Wednesday, 21 April 2010
Central Bank Reform Bill 2010: Second Stage (Resumed)
To take up from where I left off, I want to deal specifically with the issue of the â¬1.5 million which has been transferred into a pension fund for Mr. Richie Boucher of Bank of Ireland. I have no doubt the Minister of State, Deputy Martin Mansergh, is as disgusted as every other citizen at what has happened.
There are two public interest directors on the board of Bank of Ireland, Mr. Joe Walsh and Mr. Tom Considine. What needs to be put on the record by the Minister for Finance, Deputy Brian Lenihan, is what discussions he has had with the public interest directors in respect of this employment contract being agreed between the board of Bank of Ireland and Mr. Boucher. It does not comply with the requirements under the Credit Institutions (Financial Support) Act 2008 and the scheme that stemmed from that, the recapitalising of AIB Bank and Bank of Ireland or the review by the Covered Institutions Remuneration Oversight Committee.
The Minister has the power under sections 47, 48 and 49 of the Credit Institutions (Financial Support) Act 2008 to write to the board of Bank of Ireland to direct it to reverse this decision. It is unfair and contrary to legal requirements.
When did the Minister for Finance first become aware of this and did he approve it? The review carried out by the remuneration oversight committee states it did not have a remuneration plan in respect of Bank of Ireland. Discussions were ongoing with the financial regulator and it made specific reference in its findings to pensions and the need for controls in the area. It did not regard the pension allowance of â¬123,000 that Mr. Boucher got as acceptable. It felt the pension schemes should be in line with those of normal employees. There is a shortfall in the pension fund for general employees in the Bank of Ireland, meaning that many of them will have to wait until they are 68 to retire, unlike Mr. Boucher, who is able to retire at 55.
Mr. Boucher was appointed as the new CEO of Bank of Ireland on 25 February 2009 and the report of the oversight committee was published two days later. I did not think he should have been appointed because new CEOs were needed. Mr. Elderfield and Mr. Honan have come in from the outside and have proved to be of great benefit to the financial institutions of the State.
When this happened I asked how much Mr. Boucher would be paid and we were told his remuneration covered pension entitlements. I was told, however, that no package had been negotiated with Mr. Boucher. I considered it unusual that a CEO would be appointed before the details of his employment contract were in place. Clearly this was rushed, for one reason or another.
I was told then Bank of Ireland would negotiate the contract on the basis of the Covered Institution Remuneration Oversight Committee's findings. Its review clearly states that the pension cash allowance was a major problem and that there was a strong case for reviewing the pension arrangements that had been a feature of the remuneration of some senior executives in recent years. The committee said arrangements should be in line with normal pensions for ordinary bank staff. What happened? A package was put in place for Mr. Boucher that is completely at variance with all legislation and the Covered Institutions Remuneration Oversight Committee's report to the Minister on 27 February 2009.
The Minister has the power to act. The Taoiseach claims the Government can do nothing about this but nothing could be further from the truth. Under section 48 of the Credit Institutions (Financial Support) Act 2008, the practical result of the financial guarantee, when the Minister considers on the advice of the Covered Institutions Remuneration Oversight Committee that the covered institution has not complied with the requirements of the section, he may direct the covered institution to amend the remuneration plan so compliance is achieved. It was done for the non-executive director of AIB Bank so why is the same not being done with the Bank of Ireland? People are entitled to know. It is a fudge to say it is about a pension scheme. An employment contract was negotiated by Mr. Boucher and Bank of Ireland that completely ignored the legislation underpinning the guarantee scheme and the Covered Institutions Remuneration Oversight Committee.
The fitness and probity aspect of the Bill is welcome. It has been clearly acknowledged by the Government that it failed when the Central Bank was responsible for the promotion of the financial services industry and the IFSC. That was contrary to proper regulation. There is provision for "living wills" for banks, so bond holders instead of taxpayers will have to pick up the tab, with consumer protection being the responsibility of one body. Fine Gael opposed the plans for regulation and consumer protection in 2002 when the original legislation was introduced.
The CEO of the Irish stock exchange appeared before an Oireachtas committee recently and she stated contracts for difference should have the same disclosure requirements as any other share dealings. If that measure had been in place in recent years, no one person would have been able to build up a 25% stake in Anglo Irish Bank under the cover of contracts for difference.
We must have proper regulation. We have tabled an amendment that simply calls for proper investigation, consistent with what we said when the Central Bank Bill was introduced in 2002, so we can see what is needed. This Bill attempts to change the financial architecture but that might be unnecessary. There should be a proper oversight process within the Oireachtas for appointments to the Central Bank commission, its board and every other office. The new commission should have banking resolution powers to deal with that issue.
The credit union movement has been great, it has not had the same problems as the banking system. On Committee Stage we must ensure it can continue to function in a prudent way. It is not in the same situation as the banks. The reckless lending of the banks has led to taxpayers picking up the tab, many of them holders of credit union accounts. Many small businesses would have gone out of business without the support of the credit union movement when the banks have let them down.
I welcome the opportunity to speak on the Central Bank Reform Bill 2010.
I want to deal with the specifics of the legislation and then outline the further measures that will be needed to regulate Irish banks beyond the contents of the legislation. After that I will deal with Bank of Ireland and Anglo Irish Bank. We are here today because of institutions like them. This legislation is the first of a three-stage legislative process to create a fully integrated structure for financial regulation. It will provide the statutory basis for the new structure which will replace the Central Bank and the Irish Financial Services Regulatory Authority. The second Bill, to be introduced later in the year, will enhance the powers and functions of the restructured Central Bank in regard to prudential supervision of individual financial institutions, the conduct of business, including consumer interest, and the overall stability of the financial system. In due course, there will be consolidating legislation to bring everything together into one piece of legislation.
Certain specific aspects of this Bill are very complex and difficult to follow because substantial amendment to existing legislation is involved. However, the principles are straightforward. The purpose is to change and give effect to structured changes in the Central Bank and financial regulatory authority in Ireland. This will involve the creation of a Central Bank commission, the dissolution of the Irish Financial Services Regulatory Authority, the establishment of a new management structure within the bank and the introduction of new accountability measures, in particular, enhanced accountability to the Oireachtas. In addition, the Comptroller and Auditor General will carry out the annual audit.
Regarding some of those provisions, sections 7 to 12 set out the continuity provisions to enable the Central Bank carry out various activities it will inherit from the previous regulatory structure. I wish to speak on that issue. Some of these will include superannuation and pension payments that may exist under the current arrangements. I believe every Member accepts - I know few people who can disagree - that the former Financial Regulator, Patrick Neary, and John Hurley, former Governor of the Central Bank, did not do the job they were paid to do by the State. Many people strenuously object to what has been going on not only in the past week but for months. These two men walked out of top-paying public service jobs with considerably enhanced pensions and lump sum payments as a reward for not doing their jobs.
I have a straightforward view on Mr. Neary's term in office. I do not know much about his history but he was probably a distinguished civil servant over many years and, as such, would have contributed to his pension and would therefore be entitled to it. In respect of the period during which he was Financial Regulator, however, he did not do his job. I maintain he was in fundamental breach of his contract and there should be no pension entitlements payable to Mr. Neary, today, tomorrow or at any time in the future, in respect of a contract he did not fulfil. I do not say the man should be stripped of his pension for all his years of public service but he should get no pension in respect of the years during which he did not carry out the function for which he was employed as Financial Regulator. The same should apply to Mr. Hurley. The most charitable statement that can be made about both men is that they were asleep at the wheel during the course of their tenure in their respective offices.
I get worried when I hear about continuity provisions because I have a genuine fear that in 20 years' time Members of the Oireachtas will be discussing these provisions in regard to the Irish Financial Services Regulatory Authority. While we are setting up the new legislation and transferring the new powers inevitably some item or other will be left hanging and even though we have the authority to close it down it will be deemed right to keep it open for some administrative, operative or legal reason. When the new legislation is passed I want to see, within a defined period, perhaps six months, that every item concerning the current Irish Financial Services Regulatory Authority is closed down, absolutely. IFRSA should cease to exist, not have a bank account or an administrator or anybody doing anything for it on an agency basis. There should no longer be even a brass plate on the door. People might think it strange for me to say this but in Ireland we have a history regarding structures we think we have closed down that instead we let run forever. I wish to highlight this matter although I may have mentioned it before.
The PMPA insurance company collapsed in 1983. Under administration it continued to trade until 14 July 1989 on which date its ongoing business was sold to Guardian Royal Exchange for Â£110 million. From that date the company ceased writing new business as PMPA and began to wind up its affairs. It changed its name to Primor plc to reflect its new business and continued under administration. Current legal advice to the Department of Finance, which I received last year when I made an inquiry, is that the company is required to remain in business until July 2011. After it collapsed, therefore, the PMPA was kept operational, writing business for six years after which it stopped and began to wind up its business. However, in 2011 it will have taken 22 years plus the original six years - a total of 28 years - to wind down the old PMPA company.
I have a vision that the same might happen in the case of IFRSA. I would not like to see any remnants of that body around in 28 months, never mind 28 years. I will be told that insurance is different but somebody may come along in 28 years' time and say that IFRSA was different too. I want an absolute guarantee during the passage of this legislation that every vestige of the old company will be wound down.
Regarding the actual legislation, it is intended to create the Central Bank commission, to be chaired by the Governor of the Central Bank, and the Irish Financial Services Regulatory Authority is to be dissolved. I sincerely want it to be dissolved not merely for there to be a provision to dissolve it. Most of its existing functions will be merged into the new structure. The functions of the consumer director, with regard to the promotion of the interests of consumers through the provision of information and the development of financial education and capability, are to be assigned to the National Consumer Agency. That is fine and I do not believe people have any problem with consumer issues being dealt with through that agency.
Within the new structure the positions of head of the Central Bank and head of financial regulation will be given a statutory basis and the officeholders will be ex officia members of the Central Bank commission. The remaining members of that commission will be appointed by the Minister for Finance. Details of the appointment procedures will be dealt with publicly and transparently in due course.
That legislation is important and we need it. It is important for all the reasons the Minister mentioned and I concur with them. However, I am trying to take a longer term view, beyond this or next year. Essentially, there will be two main banks in Ireland and one regulator. We must look forward. The scale of the banks in regard to the Irish economy means that both are too big. Duopoly may be the word for this. Only today we heard that the ESB has been told to reduce its business in Ireland below a certain level of activity. If a supermarket has 35% of business share we are told it is too big and therefore not in the consumer's interest. We are engineering a situation whereby the two main banks will have an absolute stranglehold on almost all domestic banking activities. I do not refer to the foreign banks in the financial services sector.
I do not take from the new regulator, the Governor of the Central Bank or the Department of Finance but in my view the scale of these banks will be too big for us to handle or regulate. It is important to remember that when the banks submitted their business plans to the EU it was able to insist on some changes to these plans before it would allow them. It stipulated to what degree they would have to divest some of their current activities in order to bring them back to their core activities. I believe EU regulation of banks will be required across Europe because individual regulators in the different countries will not have the power, strength or ability to carry out regulation on a country-by-country basis.
These factors are all being examined. We are aware of the Greek example. Many countries of the EU are in the euro area. Because there is a single currency and central banks across Europe print currency for each country in the euro area in due course it would be logical to move to having EU regulation of banking, with less individual regulation. There may be inconsistencies in approach, with some countries doing a good job and others being overly diligent, leading to a mixed bag. The basic principle is the Irish banks will be almost too big relative to the size of the economy. If the banks do something wrong we will not be able to close down the banks or the country will collapse. They have size on their side no matter what mistakes they make.
An example has been referred to at length here and I support much of what has been said with reference to Bank of Ireland and Mr. Boucher's pension fund top-up. I do not think it is right and although somebody may have legal advice to back up the action, it is still not correct. Legal advice is still just advice and every time a person goes to court there are two sets of legal advice, neither of which is always right. We are being told this is part of Mr. Boucher's contractual arrangements and former CEOs were required to retire at 55 from the bank. There is no reason he had to sign a similar agreement, although those were the arrangements in place for former CEOs.
Will the pension for every other staff member in the bank be fully funded to the extent that Mr. Boucher's will be? If not, it is extraordinary that the senior people in the bank, including Mr. Boucher, will look after their own pension funds when the same does not apply to other staff members. It effectively comes down to the captain of a ship looking after his own lifeboat. I and most other people will see it as such. It is not satisfactory and I reject the notion that the Government cannot take action.
We have heard much about the salary cap for chief executives and other executives in banks, along with a cap on bonuses, but that is only part of the picture. Remuneration includes pensions, company cars and perhaps chauffeurs, as well as many other benefits. We might hear at some stage that dividends are being paid through a subsidiary or associated company of the bank; we would be told dividends are not part of a salary and it is a different issue. A company in Ireland or an offshore company could be used to that effect. I reject the narrow interpretation of the cap applying to salaries and bonuses.
I also reject the argument that it is not the function of the Government to deal with the matter. We are putting money into the banks and this issue is in the public interest. The Government, on behalf of the Irish public, has a duty, and the remuneration committee of the board should be called in to explain the position, either to the public interest directors or directly to the Minister for Finance. This issue affects the majority of Irish people, who are very sore because of the current financial position. People are feathering their own nests, which is not satisfactory.
One of the principal reasons we are here is the mess Anglo Irish Bank made of its affairs, the banking industry, the Irish economy and Irish reputation across the world. It is not a bank and is long past needing life support; it is a dead duck. Most of the decisions made regarding Anglo Irish Bank in the past 18 or 20 months have been based on bad information. We were relying on the former regulator, Mr. Neary, former Central Bank Governor, John Hurley, and other such people. Now they are gone, we know the quality of work they were doing. They were not working at all. If they were the people providing advice, it is no wonder such poor advice was given.
Every time we speak about Anglo Irish Bank, the figures get worse, and they will deteriorate further with more disclosures in a few months. I suspect we have been only given details of the known losses from property transactions that will go to NAMA but I am sure Anglo Irish Bank has many other bad loans on its book not connected to property. As the exercise proceeds, the cost of closing the bank is getting closer to the cost of keeping it open. We have agreed to put â¬22 billion into the bank but it will not stop at that. Events in recent weeks show further exposures that will cost billions across the Irish economy.
The auditors of these major organisations should have been more careful, particularly with banks which had buccaneer chief executives and chairmen. These people may have built up the company from nothing and be the owners or in the case of Sean FitzPatrick or Michael Fingleton, built up a small bank, but they were lord and master of the entire operation. These people had absolute control, and every auditor knows this shows a much greater risk to the financial security of the organisation. There are common features in all the companies which have seen the biggest disasters in recent times.
People said when we provided the bank guarantee that Anglo Irish Bank was of systemic value to the Irish economy, and had we closed it down there would have been a systemic shock. At best that was a subjective opinion. I have never accepted that point, although some people do, and I have never seen figures to back it up. It is not of systemic value to the Irish economy now and 50% of the business is going to NAMA, with the balance of activity in loan collection. Nobody can argue for its systemic value at this stage.
I agree with the people who argue that Anglo Irish Bank should not be wound up quickly. I do not know who has called for it to be wound up quickly. There should be an orderly winding down of the business. People may argue that a quick loss would lead to a fire sale but nobody in a position of responsibility has ever argued that there should be a fire sale and a quick wind-up. Given that 50% of Anglo Irish Bank is already on its way to NAMA, 100% of the bank should be transferred to the agency.
We have great confidence in NAMA and we see it has the best people to manage the billions of euro in loans from all the Irish banks. There is no better organisation to manage an orderly winding down over the next ten years or so. The Oireachtas has put more confidence in NAMA than in the boards of any of the existing banks. It would be almost a logical extension of NAMA, given that some of the rest of the associations of Anglo Irish Bank is also connected to property loans. I have confidence in NAMA but none in Anglo Irish Bank. It would be logical to transfer the bank to NAMA in its entirety, with a view to NAMA managing its business in an orderly winding down.
This leads us to Sean FitzPatrick, the former chairman, who owes more than â¬70 million to the Irish taxpayer because we now own Anglo Irish Bank. I find it offensive that he is even considering a legal scheme in an arrangement with his creditors which would involve the Irish taxpayer, through Anglo Irish Bank, making some reduction on the money he owes to the bank. This is a point of principle and there should be consequences for his reckless action. I am reminded that Judge Peter Kelly ordered gardaÃ to break down the door of a man's house in Cork recently to bring that person to court because of an unpaid â¬28 million loan. The same should happen to Mr. FitzPatrick. The man owes a civil debt and Anglo Irish Bank should go after it the same way that Judge Kelly ordered the front door of a man's house be knocked down in order to bring him to court to answer for his unpaid bill.
People must vacate their houses when they owe money to banks and there is no reason we cannot follow Mr. FitzPatrick for his civil debt. This is not tied to a criminal or other investigation and the current Anglo Irish Bank management should be sacked if it does not proceed with the action. It is a civil debt and the taxpayer has been left carrying the can. The taxpayer would be better to take charge of whatever assets can be used; the value of the assets could be worked out by the taxpayer rather than allowing Mr. FitzPatrick the opportunity to work out the value of his remaining assets at a profit to himself and a loss to the Irish taxpayer.
Much more could be said about this but I am out of time. I am sure we will have further discussions on the matters during the course of the year. I welcome the Bill as important legislation which corrects and improves the Central Bank and financial regulatory system in Ireland.
I am pleased to have an opportunity to speak on this important legislation, namely, the Central Bank Reform Bill 2010. Clearly, this legislation is badly needed and were one to comb the nation's highways and byways, it would be difficult to find anyone who does not share the view that our banking and financial systems, and probably our political system, are in dire need of reform. Consequently, this Bill constitutes an important first step. I believe the public is disillusioned and distrustful and is utterly dubious about all financial and regulatory institutions within this State and consequently, reform is badly needed. A robust, credible and rigorous system must be developed that will prevent any recurrence of the type of Russian roulette-style banking and financial practices that literally have brought this country to its knees. While a new system of regulation undoubtedly is required, the question is whether the legislation proposed by the Government is the solution and this requires some consideration.
Objectively, it is highly difficult to place one's faith and confidence in any system proposed by a Government that itself is utterly discredited. It is even more difficult to place one's faith in proposals to reform a system that has not undergone meaningful scrutiny or any form of public investigation. This is quite extraordinary and unique, given the scale of dramatic financial collapse witnessed in this country. We are starting from a point at which there are no definitive answers to the questions as to what went wrong, the reason it went wrong or who was responsible. Without answers to these questions, it is difficult to prescribe a solution or panacea to the serious ailments within the banking sector and the wider economy. One cannot credibly apply a sticking plaster to a failed system and simply move on without any self-analysis, serious investigation or self-examination. The ordinary citizens and taxpayers seek root and branch reform and real change to the entire culture and to all the failed practices and procedures within the banking system. They simply will not accept superficial solutions but desire real change. They do not wish to ever see a repeat of the reckless practices that have destroyed our banks and economy with effects and ramifications that no one in this Chamber can quantify. Moreover, I do not believe that any of the so-called experts who comment via the media or in academic circles can quantify it either. While the gravity of the situation is profound, I am not convinced that any meaningful solutions are available.
In order to achieve the type of reform that people expect and deserve, the Government must undertake a series of measures, some of which have been proposed by my party's finance spokesman, Deputy Bruton in recent months and specifically in the Chamber yesterday. First, I acknowledge this point has been played out in the media and that the Opposition parties have repeatedly called for it but it is time for the Government to listen to the Opposition. There is a need to conduct a special inquiry into the financial collapse of this country, as was instigated by the Icelandic Government. The Minister for Finance, Deputy Brian Lenihan, and other Ministers may be heard pronouncing on an almost daily basis that our international reputation is by far the most important asset the country can have. Moreover, one is repeatedly reminded of the need for a positive response on the part of international markets. While I do not disagree with this, if we are to instil confidence in international markets or to restore credibility among our international peers, we must be transparent. We must prove our readiness to take the necessary steps to identify clearly what went wrong and to prescribe a solution in order to ensure recovery and to prevent a repeat of the type of practices that got us into the mess in the first place.
When one considers the model that was pursued by the Icelandic Government, it is almost a no-brainer as it is so straightforward and obvious. However, Ireland has failed to follow suit. The committee of inquiry that was established in Iceland had wide-ranging powers, including the power to search premises and to seize property evidence to complete a thorough investigation. After almost two years of investigations and a detailed inquiry involving hundreds of witnesses and lengthy hearings, the commission has reached a point at which there are likely to be prosecutions and clear findings have been made that implicate the government, the finance minister and the regulator. I wonder whether this is the nub of the issue. Is the issue that prevents the Government in Ireland from pursuing a similar course of action the simple naked fact that the Minister of State and his colleagues are aware that the Government also would be fingered? It would be identified as having been party to, complicit in or turning a blind eye towards this issue. It would be identified as having played an extremely detrimental role in the Irish economy and banking sector in recent years and would be found to have facilitated the economic collapse that, as I stated earlier, has the country on its knees.
I do not believe this is a good enough reason. While this may require a change of Government, the present Government must begin to introduce some degree of accountability. This is badly needed from the perspective of vindication and of ordinary taxpayers being entitled to know what went on and what went wrong. However, this also is badly needed as a means to gather the intelligence and information that will be required to effect meaningful reform of the financial and banking sectors in Ireland. An inquiry in Ireland that was similar to the Icelandic inquiry could answer many of the questions that remain unanswered such as what went wrong, the reason it went wrong and who was responsible. This is necessary information and is not a luxury. It is not a question of finger-pointing but constitutes necessary information that is required to ensure a comprehensive redesign of the financial regulatory system in Ireland. This is essential and the Minister of State should convey the need for such an approach to be adopted by the Government to the Minister for Finance. This need should be taken into account in any new regulatory environment. Introducing legislation that simply focuses on reform of the regulatory institutions, the Central Bank and so on is all very well, but accompanying reform in the political system is required. It must be built into the larger system of reform that is necessary.
There is a risk that the old regulatory system will be blamed exclusively without any focus on the political decision making mechanisms that were in place. They need to be scrutinised and changed. If we focus on the regulatory system in the financial sphere, we could risk ignoring 50% of the cause. This would set a dangerous precedent in beginning the reform process.
While it cannot be proven, since there have been no inquiries, it is fair to assume on the basis of anecdotal evidence and what is known to Opposition Members and the public that there was a degree of joint culpability between the regulator and the Minister, the Department or the Government collectively. As far back as 2006, both the regulator and one can only assume the Minister for Finance were well aware of the problems in the property market, yet they did nothing. This is a clear example of joint culpability. The advice made available to the Government during the so-called boom years in the run up to the financial crisis should be published and subject to an inquiry. If the Government is not prepared to initiate the public inquiry demanded by Fine Gael and other parties, it should publish the briefing documents, correspondence with the banks and so on in the interests of transparency and accountability. It is not acceptable that, almost two years on from when our country was first declared to be technically in a recession, we are still in the dark. That neither we nor the public have access to this information is unbelievable. The documentation and correspondence relating to the short period preceding the creation of the bank guarantee scheme, the famous night in September, should be made available to Members of the Opposition and the public. It is essential that the Minister for Finance publish this information. Otherwise, the whole notion of reform, starting with a clean sheet and cleaning up the regulatory system is a farce.
The third matter that must be addressed by the Minister for Finance and the Government in the Bill is the mechanism for appointments to the board of the Central Bank. My colleague, Deputy O'Donnell, touched on this issue. Under the legislation, such appointments are to be made by open competition unless the Central Bank Commission believes doing so to be inappropriate. This is bizarre. No definitions or criteria are set out as to how the commission would conclude that an open competition was inappropriate. It is a vague section that is open to abuse. There is a potential for widespread abuse of the system, given a lack of clarity in its interpretation. There is also a potential for the continuation of the now familiar culture of jobs for the boys. There should be transparency, open competition and independence in respect of these crucial appointments.
The European Central Bank has expressed major reservations and concerns at the breadth of power and influence wielded by the Minister for Finance over such key appointments. Up to eight members of the board will be appointed by him. Despite significant protestations, lobbying and attempts by the Opposition to influence the Minister in this matter over many months, if not years, there is no proposal to introduce a level of transparency via the Oireachtas. Once more, we are seeing the diminution of the powers and relevance of this House, this seat of Parliament, this bastion of democracy. It is completely ignored by the legislation.
As the Minister of State is aware, Fine Gael published a public appointments Bill last year. It would have allowed for hearings at Oireachtas committees for appointments not only to the Central Bank, but to all quangos and semi-State bodies. No body is so relevant and so badly crying out for transparency and additional democratic legitimacy as the Central Bank, yet there is no proposal in the legislation to allow for that. An Oireachtas committee should have oversight and its confirmation of board members of the Central Bank should be a requirement. This would be important from the point of view of accountability, transparency and - please do not underestimate this last - public confidence. The public has no confidence in the system or the Government's desire to clean it up.
Ours is not an outlandish proposal or a strange request. It is the case in other countries like the United States of America, a country with which we have a strong relationship. In our nearest neighbour, the United Kingdom, the Treasury Select Committee scrutinises and hears evidence on proposed appointments to the Bank of England. Let us take a leaf out of their book. This is international best practice. Let us try to follow in their footsteps. If we can improve and raise our standards by learning from other jurisdictions, let us do so. Why not? We have nothing to lose and everything to gain.
The challenge of dealing with failed financial institutions is an important matter. During the past two days in the House, there has been much heated discussion about Anglo Irish Bank and Irish Nationwide, but it is incredible that they are ignored in the Bill. As pointed out by Deputy Bruton yesterday, it is obvious that the Bill should provide for bank resolution powers to take failing banks into administration. It is a simple proposal that has been enacted in other jurisdictions. The failure to provide for it once again shows the Government's determination to expose taxpayers at every turn in order to protect risk investors and bondholders. That is highly unjust and extremely inequitable and it is also completely out of kilter with best practice in other jurisdictions. I hope that fact will be taken into account and that the Government will take action.
Everyone agrees that there is a desperate need to reform the banking and financial regulatory system. However, such reform should be informed and should be based on the facts that would emerge from a detailed and extensive public inquiry. I hope the Government will, in the spirit of co-operation and at such an important time in the country's history, take on board the points being advanced by the Fine Gael Party in respect of this matter.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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If a double dose of contributions from representatives from south Tipperary would not prove too much for the House, I wish to share time with Deputy Mattie McGrath.
Martin Mansergh (Minister of State with special responsibility for the Arts, Department of Arts, Sport and Tourism; Minister of State with special responsibility for the Office of Public Works, Department of Finance; Tipperary South, Fianna Fail)
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I welcome the Central Bank Reform Bill, which is a clear necessity in light of the events of the past two years in order that we might strengthen greatly the effectiveness of the regulation carried out by the Central Bank. In conjunction with related items of legislation that are to follow, this Bill forms part of an overall strategy to put Ireland back on its feet economically and to restore confidence. The Minister referred to a number of examples which show that there is confidence in this country's approach to its problems. That confidence has important implications in respect of both the ability to borrow and the cost of borrowing. For an indication of those implications, one need only consider the difficulties faced by Greece.
This is not the first item of legislation to deal with this subject during the past decade. I had just been appointed as my party's spokesperson on finance in the Seanad when what became the Central Bank and Financial Services Authority of Ireland Act 2003 was introduced. At that stage, the focus was on separating prudential regulation from the consumer interest. The Government of the day was criticised by the Opposition for not agreeing to a complete separation. As Deputy Rabbitte of the Labour Party stated, quite factually and correctly, at the time, the most basic protection sought by consumers was that the institutions to which they entrusted their funds should be financially sound and that the system should be fundamentally solid. During the debate on the 2003 Act, Deputy Rabbitte said: "We take that as read, just as we take as read that the Central Bank has a good record in prudential supervision." His contribution also contained references to Allfirst, Enron, Ansbacher and Tony Taylor. The possibility that mainstream Irish financial institutions could be at risk never occurred to anyone at that point.
Much of the debate on the Bill before the House has - like the remarks I have just made - been retrospective in nature. It is the duty of the Opposition to challenge, play devil's advocate and put forward alternatives. As is the case with historians, it is possible to argue endlessly and inconclusively about counterfactual hypotheses. One can never definitively indicate what would have happened if different courses of action had been pursued at particular times. Even when governments adopt opposition strategies wholesale, they still remain primarily responsible for the consequences of their decisions. In that context, it is the Government of the day which must measure the risks.
The different conspiracy theories being put forward are not credible. The crisis of confidence which had been building internationally was precipitated by the decision to allow Lehman Brothers to fail. When representing the country at the IMF conference in October 2008, I heard the US Treasury representative admit that the collapse of Lehman Brothers had precipitated the global financial crisis. What happened made smaller and weaker countries more vulnerable. We are asked to believe that allowing Anglo Irish Bank to fail would not have shaken the position of our other financial institutions. The decision to allow Lehman Brothers to collapse had a widespread effect on financial institutions in the US.
The Government has taken the view that it is vital to maintain credit, even if the flow thereof remains unsatisfactory. The current crisis has revealed woeful inadequacies and reckless irresponsibility on the part of some of those who held leadership positions in financial institutions. The autocratic-idiosyncratic style cannot be permitted to obtain in the future.
Apparently, the two most secure investments during the past 30 years were banks and property. However, both have recently suffered major setbacks.
In light of my background, I am somewhat bemused that the heavy hitters - there is no doubt that the public has been heavily hit - sometimes benchmarked their achievements against those of the old ascendancy. I doubt if much comfort will be derived from the fact that at least a handful of these individuals will go down in the annals of infamy alongside some of the worst landlords of the ascendancy. In the days before democracy, star chambers or, as was the case in France when Louis XIV held the throne, chambres de justice made people disgorge information relating ill-gotten gains. However, we cannot employ such methods because ours is a written Constitution.
Have we learned lessons? I am not always so sure. Do we know how to say "No"? Property developers and similar individuals come forward with schemes which, according to them, will create hundreds of jobs but they ignore the entire question of sustainability. The banks, or at least some of their leading executives, etc., seem to continue to adopt a macho approach and show little humility or penitence in respect of the consequences of their previous actions.
As far as the investigations are concerned, the Opposition parties are seeking highly politicised explanations. I can easily understand the attractions of Iceland from that point of view. What are required, however, are much cooler appraisals of systemic failures.
I was disappointed by some of the more extreme charges levelled at the Taoiseach and others. How credible is it that a Minister or Taoiseach would seek to undermine this country or its people? Deputy Gilmore has a leftist party background and comes from a tradition that specialised in the virulent denunciation of political opponents. I would certainly be slow to use a word such as "treason" in a republic, but how would one describe wanting to subvert our parliamentary democracy by creating an irreversible socialist republic by revolutionary methods, having one's party's general secretary seek Â£1 million from the Communist Party of the former Soviet Union or forging currency in the basement of one's party headquarters? That which I have outlined seems to have been a woeful misjudgment. However, Members on all sides of the House have at some point made fundamental mistakes of one kind or another. No side of the House has a monopoly on such mistakes.
As far as the charges relating to property incentives go, when he served as Minister for Finance, the Taoiseach, Deputy Cowen, tried to phase out many such incentives which then existed and resisted demands for the abolition of stamp duty.
The Government has done a good job of crisis management and has placed the country on the road to recovery by creating more robust institutions and introducing effective regulation. Competence and competitiveness are key to recovery, investment and jobs. There are few short-term fixes. We are ready to do whatever is necessary and that has included bigger nationalisations than ever carried out by any party opposite but not losing sight of the fact that we need to maintain and recover a mixed social market economy and get private enterprise back on its feet. Undoubtedly, there was far too much hubris and there is need for a strong State working in constructive partnership.
I note Fine Gael seeks two terms of single party government in a single Chamber Oireachtas without obvious input from the Labour Party. The people will decide in due course what it has done to merit that degree of trust. The Labour Party is claiming the office of Taoiseach by implication without earning it by becoming one of the two largest parties in a potential coalition. There are some precedents abroad for that but not good ones. I need only refer to Lloyd George and Ramsay MacDonald. Undoubtedly, we need practice of government and governance put on a new and more rigorous footing. Which parties are best able to implement that in government and will be chosen and entrusted to do so remains to be seen.
I would be interested in the IMF proposal published today to be submitted to the group of 20 for consideration and then, presumably later, to the whole EU and other bodies. That is certainly part of the agenda that must be considered.
This Bill is of major importance to the House and I welcome its publication. The Central Bank Reform Bill is the last step in a series of measures the Government has introduced to stabilise the economy and rescue the banking system from the brink of collapse. The Bill, which is complex in nature, will be introduced in three parts. It proposes to maintain the stability of our financial system, provide for the effective and efficient supervision of financial institutions and markets and to safeguard the interests of consumers and investors.
The causes of the current crisis have been subject to intense speculation and debate. However, we all agree regulation failure, or a lack of regulation, had a major role to play in bringing about our current difficulties. The former Financial Regulator, Mr. Neary, failed in his duties. He took his eye off the ball and let us all down. In fact, I would say he did not go to work at all and that his contract was not fulfilled. I would question his remuneration and payment for such a lack of work.
Barely a day goes by when another story does not appear in the press highlighting bad practices and immoral behaviour by former bankers. This week we learned about Irish Nationwide Building Society which was giving out 120% loans. That type of behaviour was crazy and criminal. It appears some of the extraordinary successes the banks experienced during the boom years were built on a house of cards and on quick sand. While I share the outrage and disgust of most people about what went on, I realise anger is not a policy and that we need to work out our future. The Bill is of major importance because it addresses the systematic failures which have brought us to this place. It addresses the inadequacies in our regulatory system, or our lack of any regulation.
The appointment of the independent expert, Professor Patrick Honohan, as Governor of the Central Bank and Mr. Matthew Elderfield as Financial Regulator demonstrates to the banks and the markets that the era of light touch regulation is well and truly over. The Central Bank will be responsible for the stability of the financial system, prudential regulation of financial institutions and the protection of consumer interests.
In his impressive performance before an Oireachtas committee on which I sat, the Financial Regulator, Mr. Elderfield, spoke about how new senior personnel would be vetted regarding their fitness for office before being appointed to key positions within our banks. However, I was a bit concerned to see some senior personnel from the old regulator's office accompany him to that meeting. He would need to apply this wish to his own new role as well. He has requested more staff and I hope he gets them as he needs them to do his work.
The Bill also ensures annual performance statements on regulatory performances which will be laid before the Houses of Oireachtas and will be subject to regular international peer reviews. This is a very welcome step. There is a commitment to openness and transparency and this is commendable.
I cannot understand how gentlemen like Mr. FitzPatrick and Mr. Fingleton and cabals of friends were allowed to do what they did, get us into this position and are now allowed to walk free. I fully appreciate that every man or woman is entitled to his or her freedom and the presumption of innocence of any charge, unless otherwise is proven. However, these people must be brought before the courts, made accountable and defend what I believe is the indefensible, but we should let the courts of law decide.
I speak on behalf of small and medium-sized businesses, which are on their knees. They are the backbone of this country but are not supported by the IDA, Enterprise Ireland or anybody else. The people who set up such businesses provide employment for themselves and their families and then go on to employ up to 20 people. These people are crippled with regulation.
I also speak in a voluntary capacity and refer to the amount of regulation implemented in recent years. I sit on a number of voluntary boards and to change a treasurer is almost a week's work. One must sign so many forms that one would think one was getting part of a bank. The little people were crucified by regulation while the eye was completely taken off the ball in regard to the big people.
Another issue I have relates to the total lack of respect. I am not talking about the ordinary bank workers or officials but about senior bankers from middle management upwards. They show a lack of respect for public representatives, the general public, customers and, in some instances, the courts. Court dates are set to bring a customer to court. The customer feels he or she will have his or her day in court and will employ legal people to defend himself or herself and perhaps trade out of the difficulties but eight to ten days before the court date, the bank will appoint a receiver. That is outrageous behaviour.
My colleague mentioned landlords and the colonial system. Cromwell did not get away with that kind of behaviour, and we know what happened him. These people do what they like. We talk about tiger kidnappings, which are atrocious. However, I believe the tigers were in charge of the banks and kidnapped the public. They continue to hold us to ransom every day and it will take a significant sea change for them to get their paws off the backs of the ordinary people. It seems they have no intention of doing so, despite Government efforts, the Financial Regulator and so on.
A couple of weeks ago we heard about the increases in salaries in Anglo Irish Bank, which brought us to this mess. I did not see that bank on any high street in any town in my constituency. It was a bank for the rich which created cabals. Unfortunately, other banks followed it and allowed us all to get into this mess and it will take us generations to get out of it.
I have argued long and hard for a total clear out of the senior management and the boards in the banks. In recent days, I was appalled to see that the person who is the subject of this pension increase was a former employee. These people should have had their comeupance long ago and been removed.
The recent increases in salaries in Anglo Irish Bank, the pension top-up in Bank of Ireland and Mr. FitzPatrick's family member getting a loan subsequent to the guarantee scheme demonstrate that these people have total contempt for the Houses of the Oireachtas and for any sort of regulation. Common decency ended a long time ago in these institutions.
As I said, there are many decent people working in the banks but their jobs are in peril and they face the wrath of an angry public. I feel sympathy for those people. This situation is untenable and must be discontinued. Light touch regulation should not have existed. It did not apply to the ordinary customer, the ordinary working man or to community committees, or enablers as I call them, trying to better their communities. It did not apply to small business people who worked hard to build up a reputation with their banks and to gain overdraft facilities.
Although legislation is in place to provide that both the major banks must lend â¬3 billion annually, when will they do this? There is an old saying tosach maith leath na hoibre but they have not started at all. They produce false figures of loans given out. The loans have not been given out and the figures are wrong. Most people who contact their bank are not even given an appointment but are instead told to forget about trying to secure a loan or overdraft facility or paying their employees because the banks are in a perilous position. Those in charge of the banks informed the Joint Committee on Finance and the Public Service that they would look after the banks first once the National Asset Management Agency had been established. They were blatant about this. The banks are looking after themselves rather than members of the public.
As I stated, the tigers - I could describe them in much worse terms - are in the banks and we need to get them out. While I hope we will do this in a fair and reasonable manner, it must be done by whatever means. Members of the public are not happy and will not put up with blackguarding, cronyism and the rest of what is being done for much longer because they are at their wits' end. We must get the economy back on its feet and show the world the country is run in a decent manner rather than by the cabals which previously ran the financial institutions.
I thank the Minister and his officials for the briefing they provided on the Bill. I have a problem with this legislation, although it is interesting. The legislation will take time to implement and will not be fully up and running until Christmas. Does this matter given that the Bill is academic? What counts is proper political accountability and oversight to ensure the various individuals in key positions are doing their jobs. The other critical element of the regulatory regime for the banking sector is the need to ensure these individuals are honest and accountable and possess a high degree of integrity.
I note that all the Fianna FÃ¡il Party backbench Deputies who have spoken were critical of the former Financial Regulator, Mr. Patrick Neary, and a number of bankers who are no longer involved in the banks but did not criticise the bankers who are still in place. While they may have been critical in a general sense, they did not make specific criticism of the individuals running the banks. I wonder if an old boys' club is in operation or some form of convention is in place which prevents such criticism from being made.
To return to the critical issue of accountability, I believe bankers are not subject to any accountability. I will refer briefly to the example of Anglo Irish Bank, which is as good an example as any because there is not much difference between most of the banks. In December 2008, the Minister for Finance appointed two public interest directors, Mr. Frank Daly and Mr. Alan Dukes, to the board of Anglo Irish Bank. It is interesting to note how these two appointees performed in relation to their public interest responsibility. In February 2009, when Anglo Irish Bank published its accounts for 2008 we were all expecting them to reveal substantial losses at the bank. I was gobsmacked to learn that they showed a profit of â¬784 million and asked what was going on when an institution which had been nationalised just one month previously because it was on the rocks could make such a large profit. I also wondered whether the public interest directors would have something to say on the issue, particularly Mr. Daly who was chair of the bank's audit committee.
The truth emerged some months later when we were told the bank had â¬12.7 billion in losses. How did this come about? Why is it not considered a scandal that a supposedly accountable bank published incorrect accounts which were signed off by at least one of the public interest directors, Mr. Frank Daly? Under the heading, Books of Account, the 2008 annual report states: "The Directors are responsible for ensuring that proper books of account, as outlined in Section 202 of the Companies Act, 1990, are kept by the Bank." Under the heading, Going Concern, the report states: "The Directors confirm that they are satisfied that the Bank and the Group have adequate resources to continue to operate for the foreseeable future and are financially sound." The directors of the bank, specifically the public interest director, Frank Daly, signed off on these statements. Questions have not been asked about this. How were these figures arrived at? Why did the directors sign off on something about which they were not clear? Were they up to the job?
I will briefly run through the 2008 annual report. On page 22, it states: "The Directors present their report and the audited financial statements for the year ended 30 September 2008." The following page states: "The Directors are responsible for ensuring that proper books of account, as outlined in Section 202 of the Companies Act, 1990, are kept by the Bank." On page 24, the report states that the directors confirm that, to the best of their knowledge, the accounts give "a true and fair view of the state of affairs of the Bank and of the Group as at 30 September 2008." On page 27, the directors "acknowledge their overall responsibility for the Group's system of internal control and for reviewing its effectiveness." On the following page, as I noted, the report states: "The Directors confirm that they are satisfied that the Bank and the Group have adequate resources to continue to operate for the foreseeable future and are financially sound."
I wonder what was the view of the Minister for Finance when he received a copy of the 2008 accounts. My view is that they are not worth the paper they are written on yet there has not been an outcry. Let us imagine that Bord GÃ¡is, Lloyds Bank, Barclays Bank or a similar institution published an annual report and accounts which later transpired to be totally false. The case to which I refer is an absolute scandal. Either the two public interest directors, Mr. Daly and Mr. Dukes but the former in particular, were up to the job or they were not. If the first scenario is the case, why did they not comment on the false accounts and refuse to sign them on the basis that something crazy was taking place? I am not referring to the shenanigans involving Seanie FitzPatrick, the money swilling in and out of Irish Life & Permanent or the case of Hypo-Bank Ireland. We know that what took place in those cases was wrong and gave rise to corporate enforcement issues. While I hope these issues will be addressed, progress has been slow. The issue of profit at Anglo Irish Bank was critical given that there may have potential buyers for the bank. What is being done about this issue?
At a time when pensioners were having their Christmas bonus cut, people on low wages had a levy imposed on their salaries and welfare recipients had their income cut, Frank Daly was appointed chair of the board of the National Management Asset Agency commencing in December last year. That was his reward for the manner in which he dealt with the issue I have raised. We also know that Alan Dukes is chairman designate of Anglo Irish Bank. As such, he was also kindly rewarded for his role in this matter.
I wish I had another 22 minutes left because a significant number of other issues arise. Unless there is accountability in the banking sector, we are wasting our time. To return to the issue of Frank Daly and NAMA, Mr. Daly was rewarded with a job of â¬100,000 per annum beginning in December 2009. Within weeks, he had been given a salary increase of 70%, which brought his salary to â¬170,000 per annum. I do not know if he sought this increase. All other members of the board were given a pro rata increase. When we speak about this Bill, does it matter when there is so little accountability?
There are very serious questions I hope the Minister addresses when he replies to this debate. Unless he addresses these critical questions, where so-called public interest directors completely and utterly failed in their responsibility, what is the point in proceeding with the Bill? It appears worthless to me. If we can get proper explanations for this, then fine. Running after the former Financial Regulator and other bankers who are no longer in position is constructive, but it is time somebody addressed the bankers who are still there, as well as the public interest directors who are supposed to perform a critical public function in those banks. They were supposed to be the eyes and ears for the Irish taxpayer, the Minister for Finance and for the Government. They either knew what they were doing, or they did not. If they did not know what they were doing, the Minister made a mistake in appointing them. If they did know what they were doing, why did they not say something about it? Why are we not better informed on these matters?
I do not have to time to deal with how the auditors signed off on all this business without a word of a qualification. When I raised this with the new Financial Regulator last week, he told me it was a matter for the self-regulating bodies. There is little hope of getting accountability from that quarter.
I am delighted to have an opportunity to say a few words on this Bill. It is the first legislative proposal to deal with the flawed regulatory and supervisory mechanism that was in place until now. We certainly need a better system of regulation and supervision. We need to ensure there is integrity and that the structures put in place are not flawed and are subject to subversion. The proposals for a new, single unified Central Bank of Ireland commission will hopefully go some of the way towards achieving these goals. However, the proposals will not be successful unless they are backed up by a strong EU supervisory framework that insists on the proper independent regulatory mechanisms working in the first place. Nor will they be successful unless there is a strong political motivation to ensure they operate properly.
We need structures, proper personnel and proper political leadership. We did not have any of these in the past, but we need them for the future. It is an amazing sign of the times that the IMF has today called for a banking stability fund to have a pot of money available to cope with future bank bail-outs. The situation is pretty dire.
It is now nearly two years since the bubble burst, yet the economy is still in sharp decline. We are finding more nuggets of nasty information every day. It is like turning over a stone and finding creepy-crawlies everywhere. There is no sign of an end to the creepy-crawlies. There is a bewildering array of irregular transactions coming to light at Anglo Irish Bank, and the most recent has been the â¬200 million fund that was transferred from a German bank to give the impression that Anglo Irish Bank was in a healthy state of liquidity. The board members were more or less sworn to secrecy not to say a word about it in case it would leak out to the financial markets and it would be discovered that Anglo Irish Bank was on its uppers.
NAMA is finding out that only a third of the portfolios it is acquiring have any meaningful commercial value. We are fully coming to terms with the extraordinary events at Irish Nationwide, a building society that was set up to give mortgages to home borrowers. We now find that 80% of its operations was for speculative property transactions. No regulator shouted "Stop", nor did any Minister for Finance see what was going on in the past few years. No civil servant in the Department of Finance copped what was going on there. It is extraordinary that a body was not engaged in its core function, but got involved in something completely different.
People who bought their homes in the past seven years are in negative equity. There are 30,000 homeowners who are three or more months in mortgage arrears, while another 30,000 have changed to interest only mortgages because they cannot pay back the premium. They will be in dire straits following an increase in interest rates. Forty thousand people emigrated in 2009, while a further 60,000 are expected to have departed the country by the end of this year. That is back to the worst days of the 1980s and the 1950s. This is due to the lack of regulation and the lack of political control that has allowed the meltdown to take place.
At the Labour Party conference in Galway last weekend, we made a promise to conduct a full inquiry into what has gone on. We have made this call and it does not matter whether this limited private inquiry proposed by the Government takes place. It is not adequate.
It is a commission of inquiry, and if the Deputy has read the legislation under which such a commission is established, he will see that the intention is to carry out a private inquiry into matters. The function of the commission is to avoid the public inquiries of tribunals and that is why it was established by the former Minister for Justice, Equality and Law Reform, Michael McDowell. It is effectively a preliminary inquiry and is not a full blooded public inquiry.
We must have a proper inquiry into all the circumstances. We must return to that fateful night of 28 September 2008, when the Government decided to give a blanket guarantee of â¬440 billion, without any consideration for the zombie banks and building societies like Anglo Irish Bank and Irish Nationwide. Irish taxpayers' money was thrown at banks that had ruined our economy and our institutions. Why was the Government bounced into that decision? Why did it not reflect on the matter for a couple of days? Was there some other reason? We do not know. We can only know if we have an inquiry, but the inquiry being established by the Government will not cover those events. It must go back that far and it must be comprehensive.
We owe it to the taxpayer to carry out all investigations necessary to get to the root cause of Ireland's financial collapse. We must determine why we came to this sorry state. Only then can we properly put in place a regulatory and supervisory mechanism. To an extent, we are putting the cart before the horse so when the investigation is done we will have to come back and address the issue again. In addition, we must apportion blame and impose sanctions. We must ensure that, where appropriate, people do end up in prison. Deputy Morgan referred to directors who signed off on accounts and gave the impression that everything was fine within Anglo Irish Bank and other institutions. For that matter, the former Financial Regulator was telling the public at large that we had the best capitalised banks in Europe when there was scarcely a penny in their coffers and they were desperately seeking money. These matters must be addressed and those responsible have to be dealt with.
Regulation must come about and this Bill is the start. The regulator, Mr. Matthew Elderfield, has shown how it can be done and the European Union is already engaged. The Minister for Finance is proposing in legislation to mirror what is already being proposed in the EU. It is very important that both the domestic and European legislative packages can integrate in such as way that the EU can play a necessary supervisory and regulatory role, as proposed in the Jacques de LarosiÃ¨re report.
I welcome the opportunity to speak on this Bill. Last week, it was refreshing to see Brendan McDonagh, the chief executive of NAMA, and Matthew Elderfield the new Financial Regulator appearing before the Joint Committee on Finance and the Public Service and the Joint Committee on Economic Regulatory Affairs, respectively. It is clear that their approach will be in stark contrast to that of their predecessors. They spoke in clear and simple language and they will hold no hostages to fortune. We can have confidence that they will carry out their important functions with the level of integrity and professionalism that is required.
I also commend the appointment by the Minister for Finance of Professor Patrick Honohan as the new Governor of the Central Bank. As the Minister said last night, these appointments have brought credibility and professionalism to the various offices they hold. They hold critically important offices as we seek to rebuild some degree of public confidence in the banking sector and the regulatory system.
Some of the evidence we heard last week from Mr. McDonagh was not very comforting concerning the work of NAMA and particularly the quality of loan documentation that NAMA has encountered when it went into the detailed, loan by loan, due diligence analysis. However, I am confident that NAMA will work over the course of its lifetime, which is estimated at seven to ten years. At the end of that process it will have been successful. By imposing a higher haircut on the purchase of the loans, it is pushing a lot of the cost of rescuing the banking system directly into recapitalisation. We saw the outcome of that in the Minister's speech before Easter whereby the total cost for each of the institutions was clearly outlined.
Overall, the choices the Government has made to rescue the banking system have been the right ones. The overriding requirement is to maintain financial stability for us as a country. Those decisions have been supported internationally by all the essential stakeholders, including the IMF, the ECB and the European Commission among others.
Economically we are heading in the right direction and there are some positive and encouraging indications on the progress we are making to bring this country firmly out of recession - not least the recent reports from the Central Bank and the ESRI. Both reports confirmed the Government's target that by the second half of this year the recession will have formally ended and the country will begin to grow again. Once people begin to see growth in the economy, confidence will re-emerge and consumer spending will improve. In addition, sentiment will help to rebuild confidence in the economy and growth will take root once again.
In recent days the pension top-up for Richie Boucher, group chief executive of the Bank of Ireland has rightly taken centre stage in the media. I would ask a number of questions of those in charge of Bank of Ireland. Who had oversight and who was involved in negotiating the new contract with the new chief executive, which allows him to retire in four years' time at 55 years of age? According to media reports, his pension will be just under â¬370,000 per annum. The facilitation of that package has required an investment into the pension fund of â¬1.5 million by the bank so that Mr. Boucher can retire in four years' time. How the board could have signed off on the that contract, if it did so, is beyond me. The board members need to come clean as to their involvement. Did the public interest directors have an involvement and, if so, what level of oversight did they have? I agree with Kieran Mulvey, the chief executive of the Labour Relations Commission, that this could jeopardise the passage of the public sector pay and reform deal, which was agreed at Croke Park in recent weeks. If Richie Boucher has any respect for the Irish people he should refuse to accept the pension top-up. I believe he should reject it on the basis of the level of commitment and sacrifice the Irish people have demonstrated to bail out his bank and the other financial institutions.
I listened carefully to the Taoiseach earlier today during Leaders' Questions when he said the Government sought advice from the Attorney General on the issue. I have no doubt therefore that the Government does not believe that the pension top-up payment should have been made. Every day the Taoiseach has to answer questions here about some indefensible decisions that senior bankers are making, but he should not be afraid to represent and express the public's anger over the breathtaking arrogance of senior bankers who time and time again recently have shown two fingers to the democratically elected Government and the people. Enough is enough. The banks owe their very existence of the Irish people and they need to show some degree of sensitivity concerning ordinary people's daily lives and the impact of the recession, as well as the impact the reckless management of the banks has had on people. They need to show some common sense, which is sadly lacking at the higher echelons of our banks. Regrettably, that is a damning indictment of them.
While I accept that we need to allow the banks to operate commercially, they must have regard to the impact and perception of their decisions on the public and the wider economy. How can Mr. Boucher accept that top-up? How can Mr. Fingleton not return the â¬1 million bonus he received from the Irish Nationwide Building Society at a time when people are in dire straits, partly because of the reckless management of the banks? It is beyond me.
Turning to the issue at the heart of this Bill, it is clear, to say the least, that the regulatory system we have in this country to date was simply not fit for purpose. It was a shambles. We did not have the right people in charge and it is clear now that the structure itself was not designed to meet the needs of a banking system that was running rampant in the economy. Time and time again, like Deputy Morgan, I sat at meetings of the Oireachtas Joint Committee on Finance and the Public Service which were attended by the former head of the Central Bank, senior bankers and the former Financial Regulator. Looking back, the evidence we were hearing was farcical. One could not expect a primary schoolchild to believe some of the evidence that was put forward. It is clear that they had the evidence, which demonstrated that what they were telling us was incorrect. That is regrettable, to say that least, and it has put us in an invidious position today. Let me give an example. When the regulator's office came before the Oireachtas committee on the issue of the SeÃ¡n FitzPatrick loan scandal, it was quite clear, despite the fact that members of staff at the authority had a series of meetings with key personnel in Anglo Irish Bank as far back as January 2008, that we were being led to believe that neither the chief executive of the authority at the time nor any member of the board was aware until December 2008 of the directors' loans, or until the Minister informed the regulator as soon as he became aware of the information. The authority investigated itself in that regard and the resulting report was, unsurprisingly, a complete whitewash.
It is for this reason that the Minister had to say last night that we need a system where the overreaching objective of the stability of the overall financial system directly informs the supervision of individual firms, while at the same time safeguarding the interests of consumers and investors. Many times during the Celtic tiger boom years, the Central Bank highlighted the risks for the economy arising from excessive lending, particularly in the property market, but the advice it provided was not implemented by the regulator in its dealings with individual financial institutions. I believe that is why the Minister has taken the decision to consolidate the functions of the regulator and the Central Bank so that they speak with one voice on the key issues of the stability of the financial system overall, the prudential regulation of financial institutions and for the protection of consumer interests.
I agree with Deputy Costello that this Bill is part of an overall jigsaw of regulation, both in European terms and globally, into which Irish reform must fit. The Chair, in his contribution, referred to the work of the credit review office and the need to ensure that the â¬12 billion of lending which AIB and Bank of Ireland is required to engage in between now and the end of next year is delivered. That is a key issue. I support the Bill and commend the Minister for bringing it forward. Obviously, the full effect of the Bill will not take root until the three pieces of legislation are implemented, but I look forward to it happening so that we can have a new robust, independent and tough financial regulatory regime once again.
I too welcome this Bill. I also welcome the speech made by the Minister for Finance when he introduced the Bill yesterday. I pay tribute to the Minister. I have only been a Deputy since 2002 and was previously a Senator in the 1990s for three years. I have been a member of a local authority since 1985 and a member of Fianna FÃ¡il since 1979. In all that time, I do not recall any Minister for Finance from any party having such a difficult or more challenging tenure or who acquitted himself or herself as well as the current Minister. Whether one agrees or disagrees with his policies, there is no doubt but that he has been extremely active and has risen to every challenge put to him, and done so very well.
I also pay tribute to the Attorney General and his staff. If one considers the various legal instruments and measures that have been required to stabilise our economic situation since September 2008, including the bank guarantee scheme, the recapitalisation of the banks, several budgets, the NAMA legislation, public service reform, setting up the banking inquiry and now the reform of the regulatory regime, one becomes aware of the incredible amount of activity and of legislation and DÃ¡il procedural work that has taken place. It is a great tribute to the staff of the Attorney General's office and the officials in the Department of Finance that they have coped with such a huge volume of work in such a relatively short period of time. I challenge anybody to show me an equal period of time in the history of this State that required as much legislation or activity.
The Bill is the first part of a three stage legislative programme to create a new fully integrated structure for financial regulation, to enhance the powers and functions of the Central Bank and to consolidate existing legislation. The Bill dissolves the Irish Financial Services Regulatory Authority and creates a unified Central Bank of Ireland under the control of a single board called the Central Bank commission. The Governor, currently Professor Patrick Honohan, will remain solely responsible for the European system of Central Bank related functions and the Financial Regulator will be replaced with a statutory head of financial regulation. That post will be held by the current regulator, Mr. Matthew Elderfield. The Government has clear objectives - the maintenance and stability of the financial system, effective and efficient supervision of the financial institutions and markets and the safeguarding of the interests of consumers and investors.
Much of the Bill concerns the fitness and probity of persons involved in the financial services industry. It provides for new powers to be exercised by the bank to ensure the fitness and probity of nominees to key positions within financial service providers and of key office holders within those providers. This initiative will help restore confidence in the management of those institutions, both domestically and in international markets, something that may also arise with the financial service industry representative. Accountability is another major concern of the legislation. Annual performance statements on regulatory performance will be laid before the Houses of the Oireachtas and will be subjected to regular international peer reviews. A committee of the Oireachtas may call the Governor and-or the heads of functions to be examined on the performance statement. Responsibility for consumer information and education in respect of financial services will transfer to the National Consumer Agency, along with associated staff.
It is very easy in a discussion of large scale financial issues to forget some of the people most affected, those who have taken out mortgages. Many ordinary working people are finding out to their cost that our financial problems have real consequences, particularly in terms of their mortgages. The issue of mortgage arrears is one in which the Government is centrally involved. It has made it clear it will introduce new measures to protect families that are having difficulties with home mortgage payments due to the current economic situation. This is outlined in the renewed programme for Government.
A mortgage and Government debt group has been set up and the Government has already taken a series of steps to deal with the situation. It has provided financial help to over 15,000 families through the mortgage interest subsidy scheme, increased the advisory services provided through the Money Advice and Budgeting Service, MABS, introduced a statutory code of conduct on mortgage arrears for all the financial institutions and extended the six-month moratorium on legal proceedings to 12 months. It has also refocused mortgage interest relief on those who bought their homes at the peak of the market, with extensions up to the end of 2017. In 2009, there were only 28 forced repossessions of homes by legal process by State guaranteed lending institutions, which is a remarkable achievement.
I support this regulation and will support further, tougher legislation coming from Europe. However, it is obvious to me and should be obvious to the House that no amount of regulation will ever fully overcome the creativity of some ingenious people who wish to break the rules. Unfortunately, many financial institutions seem to have succumbed to the Wall Street dictum that greed is good. In America, the Securities and Exchange Commission, SEC, is a very powerful body with extensive powers and a large staff. However, that did not stop the people who caused the Enron or Bernie Madoff scandals and now there major questions with regard to the transparency and correctness of financial transactions within Goldman Sachs.
Those involved in the financial services industry must act morally. There is an injunction on people involved in handling other people's money and in selling financial products to act morally and not just to obey the rules. To obey the rules is not quite good enough because it is always possible to create a way around every rule. A message should go out from this House that people in leadership positions particularly in financial institutions have a duty to act morally and in good faith towards their customers or else they should get out of the business. It is as simple as that.
I agree with other speakers who decried legal contracts whereby various bankers feel they are entitled to large pensions or bonus payments. I do not want to mention any particular names but I want to make a point. Is it not time that the banks showed a little bit of moral leadership even if they have a contract? I know people across the floor will agree with this. They should recognise that people are living on less than â¬200 a week and who have genuine difficulties with feeding or clothing their children or paying essential bills. There are people who, if they are stranded abroad, cannot afford to come home. Many people are suffering serious economic deprivation, particularly arising out of the misdeeds of financial institutions. To those in financial institutions who will not show moral leadership I state that we will not forget it. They have an opportunity to break with the past and show the type of moral leadership required in this connection.
I disagree with some of the comments made by Deputy Costello of the Labour Party. The Labour Party states it wants to support the rebuilding of the economy but it has opposed at every stage every positive and constructive change introduced by the Minister. It did not support the bank guarantee scheme, the recapitalisation of the banks or the NAMA legislation which has been widely praised throughout Europe and by the IMF. It is time for every party in the House to come on-side and stop scoring points. This is above politics in the sense that Ireland must get back to a position of financial stability so people can get on with their lives and enjoy happy and prosperous lives. I strongly support the introduction of this legislation.
I welcome this opportunity to speak on the Bill as it is important. Timely is not an appropriate word because we are in a crisis and the decisions that have been made and future decisions will be critical to pave a way for us to get out of the mess we are in. Deputy Michael McGrath spoke about sending people to prison and I have a statistic for him. In the United States, 42 people who were in the banking profession have gone to prison whereas in Ireland not one person has gone to prison. Interestingly, about six weeks ago in County Cavan at a meeting of the British Irish Parliamentary Assembly I asked Patrick Honohan of the Central Bank, who was in attendance, whether bankers should go to prison for being involved in what everybody now knows was malpractice if not corporate neglect. The first part of his answer was that they should, and I thought we would get somewhere. However, Mr. Honohan would be a good man in this House because he ended his answer with a political response, as he stated they should go to prison but first they need to be found guilty of the crime. That is fair enough and one is innocent until proven guilty but in the corporate world of white-collar crime which went on, and I call this white-collar crime, it will be very difficult to prove this in the courts.
There was a tipping point when bankers became sales people in this country. Good bankers worked from a banking philosophy underpinned by prudence in lending. I remember that in the 1980s my parents had a good and positive relationship with bankers. They knew they would not get money on a laissez-faire basis. They built up a relationship with bankers through managing their own affairs and providing savings and it was a good, positive and pro-active relationship. There was two-way respect whereby bankers did not want borrowers to get into difficulty and have long-term debt as a millstone around their necks. They had a shared responsibility from within their institutions and this was underpinned when they learned how to be bankers.
Who decided that all of a sudden commission would be the driving force for bankers? Bankers were on commission to get as many mortgages and as much lending as possible. That was the tipping point. Who was to blame? Was it the bankers themselves or the regulator? In the past week serious questions were asked about the lack of regulation. However, a predominant role was also played by the Government as the ultimate watchdog in the State. Freelance and laissez-faire lending was the culture in this country for the past decade or longer. Someone authorised that change in philosophy and culture and forced good bankers to become salespeople. Unfortunately, human nature being what it is, good bankers bought into this philosophy because they were not in a position to stand up to it and they needed their jobs. Other good bankers decided not to buy into it and many of them lost out through not getting promotions or being cast aside after years of experience. I have heard of various examples of this through contact with people in banking institutions.
Bankers are the people who know banking. I believe the public has the attitude that bankers are leading this charge. I share Deputy Mulcahy's admiration for the Minister for Finance, Deputy Brian Lenihan, and he has to be admired for the work he is doing, the effort he is putting in and his positive attitude to try to get the country out of the banking situation it is in. However, if one removes the layers to see who is leading the charge for the banking solution I believe it is the bankers. The question has to be asked, who knows banking and obviously the answer is the bankers. It is certainly not the people in this House; we are politicians and not bankers. It is not the case that people in this House know how bank institutions are run unless they are former bankers.
We need to build an infrastructure around us with people with the knowledge, understanding and know-how to examine where everything went wrong and how solutions can be put forward. There is way of doing so and there are plenty of young retired bank managers, officials and executives who did not want to be part of this culture or promote this philosophy. We should be reeling them in and pulling together their expertise, knowledge and understanding of the banking system. If the officials at the Department of Finance think they know banking, they are wrong. The Department of Finance is made up of people without banking experience. The Minister should bring in an arsenal of former bank managers and bank executives, who were not part of this culture, were cast aside and missed out on promotions because they did not want to be part of the culture of banking in the past 15 or 20 years. They are the people we should bring in to give us a deep understanding of banking.
Small business is on its knees as the Minister of State will know from talking to people in his constituency. Every Deputy in the House knows the story with small business. Small business is on its knees because the relationship between bankers and the small business community is broken. A two-way relationship no longer exists; it is one way. It is the banker's way and the banker's way is the only way. There is no room for negotiation or compromise. There is no assistance or support. It is bottom line stuff as the Minister of State and every other Deputy in the House know. Businesspeople with overdrafts have had the rug pulled from under them at short notice. In recent days I came across the example of certain banks cutting overdrafts overnight and turning them into term loans with no negotiation or compromise. I know of no solution-based examples of bankers trying to work with the small business community. Many of the clerks who work at the desk and the front-line staff who work at the coalface of the banking institutions are feeling the heat because they are working under instructions. It is important that we do not fall into the trap of shooting the messenger. Many of these people are just messengers and are just doing the job based on the new type of practice that is being carried out.
I am hearing horrendous stories of how the backroom banking executives are treating some of their creditors. I am not talking about the NAMA brigade, those with in excess of â¬5 million or even in the millions. I am talking about people who are in debt and having difficulty, and are trying their level best to get off the ground with home-grown solutions. Some people are even going abroad to try to rake in a bit of cash, including people flying to Spain on a Monday to do some construction work and flying back to their families on a Friday. Some people may be setting up small businesses - maybe going to England. People are using their family connections and trying different countries looking at the European market. They are looking for medium to long-term solutions for their businesses. Bankers are not interested. They only care about bottom-line answers in the short term. They are not interested in compromise or solutions. They are not interested in people putting together practical proposals that might get them out of the mess in the medium term. The banks are closing them down and are not interested.
Two-way traffic in banking needs to return with respect on both sides of the counter. That respect has gone. It is dysfunctional and some of the people in the backroom offices are treating customers with absolute contempt. I have an example of a certain official ringing up a certain house, could not get the creditor who owed the money but got to speak to the man's wife and took it out on her. The official started asking where the man was and what he was doing. There is interrogation and intimidation. It is one-way traffic. It is an absolute nightmare in terms of the relationship between the backroom banking staff and their clients and creditors, many of whom are in minimal trouble in terms of being in debt.
There is a fear that extra banking charges will be imposed in order for banks to achieve the capital levels and meet the criteria of the regulator. If this happens it is the customer who will suffer. There is a fear among taxpayers that there will be further charges in future. There is very little optimism that people will get out of the traps in which they are stuck and very little optimism that there will be long-term progress in getting the banking crisis under control. The ultimate victim is the taxpayer, whom we all represent. There are people who cannot and will not survive financially. They will be faced with a carbon tax on 1 May. On average it will cost people an additional â¬50 to put 1,000 litres of oil in their tanks for home heating. That is an extra â¬50 that people will not have. It will start to apply in the summertime. For people who are already struggling to heat their houses in the summertime, what will it be like next winter?
What is it like for people if we cannot offer them some hope or optimism? It is not just in the sense of addressing culpability. Nobody seems to be coming out of this with any sort of blame or responsibility. Why are we not putting windfall taxes on the bonuses? Should we not have a windfall tax on the bonuses and use that money to stimulate small businesses? Some 18 months ago we were told that Irish Nationwide Building Society and Anglo Irish Bank were of systemic importance to the economy. If those banks were of systemic importance 18 months ago, could it not be the case that they are not of systemic importance today? We have an opportunity next September to wind down these banks. I know Matthew Elderfield recently told an Oireachtas committee that it would cost too much money and the Minister agrees. We on this side of the House would ague differently. It is costing too much money as it is. We believe it is a systematically dysfunctional bank that should be wound down. That is an issue that could be addressed next September.
We are trying to deal with the culture of banking with the same people in charge. It is like the Government. There are many good people in the Government, but it has been in office for too long and has lost the public's confidence in its leadership ability. The same can be said of banking. However, if the same people are kept in place, as with the Government, nothing changes. The same people will not change things.
Regarding the wider picture, we are handicapped compared with the United Kingdom. We cannot influence monetary policy and cannot print our own money. We cannot influence interest rates. However, that begs the question as to where we can be proactive within Europe. It is not just as simple as Deputy Mulcahy saying we get great reviews and respect in Europe, and that international observers say we are doing the right thing. That is a load of nonsense. The people we should heed are the people on the ground in this country who do not share those sentiments. It was the people on the streets who warned of the property bubble bursting and warned against excessive lending and overheating in the economy. They are the people to whom we should be listening, not international observers and high powered people in nice suits and fancy shoes in nice buildings eating big meals. We should go back to basics.
There is a problem in this country at present. People are not angry any longer - they have moved on from that. They are not even suffering from apathy. There is a dangerous phenomenon in this country at present, namely, indifference. There is an attitude of indifference towards Government and how it affects people's lives. That indifference is very dangerous because people are making alternative plans. I meet people from my constituency every week who are planning to emigrate or are making plans for their sons and daughters to go to different countries. Parents are sitting in their houses with PhD and master's degree graduate children who are waking up every morning with no reason to get out of bed. We in this House are lucky in that we have a reason for getting out of bed in the morning but far too many people do not have a reason to do so, including very talented and educated people. Why are we not employing them in some way to help us to get out of this crisis? This is the damage that has been done to this country by banks and by the people who are supposedly in charge of the country.
To return to my original point, I asked a question of Professor Patrick Honohan and I will ask it again of the new regulator, Mr. Matthew Elderfield. I will put the question in two parts. First, will Mr. Elderfield employ a crusade to try to put in jail the people who contributed to this crisis? Second, he is our regulator and it must be understood that this is not just about regulation at the top end. Will he regulate the way in which some of the executives in the back rooms are treating the small business community and taxpayers? This is where the real regulation should be because until we build up that relationship between bankers and the community, we will not get out of this crisis.
At present, the system is dysfunctional and is not working. There has to be culpability and responsibility, and it starts in this House. Obviously, the Government will not take responsibility for the sins of the past but the dangerous point, which history proves, is that the past is always a very good indicator of future performance. With the present bankers and the present Government in office, that is a very negative sign and it will instill a level of indifference among the public.
I welcome the Bill. I would always wish to welcome a new structure in regard to the head of the Central Bank and the head of financial regulation, which this Bill is, and to give them a statutory basis is very welcome. I pay tribute to the contributions of the governor of the Central Bank, Professor Honohan, the Financial Regulator, Mr. Matthew Elderfield, and the chief executive of NAMA, Mr. Brendan McDonagh, in recent weeks. They have brought great credibility and a new professionalism to the new structures the Government has put in place to deal with the banking crisis. I understand the situation is very serious. I would hope the work they do will be recognised, as it has been, not only by commentators in this country but also by the members of the European Union.
This Bill is part of a three-stage legislative process, with another Bill coming to the House in the autumn in regard to the overall stability of the financial system, and a third Bill to consolidate the existing statutory arrangements for the Central Bank and financial regulation in the State. My particular concern is in regard to mortgages, on which the Minister touched, and I welcome the measures that have been taken. I understand the mortgage interest subsidy scheme has been of great benefit to 15,000 families and that extra resources have been made available to the Money Advice and Budgeting Service, MABS, which is also significant.
I hope we will never have a high rate of repossessions of property, as has been seen in the UK, the US and other countries. There were 29 forced repossessions of homes by legal process by State-guaranteed lending institutions in 2009. While I hope we do not see that happen again, it is an issue that is to the forefront of our minds and constituents have had much to say on it. The more help we can give to people who are in financial difficulty, the better for them. Taking away homes is the last thing that should happen.
Much comment has been made in recent times on the insurance industry, particularly in regard to the Quinn Group. The Minister referred to this and to the fact the Financial Regulator has been very clear about what he is trying to do in restoring financial health to the insurance sector. Obviously, insurance companies are required to hold sufficient assets to cover their insurance liabilities and those losses have to be dealt with. It is important the Financial Regulator has the support of the Government and the full confidence of the people in what he is doing. There has been a great lobby by all politicians to try to save as many jobs as possible in the Quinn Group. There is great diversity in the Quinn Group, which has many projects, not just in the motor insurance business but also in many other areas such as health insurance and commercial business.
This highlights the point that insurance is becoming a big problem for small business, as noted by many Deputies. This was brought home to me in particular following the flooding in County Galway, which was particularly bad in Ballinasloe town and the south Galway area, where it appears people were refused insurance because it was the second time they were flooded. It has been a serious blow for small business. It amazes me to think â¬82 million was made available for structural work to tackle flooding, for humanitarian assistance and for fodder grants in the agriculture sector, yet small businesses which wanted to be re-insured fell between every stool.
I hope there may be an opportunity for the county enterprise boards to help small businesses, particularly those companies where fewer than ten people are employed given that the employment subsidy cannot help such businesses. Funding those companies will entail giving at least â¬500,000 to every county enterprise board to ensure those companies can remain in existence, and I hope this will be done. Where small businesses work together, with perhaps two companies employing five or six people each, this has been one of the great strengths of the small business sector. NAMA has been debated a lot in this House and outside. The Governor of the Central Bank and the Financial Regulator have advised on and supported the Government's approach to resolving the difficulties in the financial sector. The Governor of the Central Bank said the guarantee, even if it had been known how large it would be, would still have had to be provided. It was an extraordinary time involving a large bank, Anglo Irish Bank, that was central to the economy and it had to be done. I endorse that. The Governor also made it clear that the lowest cost solution for the taxpayer was to support it and he backed it. The regulator also said it was systemically important on the night of the guarantee and he backed it.
This Bill will establish new and fully integrated structures. We are replacing the Central Bank and the Irish Financial Services Regulatory Authority. Oireachtas oversight of the Central Bank's regulatory performance will enhance its accountability. This will ensure stability of the financial system, effective regulation of financial institutions and safeguard the interests of consumers and investors.
The new powers give the Central Bank the ability to investigate nominees to key positions within financial institutions. This reinforces the tone of the new regulatory regime. It will help to restore confidence in the management of the banks at home and internationally. The legislation that will be introduced in the autumn will cover enhanced powers and functions for the restructured Central Bank, which is welcome.
There has been much comment about Mr. Boucher's â¬1.5 million pension top-up from the Bank of Ireland. I hope that will be resolved and another way will be found to deal with it. People are annoyed about this and do not accept this is going into a pension fund. Similarly, Irish Nationwide, which lost â¬2.5 billion last year after writing off â¬2.8 billion in loans, is causing outrage, particularly because there was no regulation to prevent it from happening. I hope the banking inquiry will prioritise such issues and ensure it never happens again.
In 1998, the Joint Committee on Finance and the Public Service published a report on the review of banking policy on foot of allegations relating to certain sectors of the commercial banking sector in Ireland about possible tax evasion in overseas or offshore bank accounts and about undisclosed overcharging or loading of customers. Another report was published that year by the committee chaired by Michael McDowell that recommended a division of responsibilities between the Central Bank and the regulatory authority. It reached the same conclusion as the joint committee.
In 2002, legislation was introduced to establish the Financial Regulator on 1 May 2003, following a Government decision to set up the Central Bank of Ireland as a central bank and financial services authority. The structure combined two distinct components, the Central Bank and the Financial Regulator, each with its own set of responsibilities and governance structure. The responsibilities of the Central Bank included surveillance of the strengths and vulnerabilities of the overall economy and the financial system.
We listened in the past number of years at the Joint Committee on Finance and the Public Service as officials from the Central Bank told us everything was rosy in the garden and if anything went wrong with the world banking system, we were fine. A number of the reports from the former Governor of the Central Bank, Mr. John Hurley, carried warnings in the forwards but, overall, the impression given to the world was that our system could withstand any problems likely to arise. We have seen the result when those problems did arise. The Central Bank had not done its job as effectively as it should have.
The other side of the coin is the Financial Regulator. The regulator's remit included, and includes still, the monitoring of the financial soundness of individual institutions in addition to wide-ranging consumer protection powers. The question we must ask is if it did its job effectively and efficiently. It is clear it did not. We need merely look at the situation all the banks and financial institutions in the country are in today and what the Government has had to do to clear up the mess.
The volcanic events in financial institutions over recent years have resulted in a review of the Central Bank and IFSRA's functions. The Bill before us was signalled by the Minister for Finance in his budget speech on 7 April 2009 when he stated that the role of the Central Bank of Ireland will be reformed to place it at the centre of financial supervision and financial stability oversight, providing for full integration and co-ordination of the prudential supervision and stability of the individual institutions with that of the financial system as a whole. The Central Bank of Ireland will in future be headed by a commission chaired by the Governor.
The problems that arose in the old situation brought about these decisions. The Minister outlined that the Bill is the first of a three stage legislation programme that will create a new and fully integrated structure for financial regulation, enhance the powers and functions of the Central Bank and consolidate existing legislation. In these troubled times, the Government must ensure the maintenance of the stability of the financial system, the effective and efficient supervision of the financial institutions and market and the safeguarding of the interests of consumers and investors.
At present, due to current and past actions, appointments in the financial institutions and the banks have been met with a degree of cynicism, rage and anger in the public arena. This has led to a lack of confidence in the banks and a lack of trust in them that they can provide services for the public that are vital to get our economy functioning again.
Events in the past couple of days related to pension provision has not helped one bit in getting us moving in the right direction. I join colleagues on all sides of the House in calling on those involved to look at the situation again to see if they can undo the undermining of confidence that has been caused by those actions.
I welcome the provision of new powers to be exercised by the Central Bank in order to ensure the fitness and probity of nominees to key positions within the financial service providers, and of key officeholders within those providers. This initiative will help to restore confidence in the management of the institutions, both at home and in international markets.
I also welcome the provision regarding the laying of annual statements on regulatory performance before the Houses of the Oireachtas and especially that these will be subject to regular international peer review. I believe it is important, in a small nation such as ours, that there should be outside independent individual bodies reviewing our systems every now again to ensure everything is kept above board. It is a fact of life that ours is a small country. People come from the same colleges and backgrounds and there may be a certain amount of questionability about certain decisions, not because of anything found but because people know each other and take the word of those they know instead of looking at an issue in the cold light of day and making decisions on the facts and figures before them. I also welcome the fact that the relevant Oireachtas committee will be able to call the Governor of the Central Bank and the heads of functions before it to examine them on performance statements.
Another section of the Bill about which there have been queries concerns the transfer of functions and responsibilities for consumer information and education from the Financial Regulator to the National Consumer Agency. In my view that is where they should be in any case and I welcome the decision. A Deputy stated that decisions had been taken to date which have met with international approval from the IMF, the Financial Times, The Wall Street Journal, The Economist and Moody's credit agency. All these decisions have been successful for our country and to have them acclaimed by such bodies is vitally important for our ability to get funds from abroad. For a person on the Opposition - or anybody - to say, in effect, that it is only a joke that these people support what we are doing in this country does not do service to the growth and renewal of our economy.
A comment was made about auditors to the effect that they are merely leased by their own organisations. In 2003, when I was Minister for Trade and Commerce, there was legislation to bring into being the Irish Auditing and Accounting Supervisory Authority, IAASA. This is an independent outside body which is looking at the activities of accountancy firms in respect of the current problems that arise in all our institutions. It will take a fair course of action against any auditing body which can be shown not to have done its job.
This Bill is a start in terms of getting our regulatory system back to main stream and, with support from all sides of the House, it should ensure that in years to come we will have a regulatory system that will work and be true, fair and effective.
I will need half the day to deal with this issue.
This Bill can be likened to surgery without having a scan or X-ray to pinpoint the affected area. Reforming the financial regulatory area without having an inquiry into the collapse of the Irish financial system, such as took place into the Icelandic banking fiasco, is an exercise in groping around in the dark. This is what the Government is doing.
Yesterday the Minister for Finance was honest when he said, wittingly or otherwise, concerning the Government's strategy to resolve our banking crisis, "Let us make no mistake that what we are discussing now is the fallout of the financial sector for which the Government must take the major responsibility". I am glad he said that because there are very many angry people criticising the manner in which this Government dragged us into the mess in which we find ourselves today.
To state the obvious, an inquiry would not be in the Government's interest, no matter how it spins this. It is most evident that Fianna FÃ¡il and the Green Party have blocked an investigation for their own ends. I am very surprised that the Green Party is backing Fianna FÃ¡il 110% on this. A constituent inquiry would have set the foundations for reform but the cost would have been too high for the Government, especially for the Green Party. Every member of that party now has a position. They have looked after their own interests rather than those of the country although at this stage it is hard to see what they have to lose.
The electorate is waiting in the long grass for both Fianna FÃ¡il and the Green Party. The Government's cover has been well and truly blown in every area. There was the crazy cronyism that went on in the Galway tent. There are the entire areas of health, education and farming. The Government created the jobs crisis that now exists in the country, where almost 440,000 people are out of work. In my constituency, Longford-Westmeath, 15,000 people are unemployed: more than 5,000 in County Longford and 10,000 in County Westmeath. I am pleased my constituency colleague, Deputy Peter Kelly is present to listen to this.
Every man, woman and child in the country knows what went on and what still goes on. They know it but are powerless to prevent the dissemination of their lives and lifestyles that was necessitated by the greed of those who were and still are milking the system. On several occasions there have been votes in this House but we all know that politics is a numbers game. The Fianna FÃ¡il troops walked into the lobbies along with the Green Party to support NAMA while Fine Gael rejected it and all the depredation it has brought to the country.
I am interested in, and almost amused by, the Minister's contention that NAMA is winning the respect of the public. He only has to come down to the midlands, to Longford-Westmeath, where NAMA is like a noose around the neck of people but it is also tightening, every day, on the Government. Perhaps the Minister will give me a detailed breakdown of the reasons for not having a referendum on NAMA. Was it because the Government feared the country would rise up and refuse to bail out its cronies? If this were happening in France or any other country there would be a revolution. I still predict a revolution in Ireland because I witness people coming to my office and my clinics every weekend who are extremely angry because of the way in which the Government is behaving.
There is no NAMA for the young people who purchased houses four or five years ago at prices from â¬250,000 to â¬400,000. When they were getting their mortgages the same banks told them to take out a loan for a holiday or a cheap whatever. The banks put a huge noose around the necks of those young people whose children will not see these loans repaid.
NAMA is increasing the divide between the haves and the have-nots. An inequality of provision sees social welfare benefits being cut across the board while taxpayers' money, to the tune of â¬8.3 billion, is being ploughed into Anglo Irish Bank, with a possible â¬10 billion yet to be provided by the taxpayer. This is a shameful disgrace as our young people head in their droves out of the country. There are predictions that over 60,000 well educated young people from Ireland will be forced to emigrate during 2010.
This bank has recorded the largest corporate loss in the history of the State. There is a shocking deficit of â¬12.7 billion and I am delighted with the European Commission's decision to reject the Government's business plan for the bank. It has been revealed that the EU knew about the â¬8.3 billion cash injection for Anglo Irish Bank long before we in the DÃ¡il, which makes a sham of any debate in this House.
The Government has been driven by cronyism throughout this recessionary period, with the elite in the country immune to the cuts. Those in extreme poverty are being refused their entitlements for the most tenuous reasons. It is heart-breaking to see people come to my constituency clinic having lost their jobs or self-employed people waiting over six months to get some form of social welfare. Some of these people are at their wits' end, and I know of people who have gone to mental institutions because they were not able to cope. People are threatening suicide because of this Government's behaviour.
The Government is continuing without accountability and ignoring the interests of consumers in this Bill. It is a disgrace that the Government is proposing to abolish the statutory position of the consumer director and disband the consultative panel. Lest the Minister forget, that panel was set up to protect the interests of the consumers and customers, and it seems that under the current Government, anything protecting the consumer, the taxpayer, the unemployed and the disabled is to be done away with. It is cowardly behaviour. Conveniently, anything protecting the elite is to be encouraged under this Fianna FÃ¡il and Green Party coalition.
The Minister claimed yesterday that the citizens of this country have demonstrated their gritty determination to get this economy back on the road to growth. He failed to put the emphasis on the word "demonstrated". Has he forgotten the industrial unrest and demonstrations that should leave him in no doubt how the lower and middle income earners of this country feel? They are extremely angry and hardly a day or week goes by without people protesting outside the gates of the Oireachtas because of the disgraceful actions of the Government. Those actions were not promised in the programme for Government.
The Minister has said the Irish people have shown the world that the enterprising spirit which brought us the boom is alive and well and will lead us back to recovery but who will benefit from the recovery. Every family in this country is in hock to the Exchequer for generations to come. It is not just those who are alive today who will suffer but generations not yet born will bear the brunt of the reckless behaviour of the Government. Was the Minister referring to a recovery for those who have been forced to cut down from three expensive cars to two or reduce their holidays by half?
What have the people got for their trouble? They have received a half-hearted apology from the Minister and his Government but who has accepted blame? Has one banker been brought to justice? Is one dodgy banker who led us into the mess we are in today behind bars? If there is nobody behind bars, it is the fault of the Government and the system we have in this country. Young people - and those not so young - in every village, townland and county are saying that some of the dodgy bankers should be in prison because of their reckless behaviour. Fine Gael, the party of law and order, will ensure that the culprits who wrecked this economy will be brought to justice.
Are the banks now operating in a manner that would lead one to believe that they are interested in reform? Are they conscious of the sacrifices the citizens of this country have been forced to make to prop them up? It will be business as usual for the banking sector, and â¬1.5 million for a pension fund is small change to these people. Living in their rarefied atmosphere they cannot conceive the heartbreak and despair being experienced by the small and middle income earners who have lost their jobs, or if in employment, taken a massive reduction in wages because of the various taxes introduced by the Government. That sort of grief does not make its way into the consciousness of those who lived off the wealth of the Celtic tiger and see no reason to change their lifestyles. We saw some of these people pictured on the front of newspapers returning from exotic holidays recently.
The only achievement of Irish bankers was extremely dubious. They propped up the property bubble and in doing so destroyed the country. They were not alone, as the Government was with them putting a legislative stamp of approval to their worst excesses.
I can see the result of this in my constituency of Longford-Westmeath as vacant houses in the midlands will be among the first to be demolished by the NAMA wrecking ball. A decision will be made over the next few months as to how much land and housing taken from developers will be built or completed. There are 19 ghost estates in County Longford and 18 in County Westmeath, a particularly high ratio of estates per head of population. These estates are proof of the excesses of the Celtic tiger years, the out-of-control bankers and the greed of some developers.
A significant question hangs over the issue of planning permissions. Unlike my colleague, Deputy Peter Kelly, I do not believe the Planning and Development (Amendment) Bill 2009 will wave a magic wand over the area of rogue developers. Services must be developed to turn ghost estates which are not bulldozed into sought-after residential units; we must convert anything left unfinished into a proper unit where parents, children and families can live in comfort with infrastructure such as sporting facilities, public lighting, footpaths, etc., on hand. The needs of those awaiting social housing must be paramount and local authorities and the appropriate Minister must act to clear waiting lists.
There is a significant number of people in the country waiting on houses. There is a go-slow in the Department of the Environment, Heritage and Local Government under the Green Party Minister, Deputy Gormley, especially in the purchasing of houses for people who have no homes of their own. As it stands the horrible spectre that hangs over the rural landscape in Longford and Westmeath, and throughout the country, is that of estates left to rot over years with no initiative taken to remove them and restore the land's rural heritage.
The fall-out from the banks has also left rural Ireland without another essential service. The decision of many banks to close local branches and centralise is a retrograde step. We have lost bank branches in my own county of Longford, and Deputy Kelly knows of the protests which took place in Lanesborough, Edgeworthstown and other parts of the county as a result.
People have had services taken from them but they need local services. On-line banking does not fill the void as people need to lodge and withdraw money, for example. Elderly people may not be up to speed with Internet banking and such people cannot afford to keep money in their houses under the bed in the current climate. They need a local banking service.
It does nothing for our elderly to close bank branches in rural areas, thus forcing them into the larger towns. The lack of a proper local transport service kicks in when services are not available in local towns and this has not happened across the midlands. How to access the nearest large centre constitutes a huge problem for those in remote rural areas. I am sure the Ceann Comhairle is aware of the position of those who live in isolated areas, as are many Members who represent rural constituencies. These problems will not engage the mind of the bank executive but are the inheritance of a system that is rotten to its core.
While listening to the Minister speaking yesterday, I was struck forcibly by the self-congratulating attitude and the spin that has been at the core of the current economic problems and still remains so. I detected neither doubt nor a sense of shame about the problems that now haunt those who have lost their jobs, those who have lost medical benefits or other entitlements and most importantly, those who have lost hope. The Government is providing no hope to the people. Instead, Members have heard a litany on how great are the Minister and the Government. The only people who will tell the Government how great it is are the electorate when they get their chance in the not too distant future. Members are being told the Government has saved the country from the jaws of economic ruin. It appears that only Fianna FÃ¡il and the Green Party could do it. The Government should make no mistake but that the people are angry and will teach it a lesson at election time. Members should not mind the minor detail that the Government caused the problem and now expects them to accept that the merger of the independent Financial Regulator's office with the Central Bank is the answer to our problems. On what grounds should Members accept this? They cannot and will not. While promises by Fianna FÃ¡il and the Green Party come easily, results do not.
In December 2008, a bank executive stated that the banking sector is on life support. The taxpayers of this country, particularly those who can least afford to, are now manning the intensive care unit. The manner in which the Government has behaved towards the citizens is shameful because all our citizens are human beings. While the Constitution states that this nation cherishes every citizen equally, Fianna FÃ¡il cherished the rich at the Galway tent over a great number of years. Shame on them and the sooner the Taoiseach, Deputy Cowen, goes to the country the better for this nation, because Members should make no mistake but that Ireland is the laughing stock of Europe.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Minister of State, Department of An Taoiseach; Minister of State, Department of Finance; Mayo, Fianna Fail)
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I wish to share my time with Deputies Kelly and Thomas Byrne.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Minister of State, Department of An Taoiseach; Minister of State, Department of Finance; Mayo, Fianna Fail)
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I welcome the chance to speak on this important legislation today. I thought for a minute that I was attending a meeting of Longford County Council, such was the exchange of views between Deputies Bannon and Kelly. I note that Deputy Bannon was so passionate that he forgot to pay tribute to Deputy Kelly for all the investment the latter has directed into Longford since his election in 2002. Moreover, being the modest type he is, Deputy Kelly will not take the credit for it and so I will do it for him in Deputy Bannon's presence.
Dara Calleary (Minister of State with special responsibility for Public Service Transformation and Labour Affairs, Department of Enterprise, Trade and Employment; Minister of State, Department of An Taoiseach; Minister of State, Department of Finance; Mayo, Fianna Fail)
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The Deputy is not so bad at it himself.
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The Bill reflects the events of the past two years, which have highlighted grave shortcomings on the part of the current system of financial regulation in Ireland and globally. Coupled with the establishment of the banking inquiry and with reforms that are ongoing at European Union level and elsewhere, this Bill is designed to ensure we have learnt from the experience and from the events of the recent years and, most importantly, to ensure they will not happen again. I am pleased to note that there is general international approval of the overall approach being taken by the Government in respect of banking. The Bill ensures greater fitness, probity and accountability across our financial and insurance sectors. It is intended to safeguard the stability of our financial system, the prudential regulation of financial institutions and most importantly and in particular, the protection of consumers and depositors.
In addition to its importance to economic growth, the financial and insurance sectors are key providers of many high-quality jobs. The total number employed in financial, insurance and real estate activities has remained remarkably resilient during the current downturn and more than 100,000 people are employed in this sector at present. Effective regulation of the sector is designed to enhance the sector from both an economic and an employment perspective. Our recent experience has shown a need for serious monitoring and that operational deficiencies have been evident in recent years. Accordingly, this experience has underlined the need for a more robust system of financial regulation. The role of the Central Bank and the Financial Regulator is vital to ensure full compliance with regulatory requirements within which competition takes place.
As for the insurance sector, the actions of the Financial Regulator in recent weeks in seeking the appointment of provisional administrators to Quinn Insurance Limited are an example of this robust approach. The Regulator has the full confidence and support of the Government in the steps he has taken to protect the wider interests of policyholders and the wider economy. I am conscious of the importance of the Quinn Group to employment in the Cavan region.
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I wish to pay tribute to Members of the Oireachtas from across the Border region who have reflected the views of the workers of the Quinn Group on a non-political and non-partisan basis in recent weeks. However, companies in the insurance sector operate within a regulated market place in order to safeguard the long-term interests of policyholders and third parties. As Members are aware, the Financial Regulator is working on a number of issues at present in respect of the Quinn Group and the Government awaits the outcome. I appreciate the concerns of those employed directly or indirectly by Quinn Insurance Limited but the Regulator has acted in what it considers to be the best interests of the firm's policyholders and the appointment of the administrators will allow the firm to remain open for business, to continue to be run as a going concern with a view to placing it on an ongoing sound commercial and financial footing. I believe this will assist in the maintenance of the public interest and of the proper orderly regulation and conduct of its business and of maintaining employment levels as high as possible.
Another critical reform set out in this Bill is the strengthening of banks' prudential capital requirements. The ability of banks to absorb losses on an ongoing basis is crucial for them to be able to continue to service the needs of the broader economy. The G20 and the European Union both have agreed that amending the existing prudential rules on capital requirements is essential to increase significantly the level of capital in the financial system and this will be achieved under this Bill. The Regulator's assessment will ensure that banks are not simply adequately, but are prudently, capitalised in order that they can absorb expected losses, as well as foreseeable future losses, that will arise on remaining loans. As a result, the banks will be better prepared for the more onerous capital rules being developed internationally.
This Bill will ensure that Ireland has a regulatory system that is fit for purpose and that is efficient and cost-effective. The proper functioning of our banking system is critical to the economy and must be protected by the Government. Governments throughout the world have made substantial interventions to protect their banking systems. These interventions have been difficult, are not popular, are difficult to explain or understand but have been necessary. In the steps taken by the Government, its overriding objective has been to maintain and recreate a functioning banking system, ensuring a valuable flow of credit to businesses and households in this economy and this Bill will provide a further step towards so doing.
The Central Bank Reform Bill is the latest in a series of measures introduced by the Minister for Finance, Deputy Brian Lenihan, to stabilise our public finances and to fix our banking sector. The failure of regulation in this country has greatly contributed to our economic downfall. Regulation under the soon to be disbanded Financial Regulator was a disaster. When Patrick Neary appeared before the Oireachtas Joint Committee on Economic and Regulatory Affairs in October 2008, I asked him whether he saw the financial crisis coming. While it was known at the time that things were not good, looking back it now is clear that banks then continued to run rings around the Financial Regulator. Unfortunately, the people will now have to pay the price for this failure.
The Government has taken a number of bold and, at times, unpopular decisions to get this economy back on track. This Bill is a vital part of that strategy. Without effective regulation, the actions and greed of an irresponsible few could nearly destroy the whole country again.
I understand the anger and frustration that people feel when they hear about the vast sums of money that banks need to meet their capital requirements. Like my colleague, Deputy Bannon, I share their anger. This is why it is particularly galling to hear of the extravagant pension entitlements that those in key positions have received and are continuing to receive. That situation cannot be justified. It is a slap in the face of the people suffering in this recession. It is only by the grace of the people that these high paid executives have their jobs and their banks are still in existence. They need to do the right thing and give the money back to the people. The arrogance and lack of empathy for what normal people are experiencing on a daily basis is breathtaking.
Unfortunately, anger is not a policy. For this reason, the Government is taking necessary and unpopular decisions to restore this country to growth. Like many, I do not like what we must do, but I accept that if we do not rescue the banks, our entire economy will fail. The appointments of Matthew Elderfield as Financial Regulator and Professor Patrick Honohan as Governor of the Central Bank will bring about an end to the era of light touch regulation and easy credit. They will be instrumental in restoring confidence to consumers and markets.
This Bill will place financial stability and consumer protection at the heart of regulation. It will also ensure effective and efficient supervision of the financial institutions and markets. It is another step in a series of measures the Government has introduced to ensure financial stability.
Every initiative we have taken, from the introduction of the bank guarantee to the recapitalisation of the banks, from the nationalisation of Anglo Irish Bank to the establishment of NAMA, has been opposed tooth and nail by the Opposition.
If the Labour Party had its way, the banks would have collapsed on the night of 29 September and, with that, our economy. Without the State guarantee, our banks would have been unable to access funding in the days that followed. While Fine Gael, including Deputy Bannon, supported the bank guarantee, it has opposed every initiative the Government has since introduced.
Despite Opposition criticism, the international community, including the ECB, the IMF and the European Commission, has come out in support of our strategy. Likewise, the international press, including the Washington Post, the New York Times and The Economist, has commended the Government on the action it has taken.
Now that NAMA has received widespread approval, Fine Gael has tried to shift its criticism to the issue of bondholders in Anglo Irish Bank. The idea that we are bailing out senior bondholders does not stand up to scrutiny.
Senior bonds tend to be owned by corporations, pension funds, insurance companies, credit unions and other providers of long-term funds. People do not realise that some individuals are continuing to play politics with the banking crisis. Given the scale of hardship we are facing, it is time the Opposition parties got behind Government decisions that have been widely approved by international experts.
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She does not know the meaning of the word.
She should also read the section of the Financial Times that deals with the cost of Government debt. If she had read that page every day since this Government started taking action on the banking crisis, she would have seen that the cost of the Government's debt has decreased further and further. If she reads those figures and quotes them, which she used to do when they were very high, she would realise that the Government's policies are having the desired effect of getting us back from the brink and putting us on track. These are the figures she used to quote. Obviously, she no longer gets to that page in the Financial Times. She only reads the headlines, but she should read the second section. It is called "The Markets".
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An allegation was made in the DÃ¡il that Fianna FÃ¡il Deputies do not read such newspapers. Many of them do. In fact, I even saw Deputy Bannon with a copy of The Economist. The idea that the Labour Party is the intellectual giant of the DÃ¡il and the country is a nonsense that needs to be put on its head. Labour's arrogance is the reason it is not in power and will not be for another generation. That arrogance will not be tolerated on this side of the House, nor will any allegation or insinuation that we are looking after Richie Boucher or that we are friends of the banks. We are not looking after them. Rather, we are putting manners on them.
As I stated on radio today, the danger with caps on executives' pay is that the banks are past masters at getting around them. They did so successfully in the US. It is up to the Government and the Minister, Deputy Brian Lenihan, to be just as clever. He is clever enough to ensure bankers are held to account. However, the allegation that Fianna FÃ¡il is looking after them, giving them money or doing something for them must be knocked on its head. Deputy Burton can smile all she likes, but it was a false statement.
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What of all the London fund-raisers?
The issue of consumer protection has reared its head in respect of this legislation. I was involved in a relevant debate. It is an important issue, as there is no doubt that consumer protection is at the heart of the Bill. Nor is there any doubt that the personalities in the Central Bank and the Financial Regulator's office are putting consumer protection at the heart of their actions. Much will depend on those personalities, as we saw to our cost in recent years.
Last night, the Minister for Finance stated that he is consulting the various representative associations and interest groups. I would be keen for him to consult the Consumers Association of Ireland on this legislation and, if possible, to retain the Central Bank's consumer panel in some form. It is included in the legislation in a different form, but perhaps it should be retained in a bid to keep the public's confidence. The public is confident that we are looking after the consumer and doing the right thing.
However, keeping the panel would be more image than reality, since the reality is evident in terms of the regulator's actions.
We must do everything possible to prevent regulatory capture. Regulators are supposed to regulate, not be in hock to the banks. Regarding the making of telephone calls to banks, there should not be a channel between them and the Central Bank unless it has to do with an emergency or part of the Central Bank's normal functions. That the Central Bank should be independent is important, but it will depend on individuals. While the current individuals are good, we must keep them in place for a reasonable period. A time will come for change in those positions.