Brian Hayes (Dublin South West, Fine Gael)

We can look at that matter further when we debate that section on Committee Stage tomorrow.

With regard to Senator Gilroy's query as to why the Minister's consent was required, it is because he provides the funds to allow the system to be put in place. When the Minister steps back he will get his money back. The suggestion that some undue influence would occur is something we can look at. I do not believe that is the intention.

Section 15 provides that the Minister shall make regulations prescribing the rate of contribution to the fund by the authorised credit institution. In making those regulations, the Minister must balance the need for the fund to grow to an effective size with the need for the rate of contribution to be consistent with monitoring the commercial viability of such credit institutions. The Central Bank is undertaking an analysis of the appropriate collaboration of the banks. The Bill gives the Minister the power to set out the regulations and he will have due regard for the industry-wide concerns about them. A fair degree of consultation will take place on that point in advance of the regulations being put on to a statutory basis.

Senator Mooney asked about credit unions and his concerns were reflected by Senators on all sides. I repeat a point that has already been highlighted in Chapter 3 of the interim report of the Commission on Credit Unions. There was a significant fall in incomes in 2010 which has been felt by all categories and sizes of credit unions. Costs have risen significantly and arrears have increased dramatically since 2008, with a current average of 18% of gross loan book for the sector. Some 98 credit unions have arrears of more than 25% of their gross loan book. The picture is difficult and grim. In his reply to Committee and Report Stages of the Bill in the Dáil the Minister made the point that he is putting in place a means to identify the safety and security of the credit union system, both in the Bill and in how it is operated. That is something that has been reflected in all sides of the House and for which there is support. Nothing in the Bill should cause undue concern to the credit union movement.

Senator Sheahan spoke about a possible future composition of credit unions where a number of credit unions might merge in a regional structure and back-office staff could be put in place nationally or regionally with credit unions feeding into that structure. We must ensure that the same prudential system we expect for banks is in place for credit unions, without being so hamfisted as to demolish or make it more difficult for credit unions to advance. We all accept the importance of the credit union movement which impacts almost three million people countrywide and of the hundreds of branches that make such a difference across our communities. However, I do not believe that in the full light of day this legislation will be seen as a rough tackling of credit unions, rather it will ultimately make safer the environment in which credit unions can act. We can tease out that issue during the next Stages.

On Senator Sheahan's point on bridge banks, this Part of the Bill provides for the establishment of bridge banks to be considered in the context of a potential transfer of assets or liabilities from a credit institution experiencing difficulties. Bridge banks have become one of the tools available to the Central Bank to resolve a bank in crisis through the transfer from the distressed bank of certain assets and liabilities such as deposits so as to facilitate continuity of banking services to certain customers such as depositors. This Part of the Bill provides that the Central Bank may establish a bridge bank to act as a temporary transferee where it is not immediately possible to find a willing private party to become a transferee but where it is likely a willing transferee will emerge in a reasonable period of time. The bridge bank could be that mechanism for a number of credit unions which are in difficulty until such time as they have obtained full recapitalisation and are in a better condition. In response to the Senator's question about whether that could happen, the answer is "Yes, it could".

Section 17 provides for the formation of the bridge bank, namely, a private company limited by shares and wholly owned by the Central Bank or its nominee, where it is in the public interest to do so. The purpose of the bridge bank will be to hold assets or liabilities transferred pursuant to a transfer order. It is not possible for the Central Bank to provide capital funding to a bridge bank as this is not permissible by virtue of the EU's monetary financing prohibition which is intended to prevent a euro-system Central Bank from providing monetary financing to a national Exchequer. Accordingly, no capital will be provided from the Central Bank's own resources. I made the point earlier that this can only through the Minister and Central Fund.

On the question of financial incentives, this section provides that the Minister may at the request of the Central Bank provide a financial incentive to any person, including a bridge bank, to become a transferee and may enter into transactions of a normal banking nature in connection with or related to the provisions of such an incentive. It is an important feature that helps to ensure that where needed, a successful transfer occurs. As I stated, we can discuss this issue and the relevant sections on Committee Stage.

I believe the debate in the Seanad has been useful in highlighting a number of issues to which we can return on Committee Stage. The Minister and I would welcome any amendments or points of issue for discussion on Committee and Report Stages. Many of the observations that have been made by the troika in relation to our scheme of legislation were addressed in amendment form during the passage of this legislation through the other House. This is not a rabbit from a hat. A fair degree of work and deliberation has gone into this scheme. The view across the financial sector is that the Bill deserves a fair wind in terms of its putting on a permanent footing a system which can under-write the Irish financial system and give us protection so that we are able to cope, in a way we have been unable to cope during the past number of years, with whatever shocks that emerge in the future.

I commend the Bill to the House and seek support for it.