Marc MacSharry (Fianna Fail)

I join other Members in welcoming the Minister of State, Deputy Mansergh. I am glad to have the opportunity to make a few general points on banking. As we have all seen in the past few years, there has been an unprecedented crisis in the sector. The Minister of State outlined the reasons we had a property boom that fuelled the economy and a level of exuberance that has led to a great many difficulties.

It is interesting as one flicks through the websites of the various financial institutions that one can see stated a business mission and ambitions which in general terms are to provide a business activity of accepting and safeguarding money owned by individuals or entities and lending that money to earn a profit. At its simplest, that is what it is all about. One wonders how we got so far from the basic business when one considers the derivatives and complexities of banking today. Senator Ross and others can go into the more complex issues but I would like to keep it a bit more simple in my contribution. It is interesting to see the mission statements of the institutions which contain words such as "value" and "service", with phrases such as "deliver the highest standard of service in banking", "take personal responsibility", "to rigorously manage our costs" and "to act ethically and professionally, with integrity and commitment to our customer". My own nominating body, the Institute of Bankers in Ireland, the Irish Banking Federation and even the banks know these core values are expounded by many financial institutions filled with staff of the highest calibre. We know individuals from our among families, friends and neighbourhoods who have gone about their daily business in the most responsible manner, but all of this has drifted away in the past decade, during which we saw a national and international regulatory regime which was reckless in the extreme, thus permitting the exuberance and abuse to which I referred and which led to what is not just a national crisis but a very deep international problem.

I will consider the question of an inquiry, but I wanted to express a few basic thoughts of my own on the regulatory system in Ireland. There is a concept of targeting; banks are set up in such a way that they must make a profit for shareholders or owners. Many of us go to a bank for objective advice on the best place in which to invest, make a deposit and the type of account one should use to do this. We may want to know what product to buy if we are to achieve A, B or C. It is impossible to receive objective advice from the most decent and conscientious of staff members, however, if they are driven by targets. It is impossible for them to provide objective advice, although I am not saying some do not do so. From a regulatory perspective, we cannot nurture a regime to provide for the provision of so-called objective advice for clients when there are sales targets for the various products on offer. As we have seen in the past few years, there is far too much of a focus on short-term rather than long-term achievements.

This targeting issue will be extremely difficult to deal with and I do not know the precise solution but it is a good starting point. State entities could provide such advice on whatever products are available from the various commercial banks and financial services operators. I assume there would be a huge cost to all of this, but nevertheless it is an area that should be examined.

The Minister of State and some Senators from Fine Gael mentioned that Ireland's path to recovery has involved our State guarantee for deposits and other covered liabilities to the banking system, the recapitalisation of Bank of Ireland, AIB and the nationalisation of Anglo Irish Bank. We are set to have further capitalisation and further moneys will be put into those institutions, giving the State more ownership of them. We have also seen the establishment of NAMA, and I join the call made on the Order of Business today that we might have a debate on NAMA and its progress so far. Senator Regan made that call and I certainly welcome it. He stated that he was at the European Commission yesterday to see the details of the scheme put forward by the Government to the EU. I am sure we could all benefit from a debate of that nature in this Chamber, so I look forward to it in due course.

One of the key areas is in the reform of our financial regulatory system. We have created the Central Bank of Ireland Commission which replaces the old structure of the Central Bank the Financial Services Regulatory Authority. The new commission has presided over the appointment of the head of financial supervision, Mr. Matthew Elderfield, who will report to the commission on the regulatory and supervisory functions of the new structure. He was appointed in October 2009 and is not an Irish national. We look forward to him bringing his expertise and experience to that position. The Governor of the Central Bank will report on the performance of the Central Bank and its functions, and Mr. Patrick Honohan was appointed to this position in September, the first outsider, as it were, to be in this position. These moves have been welcomed nationally and internationally. Since these measures were introduced, our credibility, ratings and the perception of what we are doing have been extremely positive.

The lack of a global approach to a few basic parameters on financial services worries me. Governments should sign up to a basic set of regulations and parameters to prevent against this kind of crisis happening again. A new regulatory agenda, stronger co-ordinated supervision and effective crisis management procedures were announced by the EU in October 2008. In the last week, we have all seen the copy of the draft EU legislative package on reform of its financial supervisory and regulatory framework, which has been welcomed by most. The new legislation will create the European systemic risk board, which will carry out macro-prudential supervision across the EU. My worry is that recommendations made by the board will not be legally binding, but recipients are expected to act on a comply or explain basis. That kind of light touch suggestion is potentially one of the things that contributed to the difficulties we have had throughout the world. I think the recommendations should be made legally binding.

The second part of this legislation will see the establishment of the European system of financial supervision, which will create three European supervisory authorities, namely, the European banking authority, the European securities and market authority and the European insurance and occupational pensions authority. These will contribute to the development of a set of harmonised rules across Europe. They are welcome, but any recommendations need to be legally binding.

We have been cautioned not to rush this legislation, but it has been broadly welcomed by all our European counterparts, the Department of Finance, the Oireachtas Joint Committee on European Scrutiny, the Irish Bankers Federation and Financial Services Ireland. Senators referred to plans by President Obama to crack down on US banks by banning their ability to own, invest in or sponsor a hedge fund or private equity fund or to make bets with their own money under proprietary trading. He also introduced a ten-year levy on banks to recoup the losses taxpayers will incur on bailed out funds. We also have the option in the NAMA legislation for the bank surcharge.

The Minister of State went into detail on the banking inquiry. While I welcome the approach, we do not need the type of public hearing we have had with tribunals. I am confident that the two reports being carried out by the Central Bank and by the wise man or woman yet to be named will help us to have terms of reference which will make the statutory commission much more effective than the tribunals, which have not served us well at all other than to enrich certain quarters and provide easy copy for lazy journalists. I believe in the capability of the Oireachtas to assess those initial reports when they come, to ensure the correct terms of reference are provided, and to ensure the Joint Committee on Finance and Public Service can and will hold public hearings after that statutory commission has reported. If there are cases to answer, legally or otherwise, we will achieve our pound of flesh on behalf of the public. There is much justified anger and we are all entitled to have answers to the questions.

When the treasury select committee in Britain was trying to identify lessons to be learned from the banking crisis, it received 6,000 written questions from the public. We should encourage that here. Whether it is in Mr. Honohan's report, the report of the so-called wise person or the report of the commission itself, we should allow members of the public to put forward their questions so that they are considered. That worked exceptionally well in the UK, and I note that the journalist who mentioned it in The Irish Times, Ms Elaine Byrne, has set up a website which she hopes will attract some of those questions, namely, www.bankinginquiry.ie. We should welcome that.

I have been pushing for quite some time for changes to the Enforcement of Court Orders (Amendment) Act 2009 which will prevent against the granting of repossession of a primary family residence unless a complete analysis is done of the repayment capacity of the borrower and the original underwriting quality of that application, and that a list of alternative actions other than repossession be assessed. These might include interest-only payments, the institution taking equity and so on.

The higher interest sub-prime personal debt lenders such as Provident plc and another company in Cork are legally charging 187% APR, which is disgraceful. We need immediate reform in this area, as 30% or less is more than enough for any institution to charge. A collector for Provident plc admitted to me today that a formal instruction from his boss is to discourage engagement with the money advice and budgeting service, MABS. That is scurrilous and reprehensible. This is a licensed lender in this State. These are the kinds of reforms I would like to see and I look forward to debates on these issues.