Aideen Hayden (Labour) | Oireachtas source

I welcome the Minister of State to the House again. It is appreciated that he attends here as regularly as he does. I congratulate Senator Barrett on the Bill he has introduced, which made very interesting reading. There are particular aspects I found fascinating and wish to dwell upon. I take the Minister of State's point. Effectively there are two perspectives here, which can run on parallel tracks. One relates to EU regulation, or international regulation of the banking sector and one deals with the specific national needs that we in this country have. The crux for me is the provision in the Bill to separate the banking activities which relate to households and small and medium enterprises, what Senator Barrett terms "core activities", away from wholesale or investment banking activities which by their nature carry a greater degree of risk and exposure, ultimately for the individual taxpayer. I am very interested in Senator Barrett's analysis of what he terms the Government-put option. His analysis of the situation is most persuasive. Ironically, Senator Barrett and I would be inclined to disagree on a number of issues. He would broadly be what I would call a monetarist in terms of his approach to the economy while I would support a Keynesian perspective. I believe we agree on one point, however, namely, the current banking system has completely failed us.

As a member of the Oireachtas joint committee on finance, I am permanently at a complete and total loss as to why, when members of individual banks come before that committee, they do not give anything that remotely approximates to a straight answer on anything. I do not make that comment lightly. As Members of this House know, I am particularly concerned about the issues of housing and mortgage arrears but I have yet to get one single straight answer from any of the pillar banks as to how they treat individual borrowers who are in arrears. There is absolutely no certainty or transparency. Unless there is a complete change in the banking culture of this country we will never have a banking system that remotely approximates to what we need.

On the issue of the current banking system, I believe that what I would loosely call Senator Barrett's two-tier system has much to offer. Loans to Irish households decreased by over 4% in the year to January 2013. Lending for house purchases is down and lending to non-financial corporations is also down. If domestic demand is to recover, we need a banking sector that is capable of dealing with the domestic economy, which it is currently not doing. I acknowledge recent Government initiatives to encourage banks to engage but I remain very sceptical about the ability of the existing banking system to deal with the category of borrower who is in the first tier, as defined by Senator Barrett, namely, households and those with small and medium-sized banking requirements.

I do not agree with Senator Barrett's analysis that the influence of international governments on the current situation was benign. I actually believe that there was a fair degree of collusion by governments internationally, in terms of the light-touch regulatory regimes that were put in place, stemming from the collapse of the welfare state at the end of the 20th century. The belief that housing assets could be utilised by individuals to provide for their own welfare gained popularity, particularly in western economies dealing with ageing populations, for example. There was a belief that it would be possible for the property bubble, which led to the development of the sub-prime market and the eventual collapse of the banking system, to continue. I do not believe that governments had a benign influence on all of this. We must face up to this fact when discussing international attempts to change banking regimes.

I appreciate the Minister of State confirming that he is prepared to take on board some of Senator Barrett's proposals and to engage with him on the issue. The Minister of State said in his speech that we do not require a two-tier system because we do not have a sufficiently diverse banking system here. However, if we do not engage with what is being proposed by Senator Barrett, we will end up having to intervene and, in effect, create our own third banking force to deal with the needs that exist in the economy. I do not believe that the difficulties we have at present are going to go away. I do not share the Minister's confidence that we do not have a banking system that requires a two-tier approach.

I thank Senator Barrett for drafting this very interesting legislation. I also thank the Minister for State for committing to an ongoing engagement with Senator Barrett on this matter.