I move amendment No. 57:
In page 25, before Section 46, but in part VI, to insert a new section as follows:—
(1) If and whenever the board shall recommend to the Minister that it is expedient to require every licensed banker to make and maintain with the bank, such deposits as shall be prescribed, and to settle all or a particular class or particular classes of clearances by cheques, drawn either on the bank, or on any agent appointed for the purpose by the bank, the Minister may make an Order declaring in accordance with such request the particular deposits to be made and maintained with the bank, and the particular class or classes of clearances to be cleared by cheques drawn on the bank or on an agent, appointed for the purpose by the bank.
(2) If and whenever the board shall recommend to the Minister, that it is expedient to require every licensed banker to deposit with the bank all cheques, bills, notes or other negotiable instruments payable outside the State and lodged for clearance at an office in the State, the Minister may, in accordance with such request, make an Order accordingly.
(3) The Minister may, at any time, upon the request of the board, by order, rescind, vary or amend in accordance with such request an Order made by him under this section.
(4) No Order made under this section, upon a request of the board, which is not unanimous shall be of any force or effect unless or until it has been laid before each House of the Oireachtas, and has been approved by resolution of each such House.
(5) Every Order made under this section on a unanimous request of the board shall be laid before each House of the Oireachtas as soon as may be after it is made, and if a resolution annulling such Order is passed by either such House within the next subsequent 21 days on which such House has sat after such Order is laid before it, such Order shall be annulled accordingly, but without prejudice to the validity of anything previously done under such Order.
(6) It shall be the duty of every licensed banker to comply with any Order made under this section and if any licensed banker fails (whether by act or omission) so to do, he shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding £100 for every day during which such failure is continued.
(7) If and whenever the deposits made by a licensed banker with the bank under this section, exceed the amount it is necessary for the bank to maintain in order to settle the clearances of such licensed banker, the bank shall pay to the licensed banker on such proportion of such deposits as are equivalent to this excess interest at a rate or rates equal to the rate or rates the bank receives for its corresponding investments.
The purpose of the amendment is somewhat exploratory, but if it were adopted, the deposits would cover any deposits required for international clearances or domestic clearances, or safeguard certain assets that are held in respect of banks' liabilities within the State. Under the Minister's amendment No. 56, any deposits that would be required would be for the purpose of settling clearances. Under sub-section (1) of my amendment, these deposits would not be restricted by the necessity for using them for mere clearances. But, in considering this amendment and some other matters in connection with it, certain phenomena came to my notice that I think require a certain amount of attention and a certain amount of safeguarding. If we look at the statistical returns issued by the Currency Commission for April last, we find the domestic liabilities of the banks on the 31st March, 1942, were £165,790,000. These were the liabilities within the State. As against that, they held assets within the State that only amounted to £77,854,000. So that there was a difference of £87,936,000 between the assets and the liabilities of the banks within the State. But assets were held outside the State. That was the position at the end of March, 1942.
If we look at the position from that point of view at the end of March, 1939, we find that as against £34,726,000 of liabilities within the State, the banks held £71,234,000 of assets within the State, and held outside the State, in respect of liabilities within the State, a sum of £63,492,000. We have the position, therefore, that between March, 1939, and March, 1942, while the liabilities of Irish banks within the State rose by £31,064,000, the assets they held within the State as against these liabilities rose only by £6,619,000. So that there is a sum of £24,445,000, or about £24,500,000, in liabilities within the State covered only by assets held outside the State. That is a very considerable increase in the holding of assets outside the State against domestic liabilities, and I suggest that there is a possible serious danger in that. Of that £87,936,000 held outside the State against liabilities inside the State, a fairly large amount is no doubt held by four banks that are not institutions belonging to this State; that is, they are institutions that are regarded from the point of view of taxation and everything else in Great Britain as being British institutions. In the situation that has developed and is continuing to develop there, we do not know what type of special taxation or capital levy might be introduced in Great Britain that might operate in some way or another against those assets as long as they are held in Great Britain by non-Eire institutions.
In the first part of my amendment I say:—
If and whenever the board shall recommend to the Minister that it is expedient to require every licensed banker to make and maintain with the bank, such deposits as shall be prescribed...
When, in the development of the amendment, I free that from any condition that these deposits will be made in respect of clearances, I mean it to cover a situation in which the board might consider that, in order to preserve to a greater extent assets that our banks had lying outside the country in respect of liabilities within the country, the banks might be required to transfer these assets to the central bank and, even though they were held in Great Britain, that they would be held for the banks by the central bank as an Irish institution and therefore would be free from running any of the risks that they might run in the present extraordinary circumstances by being held by institutions not belonging to this country.
A very large amount of money is held abroad by Irish banks in cash or at short call. I should like to know why it is necessary to hold so much cash abroad. I take it that cash is held abroad for the purpose of keeping one-tenth against liabilities that are liabilities to the banks abroad and may be held also in connection with our trade balance and whatever clearances may be required in connection with them. It appears to me that there is some connection between the amount of money that is held in cash or on short call outside the country and our trade balances. If we look at the balances of trade from 1933 to 1937, we find that there was what we call an adverse trade balance in 1933 of £16,768,000, in 1934 £21,927,000 and, over the years 1933 to 1937 inclusive, there was an average adverse trade balance of £18,539,000. If we take the cash held abroad during that time, there was an average total of £19,433,000 held by the Irish banks in cash and at short call. Some of that money was required, to the extent of one-tenth, to cover liabilities abroad.
Let us take 1933 as an example. The adverse trade balance in that year was £16,768,000. The total amount of cash held abroad was £20,641,000. The external liabilities were £49,200,000. Taking it that £4,920,000 of that cash was held against external liabilities, we had, in some kind of relation to our trade balances, cash held abroad to the extent of £15,520,000. In the same way, on an average against an adverse trade balance of £19,503,000 for the six years, there was cash held abroad, when allowance was made for the one-tenth, to the extent of £14,686,000. Where your adverse trade balance was £18,500,000 you had £14,500,000 held by the banks in cash.
During the last two years a very considerable change has taken place. In 1940, when the adverse trade balance was £13,816,000, the excess in cash and money at short call over what was required to cover external liabilities was £22,230,000. During 1941, when we ceased to have an adverse trade balance, and when we exported £2,298,000 worth more than we imported, the cash held abroad, again making allowance to cover external liabilities by one-tenth, was £28,425,000. While the trade balance has changed from an adverse of £16,522,000 in 1939 to a favourable trade balance of £2,500,000 in 1941, the amount of money held abroad over what was required to cover liabilities rose from £16,000,000 to £28,000,000, or by £12,000,000.
It seems to me that an examination of that position would show that there was a very considerable amount of money lying abroad earning nothing. It could be utilised, on the credit of the central bank, by deposits being made with the central bank, to earn money. When we see a situation like that developing, it does seem to require some review here in order to ascertain why such a large amount of money would be lying abroad, perhaps lying dangerously abroad, and earning no money, while we were here paying very high rates for any money we required.
Under the first part of the amendment, it does seem an examination is required as to why deposits of that kind should not be made, in the first place, to safeguard those assets that are being held abroad against liabilities that are entirely domestic, and, in the second place, we should like to know why our financial resources are wasted by the holding of such huge amounts in the shape of cash and money at short call abroad, earning nothing, particularly when our trading position, which might be expected to require money abroad for clearance purposes, has been so radically changed, when we compare it with what it was before the emergency started.
I should like to know whether any estimate has been made of the amount of money that would be saved by bringing domestic clearances from London here; and, again, what might be saved by bringing the international clearances from London here. Deputy Cosgrave has asked whether this is going to cost the banks anything more. I should like to know that, too, and how the central bank is going to pay itself for the amount of work it will do in that connection. The amendment provides that where decisions along these important lines are taken, by a unanimous decision of the board, they may be put into operation by an Order of the Minister, but they may be challenged by a vote here. Where the Minister considers it advisable to take decisions on these lines, and where he has not the unanimous recommendation of the board, they would have to come before the Dáil for positive approval.
Under this amendment, if it is put into operation, where deposits are made with the bank over and above what is required for clearance purposes, the banks making the deposits would get, on the amount of money they have deposited, interest at the same rates or some equivalent rates as the bank was earning on these deposits —they would earn money on the proportion of the amount of their deposits that was not required for clearance purposes. Again, I say the idea is in the first place to safeguard money that is held abroad as against liabilities that are internal ones; in the second place, to get some kind of machinery going that would show how much money was being unnecessarily held abroad as cash and would see that it was put to use by the banks or would require deposits to be made so that it could be made productive through the operations of the central bank.