Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank all Members for their contributions which we very much welcome. It is fair to say that the task facing this Government is to get the banks out of the accident and emergency ward and into the real economy where they can become profitable and start lending again and, most important, we get our money back from them. I was before a finance committee meeting last week where I made the point that more than ¤20 billion has been taken from the National Pensions Reserve Fund. That is our money and we want to get it back because that money has gone directly into the pillar banks in the first phase of recapitalisation, with other money, and therefore it is in all our interests that we get that money back over a period.

I very much agree with the comments made by a colleague of Senator Barrett, Mr. Colm McCarthy, in University College Dublin who has said repeatedly that if we have a single currency there must be within that single currency a means through which we can resolve banks that go bust in a collective way. America has a federal system where effectively banks that go bust because of bad lending policies are propped up and reserved by the totality of the lending that goes on within that federal system. Europe has gone through this contortion of recent years because we have not had in place a single supervisory system, a proper means of resolution on an EU-wide basis, and a deposit guarantee scheme in place.

In the next six months Ireland, as President of the European Union, will play a pivotal role in the way we bring forward the next two steps towards banking union. The agreement to have in place the European Central Bank as the single supervisory system is a crucial decision taken last week but now we must go on in terms of agreeing a resolution system and a deposit interest guarantee system which will underlay and retrofit the essence of having a single currency, about which the Minister for Finance has spoken. I agree with Mr. Colm McCarthy who has spoken about that. We must have within a single currency a single means of resolution, a guarantee and supervision. We have not had that in Europe and we are now retrofitting the entire system to put that in place.

I agree with Senator Michael D'Arcy who spoke about a necessary evil, and Senator Gilroy said it was a pity we did not have this in place when the collapse occurred but we did not because we all believed that the banks would continue on their merry way. Extraordinary lessons have been learned from that and that is the reason it is important that this necessary evil remains in place.

Senator Gilroy asked when I envisaged this coming to an end. As I said to the House recently, the Government is confident that the eligible liabilities guarantee, ELG, scheme will be brought to an end in the first part of next year. That will be a substantial shot in the arm for the pillar banks in terms of returning them to profitability but we would still need to have this power in place to ensure that if things were to go wrong again the Minister for Finance would have the powers to take the steps required in terms of guaranteeing the public interest. In the long term, however, one would hope to see an over-arching European Union scheme in place which would give this country, and other countries within the eurozone in particular, a guarantee in that respect.

My old friend, Senator Ó Clochartaigh, referred to the commitments made before the last election. I want to inform him of what we committed to at that time. We committed to restructuring the Irish banking system, and the first announcement made by the new Government in coming into office in March 2011 was exactly that following the results of the prudential capital assessment review, PCAR, test. The second commitment we gave was that junior bondholders would take a bath, so to speak, and they have taken a substantial bath in that between ¤7 billion and ¤8 billion has been successfully transacted in terms of that announcement in March 2011.

The third commitment we gave, while wanting to deal with the issue of senior bondholders and attempting to negotiate it, in our election manifesto, was that we would not take any unilateral action in this regard. I remember it well because I was beside the Minister for Finance, Deputy Michael Noonan, as the deputy finance spokesperson in opposition. Why did we say that? We said it because the very funders who are keeping the country afloat, the ECB system which is continuing to fund emergency liquidity into the Irish banking system, and the view of those countries and, in particular the majority of the ECB, is that it should not happen. I agree with the Senator that there remains a legacy issue. That is what the Government is attempting to negotiate with our EU partners, the unique legacy issue that Chancellor Merkel and President Hollande have accepted needs to be resolved for Ireland. This is a work in progress. We have attempted to work this out since coming to office and both parties have shown a strong determination to get the country to a better place by renegotiating the debt position as a result of the legacy debts lefts by Anglo and other institutions. We are determined to get a result for the country by diplomacy and clever political actions but not by throwing the baby out of the pram and certainly not in the circumstances where the national funding required for the country and the funding required for our broken banking system is coming from third parties who do not want us to do such a thing. We remain hopeful that we can get the deal required.

Everything we have done since coming into office has been in terms of the solid commitments we gave before the election as can be judged against that background. I refer the Senator to our banking policy paper published in the manifesto a month before the last election and he will not point out one difference between what we said we would do in opposition and what we have done in government. That is a test I put to him during the Christmas period if he is sitting in front of the fire. He should take out our banking policy before the election and test it against what we have done. We said we would introduce massive restructuring and we have done that. We now have pillar banks. We have a very substantial Department of Finance which has broken away with a new Department and has a strongly focused banking unit within it which deals on a bilateral basis with all of these banks on a daily basis. All the old directors are gone. We have had significant deleveraging of the banks, significant bank assets have been sold off and we have a much smaller banking system, as set out in our banking policy announced before the last election. The objective is to move the banking system from intensive care into a more normal arrangement where we can get funds back into our banks on a consistent basis.

Points have been raised about the review issue. A review of bankers' pay and bonuses is under way by Mercer which I understand has yet to come to the Department of Finance; the objective was by the end of this month. Obviously it will be a matter for the Minister for Finance in the first instance to reflect on that review and to bring it to Government in due course. We also said we would do that in March 2011 - we have done it. It is a matter for Government as to when it will be published but I hope the review will meet the time in terms of what is required for bankers' pay and bonuses into the future.

I have noted comments made by colleagues on all sides concerning the public interest directors. As Senator Ó Domhnaill mentioned, they have a fiduciary requirement in that under company law they are responsible for the interest of the bank or the company but equally they have responsibilities on behalf of the public interest. It is that balance they have got to strike in a circumstance where they do not report to the Minister for Finance on an annual or daily basis. That is not their task; their task is to get the balance right between bringing the banks, of which they are members of the board, to a healthier position and representing the public interest. I look forward to their engagement tomorrow at the Joint Committee on Finance, Public Expenditure and Reform. Since coming to office, the Government has not appointed any new public interest directors. It is fair to say there is an open debate between the Department, the Minister and the Government about the role of the public interest directors and about their ambition and what they are at on a constant basis. The Minister for Finance is open to hearing the views of the committee and Members of the House on the future role and objective of the public interest directors in a context where we have not appointed any of them. This is not a diminution of the people in question who are of high standing and the role they play but there is an open debate on this question. We would appreciate the views of colleagues on all sides in coming to a considered view as to the future role of public interest directors within the pillar banks.

I have answered the question on the review. I agree with colleagues that the job of the banks is to go back to their traditional task which is to lend with prudential risk, to get money into the real economy. We have given them a mandate of investing ¤21 billion over three years for each of the pillar banks into the real Irish economy. We have given them the task of getting their mortgage books into a better state, about which we are all ambitious. We will begin to see more progress next year once the insolvency Bill is through and the agency is working.

I have taken a great interest in what the banks have said in their submission to the Central Bank concerning the new schemes which will be put in place. They need to get on with the task in 2013. I agree with the Governor of the Central Bank who spoke about the need for the banks to get on with the task of writing down some of the debt on a case-by-case basis where they believe that is appropriate. The tools are in place through the insolvency legislation, therefore, there can be no more excuses. It is worth saying that the banks have met their target so far. Much of that lending is for the purpose of restructuring existing businesses. Colleagues appear to think that is not new lending. It is new lending, because without that restructuring many of the jobs within those businesses would go belly up. We have got to get the balance between absolute new lending when it comes to SMEs and restructuring existing debt to ensure those businesses can remain viable. The Government has also put in place the micro loan financing scheme and the loan guarantee scheme as a means of helping those businesses that cannot get credit from the banks.

As to the future of the CISA we will have to wait and see. This is a long process. The progress made so far is leading to a more normalised banking system. I note that according to the Financial TimesMr. Draghi of the ECB is the man of the year, I do not disagree with that selection. He gave the banks across Europe three year funding at 1% and has consistently argued that one of the roles of the ECB is to buy up national bonds and debts. Both policies appear to be working well. When comparing the situation in December this year to December last year, are we in a better place? Yes, we are. Is Europe in a better place? Yes, it is. Have we seen progress in the past 12 months? The six pack, the two pack, the fiscal treaty are in place and now there is agreement on a supervisory system and much more detail to come. Enormous progress has been made during the year.

In December 2011 people asked how many weeks Greece had got to go before it was out of the euro. That question no longer applies. The Greek issue has been resolved somewhat in terms of the new funds that have been put in place. We are in a better place across the eurozone because of the actions taken by the political leadership across the euro area. We are definitely in a better position because our banks have been well capitalised and have the funds and the means through which to get lending going again. It is that nebulous confidence trick that is required not only to get lending going again but for lending to be drawn down. There is little point in banks making funds available to businesses if they do not draw it down. The Credit Review Office has consistently made the point that it is one thing for the banks to make moneys available, it is another for businesses to draw it down.

We saw the figures published today by the Department of Finance showing growth in GDP and GNP. Our projections for this year have come in on target in terms of growth. We are hopeful that next year we will see a significant improvement in GDP figures which will have an impact on the domestic economy. The big task is to get people back to work as a result of the shock of some years ago where effectively 12.5% to 13% of GDP was knocked out over three years. That is the task the Government faces in working with the banks to achieve what we want. This motion is an essential pre-requisite to that in terms of giving significant powers to the Minister for Finance to take the measures he has to take. These are the big stick powers required if a situation like this re-emerged.