Deirdre Clune (Fine Gael)

I am glad of the opportunity to contribute on this Bill, which is necessary and important. It is important for many reasons but mainly because of the signal it sends out internationally, although I know that jars with many in this country who are suffering the consequences of the collapse of the banking system and the property boom. It is important to send out a signal internationally that we are establishing a strong banking regulatory regime that can intercede to ensure that financial institutions that are important to the economy can be managed if they fail, with the aim of avoiding the catastrophic consequences of previous bank failures. We are establishing such a system permanently against the backdrop of EU discussions. I know it is of little comfort to hard-pressed taxpayers, but it is important that we have such a system.

The Bill gives powers to the Central Bank to deal in a much more effective manner with banks that are likely to fail. As outlined previously, it offers many tools for doing this, including bridging banks, the ability to transfer assets and liabilities from failing banks, special management orders and special resolution regimes, all of which are extremely important.

The Credit Institutions (Stabilisation) Act 2010 was enacted by the last Dáil as a temporary measure which would cease to apply at the end of 2012. When that legislation was going through the Houses there was a great deal of concern that it conferred enormous power on the Minister for Finance to seek court orders to issue directions to banks, restructure them and reorganise their assets and liabilities. Without casting aspersions on any individual, this seemed to present a danger of investing too much power in one person. I am pleased that in this Bill, under section 8, a different approach is being taken whereby conditions must be met before the Central Bank can intervene and that the latter, under the Governor, is the body responsible to initiate any actions that may need to be taken under the legislation. That is an important difference which should address Members' concerns in this regard.

The Bill deals with the continuing consequences of decisions made in the recent past. The various inquiries into what happened since 2008, including the Honohan report, Regling and Watson report and Nyberg report, all found that the problems arising in the banking sector were domestic in origin but brought to the fore by global influences. Several speakers referred to the guarantee initiated by the previous Government in September 2008. It is now clear that the problem was not one of liquidity but of insolvency. Different actions might have been taken if that information was available. The former Minister for Finance, the late Brian Lenihan, was clear in the information he gave to the Dáil at the time, which was the information available to him. If the full facts had been made available to him, the situation today might be different.

The Honohan report indicates that the Central Bank was working in early 2008 on a framework for a resolution similar to that set out in this Bill three years later. The wheels of bureaucracy take a long time to turn when it comes to such matters. Many speakers referred to the need for the type of regulation provided for in the Bill. It is one of several measures that will help to restore confidence in our economy. The international media and the troika, representatives of which are in Dublin this week, agree it is an important step along the road. The appointment of Mr. Matthew Elderfield as regulator was another important development in terms of restoring confidence in our ability to ensure effective regulation of the financial sector. I welcome his comments at the weekend regarding interest rates. Action to protect home owners with variable mortgages was long overdue in terms of ensuring they do not bear the full brunt of the costs associated with the difficulties in the banking sector.

On the special resolution regime, I assume the taxpayer will bear at least part of the cost of this initiative. How does the Minister of State envisage it will proceed? There are 40 banks and building societies licensed under the Central Bank Act and once the 2010 Credit Institutions (Stabilisation) Act expires banks and building societies will be liable also to contribute to the fund. The Minister of State might give some idea of the structures that will be involved in that regard.

The Bill will not be attractive to the many people watching proceedings in this House and in the Dáil but if we had this Bill in place we might not have to deal with issues such as the pension levy, budget 2008, the universal social charge, small and medium enterprises not getting funding, businesses collapsing, people struggling with mortgages, young people having to leave the country and all the social consequences of that, the pension time bomb we saw depicted on television last night, and the budgetary position facing us in December. However, I will not be negative by saying it is closing the stable door after the horse has bolted. It is necessary legislation that we must put in place to instill confidence in our banking sector.