly implements that principle. There are no parameters laid down or principles enunciated in it to determine the types of conditions that might be imposed by the Minister by way of a scheme under section 6.
On Deputy Shatter's point on the action of the Government at a time of global turmoil in all financial markets, the one Government that has taken very decisive action that has had a favourable impact on the markets is our own. When one compares this action with the piecemeal action being taken in other countries throughout Europe, and particularly in the United States, one realises it is a clear and decisive measure. It has met with approval and has steadied the ship in so far as our own financial institutions are concerned.
I commend the Minister on this action, particularly because it is for the protection of the taxpayer. This point must be laboured. Particularly at a time when people are talking about bailing out banks, it is important that it be recognised that it is the individual taxpayer and deposit holder we want to protect, in addition to businesses. Many businesses in Ireland are very viable but have experienced a shortage of working capital and overdraft facilities to enable them to operate. It was the lack of liquidity in the market that forced the Minister to take action in the first place.
On section 6(4), I welcome the fact that the Minister stated clearly that guarantees will be paid for on commercial terms and that they are not free. He said he will ensure value for the taxpayer is achieved. It is extremely important to comply with EU state aid and competition law requirements. Will the Minister clarify whether we are in compliance with these and whether any concerns have been raised about the Bill at EU level?
On Deputy Burton's amendment, I understand the call for certainty. Of course, everybody wants to see certainty in these difficult times. It would be desirable for us to know the extent of our liability and the precise nature of the guarantee and the terms and conditions. However, we are looking for certainty in a very uncertain environment.
We have seen the reaction of the markets yesterday and today and it is impossible to predict what this will be in the days and weeks ahead. It is also impossible to predict how the guarantee applies to the six individual institutions for which it is being provided in the first instance. Unfortunately, one solution does not suit all. Some institutions may be in a position to pay immediately and some may not, and the measures whereby some institutions may be in a position to pay commercially will vary. Moreover, we cannot be certain with regard to the existence of the individual institutions going forward.
While I compliment the Minister for Finance and know exactly where he is going in regard to the issue of certainty, I do not believe it is possible to provide the necessary certainty in these uncertain times. It is important that the Minister would be given the necessary flexibility to deal with this matter, particularly as he is giving us the assurances that this will be done on competitive terms and in the best interest of creating stability, which is badly needed in this country at this time.
I have a question for the Minister with regard to our level of exposure and the level of assets in the banks, particularly when he refers to the buffer of â¬80 billion. The Minister gives a figure of â¬500 billion for present assets. How was this asset value arrived at? I am concerned with regard to the review and recategorisation of debt that is taking place in some of the financial institutions throughout the country. I would like to know if this asset value has been verified by the Financial Regulator and the Central Bank.
It is relevant because the implication of seeking certainty with regard to the terms and conditions is relevant in the context of the level of our exposure. While I might be stretching a point, it is important we would clarify the exact level of our exposure, which hopefully will not ultimately amount to much, as has already been confirmed by the Minister. There is an element of uncertainty with regard to the banks' assets and it would be helpful if we received clarification.
I am delighted to speak on this very important issue. When one considers the partnership between the Government and the banks for the past ten years, for every â¬100 million provided by the banks, the State benefited indirectly through taxation by up to â¬40 million.
The amendment concerns regulation. It is important to ascertain where the â¬400 billion came from. It was a unique partnership. Personal debt was huge and indebtedness rose because the more money that was given out, the more revenue came to the State.
Like most of my Oireachtas colleagues, I must accept on trust the argument that the immediate liquidity problems of the banking sector require decisive action by Government. Given the complex nature of the problem facing the country and the short time available to frame a response, the legislation has been drafted under emergency circumstances. As we all know from past experience, even the most carefully drafted legislation can unravel over time. Rushed legislation, such as we are now debating, carries risk that it will unravel quickly and in serious and unforeseen directions.
As for the immediate problem with liquidity, I hope the guarantee system will address this without any cost implication to the taxpayer. This week is about solving the liquidity problem. I hope this move will secure the stability of the financial sector and that the banks can again go to the international markets and raise funds, which would be welcome.
There may be a problem with bank solvency in the medium term. There are conflicting opinions about this. The message from the Central Bank and the Financial Regulator is that the banking institutions have assets that exceed their liabilities, which certainly concerns regulation. Only time will clarify this situation. Other independent commentators are more pessimistic, so it is important to clarify this issue.
My main concern with the proposed legislation is that it has a potentially serious risk for the taxpayer in the medium to long term. Given the banks have a Government guarantee, I worry that we might be setting ourselves up for a crisis like that which happened in the US over 20 years ago. The history of the savings and loan crisis in the US of the 1980s and 1990s had its origins in a federal guarantee system to a section of the US banking sector. It is important to put on record that the ultimate cost of this disaster was approximately $150 billion.
The federally chartered savings and loan banks were originally only allowed to make a narrowly limited range of loans. They were tightly regulated and there was a ceiling on the interest rates they could offer depositors. Under various economic and competitive pressures, the financial performance of savings and loan banks began to suffer. The US Government's response was to increase the federally guaranteed insurance amounts, raise various caps on mortgages and deposits and ease regulation. The savings and loan banks were permitted to engage in new business lines and were generally allowed to take greater risks to work their way out of their financial troubles, including taking on the ownership of assets.
A key message that comes out of the savings and loan scandal was that regulatory structures were inadequately resourced and lacked adequate legal powers, and the staff lacked the cutting edge market knowledge, experience and skills. This is an important point which we must clarify in the context of regulation in this country. The regulators were always working from a position of being several steps behind the banks, which is an issue here at present. Where was the Central Bank and the Financial Regulator for the past six months or the past number of years? All of these problems resulted in fatal delays and indecision in the examination and supervision processes. Many institutions which ultimately closed with big losses were known as problem cases for a year or more, and it sometimes appeared political considerations delayed necessary supervisory action.
My concern with this guarantee system for Irish banks is that the more pessimistic picture of bank solvency may turn out to be closer to the truth. Then, as the financial pressure mounts up for Irish banks, there will be a very strong temptation for them to engage in fancy footwork that will see the taxpayer eventually having to pick up the bill.
A simple point is that regulation is not enough in this situation. With so much taxpayers' money at risk, Fine Gael proposes that the Government would insist on appointing officials to the risk management committees of the banks involved. I remind the Minister of the cynic's definition of a good information and reporting system, namely, that it can take a disaster at the bottom of the organisation and change it into triumph by the time it reaches the top. If the Government is to have adequate control of these guarantees to the banks, it must have its people on the inside. I would go further and propose that the Government appoint officials to the main bank boards for as long as the taxpayer is providing a guarantee.
I have explained on numerous occasions the import of amendment No. 1. My difficulty from here on is that while the amount of time available is in theory limitless, nonetheless, nobody will be around for eternity. In those circumstances, from here on and certainly when we come to the next amendment, I must insist that Members speak to the amendment.
The Taoiseach stated it is his intention that the taxpayer would not be liable for any shortfall down the road. He stated he is not handing over any money to the banks. All he has done, he suggested, is that he has lent the name of this country so the banks could access liquidity. I very much endorse the point made by the Fine Gael Party leader, Deputy Kenny, that we do not want to see a situation where bank gains were privatised and losses socialised, which is an important point.
The Taoiseach also stated that the facility would come at a price and that a fee reflecting commercial reality would have to be paid by any banks that sought to make use of the guarantee. There is no reassurance to taxpayers that this charge will not be just another stealth charge on bank customers. One way or another, the public will end up paying for this guarantee. It would be preferable if the proposed fee was a levy on bank profits. Banks have made in excess of â¬2 million a day in recent years and have made profits of up to â¬1 billion. I would be much happier if the levy was on bank profits.
I welcome the guarantee put in place by the Minister that has helped the banks to date. That is all very well for the banks but this is a two-way process and people are entitled to be treated fairly and justly by the banks. I address my remarks especially to those people who are currently unable to pay the mortgage on their family home. Between now and Christmas the number of families affected could be in excess of 100,000 nationally.
This is important. When those people approach the banks and request that they be allowed to pay interest only or make an alteration to their original agreement with the bank, they use the opportunity to increase the rate of interest being charged to homeowners. This is important. If we are underwriting the banks, they should help people. Many of those people are on ECB tracker mortgages, which are favourable, and banks are deliberately trying to move people on to less favourable rates to increase their profits. I must put that point on the record. Given that we are introducing a guarantee for the banks, I call on the Minister to ensure that this practice ceases immediately and that banks make every effort to help people over their difficulties. We are helping the banks without crucifying them. If people require to have repayments reduced to interest only over a 12 to 24 month period, it should be granted to help them get over the difficulties. It is imperative that we keep people in their homes and that we do not enter the downward cycle being experienced in America. This is a two-way partnership. People have donated generously in this instance and it is imperative that the financial community responds by treating them decently and correctly.
We must examine the role of the Financial Regulator, the Central Bank and the banking institutions. Deputy Shatter referred to the legal case for banks that are excluded, the privatisation of banks and the partnership with Government in the past ten years when in excess of â¬160 billion has benefited the Exchequer through value added tax, other taxes and legal charges. That is a significant amount of money. It is important that we bring financial stability to the economy but it is equally important that we look after borrowers and small business people who are being penalised by banks.
I am dismayed that none of the banks has made any comment on the announcement by the Minister yesterday. That is appalling. I thank the Ceann Comhairle for his forbearance but it is important that I put on record my feelings on the matter.
I appreciate that but the difficulty is that there are 28 amendments. Once we have disposed of amendment No. 1 we will have to tighten things up. I will have to burst a few bubbles of my own because if I do not we will never get the legislation passed.
We must ask why we are here this evening. We are here simply because of greed throughout the western world and events in the world financial services. I compliment the Minister on drafting legislation and taking a fire brigade approach to the matter so quickly to address the crisis.
I have been a member of the Oireachtas Joint Committee on Finance and the Public Service for approximately seven years and many of the questions we asked of the Financial Regulator and the Central Bank were left unanswered. There was a failure on the part of the committee also because all it was interested in doing was discussing bank charges and getting more competition into the system. Competition creates its own difficulties. The Minister is supporting six Irish financial institutions that have been to the forefront of Irish financial services for generations. The introduction of financial institutions from abroad caused the crisis in our financial services because the competition was unreal. Competition is fine if it is properly regulated but a small number of banks were not able to meet the competition.
I am quite critical of the operations of the Central Bank because for as long as I can remember every quarter it has warned Governments of all persuasions of the dangers of over-borrowing and an over-heated economy but we heard nothing from it in the past three or four years. One bank in Ireland was offering more interest on small and large deposits than it was getting on its loan book in repayments. That could not work and it is the role of the Central Bank to regulate as it should and put on the warning lights.
I apologise to the Ceann Comhairle because this is an important matter and finance is an important issue to the economy. I beg his pardon to give me an opportunity to say a few words. The Minister is aware of my concerns as I questioned him on what will happen to the banks that are not included in the scheme. Who will support their depositors? We hear Rabobank and Danske Bank have a triple A rating but what will happen to customers of Ulster Bank that is tied in to the Royal Bank of Scotland? We read in the financial newspapers and business sections that, as an institution, the Royal Bank of Scotland has difficulties across the world. Fortis bank in Belgium and Holland took over ABN AMRO a few years ago, which was bid for then by Royal Bank of Scotland, and it was unable to meet the targets and the price. We fail in that situation. The issue is a much greater one than we are discussing here. I hope the approach we are taking will work and that we do not have to come back in six months to deal with a new crisis. What can the Minister do to control the institutions that lend money? One of them is shovelling out money indiscriminately to developers and property owners. There is a need for regulation.
I am sympathetic to the position of the Ceann Comhairle but we are dealing with the money of depositors and shareholders, people who are watching what is happening in the House today who are really worried about the situation. I welcome the decision of the Minister to rescue them in some form. Is there a role for credit unions in the Bill?
Many issues have to be clarified for the pundit on the street and investors and borrowers who are concerned. The insurance industry is also tied into the matter. We must look at the big picture. I sympathise with the Minister on what he is trying to do. The role of the Central Bank has to be strengthened in future and that may require more legislation. Either the system is weak or there is not enough power to do what is required. These things should not happen if a financial system is properly regulated. Finance is a delicate business and we have seen recently how much that is the case.
The Minister has a big job on his hands. He has handled the crisis very well since it began last Wednesday. We would be facing an even greater crisis were it not for the action that has been taken. While it is being lauded across the world, that does not mean it will be successful. We saw what happened in America, in one of the biggest financial markets in the world, and in many places in Europe. I urge the Minister to pick up the bits and pieces.
I asked for clarification on deposits for people in institutions other than the six being covered by the Minister. If that issue is not addressed there will be a crisis. E-mails have been sent by banks urging the removal of deposits from banks outside the scheme. The move has already started. The financial institutions are already using the legislation. I received a telephone call in the past hour on the issue. The situation is serious for those who do not know what security there is to protect the money they have on deposit.
I serve notice that we have 28 amendments and once we move on to the next amendment we will have to strictly enforce Standing Orders. I will do so without fear or favour. I understand the frustrations of Members and their need to express their views. I am trying to be as fair as I can but when we move on to the next amendment I serve notice that we will have to deal strictly with the amendments.
I have two points to make on this important Bill, one of which is general and the other is specific. The fact that we are discussing this emergency legislation in the House is proof that we are in a monetary, banking and economic crisis. This crisis was manufactured at home and three parties contributed to it â the banks, the Government and builders. The Government is guilty because it completely failed to enforce any regulations or controls on the banks in recent years. The banks were grossly negligent in offering huge mortgages to customers, often in excess of 100% and with additional funds for cars and other items. The builders are culpable for the manner in which they used the money that was given out like confetti. These three parties have contributed in no small way to the situation in which we find ourselves and which necessitates this legislation.
I am conscious of the number of speakers who have gone before me and those who are waiting their turn but I wish to make some important points. There are several financial institutions in my own and other counties which are not covered by this legislation. In County Donegal, for example, there are nine branches of Ulster Bank. I do not seek to differentiate between the various institutions but merely wish to draw this to the Minister's attention. As recently as this afternoon, I met with a deputation from the Irish Farmers Association.
I told them I would raise this issue under amendment No. 1, with the Ceann Comhairle's permission. These are decent and hard-working people, the backbone of the farming community in Donegal. However, as customers of Ulster Bank, their banking concerns are not covered by this Bill.
There are three banks in the village in which I live â Bank of Ireland, Allied Irish Banks and National Irish Bank. Only customers of the first two will be covered by the terms of this legislation. What we seek is a level playing field. I do not know how that will be achieved but I urge that there be some ring fencing so that depositors in banks other than the designated six will receive the same protection. If people withdraw their money from the other institutions, the people working there will be in a precarious situation. I ask the Minister to set people's minds at rest in this regard.
I sympathise with the Ceann Comhairle's difficulties in managing this debate and will be as brief as possible. I have listened to the debate all morning and am pleased to be associated with the points made by my Labour Party colleagues. The Minister was not in the Chamber when my party leader, Deputy Gilmore, reiterated the conditions and provisions we seek to have included in the Bill before we are in a position to support it. I endorse those comments.
Amendment No. 1, in the name of my colleague, Deputy Burton, is central to our objectives. We wish to improve the Bill, not to oppose it. We want to be in a position where we can support it, but we cannot do so in its current form. Addressing amendment No. 1 will reach to the core of our concerns. For reasons already stated, including the constitutional issue and the competition argument, as addressed by Deputy McGinley, giving effect to this amendment would strengthen the Bill against any legal or constitutional challenge, in respect of which much speculation is abroad.
The Minister should adopt the mechanism for the adaptation and ratification of regulations as set out in section 5, which provides that the regulations be published in draft from, laid before the House and endorsed by it before coming into effect. The Minister has not explained why he reversed the procedure and reverted to the normal one. In regard to the constitutional cases to which Deputy Shatter referred, the responsibility of scrutiny placed on this House under the Constitution means that if the draft regulations were laid before this House, debated in a substantial way and subsequently ratified or amended, they would have a legitimacy that would not apply if the procedure proposed in section 6 is adopted.
For these reasons, I urge the Minister to consider my party's amendments. We want to be able to support the Bill but cannot do so as it currently stands. The markets have been reassured to a certain extent. Deputy Burton's amendment will allow this Bill to be included in the Statute Book, which is sufficient for now to provide the comfort factor we all know is necessary. I urge the Minister to be flexible. We do not necessarily expect him or his departmental officials to provide all the necessary regulations immediately. It may be the case that additional regulations are required as we move forward. We seek substantial regulations to give effect to these measures but they do not have to be the whole nine yards. We are in uncharted waters and new regulations may be necessary at a later date. However, the Minister must move some way to meet us on this issue.
I will join in the spirit of the last several contributions by refraining from the temptation of making a Second Stage speech. Instead, I will address myself strictly to Deputy Burton's proposed amendment. The Minister and Taoiseach have already said that the Opposition has been generous in its support for the principle of the Bill. It is never easy for an Opposition to take a Government at face valueââ
ââwhen the former is given little time to examine a document. This is the case no matter which party is in opposition. In fairness, we only received this document at approximately 9 p.m. last night. None of us has had much time to consider it. All parties supporting the principle of the Bill are to be congratulated on engaging with the spirit of this endeavour. That is essential. Anybody who watched the news on Monday night knew something had to be done and that Tuesday would not be a pretty day.
Amendment No. 1 is not feasible in any sense. Section 6(4) refers to two elements â an individual agreement and a scheme. I understand the former refers to an individual agreement with an individual financial institution, whereas a scheme would be a general scheme applicable to all financial institutions. One speaker referred to the Bill as a skeleton. If the skeleton is not there, one cannot put the flesh on the body. There is a logical flaw at the centre of the amendment. One cannot simply say that the Act, excepting section 7, will not come into operation until the Minister has devised a particular scheme. This simply does not make sense. However, I understand Deputy Burton's intention in this area. Deputy Shatter acknowledged the same before expressing his lack of enthusiasm for the amendment.
As I said, section 6(4) makes reference to an individual agreement and a scheme. Given an individual agreement, is it being suggested that in a situation where a credit institution was in financial difficulty the Minister would have confidential discussions dealing with its core viability and would then lay the details before the House for adoption or otherwise? Again, that is not a runner. No commercial organisation could afford to bare its soul in the public gaze in such a way until agreement was reached with the Minister. The same argument goes for the scheme.
I refer to the comments of Deputy Shatter concerning the delegation of legislative powers. I believe his views on this matter are incorrect, because he was referring to the delegation to subsidiary bodies of legislative powers. However, this copperfastens and underlines the Minister's executive powers. In so far as the Minister for Finance performs functions under this Bill he is performing executive powers. It is the case that his powers are being increased. However, I cannot see any constitutional bar to this Bill indicating that the Minister shall have new powers x, y and z under this Bill, yet completely within the constitutional circle of the Minister for Finance, who gets specific recognition in the Constitution. Deputy Shatter's argument is simply erroneous. The Minister for Finance must be accountable to the House and this is only proper.
By the way, it should be noted that section 6(5) only necessitates that the scheme be laid before the House. It does not specify that the individual agreement referred to in section 6(4) be laid before the House, which is an important distinction.
Let me finish. This is very important legislation and the Government must be generous and listen to the words of wisdom when they arise from the Opposition with regard to proposed amendments in this Bill, as the Minister is asking the nation to assume a very large responsibility.
Given the content of section 6(5), it would be a better idea that there should be a requirement on the Minister to have such a scheme passed by the House, rather than put the onus on the House to bring a motion to annul such a scheme. I mean this in a positive sense.
This is going a little away from the matter of the amendment but I fully support the notion. As for constitutional responsibility, that is the purpose of our Ministers. It is the job of the Minister to come to the House, to be fully accountable and to say "I have made this scheme", or "I have made this financial arrangement, I am standing here, I am proud of it and I am prepared to be accountable." That is the spirit of the Bill.
I commend the Minister for the annulment provision. It is putting the cart before the horse to say the Bill could not come into being until a scheme is published. I hope we have a constructive debate. I urge the Minister to take on board any amendments from the Opposition in so far as they improve the Bill and I believe he will do this. Many financial commentators throughout the world have said that what we have done over the past day or two is a model that can and will be followed by other nation states. It is imperative we pass this Bill in the next few days. This is not just for the banks, but for the entire Irish economy and its stability. We must pass this Bill as quickly as possible.
I will be brief. The last speaker discussed allowing several days to go through this Bill, but I will not delay the House to any great extent. Last night during his Second Stage contribution, Deputy Richard Bruton explained with what we are dealing very succinctly for the public. He said:
We must all understand that a sound financial system is like the oil running through an engine. If that oil is drained away by a loss of confidence, then suddenly that engine seizes.
We must ensure that does not happen in this country. Without a sound financial system everything would seize up, not only the banks in this country but the day-to-day lives of ordinary individuals. The principal concern I have regarding the terms and conditions is for provision to be made to ensure the taxpayer is protected. In his contribution last night, Deputy Bruton made the point that we do not wish to see a situation where the banks are going to gamble their money on the basis they have an AAA rating supported by the Government. That situation cannot and should not arise and I do not wish to see such an eventuality.
At present, viable proposals put forward by individuals or small businesses in this country are being shot down. The banks have the additional protection to ensure flexibility can be provided. I know of one small company in the past few days which had to go to six financial institutions to get a loan of â¬200,000 from each institution. It succeeded in getting approval in five of those six financial institutions, even though the company provided a fully audited business plan. However, because the sixth institution turned the request down, the company went to the wall. At present, banks are being far too conservative in issuing loans. One bank manager put it to me yesterday that the only applicants being approved for loans are those that do not require them.
It is critically important that we see the terms and conditions stitched into this legislation and the flesh on it. The terms and conditions stitched into the agreements with the banks must ensure there is liquidity and credit available to those that have a well-founded business plan. We must not facilitate the banks in this country so they may gamble on the derivatives trading market. Irish taxpayers are putting their necks on the line to protect the banking sector in this country and there needs to be a benefit from that, not only in terms of equity but also in terms of getting the economy running again.
The proposals of Deputy Bruton and Fine Gael dealing with appointing personnel to the risk management committees of each of those banks is a fundamental request that must be facilitated. They also deal with the issue of excessive bonuses, top-ups, dividends and payments made. Such outcomes cannot be allowed to happen with the protections we are now providing to the banks.
I will try to be as brief as possible. The Minister's speech yesterday was based exclusively on liquidity. I am concerned with several economists with whom I have been speaking in the past few hours, that we are trying to ignore the other major aspect of this, namely, solvency. While the Wall Street problems are affecting liquidity, the Wall Street issue has nothing to do with the solvency of several of the institutions we are preparing to guarantee. The solvency of those institutions will be based upon the extent to which the bad debts will be problematic for them and, potentially, for us as representatives of the taxpayers. The Minister said last night that according to the numbers available to him there is an excess of â¬80 billion of assets over liabilities. The problem is that is an aggregate figure and those numbers are most likely based on two of the larger institutions. The concern is that, more likely than not, the two larger institutions have some form of a liquidity problem but the two smallest institutions have a solvency problem. Those solvency problems potentially could lead to a massive exposure on the part of taxpayers.
There is a â¬400 billion guarantee but we do not know the percentage of those numbers that are likely to be bad debts. We have spoken about transparency, and other speakers referred to the banks coming in following the DIRT inquiries, moneys in the Cayman Islands, and representatives coming in here some weeks ago, including the body over the banks, stating that everything in the garden was rosy and all of our banks are safe and sound. If that was the case, the Minister did not have to be up all night last Monday. We cannot ignore the solvency issue and the Minister is trying to pretend there is not concern about solvency. There is a serious problem with solvency in a number of the institutions the Minister is now guaranteeing.
On the terms and conditions, I support the Fine Gael finance spokesperson 100%. It will be a matter for him and I am happy to take instruction from him, as I have no doubt would the rest of the Fine Gael Parliamentary Party in terms of our support for this Bill, depending on how the Minister is prepared to satisfy what is a fair and reasonable requirement in respect of oversight. We are expected to buy a pig in a bag but, to quote a phrase that caused much consternation in the United States, the Minister cannot put lipstick on a pig and pretend it is anything other than a pig. That is the reality.
If another crisis arises overnight and the Minister has to move immediately to nationalise a bank, this legislation will give him the power to do that. That is welcome and is the reason many people on this side of the House are prepared to support the issue.
As a commercial farmer who trades on the land, I am aware of the dearth of land available to local authorities and to the State. If it turns out to be the case that the Minister for Finance, with the authority, must intervene and nationalise a bank, the land bank should be held on behalf of the State to reinstate the diminishing land stock.
In the past decade the banks never had it so good. They have provided the seller of property or lands with a place to invest their money. They provided the developers who purchased that land funds to build on the land and then provided first-time buyers money to buy that property. They then took the proceeds of profits from the developers and reinvested it. On each occasion they got a slice of the case and did very well. We have seen that in the profits that have been reported in the past number of years. Outside of the State there is no other institution that has profited as much.
I am concerned about buying a pig in a bag but on this occasion we are like the Democrats supporting the Republicans who went to war on the information that was placed in front of them. We do not have enough information and that is the reason I support Deputy Burton's amendment. The Minister should put the terms and conditions on the table and allow those on this side of the House, who have been generous to the Minister, make a fully informed decision rather than buying a pig in a bag.
I agree with my party leader and our spokesman on finance that we must support the Bill in general because we face a difficult situation. The proposal from the Minister and the Government will at least ease some of the pressure in the marketplace. That was vital for those of us who watched the situation unfold on Monday evening and night.
There is a need for fair play and competition. The issue is extremely important as far as those of us living in the Border region are concerned. In Donegal, which was mentioned previously, and in my own constituency of Cavan-Monaghan, a sizeable number of banks are not covered under this ruling from the Minister. The Minister said he "can do". I am saying to him that he must do; "can do" is not good enough. I appreciate that the other banks are foreign based in the United Kingdom, Denmark and elsewhere but some system must be found to ring-fence the business they are doing here to ensure fair competition. From our point of view, Ulster Bank, National Irish Bank and ACC Bank are extremely important and must have regulation put in place.
We must have a clearer indication of the way this scheme will work and whether the taxpayers can be given a guarantee that they will not have a major cost to bear in the future. That is vital. My main reason for speaking, however, is to ask the Minister to indicate clearly that fair play and competition will be allowed within the current banking structures and that the other banks will have some comfort, in whatever way the Minister does that. "Can do" is not enough. I want to hear the Minister say he will do it.
I will endeavour to speak to Deputy Burton's amendment, much as I might like to give a state of the nation speech, as many other speakers have done.
While I recognise the reason Deputy Burton put forward the amendment, and it is well intentioned in its own right, I am concerned about any delay in bringing this Bill into being. We saw the reaction of the market yesterday morning when the Minister, Deputy Brian Lenihan, and the Government announced they were providing these guarantees for the six banks. It stabilised the market and staved off problems a number of our banks were experiencing on Monday. I have no doubt that without it we would have had people queuing up outside different banks to take out their money and put it under the mattress. That measure was necessary. It is vital we pass this legislation without delay and that we can come back at a later stage with recommendations in terms of putting terms and conditions etc. before the House. I am confident the Minister, Deputy Brian Lenihan, and the Government will operate the scheme in a professional and business-like fashion. The Bill clearly states that commercial rates will apply.
I do not believe a "one size fits all" approach is possible, as each of the six institutions is different. They are different sizes and engage in different forms of business. I do not think it is possible to reach agreement on a set of regulations that would apply to each of them. I accept it would be desirable for the regulations to be laid before the Oireachtas at the earliest possible opportunity. I have suggested to the Minister for Finance that we should consider the position of other banks like National Irish Bank and Ulster Bank after this legislation has been passed. I hope we can do something to protect the business such banks have in this country. I do not expect the Government to underwrite British business, just as I do not expect the UK Government to underwrite the potential losses of Irish banks. This Bill needs to be passed as a matter of urgency.
Deputy Burton is proposing that the regulations be introduced first. If we took such an approach, the market would immediately seize on it. The problem we tried to resolve yesterday would come back to haunt us tomorrow. If this Bill is not passed tonight, the vultures in the marketplace will cause further problems. While I accept that Deputy Burton's amendment is well intentioned, I urge her to leave it off the table for the moment. We can come back to it at a later stage, if necessary. If regulations have to be brought in, this Bill will be delayed by two days, a week or a month. That would cause major problems. We do not want this House to act like the US Congress did on Monday, when it failed to agree a bail-out package. We are familiar with the problems which have ensued there since then. I hope the US Congress passes the legislation in question, because its failure to do so on Monday is causing problems here. Similarly, this House has to deal with the legislation before it if this country's immediate problem is to be solved. We should pass the Bill quickly and analyse the various aspects of it at a later stage, when we have the facility to do so.
The problems in the international money market and the uncertainty in the US are having a detrimental effect on Ireland's economic climate and exacerbating the Taoiseach's recession. There is a need to take action. Fine Gael has made it clear that it will support action taken to protect our financial institutions, which are of integral importance to our economic system. Such action will ultimately determine whether Irish business flourishes or fails. We want to ensure we do not have to endure even greater levels of unemployment than those we are currently experiencing.
In the past, perfectly good concepts have come unstuck as a consequence of a lack of attention to detail. The manner in which the Health Service Executive was established is a prime example of that. Equally, legislation that was originally rushed often has to be brought back to this House, having caused unexpected and serious problems. This specific initiative lacks detail. What are the facts? Where are the figures? We need to know how much money each bank covered by this scheme owes. How much does each bank have in borrowings, bad loans, bad debts and assets?
Deputy Olivia Mitchell told this House earlier that 40 borrowers are responsible for 50% of all commercial development loans. Can the Minister for Finance give the House details of the spread of such exposure? Are the loans concentrated in a single bank? If so, can the Minister give us the name of that bank? We need individual figures for each bank, rather than the amalgamated and homogenised figures the Minister gave us last night. We need clarity so we can legislate clearly for the difficult times we find ourselves in. We do not have that clarity at the moment. Which bank is in the most trouble? Which bank is the bad apple that could rot the entire barrel? We need such detail if we are to protect taxpayers.
I am concerned that we are not taking this opportunity to beef up the power of the regulator, thereby ensuring that borrowings and lendings are carried out in a safe and reasonable fashion in the future. I do not doubt that this measure will have cost implications for taxpayers. The banking system will get some value from it. The Taoiseach intervened during Deputy Bruton's speech last night to intimate that if there were a shortfall and a bank were to go into liquidation, the Government would seek to make up the shortfall to the taxpayer by imposing a levy on banks. There is no specific mention of an arrangement of that nature in this legislation. Such detail is needed. The full facts need to be laid before the House. The regulator needs to be beefed up. We need proper oversight of any bank that takes up this facility. We need regulations in respect of borrowing and lending. The legislation should contain a clear reference to the mechanism for imposing a levy on the banks to recoup any shortfall that might arise. We should be able to control the salary and bonus arrangements of CEOs by having a presence on bank boards and risk assessment boards. The banks involved should acknowledge that they have been offered a taxpayers' guarantee. They should not try to recoup the losses they incurred by lending to developers by imposing additional levies on householders and other smaller customers.
The proposals I have made are hugely important. If this goes wrong, the barn will be empty. There is no plan B. There is no further capacity in our economy to consider this matter a second time. A country as small as Ireland cannot afford to lose â¬400 billion. To do so would be to become indebted, to the tune of â¬250,000 per person, for generations to come. What percentage of the exposure of the banks is represented by the figure of â¬80 billion? In other words, how much cover do we have? It may be the case that we have just 20% cover, given that â¬80 billion is just 20% of â¬400 billion. I do not know the answer. I would like to have the facts. It was clear throughout the document we were given last night that this measure involves giving the Minister a blank cheque to use as he sees fit. The trust that is needed to take such a step has to be earned and maintained. That can be achieved if regular reports are issued by the regulator and the Minister to the Committee of Public Accounts on a quarterly basis.
We are supposed to be considering section 1 of the Bill on Committee Stage, but this has instead become a Second Stage debate by default. We have heard a series of Second Stage speeches. Perhaps we can examine how we will structure future discussions on Bills.
I asked the TÃ¡naiste this morning about the consequences of the Government's decision in the context of fair competition. I have been contacted by officials from a number of financial institutions which are regulated in Ireland but are not covered by this guarantee. They told me they have evidence of substantial outflows from their institutions to other institutions which are guaranteed under this scheme. When the Minister for Finance responds, he might confirm whether the Government has been contacted by representatives of these financial institutions. Is the Government monitoring what is going on in this regard?
I realise that certain complications are associated with the essential issue I raised with the TÃ¡naiste. Is it possible to ring-fence the activities of institutions which are regulated here in terms of liability, capital and solvency, but which have parent bodies abroad? We do not want to encourage financial institutions to transfer international liabilities to other institutions which are regulated here in the expectation that, by default, they will be guaranteed by Irish taxpayers. I am not sure whether it is possible for the Department of Finance and the Government to ring-fence the activities in this jurisdiction of institutions which are regulated here, but owned by institutions in other countries, while at the same time maintaining a competitive and level playing field. Perhaps the Minister, Deputy Brian Lenihan, will comment on this matter when he gets a chance to do so. I am not sure whether he will respond this evening or in the early hours of the morning.
I would like the Minister to give the House details of the guarantee the Attorney General has given him, in so far as that is possible, that this measure will comply with EU directives and our domestic competition legislation. I would not expect the Attorney General to say anything other than that he believes this proposal complies fully with the requirements of the EU. Concern is being expressed by some of our European partners in this regard. I hope the Minister can deal with that conclusively and comprehensively when he responds to this amendment.
Progress reported; Committee to sit again.