Brian Ó Domhnaill (Fianna Fail) | Oireachtas source

I welcome the Minister of State, Deputy D'Arcy. This Commencement debate relates to a call to consider separating the investment and retail, or customer-driven, arms of our banking model. Only full separation will constitute the safety valve required for the ordinary consumer and ordinary taxpayer in Ireland. As long as retail and investment banking continue in the same groups, the Government will never let the banks go bust and they will always rely on the too-big-to-fail mentality. That is exactly what happened here during the crisis in September 2008, when the Government bailed out the banks. The analogy given by the then Minister for Finance was that there would be no money in the ATMs if we did not do what he did. This goes back to the philosophy of the bank being too big to fail.

The bank lobby is desperate to suggest that the investment banking industry has, for all intents and purposes, disappeared. That is not the case. It is said large-scale investment banks do not exist now and will not exist in the future. This is coming from the new CEO of Morgan Stanley. The clear implication is one I do not buy for a second and that is why I am raising this matter today. As long as retail and investment banking are contained within the same groups, governments across the world, including in Ireland, will not let the banks go.

The universal banking model we have will always take on an increasing amount of debt and make ever more risky bets in the knowledge that the bailout will always come at the point of disaster. The only way to make our banks safe, or as safe as they can be, is to draw a full line in the sand separating investment banking and commercial banking. There should be different institutions with different owners and business models. This is the Glass–Steagall divide implemented in the United States after the Wall Street crash of 1929. It kept the American banking model safe for over 70 years until the Clinton Administration decided to deregulate extensively.That later led to the crash of 2008-09. Since deregulation occurred in the United States in the late 1990s, the world has lurched from one banking crisis to another. Obviously, the banking lobby will say otherwise. It is infiltrating every Department of Finance equivalent across the world. It is a very strong lobby and can only be tackled with serious political resolve. A recent report by the International Monetary Fund, IMF, showed that the world's largest banks still benefit from direct public subsidies to the tune of $590 billion because of their too-big-to-fail status. That is also occurring in Ireland. Ireland was the first European country to go where none had gone before under the European Central Bank, ECB, rules.

The lack of reform and the continued behaviour of our banks, which we will be discussing later in the House today, are unacceptable. Three recent reports - the Volcker report in the US, the Vickers report in the UK and the Liikanen report in Europe - referred to the need to segregate or separate retail and commercial banking from investment banking to protect ordinary consumers and savers. The ordinary pensioner or saver in Ireland puts his or her money into the bank in the hope that it will be safe. The Government regulates the banks. However, the investment arms of the banks are speculating on world markets and investing money in various jurisdictions and companies across security exchanges around the world. It is risky business. That is how they make their money. When one arm fails, the Government says that it is bailing out the pensioner on the high street, but that is not the case. It is bailing out the costs of the bank across its portfolio.

This is something bold which Ireland should embrace. The UK has done so and is moving towards it. We should do this and stand up to the banking lobby.