Paschal Donohoe (Fine Gael)

I welcome the Minister to the House to discuss this important Bill. The Minister enjoys reading and also, when possible, putting forward a very strong defence of his Government. Given those two factors, I recommend a recently published book to him that covers both those levels, What Did We Do Right? by Michael O'Sullivan and Rory Miller. It makes for very good reading in the present environment because with regard to all the factors we are reviewing - the difficulties we face, the challenges, the things that went wrong and those for which this Government was responsible - the book details the different things that went right in Ireland during the past 20 to 30 years and that played a role in delivering economic security and prosperity for a period to our country. We want to see that situation return and because we do, it is incumbent on us at times to reflect on what went well and why.

The book introduces an idea I had not come across before and which came to mind when I was preparing to discuss this Bill. It is the idea of "intangible infrastructure". This is an interesting concept given that today is also the day that cutbacks in the more tangible end of infrastructure have become apparent. The work defines intangible infrastructure as meaning successive factors that develop human capability and permit an easy and effective growth of business activity. This can cover a great variety of things, for example, faith in law, faith in the institutions that are meant to govern us, concepts such as intellectual property and ensuring such concepts are implemented and done well. Most pertinent to this Bill and our discussion is the focus on the role of our banking institutions and banking regulators in creating an environment within which people can have trust and faith that our banking institutions are working and, more specifically, that these are being well regulated. Within that area people are given the confidence to spend and businesses the confidence to invest.

That is why in any legislation or move by any Government that seeks to deal with the difficulties our banks and regulatory structure have faced, there must be factors we welcome. There are many important parts to this Bill, which, having considered and reviewed them, I believe merit welcome. They will make a difference. Sadly, I also have some grave concerns about the operation of this Bill which make me question whether the lessons we spoke about have truly been learned and whether the intent exists to learn from what happened and ensure it does not happen again.

The Bill is very important legislation. It proposes one of the most important changes in our regulatory architecture since 2003 and the legislation that put in place the Central Bank and Financial Services Authority for Ireland. This moves away from such a structure to creating one in which the Central Bank commission will have a far more central and co-ordinating role to play and to which some of the agencies in question will report. I welcome some aspects of this Bill. Those items that are worth welcoming are the role the Bill gives to allowing the regulated capture of individuals not doing their role properly or in line with the expectations of the regulator. The phrase used in the Bill is "probity and fitness". We can see how this would be defined and how it allows the new regulator to understand whether people are performing in line with that standard.

There are a number of different powers detailed in this Bill which I believe will make a difference but that difference will relate to individuals. These are the powers in regard to pre-approved controlled functions where the new system will nominate particular roles across the banks it regulates and will play a role in ensuring the people in those roles are displaying probity and fitness, as outlined. The Bill also makes clear what will happen if those qualities are not displayed. The ability of this system to deliver a suspension is mentioned, as are its powers to investigate and ensure the right powers are in place to understand whether an individual is doing his or her job well. Some items in the Bill represent improvements and a step forward but I am very concerned that in two areas there is what I consider to be a step backwards. There is also what I see as a missed opportunity.

I refer to the credit union movement and the points the Minister made in that regard. What disturbs me most about the legislation is the structure laid out in regard to the appointment of the commission which will have considerable power in terms of guiding this new body and ensuring it does the job intended. I am not sure whether the Minister's speech laid out what that structure will be. If it did, I apologise for missing it. However, it specifies the three different groups or kinds of people who will play a role in it. First are the chairman of the commission, those who will play a role in financial regulation and the person who will play a role in central banking functions. Second is the Secretary General of the Department of Finance. The third group are those members of the commission who will be nominated by the Minister and the Department of Finance, and this is where my concerns are reservations become apparent, and in two areas.

Why is it necessary and why does the Minister believe it important that the Secretary General of the Department of Finance sits on this body? The Minister has acted very well by bringing outsiders into very important roles within our regulatory system. Mr. Elderfield and Professor Honohan are people who bring experience beyond that they would have picked up within the Department of Finance or in business in Ireland. One reason I welcome that action so much is that it allows an escape from the culture that would be created for someone who works for a long time within a particular Department or area of Government. Given the work the Minister has done in this regard, I question why it is important the Secretary General of the Department of Finance be on this body. Does it not provide a mechanism within which it might be perceived that the views of the Minister would in some way be relayed indirectly to the commission through his Secretary General?

The other area, which is perhaps of greater concern, concerns the powers presented by the ability of the Minister for Finance to appoint six to eight members of the board, as specified in the Bill. I have no doubt about the Minister's good faith or bona fides in this area but I have severe doubt - as history will corroborate - about many of the people who have been appointed to positions of authority within our semi-State and regulatory bodies in the past ten to 15 years. Can we not learn from this experience and put in place a mechanism whereby the people who are to be appointed to this commission, which we trust will ensure this situation never happens again, are appointed without political influence from any Government, whatever its political hue or make-up? We have seen repeatedly that where appointments are made, as influenced by Government or a political party, questions will arise regarding the ability of those appointees to perform their role and regarding the attitude they bring to the role. One of the big lessons we must take on board is that the people who are to be appointed to these roles not only must be free from political influence but, more important, must be seen to be free.

Our country should consider putting in place organisations and bodies, on which there is no political influence and which are genuinely independent, that can provide a second opinion on the work that Government and the Department of Finance is doing. In that spirit, putting in place a commission to which political appointments will be made raises the spectre for me of the establishment here of the forces of crony capitalism reasserting themselves at some point in the future. Given the number of Members of this House who have pledged that this will never happen again, why are we putting in place a mechanism that at least provides the potential for this to happen again? This is one of the reasons we will not be able to support this Bill and one of the issues to which I would like the Minister to respond.

The second reservation I have about the Bill is that it in many ways represents a missed opportunity. I was here the night the Minister brought in legislation to provide for the bank guarantee scheme and I noted the sweeping powers that were put in place to allow his Department to examine the structure of our banking system and make decisions in regard to it. As I was preparing for the debate on this Bill, I came across a person who knows a great deal more about banking than I do who summed up very well the situation in which banking globally and in Ireland finds itself. This person's name is Nouriel Roubini. He was one of those people who appeared to have called well what was going to happen. He wrote we are now in the worst of both worlds where many too-big-to-fail institutions have been bailed out and expect to be bailed out in any number of future crises. He further wrote that they as of yet have faced no sustained regulatory scrutiny and no system has been put in place to put them into insolvency should the need arise.

In a week where the European Commission has published major reservations in regard to the Government's plan for Anglo Irish Bank-----