Dominic Hannigan (Labour)

I am glad the Minister of State is present because we have awaited this scheme for a while. However, the scheme and its clauses are disappointing. Like the previous speakers, I would like the board representation increased to a minimum of two people. The Labour Party believes they should be representative of the people who are bailing out the banks. We would like a taxpayer's representative such as a member of the consumer's association and a representative of the small business association to be appointed in order that their interests are well guarded and protected.

Insufficient reporting is being provided for in the scheme. We tabled an amendment to the legislation in this regard a few short weeks ago. The Houses of the Oireachtas should receive a monthly report and I ask the Minister of State to consider amending the frequency of reporting to a quarterly, if not monthly basis, because oversight of this regime is important.

With regard to commercial rates, the Minister for Finance stated the banks would pay for the guarantee provided but this is clearly not the case. He calculated the cost involved at 0.3% of the cost of servicing the national debt. What happens if an emergency budget is introduced in six months and increases the national debt? That would lead to an additional charge on the taxpayer. Will the banks be asked cover that? It does not appear so under this scheme. There is a danger the costs of the additional borrowing are not covered by the levy being applied to the banks and they should pay more. I am interested in Senator O'Malley's call for a percentage of profits to be paid, which is almost the equivalent of taking equity or nationalisation. Perhaps taking shares in banks is an option but it is clear if they are to pay for a guarantee of this size, they should pay five or ten times the amount being sought. The Government parties are allowing their banking buddies to get away with it in the same week they levied charges on the poor and worried the elderly. Will the Minister of State consider this again?

No guarantees are provided regarding salaries. The Minister for Finance suggested earlier this week that he might examine a salary cap but that is not provided for in the scheme. I am surprised share options have not been ruled out, although that has happened elsewhere. During the debate on the legislation, reference was made to the dilemma that exists if bankers are allowed to retain share options. They have a one way bet because they know if the value of the shares in their banks increase, they can exercise their options and make a great deal of money and they do not care if the value decreases because we are guaranteeing their losses. I am worried, therefore, about the moral hazard that still exists because the Minister has not ruled out share options.

Earlier this week, the UK Government nationalised a number of banks. When the Swedish banks were in trouble in the 1980s, bankers were called in and senior management was cleared out. The Royal Bank of Scotland and HBOS were nationalised earlier this week and their chief executive officers and chairmen were called into Downing Street. They walked in with jobs and they walked out without them. It is a different story for our bankers. They walked into the Taoiseach's office where they were given tea and sympathy and he might even have sung them a song but they walked out with their jobs intact. There was no accountability or responsibility. They have owned up to nothing and this must change. The scheme should make it clear the current way of managing banks is wrong. A number of the banks may have addressed this internally but heads should roll in a number of others and the Government's scheme does not provide for this to happen.

Ireland is the only European country guaranteeing dated subordinated debt. I would like to know why this is being done because I am not satisfied this needs to happen. What is the Government's motivation to include such debt in the guarantee? In general, a bank has two sources of funding — equity from shareholders and debts such as bonds or loans. The theory is that equity is slightly more risky and, therefore, a higher return is generated. Bonds provide banks with first call on a company. If a company runs out of money, bond holders get their money back whereas equity holders suffer. If a company makes money, the bond holders get the same amount as they would have otherwise, but equity holders stand to gain more. Subordinated debt is like a form of quasi-equity. It has a high rate of return, but low risks. If someone looking for a high return knows the Government is guaranteeing subordinated debt, he or she will be motivated to move money from, for example, equity or loans to it. Other countries are not guaranteeing subordinated debt.

I have three questions for the Minister of State. First, is he aware of whether there has been a flight of money into subordinated debt in the Dublin-Irish markets in recent weeks? Second, who is buying subordinated debt in the Dublin markets? Third, has the Government held discussions with individuals or institutions on the inclusion of dated subordinated debt in our guarantee? The reason the Government is including this measure is unclear. Why are we including this provision and are we serving the taxpayer?