Dáil Éireann debate -
Thursday, 24 Feb 1966

Vol. 221 No. 3

National Bank Transfer Bill, 1966: Fifth Stage (Resumed).

Question again proposed: "That the Bill do now pass."

Mr. P. Hogan

(South Tipperary): I am still not satisfied, despite what the Minister has told us, that it was essential to bring this matter to the House for legislation and that this matter could not be dealt with under ordinary common law. There has been, from the beginning, a great scarcity of information. Indeed, it was obvious that the Minister had been rather incompletely briefed on the subject and his main purpose was to get this enabling Act through the House. Naturally, when one finds a situation like that, and when one hears rumblings outside about dissatisfied shareholders, one is inclined to make full inquiries into the matter. For instance, the Minister has given us figures as regards the Bank of Ireland and their offer to the National Bank section here in this country but we have had no information as to what has been offered by the National Commercial Bank for the part of the National Bank in England and Wales. Apparently the bank is being divided into two and one half is being tied up in England and Wales. We have no information about what offer has been made there by the National Bank of Scotland.

Deputy Sweetman stated that this Bill had been introduced to save money to the bank and to the customers, to facilitate a cheap merger, that, if this Bill had not been introduced, it would be a very expensive merger. It is the first time I have ever heard of a Minister for Finance throwing away money and when one finds a Minister for Finance doing that, one begins to wonder. Deputy Sweetman has also said that the House is not passing judgement on the merits or demerits of the transaction as far as the shareholders are concerned. I cannot but feel that the bringing in of this measure for the approval of the House prior to consideration of the transfer by the respective shareholders, and particularly by the shareholders of the National Bank, may be calculated to influence the minds of some shareholders.

Deputy Tully had adverted to a point which, apparently, has disturbed the shareholders from the beginning, that is, the feeling that they are not getting full value for their shares. He has mentioned the real value of the bank premises as against the value quoted in the balance sheets published to the shareholders. The Minister is getting a half interest in this venture. He is, of course, expected to get £100,000 in stamp duty on the transaction. It is also stated—the Minister can correct my figure if he likes—that he will get an extra £100,000 in income tax when the merger is brought about.

I would like the Minister to tell me if there will be any capital inflow. The Minister is desperately in need of capital at the moment. I would not blame him for looking over his shoulder to get money. If 75 per cent of the shares are in the hands of Irish citizens, and if the interest in that professional ownership is in the hands of citizens here in the Twenty-Six Counties, may we not expect a net capital inflow here? I am putting this question to the Minister. If public capital inflow is expected as a result of this transaction, how much does the Minister expect on that basis?

The Minister has not told us what the directorship position is. I would certainly expect that he was approached by the Bank of Ireland and by the National Bank to introduce this measure here to facilitate the merger. I presume he was approached by the directors of the Bank of Ireland and by the directors of the National Bank. Will this merger create new directorships? Will any improved financial circumstances arise to any of those directors? I am putting the old Roman question, cui bono? When we are asked to take the rather unprecedented step of giving the Minister an enabling Bill to secure a commercial merger, we are entitled to know those facts.

I asked the Minister last Tuesday if he was aware of any situation where a commercial merger had taken place at any time in any country where it was deemed expedient or necessary to go, before the measure took place, to the national parliament to ask them to introduce and pass an enabling Bill. He said he was not. Surely some situation like this must have occurred some time, somewhere in the history of the world. I presume, if it did, or wherever it occurred, it was dealt with under the ordinary company laws obtaining in those countries. I am not a lawyer and I am, naturally, not conversant with the niceties of legislation but I am still unconvinced that this matter could not and should not have been dealt with under the ordinary company Acts. Certainly, it would have looked much better had we allowed the shareholders of the National Bank and the shareholders of the Bank of Ireland to make their own horse-deal—call it what you will—in their own way and then, having made their decision one way or the other, let the Minister come forward with his enabling Bill, if it was deemed necessary and expedient to do so.

Mr. Donegan

I do not intend to intervene for very long in this debate, except to say that I think the situation falls as between Deputy Sweetman's assertion that if there were further take-overs banking would become a monopoly in the hands of a few, while, at the same time, there is the argument that the bigger the bank the better the balance. What I mean by balance is that, for instance, a certain section of a bank's customers needs a greater amount of accommodation, but as long as it is a big bank covering a wide spectrum of the economy, then the likelihood is that there will be another sector of customers of that bank who will not require this extra accommodation during that same period. In other words, the scales would be balanced, as they would not be balanced in a small bank which, of necessity, must have a smaller involvement in the entire economy within the country. I think, therefore, that perhaps what Deputy Sweetman has said, or even to go as far as Deputy Hogan's field, is clinically accurate, in as much as this take-over is probably a good thing for the customers of banks in this country, but that further take-overs would be a bad thing. From that point of view, then, I think we can go forward in the realisation that today, or some other day, the shareholders—who are really the proprietors of the National Bank—should make their decision. This is really a matter which should be decided by them in the light of their opinion of what the deal is. I do not think this House has to be concerned with the Bill; it merely has to be concerned with the general effect on banking policy and banking itself.

Deputy Sweetman's line is probably correct in as much as mergers can be good, and this one could be a good thing, but we do not want a lot more mergers which would create a monopoly.

Sir Anthony Esmonde

I am still of the same opinion as Deputy Hogan that we have not really had any real explanation as to why this deal has taken place. The only thing one can read from the documents is that the National Bank, finding itself with a considerable call on its finances for development of the economy here, was unable to meet its requirements, or that it was a source of embarrassment to meet them. For that reason they wanted to get rid of the Irish section of the bank so that they would not have to continue to supply the credit which the Government were unable to get elsewhere. If one reads into Mr. Acton's statement, Mr. Acton being the President, sitting in London, of the National Bank, that is the only thing one can extract from that—that that is the sole reason why this merger is brought about.

It seems to me, then, that the Bank of Ireland are getting quite a good deal. The statement of the Governor of the Bank of Ireland in Dublin today—which was reported on the 1.30 p.m. news, which the Minister may or may not have heard—that, domestic savings were insufficient to meet the requirements of the expansion of the economy in this country supplies the answer. He said, as a result of that, the drain was so heavy on the banks that they were unable to lend the requisite amount for private enterprise.

Now, we have not had from the Minister any real reason as to why this transfer has taken place. He has told us, in effect, that this merger has taken place, or this Bill has been introduced here, because he has been asked by the Bank of Ireland to introduce it. I am not quite sure if he said the National Bank asked him as well, but that is the only explanation given for these two documents. The only other thing we have is the Chairman's statement which I read into as being the reason for the English branches advising this bank to get out because they do not want to continue lending to the economy here, the drain being too great on their resources. I do not think there is any other reason.

The National Bank has a record, going back over hundreds of years, as being one of the most solvent banks and one of the biggest employers in this country. In this Bill, we are virtually winding up that bank because it will become a subsidiary, with no policy of its own, of the Bank of Ireland. We notice that the directorships are being ladled out so that one of the sitting directors of the present National Bank will be a director of the remaining National Bank in London, the National Bank of Ireland to be, and a director of the Bank of Ireland as well. So it is, to my mind, the closing down of the National Bank. I think the Minister owes it to this House and to the people to tell them why this is happening. There must be a certain amount of public concern. I do not know what is happening in London today. I do not know if the directors have succeeded in getting the vote they hoped to get. I have seen several of these documents sent out to the shareholders and, in them, it was suggested that they appoint one or two of the directors to act as proxy for them. Very likely there are a lot of small investors who have replied putting themselves in the position that the directors will act as proxy for them and this will be carried.

I tried to raise this on the Report Stage in an endeavour to get some information from the Minister but I understood he would tell us, on the Report Stage, the real reason for this merger. I think it is up to him to tell the House and the country. I think that anybody who reads into the statement of the Governor of the Bank of Ireland this morning will get the answer there, and it is that the banks are being drained for public expansion, for the sake of the economy, and there is not a shilling left in the kitty to carry on with private enterprise. It is for that reason that this old bank with its historic background is bound practically to close down and hand over its cross-Channel assets to the old company to retain. We have no idea what the dealings are with the Bank of Scotland.

Mr. Norton

When the Bill was introduced, I said I was not satisfied that the shareholders were being treated fairly. I must be definite also in saying that I have no shares in the National Bank and no personal interest beyond the desire to see that justice is done to the shareholders. People who own shares in the National Bank are not capitalists with silk hats who smoke cigars. They are middle income people who own 200 or 300 shares each and they are not able to defend themselves against the type of manoeuvres the directors of both banks seem to have got up to. I agree with Deputy Hogan that it would have been far wiser for the Minister to have left this to sort itself out and bring in the Bill later, if necessary. If today's measure in London is unsuccessful, it may transpire that this House has been wasting considerable time in dealing with this matter. It seems to me that the presentation of this Bill is part of the psychological warfare being waged on the shareholders and despite the Minister's Pontius Pilate attitude——

Mr. J. Lynch

This debate is becoming bitter.

Mr. Norton

It is not becoming bitter. I like to approach matters by being fair to all sides. The Minister in this case has lent himself to the people on whom he is depending for money, the Bank of Ireland. He is not entirely a free agent. When one is in the hands of a moneylender——

Mr. J. Lynch

As I suggested to Deputy Esmonde earlier, there ought to be a limit to the imaginative drawings——

Mr. Norton

I do not expect the Minister to give us a lead in imagination because, as far as I can see, it is fairly limited as far as the Department of Finance are concerned. I say this without reflecting on the officials. The Minister should not resent criticism. I am offering only fair criticism. I do not think the Minister should lend himself to his moneylenders in this matter. I was not here last night so I did not hear the Minister's answer to the question about the valuation of premises and whether the stamp duty would be paid on the old or new valuation of the buildings. The Official Report is not yet printed and I do not know what answer the Minister gave. I hope the stamp duty will be paid on the new valuation and that the Bank of Ireland, who have been able to cod the shareholders as to the value of their property, will not be able to cod the taxpayer by getting away with the reduced stamp duty. I suggest that they should pay the full economic stamp duty. One other point I should like to mention is that a considerable number of National Bank shares are held by the National Bank and Bank of Ireland nominee companies. Some of these are security for loans, some are not. I understand that the bank concerned will not ask the real owner of these shares how they would like to vote, that they will automatically vote for the take-over.

Mr. Sweetman

I think the contrary is the case. I know a case in which a letter was written asking what did the beneficial owner wish to do.

Mr. Norton

Two people have told me they have not been asked. If Deputy Sweetman tells me otherwise, I am glad to hear it.

Mr. Sweetman

I know of only one case.

Mr. Norton

If they are not allowed freedom in this matter it is wrong. I do not think the Minister has shown that he is sufficiently interested in this matter to find out everything that is going on, all the implications. I should like to make one last point on the value of the shares. In previous days there was a tendency for banks to get into difficulties, and if shareholders panicked they rushed in and asked for their money back. In order to relieve the banks of such a situation occurring, banks were allowed not to declare the real profits. This might be justifiable from a certain viewpoint, but when the bank is being taken over, the real owners of the bank, the shareholders, should be told the truth. The shareholders should be told clearly: "This is what the bank is worth; this is what you will get." The directors are merely the servants of the people who own the bank.

In the case of the National Bank, out of six million shares in circulation, a mere 35,000 are held by directors. Therefore, the directors are servants of the shareholders in the most definite meaning of the word. They have practically no stake in the bank, but they will be influenced by the fact that, not only will they retain their directorships, but the bulk of them will end up with two directorships. This is wrong. I think the Minister has lent himself to his moneylenders.

Mr. Ryan

If there is any reason for legislation to deal with a problem of this kind it is that, in theory at any rate, the people are apparently regarded as having a right to be consulted before there is a change in the Irish banking system. While we have been consulted in theory, we have not been given adequate information on which to make a decision. The process of having the Bill passed through the House is no more than an empty formula. It makes a farce of the principle supposed to be at stake—the principle of consulting the people who, after all, are the banks of this country. It is the people's sweat, labour, money and other property that constitute the Irish banking system which, after all, is but the repository of our wealth.

Even at this Fifth Stage we have not been given the information which even educated people need to make an accurate assessment of the position involved here. If we decide to allow this Bill to go through we are accepting the proposals in good faith. However, we must query certain matters. We must query accounts which show that the value of the premises is a mere £1,800,000 when we know that the property includes headquarters in Trafalgar Square in London and in College Green in Dublin, with branches throughout Britain and this country. It is quite clear on the face of it, without any detail, that the premises are grossly under-valued, that the figure represents no more than one-fifth of the actual value of the property. This is not an attack on the bank. It is a criticism of all banking accounts. If the situation can be improved by criticism, then I suggest we should offer criticism. The present situation is un-satisfactory and as long as we allow it to continue we are putting our banks in jeopardy in their reputation and in their standing.

The Minister said of Deputy Esmonde and Deputy Norton that they were drawing on their imagination. I do not think they are. They simply posed problems to the Minister and to the House and they are to be complimented on doing so. There is a paucity of information. There is no adequate justification for this move, and in the absence of such, Deputies have an obligation to try to seek out the true reasons. The reasons advanced by Deputy Esmonde are cogent and compelling and it will take a great deal of factual argument to prove that he was not justified in his assertions. If a proposal of this kind came at a time of plenitude in money and credit, one would have less worry than at present, when we know the whole banking system has been subjected for the past year or 18 months to the greatest pressure ever brought to bear on it by an Irish Government. The effect has been to dry up the supply of credit and finance to the private sector. It is having untold harmful effects.

It seems extraordinary, and must cause a certain amount of uneasiness in the public mind, to see other international banking concerns, such as the Bank of Nova Scotia, the First National City Bank of New York, the Lombard Bank and several other international concerns, moving in here and at the same time seeing a traditional Irish bank, founded by no less a person than Daniel O'Connell, moving out. I know the Minister's argument will be that in fact the National Bank has in the process of time become a British bank and not an Irish bank. Fundamentally, however, its origins and connections are Irish. It creates a certain amount of public uneasiness to see long-established institutions, for inadequate reasons apparently, being brought to an end and other agencies of which we know very little coming into our economic and financial set-up.

Having said all these things, I reiterate that if after all this we got more explanatory information, even at this stage, about this transaction, and in the long-term about all banking transactions, we would be better off. But unless we get it now, and get it in future in relation to all bank transactions, we should put an end to this farcical procedure of pretending to consult the people through their representatives in Oireachtas Éireann, when in fact we are doing no more than asking public representatives to put a rubber stamp on a document they do not understand. That is not a satisfactory situation. It is something we want to put an end to once and for all.

Mr. J. Lynch

From the last few speeches I have heard, one would think it is by the enactment of this legislation that we are making possible the sale of the shares of the National Bank to the Bank of Ireland and to the National Commercial Bank of Scotland. As Deputy Sweetman pointed out, this could be done without any legislation. The purpose of this legislation is to facilitate the transfer of accounts, securities and bailments and to obviate the payment of stamp duty that should not arise on the transfer of these shares. We still have the right of ownership and free disposal of property in this country. Companies are set up with certain rights and certain properties, and they have the right to hold or dispose of those properties as they wish. The ordinary company elects a board of directors. These directors act for and on behalf of the shareholders. These directors have rights under the Companies' Acts, under common law and the natural law, and under the Constitution, to acquire or dispose of property as they wish, subject to the rights of their shareholders by a certain majority vote to acquiesce to the sale or acquisition of property as they see fit. The company could have decided to sell the shares, and could have gone through all the rigmarole of transferring accounts, returning securities, returning bailments and re-registering deeds in the Land Registry. All that could have been done without let or hindrance by this House. All I am asking the House is to pass enabling legislation to avoid the complexities of operations that would have to be gone through otherwise, and to avoid the payment of stamp duty that ought not in fairness arise.

As far as the suggestion that we are now abolishing a traditional old Irish bank is concerned, we are purchasing from Britain what used to be an old Irish bank. As I said in my opening statement, the bank was founded by Daniel O'Connell in 1835, but within 25 years it had ceased to be an Irish bank, was registered in London and has operated since through the London owners. In later years a subsidiary was set up here with nominal share capital, the National Bank (Ireland) Limited. It had Irish directors with the association of some English directors, but as far as overall policy was concerned, they were subject to the British board. It is nonsense to suggest we are abolishing something traditional. On the contrary, we are converting something not Irish into Irish ownership.

Mr. Norton

On a point of accuracy, I understand that 62 per cent of the shares were Irish-held. So, even previously, it was Irish-owned by English directors.

Mr. J. Lynch

I cannot comment on that. It was an English company.

Mr. Norton

The Minister referred to ownership. The ownership was Irish.

Mr. J. Lynch

It was an English company; it will now become Irish.

Mr. Norton

The directors were English, but it was Irish-owned nevertheless.

Mr. J. Lynch

Deputy Hogan suggested he got no information as to what was the sum involved for the National Bank of Scotland. I said quite specifically in my opening statement that the National Bank of Scotland were paying £4¾ million for the share capital of the reconstituted National Bank in the United Kingdom. What is the point of coming in here and blaming me for not giving information if it is there for the Deputy and he does not read it?

Sir Anthony Esmonde

Does that include all the premises and everything?

Mr. J. Lynch

Yes, it is inclusive. Deputy Ryan complained about lack of information in regard to the valuation of premises. We went into that very closely the other evening. While there appears in the balance sheet a sum of £1.9 million as the value of the premises, in fact an up-to-date valuation has been made of the premises both here and in the United Kingdom. The full value of the premises in Ireland at current prices is about £3½ million. This is included in the purchase price and is being assessed for the purpose of stamp duty on the transfer of the real property.

Mr. James Tully

The Minister is satisfied that is a realistic valuation?

Mr. J. Lynch

I am given to understand it is.

Mr. James Tully

For the two head offices and 130 branch offices in this country?

Mr. J. Lynch

I understand it is a realistic valuation. I am not a valuer. I am not familiar with the premises throughout the country. Even if I were, I would not be in a position to comment other than accept the competent advice I have been given in that respect.

Deputy Esmonde asked why all this was being done. Why must we legislate in advance? Why was the National Bank being bought out? That goes back to my original assertion that people are entitled to dispose of their property as they wish. People are entitled to sell their property if they so wish, and Deputy Esmonde's contention that the National Bank were selling out because they were being pressed by the Government is not right in any sense at all. On the contrary, what has been happening here is, as every Deputy knows, that there is an increasing interest being taken in the Irish economy by financiers, property developers and entrepreneurs of every kind, and there has been an influx, in particular, of some finance houses from London, from the United States and Canada. As Deputies know, there has been an interest in the purchase of banking interests in Ireland by some of those outside interests. Is it not far better that we should, as far as we can, facilitate the acquisition of such banking interests by an Irish bank?

As far as the necessity for the legislation is concerned, it is not necessary at all if the banks were prepared to go through the rigmarole of the arrangements that would have to be made otherwise, to which I have already referred and to which Deputy Sweetman has referred in much detail. Since the Finance Act of 1965 in Britain, there is a change in the type of tax that can be charged, and the purpose of getting this Bill through now is that it is desirable that the transaction should be completed before the end of March. The Scottish Bank, as part of their agreement in carrying out this transfer, wanted this legislation enacted in this country. The purpose of the enactment of the legislation is to avoid paying higher tax ultimately in the United Kingdom, to avoid the multiplicity of transactions that would have to be gone through and to avoid paying stamp duty on a transaction which in its entirety would prove to be an inequitable burden.

This, as has been pointed out, is being voted on today by the shareholders in London, of whom 75 per cent will have to vote in favour. It will then come before the High Court in London and the transaction will have been completed, provided by that time the enactment has been put through here. By providing for greater facility in the transfer and obviating undue taxation, we are in this Parliament doing no more than providing some oil for the wheels of the vehicle that will carry the transfer.

Mr. Norton

Oil for the wheels of the Minister, a bigger and better moneylender.

Mr. J. Lynch

We shall get the taxation out of the profits which is a good thing for the economy.

Mr. Sweetman

We shall get the income tax here now instead of its going to London.

Question put and agreed to.