Alan Kelly (Labour)
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I move amendment No. 1:

In page 1, before section 1, to insert the following new section:

"1.—This Act (other than section 7) shall not come into operation until the Minister has published and laid before each House of the Oireachtas for its approval full particulars of the terms and conditions under section 6(4) including the terms and conditions of any scheme."

The Minister will be aware, following the debate in the Lower House, that particular concerns have arisen regarding the terms and conditions and the generic nature of the scheme to which the Bill relates. It will be entirely at his discretion to interpret the conditions under which he will have powers to provide support. The Minister has gone some way towards explaining why this matter has been dealt with in such a generic fashion. However, there is a need to go further. We must set the parameters and principles within and under which the terms and conditions will be applied. Those parameters and principles are not set out in the Bill. Amendment No. 1 is designed to ensure a process to lay before the Houses the particulars of the terms and conditions is put in place in order that the powers the Minister may exercise and the principles that will apply in respect thereof can be outlined and justified.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Bill is necessary to allow the State to act urgently and decisively in respect of a complex issue when markets are volatile, while keeping the Houses informed of the details. This amendment would prevent the legislation from coming into operation, except in respect of section 7, until the scheme was approved by both Houses. The purpose of the Bill is to enable prompt, effective and expeditious action. Accepting the amendment would defeat that purpose and mark a departure from standard reporting procedures.

The provision for making a scheme in respect of financial support recognises that in a dynamic area, schemes may require revision. It is important we should commence drawing up the scheme, which will be submitted to both Houses, within the framework of the legislation. The amendment would impose a delay and, potentially, a harmful disclosure of an intervention to address a particular need.

I understand the spirit in which the amendment has been tabled. However, it is unusual to include a provision whereby an Act will not come into force until, effectively, a decision under that Act is made. The purpose of enacting legislation is to enable decisions to be made. With respect, I am of the view that this proposal puts the cart before the horse in legislative terms.

Paddy Burke (Fine Gael)
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If one of the six banks covered by the legislation were taken over by an outside financial institution, would the guarantee extend to that bank following the takeover or is the scheme designed in such a way that mergers will only take place among the six banks to which I refer?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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That is an extremely pertinent question. As previously indicated, it is intended, subject to the commercial discussions which must take place, to confer the guarantee upon the six domestic banks. Section 6(1), which is the core provision in respect of guarantees, states that the Minister may provide financial support. Section 6(4), which relates to the guarantee clause, states "Financial support may be provided under this section in a form or manner determined by the Minister". The Minister for Finance will not obliged to provide a guarantee under this section. He or she has discretion and may provide a guarantee. That is the crucial point. If an Irish credit institution were taken over or became a subsidiary of a company from another jurisdiction, the Minister would not be obliged to continue to provide a guarantee.

It is intended, in the implementation of this legislation, to draw up the scheme that will be laid before the Houses and then complete commercial agreements with particular institutions. Within such agreements, the interests of the State in respect of the revocation of any guarantee will be fully protected.

Alan Kelly (Labour)
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I move amendment No. 2:

In page 1, before section 2, to insert the following new section:

"2.—It shall be a condition of an application under this Act for financial support that an applicant shall agree not to offer to any of its officers or employees any share options during the currency of financial support and to limit the gross annual earnings of any of its officers or employees to not more than the gross earnings of the Minister for Finance during that period.".

This is a very important amendment and we hope the Minister will accept it. We would like to support the Bill and such support would be conditional upon the amendment being accepted.

The amendment refers to the "gross earnings of the Minister for Finance" and there are ways of discovering what might be those earnings. Everyone is discussing the massive earnings enjoyed by many bank executives. The executives of the six banks covered by the Bill were paid €17 million between them last year. That is a humongous figure. If we are to bail out the banks — I know the Minister hates that phrase — surely we should put in place a mechanism to ensure the massive pay and perks enjoyed by bank executives will be limited in some way.

There has been a great deal of debate regarding share options and the impact these have had on the performance of some of the executives to whom I refer and to the banks for which they work. The amendment suggests that the issuing of share options should be controlled.

This is a very important amendment. I accept it was pushed to the limit in the Lower House. However, the Minister has had time to reflect further on the amendment and I ask him to accept it. It is designed to act as a control mechanism. It would help restore a little goodwill towards the banks and show they are willing to give something back.

Ivana Bacik (Independent)
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I support this very important amendment. As the Minister said, part of the problem we now see is as a result of a disproportionate reward of excessive risk-taking by some bankers. I accept what he said that not all bankers were reckless. However, it is clear there were bankers who were reckless and who were disproportionately rewarded. That is politically unacceptable and, as Senator Kelly said, people are very concerned about it.

If the Minister does not accept this amendment, he might tell us if it is proposed to insert in the scheme he will bring before the Houses, a measure to control the share option offers and the earnings, perks and so on given to senior officers and employees.

The Minister said it is envisaged the scheme will provide for a representative of the public interest to be placed on the boards of institutions which seek financial support. That representation might be one way to ensure controls. I ask that the representative to be placed on the boards of such institutions be a representative of the Financial Regulator.

Liam Twomey (Fine Gael)
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This amendment is somewhat similar to our amendment No. 4, which is not quite as restrictive as Senator Kelly's. The important issue on which we would like to hear the Minister's views concerns the rebuilding of capital in a bank receiving financial assistance from the taxpayer. It would be almost unethical if people received large bonuses, large dividends or whatever if the taxpayer was giving a huge loan to the institution. This is very much based on rebuilding the credit and the capital of the institution as well as for reasons of ethics. The taxpayer should not see people receive huge remuneration or bonuses while restructuring is going on.

Alex White (Labour)
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I support those who have spoken on this amendment. A colleague made the point earlier that the issue of executive pay is a populist one and is not an objection of substance. I fundamentally disagree with that. This legislation looks likely to be passed by both Houses but the Minister and the Government will require an element of buy-in, if I can use that phrase, by taxpayers, the people who will fund or back this, whether it is a bail-out or otherwise.

The most repeated objection which people quite legitimately have to the way matters have gone is that those at the top of these financial institutions and elsewhere earn such inordinate sums of money. The issue of large bonuses was singled out by Senator Walsh, I think, and perhaps even by the Minister who said that whatever about pay and director remuneration, there would be considerable objections to bonuses. Gross annual earnings include bonuses in addition to the bottom line salary these people get. If the Minister objects to, or has this view about, inordinately large bonuses — I take him at his word — this amendment will cover that issue. It can be dealt with in the legislation. The Minister may say this is something which can fall for him to deal with in the course of the scheme and so on. However, I strongly urge him and the Government, in circumstances where they are looking for the support and confidence of the public in this very dramatic measure being taken, to include this provision and accede to the amendment.

Dominic Hannigan (Labour)
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We are only looking for this measure to be brought in for the period of financial support which is, in effect, two years. The Minister spoke earlier about how moral hazard would be a priority for him in this issue.

In regard to share options, we are providing a guarantee to these institutions to avoid the potential to go under. There is a clear bet here if we offer share options to executives. They know that if the share price rises, they can exercise their options making personal profits and that if the share price goes down, because of their bets, the Minister and every taxpayer will guarantee their losses.

We are looking for this measure for two years. It is not a great deal to ask or that difficult to include it in the Bill. When it comes to giving maximum salaries, we could even throw in a car if needs be. This is a sensible measure and if the Minister is serious about the whole issue of moral hazard, something like this needs to be included the Bill.

Joe O'Toole (Independent)
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It is very important we make it clear that this Bill is not to guarantee losses. It is only to guarantee those losses the banks cannot meet out of their other funds, etc. In an attempt to be helpful and recognising the county from which I come where Mr. Daniel O'Connell made a fortune out of changing names, one cannot disagree with the intent of this. We said we should do this on the basis of not trusting bankers. My only difficulty with this is that it trusts bankers. What they would do is just call it something else.

The solution to this lies in the Minister's Department. For my sins, I chair a remuneration committee and I am a member of two other such committees. I deal with the Minister's Department in that regard. I would be very happy if the same scrutiny were put in place through a remuneration committee established by the Minister's Department. The Department already has one which includes the Secretaries General of the Departments of the Taoiseach and Finance. It must go through a parent Department and must have a clear set of objectives for the year, a twice yearly review of progress, an assessment and key performance indicators. On that basis, a package is agreed.

No one can walk away from what the Labour Party is trying to do. There is an intent here to which no one can object and it is about scrutiny. If the Minister said it was his intention that the remuneration package would receive the same scrutiny as the remuneration package for the chief executive of a State body or semi-State body, that would cover exactly what we are setting out to do. It would have to be approved by his Department. If we heard his Department was beginning to approve the type of bonuses to which Senator Kelly objected — we all agree with him on that — this would fall on its face.

Is the Minister prepared to insist that the same level of scrutiny, assessment, monitoring and measurement of performance indicators is put in place for the chief executives of these institutions as it is for other bodies with which he deals?

Paschal Donohoe (Fine Gael)
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There is much in this amendment which is important and deserves consideration. We have acknowledged at length in this discussion that there has been a casino culture in some banks and we are all dealing with the consequences of that now. The compensation packages that have been created have contributed to that.

There are two elements in this amendment which are worthy of discussion and a response from the Minister. The first element relates to the incomes some of these people receive. I have no issue if someone capable of leading a huge business enterprise is paid hundreds of thousands of euro or millions of euro. However, if there is an industry where the average income of everyone participating in it is around that mark, then there is something wrong. That is the case in many of the banks about which we are talking. Some of them are in Ireland while some are not.

People in bank departments are being paid a lot of money and the conditions in which that money is released are all about what they deliver in the short term or what happens in a quarter or in a half year. That places a focus on the short-term gain which undermines the long-term health of our banking institutions.

That said, we must picture the circumstances in which we would view the chief executives of some of these banks. If a bank was in a situation where it had to receive State support, it would be a bank in significant financial difficulty. More than likely, we would require a change in its management and a new leader with the talent and ability to lead the bank out of its difficulties. It is plausible that to get that talent we need to pay more than the Minister of Finance is paid. Although some of the banks are staffed abundantly with poor talent and poor decisions have been made, there are many good and able people within the industry. We will need to retain them for the long-term health of the banking industry. The suggestion made by Senator O'Toole is a far more realistic way of moving forward. We cannot allow ourselves to end up in a position where suitable leaders for our banks will be turned away because of a cap on salaries that is unrealistic for the type of people we need to run the banks.

Jerry Buttimer (Fine Gael)
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The Minister said Fine Gael did not want the support of developers, builders and bank staff. We have their support. One of our core values is the reward of enterprise. There is merit in the amendment. I support the notion that a job should be done well and I am sickened by the attitude that it does not matter. I have received ten telephone calls today from people concerned about others who are rewarded for doing a job that has not been done well. This aggravates me. We must send a message to the public through this Labour Party amendment to the effect that we will no longer condone reckless behaviour. I am not talking about middle and lower management, the ordinary bank workers who do a good job. I am talking about those who drive policy. Part of the task of the Minister is to restore confidence in the banking sector and he must send a clear and cogent message to those in charge. I urge him to take on board the suggestion of Senator O'Toole which has merit. We must rein in the people in charge of our banks.

Mary White (Fianna Fail)
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It is opportune to spell out the fact that the beauty of this model is that it avoids paying taxpayers' money up front. The scheme should, in fact, earn substantial moneys for taxpayers. Clarification in this regard would be enlightening.

Paul Coghlan (Fine Gael)
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On Second Stage several Members referred to the excessive remuneration for apparent short-term success in the banks. The Minister acknowledged that the success was doubtful because we know these successful managers did not provide properly and prudentially for bad and doubtful debts. They under-provided for and under-declared them. I agree with other Members that the admirable solution for the Minister would be to accept the suggestion made by Senator O'Toole.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is important to note the precise terms of section 6, whereby financial support can be provided in such form and manner as determined by the Minister and on such commercial or other terms and conditions as the Minister thinks fit. The legislation empowers the Minister not alone to set commercial terms, but also other terms in the arrangement arrived at with the relevant banks as he thinks fit. That discretion is provided for in the Bill. It is clear from the section that it provides ample power for the Minister in legislative terms to address the issue. It is always a mistake in legislation to include too much detail. I have piloted Bills through the House in the past and have always been struck by the fact that we are inclined to make our legislation too detailed. This is understandable and comes from our vocation as politicians.

Alex White (Labour)
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The Minister cannot suggest this Bill is too detailed.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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We all have legitimate aspirations and ambitions and points of view we want to articulate. This sometimes leads to too much legislative clutter. There is no legislative clutter attached to this section. The Minister can go in and insist on commercial or other terms. As I indicated on Second Stage, other terms are an issue that I am determined to address. I am determined to ensure the issue relating to remuneration and the terms and context in which I dealt with it will be addressed in the legislation. The appropriate response in the context of this legislation is remuneration linked to the abusive practices.

Joe O'Toole (Independent)
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I accept the Minister's reference to the need to avoid legislative clutter, but the Chair will note that my suggestion avoided legislative clutter. It would provide comfort for us that the Minister would move along the lines indicated by the Labour Party amendment. One option to do this would be a remuneration committee system structured by the Department of Finance on the basis of a documented report from the higher remuneration body of eight years ago. The higher remuneration body would be another option. We want an indication from the Minister that he will return to us with such a structure. We want to know what he plans to do, without tying him down with legislative clutter.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am willing to entertain and examine Senator O'Toole's suggestion. The Senator is not the most popular figure in the Department of Finance, because he is such an effective negotiator on conditions of service. That said, I will examine whether a suitable group of wise men or women can be constituted to consider the issue.

Jim Walsh (Fianna Fail)
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I will be brief because I do not want to cause a delay. I caution against this. Any intrusion into the corporate governance of the banks could be detrimental.

Ivana Bacik (Independent)
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This is all about corporate governance.

Jim Walsh (Fianna Fail)
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A board of directors will have responsibility for the banks. It is not wise to ask the Minister or the Department to assume some of that responsibility. What we need is an incentivised provision which would deal with the fundamental flaw of bonuses being paid for short-term profits to the detriment of stability and medium-term prudence. Interfering in the marketplace as suggested would be detrimental to the future of the banks.

Ivana Bacik (Independent)
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With respect to Senator Walsh, this is about corporate misgovernance. The Bill is and must be about corporate governance. What we have asked is that the Minister clarify the situation and include, perhaps in the scheme he will bring before the Houses, some conditions relating to chief executives and higher bank officials in terms of a cap on their salaries and expenses. This is a limited request.

Alan Kelly (Labour)
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I move amendment No. 3:

In page 1, before section 2, to insert the following new section:

"1.—A committee of the National Treasury Management Agency consisting of the chairperson and chief executive of the Agency shall be established to review the remuneration of board members and senior officers and employees of institutions participating in a scheme or arrangement under this Act and shall report annually to the Joint Oireachtas Committee on Finance and the Public Service."

Amendment No. 3, which deals with remuneration review, is a good amendment and the Minister should consider it. A provision such as this is badly needed. The Minister did not accept the previous amendment, but this amendment will allow the public to be confident that the remuneration of the various executives is being considered and assessed so that the lavish payments and perks will be monitored and the issue will not be swept under the carpet, especially as the taxpayer will be underwriting these six institutions.

Ivana Bacik (Independent)
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I support the amendment. If the Minister is not willing to accept it, he might consider putting something similar into the scheme he is presenting before the Houses. It seems eminently sensible to have some provision for review of salaries and bonuses paid to board members and senior officers of institutions which are seeking financial support under the Bill.

Dan Boyle (Green Party)
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There is one flaw in this amendment, but it is more of an irony. The National Treasury Management Agency is one of the few sectors of the public service whose members' own salaries are not publicly revealed, because a certain type of person must be attracted to the job owing to the specialist nature of the work. For this reason it is thought better to keep the salaries secret. It would be rich in irony if a body whose members' salaries are not publicly revealed were to carry out remuneration reviews of other people.

Paul Coghlan (Fine Gael)
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That is a good point.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have some sympathy with the point of view expressed by Senator Boyle, but as Minister for Finance I cannot comment on the matters he has raised. I gather RTE now discloses staff salaries, but it had a similar arrangement for some time. Those were the two State bodies that were exempt.

Paul Coghlan (Fine Gael)
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Does that mean the NTMA will follow suit?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As far as the section is concerned, there is——

Joe O'Toole (Independent)
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On a point of order, RTE only reveals the salaries of its presenters. It does not reveal the salaries of its chief executives or assistant chief executives. We have been denied that information in the committees. I just want to add some clarity to the discussion.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Now Senators know why the Department of Finance fears Senator O'Toole.

Pat Moylan (Fianna Fail)
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It is a point of information rather than a point of order.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The provision does involve a degree of invasion of the normal commercial management of a company, which is in my view a little excessive. A more important question is the extent to which, as a result of this guarantee, there will be public interest representation on the boards of the relevant financial institutions.

Liam Twomey (Fine Gael)
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I move amendment No. 5:

In page 2, between lines 14 and 15, to insert the following new subsection:

"(4) The Regulatory Authority shall have the power to examine any additional customer charges applied by a credit institution in receipt of financial support under this Act."

This amendment provides for the regulatory authority to monitor any institutions receiving support from the State to ensure they do not engage in excessive profiteering in some other manner. One of the things people have noticed recently is that many of the lending institutions are levying new charges and surcharges on their customers to make up for the drop in profitability resulting from the difficulty in lending at high interest rates and borrowing at low interest rates. People have noticed that additional charges are being incurred. The regulatory authority should monitor institutions to ensure they do not start to levy hidden or indirect charges on customers.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Senator Twomey has raised an interesting question and one that is worth examining. My officials are already considering, in the context of the preparation of the scheme, how the terms and conditions implemented on foot of it will prevent charges being passed on to the customer. That is the way in which we should deal with the issue.

Paddy Burke (Fine Gael)
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Subsection (3) states: "Nothing in this Act prevents the performance by the Central Bank or the regulatory authority of its functions in relation to any credit institution." I understand it is within the authority of the Central Bank to provide liquidity to Irish banks. The Minister stated that the problem we have run into is one of liquidity. Where does the change occur whereby the Minister takes over from the Governor of the Central Bank? Where do his responsibilities cease and the Minister's begin? It may be argued there is no need for subsection (3) at all.

Paul Coghlan (Fine Gael)
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Section 2 provides that the prudential supervision by the Financial Regulator of any credit institution will not be affected by the provisions of the Bill. The Minister touched on this in his response on Second Stage, and several speakers have referred to the issue. Will he consider strengthening, where necessary, the powers of the Financial Regulator? That has become somewhat necessary. The Minister might comment.

Joe O'Toole (Independent)
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There is an important point here which may give the Minister the opportunity to enlarge upon the functions of the regulator. In these Houses we have consistently restricted the functions and powers of the regulatory authorities — all of them — because we have never liked to "interfere with the market", as the term is used. I have lost many arguments on this issue over the past 20 years. Is the reason for subsection (3) that the current financial authorities do not have adequate powers for the additional scrutiny the Minister has now taken on board? If so, this subsection is crucial. Otherwise, the demands we are making of the Minister could not be fulfilled by the regulatory authorities. At the same time, however, the regulatory authorities must fulfil their prudential function and monitor issues such as liquidity, which was mentioned by Senator Burke.

It is crucial that all the authorities work together. My understanding is that the regulatory authorities have indicated they are quite willing to take on additional scrutiny on the Minister's behalf, under the terms specified by him. People should recognise that, for instance, the regulatory authorities have required the banks to have additional capitalisation to deal with speculation and so on. The regulatory authorities have, for instance, defined speculation for banking terms. Any speculative investment in housing, for instance, is deemed to have occurred where 50% of the houses have not been sold. Levels of liquidity, capitalisation and loan to value ratios must be undertaken on that basis. This work must be done, as it is done at the moment.

There are issues such as this and I want to add a question. The eighth or ninth directive from Europe on common audit standards in the European Community still has not been transposed by the Government. There are issues of quality assurance attached to that. It is very important to recognise that the Government should move swiftly on that. This would clarify the points raised by Senator Burke and ensure the role of the Minister has some checks and balances attaching to it by accommodating the European common audit standards.

Jerry Buttimer (Fine Gael)
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Under section 2(2), does the Minister intend to report to the Committee of Public Accounts and the Joint Committee on Finance and the Public Service or set up a separate banking sub-committee? This Bill gives the Minister major powers so there needs to be ministerial accountability.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Regarding the Central Bank and the issue raised by Senator Burke, liquidity in the Irish financial system is provided by the European Central Bank. It assures the liquidity of the Irish banking system. The Irish Central Bank has assets and liabilities but in general provides liquidity in an emergency rather than acting as a normal provider of liquidity in the system. That emergency liquidity would be provided on a short-term basis. That is the division of responsibilities between the European and Irish Central Banks.

Senator Burke and Senator O'Toole also raised the matter of the Financial Regulator. We in these Houses enacted legislation in 2003 providing for a regulatory system which was much lauded at the time as a model of its kind, based on principles-driven legislation and the idea that the Central Bank and the Financial Regulator were in the one building with the same front and back doors so that they could share and exchange information. As Minister for Finance during these difficult weeks, I found the degree of collaboration between the Financial Regulator and the Central Bank encouraging. The fact they are in a shared premises and have a shared legal entity is helpful.

Our difficulty relates to standards rather than legislation and the extent to which the Financial Regulator enforces standards in banks. If Senators want more extensive powers conferred on the Financial Regulator to restrict lending, that is something that can be examined. When legislation is enacted in these Houses on matters such as this, enthusiasm is not always expressed for that point of view. It is in a crisis such as this that we reflect on things and perhaps see there is merit in the case. I am willing to look at the issue of regulation when this is completed. While it is important to enact this legislation and implement it in terms of the schemes and arrangements with different banks and what the State looks for in value and performance, these being the most urgent matters, and while I am satisfied the regulator and his staff work very hard, we need to reflect on how to strengthen his position. There is always a balance in those matters.

Senator Buttimer referred to my accountability under the legislation. Section 6 provides for an annual report, the duration of the legislation is two years, I am accountable to Dáil Éireann in the performance of my functions, and the Committee on Finance and the Public Service can ask to see me on any matter they wish to enquire into.

Paddy Burke (Fine Gael)
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Is it on the advice of the Governor of the Central Bank that the ECB provides liquidity to Irish banks? If that is the case, it is funny that the Minister has not consulted the ECB on the existing problem.

Paul Coghlan (Fine Gael)
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Have the Governor and the Financial Regulator not told the Minister in their many contacts and chats that in the light of recent developments, the powers need some strengthening?

Joe O'Toole (Independent)
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I want to remonstrate gently with the Minister. It is very easy to agree in this House that we need to get a balance in terms of the stringency of the Financial Regulator. Senator Coghlan and I made an impassioned appeal in this House, with full support from all sides, when the Director of Corporate Enforcement approached the Government two years ago, at a time when he was dealing with the directors of a bank — not under discussion today — who were in some trouble, that his office be given the additional 30 staff it was felt he needed. The Department reluctantly conceded a number of extra people, that number being in single figures, but I stand to be corrected. It would be good to achieve a balance in the current structures so that the Financial Regulator can do what he needs to do with the necessary resources.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I take the Senator's point. There may be more ample resources following the enactment of this legislation given the amount the Exchequer should acquire under it.

On the point about the Central Bank, the Governor of the Irish Central Bank sits on the governing council of the European Central Bank, and a liaison is maintained between him and the President of the European Central Bank, Monsieur Trichet. That is the normal line of communication. The authorities at the ECB in Frankfurt were apprised of the developments in Ireland on an ongoing basis throughout recent events, and they apprised us of developments in other European countries during that period.

One of the problems in this area is that the European Central Bank can provide liquidity, and can do so at the request of our own Central Bank, but it does not operate a guarantee system for the existence or reconstruction of banks or for the protection of those who have deposits in or extended loans owing to the banks. That is an issue that will have to be examined for the future. A small state is in a very difficult position protecting financial institutions whose assets may far exceed the assets available to the state itself. In addition, in an increasingly globalised economy, financial institutions have footprints in many different jurisdictions. There is a case for a more harmonised European approach, but there is no evidence of an appetite for it materialising yet. The events of recent days may have changed perceptions on that issue.

Liam Twomey (Fine Gael)
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I move amendment No. 6:

In page 2, before section 3, to insert the following new section:

"3.—The Minster shall at all times in the operation of this Act be cognisant of the broader competitive environment along with the business needs of all banks with substantial operations in Ireland.".

This has been well discussed in the Lower House. It covers the situation of Ulster Bank which is not one the institutions that has been prescribed in the legislation. The Minister has commented on that but he may wish to make a quick comment on the record of the Seanad.

Pat Moylan (Fianna Fail)
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Is the amendment being pressed?

Paul Coghlan (Fine Gael)
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It is a very important point and I discussed it privately with the Minister between Second Stage and Committee Stage. This institution, as I understand it, is wholly licensed and regulated in Ireland. Can we have the operations of any foreign institution which the Minister may have to deal with ring-fenced, as we would need the operations of our own banks abroad ring-fenced?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This issue was raised in the other House and I outlined the position in my reply to the Second Stage debate in this House. As this legislation is drafted and in its preparation, it was always intended to cover all credit institutions.

A credit institution is a term of art in European Union law. In theory, the legislation might apply to all EU institutions, but there is no intention for it to do so. The intention is to protect those institutions related to the financial instability, which primarily refers to the six domestic Irish banks. An assessment would need to be made of the banks based in Ireland that are owned by foreign companies. An assessment would also need to be made on a case-by-case basis of subsidiaries of Irish banks abroad and the extent to which they pose a systemic threat.

Given the asset and liability figures in this area, we must be cautious. On the one hand, Senators are questioning the size of the cushion and, on the other, representations are being received from banks to the effect that they wish to avail of our sovereign guarantee.

Non-domestic banks fall into two categories. The first consists of those that are fully established as corporate entities in Ireland and subject to regulation by the Financial Regulator, but operating as subsidiaries of foreign banks. The second consists of banks that do not have a distinct corporate existence here or clearance from the Central Bank and are not subject to our regulation. Rather, they are regulated from their home countries much as we regulate some external banks through our regulator. There is a distinction between the two categories.

Ulster Bank has made an application to the Government to be considered for inclusion on the list, which we will do having regard to the issues of the stability of the financial system and the legal advice we receive on competition and State aid matters. We will examine the application sympathetically because of its large branch office, but I cannot commit the Government on the issue at this stage.

Liam Twomey (Fine Gael)
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I move amendment No. 6a:

In page 2, between lines 18 and 19, to insert the following new subsection:

"(2) Any loan or other monies provided directly to a credit institution under this Act, shall not exceed €10 billion.".

Since the amendment was tabled under pressure, I would like it to read differently. It should read "to all credit institutions". The legislation is concerned with saving our financial institutions. When I made my opening address, I referred to events in the Japanese banking sector in the 1990s and how it took Japan more than a decade to get out of the mess. At around the same time, Sweden experienced a property crash.

What are the Minister's opinions on what will occur after the legislation is enacted? What are the potential second and third steps that should be discussed? We have heard that Irish banks are well capitalised and, according to some contributors, have become better capitalised in the few days since the Minister's guarantee of security for all deposits. We have also been told that, due to regulations in the sector up until recently, there is a low level of debt to assets. The sticky point is something that we do not know but have been told about, namely, the low level of bad debt in the sector as a whole.

Last year, the six banks in question made approximately €6 billion in profit, a significant amount. The deposit guarantees notwithstanding, what is the chance that the Government will need to loan considerable amounts to an Irish bank? From what I have gathered during the debate of recent days, that risk is low. A sum of €10 billion would be a large loan to any institution. It could only occur if a smaller bank merged with a large bank. What are the Minister's opinions in this regard and what does he know about the banking sector? We are second guessing. Should the taxpayer be told that a limit will be placed on the provisions, namely, that there should be no need to legislate for a loan of more than €10 billion? I wish to generate a discussion on this aspect.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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It is not my intention or that of the Government to expend €10 billion on the Irish banking system. I would be exceptionally concerned at that reference in the legislation. Our immediate task is to establish a guarantee scheme, which will result in an accrual of funds or value to the Exchequer or State in some shape or form. It will be done through the use of the Irish sovereign name.

When we go beyond that, it is true to state that the legislation contains provisions that allow the Minister to deal with emergencies. I envisage that emergencies could be categorised into two forms. The first would be a temporary emergency, a short-term shortage of liquidity that could be repaired and the State could be reimbursed. A more dangerous position would arise if a bank became permanently illiquid and unable to discharge its obligations and liabilities. The Bill contains ample options whether by way of taking shares, effective control or management. The legislation provides for a wide panoply of power for the State to act in such circumstances, but I would prefer not to explore those contingencies because they are not envisaged in the legislation. Rather, we envisage a positive outcome. Contingencies must be planned for close to them, but I am satisfied that there is ample power to deal with the contingency mentioned by the Senator.

The obsession with considering the assets and liabilities of banks is dangerous in the context of the Bill because that matter is not what the legislation is about. To realise all of the assets to which I referred on Second Stage, one would need to fire-sale the securities for the loans held by every Irish bank. It is an inconceivable chain of events, one that no Government could let happen.

Liam Twomey (Fine Gael)
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My main point concerned something to which Senator Ross and others referred, namely, the considerable urgency in sorting out the legislation last Monday night. We have never been given the background to the urgency. What is the Swedish model, which the Minister believes is so good that it will save our banking sector? Should we know about other concerns or is everything fine?

Joe O'Toole (Independent)
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Senator Twomey referred to my previous comments. I have regularly discussed this matter with the regulators, who informed me several times that they are not worried about the banks collapsing on the basis of people being unable to meet their mortgage repayments. Nor are they worried about the banks' solvency.

Traditionally, the loan to value ratio and its related liquidity were determined on the basis of a point in time. The regulators of the Central Bank would consider a bank's experience and determine what level of liquidity was required. In recent years and uniquely in Europe, the Financial Regulator has taken a forward-looking approach to liquidity. He has considered the possible future needs for liquidity and required the banks to meet them. Accordingly, their asset levels in terms of loan to value are stronger than ever.

The current issue is that of the banks doing their ordinary day-to-day business. As the Minister stated, they must draw down short-term interbank lending, but they cannot do their business because the period is getting shorter. The net effect is that, when a shopkeeper wants to buy stock or a contractor wants to buy a pallet of blocks or a couple of bags of cement, no money is available. This is a matter of liquidity, the issue with which we are trying to deal. The cost to the taxpayer is only relevant after we have drawn down by fire-sale or otherwise whatever assets and securities a bank might happen to have. Only then would we have to meet that guarantee with hard cash. Only an extraordinary set of circumstances would bring that about. I cannot imagine such circumstances.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Yes, and even if the extraordinary set of circumstances outlined by Senator O'Toole came to pass, the State insisted on the gradual winding down of the assets of a bank and there were a deficit at the end of that procedure, the Government has made it clear that its policy would be to levy the banks to the extent of that deficit. The purpose of this legislation is to prevent any exposure to the taxpayer. Although the figures about the relative assets and liabilities in the banking institutions and the fact that there is a cushion there were outlined in the House, the assumption should not be drawn that we will automatically have to lay our heads on that cushion. We will not.

Pat Moylan (Fianna Fail)
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Amendments Nos. 7 and 8 are related and will be discussed together.

Alan Kelly (Labour)
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I move amendment No. 7:

In page 2, subsection (3)(a), lines 29 and 30, to delete "any other Minister of the Government" and substitute the following:

"the Joint Oireachtas Committee on Finance and the Public Service and any other person or body".

The Minister is given specific powers in section 5 that during the two-year period he can make regulations he feels necessary and expedite them in any way possible to execute this Act. Under this amendment we propose that instead of the Minister's feeling it is appropriate to bring any considerations to the attention of Ministers in Government, he should bring them to the attention of the Oireachtas Joint Committee on Finance and the Public Service or any other body, as necessary. Given the wide-ranging nature of the legislation, that would be the most accountable way of bringing it to the Oireachtas so it could discuss the changes necessary from the Minister in the Houses with the people on this committee. It would be one way of ensuring any changes were discussed properly and with everyone across the Houses to ensure the Act was being interpreted and implemented in a good fashion.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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While I understand Senator Kelly's point, these regulations must be laid before the Houses for approval in the first instance, so they are approved by the Houses. That is the key point set out in the legislation. The Senator seeks to amend this provision to provide some kind of power for the Oireachtas Joint Committee on Finance and the Public Service. However the requirement of the Minister to consult another Minister is a simple requirement that if there is a relevant other Minister, the Minister for Finance should consult him or her. Often legislation specifies that one cannot incur funds or recruit staff without the sanction of the Minister for Finance. It is a matter pertaining to the executive branch of Government and one cannot mix that up with the legislative branch.

Joe O'Toole (Independent)
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Issues have been raised by a number of people and I felt the Minister would deal with them. This regulation is the core of the Bill. The first amendment tonight was by the Labour Party suggesting the Bill should not come into operation until this regulation was framed and put through the Houses. Whether one agrees or disagrees with that, the thinking behind it was that this is the core of how it will operate, and fundamentally so. While it is secondary legislation, it is crucial secondary legislation. A very solid argument was made that this should be put through the Houses by the affirmative, positive process of being passed by both Houses, rather than just being laid before each House.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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These ones are. The Senator is anticipating the next section.

Joe O'Toole (Independent)
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My apologies.

Jim Walsh (Fianna Fail)
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I agree with the thrust of section 5(3)(c) but I wonder if there is a lacuna. Perhaps there is not but the Minister might clarify this. In an emergency which, it was found at the time, was not covered by the regulations, would section 5(3)(c) become an impediment to swift action being implemented? Could this happen in a case where secrecy might be paramount? Perhaps it would not, but I am concerned.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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No, I am satisfied that I have sufficient power.

Alan Kelly (Labour)
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I move amendment No. 11:

In page 3, between lines 8 and 9, to insert the following subsection:

"(2) There shall be an oversight board consisting of 3 persons appointed by the Public Accounts Committee of Dail Eireann being persons of international financial expertise and repute, which shall report every 6 months to that Committee on the operation of this Act.".

This amendment proposes the creation of an oversight board consisting of three people appointed by the Committee of Public Accounts, these people having international financial expertise and being of similar standing in terms of such expertise, which would report every six months to the committee on the operation of the Act. The purpose is to bring in wider knowledge and expertise to oversee the unique legislation that has been put before the Houses in the last two days. This would be a good outside channel to examine how this Act performs in the duties for which it was proposed. We ask that it be supported. It is not a major ask and the Minister should support it.

Liam Twomey (Fine Gael)
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The Financial Regulator went on the news and said good corporate governance, transparency and structures are very important. Such an oversight group with the necessary expertise reporting back to the relevant Oireachtas committee would fulfil those criteria and be very beneficial in fulfilling this legislation.

Ivana Bacik (Independent)
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This amendment gets to the root of the problem some of us have with the Bill. The Minister has suggested we are obsessed with the assets and liabilities of the institutions. However, it is appropriate and responsible to examine the potential exposure of the taxpayer to liability under the Bill in the terms of the guarantee scheme proposed by the Minister. While we accept and all hope that only an extraordinary set of circumstances would give rise to any real exposure by the taxpayer, we must examine the potential level of exposure. In doing this we must examine levels of assets and liabilities. Many of us would have an issue with the €80 billion cushion that was spoken of, and would see it as a gross overvaluation of the banks' assets. It is important we examine the safeguards in the Act, and this is one important safeguard that could be in it but is not. Another would be to have a representative of the Financial Regulator appointed to the board of any institution getting financial support. Another would be for the Minister to agree to set limits on the levels of salaries and perks for chief executives and senior officials of banks. We need to see more safeguards and this oversight committee could be an important safeguard.

Dominic Hannigan (Labour)
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This is about improving regulation and ensuring safeguards are in place. A committee of three wise people will not place an inordinate demand for funding on the Department. It is sensible to include something like this in the Bill so I ask the Minister to accept this amendment.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Nothing prevents the annual report being examined by the Committee of Public Accounts or the Committee on Finance and the Public Service. Nothing, subject to Oireachtas Commission approval, stops those committees from obtaining expert advice or an outside assessment of the report submitted to the Houses. All that can happen. One does not need an Act of the Oireachtas to say it can happen.

Dominic Hannigan (Labour)
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Will the Minister enshrine it in legislation?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I do not understand this concept of an expert oversight board because I thought my expert oversight board was Dáil Éireann.

Dominic Hannigan (Labour)
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With respect to the Minister, these matters are very detailed. No one in this House is an expert on international finance. It is imperative we get experts in to advise us on a regular basis.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Oireachtas has the capacity to do that.

Alan Kelly (Labour)
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I move amendment No. 13:

In page 3, subsection (4), lines 16 and 17, to delete "or other".

This relates to section 6(4), which states: "Financial support may be provided under this section in a form and manner determined by the Minister and on such commercial or other terms and conditions as the Minister thinks fit." The Labour Party amendment seeks to withdraw the word "other" or, at the very least, we would like the Minister to explain it. It suggests non-commercial terms and we spoke about this earlier in the House. To the Labour Party, this could be a dangerous proposition. If an explanation is forthcoming we will consider it but otherwise we will press for this term to be withdrawn.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This is the amendment that seeks to provide in section 6, without prejudice to section 6(1), that the obligations of a credit institution in receipt of financial support shall include an obligation to take all measures——

Alan Kelly (Labour)
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No.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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My apologies, Senator Kelly, I have mistaken the numbers in my brief. The section includes: "Financial support may be provided under this section in a form and manner determined by the Minister and on such commercial or other terms and conditions as the Minister thinks fit." Of course the expression "or other" must be included because the Minister needs power in respect of prudent lending and abuse of payments to those who encourage unreliable lending. The reason the term is included is to extend the amplitude of the Minister's powers as I outlined earlier in the debate.

Alan Kelly (Labour)
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I move amendment No. 16:

In page 3, between lines 22 and 23, to insert the following new subsection:

"(5) In making a scheme under subsection (4) the Minister may require any specified credit institution to make particular provision to meet the credit requirements of persons on low incomes, and he shall consult with the Money Advice and Budgeting Service in this regard.".

In this section we want to see if the Minister will succumb and allow us to include a provision to help those on low incomes through the scheme set out. We want to extend the scheme so that those on low incomes can be helped through this process, that ordinary people can be helped with regard to foreclosure and that it be addressed through this process. We ask the Minister to look favourably on this amendment.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have examined the amendment and the issue raised is an important one. We need our community to have access to the credit and do not want people to resort to services provided by those who require high interest. Section 6(5) provides for the preparation of a scheme relating to these issues, the terms and conditions relating to the granting of a guarantee. The Minister has a wide discretion but a guarantee cannot be subject to issues such as credit for those on low incomes. This is not because it is not a desirable policy objective — clearly it is — but Senators recognise that this risks wholly extraneous factors becoming attached as conditions of the guarantee. Given the commercial character of the guarantee, it is important that the requirements be related to questions of stability, ethical standards and transparency and not to the lending and borrowing practices of the institution in its day to day work with customers. For those reasons I cannot accept the amendment.

Pat Moylan (Fianna Fail)
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Amendments Nos. 17 to 20, inclusive, are related and may be discussed together by agreement.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The purpose of this amendment is to substitute a positive resolution process in respect of the scheme for financial support to guarantee credit institutions. This amendment, signalled in the Dáil earlier this evening, reflects the importance of ensuring that both Houses of the Oireachtas have an opportunity to consider and endorse the scheme dealing with key requirements for financial institutions. The mechanism for pricing the value of the guarantee for these institutions was the terms and conditions for strengthening corporate governance, transparency and risk management. All arise in the scheme and the scheme should be approved by each House.

Paddy Burke (Fine Gael)
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Can the Houses amend the scheme or can they only reject it?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The House can accept or reject it, as is the normal arrangement.

Alan Kelly (Labour)
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I move amendment No. 22:

In page 3, between lines 29 and 30 to insert the following new subsection:

"(6) It shall be a condition of an application under this section that an applicant shall agree that in the event of financial support under this Act being availed of from State resources, the applicant (if a limited company) shall issue shares to the Minister for Finance to a value equivalent to the amount paid by the State under the financial support.".

This is a simple amendment with a major impact. Effectively, if an institution applies under this scheme it will issue shares equivalent to the amount paid by the State so there is some come back for the taxpayer, showing some faith for the role the State is pursuing.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This is an interesting proposal and was tabled in the Dáil. The State intends to draw up the scheme, have it approved by each House of the Oireachtas and then conclude individual arrangements with each financial institution. The terms of the arrangements will be confidential because they are commercial documents.

The guarantee referred to in the Senators' amendment is an entirely different matter. The Bill contains provisions to deal with a deeper emergency of a temporary or permanent shortage of liquidity. In the event of a temporary shortage, the Minister has power under this legislation to require the NTMA to come to some commercial or other arrangement with the party concerned or to make provision by way of funding. Were the Minister to do so, there would have to be a vote in Dáil Éireann sanctioning the expenditure and appropriation of the amount. Under this legislation, the Minister has the power to subscribe for shares in the credit institutions. The amendment seeks to make this share subscription mandatory in all cases where financial support is granted. In the case of the guarantee arrangement proposed, the State proposes to get cash, which is far superior to a share, for this guarantee.

It may be that the credit institutions would prefer to give equity or participation in their risk rather than the most valuable item of all, cash. I do not see how giving shares strengthens the guarantee but I appreciate why the Senators tabled the amendment. It deals with a grave scenario for a financial institution and there is the power to take shares. Preference or ordinary shares could be taken to take control of the company. To make it mandatory is not a desirable idea.

In Sweden it was made mandatory and there has been much talk of that model. Let us be clear about the Swedish model. The Swedes suffered a complete meltdown of their banking system and their gross domestic product fell 10%. The matter was tackled very well by the Government in Sweden. We are not there yet and the Swedish model appears always to appeal to our social democratic consciences. The Swedish Government at the time did a very good job but let us not forget the catastrophe with which it was struck. We have studied the Swedish model in our contingency planning and some of this legislation reflects it but we are not there yet.

Joe O'Toole (Independent)
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The night was going very well but the Minister has scared the wits out of us with his "we are not there yet" phrase. I presume the Minister wants to strike that from the record immediately. He never said "we are not there yet".

Senator Twomey asked the Minister to explain the Swedish model. In fairness to the point raised in the amendment and the question asked earlier, what happened in the Swedish model was that in the Armageddon situation where the banks did not have the cash to pay off their debts, the state was left with no choice except to take equity and ended up owning two banks which became one bank. That was the outcome of the Swedish model. That is a nightmare or Armageddon scenario. That is the way it would play out if we ever came to be at the place where the Minister said "we are not there yet". If we are, we may all start to explain something to the people.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Senators are so anxious to discuss these doomsday scenarios that I decided to bring them nearer to them.

Jerry Buttimer (Fine Gael)
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A good job was done last Tuesday.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I did say in the other House and I will confirm it in this House that it would be the policy of the Government to follow that course in the event of a doomsday scenario. That is what one would do, obviously, because the State would want total effective control. One of the points made about moral hazard is that those who take risk in the bank should suffer in the event of failure. Of course, the shareholders are those who take the risk in a financial institution. There is no question that a true bail-out would involve bailing out the shareholders of an institution.

Jerry Buttimer (Fine Gael)
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What about the taxpayer?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The taxpayer would have to be safeguarded in that situation.

Pat Moylan (Fianna Fail)
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We do not want to drag on the debate. The early shift is in and shortly the school tours will be coming in. Is the amendment being pressed?

Alan Kelly (Labour)
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I move amendment No. 23:

In page 3, between lines 29 and 39 to insert the following new subsection:

"(6) No guarantee under this section shall apply to any business acquired by an applicant after the date of passing of this Act unless the Minister for Finance so directs, or to any liability of a bank acquired on the basis of an interest rate that differed more than one per cent from the associated banks lending rate.".

This is an important amendment which aims to limit those institutions from adding more risk and taking more reckless decisions after being underwritten by this Bill. It seeks to ensure that no guarantee under this section will apply to any business acquired by an applicant after the date of passing of this Act. Once the Bill is passed, any business cannot add on more subsidiaries, if it has any, unless the Minister so directs. We discussed this matter on Second Stage.

Also, the same bank or any bank cannot add on any liability on the basis of an interest rate that differs more than 1% from the associated banks lending rate. That is an additional qualification. This is a very important amendment, on which we would like to hear the Minister's comments, which seeks to avoid circumstances whereby these institutions can add on more liabilities after signing up to the contracts that will subsequently be put in place with him.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The provision in the Bill which precludes the operation of the Competition Authority only relates to circumstances where there is an instability in the financial system. In all other circumstances, competition rules apply to mergers, acquisitions and businesses. It would not be normal practice in a purely commercial understanding between a bank and the State that the State would impose an obligation on that commercial entity in regard to how it conducts its acquisition of businesses.

Paddy Burke (Fine Gael)
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To follow on from Senator Kelly's point, how does the Minister see the banks trading their way out of the difficulties because their problem, as the Minister has said, is one of liquidity? If no cash is injected other than getting large amounts of cash on deposit, how does the Minister see them working their way out of the difficulties? None of the banks has said it does not need the Minister's assistance. How does the Minister see them trading their way out of the difficulty?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Liquidity in terms of a bank is acquired through the taking of deposits or the obtaining of interest bonds, interest bearing loans or loans from other banks or the interbank market. We have to inject confidence into that market. That is one of the main purposes of this legislation where Ireland is concerned. On the liability side of the balance one also has subordinated debt but that is normally the way banks build up that side of the balance sheet. On the other side of the balance sheet, the assets side, in addition to the loans which banks have, they also have shareholders' capital. The market has been very bearish about shareholding capital as I am sure Senator Burke is well aware from the various attempts to have rights issues in the UK in recent times. Clearly, if that degree of confidence existed for the banks to have a rights issue, the banks could undertake such an operation.

Liam Twomey (Fine Gael)
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I move amendment No. 24:

In page 3, between lines 35 and 36, to insert the following new subsection:

"(7) (a) Any credit institution in receipt of financial support under this Act shall have appointed to its risk assessment committee, risk management committee or other appropriate board, such person as the Committee of Public Accounts shall direct to protect against possible misuse of such financial support.

(b) Any credit institution in receipt of financial support under this Act shall have appointed to its Board of management such person as the Minister directs to protect against possible misuse of such financial support.

(c) Any person appointed under paragraph (a) and (b) shall be of an appropriate degree of qualification and experience to discharge their function under paragraph (a).

(d) Any credit institution in receipt of financial support under this Act shall, in under the supervision of the person appointed under paragraph (a), conduct a due diligence assessment of its practices and procedures to ensure that it is operating with such strict financial controls and regulations as may be prescribed from time to time by the Regulatory Authority.".

One of the things the Minister has been saying during the course of the debate is that he would like to see a greater involvement by the Oireachtas in the risk management of all credit institutions. This amendment seeks that those appointed to senior posts within the banking sector or the regulatory sector by Government should appear before the Committee of Public Accounts and say why they are the most suitable for the job. There should be an onus on such individuals, when appointed, to carry out due diligence functions on the organisations they are due to supervise and report back to the relevant Oireachtas committee. This would strengthen the role of the Oireachtas in the regulation of all financial institutions in which in which it has a role.

Paul Coghlan (Fine Gael)
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In regard to that due diligence examination which the Minister deems desirable and necessary, where he finds a shortfall in regard to management, will he look for heads or proper people to conduct the risk assessment controls and so on?

Frances Fitzgerald (Fine Gael)
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There has clearly been much concern about the governance of banks about which many Members in the Dáil and Seanad have spoken. The purpose of this amendment is to ensure an outside person is appointed to the risk management committee and the main company board of each financial institution that receives financial support.

The Minister may have seen the Fine Gael Public Appointments Transparency Bill 2008 which was published during the week. This Bill provides that the chairpersons or chief executive officers of statutory agencies or public bodies would appear before the relevant Oireachtas committee to answer questions relating to their experience or qualification for that role. The recommendation would be made to the Minister who could confirm the nomination to the Dáil.

This amendment takes into account the concerns expressed by many people and sets a formula for appointing suitably qualified persons to a variety of positions in the banks to ensure oversight. I am interested to hear the Minister's views on whether this should be in the Bill at this point.

Ivana Bacik (Independent)
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I support this amendment which goes to the heart of providing a safeguard and an adequate degree of oversight to the guarantee the Bill provides. It would address some of the concerns we have with the legislation. The Minister has already indicated he would like to see a representative of the public interest appointed to the boards of institutions receiving financial support. Will he clarify if that representative of the public interest effectively would fulfil the functions envisaged in the proposed amendment?

Joe O'Toole (Independent)
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This amendment contains very important material. If the Minister is not prepared to accept it as drafted, he should give an indication of how he would deal with it. That bank directors are independent is a joke. The copybook of corporate governance of Irish companies is the UK Higgs report. Fifteen years ago AIB decided to be brave and appointed Mr. Higgs to its board as one of its independent directors. He promptly rode roughshod over most of the basic principles on which he had preached to the United Kingdom and Ireland in previous years, first by extending his stay on the board beyond the five or seven year period as recommended in his own report. There are no independent directors of the banks. It is a club. At least, the Labour Party amendment seeks to get people in. The boards should be dissolved and reconstituted by decent people. This is an indication of the way things go on that point.

Paul Coghlan (Fine Gael)
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It is a Fine Gael amendment.

Alex White (Labour)
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I clarify that it is not a Labour Party amendment but a Fine Gael proposal that the Labour Party will be happy to support. It seems to be the minimum measure that would meet many concerns raised by others. Many of us have made the point that the Bill is a bare bones proposition with very little meat on it. Much is left to trust. We must see what will come out in the scheme. There must be a minimum gesture in the body of the legislation that meets the issues of substance raised regarding regulation. I urge the Minister to accept this excellent amendment or, as Senator O'Toole has asked, at least tell us what he proposes to do in order to reflect its content.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This proposal is worthy of examination but if one looks at its two core ideas, there are better ways to implement it than by this legislative format. The risk assessment committee is an important issue. However, the Financial Regulator already has powers to attend meetings of such committees, to open the latch at a bank and look at risk practices. We need a more frequent exercise of that power by the regulator rather than adding it here.

In regard to the scheme and the contracts being drawn up on foot of it, there will be specific provisions to prevent lenders from engaging in abusive loans. That is a crucial issue in the implementation of this legislation in order that there will be no abuse of the sovereign status we have now attached to lending by these agencies.

With regard to appointments by the boards of the banks, the position is that the directors of these boards have fiduciary obligations to their companies. I propose, in consultation with the relevant banks, to make the case for and secure the appointment to each of these boards of someone who will act in the public interest. Of necessity, the banks all have their own charters and constitutions, articles and memorandum of association. Therefore, it would require an adaptation by each institution. I am anxious to see this happen and do not wish it to be left in the category of "active consideration". I am glad, therefore, that Senators have pressed this point. The objectives can be achieved without this legislative format.

Liam Twomey (Fine Gael)
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Amendment No. 17 is very much a version of the Fine Gael amendments that I withdrew subsequent to what the Minister said earlier. It is about bringing the Oireachtas closer to what is happening in the sector. We should have a central role in the regulation of, due diligence and everything else that happens in the financial sector. Concerning what the Minister said about oversight and transparency, I am disappointed that he did not take the amendment on board.

Alan Kelly (Labour)
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I move amendment No. 26:

In page 4, subsection (15), line 39 to delete "2009 and each year" and substitute "October 2008 and each month".

This relates to subsection (15), which states:

As soon as practicable after the end of 2009 and each year thereafter, the Minister shall lay a report before each House of the Oireachtas for the purpose of informing the members of each House on the situation with regard to any financial support provided under this section.

The Labour Party wishes to change this by deleting "2009 and each year" and substituting with "October 2008 and each month". This is an extraordinary Bill. Members find themselves in highly unusual circumstances and the Labour Party believes that if circumstances arise in which the Minister will be obliged to help different institutions, he should report on the matter on a monthly basis.

Dominic Hannigan (Labour)
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Members are being fobbed off in this regard. There is no obligation to place a report before the House before 2009. The support period will run out in 2010 and anyone who has been involved in the preparation of reports is aware it could be months into 2009 before such a report would be received. As this could take place after July, it is possible that Members would not receive a report until after the House had broken for the summer recess. If this clause is to have any meaning, Members must receive reports much earlier than that. The Minister can understand the spirit of the clause and I ask him to consider how he might accommodate our wishes.

Ivana Bacik (Independent)
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This is an important measure as, presumably, were financial support to be provided, this would be a matter of public record. Therefore, were financial support to be provided for an institution, it would be in the public domain. Consequently, it makes sense that if financial support is being provided for an institution, there should be a report, at least on a monthly basis.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This is the last amendment to be tabled by the Opposition and I have one further amendment to go. In the amendment under discussion Members seek to impose a monthly reporting obligation. I am always accountable to Dáil Éireann. We are dealing with institutions which have shares quoted in the marketplace and which are subject to huge degrees of public scrutiny. Admittedly, two of them are building societies, which are not subject to the same degree of public accountability. In all the circumstances, however, a monthly reporting obligation would impose a burden that would not be consistent with the effective and efficient operation of the legislation.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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This is a technical amendment required to ensure the non-registration of charges only applies to charges with secure liabilities arising under section 6. In other words, all other charges created by credit institutions will be treated in the normal way.

Pat Moylan (Fianna Fail)
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When is it proposed to sit again?

Donie Cassidy (Fianna Fail)
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It is proposed to sit today at 12 noon.

Joe O'Toole (Independent)
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It would be appropriate to record our thanks to the Minister and his officials.

Pat Moylan (Fianna Fail)
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In regard to expressions of thanks, I will call the spokespersons. I call Senator Twomey.

Liam Twomey (Fine Gael)
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It is not since my days as a junior doctor that I have worked all day and all night. First, I thank all the staff.

Joe O'Toole (Independent)
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Hear, hear.

Liam Twomey (Fine Gael)
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They have also worked all day and all night here. It was unexpected that they would be required to do so earlier. We thank the Minister for his commitment in this respect during the week. It is not too often that I reach across the political divide but I compliment him on what he has done this week. It was work well done and that must be said.

Joe O'Toole (Independent)
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Hear, hear.

Liam Twomey (Fine Gael)
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This has been an historical occasion for all of us. I hope we will not repeat it too often. Hopefully, what we have done will make a huge difference to our financial services and that we have headed off any major crisis the Minister thought was pending last Monday that led to this emergency legislation going through the Dáil. On behalf of everybody in Fine Gael I thank the Minister very much for his work.

Joe O'Toole (Independent)
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I wish to be associated with those remarks and, in particular, to thank our staff of the House who have done an extraordinary job in trying circumstances.

Senators:

Hear, hear.

Joe O'Toole (Independent)
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On my behalf and, I am sure, on behalf of other Members and the Minister, I convey congratulations to Mr. David Doyle and the rest of the staff of the Department of Finance who went into the bearna baoil when it was necessary to do so. They made a bold move. We are launching the measure here tonight. Let us all wish it well and all who sail in her. It is a hugely important step. The officials who were here supporting the Minister all night deserve our thanks. We recognise the work they have been doing. I ask the Minster to convey to them the thanks of our group and that of the House for doing that.

Mary White (Fianna Fail)
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Hear, hear.

Joe O'Toole (Independent)
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I will conclude with one negative comment. The Minister introduced e-Government to the Cabinet table and various attempts are being made in that respect in the Dáil. We had a fine debate here. In my subjective and biased view, it was a finer debate than that in the other House. What we passed here tonight now has to be sent physically to the far end of town, somebody has to do something with it and it has to be printed off and brought back here. It is a matter of using just a screen to track changes which should be done contemporaneously. We have four huge printing presses across the road. It is appalling that this is happening. It looks bad. It is not proper management. This work should be done in-house and contemporaneously. We should be able to see here on our screens the first version of the Bill, the changes — let us say, in red — that were tracked in the Dáil, the amendments — in blue — tabled in the Seanad, the amendments — in green — passed in the Seanad and the final version of the Bill.

Mary White (Fianna Fail)
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There is the question of unemployment.

Joe O'Toole (Independent)
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It could be printed and we would have it here. It is a very easy thing to do and I ask that it be considered. I thank the Minister for his openness and discussion tonight and I hope the Bill is a success.

Alan Kelly (Labour)
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I would like to be associated with comments expressed by the previous two speakers. I thank the staff of the House and everyone concerned for working so late. I thank the Minister for his dedication and his departmental colleagues for their work. I wish the Minister all the best with the passing of this Bill. It is not a measure with which we wholeheartedly agreed and we ended up voting against it. To carry on the analogy of my party leader, from an insurance point of view we have taken out an insurance policy. I hope there will not be too many claims on it in the next two years and, if there are, I do not know where we all be heading.

Marc MacSharry (Fianna Fail)
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I join others in thanking the staff of the House, the Clerk and the Assistant Clerk of the Seanad and all the staff associated with the House who have given unstintingly of their time and co-operation in recent days. I also thank the officials from the Department of Finance and other State agencies, who have given unstintingly of their time over the past week in the preparation of this most important legislation. I thank the Minster who must have had the worst week——

Jerry Buttimer (Fine Gael)
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He claims he did not.

Marc MacSharry (Fianna Fail)
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——of anybody I could possibly imagine in terms of the commitment and effort he managed to put into this and for the time that he has given us here.

Senators:

Hear, hear.

Marc MacSharry (Fianna Fail)
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I congratulate each Member of the Seanad for the spirit in which they have processed this legislation. It is appropriate as the sun shines in from Merrion Square that this legislation provides the vehicle for Government that it may steer us in these uncertain times——

Mary White (Fianna Fail)
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Hear, hear.

Marc MacSharry (Fianna Fail)
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——to more positive economic times for our people in the future.

Dan Boyle (Green Party)
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We live in interesting times in the Chinese sense of the word. We have made a very emphatic decision here, one in which we can take some pride that we have carried out our role effectively as legislators. I thank all those who have assisted us in doing that, the staff of the House, the Cathaoirleach for his patience and forbearance, the Minister for spending all his time in this all-night session after steering the same legislation through the other House. We will wait to see the effect of it. We can have satisfaction in doing what we are meant to do in this House and hopefully in reflecting the importance of this House to the wider public. We can take satisfaction that this is why we are here and that legislation such as this is why the people have us here.

Donie Cassidy (Fianna Fail)
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I thank everybody for their patience in bringing this legislation to where it is, namely, the leaders and Whips of the groups, the staff of the offices of all Senators and everyone concerned. We are deeply indebted to the Clerk of the Seanad, Deirdre, and to Jody and their staff for making the facilities available here when this legislation had to go through. I thank the Cathaoirleach for what he has done to help me during the entire evening and into the morning which it now is.

The Minister, Deputy Brian Lenihan, excelled. He has been dealing with this Bill for 21.5 hours between taking it in the Dáil and in the Seanad. The House has been sitting more than 21.5 hours from the start of the Order of Business this morning. It is an historic day. It is something that had to be done in the national interest. I deeply thank everybody here for their understanding and co-operation.

Frances Fitzgerald (Fine Gael)
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I thank the staff, particularly our own staff, and all the staff who work in Leinster House for their support this evening, which was essential. I thank the Minister for staying here with us all night and his officials for all the work they have put in.

It is an historic occasion. It is the first time that all Stages of a Bill have been passed after midnight in this House, emphasising the importance of the legislation and its importance for the economy. We hope for the very best for our people and for our economy from this legislation. We hope sincerely that it does the job it is intended to do and restores confidence. I thank especially the spokespersons from each of the parties who have carried the brunt of this legislation in the House tonight. I thank the Cathaoirleach for the way he has conducted affairs tonight and the time and space that has been afforded to all of us during the course of this debate.

Pearse Doherty (Sinn Fein)
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I, too, want to be associated with the expressions of thanks to the staff in the Seanad and throughout the House who are working here early in the morning because the House sat through the night. I thank the Minister for paying attention to what was said during what was an extremely healthy debate. I am glad I was able to support the Bill, which is in the national interest. However, I harbour a number of reservations. I hope the consensus among the parties evident during the debate can be replicated when the scheme is presented to the House. It is important the Minister takes on board the views expressed by Members and ensures that these are reflected in the scheme. I thank the Minister and his staff for their attendance.

Alex White (Labour)
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I join previous speakers in thanking the Cathaoirleach, colleagues on all sides and, in particular, the staff for their efforts during what has been a very good debate. The Minister has not been as accommodating as I would have wished, but he listened to and dealt with our comments with his usual professionalism, care and attention.

The Leader and Senator Doherty stated that the legislation is in the national interest. At the risk of disagreeing with them, I am of the view that all legislation passed by the Houses is in the national interest.

Ciarán Cannon (Progressive Democrats)
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I echo the sentiments expressed by previous speakers. This is an historic occasion, not only in the context of the hour at which we are concluding our business but also in respect of what the Oireachtas has achieved during the past 48 hours. Effectively, we have secured the Irish banking sector and also the economy. The Minister made a bold and decisive move and the support the Bill has received in both Houses is an acknowledgement of that fact. I thank the staff who were involved in facilitating the debate in the Seanad, in drafting the legislation and in assisting the Minister during the past two day.

Pat Moylan (Fianna Fail)
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Before calling the Minister, I wish to thank the Leas-Chathaoirleach, Senator Burke, the Clerk and Clerk Assistant of the Seanad and the staff of the House, the restaurant staff — who remained loyal to us right throughout the night — the staff of the Bills Office, the various other members of staff and Members for their help and co-operation in ensuring the Bill was passed.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I join in the tributes paid by the Cathaoirleach and Members to the staff of the Houses of the Oireachtas who enabled us to function throughout the night. I refer to both the staff of the Seanad and other members of staff who have been of great assistance to us in completing our business.

I pay tribute to certain officials associated with the preparation of the legislation. I have had the opportunity to work closely with officials in my Department for some months. A number of them are specialists in this field and have provided great assistance. I also pay tribute to the officials of the National Treasury Management Agency, the Central Bank and Financial Services Authority of Ireland and the Financial Regulator who were of great assistance. I thank the Attorney General and his staff who were very involved in dealing with this matter from before the Cabinet decision to proceed with the introduction of legislation on Tuesday.

I am always struck by the professionalism and integrity of our public service. When initial difficulties arose in the banking sector in early September, it was necessary for my officials and I to take a number of individuals into our confidence in order that we might make a balanced assessment of what was required. I am extremely impressed that those confidences, which are extremely important aspects of attempting to deal with a crisis such as that with which we were faced, were never broken. I pay tribute to the professionalism and high standard of care displayed by public servants in respect of their work.

I thank Members for the considerable attention they paid to the Bill during the night and into this morning. A Sheanadóirí, gabhaim buíochas ó mo chroí libh go léir ag bánú an lae seo.