Michael Colreavy (Sligo-North Leitrim, Sinn Fein)
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Question 36: To ask the Minister for Finance the job description and scope of work given to each of the public interest directors appointed by the State to banks which have received State assistance; and if he will make a statement on the matter. [9668/11]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, under the terms of the Credit Institutions (Financial Support) Scheme 2008, domestic credit institutions benefiting from the State guarantee were required at the direction of the Minister for Finance to appoint up to two non-executive directors to promote the public interest. The legal position is that any director appointed to the board of the covered institutions, whether under the CIFS scheme or otherwise, is subject to the requirements of company law in the discharge of his or her responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the director's so-called fiduciary responsibilities.

I understand that in addition to their other experiences, the public interest directors currently on the boards of the covered institutions were nominated by my predecessor on the basis of the Minister's assessment of their civic mindedness and sense of where the public interest lies to inform their view of what was in the institution's interest. I am advised that the Department of Finance held generic briefing sessions on the CIFS scheme in general and on the fiduciary duties of non-executive directors for individuals on the panel from which the covered institutions appointed public interest directors but that there was no job description or scope of work set out for them as this, as I have outlined, was determined under company law. In addition, for this reason public interest directors did not have a formal reporting relationship to the Minister or to the Department of Finance.

In light of the foregoing and the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances that those institutions have received huge financial support from the State, it is essential to bring legal clarity not just to the role of the public interest directors but to that of the entire boards of those institutions. Section 48 of the Credit Institutions (Stabilisation) Act, therefore, provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act. As Minister for Finance, I am strongly committed to ensuring that the boards of the covered institutions act at all times in a manner fully consistent with key public interest objectives for the banking sector. This will be a major element of my assessment of the board renewal programme that I have recently sought from the covered institutions.

Pearse Doherty (Donegal South West, Sinn Fein)
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Gabhaim buíochas leis an Aire for his response. Has he personally spoken to any of the public interest directors in the banks covered by the State guarantee and that are being supported by State funds? In particular has he called in the AIB public interest directors to ask them what they were doing when they allowed a package to be signed off under their watch allowing Colm Doherty to get a €3 million golden handshake? Does the Minister believe that Dick Spring, one of those public interest directors, is fit for the job to which he was appointed by the previous Minister for Finance?

Will these public interest directors be reviewed in the same way that the other bank directors will be reviewed? The Minister should at least call them in and ask them to be held accountable. As the Minister said their primary interest is the public interest. Has he questioned them as to how they fulfilled the public interest when they agreed to sign off on the type of severance package handed over to Colm Doherty?

Michael Noonan (Limerick City, Fine Gael)
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The primary duty and responsibility of the public interest directors as well as all the other directors are to ensure that the institution on whose board they serve is run properly and appropriately. Their primary responsibility, regardless of their title, is to the institution on whose board they serve. Is Dick Spring a suitable person to be the director of a board in the public interest or otherwise? Of course he is. Dick Spring has a very long record in this House. He has a very strong record as a Minister and as Tánaiste, and he has a very strong record in business and as a member of the legal profession. He is well fit to be-----

Pearse Doherty (Donegal South West, Sinn Fein)
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Was Colm Doherty's severance package-----

Michael Kitt (Galway East, Fianna Fail)
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Deputy, please.

Michael Noonan (Limerick City, Fine Gael)
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He is well fit to be a member of the board. Have I called in public interest directors and talked to them separately? No, because it would be inappropriate for me to do so. They do not report to the Minister for Finance or to the Department of Finance. Their responsibility under company law is to the institution on whose board they serve. I work with these covered institutions through the chairpersons of the boards and that is my point of contact. If I want to see the board or individual directors, I will meet the board in its totality. I will not pick out individual directors and call them in for some kind of reprimand when I do not have a legal leg on which to stand to make any suggestion to them whatsoever.

I believe it is inappropriate to go after individuals. We do not know what position the former Deputy, Mr. Spring, or any other director took on any particular issue at the board. The Deputy should be careful not to make statements even under privilege of the House unless he is sure of the position.

Pearse Doherty (Donegal South West, Sinn Fein)
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I asked the Minister to state his position as to whether he believed the public interest directors in AIB were fit for their position, because under their watch they signed off on a severance package that allowed the taxpayers to pay Colm Doherty €3 million. As the public interest directors have a different role from that of the other directors of the bank, does the Minister for Finance, as the person who will appoint public interest directors in the future, have the power to call in these public interest directors to ask them what is happening with severance packages in the bank?

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister has made it clear that there is no formal or informal reporting relationship in place between the public interest directors and the Minister. Many people will find that strange. Does he have no direct contact whatsoever with those public interest directors as individuals and if not does he intend to introduce more formal arrangements between him, as Minister, and these directors who were appointed to represent the interests of the State and the citizen?

Michael Noonan (Limerick City, Fine Gael)
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My predecessor appointed all the public interest directors and he had the same relationship with them as I have. Their job under company law is to bear in mind the interest of the institution on whose boards they serve. That is their priority, but there is no reporting back. When they are considering a particular issue at board level, as well as making the decision in the interest of the bank they are obliged to ask what would be in the interest of the public. However, they are not subject to direction from the Minister or the Department on that. They are independent, as are all directors in accordance with company law. That is their fiduciary position.

Deputy Doherty's very legitimately asked how long the directors would remain in place and what is the situation for appointments. First, I will seek a renewal programme from each of the chairpersons and I have asked in the first instance to bring that up to the night of the infamous guarantee in 2008. That will be one part of it. The regulator, Mr. Elderfield, is writing or has written to all directors and effectively advised them that he will adjudicate on their suitability to be directors based on their knowledge of banking and financial affairs. That process will terminate in January 2012. What I am doing takes it up to 2008 and what he is doing takes it into the area of the new directors. We will wait to see what happens.

With the exception of Bank of Ireland, the State is now the majority shareholder in all the other banks. As majority shareholder, I can instruct how shareholders vote at the annual general meeting. If all else fails, I can refuse to exercise the voting rights of the shares to put any director back in place at the AGM.

Pearse Doherty (Donegal South West, Sinn Fein)
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Does the Minister have the power to call in the public interest directors?

Michael Kitt (Galway East, Fianna Fail)
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That concludes Question Time.