Ciarán Cannon (Progressive Democrats)

I welcome the Tánaiste to the House. It is the role of Opposition to forensically analyse the actions of Government and point out shortcomings in its performance. Our people place great faith in the Opposition's ability to carry out this role on their behalf. To retain real credibility in carrying out this duty it is important that those in opposition acknowledge and support a positive step in the right direction by any Government. This Bill is one such positive step. It is a legislative response to the recent events in our banking system that have shattered confidence in our financial institutions, not alone nationally but internationally.

In April 2005 the New York Times described Dublin as the "Wild West of European Finance". Perhaps that description was a little on the sensational side for a normally sober publication, but it gave a number of warning signals to the effect that something was not quite right in our financial services sector. Four years later our faith in the financial institutions and in those who manage and regulate them has suffered massive damage. I sincerely hope that this legislation will go some way towards restoring that faith. We must acknowledge, however, that if the provisions contained in the Bill had been in place some years ago, Ireland might have been a very different place financially. Unfortunately, this Bill cannot make up for the past few years of questionable regulation of the financial sector. Serious questions still remain for the former Financial Regulator and his staff to answer as regards how they allowed dubious actions in the banks to proceed without raising objections or taking strong action. Not alone did the regulator not raise any objections, he seemed at times to be party to some of these actions. The furtive exchange of funds between Irish Life & Permanent and Anglo Irish Bank, euphemistically described as balance sheet management, and allegedly done with the blessing of the regulator, must have been the low point in deceiving not only the shareholders of both institutions but also the Irish people. The only regulatory response to such balance sheet management seems to have been the by now infamous phrase, "Fair play to you, Willie".

Running alongside these dubious activities was another altogether more disturbing exchange of funds where directors of certain banks took out massive personal loans. In Anglo Irish Bank alone, the figure for loans to directors ran to €179 million. This activity was ongoing while the bank's annual report painted a completely different picture. The following words contained in the 2007 annual report of Anglo Irish Bank now have a very sickening hollow ring to them:

We operate to the highest ethical and governance standards as we aspire to be a model corporate citizen. For this reason we invest heavily in the development and training of our staff, as well as maintaining the highest levels of integrity in our relationships with our stakeholders.

Unfortunately for those stakeholders and for our taxpayers, integrity was not a priority for those at the helm of this bank and indeed many others. The Bill seeks to give extra powers to the Director of Corporate Enforcement so that such an abuse of power and downright greed will not be allowed to happen again. It will in particular place a duty on a director of a company to declare any interests he or she may have in contracts or proposed contracts. It also requires the full disclosure in the annual accounts of loans, described as transactions, arrangements or agreements, made by a company to its directors and to persons connected with them.

The considerable extra powers bestowed on the Director of Corporate Enforcement in this legislation, while late, are very welcome, indeed. The Bill will clarify and enhance the power of the Director of Corporate Enforcement to require the production of records from third parties where these relate to the business of a company under investigation. It will give an extension of the period of a search warrant which can be sought from and granted by the District Court to the Director of Corporate Enforcement to enter and search of premises. The value of giving the director unfettered access to company records is also acknowledged as the Bill allows for the removal of paper and electronic information from premises being searched for subsequent examination elsewhere.

The Bill includes major disincentives for those company directors who might be planning to engage in creative loan arrangements in the future. It proposes that if a company enters into a transaction or arrangement that contravenes the Companies Act 1990, every officer of that company who is in default will be guilty of an offence. This aligns the offence with numerous similar offences under the Companies Acts and places a serious onus of responsibility on all officers of a company to ensure that all its activities are legal and fair. Simply turning a blind eye to dubious practices will not be a sufficient defence in the future. For the taxpayer, probably the most galling aspect of the recent financial debacle was the way in which some directors were able to award themselves substantial loans at very attractive rates. They also managed to deceive their shareholders, customers and the public by not disclosing details of these loans. This Bill hopefully will address that problem in that it requires all banks to disclose in their annual accounts details of loans to directors above a minimum threshold. This disclosure will include the maximum amount outstanding on these loans during the period covered by the accounts. It also requires the disclosure in the annual accounts of loans made to persons connected with directors. Banks will be required to have a register of loans to directors and the preparation of a statement, based on information in the register, is to be made available prior to a company's annual general meeting.

As I mentioned at the outset, the Bill goes a long way towards protecting the shareholders and taxpayers of this country from being subjected to dishonest and sharp practices. However, there is one omission and that is a provision that might seek to address the anomaly of the building societies and perhaps credit unions, which are not covered under the Companies Acts, for the purposes of investigations by the Office of the Director of Corporate Enforcement. My colleague, Senator Paul Coghlan, recently published a Private Member's Bill, the Credit Institutions (Financial Support) (Amendment) Bill 2009, that aims to resolve this anomaly and Fine Gael will be seeking to amend this legislation to reflect our Bill. I sincerely hope that the support we are giving the Government in bringing forward this new Bill will be reciprocated by an acknowledgement on its part that the Fine Gael proposal to include all financial institutions in the legislation is a wise one. The last thing we need is another flawed item of legislation that continues to leave our people open to the type of greed-fuelled abuse they have suffered in recent times.