Sean Barrett (Independent)

I shall seek to be economical.

There is a general welcome for the Bill. As always, I welcome the Minister of State, Deputy Brian Hayes, when he comes in to this House. I agree with much of what Senators MacSharry and Michael D'Arcy have said.

Looking at where we stand, I would have concerns that the pillar banks represent a duopoly. I do not know why we chose that form of doing things. To have two protected banks has the consequence of driving out other banks. Foreign banks may leave the Irish market, as companies do in insurance when they see the Government intervening to designate certain producers or insiders in a market as protected institutions.

I would have liked to see some idea of a utility bank where the people could be perfectly assured that their money was safe and that they would behave like Irish banks used to, from 1783 until 2005 or 2006, that one could trust them with one's deposits and they would not act like a casino bank. The worrying aspect in this one is - there are strong measures taken by the Minister to prevent the growth of casino banks again - that there is the moral hazard problem that the good people in the business, if we get into trouble again, would be bailing out the bad ones. However, I note that there is provision to liquidate banks and get rid of them.

All told - I heard the troika, both in Kenmare and in TCD yesterday - the Government will be getting an accolade for its new banking policy. It is strict. I even heard people state it may be the model in Europe, that the Government has set the bar so high. This is good. We fell so low, we should now set it high. I do not want to anticipate what the troika will say but from the nuances we observed, it is pleased.

We must look at why the rules which were there were never enforced. Why did the Central Bank not say something about 100% mortgages or require larger deposits? The general view would be that the powers were all there and they were not used, and I suppose that is why this legislation is necessary. It could have been prevented had there been more active interventions by the Central Bank acting under the rules we had up to now. Is there a problem with legacy staff in banks who got us into this problem, and, indeed, the Central Bank? At the Joint Committee on Finance, Public Expenditure and Reform, the Chairman, Deputy Alex White, no doubt will be telling the Minister that there are too many people hanging around banks who were there in the bad times and they do not form part of the procedures to get the system back in order.

I do not have legal training, but I was concerned at sections 102 and 103 on the limitation of application for judicial review and certain rights of appeal to the Supreme Court. I thought those were sacrosanct and one could not bring in legislation stating one can never apply for judicial review, but I will leave it to the Minister of State to state whether it is possible to amend people's rights to a judicial review and to appeal to the Supreme Court, as appears to be envisaged in sections 102 and 103.

The Minister of State dealt with Part 5. On the market value of assets, we are not selling ghost estates because we were afraid we would not get any money for them and we will not deal with rents coming down because of the upward-only rents review. The sooner property prices go right down to the floor, the sooner the recovery of this economy will start. I never believed in the concept of long-term economic value and it was hotly disputed by economists when it was first mooted. It is a case of putting it on E-Bay to find out the value and to do it fast because the economy will then start to recover. This is preferable to pretending that items on balance sheets, as previous Senators said, have a fictitious value and this makes the people who own those balance sheets feel better.

This area was epitomised by the backstairs lobbying to which Senator MacSharry referred and by regulatory capture and the need for scrutiny and for an active Seanad. More checks and balances and more governance are required. I suggest all the Governors of the Central Bank should be interviewed by an Oireachtas committee. I note the programme for Government states that the Governor alone would be interviewed and the Governor regularly facilitates the joint committee on finance by his attendance and reports. This should also apply to the Central Bank board members.

The Minister of State has endeavoured to put in place the best administrative procedures for which I commend him. I suggest there has to be an early warning system in place in the Central Bank to communicate to the ECB in case there were to be significant inflows of capital which would destabilise the Irish banking system because it borrowed abroad and which would drive the property sector wild. We do not need large capital inflows. About 98% of previous inflows simply pushed up the prices of existing assets in land, housing and commercial property while only 2% went to agriculture or industry. A capital inflow into a small economy - as Senator MacSharry said - is not necessarily a good thing when we go out looking for an investment. I agree we need investment in industry and services and in products we can sell, but pushing up asset prices is not what we are interested in. The small countries have to be protected by the ECB from massive flows - as Greece must be - from France and Germany. In the past, large inflows of foreign investment might have been welcome but if such inflows are of the wrong kind, as Greece and Ireland discovered, they can do a lot of damage to an economy.

We need wise regulation of banks and bankers must be better trained because this was a problem. The troika delegation was highly impressed with the questions from our students. However, remarkably few of those students were ever employed in Irish banks or indeed by the Department of Finance. The Wright report has drawn attention to the fact that only 7% of the staff of the Department of Finance had qualifications in economics. I know the Department gets annoyed and telephones Marian Finucane's programme to complain about that figure but I understand it is the correct one. A large investment in human capital is required both in the banks and in the regulatory authorities in order to provide proper administration. It might be said we are closing the stable door long after the horse has bolted but we must ensure that no other horses do as much damage as happened to the Irish economy. I commend the emphasis in the legislation which will receive the much more important commendation from the troika whose members are pleased with our progress. We will probably end up with one of the more tightly regulated banking systems in Europe and that would be a very good outcome.