Dáil debates

Wednesday, 1 October 2008

Credit Institutions (Financial Support) Bill 2008: Committee Stage (Resumed)

 

NEW SECTION.

Debate resumed on amendment No. 1:

In page 1, before section 1, to insert the following new section:

1. —This Act (other than section 7) shall 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) including the terms and conditions of any scheme.".

—(Deputy Joan Burton.)

8:00 pm

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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We resume on amendment No. 1 in the name of Deputy Joan Burton. I understand a number of Deputies will make a brief contribution on the amendment, having regard to the fact that there are many amendments to come and the discussion that has taken place between the Whips.

Photo of Tom KittTom Kitt (Dublin South, Fianna Fail)
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I commend the Minister on introducing the Bill. It is understandable that people want to speak on it because it is exercising the minds of people within and outside the House. The legislation is not about keeping fat cat bankers afloat but about keeping the economy afloat, ensuring the stability of the markets and protecting jobs. The Bill is in the interests of those we represent, including small businesses.

I support the format of the debate because it gives Deputies on all sides of the House a chance to express their views and for the Minister to respond. I appreciate that we want to move on. I have two issues to raise and I would like the Minister to respond to them. We need to know details of the capital assets of the banks concerned. I appreciate that the Minister has said they exceed the liabilities by €80 billion. It would be helpful if we had the full details of the assets before the debate commences in earnest, which it will now.

The second point relates to charges. The Minister said the guarantees being provided would be charged to the institutions concerned and would be subject to specific terms and conditions. It is absolutely crucial that the banks pay for the generous and necessary initiatives we are taking. The initiative provides protection for them and allows them to continue to trade and make profits——

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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The Deputy must speak to the amendment. He is engaging in repetition.

Photo of Tom KittTom Kitt (Dublin South, Fianna Fail)
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——as well as providing a stable banking environment. The public wants us to ensure the banks pay the appropriate charges. I am aware this will be a commercial charge that will be worked out by the Central Bank. Has the Minister had any discussions with the Central Bank on how it will calculate the charge? There should be maximum transparency on the issue. Should there not be a percentage charge on the amount of deposits held by the banks that are guaranteed by the State during the two year period in question? We need an absolute assurance that the cost will be borne by the shareholders and not by the taxpayers.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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Since I last spoke it appears there has been some movement on this matter. I note the Financial Regulator has said he would not rule out the appointment of persons to boards of risk management committees of banks. That is a very important intervention and I hope the Minister will elaborate on it when he replies to the debate on amendment No. 1. The longer one leaves something like this, the more questions that arise. We want a strong, energetic, accountable, workable banking system and, from that perspective, the Government must foresee the contingencies that make it equitable and competitive. Institutions regulated in this country should be able to apply for consideration under the guarantee where it is clear that they have substantial interests here and where they are regulated here in terms of their liquidity, assets, solvency, etc. I expect the Minister for Finance to reply to those concerns. I hope he can do so.

Two core points arise from dealing with section 6(4) about the appointment of persons to be seen to be active in the regulation under the conditions laid down by the Minister. When the initial statement came from Government yesterday morning it was indicated that normal practices would apply. However, normal practice as heretofore applied cannot apply in the future. This is a different regime requiring a different response entirely. The Minister has a very strong legal instrument and it is his responsibility to set out the conditions and the regulations governing it.

One of the most interesting points made in the House today was by Deputy Ardagh who said it would be very interesting to see what figure would emerge from a prudential assessment of the value of the assets. The Department of Finance indicated it is €80 billion of assets in excess of liabilities. It would be interesting to follow through on that suggestion. Other points include whether credit unions can apply to the system for a guarantee. Some comments were made also about the banks in the IFSC.

Section 6(4) states: "Financial support may be provided under this section in a form and manner determined by the Minister". On what basis will the commercial terms be determined? Who will make the determination and at what level will it be pitched? My understanding is that the Financial Regulator does not have sufficient personnel to undertake that task. While the market has already determined that there are substantial losses, particularly relating to property in two institutions, the commercial terms appropriate in these circumstances could well be so severe as to be beyond the scope of the institutions concerned. The Minister needs to be very specific and not just aspirational in his response.

Section 6(4) further states: "Financial support provided shall so far as possible ultimately be recouped from the credit institution". That is also a fine aspiration but the credit institutions that require support will be unable to repay it because they will only need support when their own capital is exhausted. That statement must be clarified.

Section 6(6) deals with the appointment of persons to committees. I do not know whether the Minister is personally disposed towards this but I believe it is in both his interests and the system's that we in the House should be seen to make this work. I recall standing in the house of a young couple just over a year ago. It was furnished to the hilt and funded by a mortgage from a financial institution. The wife has lost her job and it will be impossible for them to pay the substantial mortgage. That example can be multiplied by many other cases. The Minister has an opportunity to respond to the emergency that occurred the other night. It is absolutely critical that the system is seen to be able to work, but in the new response that is required that the system will be regulated with conditions attached.

I do not wish to hold up proceedings any further. We have made our points about protection of the system, defence of the economy and, as Deputy Bruton pointed out, the necessity to keep the oil flowing through the engine of the system that affects the lives of ordinary people. From that perspective, I hope the Minister can respond to the legitimate concerns and constructive points put forward by Members during the course of the debate. We can then proceed to the remaining sections.

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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I thank Deputy Kenny for following up an issue I raised at yesterday's meeting of the Fine Gael parliamentary party in regard to the status of the financial institutions other than those six named in the legislation. I have heard speculation today that some of these unnamed institutions may be included in the remit of the Bill and that a certain formula will be devised for this purpose. Some of these institutions have been operating in the State for decades and have provided a vital service to the farming and business communities and other groups in our society. I hope the Minister will outline the specifics as to how these institutions can be included in the legislation. It is vitally important that we instil confidence in communities throughout the State where people have deposits in these institutions.

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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Will we receive a note indicating what the Whips have agreed in terms of the grouping of amendments?

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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That is a matter for the Government. However, it is my understanding that the Government Chief Whip, Deputy Pat Carey, will move an amendment later which will clearly set out the proposal. In the meantime, I am allowing a certain latitude to Members in the debate on amendment No. 1 because there was only a limited Second Stage debate. However, I have indicated that we must make progress. There cannot be unrestrained debate.

Photo of James BannonJames Bannon (Longford-Westmeath, Fine Gael)
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There is a view among the general public that the Taoiseach and the Minister for Finance should be more open with the facts about the assets of the credit institutions being supported by this Bill. Will the Minister elaborate on that in his contribution later tonight? It is important that there be clarity in this regard. What baffles me and many people to whom I have spoken in my constituency and elsewhere is that a country the size of Ireland, which could fit into the back pocket of the United States, can afford to commit a sum of money equivalent to the amount the United States failed to endorse earlier this week.

In this first decade of the new millennium, we are undeniably in the midst of the "Cowen recession". It was during the Taoiseach's years as Minister for Finance that deregulation occurred and mountains of debt were created. We were living in a casino, with money being thrown about like confetti and wasted by the Government. The banks and the Government fiddled while Rome burned. As Minister for Finance, the Taoiseach turned a blind eye to what was happening.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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Deputy Bannon should make some effort to address amendment No. 1. There is no mention of casinos in the amendment.

Photo of Seán PowerSeán Power (Kildare South, Fianna Fail)
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Food poisoning seems to have had a devastating effect on the Deputy.

Photo of James BannonJames Bannon (Longford-Westmeath, Fine Gael)
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Loan sharking was the norm. My party leader, Deputy Kenny, spoke earlier about the plight of young people. I have met many such people who are saddled with enormous personal debt and whose earnings equate to only a fraction of their mortgage liabilities.

The wholesale destruction of our economy has arisen solely because of the greed of corporate chief executives, the Galway tent men and women who had the ear of Fianna Fáil Ministers.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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There is no mention of tents in amendment No. 1.

Photo of James BannonJames Bannon (Longford-Westmeath, Fine Gael)
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On assuming office, the Taoiseach closed down the tent. The public would have closed it down long ago out of disgust at the antics of the Government in recent years. The spin doctors of the Government and the Minister for Finance must no longer be allowed the control they have enjoyed.

Photo of Seán PowerSeán Power (Kildare South, Fianna Fail)
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Deputy Bannon should consult a spin doctor himself.

Photo of James BannonJames Bannon (Longford-Westmeath, Fine Gael)
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It is important that we have an effective committee of scrutiny, as called for by Fine Gael, to monitor the working of this legislation in the next two years.

Photo of Catherine ByrneCatherine Byrne (Dublin South Central, Fine Gael)
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It is necessary to take steps to safeguard our economy at this difficult time. However, I have concerns in regard to the true purpose of this legislation and its impact on taxpayers. I only hope the Government has the public's best interests at heart and is not merely concerned with providing a safety net for the banks. We must ensure accountability and transparency once the Bill comes into effect.

With this in mind, I support amendment No. 12, in the name of Deputies Burton and Bruton, which proposes the establishment of an oversight board that would report to the Committee of Public Accounts. Under the chairmanship of the late Jim Mitchell, that committee worked tirelessly to show it was possible to hold the Government to account for its financial decisions. The public had faith in that process and it is important that we continue in that way.

Everybody's money is at stake in the current situation. As elected representatives, we must do our best for the ordinary people who have worked hard for many years to support their families. We can all talk doom and gloom and even Armageddon but our focus should be on protecting citizens from falling victim to the credit crunch. I hope the Bill is passed and that it will provide a safety net for taxpayers.

Photo of Jimmy DeenihanJimmy Deenihan (Kerry North, Fine Gael)
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The comments I wish to make relate to section 6 but I am sure the Ceann Comhairle will allow me to proceed. Auditors should report more frequently to the Financial Regulator than is currently the case. In addition, the Minister must ensure that auditors of banks are rotated more often. It is a mistake to have the same auditors working with a particular bank for a long period. The Minister should also ensure, in setting down the terms and conditions for this scheme, that banks should be obliged to report any negative news to the auditor, with penalties payable where there is a failure to do so.

In regard to the financial institutions not included in the legislation, including foreign banks operating here, the difficulty is that they are not regulated by our Financial Regulator but by the corresponding entity in their country of origin. I am not sure how this difficulty can be overcome. In an ongoing court case regarding overcharging by one particular bank, the person concerned had to go to the regulator in Holland to make the case. It is important that the Minister examines this issue.

It is my understanding that a business person with a turnover of more than €3 million is not covered by the regulator. The Minister must extend some protection in those types of cases. I hope the Minister will consider these issues when setting the conditions for the proposal. International commentators have described this proposal as a smart move by the Government. We have taken the lead in this crisis and others will follow. I acknowledge the importance of this initiative but reiterate that we must get it right.

Photo of P J SheehanP J Sheehan (Cork South West, Fine Gael)
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I thank the Ceann Comhairle for allowing me to contribute to this debate. This is the greatest crisis in the State since I entered this House in 1981. It was caused by the phoney Celtic tiger which never existed in reality and during which people were misled into borrowing heavily to finance their lifestyles. The banks were sending letters to every person they imagined might like a new car or a second home either in Ireland or in the sun. I received such letters myself. When I was first elected to the House in 1981, I owed the banks £44,000. Had I not been elected that night in June 1981, I would have had to sell every bit of property I had to clear the loan. There was no bail-out available to me.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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Deputy Sheehan should speak to amendment No. 1.

Photo of P J SheehanP J Sheehan (Cork South West, Fine Gael)
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It is well known that finance has been the cause of trouble since Adam was a boy. Did not our Lord put the money lenders out of the temple because they were extracting money from the poor people of that age?

Photo of James BannonJames Bannon (Longford-Westmeath, Fine Gael)
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Hear, hear.

Photo of P J SheehanP J Sheehan (Cork South West, Fine Gael)
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The same is happening now down along the line. There is a crisis and we are to bail out the banking institutions, but what about the people who are sunk up to their necks in debt by borrowing from the banks? Such people were getting up to 110% loans from banks. The banks have been the architects of their own misfortune, but we should not be bailing them out unless they give a guarantee that they will bail out the common people of Ireland who are up to their necks in debt and guarantee not to acquire the homes of these people or put them out on the roadside.

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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This is a very important amendment and I support it fully. In the past week I have had three people at my clinic who had mortgages with Start Mortgages. The problem is these people have lost their jobs and are now in serious debt. In the past few months these people have had to pay more and more compound interest on moneys not paid and so on. They are at the end of their life as they see it in terms of holding on to their homes.

If we are to bail out the banks, it is very important the Minister for Finance has a strategy for dealing with sub-prime lenders, who are part of the banking institutions that may be covered in the future following our work tonight. We must ensure there is a strategy in place to help people, whether through the money advice and budgeting service or whatever, in serious debt and who have no choices. The key point is once such people default on repayments, even for one month, they cannot move to any other mortgage lender. The vast majority of companies who give mortgages in this country are excellent and fair. However, some of the companies are not, and I do not wish to bail them out under this legislation. The Minister for Finance should not underwrite any of their losses or activities. Nor should the Minister underwrite any of the builders or developers who have ripped off the ordinary people of this country with the debt they have taken on in buying their homes. It is very important — the Minister, Deputy Brian Lenihan, can shake his head and I will shake my head at him and say, "No." This is not to bail out the Sean Dunnes, or to cover the Start Mortgages and others ripping off ordinary people left, right and centre throughout this country. This Bill is to bail out the banks and ensure the system works——

(Interruptions).

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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The Government cannot allow the abuse of people who have borrowed money from sub-prime lenders to continue.

(Interruptions).

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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It is very important that all of the amendments tonight including this one——

Photo of Seán PowerSeán Power (Kildare South, Fianna Fail)
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Is it appropriate that a person can be singled out in the House during the debate?

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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I have no problem singling a person out.

Photo of Seán PowerSeán Power (Kildare South, Fianna Fail)
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Well, I have a problem listening to it. As far as I am concerned, the Deputy is abusing his privilege.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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Will the Deputy conclude his remarks?

Photo of Fergus O'DowdFergus O'Dowd (Louth, Fine Gael)
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I will conclude my remarks by suggesting that we must ensure the system works and ensure the Stock Exchange and all the money lending institutions work effectively and efficiently. However, there should be a strategy from the Government to deal with those among the institutions that are ripping off people and treating them in an appalling, disgraceful fashion.

Deputies:

Hear, hear.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I hope to give a comprehensive reply to what, in substance, has been a second, Second Stage debate on this Bill. Some moments ago I was asked about the assets position by Deputy Tom Kitt and I have here the National Treasury Management Agency estimate. This states that the guaranteed liabilities of the relevant banking institutions are estimated to be €440 billion and the assets are estimated at €520 billion.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Is that some €520 billion?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Yes. This means the assets exceed the guaranteed liabilities by a figure of €80 billion. That is the National Treasury Management Agency estimate.

The most pessimistic economist in the State gave his views about the impairment of assets on the national broadcaster yesterday evening. His estimate of the impairment was far lower than that figure of €80 billion. I do not accept any degree of impairment. I am simply putting it on the record of the House so that Members understand the figures involved here.

Many Members asked for other institutions to be considered. Certain other institutions are within the scope of this legislation and it is open to the Government and the Minister for Finance to extend the guarantee facility to them under the legislation. Of course, were we to include some of these entities, it would have an impact on the assets and liabilities equation, which must be taken into account by the Government. These bodies have assets and liabilities and they have parent companies in other jurisdictions. We would require a degree of certitude about the localisation of their assets in the State were we to proceed in their case. I wish to put this on the record of the House as I was asked about it. Deputy Tom Kitt also asked about the charging procedures. Again, I am still awaiting a report from the Central Bank on that question.

Several Deputies raised the question of solvency. I have made it clear throughout discussions on this subject that the central issue confronting the Government last Monday evening was the liquidity of the Irish banks, not the question of solvency. The maturity dates——

Photo of Michael CreedMichael Creed (Cork North West, Fine Gael)
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Why is the Minister for Finance taking powers under the Competition Act?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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We can deal with that matter when that section comes up this evening — we are on Committee Stage. The maturity dates for the loans were becoming tighter and tighter for all of the Irish financial institutions and that was the particular crisis about which they were concerned last Monday evening.

Regarding the question of Ulster Bank, which was raised by several speakers, it is important that we are exact in our characterisation of banks other than the six banks referred to in this legislation. The six banks referred to in this legislation are domestic Irish banks. They are our responsibility. They would be orphans of the storm in international terms because they are not related to any other sovereign State.

All the other financial institutions in the State are ultimately owned by companies from another sovereign State which bear responsibility for them. I appreciate the points made by several speakers, including Deputy Kenny, on this subject. I understand one of the institutions, namely, Ulster Bank, has made an application to the Government and it will give careful and sympathetic consideration to that application. However, I cannot prejudge this evening any decision the Government might make on this matter. However, I wish to explain the position concerning the financial institutions other than the six named institutions in this legislation. They fall into two broad categories. Some have a corporate existence and are regulated here in Ireland. In other words, they are subject to Irish regulation. Some of these institutions, in addition to being regulated in Ireland and having a corporate base here, have extensive retail branch networks. On the other hand, some banks operating in Ireland are not regulated in Ireland as Deputy Deenihan pointed out some moments ago. They are regulated from their parent company because they have no separate corporate existence in Ireland and are not licensed by the Central Bank to provide banking services. It would be a very far-reaching step for the Government to guarantee a bank which was not regulated by the Financial Regulator. I make these points for the assistance of Deputies because I know they will receive representations from a variety of financial institutions about their position in the light of this legislation.

On the particular proposal tabled by Deputy Burton, I realise the Deputy understands the proposed amendment would be an unusual provision in legislative terms in that it has the potential to impact on the objective of the Government. There is a consensus in the House, which I was glad to see, about maintaining a stable banking system. It is essential we protect the interests of everyone in the economy and not just one sector. This Bill provides a legislative framework to underpin the guarantee arrangement. This is essential to protect the economy from a systemic issue involving our domestic institutions. Deputy Tommy Broughan was very critical of this Bill and suggested we should follow some solution that was adopted in Sweden more than a decade ago. I assure Deputy Broughan that the Swedish experience was very carefully studied by the Central Bank and by my Department and has influenced some of the approach in this legislation. I notice international commentary has compared the response and this legislation to the Swedish response in the early 1990s.

The banks will need to pay a significant price to reflect the value they are drawing from being underpinned by a sovereign guarantee. It cannot be a penal or a punitive rate. It is a principle that is accepted by everyone here that capital must be remunerated fairly for the risk that it carries but I will have no tolerance for any financial institution which seeks to exploit competitive advantage from this guarantee. I spoke to the chairman of the regulatory authority this afternoon about this very matter and it touches directly on a matter raised by Deputy Kenny in his contribution on the need to maintain regulatory vigilance and corporate presence in all of the institutions. We must be under no illusions. As a result of this legislation we are going very deep into the banking system and we must ensure that the taxpayer is protected in regard to that intervention.

Regarding the guarantee, it is my intention to calibrate the payment such that a balance is achieved in the market between those who benefit from it and those who do not. I have also said it is essential to ensure that the implementation of this measure conforms to our European Union responsibilities in regard to State aids and competition law. This was mentioned by a number of Deputies and I welcome the fact that the responsible Commissioner has already initiated correspondence with my Department and is anxious to have full information on the matter, and we will work closely with her. In her comments on this matter, she emphasised the fact that the Commission works with member states, not against them. I look forward to working with her in that regard.

A question was raised by Deputy Shatter in the course of the afternoon about the constitutionality of this measure. The Attorney General has considered this Bill in great detail and specifically the constitutional issue raised by Deputy Shatter upon which I have received written advice. The advice of the Attorney General is that the provisions in respect of the assignment of responsibilities to the Minister in this legislation are in accordance with the Constitution because there is no question of the Minister being vested with powers to draw up delegated legislation. Rather, the Minister is empowered to set terms and conditions in regard to financial arrangements with certain undertakings. Provisions of that type are commonplace in financial legislation.

The action taken reflected a national problem affecting our domestic financial stability and the risk of contagion between the domestic financial institutions as individual institutions were subject to particular stress and speculation. The decision was based on the advice and assessment of the Governor of the Central Bank and the chief executive officer of the Financial Regulator.

As I said in my reply to Second Stage last night, these institutions are our responsibility. They do not benefit from the protective embrace of an externally based company or institution. If they do experience difficulties, there is no onus on any parent to rescue them. The Government wishes to show its determination to deal with these issues that threaten the financial stability of the Irish economy.

Returning to Deputy Burton's amendment, at its core it reflects a deeply held concern that notwithstanding the highly significant events of recent days, as reflected in this legislation, in the fullness of time nothing will change. That fear was articulated by Deputies on the opposite side of the House this morning and this afternoon.

To try to address the concerns raised by Deputy Burton, Deputy Bruton and other Deputies, I want to update the House on the progress achieved in designing the scheme and my plans for it. My officials are working closely with the officials at the Central Bank, the Financial Services Authority of Ireland and the National Treasury Management Agency to design the scheme. Good progress has been reported to me and I would expect that following enactment of this Bill a scheme would be laid before the House early next week at the latest. The scheme will set out the basis upon which charges will be levied on the credit institutions benefiting from the State guarantee, the revenue it is expected to raise for the Exchequer and the conditions on which the guarantee will be granted under the legislation.

There are a number of areas in respect of which I have been informed by the debate in this Bill, and these are matters which will necessarily arise in the implementation of this legislation. The first is the need for individuals of the public interest perspective to be present on the board of our credit institutions. The legislation, as drafted, is wide enough to cover this contingency. Obviously, there are issues to be worked through with particular institutions in regard to the implementation of such a provision. Directors of boards, as Members are well aware, have fiduciary obligations to their companies first and foremost and not to any other body, including the State. The precise characterisation of such a directorate has to be worked upon and worked through but I am concerned that we should have individuals with a public interest on the boards of such credits institutions.

A second issue that arises is the need for codes of practice for the work of risk committees in financial institutions and close supervision of the activities of risk assessment. Again, this is being worked through by the regulator.

An area about which I am particularly concerned is the need for lending practices to favour enterprise that assists the sale and export of our goods and the export of our services.

Deputies:

Hear, hear.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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The whole question of quality of management in regard to the banks is something that will have to be examined in the implementation of this legislation. Checks on remuneration approaches, which reward short-term performance and excessive risk-taking, must be installed in financial institutions. As I said a few moments ago, the State is going in deep here. We are entitled to insist beyond the regulatory system on compliance by these credit institutions with certain basics. One essential, which I know is of great concern to many of my colleagues on the European Council of Finance Ministers, are the excessive remuneration approaches which reward short-term performance and excessive risk-taking. We will have to insist that those practices are stamped out in these credit institutions.

There is the need for a return to traditional banking values in all our credit institutions. This was mentioned by Deputy Olivia Mitchell in the course of the debate. There is the need to ensure responsible and prudent lending practices in respect of consumer lending, and comment was made by some Deputies in the course of the debate that we have very irresponsible consumer lending. In fact, our consumer lending, as a proportion of our personal lending, is low by international standards and lower than the United Kingdom equivalent. The bulk of our personal borrowing and saving tends to be in connection with the acquisition of property.

Deputies:

We know.

Photo of Michael D HigginsMichael D Higgins (Galway West, Labour)
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People can still be irresponsible.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am talking about personal borrowing, Deputy Higgins. I am not talking about corporate borrowing.

(Interruptions).

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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If I could be allowed reply to the debate. A further issue that must be examined in the implementation of this legislation is the promotion of corporate social responsibility. A careful assessment of the risk characteristics and the sustainability of new financial products is another matter which the regulator will have to raise with the credit institutions. We must ensure the highest standards of regulatory compliance and effective standards of corporate governance, which ensure that bank boards take full account of their broader responsibilities to society at large. In a sense that final item completes the point I mentioned at the outset about the need for an effective public interest presence on the boards of these institutions.

All these matters will be examined and worked through in the implementation of this legislation. That is the reason the legislation is formulated in very broad terms. I considered including a specific section in regard to remuneration and excessive payments, and I knew that such a section would have been very attractive in this House in the presentation of the Bill, but I was advised that the powers conferred on me in the Bill are ample in that regard and that definition of a precise objective like that can often diminish the amplitude of the powers one has.

(Interruptions).

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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That is good legal advice.

We spend a great deal of time in this House putting our aspirations into legislation. What I want to do with this legislation is translate what we all want to see happening in the banks into action. Not aspirations, action.

Photo of Michael D HigginsMichael D Higgins (Galway West, Labour)
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It is not an aspiration. It is €3 million a year.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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The Minister, without interruption.

10:00 pm

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I can assure the House that what is very clear is that this Bill provides a strong, robust, enabling framework of reforms which must take place. This will be complemented and strengthened by the details included in the scheme to be laid before the House, which will map out the real and sustained change in the banking culture of this country that this legislation is designed to achieve.

An issue raised by Deputy Ring and a number of other Deputies was the question of persons who are in financial difficulties. We have a consumer protection code operated by the Financial Regulator which requires entities to undertake suitability assessments before offering products or services to consumers. A small minority of borrowers develop debt problems. House repossession is generally a last resort for lenders. I understand that the member institutions of the Irish Banking Federation have a voluntary code of practice on mortgage arrears and a code of practice for personal customers. The Financial Regulator is involved in ongoing work in that regard.

The Financial Regulator and the Central Bank have been criticised during this debate. Under this country's legislative arrangement, the Central Bank is at the front door and the Financial Regulator is at the back door. That arrangement is the envy of many European countries. It was a good arrangement in this instance because it enabled me to invoke a certain degree of assistance during this crisis. It facilitated a joined-up operation on the part of the Financial Regulator and the Central Bank as they analysed this matter. That analysis was of assistance to the State. Irish regulation has traditionally been based on principles. There is a huge international debate on the robustness of systems of regulation in every country, as banks are buffeted by the current crisis. As I said yesterday on the radio, I would prefer to leave to another day any detailed examination of how we can improve our regulatory practices and make our legislation stronger. We will have to have that debate. The key point in relation to this legislation is that it is establishing a new regime for the six designated credit institutions. That regime is backed up by an amplitude of powers vested in me. I appreciate the huge responsibilities which this legislation will impose on me. One of my responsibilities is to ensure we get this right.

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

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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Yes. I thank the Minister for Finance for his reply. His statement confirmed that the Labour Party is right to try to identify the extent of taxpayers' exposure to this crisis. We are attempting to enlighten the Members of this House and, more importantly, the citizens of this country about the nature of this extraordinary and historic deal. As I said previously, the Labour Party supports the broad thrust of the Government's strategy, in so far as it involves trying to protect the integrity of a banking system that provides capital, loans and deposits to business people, so they can pay the wages and salaries of employees. We are keen to support those who wish to buy homes to live in, as opposed to those who are buying houses for the purposes of speculation. The Minister has flatly rejected a Labour Party amendment which was tabled, as a conscious measure of support, to bring a framework of equity, certainty and clarity to this scheme. To date, the explanation of the scheme has been no more than a simply drawn sketch. It is unprecedented for any legislation before this Dáil to give the Minister such vast legal powers. The House is being asked to accept the word of the Minister, Deputy Brian Lenihan. I do not doubt the Minister's bona fides as he attempts to do his best on behalf of the citizens of this country. However, I question the competence of his predecessor, Deputy Cowen, when he was Minister for Finance and since he was elected Taoiseach. I have doubts about the Taoiseach's ability to deal with the magnitude of the crisis we now face.

The Minister for Finance indicated that the liabilities of the six institutions mentioned yesterday, as valued by the National Treasury Management Agency, is €440 billion. The assets of the institutions have been valued at €520 billion. That leaves a surplus of assets over liabilities of €80 billion. We have not been given an indication of the measure of the valuation of those assets. Do the valuations include significant volumes of assets which result from lending offered by the six institutions in question? Two or three of the institutions have loaned significant amounts of money to the construction industry for the purposes of purchasing land at speculative prices.

One of the difficulties with giving the Minister a blank cheque is that it can invoke what economists and philosophers like to call the law of unintended consequences. The Minister has just given the House an example of that law as it applies to the comments made in this House yesterday by him and the Taoiseach. They asked yesterday to be given a blank cheque to deal with six institutions with a rough net asset position of €80 billion. Tonight, the Minister has said that the guarantee is potentially available to all applicants.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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No. The Government has not yet made a decision on that.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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The Minister said that it is potentially open to all applicants. I heard him say it.

Photo of Paul GogartyPaul Gogarty (Dublin Mid West, Green Party)
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He also pointed out the——

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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He specifically mentioned an issue that has been raised by a number of Deputies, particularly on this side of the House, in respect of a named institution, Ulster Bank. Is this a Pandora's box? Are we opening Pandora's box? Is the law of unintended consequences coming into effect? Yesterday, the Minister was confident that the guarantee was confined to six institutions. Today, he has listened to arguments suggesting that three other institutions may be involved. A guarantee of €60 billion would potentially apply to one of the institutions in question.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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As this is Committee Stage, I will have an opportunity to reply to the Deputy.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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It was the Minister who stood up and said this. I am responding to him in all seriousness.

I would like to address the Labour Party's amendment. I will show why it is essential if we are to protect Irish taxpayers. The amendment states:

This Act (other than section 7) shall 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) including the terms and conditions of any scheme.

The phrase "terms and conditions under section 6(4)" refers to the vast powers being given to the Minister for Finance. We do not want to pry into the detailed business affairs of banks or other financial institutions. We want an outline framework that sets out the parameters of this scheme. People listening to this debate at home — including business people and other taxpayers — want that information. The Minister referred to the skeleton of the structure of the scheme. It may be a skeleton, but we want to see it so we have an idea of its dimension.

The Opposition parties are exercising a profound and important responsibility. This matter goes to the heart of the integrity and maintenance of our financial and banking systems. We are entitled to get more detail, confirmation and explanation from the Minister. It is not enough to say that officials in the Central Bank and the Financial Regulator are working on a scheme. Like Deputies on all sides of the House, I am a member of the Joint Committee on Finance and the Public Service. In recent years, I have been a member of the Committee of Public Accounts. Every time representatives of the Central Bank and the Financial Regulator attended meetings of those committees, they told us their systems were perfect.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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That is right.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I accept they have a difficult, technical and sensitive job to do. As one problem after another came to light, they acknowledged that problems existed in the past, while maintaining that the system is fine now. As experienced parliamentarians, we are asking the Minister to level with us. We have been elected by the people to come here. The Government has certain responsibilities and powers, just as we do. As Opposition Deputies, we have the power to ask questions.

I intend to press this amendment. I thank the many people in the Labour Party who spoke with some consequence about the implications of this measure. I also thank those in Fine Gael and Sinn Féin who spoke about the consequences of this. What we have to say on this is borne out by what the Minister just told us with regard to the potential extension and the very brief statement I saw this evening made by a press secretary in the Minister's Department that there are further possibilities of other organisations and institutions being added to the scheme.

I accept what the Minister and the Taoiseach stated yesterday which is that this is about a guarantee. Nonetheless, section 6 contains sweeping powers for the Minister to provide any form of support to an institution which he or she deems fit. Among the forms which are listed are loans, equity, debentures, preferred stock, near equity and an entire description of practically every financial instrument of which I am aware. While the Minister spoke about guarantees, and I accept this is the intention, the law of unintended consequences has already moved in the 48 hours since the Minister spoke about this. The taxpayers of Ireland deserve the protection of this amendment.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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I wish to make some brief comments. I am content to allow the guarantee scheme to operate with the Minister having discretion to apply it on the understanding that he will return to the House with the scheme and provide us with an opportunity to approve it and not on the basis that we must have a Private Members' motion seeking to annul it. We need Government time committed to presenting this for debate and providing an opportunity for the House to sanction or reject it.

A rumour circulated throughout the House that the Minister would indicate in his reply that provision would be made for positive approval by the Dáil. However, I did not hear it stated in his remarks. Perhaps I momentarily nodded off.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I will reply to the Deputy. The amendment is in a subsequent section.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
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I realise that but in considering the amendment before us it is important that we know we will have a chance to have a positive role in approving or disapproving of the scheme.

I also wish to make it clear to the Minister that Fine Gael wants this scheme extended beyond what the Minister is now stating. The Minister has stated it will have the basis of charges and the revenue raised and the conditions under which it is granted to institutions. We are clear that in this scheme we want some detail of the new regulatory approach. The Minister outlined some of the content that might include, which is encouraging.

I would welcome codes of practices for risk committees. That is something we have demanded consistently. It is vital that a person representing the public interest is appointed to these boards. I notice that already the regulator has stated this will happen. There needs to be clarity about lending practices for enterprise and checks on commissions and rewards. When this scheme comes forward we need to have not simply the basis on which people enter the doorway to this guarantee but also some of the rules which will apply when they are inside the doorway and the taxpayer is underpinning their performances.

I welcome the potential extension to other applicants. However, I am aware of the difficulties which the Minister has outlined. I do not underestimate these difficulties. There is a problem with us underwriting the ability of institutions which are substantially based elsewhere to raise money with our guarantee. We need to know we will have the regulatory control that is necessary and on which we are insisting even with regard to our own six banks. We must ensure we have these regulatory conditions and application with regard to the extension.

I welcome the extension, however, as there are significant players who are important to the competitive environment that exists in the banking sector. For many years, we lamented the lack of competition. It has improved in recent times and we do not want to see the ground gained in terms of competition being lost inadvertently. I am cognisant of the difficulties and I hope the Minister's work will succeed.

Will the Minister explain the €80 billion which he stated stands in the way of the taxpayer being called upon. Perhaps I am wrong but I understand this €80 billion is partly made up of approximately €25 billion in shareholder capital, and this is a buffer. However, some of it is made up of ECB loans. It is true that ECB loans are a buffer in one way but they are backed by an equivalent amount of premium assets on the other side of the balance sheet. The only reason the ECB has come in there is that it has pre-empted the premium assets on the other side.

One cannot subtract the €440 billion from the €520 billion and state there is €80 billion. One must subtract from the €520 billion that the ECB has pre-empted some of those assets. For that reason, it is my belief that the buffer is not as wide as the Minister stated. The Taoiseach was very clear that he was including the ECB loans. They have pre-empted the premium assets in the balance sheets of those who offered those assets to the ECB to get the loans. The Minister's subtracting one from the other to get €80 billion is not robust.

If it is clear the Minister will return to the House with the scheme and that we will have an opportunity to debate it. We will not support this amendment because we feel the guarantee scheme should be allowed. It has brought stability and should be allowed to continue. We can return next week and debate the scheme. However, I want the scheme to be broader than the very limited terms which the Minister suggested it will cover.

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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Will the Minister be more clear with the House in terms of the admission of banks not headquartered in this jurisdiction? The statement he made in the first interview he gave on this yesterday morning made plain it was to refer to six institutions originating in this State. Now, he is stating that it will be wider than that, and it probably must be. How will the Minister ring-fence this? The Bill refers to credit institutions as defined in the Central Bank Act 1997. As I recall, under the 1992 regulations the definition states that a credit institution takes deposits on the high street. Will this be the definition? Will any bank licensed by the Central Bank to take deposits on the main street here be entitled to receive the protection of this guarantee? It is important that we have clarity on this.

To what extent will this expose the Irish taxpayer in terms of business done outside the State by these banks or the original banks? One of our banks has a significant influence in Poland. Is the Minister satisfied that he cleared the competition aspect of this? How will a local Polish bank view the liabilities of Irish Bank Limited, Main Street, Poland, being secured by the State? Did the Minister get clearance from the Commission on that?

I also wish to ask the Minister about the capacity of these banks to parcel up loans, including some of the bad loans, and sell them off as asset-backed securities. As the Minister knows, there are different ways in which the banks here source money. Approximately 40% is sourced from deposits, while other money is raised on the wholesale market or the interbank market. Some money is raised in asset-backed securities whereby a vehicle can be used to combine various loans and sell them off. In this situation it seems the banks will be able to put a Rialtas na hÉireann stamp on that and, if they want, a photograph of An tAire Airgeadas, Deputy Brian Lenihan, and sell them off on that basis. When the Minister talks about tighter regulatory control, what steps will be taken in that regard? It seems to be an invitation to banks that are so minded to use this stratagem to get some of the bad loans off their books. They will do that while fully secured by the Irish State's indemnity. I would appreciate if the Minister would make some attempt to address that point.

I welcome some of what the Minister said in his statement, including the fact that the scheme will be published next week. However, he did what everyone would do in his position — he answered the questions that he wanted to answer, but did not answer others. I am glad Deputy Tom Kitt came in to contribute to the debate because if he had not done so, there would not be any answers. Those of us who have been here since early this morning were glad he came in to raise questions of which none of us had thought. I would appreciate if the Minister could answer those questions when replying this time.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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At all stages in the drafting of this legislation it was appreciated by the Government that provision would have to be contained in the legislation dealing with credit institutions. A credit institution is an EU legal term which covers any bank in the EU. As Deputy Rabbitte rightly pointed out, many of the six named Irish domestic institutions have overseas subsidiaries and, therefore, a systemic issue could arise concerning the subsidiary for which the Irish State would be responsible. These entities are regulated by the Irish regulator. The asset figures disclosed to the House include their assets, as I understand the position. Therefore the asset figures I gave earlier include the overseas subsidiaries of the six domestic institutions. It was always appreciated that a degree of flexibility would have to exist in the legislation, but no decision has been taken by the Government other than to provide the guarantee for the six institutions and to consider on a case by case basis both the overseas institutions and the local credit institutions in Ireland which have external ownership. As I said already, these institutions fall into different categories. Although I do not want to identify them, there are institutions which are wholly headquartered in other jurisdictions and do not have a domestic regulatory framework in this jurisdiction. Of course it is difficult to envisage circumstances in which the Irish State would then be in a position to provide a guarantee to them. Deputy Rabbitte also asked about the covered bonds.

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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What is the criterion? Is it the depositor relationship or is it the origin of where they are headquartered?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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No. The whole basis of the selection of the six institutions was that as a sovereign State we ultimately hold responsibility in political terms for these six institutions. They are the orphans of the international banking storm in the sense that they would be if they did not have Ireland behind them. All the other institutions based here have some other sovereign to look to. Clearly, for example, in the event of a catastrophic event here in Ireland, the institutions that are subsidiaries of a United Kingdom bank could look to Her Majesty.

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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The Minister said he may admit Ulster Bank. I am asking him what are the criteria for the non-six. For those outside the six, what criteria will be brought to bear when the Minister is deciding on the submission whether to accept them or not?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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We are still devising appropriate criteria and standards to even evaluate the issue of whether they can be admitted. We have to proceed with great care and caution in this matter. The emergency which faced the Government last Monday evening related to the six Irish domestic institutions. We have dealt with that in the legislation. I do not think the House would have thanked me for bringing forward legislation next week containing a definition of "credit institution" to work out the consequences for credit institutions which are subsidiaries of these institutions or which are based in this jurisdiction. That is the position concerning that aspect of the Deputy's question.

As regards the covered bonds, as I understand the position, a covered bond is a private contractual arrangement backed up by a security. That is something in which the State is not involved under this legislation other than by way of collateral guarantee, which is given to all banking transactions under this legislation. The Deputy graphically portrayed me as conferring some sort of stamp on that transaction, but that is not the case of course. What is the case, however, is that all borrowing by Irish banks, in whatever form it takes within the terms of the legislation, is guaranteed ultimately by the Irish State. That is what the legislation contains.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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May I ask a question?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Rabbitte referred to the security. The assets, of course, are a security. They are nothing to do with the State.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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May I reply?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I would like to reply to Deputy Bruton, if I may, because he raised the question of what my attitude was to an amendment — I think there is a similar amendment in the name of the Labour Party — concerning the issue of how the scheme would be submitted to the House. In the course of the debate, this matter was raised by Deputy Quinn who pointed to the fact that whereas the relevant regulations under section 5 must be approved by the House, the current text of the Bill envisages, at section 6, that the scheme can be drawn up, submitted to the House and then the negative resolution procedure has to be invoked in the House to set it aside. A relevant consideration in drafting the section in that fashion was that we want to get this scheme done as rapidly as possible. Dáil Éireann may not be in session when the scheme is drawn up. It is very important for the Irish State, in the event that this legislation is enacted, that the scheme is drawn up as quickly as possible in order that we can go into the contractual arrangement with the bank on foot of the scheme. The contractual arrangements of course are confidential. The scheme lays out the overall framework, but the contractual arrangement on foot of the scheme is a confidential commercial document. It is essential for us that we enter into a relationship of stability with the banking system as rapidly as possible. That is why we wanted the legislation in that form.

I am prepared to accept the proposal made by both the Opposition parties that the regulation provision should require that the scheme be submitted to the House. It is important for the State, however that, when the scheme is devised and considered by the House, the House makes up its mind fast on whether it wants to accept or reject the scheme. We want to define our relations with these institutions in the shortest possible period. We have a guarantee of sorts, a moral undertaking given by the Government last Monday evening. We want it spelt out in black and white for the institutions concerned. That is the urgency in relation to the scheme. However, in view of the opinions expressed on this from the Opposition side, I will give an undertaking to the House that I will table an amendment in Seanad Éireann to reflect what has been suggested. That will allow the Bill to proceed to Seanad Éireann and be discussed by the Upper House later this evening, if the House decides not to amend it in any other respect. That is my attitude on that specific question, as raised by Deputy Bruton.

Deputy Bruton also raised the question of European Union collateral and its impact on the assets. While it is an attractive theoretical argument, the fact is the European Central Bank is not going to withdraw collateral from the Irish system. One of the big lessons the Government has learned from this crisis is the great value of our membership of the euro in the stability it affords to our system and the support we receive from it.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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The Department issued a statement that the Minister has indicated that he will consider applications to join the guarantee scheme from financial subsidiaries with a significant high street retail presence, and that they will be considered on a case-by-case basis. With regard to the extension of the scheme, does the Minister have a position at this stage on financial institutions based in the IFSC? What is the status of those institutions? The Labour Party is trying to get at the parameters of this guarantee as far as the taxpayers of Ireland are concerned. I have already spoken about the law of unintended consequences, and the Minister has already indicated that he is moving on to consider other applicants that want to join the scheme. I understand that the guarantees for one of those applicants would amount to €60 billion. This is why we want this scheme to come before the House before the Bill is enacted, and at least we should know the shape of it.

My understanding of what the Minister said was that he was specifically excluding questions of bank capital. He said that this was a liquidity rather than a solvency issue. His description tonight begs the question that while liquidity is the driving issue, what is underlying liquidity is the issue of the capitalisation of banks. Given that he has responded to other Members of the House, will the Minister indicate to me if he proposes to include capitalisation and recapitalisation by some of the banks included in the scheme to address what would appear to be impairment of assets, due in particular to their exposure to lending for land acquisition and construction? While most of us know about the construction impairment due to the bursting of the construction bubble, most people in Ireland do not know the extent of the exposure within these banks or their subsidiaries, be it here or abroad. Some of their lending has concerned property abroad, but some of them have also been involved in trading in complex financial instruments such as derivatives. We do not know if there are SIVs involved. In his earlier comments the Minister seemed to imply — later I thought he contradicted himself — that recapitalisation was not a feature in his view. Is that factor to be included in the scheme that he has others working on, such as the Central Bank and the Financial Regulator?

The Minister did not mention either whether he valued the guarantee. There have been many estimates today ranging from a cheap €1 billion to €10 billion to €15 billion for a two-year guarantee at rates that apply for credit default swaps of a minimum of approximately 2%. I priced it earlier this morning at 1.5% in view of the favoured status of our own banks. Since then, many economists have said that it must be at 2% to 2.5% due to credit default swap rates. Can the Minister comment on this?

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Deputy Burton raised a number of issues. The credit default swap issue and the various methods available to assess the credit rating of the relevant institution is something that my officials and officials of the Central Bank and the Financial Regulator have investigated. The Central Bank and the Financial Regulator will report to my officials on that and the scheme will be drawn up in the light of their advice. However, the scheme will have to be approved by the Government. I am not determining that issue in the House this evening, because I will await the advice I receive from the Central Bank. I will consider them with my officials in the drawing up of the scheme.

I take it that Deputy Burton referred to capitalisation in the context where she envisages the taxpayer making a direct equity investment in particular financial institutions. That certainly will not arise in the course of this scheme.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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No. It includes the banks, as part of the scheme, recapitalising to cover some of the impairment of their asset values for the reasons that I set out. I did not say anything about the taxpayer paying anything for this, God forbid.

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Then Deputy Burton is suggesting that the balance sheets of the banks should be revised as to assets and liabilities. Capitalisation is done in financial institutions by raising equity and if the taxpayer does not put in the equity, the markets must put in the equity. The normal method of recourse for the banks is to make a rights issue and seek subscription from the public. However, as we know from this worldwide banking crisis, several financial institutions have had abortive rights issues and a judgment would have to be made as to whether a rights issue by the relevant commercial institution will be of benefit to it. That is a matter which can arise in the course of the implementation of this Bill, but it is not a matter which will arise in the scheme that will be submitted to the House next week. The State will not require an institution to conduct a rights issue and neither will the State commit taxpayers' money to the equity in these particular financial institutions. Therefore, the question of capitalisation does not arise in the scheme next week.

The other issue raised by Deputy Burton is the question of the assets and liabilities of the bank. When she refers to capitalisation, I think she is suggesting that the assets of the financial institution should be redefined. In the first instance, that is a matter for the auditors of the relevant institution and for the proper auditing and accounting practices that apply to that institution. An examination of this matter will be part of the involvement of the State with these institutions. However, I think I am right in saying it is not a matter which directly arises in the scheme which will be submitted next week.

Amendment put.

The Dail Divided:

For the motion: 22 (Tommy Broughan, Joan Burton, Joe Costello, Martin Ferris, Eamon Gilmore, Michael D Higgins, Brendan Howlin, Ciarán Lynch, Liz McManus, Arthur Morgan, Caoimhghín Ó Caoláin, Aengus Ó Snodaigh, Brian O'Shea, Jan O'Sullivan, Willie Penrose, Pat Rabbitte, Seán Sherlock, Róisín Shortall, Emmet Stagg, Joanna Tuffy, Mary Upton, Jack Wall)

Against the motion: 74 (Dermot Ahern, Michael Ahern, Noel Ahern, Barry Andrews, Chris Andrews, Seán Ardagh, Bobby Aylward, Joe Behan, Áine Brady, Cyprian Brady, Johnny Brady, John Browne, Thomas Byrne, Dara Calleary, Pat Carey, Niall Collins, Margaret Conlon, Seán Connick, Mary Coughlan, John Cregan, Martin Cullen, John Curran, Noel Dempsey, Jimmy Devins, Timmy Dooley, Michael Finneran, Michael Fitzpatrick, Seán Fleming, Beverley Flynn, Pat Gallagher, Paul Gogarty, John Gormley, Noel Grealish, Mary Hanafin, Mary Harney, Seán Haughey, Jackie Healy-Rae, Máire Hoctor, Brendan Kenneally, Michael Kennedy, Séamus Kirk, Michael Kitt, Tom Kitt, Brian Lenihan Jnr, Conor Lenihan, Michael Lowry, Finian McGrath, Mattie McGrath, Michael McGrath, John McGuinness, Martin Mansergh, John Moloney, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Darragh O'Brien, Charlie O'Connor, Willie O'Dea, Noel O'Flynn, Batt O'Keeffe, Batt O'Keeffe, Mary O'Rourke, Christy O'Sullivan, Seán Power, Dick Roche, Eamon Ryan, Trevor Sargent, Eamon Scanlon, Brendan Smith, Noel Treacy, Mary White, Michael Woods)

Tellers: Tá, Deputies Emmet Stagg and Seán Sherlock; Níl, Deputies Pat Carey and John Cregan.

Amendment declared lost.

Progress reported; Committee to sit again.