Darragh O'Brien (Fianna Fail) | Oireachtas source

I thank Senator Barrett for bringing forward another piece of legislation on improving the financial stability of our banking sector. It is good to see the Minister of State here again. It is particularly relevant, given the day that is in it.

I have read Senator Barrett's presentation which is well thought out. It is a genuine attempt, as part of a solution, to prevent a repeat of the banking crisis. I disagree fundamentally with Senator Sheahan that this cannot happen again. Unfortunately, it could recur in the future. History has a way of showing that societies tend to repeat their mistakes in cycles. That is why we have to place some controls on the banking sector, despite the presence of the Financial Regulator and the Central Bank's Governor. The way to do so is to put greater constraints on the activities that banks can undertake.

This Bill should be looked at in tandem with measures to progress full European banking union. We could argue the toss about fiscal or political union but European banking union, as proposed by the EU, is an absolute necessity. We should therefore have a proper European-wide regulation of the banking system in line with that aim.

The threat we are currently under concerns the issue that our pillar banks are too big to fail. However, should an Irish bank operate incorrectly and recklessly in another jurisdiction, as things currently stand, Irish taxpayers would have to pony up again and carry that burden. We had the apparent agreement of 29 June 2012 with the seismic shift in breaking the link between banking and sovereign debt but, bar the wording, we have not seen any movement to formally achieve that.

I refer to current events in Spain and the difficulties being experienced there at present. That country is conducting an in-depth analysis of its banking sector and it now is feasible to envisage the Spanish banks being recapitalised directly through the European monetary system. However, Ireland is still left holding the baby. In his one and only appearance here last July, the Taoiseach admitted in this Chamber, probably for the first time, that on that famous night Ireland had no option available to it. Ireland did not have access to another mechanism in Europe to recapitalise its banks further, as none existed. However, we must now work towards a system in which direct recapitalisation of banks can take place through the Eurosystem, using a European mechanism rather than by the host country's taxpayers. Senators Barrett's Bill would reduce the risk of and need for this to happen again.

If one considers the issue of an institution being too big to fail, one reason I argued vociferously against the EBS in particular being subsumed into AIB was there was then an opportunity for a bank from the United States to take over the EBS. The deal was pretty much done, whereby the EBS would have become a proper retail high street bank that would have given to the small and medium-sized enterprise sector the competition about which Senator Sheahan spoke. The present position effectively is there are two large Irish banks. However, when those banks are fully cleaned up - an outcome sought by all and which will happen - they will be bigger than the Irish economy. Consequently, there is a risk in the future of both AIB and Bank of Ireland again becoming a systemic risk to the Irish economy and the Irish taxpayer because the Government has made a conscious decision to the effect that the approach of having two pillar banks is the way forward. I disagreed with it then and disagree with it now. However, when considering potential solutions, Senator Barrett's Bill certainly goes a long way towards doing that. He has been obliged to park other items of financial legislation he had brought forward in the Seanad. Once again-----