Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I will get to the different questions raised towards the end of my final remarks on Second Stage of this Bill. I thank Senators for their contributions to and participation in the debate. I again apologise that my initial script was not ready on time or provided for the beginning of the debate.

As Members will appreciate and as has been mentioned, the Bill is mainly of a technical nature. It is designed principally to facilitate the implementation of the European Union banking union agenda. However, it is important because it allows Ireland to fulfil its banking union obligations. It is important that while dealing with this measure quickly, Members do not rush it. This can be done and it can be made a priority without rushing what we do. I look forward to the debate on further Stages in this House and to then getting into a more detailed discussion in which we take our time with it, while making sure it is a priority because of the aforementioned banking union obligations.

At this stage, progress on the creation of the European Union banking union is advanced. The European Central Bank, ECB, took over its supervisory role in November 2014 and is working closely with the national authorities to ensure that banks comply with EU banking regulation. This was the important first step on the road to banking union, and centralised supervision should ensure a high level of independence and objectivity and will help to rebuild trust and confidence in the European banking sector as a whole.

The next step in banking union was to ensure that if a bank gets into difficulty, there will be appropriate tools and powers to manage the failure in an orderly manner. The Single Resolution Mechanism, SRM, was established for this purpose and should ensure an effective European response where a bank finds itself in serious difficulties. In order for the Single Resolution Mechanism to be credible, however, it was agreed by Ministers that a system of bridge financing through national credit lines needed to be put in place. This is to avoid a situation where the Single Resolution Board may find itself, particularly in the early years after the bail-in process has been completed, in a position where there are still losses to be absorbed.

It is important to note this agreement will only be in place during the transitional phase to 2024, while the Single Resolution Fund is built up. The consequence of not signing the loan agreement with the Single Resolution Board is that, should an Irish bank get into financial trouble, the funding available to the Single Resolution Fund will be limited to the small amount in the Irish national compartment and the mutualised elements of the other national compartments and any borrowings the Single Resolution Board can carry out. However, if this should prove insufficient, there will be no fall-back source of financing from the Single Resolution Board as the national credit line will not be in place. It is important to point out that the banks are in general good health. Therefore, the likelihood of this loan facility agreement ever being called upon is minimal. However, the provision of this national backstop to the Single Resolution Board is key from a confidence perspective as it provides another indication to the market that the banking union member states are serious about ensuring stability in the banking sector.

The amendment to the Companies Act 2014 is required due to the need to transpose the European market abuse regulations and market abuse directive into Irish law. This will ensure the continuation of existing offences and high-level penalties that, on indictment, are up to €10 million in fines or up to ten years' imprisonment or both for insider trading and for market manipulation.

Before concluding, I will respond to the questions and I thank Senators for their good wishes. As Senator Kieran O'Donnell pointed out, the full plan will be in effect in 2024 and, consequently, this Bill will fall out of relevance from that point. This pertains to a credit line. It is a last resort after a resolution waterfall that is quite complex but which goes to other sources of funding first, beginning with the bail-in process. Moreover, because it is a credit line, it will be repaid.The €1.85 billion will be the Irish portion of the €55 billion in the Single Resolution Fund and it will come from the banks. There will be no effect on the national debt. If we have to implement the credit line before then, that would be a loan given so, again, it would not affect the national debt. It is important to note, however, that interest will be repaid on the loan and that, therefore, money will be coming into the State in addition to the loan moneys being returned. The banks are slowly paying into that fund already. We have used the national resolution fund - into which the banks have already paid - as an initial mechanism in respect of payments to the Single Resolution Fund but once the agreement is in place, the banks will start paying in based on a different weighting measure and in accordance with what has already been decided.

Without wishing to be too technical - we can deal with the technical issues at later Stages - each country has a national compartment that it pays into over this period. If a bank becomes distressed, we then move to the resolution waterfall. The 8% bail-in is a minimum requirement. Depending on the structure of the bank and its debt and liabilities, the bail-in will amount to 8% or more. When that money is exhausted, the resolution waterfall comes into play and what is in the mutualised element of the national compartment is considered. The relevant authorities can go back to see if there is anything left in these compartments. It is an attempt to ring-fence funding in the initial stage for the member state until we reach a full mutualisation. That is the purpose of the compartments. I reiterate that there will be no cost to the Irish taxpayer. The whole purpose of this, learning from the past, is to break the link completely between the sovereign and the banks. The national credit line is a loan. It is the very last stage in a complex resolution waterfall that involves approximately six pre-stages. Even if it had to be called upon, a bank in distress could enter into the 8% or more bail-in and then enter into the national compartments phase but it may never get to the point where the credit line would be called upon. However, the latter is an important backstop as a last resort. It is also a loan and repayment will not fall on individual taxpayers. That entire €1.8 billion will come from the banks on a phased basis and the €173 million already put in has come from the national resolution fund, into which the banks have paid. There is no taxpayer involvement at all.

I am not sure whether the Companies Act 2014 has ever been used. I would be amazed if it has not. What we are doing here is technical and if we did not move to do it now and if the Act was used, we would risk having a period whereby the penalties would not be as high as they have been in the past. We want to ensure that the penalties for white collar crime continue to be robust and work as a deterrent.

There was an excellent engagement on Committee Stage, with everyone contributing and some very worthwhile amendments being made. I tried to take on board as many amendments as possible and recognise the concerns expressed. If we did not take the actual amendments put forward, we introduced compromise amendments that we thought would address people's concerns. In the original Bill, the Minister was not given any unilateral ability to raise the amount. However, Sinn Féin expressed concerns about the clarity of that so we brought forward a further amendment as an additional safeguard to ensure that it would not be possible at any stage to interpret it as giving the Minister unilateral power. Other helpful amendments were accepted on Committee Stage. Those constructive contributions were very much appreciated because when it comes to a technical Bill - where people agree the general idea of breaking the link between the taxpayers and the banks and putting in place a mutualised fund under banking union - it is good to have an objective or alternative viewpoint from the Members to ensure that when the Act is in place, we will not have to return and amend it. The Bill will affect what will fall out of use when we come to full mutualisation in 2024. It is envisaged that the credit line will not be needed before then. It is just to be doubly prudent and ensure that everything is crossed off so that the taxpayer will not be exposed at all.

I thank Senators for their contributions and for assisting in ensuring that we deal with this as a priority but also that we take the necessary time and do not rush it. I commend the Bill to the House.