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Dáil Éireann debate -
Thursday, 28 May 1942

Vol. 87 No. 3

Central Bank Bill, 1942—Committee (Resumed).

Debate resumed on amendment No. 30 (Deputy Hickey).

When I moved this amendment yesterday, I did not advocate a reduction of salaries in respect of any persons. It was mentioned by the Taoiseach that if a reduction of salaries were advocated, we could not favour one section as against another. I do hold that a civil servant with a salary of £1,700 a year is sufficiently remunerated for the additional work he may do as director of the central bank. I had something more in mind than the points raised yesterday against the amendment. We should think seriously for a few moments of the mass of our people who have to live on very small incomes. I cannot exclude from my mind the mass of people compelled to exist on amounts on which it seems impossible for anybody to live. We are, evidently, prepared to give a man with £1,500 or £1,700 salary as civil servant another income as director of the central bank while we are, at the same time, refusing to give 2/6 a week extra to road workers, to allow any increase to the mass of men with a wage of £3 a week or to give more than 33/- a week to agricultural workers who also have family responsibilities. When I consider the position of the majority of small farmers, of whose standard of living I have a good idea, I cannot agree that more than £1,500 or £1,700 should be paid to a civil servant who may be called upon to act as director of the central bank. Some of the secretaries of Departments are paid salaries appropriate to their responsibilities. If they be called upon to act as directors of the central bank, I think that that salary should cover all the work they are asked to do.

The Taoiseach and other members of the House should study the condition of the mass of our people. I believe that any man who is worth a decent salary should be paid a decent salary —a salary worthy of his qualifications and merit. But we should remember that a large mass of our people are compelled to exist on as low an income as 30/- a week. We have had decent citizens forced out of industry, condemned to remain in idleness, through no fault of their own, and compelled to feed, clothe and shelter themselves on 10/6 a week. When I advocated recently an increase in the pension payable to widows living in country districts from 6/- per week and to widows living in the city from 7/6 per week, I was told by Ministers that these allowances could not be increased. These were the things I had in mind in putting down this amendment and I do not like anybody to introduce any foreign elements into the argument. Listening to the Taoiseach justifying the giving of these salaries, I asked myself if it was assumed that nobody could give honest or good service in this country unless he was extravagantly paid. Large numbers of our people are compelled to exist on very little and they are honest people, giving good service. I do not look upon a man in receipt of £1,500 or £1,600 for service to the State as badly paid when I have regard to the number of people who are ground down in poverty and privation—the people at the other end of the scale. I am moving this amendment on those grounds and on no other grounds. I think that it is a bad practice to appoint civil servants as directors of companies or as directors of the central bank. But, if they are appointed, let them do the work on their salary of £1,500 or £1,600 without obtaining a second salary. I shall not agree to that while we have, at the other end of the scale, people in a state of poverty and privation.

I think that some of the speakers on this amendment are unable to see the forest for the trees. Deputy Hickey seems to think that, when there are salaries running from 30/- a week to £1,700 a year, a man in receipt of the higher amount should not be allowed to have any more.

If the country can afford it, by all means.

Where are you to draw the line in respect of this principle? Will Deputy Hickey advocate two days' work for one day's pay? That might not suit when he would come down to the implications involved in following this amendment to its logical conclusion. I do not see why a sort of manhunt should be organised after a civil servant who has a substantial salary.

I did not suggest any man-hunt. I have the greatest regard for the members of the Civil Service, having had contact with them for three or four years. It is unfair of Deputy Dockrell to make that remark.

I did not say that Deputy Hickey had said that. What I said was that that was the effect of the proposal. Why are civil servants singled out? Why should you not apply the rule to everybody?

That is so.

Just look at where that will lead you. You then get down not only to civil servants but to everybody else. When the two salaries together amount to a substantial amount, they are not entitled to any more. They ought to give two days' work for one day's pay. Is that not the case?

That is not what is in my mind.

It is not in the Deputy's mind, but I think he would arrive there by easy stages. I am trying to point out that we have started on a slippery slope, and I would like to suggest that we might end up by asking people to give two days' work for one day's pay. If people are logical and want to pursue this to the end, this amendment ought to be extended to practically everybody, as you begin to go down the scale. The Deputy repudiated my suggestion that this is to apply only to a civil servant; when I suggested that it was a manhunt after a civil servant he indignantly repudiated it. Of course, I accept his repudiation, but the amendment reads:—

"who is entitled to receive full-time remuneration from public funds as a member of the Civil Service."

We should go down the scale and look at some people in other public services or engaged partly in other duties. We might assume that the Minister for Finance may think of balancing his Budget by this system, and might bring it in for everybody. Then you would get down ultimately to the people who are getting 30/- a week, who, it is suggested, are at the other end of the scale. They might be invited to do some more labour for the same pay. The Deputy would not advocate that?

They are not afraid of labour.

I have not suggested that they are, but where would you draw the line? In the last century, the peasants in France worked so many days on their farms, so many days for their seigneur or landlord, and so many days for the State. Is that the door that Deputy Hickey is opening?

It is not. I want to see at least a minimum established before we start at the top.

That is not what you have put in this amendment.

The Chair did not draft the amendment. The word "you" used by a Deputy in debate is presumably addressed to the Chair.

I am pointing out that Deputy Hickey, when appealed to, has deserted his amendment, and that, if we adopt it in its simplest form, it means asking for two days' work for one day's pay. We might go very low down in the scale, and I do not see why we should not go to the very bottom, with that amendment. In my opinion, it would lead to a state of affairs to which Deputy Hickey would be as much opposed as the other members of this House.

I was rather amazed last night when I heard Deputy Hickey moving this amendment, as I thought that a man of his position would have a broader outlook. It would be unfair to treat civil servants in that particular case differently from other directors. I do not see any difference between the civil servant in that particular case, getting remuneration as a director and drawing his salary as a civil servant, and the case of a member of this House drawing his allowance as a Deputy and his salary as Lord Mayor of an important city in this country.

That is a remark worthy of the Deputy.

Amendment put.
The Committee divided: Tá, 15; Níl, 68.

  • Brodrick, Seán.
  • Byrne, Alfred (Junior).
  • Cogan, Patrick.
  • Corish, Richard.
  • Esmonde, John L.
  • Everett, James.
  • Giles, Patrick.
  • Hickey, James.
  • Keating, John.
  • Keyes, Michael.
  • Linehan, Timothy.
  • McGovern, Patrick.
  • Murphy, Timothy J.
  • Nally, Martin.
  • Pattison, James P.

Níl

  • Aiken, Frank.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Bennett, George C.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breen, Daniel.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Browne, Patrick.
  • Buckley, Seán.
  • Cole, John J.
  • Cooney, Eamonn.
  • Cosgrave, William T.
  • Loughman, Francis.
  • Lynch, Finian.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • McGilligan, Patrick.
  • Meaney, Cornelius.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mulcahy, Richard.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Donovan, Timothy J.
  • O'Loghlen, Peter J.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Dockrell, Henry M.
  • Fagan, Charles.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Keane, John J.
  • Kelly, James P.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • O'Sullivan, John M.
  • Reidy, James.
  • Reynolds, Mary.
  • Rice, Brigid M.
  • Rogers, Patrick J.
  • Ryan, James.
  • Ryan, Jeremiah.
  • Ryan, Martin.
  • Ryan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Laurence J.
  • Walsh, Richard.
  • Ward, Conn.
Tellers:—Tá: Deputies Keyes and Hickey; Níl: Deputies Smith and S. Brady.
Amendment declared lost.
Question proposed: "That Section 19 stand part of the Bill."

On this section there are some points to which I wish to draw the attention of the House. A certain looseness runs right through the draft of this Bill in connection with the organisation. I asked on another section whether the governor is or is not a director. I cannot make out, from reading the text of the Bill, whether he is or is not. I am inclined to think that he is meant to be one, but there are certain contradictions in the text which run against that. If the governor is a director, when it comes to the dismissal from office of the governor that has to be done by the unanimous vote of all the directors, and that would include the governor if he is a director.

Section 15 lays down provisions that have effect in relation to every governor, and Section 19 lays down certain matters in connection with directors. One provision in connection with the directors is that every director shall be ordinarily resident within the State. A person not so resident shall not be eligible for appointment as a director. If the governor is not a director that prohibition does not apply to him and, therefore, we apparently have the position that a person may be governor although he is not ordinarily resident within the State.

There are quite a number of other points that I find running through this Bill. There is a small point on another matter and it is partially related to this. I refer to the disqualification of a governor or a director, if any of those persons becomes bankrupt. In Section 21, there is reference to the disqualification of a director other than service directors and apparently service directors may become bankrupt as often as they like and they will not be disqualified from being directors of the bank. I do not know whether the Minister can say whether the governor is intended to be covered by the term director?

Will the Minister then explain why special provision is set out in respect of the directors? The directors must be ordinarily resident within the country, but while certain provisions applying to directors are, in Section 15, applied to the governor, the one about being ordinarily resident in the country is not applied to the governor and, if director is to be covered by the term governor, surely a peculiar situation arises when you are going to ask the governor to vote for his own dismissal, or will you have a unanimous vote, including the directors only?

There are certain powers of making regulations. That might dispose of some of the points the Deputy raised. With regard to the absence of a condition that the governor shall reside within the jurisdiction——

Would the Minister look at Section 19, sub-section (6)—

"A director shall, while he holds that office, be disqualified from being nominated or elected and from sitting or receiving payment as a member of Dáil Eireann or of Seanad Eireann."

Section 15, sub-section (4) (a), has the same point about the governor. I would take that to mean that it was not intended to have the governor covered by the term "director". Else, why reduplicate the phrases?

I will look into the point. I am not certain.

With regard to the other point about dismissal, is it intended to have the governor vote on the question of his own removal from office?

How will you prevent it?

It is the unanimous vote of all the directors.

I will look into it.

The Minister will remember that last night Section 15 (4) (a) was amended in a way that, in addition to preventing the governor during his term of office being elected as a member of Dáil Eireann or as a member of Seanad Eireann, also prevents him being elected as Uachtarán. I do not know whether it is important or not, but it might arise for consideration that a director would be prevented being nominated as a member of the Dáil or as a member of the Seanad, but he might be nominated for election as Uachtarán. As Section 19 stands at the present time, while a director could not be elected to the Dáil or Seanad, he could be nominated as Uachtarán.

Does the Deputy object to that?

No, I do not mind very much.

I presume he would have to resign one or other.

My point is that last night the Government had not considered it with regard to the governor. I put down an amendment with regard to the governor, which they accepted. If the Government overlooked it with regard to the governor, I just want to know whether they overlooked it with regard to the director. Personally, I have no strong opinion to express with regard to the ordinary director.

There does not appear to be anything in the section which limits the directors to citizens of this State. I take it it is intended to get over that by the use of the words "ordinarily resident" in sub-section (5). I think it would be very wise if the directors were confined to persons who have to accept the full obligations of citizenship of this State, and I think it would be a wise precaution if the Minister would have inserted somewhere, perhaps in the regulations or in the Bill itself, a definition of the words "ordinarily resident", because the words "ordinarily resident" have been interpreted very widely by the courts under the Income Tax Act and similar Acts, and it is quite possible that a very good case could be made out that a person who only spent perhaps two or three days in this country for the purpose of attending board meetings was ordinarily resident in this country. I think it is rather dangerous to leave that as the only safeguard for ensuring that a person who is occupying the important position of director of this bank, in charge of credit and so forth in this country, is a person who is subject to the full liabilities and all the duties implied by Irish citizenship.

I think the Deputy is correct in stating that the interpretation of "ordinarily resident", certainly for income-tax purposes, is very wide. I can hardly imagine it likely that anybody appointed director or governor of the central bank would be anything else but a citizen. I think it is unlikely, but I am certainly quite prepared to look into the point and to see whether it would be desirable to have it strictly laid down that he would be a citizen.

This may be an opposition point to what Deputy Esmonde has raised, but citizenship will depend on domicile and domicile is consistent with remaining outside the country as long as there is intention to return. "Resident" is by far the more rigid term. There is one other matter I might mention on that point. The phrase "bankrupt" is used in connection with certain disqualifications. I cannot remember the case but there has been a case—I think it was in association with election to this House—where that term was used and I think on a case being examined it was discovered that the word "bankruptcy" only refers to bankruptcy inside this jurisdiction. I presume it is intended to cover a person who is a bankrupt anywhere.

It ought to cover it, yes.

Question put and agreed to.
SECTION 20.
Question proposed: "That Section 20 stand part of the Bill."

Section 20, sub-section (4), states:

"Every service director shall hold office at the pleasure of the Minister and may be removed by the Minister at any time."

I think the Minister ought to reconsider that sub-section. It gives a very short term as far as its legal phraseology is concerned. I know that in practice it is not subject to such an infirmity as is implied in the phraseology but I think the Minister ought to reconsider the wording. What it really means is that you have seven directors with a certain term of office and two directors who really have no term of office at all. I think it would be advisable to have that matter considered. There was another point—I was not here when we were passing the section—it has reference to directors other than banking directors holding shares in banks and "bank" is described as one doing business wholly or partly within the State. I think it has reference principally to Section 16, sub-section (5). That would mean that one of those directors other than a banking director could have shares, let us say, in the Bank of England or any of the big five or other banks. I do not think that was the intention. Perhaps the Minister would take a note of that and look into it for the Report Stage.

Question put and agreed to.
SECTION 21.
Question proposed: "That Section 21 stand part of the Bill."

Is it intended that service directors should be subject to all these infirmities set out and which would entail disqualification in connection with ordinary directors?

There are other ways of controlling service directors.

That is the intention—that the same rules would be applied but they would be operated by different means?

Question put and agreed to.
SECTION 22.

Amendments Nos. 31 to 34 are interdependent. Deputy Dockrell, on the four amendments.

I move amendment No. 31:—

In sub-section (1), page 12, line 40, to delete all words after the word "election" to the end of the sub-section and substitute the following words:—"of the first three banking directors".

This amendment and amendments Nos. 32, 33 and 34 are designed for the one purpose, namely, the removal of the invidious system by which these banking directors are to be elected. I have before referred to the system by which a panel of six is to be selected and then the Government will select three from that number. The Government have already got six people out of nine and I would like to suggest to the Taoiseach that in regard to the remaining three he might very well select the three that the banks consider most suitable and, probably, most knowledgeable from the banking point of view. I suppose politicians are used to being the subjects of election and rejection by an Assembly, but probably some of these bank directors might say: "Well, I am not going to let my name go forward." In that way the country might be the poorer owing to being deprived of the services of a person who probably could render most service to the country in this sphere but who might be of a very retiring disposition.

I should like again to urge on the Taoiseach that he should abandon this tortuous system of selection, having first an election by the banks themselves and then a selection of three names from amongst those so selected. I know that the Taoiseach mentioned before that he wants to have people who would have the interest of the country as a whole at heart. I should think that probably the banks would also have the same idea in their minds. In fact I do not think it has been suggested here that if the country went down the banks could remain prosperous. I should also like to suggest to the Taoiseach that the Minister in selecting three out of the panel that would be put forward as the result of the election, might quite easily select the wrong people. The people most qualified to judge of the experience of the candidates would be the people who have been associated with these directors for a great many years. I have pleasure, therefore, in moving this amendment.

The first thing that is important to secure in this case is that those who are selected should come, not as representatives of the banking interest or should not appear to have been put on the board as representatives of that particular interest, but that they should be put on the board, as the other members will be on the board, on account of their special knowledge or the special qualifications that they possess for the work they have to do. In the first place, this method is designed to make clear that they are not being appointed by the Minister as representatives of a particular interest. They are being put on the board as people who have special knowledge of the banking interest and of the working of commercial banking in this country.

The second reason is that, although there is no provision definitely made here for the representation of special interests such as agriculture, industry and commerce as such, you might have on the list of nominees set up by the banks one man who was associated not merely as a banker with banking but who also had a particular knowledge, let us say, of industry, agriculture or commerce. Now, just as it is desirable to have on the board of the bank people who have a knowledge of banking as such, it would also be desirable to have on it people who would have a good knowledge of other interests such as agriculture or commerce. It might very well happen, if you were presented with six names, that one of the six possessed a special knowledge of one of those interests which might be lacking in the case of the other members of the board. For instance, if there was no representation of commerce and that one of the six persons whose names were sent forward by the banks had a special knowledge not merely of banking but also of commerce, having been associated with commerce and trade in some direct way, and you had representatives of all other interests already on the board, you might pick out that particular man.

If there were an order of preferences —I do not think any such order is provided for—you might be inclined to select one man purely on the banking side, but on account of the special knowledge of other interests possessed by another man, you would probably give the second man the preference in order to have amongst the members of the board a proper understanding of the various interests affected by monetary policy. This does give to the Minister a certain latitude to improve the all-round character, so to speak, of the board. There is no suggestion that anybody who would be put on the board would not have the interest of the country as a whole at heart. I do not think I made that suggestion; I should be sorry if I did, but the fact is that if these three members of the board were selected by the banks it might be suggested that they had a special interest in banking. It is sufficient to say that it might even be suggested because you want to have the confidence of all sections in the board, and it would be better for the leadership and the prestige of the central bank that it should not be suggested that there was a preponderating influence in favour of any particular interest. These are the two points I wish to make clear, that these persons are put on the board because of their special knowledge of banking, and secondly that this method of selection does give the Minister an opportunity of having a better balance on the board.

There is also a third point which, I think, is not of the same importance— that is, that we know the representation of the banks has been fixed as three directors, because of the special character of the banks here in this country. They have found that the number three was the most satisfactory to give them what would be regarded as a proper representation. That is a matter which the Minister would probably bear in mind as a subsidiary point. There are banks which are operating outside this country as well as within this country and there was a natural division of the banks. It seemed, therefore, that the eight banks would be represented more adequately by three representatives than they would be by any lesser number. If there was any suggestion that you did not get a right balance with these three representatives, and that it was desired to have other factors taken into account, the Minister in his choice would have an opportunity of doing that.

Question put: "That the words proposed to be deleted stand."
The Committee divided: Tá, 55; Níl, 23.

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breen, Daniel.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Buckley, Seán.
  • Cooney, Eamonn.
  • Corry, Martin J.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Keane, John J.
  • Kelly, James P.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • McCann, John.
  • McDevitt, Henry A.
  • MacEntee, Seán.
  • Meaney, Cornelius.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • Rice, Brigid M.
  • Ruttledge, Patrick J.
  • Ryan, James.
  • Ryan, Martin.
  • Rvan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Travnor, Oscar.
  • Walsh, Laurence J.
  • Walsh, Richard.
  • Ward, Conn.

Níl

  • Bennett, George C.
  • Brennan, Michael.
  • Brodrick, Seán.
  • Browne, Patrick.
  • Cole, John J.
  • Cosgrave, William T.
  • Curran, Richard.
  • Dockrell, Henry M.
  • Fagan, Charles.
  • Giles, Patrick.
  • Hughes, James.
  • Keating, John.
  • Linehan, Timothy.
  • Lynch, Finian.
  • McFadden, Michael Og.
  • McGovern, Patrick.
  • Mulcahy, Richard.
  • Nally, Martin.
  • Redmond, Bridget M.
  • Reidy, James.
  • Reynolds, Mary.
  • Rogers, Patrick J.
  • Ryan, Jeremiah.
Tellers:—Tá:. Deputies Smith and S. Brady; Níl: Deputies Bennett and Nally.
Question declared carried.
Amendments Nos. 32, 33 and 34 not moved.
Sections 22, 23 and 24 agreed to.
SECTION 25.
Question proposed: "That Section 25 stand part of the Bill."

On sub-section (6), there is a point similar to that raised by Deputy Cosgrave a moment ago as to disqualification. It is tied to the holding of shares in any bank in contravention of the section and in the sub-section there is the definition:—

"banks carrying on business wholly or partly within the State or holding a controlling interest in a bank carrying on business wholly or partly within the State."

Suppose a person to be appointed director has an interest in a bank not within the State and not controlling a bank in the State, is it thought right that he should nevertheless be qualified to act as a director here? If he had such interests in banks, although not in this country or not controlling banks in this country, would that not count as an obvious disqualification?

I have not thought of the point. There is always a way of getting over these restrictions. A person can assign his shares to a very near relative, but we shall go as far as we can to try to get over it.

In sub-section (3), the Minister goes further than that easy method of handing over because such a person shall within three months absolutely sell or otherwise dispose of his interest. The "absolutely" applies, I assume, to both "sell" and "dispose of".

Therefore, the family arrangement would not arise. Why does the Minister in bringing in this section give, as an explanation of the point I raise, that a person might easily avoid the restriction? I imagine the restrictons are put there to be attended to.

I will put this to the Deputy who knows more about law than I: If a shareholder in a bank absolutely disposes so far as he is concerned of these to a near relative, he would have no further interest in them himself.

Does that not apply to both cases?

So that in fact the section is useless?

No, it is not.

It will apply to one as well as the other. The Minister's explanation is as good for the one type of shareholder as for the other.

There are always ways of getting around these things.

The Minister brings in a Bill by which he formally says to the Parliament and the country that he is going to see that directors will not have any interest in bank shares and he sets that out in a series of clauses in which he says that if they have them, they must sell or absolutely dispose of them and that if they get them after appointment, they must do the same. He then copper-fastens that by saying that if a director to whom the section applies retains, purchases, takes, or becomes or remains interested in any shares, he shall be disqualified. That is a very good series of provisions in regard to the type of shares referred to, but I think it should go further and should apply to shares in any bank, whether in this country or controlling a bank in this country or otherwise. The Minister's answer is: "We know that all these phrases put into a Bill can be got round", and Deputy O'Sullivan says: "Then, revoke them."

I am quite anxious to achieve that they should not have an interest, but I think that clever lawyers here or elsewhere will find ways of getting round any of these restrictions, although I hope they will not succeed.

But why the discrimination between the two types?

I do not want any such discrimination to exist and I shall look into it.

Is it the Minister's intention to regard as fully qualified to act as a director a person who would be trustee for, say, £10,000 worth of bank shares? In sub-section (3), there are the words "for his own benefit," and here again you can go to the income-tax Acts to find out what the meaning of that phrase is, because every person who signs the annual document in connection with income-tax signs that certain moneys in investments are not held as trustee. It seems to me that a director could easily get round this section by holding bank shares in trust. If the object of the section is to place a director in such a position that he is deemed not to be interested in any way in the financial doings of a particular bank in the course of his duty as trustee, he is the legal owner of the shares. He will have as such trustee a very substantial interest in the financial doings of any bank. I do not know whether the Minister has considered that aspect.

As the Bill stands, trustees are not disqualified.

Then there seems to me to be a very easy way out for a director who has a very large holding in a particular bank. He can easily place these shares on trust and this would be recognised as a legal and valid trust in the court. In the course of his duties as trustee for whomever were the beneficiaries under the trust, he would have to take a very keen interest in the doings of the bank concerned. His duties as trustee would be equally as important as they would be if the shares were held for his own benefit. If it is the Minister's intention to allow a trustee holding large numbers of shares to be a director, it gets round the intention of the section.

Following up Deputy Esmonde's point, he could make himself trustee of his own shares for his children.

The Deputy thinks he could do that?

On Deputy Esmonde's reading of the wording, he could.

I followed the Act of 1927 which I thought was pretty closely drafted.

I have often to remind the Minister that the end of wisdom did not come in 1927.

I think the Deputy will admit that we improved on it very considerably in many respects. These items in this section relating to directors and the restrictions upon them were taken practically bodily from the Currency Act of 1927. I think they could be improved on. I agree with the Deputy that the end of wisdom did not arrive then and maybe has not arrived yet, and I am thankful to Deputy McGilligan and Deputy Esmonde for the useful suggestions they have made.

Sub-section (5) which is the disqualifying section will create a certain amount of controversy. I take it that there would be certain interested parties who would want to see any director who was not properly qualified put off the board. The sub-section says:—

"If a director...shall retain, purchase, take or become or remain interested in any shares in any bank in contravention of this section..."

he shall be disqualified. There might be a body of opinion which would come forward and maintain as the section stands that a trustee remains interested in shares within the meaning of the sub-section with the result that a director might very well say: "I am only a trustee and I rely on sub-section (3)". You would have there a distinct controversy and it might be wise for the Minister to look into that aspect of it.

I shall do that.

Lest the universal agreement becomes too embarrassing, I should like to inquire what penalty there is on a director who simply continues to operate as an unqualified director? This section does not say that, on the director being discovered to have an interest in banks he shall be disqualified; it says that if a director has such an interest, he is disqualified. But suppose that one of these ambiguous interests to which Deputy Esmonde has referred exists over a period and is subsequently determined to be, under this section, a bar to a person being a director of the central bank, that bar will operate retrospectively to the danger of any acts that were done whilst the person concerned was a member. Suppose that he has done a number of things during that period, are those acts invalid, or is it the intention of the Legislature to provide that so long as he functions as a director of the bank his acts are valid but that, if it is established that he functioned as a bank director when he knew that, by holding bank shares, he was disqualified from so doing, he should be subject to a penalty for every day on which he functions? There is a proviso, as we all remember, that if a Deputy of this House sits or votes in this House after he has been disqualified, he is liable to certain penalties. I have seen a Deputy of this House voting as busy as a bee dozens of times after he was disqualified. I do not suppose that will ever happen again, but it certainly did happen in the case of that particular Deputy and he was allowed to remain here and vote, although he was disqualified, because, presumably, the Government were terror-stricken by his personality and his Liverpool accent, and his acts were valid. That probably would not have happened if there had been a penalty for every day on which the person concerned sat and voted here. There is no analogous provision in regard to a director of this bank, and you may find him doing invalid things. There is no penalty attaching to his acts, and you may find very serious consequences flowing from the fact that there is no such provision here; so long as he is allowed to act his acts will be deemed to be valid.

With regard to the point raised by Deputy Dillon, I think that under the Local Government Code and certainly under the Local Government Act of 1898, if a member of a local board was disqualified and continued to act, he is liable to a penalty. At one time it was thought that if he so acted, while disqualified, the acts of the board would be ultra vires, but I think it has been decided that although such a person was liable to penalties and did so act, still that did not invalidate the acts of the particular board concerned. I think Deputy Dillon has raised a rather important point in connection with this particular section, as to whether the fact that a director, who was deemed to be disqualified, had acted on the board, would be sufficient to invalidate all the proceedings of the particular board on which he was acting.

Certainly, no provision has been made for a penalty.

But on the other question of invalidation, I do not think that even if there is provision for a penalty it would clear up the question of whether the acts of the board were ultra vires or not.

It says here in Section 27, that four members of the board shall form a quorum. Does that include a disqualified member?

I think that according to company law, generally, there is a provision that if a director is disqualified, anything the board does, notwithstanding that, is still valid. That is not here.

Would not the disqualification be sufficient to prevent a quorum being formed?

That is covered by the phrase in Section 27, which says that the board may act notwithstanding one or more vacancies in its membership, and I take it that the operations of the board would be valid.

It would have to be stated.

Yes, it would have to be stated.

I shall look into that point.

Question put and agreed to.
SECTION 26.
Question proposed: "That Section 26 stand part of the Bill."

This section raises the point again. It says here that "the governor and every director" shall take an oath. If the governor is a director, why make the distinction?

Question put and agreed to.
SECTION 27.
Question proposed: "That Section 27 stand part of the Bill."

Amendment No. 35 has been tabled to the wrong section. It is relevant to Section 11, not relevant to Section 27, to which it might be re-submitted on Report.

Very well, Sir.

May I say, with regard to the principle of the amendment, that I am quite prepared to accept it?

In view of the fact that the Minister says he is prepared to accept the principle of the amendment, I only wish to say that it is intended as a fundamental safeguard, and I think the Minister should reasonably accept it.

On Section 27, Sir. There is always trouble over this business of a casting vote. Are the provisions of sub-section (4) of this section intended to mean that the governor always has a vote and that he has a casting vote in the event of an equality of votes, or is it meant to give the governor a vote only if there is an equality of votes?

According to one reading of sub-section (4) it could be held that the only time the governor can vote is when he has a casting vote, and that would only be in connection with an equality of votes. It is generally provided that, in addition to his ordinary vote, the governor or chairman can have a casting vote also.

I think the intention is that he should have an ordinary vote and a casting vote.

Well, there is always trouble over that casting vote.

It might be well to make it clear that, as well as having an ordinary vote, he should also have a casting vote.

Yes, that as well as having an ordinary vote he can exercise a casting vote in the event of an equality. However, it may be all right, as it stands.

Sub-section (1) says that the board may regulate its own procedure, by rules or otherwise as it thinks fit. That might clear it up.

Is it the intention of the Minister for Finance and of Oireachtas Eireann to give the governor one vote all the time and, on occasions of equal divisions, two votes?

It is? Then you ought not to leave it to the board to reverse our decision.

It is a matter that easily can be amended.

Yes, if it is not clear.

I think it ought to be clearer.

Question put and agreed to.
SECTION 28.
Question proposed: "That Section 28 stand part of the Bill."

I want to get some explanation of Section 28. We are going to do away with the Currency Commission, but before the Currency Commission is done away with, one of its last acts, as provided here, is to make a scheme providing compensation and superannuation for the chairman of the commission. In addition to that, the commission, which is then on its deathbed, is going to be asked to make a scheme providing for a grant by the bank of compensation for loss of office to a person who is a member of the commission and does not become a director holding office, and, in paragraph (c) for a grant by the bank of a superannuation allowance or gratuity to or for the benefit of every governor who ceases to hold office otherwise than by becoming disqualified. So that the commission, before it dies, is to make provision for a grant by the bank of superannuation allowances to governors of the bank who may voluntarily retire. It seems to me an odd matter that the Currency Commission should do this.

Of course, it would have to be done in any case.

Even so, I thought it would be the job of the Currency Commission to make provision for its people who are not going to be appointed by the bank, and of the bank to make provision for its governors and directors, particularly when you read sub-section (3), which says that it is the bank, and not the Currency Commission, which is going to carry the scheme into effect. It seems to be a funny sort of portmanteau, or collapsed clause, under which too much is being drawn on to the Currency Commission. I desire to call attention to the very neat provision in sub-section (3) of Section 28 with regard to the scheme for superannuations. It has taken a whole Bill to carry out a scheme of pensions for the employees of the Electricity Supply Board which could have been done in this way.

In connection with the point made by the Deputy, at the start of the working of the bank, the Minister will be called upon to arrange for the appointment of the governor and to make other appointments. It is only right, I think, before asking any particular person to become a governor, that some indication should be given as to the terms on which he would hold office—as to remuneration, superannuation and the rest. It seems to me, therefore, that this provision is intended to enable the Minister, in advance, to be able to indicate in general terms to those who are to take office what the terms of their appointments and so on are going to be. It would be useful, I think, to have more or less outside people who have an intimate knowledge of the work that is to be done, and of the class of persons likely to be appointed, who would make recommendations for a scheme to the Minister. Ultimately, the responsibility for the scheme will, I think, rest with the Minister.

It cannot be made without his approval.

This is really a drafting body for the Minister.

Will the Minister say why the Currency Commission should make a scheme providing for the grant, by the central bank, of a superannuation allowance for the governor of the bank?

In effect, when they do that they will be doing it as the agent of the Minister.

Question put and agreed to.
Sections 29 and 30 agreed to.
SECTION 31.
Question proposed: "That Section 31 stand part of the Bill."

Will the Minister say what is the purpose of the section?

It will be noticed that the Bill makes arrangements for the cessation of the issue of consolidated bank notes. The question of payment for notes outstanding will arise, and this section arranges for these payments.

What is the intention with regard to the putting in of these consolidated bank notes? Must all of them be in before the 31st December, 1953?

They may be put into the associated banks or direct into the central bank.

Is it the intention that there will be no consolidated bank notes outstanding after the 31st December, 1953?

There will be no more issued after that date.

Are they being called in?

They are being called in at present.

They are going to be called in at the rate of £1,500,000 over a certain period?

All that is set out in the Schedule.

Am I right in thinking that the intention is to have them all in about the 31st December, 1953?

We would like to achieve that, but there may be some outstanding after that date.

Is this a way of hastening payment—to make the associated banks pay the central bank for any that may be outstanding after that date?

What is the meaning of the date, "1st January, 1957?"

That provision is made to ensure that the State will get full value for what might appear to be dead notes. It is to ensure, in advance, that the State is going to get the full value of these notes.

According to the Schedule the issue of consolidated bank notes is to be withdrawn in groups over a certain period. The years are set out in the Schedule, and the last date mentioned is the 31st December, 1953. I assume the intention is to have these notes withdrawn inside the period mentioned in the Schedule. The last period seems to run from the 31st December, 1953, to the 1st January, 1957. Supposing there are consolidated bank notes outstanding after the 1st January, 1957, what happens?

The central bank assumes liability for them then.

And there will be some equivalent payment made to the associated banks prior to the 1st January, 1957?

Question put and agreed to.
SECTION 32.

The following amendments appear in the name of Deputy Mulcahy:—

In sub-section (1) (a) (ii), page 17, line 43, to delete the words "two and one-half" and substitute the words "not more than one and one-half".

In sub-section (1) (b), page 17, line 51, to delete the words "two and one-half" and substitute the words "not more than one and one-half".

In sub-section (1) (c), page 17, line 58, to delete the word "three" and substitute the words "not more than two".

In sub-section (1), pages 17 and 18, to delete paragraph (d).

The general purpose of the amendments is to reduce the bank overheads and to make the charges cheaper than they otherwise would be. In the first two amendments, the aim is to reduce the charge from 2½ to 1½ per cent. Originally, the charge was 30/-, but under a Finance Act an additional 30/- was put on. That imposition was later reduced to £1. This 2½ per cent. is merely carrying forward the charges which are at present being made and which are higher than they were originally by £1. The aim of Deputy Mulcahy is to get the payment brought back to the old rate of 30/-. Deputy Cosgrave has an amendment down to Section 36— amendment No. 45. The drive behind these amendments will depend a good deal on what is done with amendment No. 45. I am not proposing to move these four amendments.

Amendments Nos. 36, 37, 38, and 39 not moved.
Question proposed: "That Section 32 stand part of the Bill."

On the section, I have a difficulty with regard to the interlocking of certain time points which are mentioned in paragraphs (a), (b) and (c) of sub-section (1). I am trying to work out what this means and refers to. For instance, I can possibly be answered in this way: are the time references in letter paragraphs (b) and (c) referable to the same point of time but only differently expressed, or is there a different type of relationship? Section 32 (1) (a) speaks of the half year which is partly before and partly after the date of the passing of the Act and it divides the payment for the portion of such half year which ends on or consists of the date of the passing of the Act, and the second part for the portion of such half year subsequent to the date of the passing of the Act. That is in relation to a broken period of a half year which may overlap the date of the passing of the Act.

That is for the half year during which this Bill may come into operation.

Paragraph (b) is in respect of every half year which begins after the date of the passing of the Act. That I can understand in connection with the first matter. Supposing the currency year runs the same as the calendar year.

The 31st March and the 30th September are the periods.

Supposing this Bill passed in August, then there is an over-lap and you have to come to the half year which ends in September. Paragraph (b) would seem to swing in in respect of the ordinary half year which begins after the date of the passing of the Act. Why then in (c) say in respect of every half year ending after the date of the passing of the Act? I thought that was met by part of the provision of (a). If it refers to that over-lap, would not that have been met? Take the Bill as passing in August. Then the half year ending after the date of the passing of the Act would be the half year that ends on the 30th September. Why should there be a double provision for that?

Paragraph (b) is intended to provide for the payment of the entire 2½ per cent. per annum charge by the associated banks to the Currency Commission or the central bank when the Bill is passed, on notes outstanding in respect of every half-year which begins after the date of the passing of the Act.

If the Minister will look at the first part of sub-section (1) it says:—

"Every associated bank shall pay to the commission or to the bank (as the case may require) in respect of every half-year ending after the date of the passing of this Act the following sums."

Then you have the half-year partly before and partly after. That is all right. Then you have the half-year beginning and then you have the half-year ending after the passing of the Act. That seems an unnecessary complication.

Could it be ending before?

No, I do not think so. I think that is already met.

Perhaps this meets the Deputy's point? Paragraph (c) reads:—

"in respect of every half-year ending after the date of the passing of this Act, a sum calculated at the rate of three per cent. per annum on the amount of consolidated bank notes (if any) outstanding after the said date from day to day with such associated bank during such half-year in excess of the amount authorised by this Act to be so outstanding."

That is for the excess notes. The previous one is for notes which normally fall for charge during the half-year. That is for the excess and has nothing to do with the other two. Paragraph (c) refers to a different matter altogether, namely, the excess notes.

That is the penalty for having excess notes.

The others are apparently for the notes normally outstanding. There would be no payment under paragraph (c) if there were no excess notes.

There may be an overlapping.

Paragraphs (a) and (b) refer to the same payment?

They refer to the same thing.

The case which, I think, arises in this connection is that (a) provides for partly before and partly after. That is in a compartment by itself. But then it says in (b) "in respect of every half-year which begins after the date of the passing of this Act". There is apparently an extra charge there in respect to the same notes. I do not think that was the intention.

No. There is no extra charge there. There certainly was no intention to have an extra charge. Paragraph (b) refers to the half-year beginning after the date of the passing of the Act.

What about the other?

That is the half-year during which the Bill was passed —beginning before the passing of the Act.

Paragraph (b) really means in respect of the half-year, all of which was after the date of the passing of the Act?

That is so—after the date the Bill was passed.

Perhaps between this and Report Stage the Minister will again look into that and if necessary put in a clause that no more than one 2½ per cent. per annum will be charged.

There is no intention to do that. If it is not clear, I will look into it. There is no intention to charge any more than one 2½ per cent. The first paragraph refers to the half-year during which this Bill may be passed, and the second, paragraph (b), to the half-year beginning immediately after it is passed.

I understand that the amendments are being held over.

In view of amendment No. 45.

Even in view of amendment No. 45, I would like to ask the Minister if he can give any real reason why the cost of these to the banks was raised from the original 1½ per cent. to 2½ per cent., and, when we are speaking of the cost of credit generally, whether he has given any consideration to the question as to the extent to which overheads of this kind put on the banks are operative in keeping up the cost of credit.

I do not know to what extent the charge of 2½ per cent. is operative in keeping up the bank rate. I think it must be a very small item. But the reason it was raised in 1932 was to get further revenue for the Exchequer. That is the plain fact. The 2½ per cent. is not an unreasonable charge considering the advantages that are given to the banks concerned. They get a considerable profit out of this and pay a charge of 2½ per cent. Even though it is much greater than they paid 30 or 40 years ago and considerably greater than they paid ten or 12 years ago, still, as it stands, it is not an over-charge.

I take it the banks pay taxation on their profits in the ordinary way.

This is a scheme under which the Minister directly dips into the banks' money every year and by the extra 1 per cent. takes over £50,000 every year from them. When £50,000 is taken by the additional 1 per cent. from the banks, it has a definite influence on raising the price of credit in the country, and the question is whether it has not a cumulative effect.

I think we are entitled to charge that much.

Is there any reason why the Minister could not take taxation from the banks in the same way as from an ordinary business and be satisfied with that?

I take it in a variety of ways.

They have something with which to do business.

They are given a special privilege. They are taxed on that privilege. Payment of it is a special privilege, on which they make considerable profit, and which adds considerable prestige to their business institutions.

Does the Minister suggest that, on the rate of 1½ per cent., the banks were making exorbitant profits?

I did not say they made exorbitant profits at any time. I never used the word.

The Minister has deliberately come to take an additional £50,000 a year from them.

Where are the cheap rates in which the Deputy is interested going to come from?

Does the Taoiseach throw up his hands?

Cheap money or low rates of interest do not arise here.

My whole idea in putting down these amendments was to see whether one of the things that we can do in order to get cheap rates is to reduce the overhead costs of the banks.

Quite in order, but not the question of cheap money.

It is really the Taoiseach who suggests by his remark that we will not be able to get it.

The Taoiseach will not discuss it now.

I might say this to the Deputy, with the Chair's permission. In Northern Ireland, as the Deputy knows, the banks pay only 7/- per cent.—what they used to pay here—but the rate of interest charged by the banks on overdrafts, for the use of money, is no lower in Northern Ireland than it is down here.

Of what rates of interest is the Minister speaking?

General rates of interest. The banks' general rate in Northern Ireland for commercial and other purposes is no lower, although they pay only 7/- per cent., than it is here where they pay 2½ per cent.

In other words, this may not necessarily be passed on.

It may not necessarily be passed on.

Is the Minister speaking of a special year when he says that the bank rates in the north are exactly as they are here?

Take them at the moment.

Surely we have not any examination of that. We have an examination, in the Banking Commission Report, up to 1926 of the rates charged here under different headings. It is a very small charge, 2 per cent. or 2½ per cent., in respect of very well-secured loans; then there is the rate on those loans which are not so well secured, and on those loans in respect of which there is an element of speculation as to whether they will be repaid. A mean average of those three was taken—I am speaking now from recollection—and the percentage charge in respect of the whole three was 4.39. Another question arises which is germane to this. In a section of the Banking Commission Report reference is made to the necessity for the banks making profits, and to the fact that, if they do not make profits, public confidence in them will be shaken and the people will put their money elsewhere. From 1936 to date there has been a marked reduction in the dividends paid by the banks here, and the amount allocated to reserve has shown a reduction in those years. My information, for what it is worth, is that the amount put to reserve for last year is the lowest on record, and it is possible that—although the amount put down in respect of those reserves is at a certain figure—if it were calculated in accordance with the regulations or the calculations that were in force some years ago it would show a reduction on that nominal amount. That is a matter that is of some consequence, and, if the State, by reason of its charges, brings about or is in any way responsible for that position, it is not very reassuring at the present moment.

What I wanted, in my last remark, to point out to Deputy Mulcahy was that, even though 2½ per cent. is charged here for the use of the consolidated bank notes, while similar notes are got by the banks in Northern Ireland at 7/- per cent., the general rate of interest—without going into the types of securities mentioned by Deputy Cosgrave—arranged by the Banks' Standing Committee for all Ireland is the same in the Six Counties as it is in the Twenty-Six Counties.

That is a matter on which we have not got any information, except what is available to the Minister; we have not got it in black and white in the Banking Commission Report. But there is this point to be considered in that connection—that, in so far as those are banks dealing in both parts of the country, it may be that the reason for there being no difference is that they require to make whatever extra profit they made up there to enable them to pay the extra taxation imposed down here.

That is hardly likely.

It is very probable.

I think this end of the country is much more profitable to the banks than the Six Counties. This year, the Deputy points out that the banks put less to reserve. I think one of the reasons why they put less to reserve in some banks at any rate is because of the extra heavy demands they have had to meet in regard to the salaries of their staffs.

With regard to what the Minister tells me about the rates in Northern Ireland, I should like to say that the only matter on which I have what I understand to be definite information, as it is taken from official sources, is in connection with the rates in Great Britain, and on that particular matter the Minister and myself are at variance. He has quoted certain figures, and I have quoted others. When we have reconciled those figures we may be in a better position to reconcile our views as to what the other rates are, but even on the official rates at which loans are made I have not yet reconciled my position with that of the Minister.

We ought to be able to reconcile them, because there are official figures supplied by the Government in England. There should be no difficulty. My information, from the figures I have seen and examined, is that approximately 3 per cent. has been the rate for the vast bulk of the loans raised since the war.

I am writing to the Minister on that subject, and I hope he will deal with it.

I will be happy to have the matter investigated.

I will tolerate the passing of this section, for the moment, Sir.

Question put and agreed to.
Section 33 put and agreed to.
SECTION 34.
Question proposed: "That Section 34 stand part of the Bill."

This is the section which brings in the penal rates for excess consolidated notes, if I am not mistaken. Can the Minister tell us how we stand now with regard to penal interest in respect of those notes? The figures which I have down here are 3 per cent. for the first 12 months and 5 per cent. after that. Can the Minister tell us whether the penal interest is now being charged in respect of those notes? I have a recollection that it was stopped somewhere about 1932, but I am not certain. Is it intended now to revive that penal charge?

This is the section that relieves them of penal interest.

Is there any inconsistency between the terms of Section 34 and what is embodied in Section 32 (1) (c)? Apparently, an effort is being made to get in those old notes and it is succeeding very slowly. The average is from £2,000 to £5,000 a year. We have evidently made up our minds that they will not come in more quickly under the new dispensation. Why, in that case, is it intended to have penal interest charged in respect of the consolidated notes?

If the Deputy looks at the provision, he will see that it refers to the bank note issues before the consolidated bank notes came into existence and the effect of this section is to continue the existing rate of 2½ per cent. in respect of these.

These are the notes that are out of date since 1927—the old Bank of Ireland notes, Belfast Bank notes, Northern Bank notes, and so on. There is no greater charge than 2½ per cent. in respect of these but, in respect of the consolidated bank notes issued since 1927, if at any time there is not a withdrawal in accordance with the proposal to wipe them out by 1957 —if any of them are outstanding in excess of the proportion we are proposing —the charge will be 3 per cent.

That is under Section 32.

Is there not an inconsistency between the two methods of treatment? We deal in this way with the old bank note issue which had no reference to the Currency Commission and, now, we say that, should there be an excess in respect of the consolidated notes, they will be subject to an imposition of 3 per cent.—½ per cent. over the normal rate.

There are a great many more consolidated notes outstanding than there are of the others.

About 5,000,000 against 1,000,000.

The desire is to make it profitable for the banks to collect and send in within the time allowed the consolidated notes still outstanding. There are not so many of the others outstanding.

Over 800,000.

Those are the consolidated bank notes.

No. For these antiquated 800,000 notes the charge is 2½ per cent., but any excess in respect of the modern 5,000,000 notes is subject to 3 per cent.

The old provision was to charge for these old notes 3 per cent. for a year and 5 per cent. after that. That 5 per cent. is now reduced to 2½ per cent., while our own notes, if left outstanding after 1957, are to be charged at the rate of 3 per cent.

It seems odd.

Section 34 agreed to.
SECTION 35.

I move amendment No. 40:—

In sub-section (2), line 6, page 19, to delete the words "or into the Exchequer".

I accept the Deputy's amendment.

Amendment agreed to.

I move amendment No. 41:—

In sub-section (2), page 19, to delete all words after the word "Exchequer" in line 6, to the end of the sub-section, and substitute the following words: "such proportion of the amount so written off as may be agreed between the Minister and the associated bank."

Amendment No. 42 could be discussed with this amendment.

This amendment deals with the dead-note issue, as it is called. The Minister is more aware than I am of the situation which has arisen. There are certain notes of which a certain proportion may be presented but the greater proportion of which will never be presented. The purpose of my amendment is to enable a bank which considers the time opportune for writing off some of those notes to approach the Minister and ascertain how that would affect the bank—in other words, what proportion the Minister would wish to retain on behalf of the Government. My amendment makes the carrying out of this arrangement simpler and easier. The banks would know where they stood and the Minister would know where he stood and the proposal could then be carried into effect. Under the present provision, once the machinery is started it cannot be altered or recalled. This involves only the method of carrying out the Minister's proposal. It has been conceded that the Government are to have a share and my amendment makes it easier to arrive at the proportion the bank is to be allowed to retain and the proportion the Government is to be allowed to retain. An approach can be made to the Minister, the proportions can be agreed and then the amount can be written off. A bank which would be preparing its balance sheet would know what amount it had to face. Although the Minister may have an affection for his own drafting, I should like to ask him to accept the principle of my amendment. I am not pressing the wording of my amendment upon him.

The amendment I have down is on the same lines as Deputy Dockrell's, and I have a further amendment later dealing with much the same matter. They are bound up together, as they both arise out of the writing off of those dead notes which may come up for payment during the next ten, 20, 30 or, perhaps, 100 years, when a person may enter into possession of one of them. I would prefer that the Minister give us his view on this matter now. I am quite sure he has had it under consideration. I would not like to have to go into the details of it now. Where there is a question of agreement to be come to by certain people, it is better that it should not be prejudiced by anything said here. I am only concerned to the extent that it would appear to me to be unfair if, by reason of any decision of the Minister, one of these banks, after the decision had been arrived at, should find itself in the position of losing money on the transaction.

I do not know that the Minister had that in mind—that they should be at such loss—but, as the section is drawn, in the event of two possible eventualities there may be a loss to one of those banks of issue—one directly the accommodation has been arrived at, and again if it should subsequently happen that a person presents these notes for payment and the liability is on the bank to pay. The bank, according to the Minister's decision, may have agreed already with him—or he may have decided—that they would pay a certain amount in respect of this note issue. I would be glad if the Minister would give the House his views on the matter.

Unquestionably, there is a problem here, and one for which it is not easy to find a solution that will satisfy all parties. In the case of the writing-off of the dead notes, the initiative must be taken by the banks. It is implicit that there must be agreement between the parties. Probably the notes will not be written off at all unless there is agreement. There have been discussions on this matter over a number of years, and I think there is a general understanding as to the terms under which they might be written off, though agreement has not been arrived at. All the parties know the views of the other parties, yet no agreement proper has been reached.

In reply to Deputy Dockrell, it would not be fair that the banks should have all the rights and that the Minister should have no rights. If I accepted Deputy Dockrell's amendment, it would mean that the banks would be in a position to dictate the terms. That would not be the best way to approach it. The Minister will be out to secure that some share must go to the State. How the division will be made eventually is a matter for agreement between the parties, but they are not unreasonable people. Leaving the initiative to the banks to come forward and state their case and make their claim and satisfy the Minister does not indicate they will be found to be unreasonable or that there will be unreasonableness on the part of the Minister in meeting the banks when the final division has to be made.

Perhaps it is some time since the Minister examined this section as it stands. Its terms are:—

"...and may in particular, require"

that is, the Minister may require—

"that the associated bank making such writing off shall pay either through the bank...the specified proportion of the amount so written off"

That is one aspect of the matter,

"but subject to the limitation that the amount of such specified proportion shall not exceed the amount of the proportion appertaining to Saorstát Eireann."

That means that, subject to these conditions, the amount that will be paid to the central bank will not exceed the total amount written off that is applicable to this State. Surely that means that, so far as the Minister is concerned, he is not asking the bank for a penny more than the total sum applicable to this State that has to be written off. That is what we think is a rather severe bargain to put down there. It cannot exceed that amount.

Is not that a safeguard? They cannot be asked to pay any more.

Precisely. Would the Minister consider that that would be a fair bargain if he were the bank and the bank were the Minister?

Has the Deputy paid any attention to sub-section (5), that as soon as all that is done, a person may have one of those notes and—the bank not having got a penny, as the bargain is that that may happen and the bank may not get a single penny— the bank inherits the liability?

He ought to give a guarantee against that.

He is not doing so. The first point is this. These notes were issued in 1927 and this is 1942. They have been out for 15 years. The banks have paid at least 2½ per cent. on that sum of money; for a portion of the period they paid something in excess of that. Can the Minister say: "I am going to take over all that liability and wipe it out"? Not only must you pay, but you will also have to pay out the full sum as well to any person who presents these notes. I do not think that is in the nature of a bargain. Even Deputy Dillon would not regard it as being a fair settlement of the question at issue.

It seems to me that we ought to be very wary at this stage about becoming too sympathetic in regard to the joint stock banks. I agree with the Leader of the Opposition that these banks have been paying 2½ per cent. on these notes since 1927, but they have been collecting 5, 6, 7 and 8 per cent. during the period of their mortality, and now that they are dead and buried the debts created by those notes have not been extinguished. Somebody got an overdraft some years ago, passed his cheque through the grill and got a bunch of these notes, and in an unguarded moment he lost them or they got burnt and vanished. He still owes the money for them.

And the bank still has a liability in respect of them.

Yes, a liability which they will realise when somebody restores the burnt bank note. The Deputy will remember some patriotic souls in this country who, seized with the fury of resolution, under the leadership of the present Taoiseach, and resolving that they were going to wipe out the Ulster Bank in Sligo, took out the Ulster Bank notes and burned them in a bonfire in the streets and declared that they had struck a blow against the Border. Of course, the Ulster Bank did not suffer, though a great number of Ulster Bank notes were lost. On those notes the banks may have been paying 2½ per cent., but they were collecting 5, 6, 7 and 8 per cent. It is obviously unfair that they should be made pay over the whole thing to the Government and pay on any of those notes that may subsequently turn up. Would it not be fair to take a ten-yearly or 15-yearly period—whatever experience has taught is the normal life of a bank note—and to determine, as on that date, what bank notes are dead, and to require the joint stock banks to pay over the proceeds of those notes to the Minister for Finance on condition that, in the event of any of those notes turning up in the future, they would be entitled to redeem them in the bank for the customer and apply to the Minister for Finance for a refund, £ for £, in respect of any such dead notes presented to the bank? It is a source of astonishment to me to hear people talking about making a deal between the Minister for Finance and the banks as to what portion of the value of these dead notes the banks will retain. Why should they retain any of them?

But they are retaining a liability.

That seems to me to be silly. Suppose you make an agreement between the Minister and a bank, the Minister to take three-fifths and the bank to take two-fifths. It is quite conceivable three-fifths of the dead notes will turn up and then the bank will be at a loss of one-fifth of the entire issue. Here is the scheme——

Does the partition of the country cause any complication?

Inasmuch as the Bill envisages different treatment for notes used outside the country and notes primarily used within the country, I suppose that distinction could be carried into the scheme I had in mind.

Not so easily, perhaps.

The Taoiseach will note that in one of these sections there is that distinction made between notes used in the country and notes used outside. Inasmuch as that distinction is made there, it must be practicable to make it; but surely that does not alter the principle. Let us say that, on a given day, a certain block of dead notes is arranged and it is agreed between the Government and the bank that bank notes A. 1 to A. 100,000 are now dead, having been either destroyed by the bank or because they are too old or are torn, and, having subtracted the number of notes of that series that have been destroyed in the ordinary course of business, it is determined that the remaining notes shall be deemed to be dead notes. If any one of those notes is ever presented, the Government will issue a £ note in exchange for it and it will be destroyed in due course. What difficulty is there in doing that?

I do not want, by any means, to pose as an expert, but I was interested in Deputy Dillon's suggestion, because it was one that occurred to me as a means of getting over the difficulty. But I see a difficulty in applying it in a case where some of the notes are outside our own territory. When you come to an estimate of the dead notes to which Deputy Dillon referred I take it that these are within our own jurisdiction. If you make a calculation on that basis and then if notes will come over the Border all your estimates would be upset. The Exchequer cannot be supposed to pay for dead notes that were circulating outside and for which, in the first instance, we could not claim credit.

I do not understand what the difficulty is. Let us take the Hibernian Bank note issue. I presume there is some way of determining when there are dead notes, some way of determining what notes are dead by the serial number.

There is no definite way.

There ought to be a system established whereby the serial numbers of notes will be ascertained by the bank and when they are destroyed, as notes are from time to time as being unfit for further circulation, they ought to be struck out of the serial register that is maintained. At given periods it should be agreed between the Government and the banks that so many notes out of a series are deemed to be dead notes. If that procedure is gone on with, I do not see that it matters where the notes are. If the bank agrees that £7,000 worth of a certain series of notes are deemed to be dead, then Dáil Eireann knows there is a contingent liability on the Exchequer to repay any of those notes that turn up later at the head office of the bank of issue, and the contingent liability on the Government to redeem the notes fructifies only when those notes are tendered to the Secretary of the Department of Finance by the board of the issuing bank. How does the existence of those notes outside the jurisdiction of our Government alter the situation? We are not concerned in whose hands they may be; all we are concerned with is that the Government will pay the bank if they are obliged to redeem the notes. The Government will pay the bank the moment they are satisfied that the dead notes are destroyed in accordance with the statute. Where is the difficulty there?

There is a difficulty. There are rival claims in regard to these notes that have not turned up and that are deemed to be dead. If they were definitely deemed to be dead our trouble would be, to a large extent, at an end, but the fact is that we are only assuming them to be dead and they may turn up at some later stage. Suppose we divide them into three sections and the first section, which belongs to our own territory, number, let us say, 1,000,000. Suppose there is another 1,000,000 in the North of Ireland and another 1,000,000 outside this country altogether.

Each section would be held, say, by a thrifty widow, one in Belfast, one in Dublin and one outside the country.

When we come to settle with the banks, there will be a question as to how much of all that money we are entitled to. Suppose it was agreed that if they turned up we would get these millions. We settle with the bank on the basis of the 3,000,000 and, let us say, we claim 1,000,000 from the bank on the understanding that any dead note turning up afterwards would be redeemed by us. The Minister for Finance would get 1,000,000, and, lo and behold, these dead notes come to life in some particular place. We will suppose our own notes are absolutely dead, but then 1,000,000 turns up, the notes stream across, it being known that they will be redeemed here. It will be understood that I am taking an exaggerated case in order to show what I am driving at. Suppose 1,000,000 comes across the Border and the other 1,000,000 turns up alive from Britain or somewhere else. These notes are presented to the Minister for Finance, who thereupon has to pay £2,000,000 in cash. He has made a very bad bargain. He gets 1,000,000 from the banks and then the other 2,000,000 turns up.

He says the 3,000,000 notes——

Are deemed to be dead.

Are deemed to be dead. I do not think that even though the 3,000,000 might be deemed to be dead that the bank and the Government can agree to deem them all dead on the one day but, suppose they did, the bank would pay the Government £3,000,000.

No, £1,000,000.

No, £3,000,000.

No, £1,000,000. I would like to understand the Deputy, so that we would be arguing on the same premise. I am assuming that there is some proportion of these notes that are deemed to be dead allotted to us and that there is some agreement as to what proportion we are entitled to. That is the first premise, I take it?

That has been the point of dispute in the past. I understand there has been a definite dispute as to how much of these dead notes we are entitled to in our territory.

That is the point I want to challenge.

I suggest that the Deputy would leave that point over and let it be argued by itself. I am arguing with the Deputy on the assumption that what I say is correct.

If that assumption is correct, my case falls to the ground. If there is a bank operating from headquarters in this country that wants to dispose of its dead note position, its obligation is to our Government. I appreciate that the National Bank, for instance, is a bank that has its registered offices in England. It is an English bank. That is just too bad for us. We must either make a law that no bank can function in this country that has not got its registered offices here or take the consequences, in my opinion, but I view this problem on the assumption that we are dealing primarily with banks that have their registered offices here and I think there would be a good deal to be said——

For dealing with them all?

——for stipulating that all banks with a consolidated bank note issue should have their registered offices in our country.

That is another question.

What should be, and what is!

Let us deal with the question of the banks that have their registered offices here. I say that if such a bank had notes outstanding for the period during which these notes have been dying they have made a nice profit out of it—the difference between 2½ and 3 per cent. and the interest that they charged on the overdraft which created them. Now comes the time when the Government and the banks determine that they ought to be liquidated. I say, in respect of the banks that have their registered offices here, that we ought to determine how many notes are deemed to be dead. I do not care where these notes are, whether the prudent widow who has them in her stocking lives in Nagasaki, Belfast, Belturbet, or Ballaghaderreen. So far as the bank is concerned, it does not make any difference. There is a claim outstanding which, apparently, is not going to be exercised. Let us assume that the £1,000,000 held by the widow resident in Éire is destroyed by fire and never turns up. Very well, that is finished with. The £1,000,000 from the widow in Nagasaki is carted back here to Ireland and she prances into the headquarters of the bank in College Green, puts down her £1,000,000 and says: "I want £1,000,000 in currency which this is valued as at to-day." I then suggest the bank manager should say: "Certainly, Madam"; deliver out to her the proper bag of gold, fill his satchel with the 1,000,000 dead notes from Nagasaki and go off to Upper Merrion Street and present it to the secretary of the Department of Finance and collect his money back from the Government. All that has happened there is that the Government has had £1,000,000 of this credit money for use over a certain number of years; the true claimant has now turned up and, like honest men, they pay her back. What objection is there to it?

As I see it, that would be splendid if you were in a position to insist that they were your property and if there was not, say, another Government that could come in and say to the banks: "We want to do the very same thing that the Minister for Finance in Dublin did and we want to get our part of these dead notes and there is a certain territory in which there are so many notes and, as a matter of fact, the simplest way for us to deal with that whole situation would be to claim all these dead notes. We will also make arrangements with you of the same type as the Minister for Finance in Dublin made and we will take this whole £3,000,000, deem them all to belong to us, and we will guarantee to pay back the amount. We will get the whole lot from you at the start and then we will pay back to you the amount that will turn up to us." Assuming they all turn up—assuming a miracle happened, the banks will be paying two sets of £3,000,000 and they will be getting back only one set, wherever it happens.

I admit that at once if the Taoiseach's contentions are correct. I am speaking for want of full information. I certainly have not got it from the Taoiseach and the Minister. Is this matter the subject of international negotiation?

It has been over a number of years.

Tell us the truth—you will do what the British Government tell you to do.

If that were so, it would have been finished long ago.

It is not an international agreement. There is a dispute.

The fact of it is that this has to be regulated by whatever you hand out to the British Government. What is the use of talking about it here?

It is a reserved matter under the agreement of 1938.

That is not a fair representation of the case. I was hoping this matter would be discussed without reference to the details of anything in the nature of a dispute or arrangement that may be made with anybody else. I was hoping that that might be so. But, as this is drawn, the Minister seeks to get every penny that is out. You can take that interpretation from it. That is his maximum claim—every penny. On its face, it is not a very attractive bargain.

Not as sub-section (5) now stands.

Deputy Dillon has referred to people in other places looking at the type of bargain that was struck. That is a matter in which we are not uninterested, because, after all, those are our banks. The majority of the stock, I am sure, is held here, and I would rather approach it, not from the point of view of the interest, but from the point of view of a fair settlement. I cannot see in the terms that are laid down there anything approaching a fair settlement.

On a very rough calculation, we have got approximately 35 per cent. of the amount that is regarded as dead notes. We have got that dividend here in the last 15 years. That is a fair proportion, by whatever standard you take— 1½ per cent. for the first five years, 3 per cent. in the next five years, and 2½ per cent. in the succeeding five years. That is 35 per cent. in all. Assuming that is your position, what is your suggestion for a settlement? Whatever settlement you are going to make is likely to be, at any rate, the arguable basis for a settlement elsewhere. As the matter stands there, it can be a very costly settlement to our banks under two headings. First of all, a dissemination has already been arrived at by the Currency Commission which may or may not be accepted. If it is not accepted elsewhere, that is the acceptation of it here.

If there is a difference of let us say 1, 2, 3, 4 or 5 per cent. in that arrangement, we have no information that that has been accepted elsewhere and that is the basis of our settlement. It is that maximum—I am not saying it may be taken, but I am saying that the Minister is taking power to take it—that may be made the basis of the settlement. Assuming that is so, the position then is that, having made that settlement, the liability still remains on the banks for the payment of these bank notes. I do not think that is a fair arrangement no matter what the grounds on which you base it. As I have said, taking the larger view, the settlement elsewhere affects us because it affects our banks. A settlement elsewhere is not likely to be a more favourable settlement than one here, but it can be justified on the ground that it is our settlement. To that extent, I think the fairest method of settling this matter is to provide that there should be agreement between the banks and the Minister on a matter of this sort, and that it should not be left entirely to the decision of the Minister. That is not settling the matter, but it is putting it into this position, that the banks in making the arrangement have the responsibility of effecting a settlement afterwards.

Who is interested in making a settlement?

All the parties.

I am not sure that all the parties are. Why should the banks be interested in getting this thing settled?

It is not a Government liability.

Presumably the banks have assets to meet these liabilities and the assets will be there even if the liability has not to be met.

If that is the case why not let the banks take over the whole thing?

The point is that they have assets against these liabilities and if these liabilities do not mature, the question is what will happen. That is what we are arguing. They have assets belonging to the community against which they will never have any liabilities. That is they will have an absolute profit at the expense of the community. We might have a certain argument about the ordinary business of the banks but I think most people will say that these dead notes belong to the community as a whole and the Minister for Finance represents the community as a whole in this respect. The fact is that the Minister for Finance represents the community claim for the benefit that will accrue on account of the fact that these dead notes are not demanded. They have not become a live liability. Therefore it is the Minister for Finance who is anxious to get what he believes is his as the representative of the community. As long as the banks are left in the present position, they have the enjoyment of this community property.

I think there is scarcely any possibility of difference here in this House now that it is the Minister for Finance who wants to get this thing settled. Who is going to benefit by it? The banks have an interest in the opposite direction, because as long as it lies unsettled they are in the position that Deputy Dillon pointed out. They are enjoying this rate of interest, and in regard to a large number of these notes there is no likelihood of the liability ever becoming active. If it is a question of an agreement, you must assume that there is a hope of agreement if both parties are going to benefit by the agreement. I do not see that the banks are going to benefit by the agreement except there was a possibility of some other Minister coming along later with whom they might not get such a favourable settlement. They might say that they wanted to have the thing finished now as they felt that they were doing better with the present Minister than they could do with the succeeding Minister. That would be an inducement to come to an agreement, and it might not be a bad inducement at all. I imagine that the Minister for Finance will do what most people would imagine, that he will invite the banks to come along to settle this matter and try to get an agreement. If he is able to get an agreement, good and well. If he thinks he is not being fairly met, he may come to the conclusion that he might have to force a solution along some such lines as are indicated here.

It seems that there are three questions bound up with this amendment and the later amendment. There are first of all, as the Taoiseach has said, rival claims for a settlement of this question. Secondly, there is the question of the portion that the Government ought to look for and that the banks ought to look for. There is thirdly the question of what is to happen to people who turn up with bank notes that have lain dormant or have been hidden for years. Deputy Dillon, to my mind, seems to want to get down to settling the details of the question. My amendment does not get as far as that. I wanted to leave that a question for settlement between the banks and the Government. I make the Minister a present of his statement that the banks must initiate negotiations. I entirely agree with that. I think the banks would probably be very willing to initiate negotiations, but they are also entitled to look to the end of the road and to see that it does not cost them 150 per cent. to settle a 100 per cent. claim— that is taking it at its worst. The Taoiseach suggests: "Oh, well, these notes will not turn up." Of course, so far as Deputy Dillon's assumption is concerned, that a section of them had been burned, these will not turn up, but there might be quite a considerable number hidden away that could conceivably turn up.

From the Nagasaki widow.

From the Nagasaki widow. I do not think the payment would be in gold as the Deputy suggested; however, we shall not quarrel about that. The banks have been left with a liability to pay off anybody who turns up. The Taoiseach keeps protesting that it is not a liability.

I never said such a thing. I would not dream of saying it.

I accept that statement, but I suggest that there was a suggestion along these lines, although not very specific. My amendment, if accepted, will let the banks see where they are. They can initiate negotiations, find out what the Government's views are, consult other people and make a careful calculation, so that at least they will not lose money. I do not want to go into the relative merits of their proportion, but I seek to open the door for negotiations, without prejudice. Presumably the Minister can withdraw or the banks can withdraw. I do not know if the Minister will bear me out when I say that under this Bill the banks, if they initiate negotiations, must go through to the end. The Minister need not go into details. All he need be is the honest broker and leave the door open for a visit from the banks for the purpose of negotiating. If he accepts my amendments we need not start to try the merits or the proportion of the rival claims. A situation might arise for the banks in which they could not get out of the negotiations quickly enough. If they found 100 per cent. claims they might be presented with a bill for 150 per cent.

Does not the same difficulty arise in this connection? This is not the hypothetical case presented by Deputy Dillon. Old bank notes would come from outside which were not arranged for originally?

You have to think of these when dividing two or three parts in order to see what might happen.

Water-tight compartments.

I presume that the arrangement between the banks and the Minister for Finance will have to be on the basis of the amount we are assuming. There is the same basis, namely, the amount we would be expected to get.

The Minister makes an arrangement on that basis, and if all the notes were gathered in the area the Deputy's suggestion might not be an unreasonable compromise. The trouble is that if you agree to have notes coming in from outside, for which there was no arrangement originally, and only with regard to your own particular territory, then the whole thing is completely upset, because on notes coming from outside you would be paying back on the proportion which, at the start, only applied to a portion. If that applied to the area as a whole, these notes from outside would be treated just the same as notes from your own area. I think the reasonableness of the Deputy's suggestion is upset by the fact that no account was taken originally of notes that would come in from outside.

The alternative is to repudiate the notes. Nobody suggests that that should be done.

It is not the alternative.

It is one of the alternatives. I suggest that all these factors could be taken into account if the negotiations are left open and without prejudice. Somebody must shoulder the responsibility of paying on these notes as they turn up. Are we agreed upon that?

Then it is either the banks or the Government. I do not see how that can be got out of, even if they were in Japan for 20 years.

The Government has no liability except that which might be incurred if it takes over a sum of money from the banks. At the moment the liability is solely with the banks.

Yes, but you cannot have it both ways. You are arguing that the liability is nothing, and then you say that notes might come from outside.

I think the Deputy does not see the point. Before there is a bargain there is no liability on the Government. Instead of liability, the Government feels that it has a claim to something.

To a share in the deal.

If the whole of the notes were available, certainly, if there was any question about our own territory, I think they would rightly and properly belong to the State. I believe some claims of a minor kind might be put up by the banks, but, in the main, I hold that these notes belong to the State. The Minister for Finance at the moment is not in a position to say, "Look here, we are ready for the simplest solution. All these notes are ours. Give us money corresponding to them, and if any dead notes turn up afterwards we will pay you in full." That would be the way to do that if we had not the difficulty about those outside the State. The moment the money was got from the banks the liability was transferred to the State.

When you make a bargain there is part liability, and the Deputy tries to meet that part liability by some proportion. I understand what he is driving at. That is not in the Bill. If notes come along the Minister will make provision to deal with a section of the notes which will be deemed to be those to which he is entitled but, low and behold, other notes from outside may begin to appear for which the Minister had not arranged. The solution suggested does not meet the facts of the case.

I think the Taoiseach has his mind too much in compartments. He is thinking of notes coming from outside and I suggest that in what I propose that position could be met. One of the ways in which the banks have built up their reputation is on sterling honesty, namely, that they have always met their liabilities. There were no quibbles. The Taoiseach's difficulty, apparently, is that he wants to know where a note lived for the last ten years, as if a bank note could be asked: "Where were you for the last ten years?" I suggest that that is the Taoiseach's difficulty.

Not at all.

Then I suggest you will have to meet that liability.

If the banks give us the assets that they have against all the bank notes we will become the bank for that particular purpose, and then we will be prepared to meet the whole bill. The banks have their liabilities at the moment, and the Minister for Finance ought not to assume liability for more than he is going to get, and the Deputy's suggestion might very well put him in the position in which he would. If the Minister makes an arrangement with the banks for a certain portion—and it has only to be a portion, which is the difficulty——

Yes, it can only be a portion.

——he becomes liable for a big proportion of things which did not come into the first part of his account at all, and assuming that a large number of them were to turn up, he would be putting himself into a dangerous position.

At a particular time, a calculation was made that there were so many of these notes deemed to be dead outstanding, or that there had been in circulation at some time notes that were deemed to be dead amounting to a certain amount. The Currency Commission were asked to decide the relevant proportions of those notes attributable to this area and to another area, and they fixed a certain proportion. The Taoiseach has said that Governments are not interested; that it is really a bank business; but Governments did become interested at that point. As I understand it, the banks found themselves in this position that if they meet what are understood to be the claims in respect of the two areas, meeting those two claims will involve them in more than the amount of these notes said to be outstanding. Somebody has to meet them; somebody has to lose. The Minister for Finance says:

"If the banks take the initiative and ask me about writing off, I may allow them to do so, but I may demand of them the payment of the maximum of the proportion already decided by the Currency Commission, but not agreed on by the banks,"

so that the first step that seems to be a little wrong which the Minister may take in this matter is that he may say to the banks: "Pay in to me so much, and, when you have paid it, I know that you have a claim against you from the other side which is more than what you say is the amount of these notes, in total, outstanding." They have not, therefore, enough to meet the claims which they know are coming from the other part.

There is some reason there for manæuvring, but there is a further difficulty. The Minister may say: "At a particular moment, I will make them pay in the whole sum which another authority has determined is the amount for which the banks in our area are liable." That leaves them in a deficit, if the other claim is to be met, but, in addition to that, the Minister says: "And remember, having done all that, if any number of these notes turn up, you will pay." That seems to be a very harsh bargain. You first saddle them with an amount which they think is not a fair amount. When the claims of the two parties are added together the amount exceeds 100 per cent. of the amount of these notes.

Yes, it exceeds 100 per cent. A particular amount has been fixed as the proportion. That is not agreed upon by anybody, except that it has been determined by the Currency Commission. The banks' attitude is: "If we accept that, we know that there is a claim which exceeds the difference between the amount you have allocated against us and the amount that ought to be allocated against the other."

There is something apportioned to our people and to the banks outside, but, when added together, so far as the banks are concerned, they exceed 100 per cent. of what they think is the amount of these notes outstanding. Deputy Dockrell's amendment will meet that point, because he says, "Such proportion as is agreed upon"; but, apart from all that, the difficulty is, I think, exaggerated by the further provision in sub-section (5). Suppose they do pay in, if any of the notes turn up, the associated bank has to meet these claims. There are two ways of meeting these points. One is to say, "Whatever the Minister ordains, the associated banks, if any of the notes corresponding to that turn up, will meet the liability." The objection to that is, I understand, that it may lead to a bad situation, because it may mean the whole of these notes, both that part appropriate to us and the other, may be landed down here. I do not see why they should, because these are still payable elsewhere. It is not as if they were reckoned dead and of no value here, in Northern Ireland and in England. There is no great temptation to put them down here, because a price can be got for them here which is not available elsewhere.

What about a branch of a bank in the North? Why will they not be presented to us here?

If that danger exists, it may be a reason for saying to the banks: "We will give you something more than conscience dictates in this matter. We will put some penalty on you, and if any of you tell us that these notes are not likely to be presented, and you get off payment on that basis, they being deemed to be consolidated bank notes under the earlier Act, there is a temptation to you to be rather liberal in your views and to say that more of these ought to be written off than is appropriate." You fix that with the other machinery and say that if any turn up they will pay, but it is extremely difficult to ask them to accept that liability when the Minister may demand that they will pay in more than what they think is the appropriate quota for this part of the country. We know that there is a dispute about that. I notice the Minister shaking his head. I understood the dispute had definitely got to this net point: there is a proportion fixed by the Currency Commission which is not accepted by the banks, because they know that if they meet the claims arising elsewhere, they cannot meet out of what they think is the fund of these dead bank notes, the proportion allocated to them by the Currency Commission. I see in the returns that the amount in March, 1942, was £813,000. It used to be £1,066,000. These notes are bobbing up at the rate of £25,000 a year. If they continue being met at that particular rate, the difference will lessen as the years go on, as they are presented for payment, but at the moment there is a dispute with regard to what is outstanding and the banks are being ground between the demands made upon them.

I am interested in Deputy Dockrell's amendment and I propose to give him a simple example. Let us take the £3,000,000 I spoke of in reference to Deputy Dillon's point, of which £1,000,000 was attributed to us. Suppose the Minister for Finance was extremely generous and said to the banks: "We will go fifty-fifty in this. Give us £500,000," and he takes £500,000 from the banks. He has thus netted £500,000 which he had not got before. Suppose the other £2,000,000 comes in—I have to assume it to show where the thing would go wrong—suppose that, by a miracle, it all turned up and the banks presented the notes to the Minister in accordance with his agreement, saying: "Here are some of these notes, and you have to pay for them fifty-fifty." The Minister would then have to hand out £1,000,000, so although he got originally on his bargain £500,000, he would have to pay out £1,000,000. I cannot see the Minister for Finance entering into an agreement which might land him in that position.

The case could have been much worse, if it were assumed that the sum of money outstanding was £6,000,000, because the Minister would be in for £5,500,000. But what are the facts? The facts are that the sum outstanding in respect of our proportion is something over £800,000. The proportion on the other side in respect of money outside the country—I am giving a round figure and not an exact figure—is £400,000. Now, so far as the banks are concerned, they have got to deal with two highway men, each one of whom is going to get his pound of flesh if he can, and if they both claim —one by statute, mind you, and the other by a sort of factual proof—they can claim more from the banks than the banks are liable for; that is not fair, on its face. My information, for what it is worth, is that under the Currency Act of 1927 a determination fell to be made, and it was made. As I said, I would prefer to discuss this without going into all these details, but a determination was made. It is not accepted elsewhere, from my information, and whatever determination, or, at least, whatever arrangement is to be made, all that I should like to see is that the terms affecting the facts that are to be taken into account will be fair.

Now, on this question of dead notes, it is a very nice question whether there is anything like the amount of dead notes that is alleged, having regard to the manner in which they have been liquidated. There is a sum of £800,000 out now, and there was twice that sum out in 1931, only 11 years ago. I am referring to our proportion, and I suppose you would have to add half to that again to get all Ireland's proportion. The first thing that is to be done is to arrange what are the terms to be made in respect of the allocation of the respective liabilities for the dead notes, north and south, or east and west, as the case may be. Having done that—and it is necessary that an agreement should be ultimately arrived at if we are to have any settlement—then the proportion, whatever proportion there is to be arranged, can be so arranged. There is no intimation to us, as far as this section—Section 3—is concerned, that there is anything like the bargain that has been mentioned by the Minister, that if there is in dispute a sum of £1,000,000 it can be settled on a half-and-half basis. There is no indication there as regards that. All that we know is that, a determination having been made, we say that the banks are liable for £800,000 of dead notes, that the Minister will not take more than that.

That is the bargain that is down here, but having taken the whole of it he then says that the bank will be liable for whatever sum comes afterwards. That does not seem to be fair, on its face, and that is why I suggested that the word "agreed" should go in. I think it would be much better to have agreement on that matter as regards the banks, because they are business men and, if they are anxious to have this thing settled, then the sooner it is settled the better. Obviously, however, as it stands now, if they were to be asked to accept a liability for a sum in excess of what they are morally and legally liable for and, in addition, for a contingent liability subsequently, in respect of every one of those notes that would come in—and they are coming in fairly rapidly—it would be unfair. Two years ago, the sum outstanding was £865,000—that was in March, 1940— and in March, 1942, the sum outstanding was £813,000: that is, £26,000 per annum, or £53,000 in the two years, has come in, and it is obvious that there is not anything like the proportion of dead notes that has been estimated and that the estimate has been exaggerated.

Now, I do not know what the Currency Commission's view is as regards the determination they made: whether it is that, having made the determination, they cannot unmake it, and obviously it was a foolish thing to make a determination if it was irrevocable, and, if, having made it, it is not subject to that peculiar kind of fluctuation which is almost inevitable in the case of a bank, with the notes going up and down and one way and the other. Surely, the very trend of trade would influence it, and what might be the case to-day might not prevail in four or five years' time. For instance, if we were buying extensively from Northern Ireland in 1927, and trade dropped and the fluctuation was the other way, it is almost certain that the notes would follow the trend of trade, and what happens to-day might not at all govern what would happen at another time. Now, I am informed that there are other methods of calculation in respect of which a different percentage would be arrived at, but all we are concerned with is that so far as this section is concerned it confines us to that settlement. That may be a perfect settlement; it may be mathematically, arithmetically, or statistically correct, but it is not accepted by the other fellow and, after all, is it not a question ultimately that if the thing is going to be finally settled, there must be a measure of agreement between us in connection with that matter of the allocation of notes between this country and elsewhere?

The Taoiseach was at great pains to explain his difficulties to me. Some of his difficulties, to my mind, arise from the anxiety of the Minister for Finance with regard to easy money. I am afraid that what is really wrong is that the Government are looking for—I repeat what I said earlier—£150 in face of a sum of £100 in dispute. That might well happen, and the Taoiseach has been at pains to explain to me that, having settled on that basis with the banks here, the notes might come in from the other territory. Now, how can he stop that? He has agreed that you are not going to repudiate the notes. I have said that you cannot enter into an examination with a bank note; it is a dumb thing, and perhaps it is fortunate that it is dumb as to where it has been. I would like to suggest to the Minister that one solution for the settlement of this question would be that the banks might be left perfectly free to abandon the negotiations if they find that they are going to lose money.

They are free to do so. They will be free.

I suggest to the Minister that having started negotiations they cannot get out of them. Can the Minister satisfy me on that?

That is not so.

So that I am quite wrong?

Yes. They can withdraw at any time.

From the negotiation?

On finding, as I say, that they are in for a sum which is in excess of the amount involved, they can withdraw?

So I understand.

That was not my view, but it is quite possible I may be wrong on that. I am glad to hear from the Minister that I am wrong. I want to suggest to him again that he will have to face up to the fact that notes may be coming in here from an outside territory to be presented to the banks. I do not see how he is going to deal with that. I shudder at suggesting that he should make a visit to a neighbouring capital and try to arrive at a settlement. We all know that is impossible. Is it not?

Well, it has not been possible on more important questions than this, and so I am ruling it out. I again suggest to the Minister that he might accept the amendment.

Deputy Cosgrave suggests that we ought to accept this amendment. I, as Minister for Finance, have a certain interest in these notes and in getting a settlement. The banks have a certain interest, too, but nobody is going to have any power to influence the forcing of a settlement. A settlement may never be arrived at. I suggest that no Minister for Finance, whoever he may be, whether it be myself or Deputy Cosgrave or anybody else, is going to be unreasonable. The State has an interest in these dead notes. The banks have an interest in them, too. The notes are dead and they are going to be wiped out of existence. During the lifetime of these notes the banks got a considerable profit out of them. The State says that it is going to wipe these notes off as dead, and that the profit that will accrue to the banks should be shared with the State. That is all we are claiming. I do not think any Minister for Finance is likely to claim—it would be foolish and unfair to do so—100 per cent, though that has been done elsewhere. There are precedents in other countries where the whole lot was taken over by the central bank when it was founded. We are not asking to do that. I think it would be more reasonable and just to make a fair division. I think the Minister for Finance is the person in the best position to try to put the screw on to force a settlement rather than leave that power in the hands of the banks. If I accepted Deputy Dockrell's or Deputy Cosgrave's amendment that the banks must agree, then the banks would be in the dominant position.

No, if it depends on agreement.

But they need never agree.

Then they cannot write off.

That is so, but they need not agree.

The leverage is against them unless they get the Minister to agree.

I do not see that there is much leverage. They are making money as long as the notes continue.

If they do not get an advantage from writing off, then the section will never be operated.

I agree they should get some advantage, and I think any Minister for Finance would agree that there should be a fair division.

If they do gain an advantage by writing off the Minister can stump them by not agreeing.

The Minister is not likely to take up an unreasonable position. It is to his advantage not to do that.

That is all the amendments ask.

I think that, if you were to put in agreement there, it would make it more difficult for the Minister to get agreement. That is my interpretation. Deputy Cosgrave said that the apportionment that was arrived at by the Currency Commission was a foolish one. I think that was the word he used.

He said it was foolish to make it if it was not revocable.

I agree that the bankers' representatives on the Currency Commission accepted it as fair, but the bankers are questioning it now.

Is the Minister sure that they are questioning it?

Some of the bankers are questioning it.

On different data?

The representatives of the bankers agreed to the apportionment that was made, and accepted it as fair, but some of the bankers now say that it was not fair.

Was it not bound to fluctuate?

That is so, but, as I understand it, they got a fair bargain.

Is it not inevitable that there would be a certain amount of fluctuation?

That is so. That is beside the point. In my opinion the Minister would be in a better position to bring about agreement if the Deputies' amendments were not included.

Amendments, by leave, withdrawn.

I move amendment No. 42:—

In sub-section (2), page 19, line 6, after the word "proportion" to insert the words "to be agreed upon between the Minister and such associated bank".

Question put.
The Committee divided: Tá, 31; Níl, 61.

  • Bennett, George C.
  • Brennan, Michael.
  • Brodrick, Seán.
  • Browne, Patrick.
  • Cole, John J.
  • Cosgrave, William T.
  • Costello, John A.
  • Curran, Richard.
  • Dockrell, Henry M.
  • Doyle, Peadar S.
  • Esmonde, John L.
  • Fagan, Charles.
  • Giles, Patrick.
  • Hughes, James.
  • Keating, John.
  • Linehan, Timothy.
  • Lynch, Finian.
  • MacEoin, Seán.
  • McFadden, Michael Og.
  • McGilligan, Patrick.
  • McGovern, Patrick.
  • Mulcahy, Richard.
  • Nally, Martin.
  • O'Donovan, Timothy J.
  • O'Higgins, Thomas F.
  • O'Sullivan, John M.
  • Redmond, Bridget M.
  • Reidy, James.
  • Reynolds, Mary.
  • Rogers, Patrick J.
  • Ryan, Jeremiah.

Níl

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Crowley, Tadhg.
  • Davin, William.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Everett, James.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Keane, John J.
  • Keyes, Michael.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • Maguire, Ben.
  • Meaney, Cornelius.
  • Breen, Daniel.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Buckley, Seán.
  • Carty, Frank.
  • Childers, Erskine H.
  • Cooney, Eamoun.
  • Corry, Martin J.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • Murphy, Timothy J.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • Pattison, James P.
  • Rice, Brigid M.
  • Ryan, James.
  • Ryan, Martin.
  • Ryan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Laurence J.
  • Walsh, Richard.
  • Ward, Conn.
Tellers:—Tá: Deputies Doyle and Bennett; Níl: Deputies Smith and S. Brady.
Amendment declared lost.

Amendments Nos. 43 and 44 may be discussed together. I think they cover the same point.

I move amendment No. 43:—

At the end of sub-section (5), page 19, line 24, to add the following words: "but the same proportion of any sums expended by an associated bank in the discharge of such liability as the agreed proportion mentioned in sub-section (2) of this section shall be repaid by the bank to the associated bank."

I think the Taoiseach told us that this was a liability which was not a liability; that really there would not be so much to pay; but when it was suggested that the liability should be shouldered by somebody else, he got away from the question. It seems to me that this amendment is so fair that there can be very little discussion about it. I suggest that the same proportion of any sums expended by an associated bank in the discharge of such liability as the agreed proportion mentioned in sub-section (2) of this section should be repaid by the bank to the associated bank; in other words, in whatever proportion the sums are divided as between the bank and the associated banks, the liability should be shared accordingly.

Amendments Nos. 43 and 44 amount to the same thing. In any settlement that is arrived at, I am sure it will be in the minds of the bankers concerned and, undoubtedly, it will be in the mind of the Minister for Finance that some liability will still remain. It may not be very heavy, but there will be some liability there. That will be part and parcel of the bargain that will be made, and some amounts will be left with the banks to meet this contingent liability. They will certainly have enough in hands to meet such liabilities as they are likely to be called upon to meet.

It seems to me an extraordinary thing, if there is a certain bulk of old notes to be wiped out, and if they are accepted as dead, and if within some reasonable time they will all be written off as dead, that, when facing it in the way in which we are facing it now, some kind of an allocation is not made now between the State and the banks. If the State wants to come in and take some proportion of the benefits reapable from the dying of those notes, it seems extraordinary that some proportion as between the benefit to the State and the benefit to the banks is not settled now. According as the thing reaches a point where a specific amount is definitely written off, it should be definitely stated that, if notes turn up which have been written off as dead, the State will bear its own part of the cost of redeeming those notes. What is the objection to making the matter plain now?

I think the matter is pretty plain as it stands. I do not see that we can do any more.

Does not the Minister consider, taking it along with the previous section, that as it is written there it could not be any more severe or harsh or unjust? "Unjust," I think, is the proper word in a case of this sort. In the first place, if the Minister takes all that there is to be had under the settlement, and then leaves the banks with a liability in regard to those notes, surely there is some consideration due to the circumstances. Will the Minister undertake to consider the matter between this and the Report Stage?

I do not like to be unjust, and I do not like even to be charged with being unjust, but I do suggest that, whatever bargain is arrived at between the contending parties, the Minister on his part must bear in mind that there is a contingent liability there. The liability may not be a very heavy one, but nevertheless there is a liability for such dead notes as may turn up, and in making a settlement with the banks the Minister must bear that in mind. Having borne that in mind, and having made a bargain with the banks with that as part of the basis of the bargain, I think it is only fair that the banks should bear that contingent liability. We do not like to prophesy, but the probabilities are that they will profit by it in the end.

Let us take another case. It is the last thing I will say on this. Let us assume that, between this and the date of the operation of this measure, there is a dispensation of providence; let us assume that there is a general election and that none of us is returned. The new Minister for Finance takes that measure there. Is he not entitled to take exactly the letter of the law as it stands, and not bother about the speeches that were made?

Will the Minister consider that aspect of it?

Very good.

Let me put it this way: The Minister says: "I am going to treat the banks fairly." I suggest that he should stick that into the Bill. That is all there is between us.

You would not be better off then, because who is going to define "fairly"?

I suggest that the simplest and, apparently, the fairest thing would be for the Government to disclose their minds and say how much money they want to make out of the dead bank notes; to put into the Bill that they want to get the banks to pay that particular amount, and that they make the banks a present of any benefit there may be to them in whatever will die of the notes that are outstanding.

I think the banks will probably do better if it remains as it is, leaving them to make the best bargain they can.

If the Government have made up their minds that they are going to get a bit out of this money, I take it that they will get that bit.

I think they ought to be frank enough to state what amount of money they have made up their minds they can get out of this, and put it there for us to argue about. It should be a definite fact about which there can be no fighting behind the scenes afterwards.

This Government is not the only one concerned.

I take it that this Government is making this proposal.

As the Minister has promised to consider the matter, I will withdraw the amendment.

Amendment, by leave, withdrawn.
Amendment No. 44 not moved.
Question proposed: "That Section 35, as amended, stand part of the Bill."

The acceptance of Deputy Cosgrave's amendment No. 40, to delete the words "or into the Exchequer", will necessitate a further verbal amendment—"shall pay to the bank".

Question put and agreed to.
SECTION 36.

I move amendment No. 45:—

Before Section 36, but in Part IV, to insert a new section as follows:—

(1) Subject to the limitations and conditions specified by this Act and to compliance with provisions of this section the bank shall issue on demand to each associated bank legal tender notes to the extent of 25 per cent. of the total issue of legal tender notes or such larger percentage as shall be agreed upon by the unanimous determination of the board approved of by the Minister in such denominations as any associated bank may require on the security of liquid sound advances by such associated bank to persons in Éire proved to the satisfaction of the bank to exist at the time, and for scrip in the possession of such associated bank of any loan of or guaranteed by the State (Éire).

(2) Proof for the purposes of the foregoing sub-section of the existence of sound liquid advances by an associated bank to persons in Éire shall be given by such associated bank to the bank in such manner as the bank may direct and for the purposes of such proof, the governor or a permanent officer of the bank specially authorised on that behalf in writing by the governor may inspect the relevant books and documents of such associated bank.

(3) The 25 per cent. issue of legal tender notes on the backing of domestic assets shall include outstanding consolidated notes and other notes of a bank of issue prior to the Currency Act of 1927, save that as and when the consolidated note issue and the notes of a bank of issue are finally withdrawn, the said 25 per cent. shall be based on the total issue of legal tender notes.

This is a proposal to ensure that 25 per cent. of the currency issued in this country will be backed by domestic assets. That brings us back to the initiation of national currency in this country some 15 years ago. In the Currency Act of 1927, the proportion of the currency which would be backed by domestic assets was set out as approximately half of the entire issue, that is the legal tender note issue and the consolidated note issue. This amendment seeks to get only 25 per cent. of the note issue backed by domestic assets, mainly because of the alteration that has taken place in the proportion of the legal note issue with the consolidated note issue. On its face, it seems strange that the national currency here should have as its sole backing foreign securities, however good.

I think that it is unwise in these days of emergency to be talking about "mere paper". The latest recruit to that form of illustration is one of the Parliamentary Secretaries. If he were correct in his description, our currency arrangements would not reflect credit upon us or upon our country. The proposal in this amendment is that 25 per cent. of our note issue should be backed by liquid sound advances. The note issue in existence prior to the inception of the Currency Commission depended, and at present in Northern Ireland the note issue depends, for its backing on much the same sort of security, so far as I know. There is no reason why, in a country with a banking history and banking tradition such as we have, this proposal should not be given effect. In a period of over 100 years, no bank here has failed to pay its depositors the money they lodged with it. It is true that, within the past 60 years, there was a bank collapse here, but it was not a collapse which entailed loss to any depositor.

That is a matter of which we should be very proud. It is a matter which should embolden us in our consideration of this proposal to have at least 25 per cent. of our note issue backed by domestic assets of the type specified—liquid sound advances. They amount to about £50,000,000 or £60,000,000. They have been rather constant in their volume. They represent whatever there is of commerce and business in the country and should be, apart from any microscopic examination, as good as, if not better than, corresponding sound advances in other countries. It is true that the whole of the £50,000,000 or £60,000,000 of sound advances are not liquid, but there are some liquid sound advances amongst them. In connection with that, I should say that it ought not to be necessary to hold an inquisition into the secrets of the banking institutions to be satisfied that the central bank would be justified in having a note issue backed by these liquid sound advances.

On the national side, there is an unanswerable case for the issue of this proportion of the currency on the backing of our own assets. As I have said, over 100 years no depositor has lost by reason of the instability of the banking institutions of this country. In few other countries can that claim be made. Then, we have rising bank deposits and we have conservatively-minded banking institutions. They have had very close examination by a commission set up by the Government and there is no reason to suspect that there is any exaggeration in the statement of the commission that they are worthy of the confidence of the people. On the facts, as presented, and on the history and tradition of the whole institution, there is no reason why there should be any alteration in the conception of their integrity to-day, or for the past 20 years, as compared with that of the previous 80 years, during portion of which they were entitled to have a fiduciary issue backed very largely by their own stability.

My recollection goes back to an incident in 1914 or 1915 when a sum of £4,000,000 in gold was transferred from the banks here to the banks in Great Britain. It may be that that sum of £4,000,000 constituted, in the period, portion of the backing of the fiduciary issue. If one were to put the simple question to any group of conservatively-minded financiers or bankers in any part of the country: "Are you satisfied with the stability and soundness of the banking institutions of this country and with their ability to pay 20/- in the £ as well as banks in any other part of the world?" there would be an answer in the affirmative. That is the case for this amendment. It may be urged by the Minister that there is provision, as there is, in the Currency Acts for the acceptance by the central bank of securities other than sterling assets. To secure that necessitates the putting into motion of a series of events. It does not happen unless something is put in motion. To that extent, it would appear that this Central Bank Bill, as distinct and different from the Currency Act of 1927, only allows in by a sort of side-door Irish assets on which to base a currency issue. It is to remedy that national and economic defect, and to secure that at least 25 per cent. of the currency we shall issue will be backed by domestic assets that I have put down this amendment.

I am not sure that I fully understand Deputy Cosgrave's amendment as it appears on the paper, though I fully understand its implications. I should describe it as rather revolutionary. The Deputy suggests that the bank shall issue on demand— it is mandatory—to each associated bank legal tender notes to the extent of 25 per cent. of the total issue of legal tender notes on the security of liquid sound advances to persons in Éire. Now, if the bank were to issue 25 per cent. of the legal tender notes in circulation to each of the eight banks—and I take it that that is what is meant here—on the security that is set out, that is, liquid sound advances, it would mean issuing on demand 200 per cent. of the legal tender notes in circulation on the day the demand is made. I wonder if the Deputy is serious in making that suggestion and in moving that amendment. That would mean enormous immediate inflation. Perhaps that is what the Deputy would like, but I doubt it.

The present issue of legal tender notes is approximately £18,500,000. The amendment would mean, immediately that demand is put in by the eight associated banks—and the demand would not be long in coming—that £37,000,000 would be put at the disposal of the eight banks and put into circulation. That would be inflation on a grand scale. I wonder if Deputy Cosgrave means that. That is the proposition as I see it. There is, perhaps, a limiting feature in its being tied up, as he suggests, with liquid sound advances made by each associated bank to persons in Éire or with scrip of an Irish Government in their possession. As the aggregate of advances of Irish banks is in the region of £46,500,000, apart from investments of £11,000,000 and bills of over £3,000,000, the value of these provisos as a limiting factor is not very great.

If the amendment were adopted, it is probable that the banks would, without any delay, take out the new notes that the Deputy's suggestion would force the central bank to place at their disposal. They would cost them nothing. They would hand in the consolidated bank notes now in their possession and on which they have to pay a certain sum; and they would hand back the legal tender notes for which they have to pay more. The new notes issued free of charge would be a good bargain for the associated banks. I wonder what would become of the central bank. Its revenue would have gone and it might close its doors. There is a suggestion in the amendment which might be intended to mean a saving of some kind. It says: "Subject to the limitations and conditions specified by this Act". I do not know what the implications of that might be: they are not very clear to me. Taking Deputy Cosgrave's amendment at its best, the £6,000,000 in consolidated bank notes would be deducted from the permissible total of £37,000,000 which I suggest would be the resultant figure that the bank would have to put at the disposal of the associated banks. That would mean £31,000,000 as the most reasonable figure I can calculate. This would mean that the £31,000,000 must be handed over to the associated banks free of charge, with the resultant wholesale inflationary effects of such an immediate issue.

Even that is not the limit. Further issues over and above that could be made if the board were unanimous and if the Minister for Finance agreed. If there were such a Minister who would agree to that widespread inflation, one can imagine what the result might be. That is my interpretation of the Deputy's amendment. I cannot read it in any other way.

Would the Minister say how he arrives at £37,000,000?

Yes. There are eight associated banks at present. Each of these would get 25 per cent. of £18,500,000, which is the approximate amount now in legal tender notes in circulation. That makes 200 per cent., which can be demanded, and which shall be issued on demand. There is nothing to suggest that the associated banks have to pay anything for it. It is to be delivered to them on liquid sound advances as the first basis and "for scrip in the possession of such associated bank of any loan of or guaranteed by the State (Éire)". That is where I get the £37,000,000. It does not stop at that, if there is a Minister for Finance willing to hand out more. That is the proposition as I take it, reading the language there. I do not see the full force of the limitation, which reads:

"Subject to the limitations and conditions specified by this Act and to compliance with provisions of this section, the bank shall issue on demand to each associated bank legal tender notes to the extent of 25 per cent. of the total issue of legal tender notes or such larger percentage as shall be agreed upon by the unanimous determination of the board approved of by the Minister..."

"Unanimous" is very important, is it not?

"The unanimous determination of the board"—that means the sums over and above the first 25 per cent. that have to be issued to each of the associated banks. That is so much for that part of the amendment. Then we come to the liquid sound advances. I agree with Deputy Cosgrave as to the soundness of our banks and our banking system. There is nobody in this country, and there is nobody outside it, who can point to our banks as having, in the last half century at any rate, failed to pay, whenever asked, 20/- in the £, and that is going to continue. We know our banks and our bankers; they are as sound as in any country in the world.

We will soon have to put our hands to our hats when passing the banks——

Well, I do not think so; I do not think there is any necessity for that.

——there has been so much said about them here.

You might have to take off your hat when you are asking the banker for an overdraft. On the question of liquid sound advances, I have a certain sympathy with what I think Deputy Cosgrave has in mind— to secure that some agreed portion of our note issue could be based on domestic assets. I do not think this is the way to do it; I do not think that what Deputy Cosgrave proposes here is going to achieve it. I think what I have said shows that the amendment he proposes is an impracticable one, and it is one that I am rather astonished he put on the paper.

The power to issue notes on liquid sound advances was given to the Currency Commission when it was founded, as a result of the recommendations made by the Banking Commission that sat in 1926. The phrase "liquid sound advances" is used in the first portion of this amendment, but is changed in the next sub-section to "sound liquid advances", and that indicates that there was not the care taken in the drafting of this amendment that one would expect. However, whether they are called liquid sound advances or sound liquid advances, whichever name Deputy Cosgrave cares to adhere to, that basis for the issue of currency here existed from the time the Currency Commission was set up. It was given to the Currency Commission on the recommendation of the first Banking Commission to be set up in this country.

The Currency Commission took early opportunity of investigating the possibility of using the power given to base an issue of currency here on liquid sound advances—I think liquid sound advances was the phrase used in the first Banking Commission's Report— and the Currency Commission decided that it was impracticable to use that power that was given to them in Section 52 of the Currency Act. That matter was further investigated by the Banking Commission that sat in 1934 and that reported in 1938. The value of the power that was given to the Currency Commission and the extent to which that power was used was examined and there are several sections in the Majority Report of the Banking Commission dealing with that subject. I am sure Deputies have read them, but I will quote a few extracts. Paragraph 243 says:—

"In so far as account is taken of liquid sound advances for this purpose, it should be observed that it has not been found practicable up to the present to frame any precise estimate of the amount of liquid sound advances of the several banks."

That is one of the reasons why the power was never used. Paragraph 244 says:—

"It was contemplated by the Banking Commission of 1926, that the securities so taken from a bank might consist of the documentary evidence of, or might otherwise represent, liquid sound advances."

The next paragraph says:—

"During the earlier period of its existence the Currency Commission had under consideration what steps, if any, it might usefully take towards utilising liquid sound advances as protection for consolidated bank notes. It eventually reached the conclusion that close analysis of bank loans from this particular standpoint, or any attempt to assign the interest in them to the commission by way of cover for consolidated bank notes, would not serve any useful purpose."

The last sentence of that paragraph runs:—

"It is evident that, so long as this arrangement is in operation, liquid sound advances are in effect irrelevant so far as concerns the actual protection of consolidated bank notes."

The last sentence in the next paragraph reads:—

"It is, therefore, our opinion that the volume of liquid sound advances cannot usefully be employed as a basis for the administration of a system of consolidated bank notes."

That suggests that they cannot usefully be employed as a basis for the administration of a system of consolidated bank notes. Neither can they be usefully employed as a basis for the issue of legal tender notes.

I think Deputy Cosgrave referred to one other matter, and that is the position relating to the note issue in Northern Ireland. The authorised note issue in Northern Ireland, the amount authorised by law, is nearly £5,000,000 —the actual sum is £4,951,000. But there is a note circulation in Northern Ireland of £13,273,000. I understood Deputy Cosgrave to suggest that the difference between these two—the authorised issue of £5,000,000 and the note circulation of £13,000,000, a difference amounting to about £8,000,000— was backed by domestic assets. It is backed entirely by Bank of England notes, and that is shown in the certificate that I read out last night from the Belfast Gazette, the certificate as to the position of note issues in Northern Ireland. Deputy Cosgrave says it is to remedy the national and economic defects that exist here, where our currency is based on sterling, that he moved this amendment. If there is any national slight in existence by reason of the fact that our note issue is so based, I would be as anxious to get rid of that slight as Deputy Cosgrave is. I have as much faith in our domestic assets and in our people's financial stability as anybody in this House. I would like to see some satisfactory method by which what I think Deputy Cosgrave has in mind might be achieved, but I suggest that the amendment that he has put down cannot achieve what he desires and, on the contrary, would have effects that might easily be ruinous, if my interpretation of the amendment is correct. The wildest financier, the wildest faddist on credit creation that might be in this House could not have proposed anything that would be more hurtful to the credit of the country than the amendment suggested by Deputy Cosgrave.

We have just listened to very inadequate treatment of an amendment that was seriously meant and should have been seriously discussed. The Minister has now spent the greater part of half an hour in an objection to the amendment which might be said to be correct if it is based upon the way in which the amendment is now framed. Any one of us could have poked as much fun over the Bill on one point—the obvious maladjustment that was made as between the governor and the directors. Quite as much fun can be poked at the many flaws that can be picked out in the Bill as can be poked at the flaw in the amendment. We can add to that that the flaws in the Bill are flaws that have crept into it despite the immense amount of expert backing, draftsmanship and everything else the Minister has at his disposal and the length of time the Bill has taken to mature from the time the Currency Commission first recommended the setting up of a central bank. Any one of us could playact in the way the Minister has done. It will be quite clear to anyone who looks at the amendment that what is meant by it is that certain legal tender notes, to an extent not exceeding 25 per cent. of the whole, may be based upon liquid sound advances.

That is not what is there.

Can I go back to the relevant sections of the Bill and ask the Minister what is the difference between the director and the governor?

The Deputy was kind enough to do it.

I did not make a 20-minutes' speech pointing out the absurdity of what is in the Bill. That is, in any event, how the Minister has decided, at the end of three days' serious discussion, to deal with the amendment, the purpose of which he was certainly able to gather quite as easily as anybody in the House who has read it. I do not think anyone else in the House would have wasted time tilting at the windmill in order to get the little bit of amusement and exercise that he has got. The same remarks apply to this, because there is a verbal change as between sound liquid advances and liquid sound advances. The Minister knows that that particular phrase is taken from the Banking Commission Report and Section 52 of the Currency Act of 1927, but the two words have been misplaced in one part of the amendment, and the Minister has had quite an amount of enjoyment pointing that out. This is a serious proposal.

In regard to the other point, I cannot understand the Minister's point of view, that if these tender notes were issued in the way this amendment desires, every bank would run for them because they would not be subject to whatever charges there are upon legal tender notes. I do not see how that arises at all. If this is fitted into the framework of the Bill, the notes issued on this backing will be subject to whatever charges there are upon legal tender notes issued in any other way. They will be subject to whatever either the Currency Act or this particular measure puts upon legal tender notes. I think that objection is not even as sound—whatever value the comments may have—as the objection the Minister took to the verbal maladjustment in the amendment. I think the amendment is quite clear in what it means— and it is quite seriously meant—that liquid sound advances in the country should be taken as the basis of 25 per cent. of the issue of legal tender notes if associated banks like to demand that, and only to that extent. Nobody can say that that is very revolutionary.

We move in this Bill from the Currency Act of 1927 and we move from the sections in the 1927 Act which allowed for the issue of what are called consolidated bank notes. When speaking on the Currency Act of 1927, the Minister for Finance who was then in charge of the measure, speaking on 3rd May, 1927, said that the note issue as set out—I am not pretending to quote him—is elastic; it is based on our credit requirements, primarily on the advances of the banks, but not on them only. That was the situation with regard to consolidated bank notes. We are now moving into the situation in which we are not going to have anything based upon the advances of the banks. In so far as these represent the credit requirements of the country, they are wiped out. The Minister found himself hard-pressed here the other day when he was trying to explain the peculiar position in which we now base our capital on British money, but he said we still have the Irish pound—the consolidated bank note— forgetting that Part IV of this measure is headed "Extinction of Consolidated Bank Notes" and the whole Bill aims at the extinction of them.

He tried to claim credit for the consolidated bank note as the Irish pound. Now he is aiming at the destruction of the Irish pound. When he is finished with this, what we will have will be legal tender notes. The capital of the legal tender note fund has to be held in the following ways—gold bullion—there will be little of that going for a while; gold coins which are for the time being legal tender in Saorstát Eireann for unlimited amounts—I do not know if there are any of these; money in any form which is for the time being legal tender in Great Britain for unlimited amounts —what is called otherwise through the Act "British money"; British Government securities maturing within 12 months; and sterling balances on current or deposit account at the London Agency or any bank in Great Britain or Northern Ireland. Whatever may have been the hopes of the Currency Act, 1927, we are now certainly putting aside all camouflage. We are out now for the legal note which is backed entirely by gold, money in any form which is for the time being legal tender in Great Britain, British Government securities or sterling balances on current or deposit account, as long as they are in a bank outside this country. That is what we have arrived at, and an amendment is put down here to suggest that, if and when associated banks like to demand it, then the central bank might be allowed to issue up to 25 per cent. of the total legal tender note issue on the security of liquid sound advances in this country. That has been derided, sneered at and made little of by the Minister in his speech, in which he played about with a couple of verbal points.

Will the Deputy allow me a second? I started off by pointing out what was in that amendment. Deputy McGilligan and Deputy Cosgrave probably saw then what I was at. They might have stood up and said: "That is there, but we have made a mistake, as the Minister has made a mistake. We did not intend it." If either of them had said that, I would have dropped it completely. Neither of the Deputies did that.

Deputy Cosgrave has spoken on the amendment. Let me come to this point about the interruption. Deputy Cosgrave was speaking to his amendment and if the Minister were serious would he not have come in there with an interruption and say: "Would you want 200 per cent. of the total issue of legal tender notes on liquid sound advances?" The Minister refrained from putting in that interruption because he knew that was not what was meant.

If the Minister is capable of taking that meaning from a person with the experience of Deputy Cosgrave, well, he is welcome to a little verbal victory. Coming to deal with the merits of the amendment, the Minister read three quotations torn from their context in the Report of the Banking Commission. He took a quotation from paragraph 243 and the part of the paragraph he read was:

"...it should be observed that it has not been found practicable up to the present to frame the precise estimate of the amount of liquid sound advances of the several banks."

Of course, that is in the context of the relation of liquid sound advances to the allocation between the several shareholding banks of the aggregate volume of consolidated bank notes. Then they go on to say that for that particular purpose it has not been found practicable to frame any precise estimate of the amount of liquid sound advances of the several banks. The next sentence that the Minister read out was at the end of the first completed paragraph in the section that is numbered 244:

"It was contemplated by the Banking Commission of 1926 that the securities so taken from a bank might consist of the documentary evidence of, or might otherwise represent, liquid sound advances."

That is all an explanation of what goes before, that is to say, to the protection of the consolidated bank notes. Having said that, they go on—and the part which the Minister did read has no meaning when torn from the context:

"It is evident that so long as this arrangement is in operation liquid sound advances are, in effect, irrelevant so far as concerns the actual protection of consolidated bank notes."

What is the arrangement?

"The commission required the several banks to make formal transfers to it of amounts of Government securities adequate to cover all outstanding consolidated bank notes."

Of course, so long as that arrangement is in operation liquid sound advances are irrelevant. The matter was further dealt with in the last sentence taken from paragraph 245:—

"It is, therefore, our opinion that the volume of liquid sound advances cannot usefully be employed as a basis for the administration of a system of consolidated bank notes."

That is taken from the paragraph, the first sentence of which is:—

"It has been shown that, while the aggregate limit of £6,000,000 is retained,..."

They started the paragraph in that way.

I have often had to say in answer to Minister that I do not think the end of wisdom was reached in 1938 and while I am bound to accept the Report of the Banking Commission as a valuable document, I do not think the end of wisdom was reached over here when that report was issued. I do not think it is any answer to points put forward from this side of the House to tell us that the Currency Commission, such as it was, did not find it necessary, or possibly practicable, to make any issue based upon liquid sound advances. We have gone through this measure and we got an explanation yesterday, not a very satisfactory explanation, of Government securities or securities issued or guaranteed by any Government. For the purposes of a certain section of the Bill if there is a security issued or guaranteed by any Government at the remotest ends of the earth, the remotest little country or one with the worst financial history, it may be accepted here, but we cannot accept securities offered by our own Government here unless they are two years old.

That was explained on the basis of the pressure that might be put on a bank here to accept certain issues of the Government and that there would not be any temptation to do that with regard to outside securities. That is the position: that in certain respects a security guaranteed by any Government on the surface of the earth can be taken here except issues guaranteed by the native Government.

Then we come to the backing for note issue. I do not want to get any plaudits from people who are nationalistically exalted about this matter, but it is right that I should point out here that the only backing we have for the legal tender note issue is British money. We shall not allow, even if in certain contingencies the associated banks of the country wish to have it, a backing of liquid sound advances. Before a liquid sound advance becomes a backing in the country, it has to go through quite a severe ordeal. It is subject to examination as set down here. Knowing that that is in the offing the associated banks may ask that some fraction of the legal tender issue should be based on liquid sound advances. It may be that that backing is unnecessary, that there are other backings that would be quite as good, but suppose that we look at it in this way. Suppose that the backing of the liquid sound advances was as good as anything else, why should it not be accepted to the extent of 25 per cent. of the entire issue? I think humility is a great thing at times. It takes a feeling of swollen-headedness from certain people, but are we not becoming too abject when we say that even if the situation changes and even if the associated banks want it, nevertheless the central bank will not be allowed to issue one fraction of a note against liquid sound advances in the country?

There is power, and the Deputy knows it, to issue currency on domestic assets.

Is the Minister referring to the amendment of 1930?

Will the Minister read how it is done?

Deputy Mulcahy has an amendment down dealing with it.

I am not going to move the amendment until I hear the Minister's explanation on a later amendment.

I thought the Deputy was serious in his proposal.

I was until I saw the Minister's amendment No. 65.

Do not run away from it. Wait until we come to it.

I am asking the Minister not to run away from it.

There is power if there is unanimity. It is very restricted power, tied hand and foot. The Deputy is not telling the whole truth in saying that we are cutting ourselves adrift altogether from the power to base any currency here on anything native, anything Irish, anything domestic. That power exists under Section 3 of the Currency Act of 1930. It can be used at present provided the board of the Currency Commission, later the board of the central bank, is unanimous, and provided that the Minister, the Dáil and Seanad agree. It is very ponderous and slow, I admit, to put into operation, but there are some in this House who, I know, would think it wise that there should be all these brakes on that machine. That is not my idea. It should be easier. I have put down certain amendments to secure that. In reply to Deputy Cosgrave I said that I have certain sympathy with what I think he has in his mind. I feel, as Deputy McGilligan feels, that our country is financially sound. We have grown up sufficiently, we are old enough, and have sufficient knowledge of our own financial power and prospects to enable us to consider that a certain proportion of our currency might have purely Irish backing.

We are a creditor nation now.

I think the Deputy told us the other day that our credit was not worth while.

I did not say anything like that.

I think the Deputy said that we could not buy anything. I hope I am not wronging him. That is my information.

We are a creditor nation now.

I am personally sympathetic to the idea put forward and I am quite prepared to have it examined.

I heard of people buying a pig in a poke, which might be a sensible and reasonable thing to do or to condemn, but the Minister asks us to do too much.

I am not asking the Deputy to do anything.

We are being asked to pass a Bill, a condition of which is going definitely to require us to back the whole of our legal tender notes by British securities and in addition is going to wipe out our consolidated notes. The Minister tells us that he is sympathetic with the idea that we should back some of our note issue with domestic securities. He spurns the idea that the old Currency Commission had, that a specific part of our currency might be backed by the liquid sound advances—if that is the way he wants to put it—of our banks here. He spurns that, but he says that there are provisions under which he hopes to be able to do it. He read out a paragraph from the last Banking Commission's report, which completely puts the tombstone over the liquid sound advances of our banks here as any kind of basis for currency. If that is the idea, will the Minister tell us what he thinks could be put into domestic securities behind any proportion of our currency? The Minister might turn to the Currency Act of 1930, Section 3 of which says:

"If and whenever the commission shall unanimously request the Minister to add any particular security or class of securities, currency, balance, or other form of assets to the forms in which the legal tender note fund or the note reserve fund or both those funds may be held under the Principal Act, the Minister may make an Order declaring in accordance with such request, etc."

Will the Minister help us to get some kind of picture as to what are the other particular securities or class of securities or currency or balance which would form the assets that these banks might recommend to be used as domestic backing, say, for 25 per cent. of the total legal tender note mentioned. The Minister would assist the House by suggesting what might be done by the operation of the Currency (Amendment) Act, 1930, in order to meet the idea Deputy Cosgrave put forward in the amendment. It is all the more important that that should be done when we consider what is being done by this Bill with regard to the complete backing of our currency by British securities, and the position into which British securities have got. The first Interim Report of the Banking Commission, issued in April, 1926, page 9, has something to say with regard to the paper régime:—

"In these circumstances it has seemed to the commission that its first duty was to consider the question of providing a definite legal tender basis for any currency that might be in circulation in the Saorstát in the future, and inasmuch as gold appears to be out of the question for the moment, owing to the considerations sketched above, the commission has recommended the provision of a paper legal tender basis, analogous to that existing in Great Britain. In so doing, the commission is fully alive to the undesirability of a Government legal tender currency. In common with the rest of the world it deplores the continued and almost universal existence of the legal tender paper régime, and recognises the desirability of working away from that régime as rapidly as possible.

"Believing, however, as it does, that the Irish currency system is necessarily linked to that of Great Britain, and believing also that Great Britain is resolved to maintain its adherence to the gold standard, it considers that the institution of an Irish Government legal tender note, properly protected in ways hereafter to be set forth, is an expedient whose use is entirely defensive so long as Great Britain continues to progress along present lines."

The line upon which Great Britain is progressing is on the basis of a legal tender paper régime. When the commission made the final report in March, 1927, page 23, it said:—

"Great Britain has, in theory, restored her pound sterling to a parity with gold, and holds it at a value roughly corresponding to its pre-war worth, as measured in terms of the monetary standards of other gold using countries."

We cannot be satisfied that Great Britain was travelling along lines that kept her definitely on the gold standard. That was at a time when we recommended a consolidated note issue which was to be backed by domestic securities, and by a legal tender note which was to be backed by British securities where the relationship of one to the other was fifty-fifty. They thought the consolidated note issue might outgrow in volume the legal tender note issue and thereby shake the foundations of our currency or weaken it, and the provision was made that there would be certain limits in proportion by which the consolidated note issue could not grow above the legal tender note issue. That was at a time when they were satisfied that Britain was pretty well linked with gold. In the summer of 1940 the British pound was backed by less than one-tenth of a pennyworth of gold.

Is the Deputy not going away from the amendment?

I am putting up reasons as to why the Minister is putting legislation before this House that makes it mandatory that the whole of our legal tender note issue shall be backed by British securities. When he expresses nothing but sympathy with the idea of backing some of our legal tender note issue with domestic issues, but declines to show what kind of domestic securities he thinks might be used for that purpose, I am pointing out that he forces us into a situation which is at variance with the one that was in existence after the Currency Act of 1927 was brought into operation, and he is doing it at a time when the British currency has practically no relation in the world, except the reaction indicated by one-tenth of a penny per £, to gold.

How does this arise on Deputy Cosgrave's amendment?

Deputy Cosgrave's amendment demands that we put some provision into this Bill that will secure that our currency will be backed to an explicit percentage by domestic securities, because of the circumstances in which we are, and one of the circumstances he has to take into consideration is the position with regard to British currency at the moment. That position is that it is backed by one-tenth of a penny per £ in gold. As I pointed out last night, the Final Report of the Banking Commission of 1927 indicated what was the object of backing our legal tender note issue by British securities. On page 28 it says:

"...the object in view being the maintenance of immediate convertibility of outstanding legal tender paper at all times on demand into British sterling."

I think the Minister might also explain what expectation he has that there will be a demand at any time for the conversion of all our legal tender paper into sterling.

Deputy Mulcahy has asked me a question that I should like to answer. He wants to know where we would find any basis if we wiped out the liquid sound advances. I am sure the Currency Commission were anxious to use liquid sound advances as a basis. The power was given to them in the Currency Act, and, when that power was taken, I am sure that those men on the Currency Commission who were connected with the machinery beforehand thought it was going to be a very useful power, but, on investigation, they found they could not use it, that it was not practicable. I read out certain excerpts from the Banking Commission Report to show what their experience was. Deputy McGilligan charged me with taking these out of their context, but I started my quotations by calling the attention of the House to the various paragraphs. The House, I am sure, did not want me to read all these paragraphs, but I called their attention to them and said that probably every Deputy had read them already. There was no attempt on my part to mislead anybody. I read certain sections which I thought needed emphasis.

In reply to Deputy Mulcahy's question as to liquid sound advances, I call his attention to paragraph 244 of the Banking Commission Report. It says:—

"During the earlier period of its existence the Currency Commission had under consideration what steps, if any, it might usefully take towards utilising liquid sound advances as protection for consolidated bank notes. It eventually reached the conclusion that close analysis of bank loans from this particular standpoint, or any attempt to assign the interest in them to the commission by way of cover for consolidated bank notes, would not serve any useful purpose. In order, therefore, that the interests of note holders should be protected, as contemplated by the Currency Act, the commission required the several banks to make formal transfers to it of amounts of Government securities adequate to cover all outstanding consolidated bank notes. These securities are merely held in pledge by the Currency Commission; they remain in the beneficial ownership of the banks which continue to receive the interest accruing on them."

There, I say, is one suggestion, at any rate, which has already been put into operation by the Currency Commission, instead of the liquid sound advances, which the Banking Commission told us, and which the Currency Commission, in effect, told us, they found it impracticable to use.

I agree with Deputy McGilligan when he says that the Currency Commission is not the last word on these matters. The central bank, when it is set up, will not be the last word in wisdom, and none of us here is the last word in wisdom on these financial matters. Deputy Cosgrave said, and Deputy McGilligan repeated, that great changes have taken place. The whole question of credit and currency, as we know, is now in a state of flux. Changes are taking place everywhere.

Change the order of the day.

And there is no reason why we should not change. It is, however, in our nature to move slowly in these matters, and we should be wise to move slowly, but I see no reason why we should not find some way, if the use of the power in respect of liquid sound advances, is not found practicable. The men on the Banking Commission were as experienced as any men we are likely to get. The people who sat on this commission of inquiry into banking and currency were experienced people. They included three bankers, who signed all the recommendations in the majority report. They were Mr. M.J. Cooke, who, I think, is Chairman of the National Bank; Lord Glenavy, a Governor of the Bank of Ireland; and Mr. James M. Sweetman of the Royal Bank. They are experienced bankers who have as much knowledge of these matters, I suggest, as Deputy Cosgrave, Deputy McGilligan and Deputy Mulcahy, and they signed this, saying that they could not use the liquid sound advances. They are people, I suggest, who have experience and knowledge and on whose word on these matters certainly, I think, the gentlemen opposite would rely. However, the last word has not been said in regard to this matter. I am quite prepared to consider what I think was in Deputy Cosgrave's mind. As I have said already, I am personally sympathetic to the idea that I think is enshrined in Deputy Cosgrave's amendment, and I should like to find a way to meet it.

I have listened to this discussion with some unusual interest. As far as I understand it, the amending Act of 1930 required unanimity?

Of the board.

The board of the Currency Commission, yes. That will be taken over now and, instead of the personnel of the Currency Commission, you will have the personnel of the central bank?

Now, unanimity will be required also in that case, and that may be met by the amendment.

I should like to point out, however, that the power is not there in practice, if unanimity was required. Here is a matter on which there is a great deal of difference of opinion, and there must be one or two of these people who would hold the view that was held by the Currency Commission, according to what I gathered from the Minister, and by the majority of the Banking Commission. Therefore, the actual power of using our liquid sound securities as a protection to note issue is not there in practice at the moment.

The power is there with regard to liquid sound advances.

It is there, but it was not used.

That does not require a unanimous vote.

No, I quite agree, but the Minister is basing his case, with regard to the possibility of such action, on the experience of the people of the Currency Commission on the one hand, and of the people forming the Banking Commission on the other hand. Nobody will doubt their experience, but there is one thing that is not in their experience, and that is what has occurred since.

Since when?

In the last three or four years. What has happened in the last three or four years was not in their experience and, consequently, I suggest that their hands should not be unduly tied.

When we come to the particular amendments dealing with that matter, the Deputy will see that our idea is to loosen the thing as much as we reasonably can.

Will the Taoiseach give us an indication of how they will loosen it?

Yes. I was not here for the earlier portion of this debate, but since I came in it seems to me that the debate is being too much tied up with questions such as the experience of the members of the Currency Commission, and so on, and I think we ought to get back to first principles. It seems to me that in ordinary cases, in order to maintain the stability of the external value of the monetary unit, the internal currency must be backed with gold or something that is external to the country itself. Generally, the internal currency is linked up in some way with external currency. Now, inasmuch as it was found that, through our trade relations and so on, it was desirable to have the Irish pound interchangeable with the English pound, and since there was a question of getting an external backing for the currency, the most natural backing to look for, assuming that it was likely to be stable itself, was the backing of English sterling. That sterling, in a sense, was likely to remain fairly stable or fixed—I am talking now of normal times—and there was also the fact that you had a whole sterling group, so to speak, associated with it. Not merely had you the British currency, but you had a number of nations that joined in, with the result that you had a very large area which was going to aim at keeping, roughly, the value of the pound sterling fairly stable, taking it with regard to the amount of goods, and so on, that it could purchase.

Now, it has to be remembered that we are dealing with things where, actually, nothing is fixed. It is all relative. There is no one thing that is absolutely fixed. Gold, at one time, was thought to be fairly fixed, but that varied also, with regard to quantity and so on. There is nothing fixed and we have got to try to deal with things that are varying. There is nothing absolute, so to speak, in connection with these standards; they are all relative. Now, it was felt that in our circumstances the best backing we could have got for our currency was the backing of sterling.

It was suggested at one time, for instance, that it would have been better to have the dollar as a backing. That was taken into account by the Currency Commission, and, weighing the whole thing up, they came to the conclusion that the best backing for the currency was sterling, and they decided to go all out for that backing. There was no difficulty about it, because of our sterling holdings, and so on. It was a simple matter, and simplicity is a great advantage in these things. If you have a simple system of backing available, it is desirable to have that rather than some complicated system. So that the first thing I would say is that if there is good reason —we will be arguing these things out at a later stage—for having our pound, under normal conditions, linked with sterling, if it is desirable to have an external backing in order to maintain the external value of the monetary unit, and if sterling backing is readily available, it is simpler, in general, to have that, in ordinary circumstances, than to have complications with backing of different sorts.

Up to the present it has worked out in that particular way, and there seemed to be no need at all—on account of the banks' resources of sterling and so on—for having any other backing than sterling. If there had been danger, it was the business of the Currency Commission to try to foresee it, as far as they could, and, if there was something that seemed likely to be more settled or stable than sterling as a backing, to try to get portion of that. Now, in present circumstances it would be very hard to find any external currency that is absolutely stable, and internal securities are also likely to be, to a certain extent, unstable. So that, when this Bill leaves this House, I expect the position will be something like this: that the backing will be sterling, but that there will be power given to the Minister and to the board to get other securities instead, as a backing, whether it is for the whole or for any particular percentage.

Now, that one power, it seems to me, will cover the particular purpose that Deputy Cosgrave had in this amendment, and I do not think there is any reason why we should have this in two parts of the Bill. When we come to the part of the Bill which gives the power to the bank, by a majority vote, a two-thirds vote, or a unanimous vote, and with or without the concurrence of the two Houses of the Oireachtas, we will be able to come to a much nearer approach, one side to the other, than we are likely to do in this amendment, because I do not see any necessity for this particular amendment if we can get anything like agreement on the other proposition. In order to meet Deputy O'Sullivan's question, I should say, having listened to remarks that were made here on this matter during the debates, that I would be inclined to permit the board, if it were unanimous, with the concurrence of the Minister, to act without coming to the two Houses at all. I think it was Deputy Mulcahy or some other Deputy—I forget who it was at the moment—who mentioned the undesirability under certain circumstances of having a debate here which might give rise to public anxiety or something of that sort, and suggested that there would be sufficient confidence in a decision which had been arrived at unanimously by the board and by the Minister, without coming to the House at all. That would be one condition which it would be possible to combine with the other one, namely, the two-thirds majority, so as to provide for the case where you might have some people standing out very strongly against the opinion of two-thirds of the members of the board. It would permit, say, two-thirds of the members of the board to bring the matter to the Minister, who, if he assented to it, before the Order was effected, would have to come to the two Houses.

If I had an opportunity of consulting the Minister for Finance, I think that is the line of approach I would take on this, and that it would meet fairly Deputy Cosgrave's point of view except that he has put down a definite percentage. What I would suggest would be wider than that. I think you must leave the percentage to the body in whom responsibility for maintaining the integrity of the monetary unit is placed by this Bill. I want to say to Deputy O'Sullivan that what I have in mind is to try, by means of this other power, to enable either Irish securities or any other securities to be taken in. For instance, if there were some external securities which it was thought could be taken into the portfolio of the bank, and would help to maintain its external position, I think that would be better than having sterling alone. You would have there the possibility of getting in external assets or securities as well as native securities. Therefore, I think it should not be necessary to insist on this amendment.

I have an amendment down to cut out both Houses of the Oireachtas in relation to a unanimous decision of the board. Since the Minister for Finance has an amendment down to reduce the majority to six, I had a doubt about moving my amendment.

I would be prepared to meet the Deputy there.

I appreciate what the Taoiseach has said. I think the Government should bring its proposal forward in a definite way. I did think it would be undesirable, in certain circumstances, to have a discussion on a purely technical matter since it might be misrepresented. It might be suggested that the circumstances in which you could not get a unanimous decision from the board might be more ticklish than the circumstances in which you could get a unanimous decision. If the Government, having thought over the matter, did consider that they could make proposals like that, I would be prepared to accept them.

I think I can promise the House that the Minister for Finance will give very careful consideration to that line of approach.

I do not think it is necessary to refer to the earlier part of the statement made by the Minister for Finance or to the statement that I made on this amendment. The form in which the amendment appears may not be the last word in draftsmanship, but I thought the principle underlying it was fairly clear. Any doubt in that respect ought to have been resolved by the statement I made. The backing of our currency is on sterling assets. One of the advantages of sterling assets is that they can be easily realised. The market will absorb them readily. As regards any alternative suggestion in the matter of other securities, we are faced with the circumstances of the times here. There is no Irish security that I know of which is as readily realisable at short notice. If, for example, the Currency Commission or the central bank were to include national loan or securities belonging to local authorities, which are of a trustee character, and held these as backing for an issue of currency it must be said, I think, that they are not readily realisable. To say that is not to make any criticism of our money market. National loan is not easily saleable in large sums. Those who purchase it, as a rule, do so in order to keep it. There are not many applicants for huge blocks of it. In consequence a very large purchase of national loan will affect the market, and, alternatively, a very large sale of it, or of any other security—or a whole series of securities—will disturb the market and, consequently, upset the calculations of the central bank if it holds them in large quantities. In recommending the acceptance of what are called liquid sound advances, you have something that is more readily realisable. Those advances usually have a collateral, and it is there for sale, if required. That is a phase of this proposal which, so far, has not been dealt with by the Ministers, but there is time between now and the Report Stage to give consideration to it.

I said, when moving the amendment, that the fiduciary note issue might originally have been based by the banks on gold, and that the backing had altered with the passage of time. At the present moment in Northern Ireland there is something like £5,000,000 of fiduciary issue in operation there. Why we could not have the same backing here is a puzzle. From the banking point of view there is this objection in connection with those liquid sound advances that, under the Currency Act, the Currency Commission is entitled to get all the information it requires to make sure of the soundness of the securities to be considered before making an issue. There is a natural reluctance on the part of the banks to afford information regarding that. It does not appear to me to be a matter that it would be impossible to settle, even to the satisfaction of the banks. They have the confidence of their depositors and customers, and are not entitled to share that confidence with anybody else. One, then, is almost faced with the problem of weighing up whether, in a matter of this sort, one would not be entitled to waive the meticulous technicalities of the law and see if we could not alter the law, so that on an undertaking by the responsible officers of the banks, the directors and the auditors, that there were in existence liquid sound advances, which are always backed by collateral because they would not be liquid otherwise, at least 25 per cent. of our note issue could be backed in that way.

It is quite true, so far as this amendment is concerned, that if it were phrased properly and were accepted by the Minister there would be a loss to the central bank. It is not the duty of any person except the Minister to impose a tax. It is not beyond the bounds of possibility for the Minister, if he were to accept this, to impose such a commission or annual payment as would settle that question.

Therefore we are faced with the other problem which, to my mind, is one of singular moment. It has not been taken up very much by other Deputies in this discussion. But this Bill, if it were passed as presented to us, would make the provision of currency in this country very much more expensive than before the Bill was introduced. On account of the present highly competitive market in which we sell our goods, I consider that the cost of money must be affected by any extra costs placed upon our banking institutions. From the returns of the banks during the last few years I find there has been a remarkable drop in profits and, in addition, there has been a drop also in their allocations to reserve. For these reasons it appears to me, first of all, that it would be unfortunate that an Assembly of this kind, having regard to its history and tradition, should have a note issue solely backed by foreign securities, however realisable or saleable. We should not avoid, in a Bill of this sort, the responsibility of providing for the issue of 25 per cent. of legal tender notes backed by domestic assets. To my mind, that is a rather conservative figure. The original Currency Act had a provision for a 50-50 issue, 50 backed by foreign assets and 50 by domestic assets. It ought not to be left to the central bank to decide that issue. That is an issue that ought to be decided here, first, as to whether any proportion of our currency should be based upon domestic assets; and, secondly, what that proportion should be. That, to my mind, ought to be in the measure.

There goes with that the other question, which is of some moment, and that is whether we are not, by reason of this Bill, making it still more difficult to provide credit at a reasonable price in this country, and whether the impositions that arise largely out of this measure are not such as will take even a minor shake out of the banking institutions of the country. Either of these two things would, in my opinion, be unfortunate, and ought to be avoided at all costs. It so happens that by reason of the expansion in currency which is taking place elsewhere, we have got some of the overflow, and that at the present moment the deposits in the banks have risen, and the currency issue has risen until it is now at the highest point reached since the inauguration of a separate currency in this country. Legal tender notes on the 31st March amounted to over £18,000,000. If we add the £6,000,000 of the consolidated note issue, we have £24,000,000 in all. Now, as that rises, the revenue in respect of the requirements that sterling assets must be handed over and that £2 10s. per cent. must be paid on the consolidated note issue and the dead notes has also risen. Surely, in those circumstances, there is a greater reason why the cost of the currency here should be at a cheaper rate than it is. The legal tender note fund, which now stands at £18,000,000, stood at £6,800,000 in 1932. There is a sum of something like £12,000,000 extra upon which dividends or income are leviable. So far as I know, we have not increased the national income, our business is not expanding, employment is not rising and we are putting that extra cost on the national economy of the country. It must be getting to a point now that is certainly unreasonable in the circumstances, and I think that that is also a matter which the Government might reasonably take into account when considering the other question.

I think the Deputy was making a distinction between the security of liquid sound advances and the class of security which would possibly have been put forward by the unanimous decision of the commission.

I do not know whether securities of that sort could not have been put up under the old system. It seemed to me that it was sufficiently wide to allow any class of security to be put forward, and the security of domestic liquid sound advances might possibly have been taken. However, the Deputy may be right that that would not have been possible, that they would not have been included in the class that would have come under the section of the Currency Act which permitted the unanimous board to put it forward to the Minister and so on. But that matter can be examined into and, if it is desirable to make a class of security of this sort available—and it can be made available, I am sure—the Minister will consider it in connection with the other question.

Listening to the Deputy it seemed to me that there was also some question as to the cost of this to the banks. I daresay that legal tender notes could not be delivered to the banks on this basis at a lesser cost, so to speak, than under the other system; in other words, that whatever is the cost of these notes the same cost system, so to speak, would have to operate. As I understand it, the Currency Commission give legal tender notes against sterling assets or sterling securities at their present value—pound for pound of their present value. I take it that in the case of any other securities being substituted the value of these securities relative to sterling would be taken into account and a corresponding amount would be delivered over to the banks. However, the question of whether this particular class of security has to be specially mentioned can be examined by the Minister. I do not think, however, that you can give these notes on less onerous terms, as the Deputy might say, than the terms on which the rest of the legal tender issue would be delivered over. Those points can be taken into consideration by the Minister when he is examining the whole question. There is another point which was raised by the Deputy, and that is the question of the percentage —whether a definite percentage should be set out here by legislation.

"Not less than."

Yes; that "not less than" a definite percentage should be mentioned here by legislation. I think in the general circumstances it would be very much better not to put in any definite percentage, because, after all, we are handing over to this body the complete examination of the circumstances, and it is their duty to keep themselves aware of those circumstances from day to day. They are to be the technical and expert advisers to the Minister for Finance as the responsible Minister if there is any particular action which ought to be taken in the national interest. If their examination of a changing and possibly critical situation leads them to think that other measures should be taken, or that they require greater freedom than they have to substitute other backing than sterling, they will come along and put their proposals before the Minister. I do not think that we are trying ourselves up in any way. Once you have inserted the clause to which I have referred—it will come up for discussion later in the final form put forward by the Minister for Finance—I think the Minister will be in a position to deal with all the points raised on this particular amendment.

My own feeling at the moment is that, assuming that the body we are setting up are a capable body, that they will do their duty in looking after the national interests, and that we make it possible for them to have other backing—not limiting the extent— than sterling, we are leaving the door open for action in accordance with the best expert opinion we can get. I think it would be better that we here in the House should not decide a particular percentage or anything in that way. Let us at least make sure that, before a definite proposal comes before the House, it will be supported by the considered opinion of the experts we are setting up.

May I ask the Taoiseach one question? Is it possible, while maintaining convertibility and also parity with sterling, to have part of our own note issue backed by Irish securities?

We cannot hear what the Deputy is saying.

The Deputy has asked whether, if we had portion of our legal tender backed by other than sterling assets, the inter-convertibility of Irish and sterling assets would be interfered with. In my opinion it would not. I think that matter was raised by Deputy Mulcahy when he asked why we should have, £ for £, 100 per cent. backing, when there is no attempt to convert the whole at any particular time. I am not speaking as one who is certain, but my recollection of something I read of what takes place in other countries is that there is not in other countries complete and absolute backing; I think it is 60 per cent. or 70 per cent. in some of the countries, and not the whole 100 per cent. Therefore, it would be quite possible, I think, to give a percentage even as high as that which Deputy Cosgrave has suggested, without in the slightest endangering the convertibility. I am assuming all the time, of course, that the notes which would be given in exchange or against the securities other than sterling securities would be valued on the sterling value of those securities at the time.

That is the point.

They would be valued, but they need not be. Their value would be taken in relation to what they would secure in sterling, so that if you were hypothetically to convert them into sterling they would give you the assets to meet the note issue.

Does not that presuppose that Deputy Cosgrave is right, and that we have had, in fact, a great inferiority complex in relation to our own assets? Could we not reduce that backing while still maintaining the freedom of movement between the two countries? Does not the present position show a rather unnecessary conservatism on our part?

I do not think there has been unnecessary conservatism in this particular matter. I remember the time when it was suggested very strongly that the Currency Commission should take foreign securities as a sort of safeguard rather than sterling.

Can you not compare the position at the time the Banking Commission issued that proposal with what has happened in the past couple of years?

If the Deputy will believe me, I regard the work done by the Banking Commission as an extremely valuable piece of work. I just want to explain my position with regard to it. It is the opinion of the experts, showing what I would regard as purely financial consequences. They are purely financial, just as I should like to be told what would be the financial consequences of my entering into some piece of business, such as building a house. I should like to know what would be the financial consequences, but, once I was told what the financial consequences would be, it would be my business to say whether or not I would do the thing I had proposed to do. Where I differ with the report of the commission is that in certain cases they suggest that work should not have been done or should not be done because of the financial consequences, but there are numbers of things that you will do even though you will see what the financial consequences will be. For instance, if it were suggested that I should go into hospital, and if it was going to cost me a considerable sum of money, I would ask myself whether I should go or not. I would say "As a result of my going into hospital, whatever sum of money I possess will be reduced by a certain amount, but I have to go into hospital anyhow." In the same way I might take some other action which I regarded as of sufficient advantage to warrant the cost, once I knew the cost. I think it is a very good thing that we should know the cost. I do not mind in the slightest knowing what has been the cost of housing, or knowing what has been the cost of social services of various kinds.

It is a good thing that we should know the cost of them. But, once we know the cost of them, it is another thing to say that, because they cost so much, we are not going to have them at all. I am altogether in favour of pursuing the line we have been pursuing, believing that it was in the public interest, and any financial consequences which were pointed out in the Banking Commission Report would not shake me in the slightest. Deputy Hickey asked me a question about what had happened in the last two years. I know what has happened, and the Banking Commission Report is not our Bible.

I am not saying it is.

There has been a suggestion all the time that the Government has taken the Banking Commission Report, adopted all its conclusions and everything that is in it, and that somehow or other it is colouring all our policy. I want to assure the Deputy that that is not so. I think their investigation has been extremely valuable as having been carried out by a body of people who were capable of carrying out that particular investigation. They have set down their findings there in what I regard as a monumental piece of work, even though I do not agree with a lot of it, and anyway I think it is unfortunate, from the point of view of the credit attached to it by the public, that it is written in such a way as to suggest that they were doing other than examining the financial consequences of policy.

I think that that is a great pity. If it had been altered somewhat to indicate quite clearly what was being done, the public would have approached the results of that investigation with a far clearer mind and far more sympathetically than they did. Unfortunately, the report seems to be, in places, an attack upon policies, though I do not think that that was the real position. It seems to have been assumed that what they were set up to do was to examine policies. It is for the Government and Parliament to follow their own policy and it was for the commission to say that, as a result of their examination, there were certain consequences to a particular line of policy.

If they were issuing that report to-day, having regard to the changed circumstances, do you think that they would give similar opinions?

I think that the report would be largely the same. It was based on their estimate of what happened in the past. I do not think that they attempted to prophesy very much; they would be much too wise to attempt to do that. In so far as there was any suggestion as to what might happen in the future, there might be a difference now, but I do not think that there is very much prophecy in the report. If they were reporting now, I do not think that the report would differ very largely from that of 1938.

That is five years ago.

I am talking of the report as a whole. If the Deputy reads a phrase or a section from the report and asks me if they would report in the same strain to-day, I shall answer the specific question.

This Bill was framed on the Majority Report.

While we had the report before us in framing this Bill, it would have been practically the same Bill if we had brought it in earlier than the issue of the report. I gave the history of the foundation of the commission some time ago. I said that, shortly after we came into office, it was proposed to set up a central bank. It was then thought by the Minister to be wise, before doing so, to have an investigation into that and other matters. The examination was a very wide and prolonged one, and it held us up for a considerable period. What we have done is to carry out our original ideas. I could show the Deputy suggestions for a central bank going back before our time.

I am not concerned with that, but with what has taken place within the past 12 months.

I do not see what the Deputy is aiming at, and I do not know what he wants me to say. What I do say is that this Bill is intended as a measure for normal times. I said that very early in the debates. In extraordinary times, if extraordinary action has to be taken, it will have to be taken directly and immediately in connection with any exceptional occurrence. What we want to do in this Bill is to give reasonable power to those who will be watching our monetary system to come quickly, with knowledge, to the Minister and tell him that it is necessary to take certain steps. We ought to make it possible for any of these necessary steps to be taken. I think that that is provided for in the Bill. If, over and above the powers given in the Bill, extraordinary powers are required to meet any emergency, the line of approach to the Minister is very easy. Somebody mentioned the long time it would take to put through an Act. We have passed legislation of an emergency character very quickly.

We know that, to our cost.

If there were an emergency position requiring legislation, I have no doubt that reasonable people, facing that emergency, would act quickly. If the Houses of this Parliament were summoned to deal with an emergency monetary position, we would very quickly get down and deal with it.

I agree, but there is no reason why we should not do something other than wait for that crisis.

One of the reasons why the Minister is anxious, and I am anxious to get this Bill through is that we want to put this expert body at work as a watching body. They will watch the situation from day to day and they will be able to come along at any moment with considered proposals to deal with any situation that may arise. There is no use in our commencing now to make provision for imaginary things—the different things that each one of us may imagine.

They are not so imaginary at all.

The Deputy may have certain views as to what is likely to happen and I may have different views. These views are merely speculative and we could spend weeks and weeks making provision for the things which different persons imagined might happen. The sensible thing to do is to establish this body and say to them: "You know the situation better than anybody else. Watch it. You have immediate access to the Minister, who has machinery at his disposal to get Parliament to consider any proposals you may think necessary to meet any contingencies that may arise." That is a very sound position in which to be.

Coming back to the section, I think I have indicated to Deputy Mulcahy, in regard to the proposal he made, the extent to which the Minister might be able to go in designing an amendment to get as close to his point of view as possible. As to Deputy Cosgrave's proposal, the Minister will have the question examined as to whether it is possible to classify securities based on these liquid sound advances or include them in the powers that will be given to the board, either by unanimous decision or by two-thirds majority, to bring matters to the Minister for consideration.

In reply to Deputy Childers, the Taoiseach said that it was reasonable that part of our currency should be backed by domestic assets while the remainder was backed by sterling. Then he went on to say that the domestic assets would be valued in terms of sterling.

You must have some standard of value.

I do not like to let that remark pass without challenging it. I do not see why sterling must come into it at all.

That was on the question of convertibility.

We had £7,000,000 in legal tender notes in 1932, as Deputy Cosgrave indicated, and £5,000,000 in consolidated notes. The £7,000,000 issue was backed by sterling and the consolidated issue was backed by our own assets.

The value of these would have to be estimated in our pounds which would be on parity with the other pounds.

How does sterling come in? I do not see why we have to bring the idea of sterling into the whole of our backing.

To get external stability, you must have external backing.

We want money for more than external purposes, and it is absurd to think that we should be in a position in which the whole of our note issue must be backed by sterling. I move to report progress.

Progress reported. Committee to sit again.
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