Marc MacSharry (Fianna Fail)

I join others in welcoming the Minister, Deputy Brian Lenihan. It is great he is here to take this Bill.

I also welcome this opportunity to make a few points on the Bill in the form of a mild rebuttal of the previous speaker's two main objections to it. The Senator's second point related to a letter that was written referring to something last March, which was superseded. It was highly irresponsible of the media of cover this in that way and I am sure the Minister will raise it with them.

In terms of perception, when boards for semi-State companies or otherwise are being put together and if a nomination is made by the Government, we often hear that it must mean cronyism in the extreme. It is worth noting that David Begg is on the board of the Central Bank and he is hardly the epitome of what one would call cronyism. Apart from that, I have respect for the institutions of the State and whether it was Fine Gael, Fianna Fáil or whatever other party that is in power, I believe in its capability to identify people who have the appropriate expertise, experience and capabilities to do a job. With some 6 million people on the entire island, it is conceivable that one can trace, by six degrees of separation or less, a line of direct lineage to somebody who may have once voted Fine Gael in, say, the local elections of 1967 or otherwise. The old crony capitalism debate does not hold much water with me. If any Government in the history of the State has made more advances in the context of improving the levels of corporate governance and standards in this area, it would have to be the current Administration and, in particular, the current Minister.

The Minister has given a detailed outline of the Bill, and other contributions will also be made. Senator Donohoe has been broadly supportive of the Bill. However, before making some brief points on it, it would be remiss of us, having the Minster in the House, if we did not welcome today's interim report by Hugh Cooney's interim group on mortgage arrears. The interim group has come up with some thoughtful recommendations which, as the Minister said in his contribution, can be implemented very quickly in terms of the mortgage arrears resolution process that will be established, the changes to the code of conduct in mortgage arrears which the regulator will introduce and the standard financial statements to which it is anticipated the various financial institutions will sign up. I hope they do that and that these measures can be implemented very quickly. In terms of the group I established, the Prevention of Family Home Repossessions Group, the interim group's recommendations go some way towards incorporating the recommendations we made. We met the Minister, and we are thankful for that meeting and that Mr. Cooney's group has reflected our recommendations, but we look forward to the final report being issued towards the end of September. As with all the many initiatives in the past number of years from a legislative perspective, I commend the efforts of the Minister and the Government and look forward to more in that line.

I welcome this opportunity to make some brief points on this Bill. The financial crisis of the past two years has highlighted the weakness of the financial regulatory systems here and throughout the world and how much they permitted. I refer to the reckless level of lending that took place. We are seeing reform in the financial sector throughout Europe and America, on which I have made points in the House previously. I am not as confident of the international focus on regulatory reform as I am of our Minister in his introduction of the first of three Bills in this area that will be brought forward, not least the other measures. In his concluding remarks the Minister might tell us some more about his views of what is going on in the international sphere to try to ensure we will not have a repetition of the disastrous lending and lax regulatory environment we have seen which led to these crises.

The light touch regulatory models have proved to be inadequate to the goal of having sound financial service providers. The Consumer Consultative Panel of the Financial Regulator 2009 stated that complacent and permissive was how Professor Patrick Honohan described the Irish Financial Regulator before becoming Governor of the Central Bank. As the Minister mentioned, the preliminary report of Regling and Watson on the sources of the banking crisis highlighted the main failings of supervision. The supervisory culture was insufficiently intrusive, and staff resources were seriously inadequate for the more hands-on approach that was needed. Governance failures were not addressed sufficiently. Macro-financial vulnerabilities were underestimated. These are all lessons from which we have been happy to learn.

Professor Patrick Honohan's report found three route causes for the lack of financial regulation. The regulatory approach was perceived to be excessively deferential and accommodating, insufficiently challenging and not persistent enough. That was in an environment which placed undue emphasis on fears of upsetting the competitive position of domestic banks and on encouraging the Irish financial services. It also said there is an under-resourced approach to banking supervision and an unwillingness by the regulator to take on board sufficiently the real risk of a looming problem and act with sufficient decision or force to head it off in time.

The Minister has gone through in some detail the main provisions of the Bill. I welcome in particular the provision regarding the head of financial regulation. We can clearly see the work Mr. Elderfield has been doing. I also welcome the second position of head of the Central Bank. The Central Bank will have the statutory power to regulate sensitive or influential points in regulated financial services providers, including the power to direct that a person should not be appointed to perform a control function. Those that carry them out must meet and adhere to standards of fitness and probity. It also includes the power to direct that a person should be removed or suspended from the performance of a control function where the bank is satisfied the person is not a fit and proper person to perform such a function. I very much welcome these additions to the Bill.

It may be covered in the Bill, but I wish to refer to the kind of financial advice members of the public require when they wish to procure a pension, savings product or whatever. Senator Ross heard me make this point many times. It is an impossibility to receive objective advice in a sales targeted environment where a bank manager, teller or whatever member of staff in the financial services sector has sales targets for a particular product. There is no question that a member of the public can secure independent advice which is appropriate to his or her needs when targets exist. I do not know what the solution is but we will have to come up with some kind of structure which allows for that. There may be scope for it in future under MABS or another structure but there is a need for it.

People go to their accountant, solicitor or estate agent to seek this kind of advice. I remember a number of years ago the joke about a particular insurance product was that it advertised that it would educate one's children, the joke being that the only children who would be educated by the product were the broker's children because it was based on commission rather than on what one would manage to save. The Minister understands the point of view and perspective from which I am coming with regard to that. It is something we need to address, perhaps not in this Bill but in another Central Bank Bill.

The issue of credit unions was raised and while I appreciate the detailed response of the Minister, clearly they do not share the confidence he has at this point that they will be able to continue the good work they are doing. One general manager of a credit union who worked with me on the prevention of family home repossessions group made the point that when they are potentially at their most valuable in how they can assist families, there are aspects of the Bill which will limit them. While I appreciate that, out of the some 505 credit unions we have nationally a handful were not doing their business in a way which would inspire confidence. I understand those that had difficulties managed to resource them from their own resources and protection funds. That does not in any way suggest they should not be fully regulated; indeed they wish to be regulated.

At a time when we are seeing an increased number of families and the public seeking the services of credit unions they have concerns that this may introduce a level of regulation which, in advance of the review announced by Mr. Matthew Elderfield of the Irish League of Credit Unions, may be premature, pending his investigation into what regulation is needed. Following his review he may say more regulation is required. At this moment it has those concerns. While I appreciate the Minister has made the position clear I ask him to reflect a little on it.

There has not been much comment in the media, nationally or otherwise, on the Bill in recent days. The ECB, as the Minister said, welcomed the restructuring but called on us to ensure the independence of the Central Bank, the Governor and the new commission in the exercise of the European system. The Minister pointed that out clearly in his contribution. As a further step on the road to the rehabilitation of our financial sector and to complement the balance of our books and our pursuit of bringing our deficit under control I commend this Bill and the Minister's continuing efforts on our behalf to the House.