Sean Barrett (Independent) | Oireachtas source

I move amendment No. 2:

In page 44, line 5, after “with” to insert the following:
“The Competition Authority, the National Competitiveness Council and”.

These amendments are allied. We were talking to the Minister for Finance, Deputy Noonan, last Thursday and saying that we must distinguish, according to the American model, between Wall Street and Main Street. Regulation of banks in the interests of banks is what we have had up to now.

Attempts to correct the problem through quantitative easing promote asset bubbles which are again in the interests of banks and stockbrokers and not in the interest of the wider economy. The shortage of capital as we try to develop a new entrepreneurial economy will not help. The Minister's view last Thursday in the House was that he hoped that the competitive aspect of Irish banking would be improved by banks coming in from abroad. He was hopeful that we would attract an industrial bank, which would provide competition. While it had to be done at the time, the pillar bank concept is flawed in that it lead to a duopoly. It may be such a duopoly that no foreign banks will want to set up here and that deterrent would not be in the interests of the wider economy. Bearing in mind that the Minister says the State could try to develop a more competitive banking system and discussions may be taking place, we have a problem with the banking sector.

The June 2013 edition of the Compecon publication dealing with regulatory easing and competition states it is important to analyse competition agency decisions. At EU level and in most member states, competition agencies are responsible for investigating and deciding on alleged infringements of competition law. Ireland is somewhat unique in an EU context in this regard. The Competition Authority's role is limited to carrying out investigations while it is for the courts to decide if parties have broken the law. Central Bank regulation of banking failed spectacularly in 2008. The Government is trying to get the regulation of banks out of a silo. They have a blinkered look. What is this doing to the economy, asset prices and people's living standards? Why can housing or industry not be funded in a different way?

We experienced a classic case of regulatory capture prior to 2008. The agency which was supposed to regulate banks in the wider public interest was captured to the extent of staff playing golf and winning prizes with the people they were supposed to regulate. It was a disgraceful performance. The Minister of State will note the deficiencies in our policy highlighted by Pat Massey in the Compecon paper. Banking is too important to be left to bankers. The new Governor, who is a former colleague of mine in the economics department of TCD, will seek to steer a different course given that his predecessors were captured.

This is not unique. I asked on Second Stage who is supposed to regulate accountants. They prepared accounts for the banks and the bankers were not regulated. The State has tame regulators for electricity where the chief executive officer earns multiples of the Taoiseach's salary and the same can be said of the airport and transport sectors. I am worried about sectoral regulation by regulators who have a tradition of being tamed and utterly dominated by the sector and who operate regardless of the consequences for the rest of society. It is necessary to have somebody say a sector is not competitive and it could be made more competitive if the Competition Authority was brought in. The competition regulator in Ireland is much weaker than in other countries, as Pat Massey says, which damages our competitiveness. Having an input ensures we do not drift back to a regulatory regime where banking is unduly influenced by bankers attaining control over the Central Bank as they did so ignominiously in the past.

The amendment is an attempt to make the control of banking more of a team game in the interest of the public. Perhaps if the Central Bank, Competition Authority and Competitiveness Council look at the competitiveness aspects, they will diverge but we badly need new insights into what banking has done to the rest of the economy. Currently, the emphasis is entirely on restoring the financial health of the bank. We know in this House, as does the Minister of State, that we are trying to restore the economy and the two are not the same. The two certainly were not the same on 29 September 2008. That is why I have tried to broaden the way we look at banking. It is interesting that the Irish-Canadian, Mark Carney, has taken over as governor of the Bank of England. He is trying to broaden bank regulation. He comes from a highly successful background in Canada where none of these banking problems occurred and economic growth continues. We need more inputs to get away from a silo. If we had more inputs, the problem we are trying to correct now would not have happened. I am not interested in prosperous banks; I would much prefer a prosperous economy. I would like the other impacts to be considered.