I have a drafting objection which I am sure does not surprise the Minister. In my opinion subsection (2) should read: "The Currency Act, 1927 and the Central Bank Acts, 1942 and 1964 and this Act shall be construed together as one Act and may be cited together as the Currency and Central Bank Acts, 1927 to 1970." The Currency Act has literally nothing to do with the Central Bank Act of 1942. Therefore, for the purpose of precision, it would be better that the wording be as I have indicated. I do not mind the wording as it stands appearing in the second instance but it is wrong to leave it like that in the first place.
Central Bank Bill, 1969: Committee Stage.
Would the Deputy mind repeating that please?
Not at all. The point is that there is really no close connection between the Currency Act of 1927 and the subsequent Currency Act of 1930. They should be separated in the first place in which they are mentioned as follows: "The Currency Acts, 1927 and 1930 and the Central Bank Acts, 1927 and 1964 and this Act shall be construed together as one Act and may be cited together as the Currency and Central Bank Acts, 1927 to 1970." In the wording as it appears, two Acts are being put together which, strictly, are not the same. After all, it is a constructive effort and the correct way to do it is the way I have indicated.
The wording of subsection (2) is based on section 4, subsection (2) of the Central Bank Act, 1964, which reads:
The Currency and Central Bank Acts, 1927 to 1961, and this Act may be cited together as the Currency and Central Bank Acts, 1927 to 1964.
Therefore, in effect, this is referring back.
It does not make it right. The fact that an error was made once is no reason why it should be repeated.
Since it was made in the previous Act, I think it may be taken that whether it is right or wrong according to the view expressed by the Deputy, it is the correct legal way to cite these Acts.
I wonder. However, I have made the point and, perhaps, the Minister would think it over before the Report Stage.
I move amendment No. 1:
In page 4, line 7, after the word "person" to insert "or company".
This amendment is being met by the Minister.
Perhaps, if the Deputy agrees, we could take amendments Nos. 2 and 3 together.
Perhaps this is only slightly additional to what the Minister is proposing but I am concerned that the definition should cover "company" in addition to "the public".
I understand the Deputy agrees with the amendment I am proposing which is to insert the words "the public".
I have a similar amendment down.
We are meeting the same point but, perhaps, "the public" is a little more precise. On the question of "company" this, I am informed, is not necessary because under section 11 of the Interpretation Act, 1937 the word "person" includes a company. The relative portion of that section reads as follows:
The word "person" shall, unless the contrary intention appears, be construed as importing a body corporate (whether a corporate aggregate or a corporation sole) and an unincorporated body of persons as well as an individual.
I am advised that what the Deputy has in mind is covered by the word "person".
If "public" is substituted for "person", does the word "public" include companies?
I see what the Deputy has in mind. In line 7 page 4, we will be leaving in the word "person".
The Minister's advice is that it is not necessary to add "company"?
Yes. It is covered by the word "persons".
I move amendment No. 2:
In page 4, line 16, to delete "persons" and to substitute "the public".
I move amendment No. 4:
In page 4, between lines 22 and 23, to insert the following:—
"‘the orderly and proper regulation of banking' shall be construed to include the necessity for a regular, constant and efficient banking service for the public."
This amendment which I seek to put in in the definition section is really referable to subsequent sections of the Bill but, perhaps, I should move it now since it comes in this place. There should be a definition as to what is meant by the words "the orderly and proper regulation of banking" because these words describe the use of the power by the Central Bank in relation to the imposition of conditions and the making of regulations as to the transaction of banking business. As it stands, there is no guide as to what that should mean or what it should cover or what the policy should be. I am suggesting that it "shall be construed to include the necessity for regular, constant and efficient banking service for the public." I would urge the Minister to accept some sort of detailing of what policy should be aimed at by orderly and proper regulation of banking.
As Deputy Higgins has indicated, this phrase is a key phrase in this Bill. It applies to many other important sections of the Bill. Therefore the amendment he proposes relates to the kernel of the Bill. It should be clear that the phrase already in the Bill covers efficient banking and also the provision by the bank concerned of a reasonable banking service for the public. Having regard to that type of business and to local circumstances, I do not think it would cover a regular, constant banking service as proposed by the amendment. "Constant" could be held to mean 24 hours a day for seven days a week and "regular" might not allow for reasonable variation in the services provided by different types of banks and different types of branch banks.
As the Deputy is aware, in various towns where small branch banks may operate, they operate in many cases for a limited number of hours or for a limited number of days in a week. This is required by local circumstances and I think it is necessary that the Bill should not interfere with this kind of practice.
In addition to that, there are differences as between, say, the Associated Banks, the merchant banks and industrial banks as to the kind of services they would give and I think the Bill must recognise this and allow for the necessary flexibility. While it may be reasonable normally to expect the associated banks to provide a regular service on the main working days and during certain hours on these days, this may not be necessarily so for the other banks. I think small banks—and I am not referring now to small branches of big banks but small banks —might find it quite onerous to provide an extended service. I think the difficulty about giving a more precise meaning to the phrase is that a narrower definition would result in the Central Bank having to operate in a very rigid framework and this could well work to the detriment of the public. I think, therefore, flexibility is necessary. The Central Bank are a responsible public body with long experience and we can and must rely on them to take all the relevant factors into account in relation to the particular operations of a particular type of bank, where they are operating and the kind of business they are doing.
There is, of course, one other aspect of this amendment. Deputy O'Higgins did not mention it and I do not know if he had it in mind but I think it is better to deal with it as it is bound to come up.
The Minister may be sure of that.
If the amendment is aimed at compelling the banks to stay open during a dispute such as we had last year, I think this would be quite an illogical approach. If the basis of the argument for this is that banking service is a vital service to the community and should therefore be maintained at all times then logically the provision should be something on the lines of providing for compulsory arbitration because you cannot ensure a constant regular availability of the banking service if either the banks or their staffs refuse to give it. So that, if you want to ensure that, you have logically to ensure that both parties give it and you must provide a framework which will deal with disputes and so on. If, on the other hand, what you say is that the staffs can go on strike but the banks have a legal obligation to provide a service under this Bill, what you are saying is that whatever demands are made by the staff must be met by the banks, no matter how ridiculous they may be. I do not think anybody could reasonably accept that position. It seems to me that, as I say, if you are arguing that the service provided by the banks is so essential to the community that it must not be interrupted under any circumstances then you have to face up to the logic of that and apply whatever restrictions you are applying to all parties concerned. You cannot just apply them to one party. It would be unrealistic to do it if you really want to ensure non-interruption of banking service.
I feel that on consideration of this matter it will be agreed that this cannot be done, certainly by this amendment. I am not at all sure that it would be desirable to provide something on the lines I have outlined but certainly if one wants to ensure under all circumstances a constant and regular banking service one has to provide some kind of framework that will ensure that matters in dispute, ordinary industrial disputes, are dealt with and that the findings of whatever tribunal is concerned are binding and compulsory on all the parties concerned.
I am surprised that this Bill, which is the first banking Bill introduced in the House following the disastrous lock-out last year, does not refer in any way, except in the amendment put in here, to an effort to prevent something like that happening again. It is all right for the Minister to say that you cannot force the banks to stay open if you are going to allow the officials to go on strike but I think there is a very big difference. In fact, the banks are legally bound to give a service to the public. They are bound to stay open. Deputy O'Donovan asked a number of questions which, I must say, the Minister fielded pretty well but a couple of them did go through the sticks.
The trouble about it is that we had a situation here last year which was disastrous for the community, disastrous for the economy, disastrous, it appeared to me, for the people concerned at the start but when the Minister says that, if this is accepted, that the banks must stay open, unreasonable demands could be forced by the employees, is the Minister not aware that, in effect, the bank lock-out which occurred last was settled on better terms than would have been accepted by the employees the first day the bank dispute occurred? Is he not aware that in the end it actually cost the banks more in hard cash to settle the dispute than if the dispute had not taken place at all? This is not confined to the banks. There are other organisations doing the same thing. They seem to take delight in causing as much trouble as they can and eventually agreeing that what was originally asked for by the workers is reasonable, and paying it. This in effect is what is happening in this case and I think the amendment is quite reasonable.
There is no doubt about it that the banks, who have a responsibility and who look for protection from the State when it suits themselves, cannot have it all one way and give nothing at all in the other direction. The onus is on the banks to stay open and give a service to the public and this amendment, if carried, will make them do exactly that. For that reason, the Minister has either to accept the amendment or, if the movers agree, agree to have another look at it. He cannot write off last year's dispute as if it never occurred and say, "It is all right. Next time we will think of something else."
In former times it was legally incumbent on the commercial banks to remain open for specified hours and, as has been said, it is very important that we should have a constant and regular banking service and that a dispute such as occurred last year, which was of a most unfortunate nature, should never occur again. It is incumbent on the Minister for Finance to take whatever steps he feels necessary to ensure that there is a harmonious industrial relations policy as between the banks and their employees. Whether that can be done within this Bill or not remains open to question. Perhaps it could be dealt with under section 10 where conditions can be imposed by the Central Bank on the issue of licences to banks. One of the conditions which could be included by the Central Bank would be that there would have to be a proper industrial relations set-up as between the staffs and the banks. Certainly there must be some method laid down which will ensure that a dispute such as occurred last year will never occur again in this country. The Fine Gael amendment is both important and relevant.
There was a decided move by the directors of the commercial banks when the second inter-Party Government were in office to get the Government to agree that they could do what they did last year. Instead of that, the Government pointed out to the banks that they could open for two hours a day, from 10 o'clock to 12 o'clock, and that situation was got over in that way.
It is true that the arbitrators appointed by the present Government in 1969 and 1970 were incompletent. Their interpretation of the agreement was flagrantly wrong. There was a condition about deteriorating circumstances between the banks and their staffs and nobody can suggest that increases in the cost of living of 8 per cent one year and 9 per cent the next did not represent seriously worsening conditions. The Government played ball with the arbitrators by allowing the commercial banks to close illegally by making an order enabling them to close on St. Stephen's Day or on January 1st, I do not know which. Having made a special order, the Government allowed them to close without interfering at all, the Government adopting the attitude that they would be intruding in the dispute, avoiding their responsibility in that way. The first inter-Party Government made an order in, I think, 1950 authorising the banks to close. I do not think that what happened last year is good Government. I will leave it at that. I said it last year.
I should like to add a few words to what Deputies have been saying. As the Minister pointed out, the phrase "the orderly and proper regulation of banking" is a key phrase which applies in particular to the grant of licences. I do not wish to anticipate sections which we will come to deal with later, but in order to understand the effect of the amendment, Deputies must appreciate that after the passing of this Bill and of a transition period, all banks and bankers, in order to continue to transact banking business, will require to have a licence from the Central Bank and that will include, in addition to whichever new banks or bankers that may be recognised, existing banks and bankers. In relation to the grant of a licence, the Central Bank, under the sections we will come to deal with, are given power to impose conditions which in the opinion of the bank are calculated to promote "the orderly and proper regulation of banking".
The purpose of my amendment is to say by legislation to the Central Bank that when they are about to impose conditions calculated to promote "the orderly and proper regulation of banking" that these may include conditions providing for a regular, constant and efficient banking service for the public. I do not think the people whom we represent in the Oireachtas would understand our legislating at this stage, in the aftermath of a serious and dislocating bank stoppage, if we did not in that legislation advert in some way to the necessity for avoiding in future what occurred in the past.
I do not think it is correct for the Minister to suggest that the adoption of my amendment would achieve situation through which the Central Bank and the banks have an obligation to remain open though nobody is working in them. That may be the law but it certainly does not follow from this amendment. I do not want to go into the past or present situation in regard to the banks involved in the recent dispute. There is sufficient reading in the Fogarty Report on that. However, one can imagine an entirely new bank applying for a licence. It might be very clear to anybody who examined the structure, servicing and personnel of that bank that the industrial relations set-up was as bad as could be. In these circumstances, the Central Bank very well might provide for proper arbitration, proper ventilation of difficulties from staff point of view, because that would be designed to achieve a regular, efficient and constant banking service.
These conditions may not always operate successfully but all I am concerned with is that under the new banking structure provided for by this Bill it should be the policy and the aim to provide a constant, regular and efficient banking service. I have said this before and I urge it now by way of this amendment: if things continue as they have been, with a bank strike five years ago and another last year, we will have another strike unless there is a radical reappraisal of what has been going on, and I do not think that in the case of the next bank strike traders will finance business. They will not accept cheques, and this would mean that a repetition of last year's bank stoppage next year or the year after would bring about a very serious dislocation of the economy. It is for that reason—I am not married to the words of the amendment—that some special element of policy should be included in what is meant by "the orderly and proper regulation of banking."
I have suggested in the House that there should be a 60-day cooling off period in essential industries threatened by disputes and I would recommend such an approach to industrial relations in banking. I do not think compulsory arbitration would be acceptable and I am not sure it would be desirable. We have had always a system of free bargaining and I think what we should have not only in relation to banking but to other essential industries is a contract agreement in relation to wages and conditions governing periods of from two to three years. That would be one way of tackling this problem and it would be successful if adhered to in the banking system.
I am surprised the Minister did not put in an amendment to deal with the position in relation to future bank disputes. He should have tabled some amendment to allow proper discussion of it. I feel the words "regular, constant, and efficient" in our amendment are very important to the public and I recommend the Minister to accept the amendment.
(Dublin Central): We all fully agree about the hardship the last strike brought about but I am not fully sure that the amendment as I see it would solve the situation. I would be afraid that by inserting this amendment we might worsen relations with the banks. We must remember that, in effect, banks are a private enterprise and we would by inserting this make it very difficult for them to negotiate. We might be weakening the hand of the negotiators on one side and strengthening their hand on the other.
We must try to get away from this type of legislation and create proper staff relationships. This is about the best way to help any labour relations. It would be unfair to the banks to direct that they must open. After the last bank strike there was such a backlog of business that the banks opened for only two hours a day and it became utterly impossible for them to carry on. We could run into complete chaos by inserting this amendment. I hope we never again have a bank strike such as we experienced on the last occasion. We should see that the Central Bank get proper powers and that they give directions that they expect the commercial banks to give service to the community without spelling it out in legislation. If we inserted this the Central Bank would always be able to point to this Bill and say: "It is there in the legislation and you must stay open whether you like it or not". The Central Bank, in co-operation with the commercial banks may be able to set up proper staff relationships whereby we may never again see a strike such as we witnessed on the last occasion.
I sympathise with and accept Deputy Fitzpatrick's point of view but I think he is under a misapprehension in relation to the effect of the amendment. If the amendment were accepted by the House the effect of it would be to include amongst the purposes which the Central Bank must think of in making conditions is the necessity for a regular, constant and efficient banking service. Under section 10 the Central Bank is empowered to impose conditions on a bank or all banks or it may impose none. If it decides to impose a condition it may or may not have a condition in relation to industrial relations or in relation to providing a constant, efficient and regular service. If it imposes conditions under section 10 (2) the conditions of a licence may be amended, revoked or added to at any time. In fact, if a situation arose whereby there was a condition in the licence aimed at a provision explicitly of a regular, constant and efficient banking service and if, in fact, by reason of frustration or matters which could not be foreseen it became impossible for the bank so to do, then the Central Bank would have power to amend or revoke that particular condition.
That is what has happened in the past in another way when the Government gave permission to the banks to close. The banks were under a statutory obligation to remain open but, of course, once the difficulties arose they could not maintain the service and the Government, in effect, gave them permission to close. From the point of view of a statutory obligation there is no problem. The concern is that under the licence the necessity should be pointed out to everybody engaged in banking of providing a constant and efficient service to the public. I hope that meets Deputy Fitzpatrick's problem.
We must clearly distinguish here between the legal obligation a bank to its customer and the obligation of a bank or the banking system to the community. In so far as the legal obligation of a bank to its customer is concerned in the recent dispute there was no interference whatsoever with that. In so far as banks were legally liable to their customers it was open to customers to sue them if they lost money and to recover damages if the bank was, in fact, in breach of its contract with the customer. I would point out that the banks do not require the authority of the Government to close.
Why then is it necessary to make an order when the banks close on a Bank Holiday?
The reason is that if a promissory note falls for payment on a Bank Holiday it provides, in fact, the due date is the day after. It has that legal effect.
That is an important thing because if it occurred in the middle of a bank strike you know what would happen.
I am coming to this. It also has this effect. In certain other respects the bank might have a legal obligation to its customers and it is relieved of that legal obligation in respect of that particular day where it is authorised to close on a Bank Holiday. However, during the bank dispute the banks were not relieved of that obligation at all nor did they seek to be relieved of it. They did not ask either in the recent dispute or in the 1966 dispute any permission from the Government nor did they get it. Their legal position in relation to their customers was not interfered with at all. The position there depended on the contract between the customer and the bank.
Frankly, my advice in relation to the incident referred to by Deputy O'Donovan is that legally that condition was not necessary but, in fact, it was given under a Supplies and Temporary Provisions Act which has now lapsed and does not now operate. I am not purporting to speak with absolute authority on this but I think the effect of that permission was to relieve the banks of legal obligations to their customers. This Government did not relieve the banks of their legal obligations. I just draw the Deputy's attention to that.
Is the Minister now telling us that any customer could have taken action in the courts about it if he wanted to?
In the recent dispute?
Yes, in so far as there was any breach of his contract with the bank he could sue the bank and nothing that was done by the Government interfered with his right nor, I should add again, did the banks request the Government to protect them against this liability. However, that is water under the bridge.
They got it in the 1950 strike.
They got that protection.
This Government did not give them that protection.
The Government were keeping out of the situation.
They were not.
Yes, they were.
What the Deputy was referring to was an occasion on which a previous Government, not a Fianna Fáil Government, gave protection to the banks. This Government did not.
If the Minister checks I am sure he will find that when Deputy Aiken was Minister for Finance—I am not sure what Government it was and I am not sure what strike or difficulty it was—such an order was made.
As I say, this is water under the bridge. We are concerned here with what is likely to happen in the future. Again I want to stress that we are talking now about the obligation of the banking system to the community. In effect, that is what is involved in this amendment. If we lay down a legal obligation on the banking system to remain open within all reasonable business hours, we will have to keep our eyes open as to what we are doing. In relation to what was said by Deputy O'Higgins, I do not visualise the Central Bank, under other provisions in this Bill, laying down conditions in a licence which would pertain to the industrial relations of the bank. I do not think this would be appropriate. It would involve the Central Bank in matters which are far outside its ken. The Business of the Central Bank is to deal with banking, with such matters as deposits, rations, liquidity and so on, not with industrial relations. I do not think we should anticipate anything, because it is very unlikely that the Central Bank would involve itself in industrial relations.
Some Deputies who have spoken on this are not facing up to the realities. I deplore the last bank closure. It did enormous damage to our economy, and this has emerged since. There were other factors, but this was a big factor in the low rate of growth of our economy, and I would be very anxious to ensure that such a thing did not occur again. There has been, as Deputy O'Higgins has mentioned, the Report by Professor Fogarty and there are certain other inquiries which have gone on, some of which have been conducted by the Central Bank; and the Economic and Social Research Institute are conducting inquiries into the causes and effects of the last dispute. In that regard there seem to be some moves towards ensuring a better and more rational approach to industrial relations in the banks.
However, this does not solve the problem which has been posed here by Deputies, and I would ask Deputies to face up realistically to what they are suggesting. They are suggesting that one party to an industrial dispute should have their hands tied behind their back. The only possible consequence of that is what was pointed out by Deputy Fitzpatrick. We cannot reasonably expect this. To bring it home very strongly to Deputy Tully I might suggest that he would consider this situation, extreme, I admit, but it illustrates the difficulty. Supposing the view were to be taken—and it is not an unreasonable view—that the operation of the trade unions is essential to the ordinary life of the community.
It is essential. That is generally accepted.
Right. If that is accepted, supposing on that basis legislation were to provide that no matter what happened the trade unions were to continue to operate. Could Deputy Tully visualise the position in which a trade union would be if their members made unreasonable demands and the trade unions were bound by law to continue to carry on? Let us face up to what is involved. There is only one possible approach to take, that is, that if you say that because a certain service such as banking or electricity supply is essential to the lives of the community, that the ordinary system of collective bargaining will not apply, and that a new structure to deal with it should be provided, it has to be acceptable to both sides in the particular industry if it is to work. You can approach it that way, but to approach it on the basis of saying that one side must accept a legal obligation but the other side are free to do what they like——
That is not so. It is not the effect of the amendment nor is it the intention of the amendment.
But I think that is Deputy Tully's intention.
I shall explain that in a moment.
Whatever about the intention, I am afraid that is the effect.
It is not. I do not know how the Minister could say that.
Let us suppose this amendment had been in operation during the recent dispute. Would it not be that the banks would have a legal obligation——
No. What would have happened in the course of the recent dispute would have meant that policy had failed, that whatever had been aimed at was not succeeding, and the condition would have been varied.
The Deputy means the condition——
Under subsection (2) of section 10. Immediately the condidition would have been revoked, amended or altered.
By the Central Bank?
Then it does not achieve at all——
I am not saying it does achieve, all I am concerned with is that policy should aim at providing at all times a constant, efficient banking service. If you do not put that element into it you will drift into a situation in which in 12 months time you will have a repetition of the bank stoppage.
I should say that the aim would be certainly as indicated by Deputy O'Higgins. The aim of this Bill and the aim of the Central Bank would be to provide a regular and efficient banking service. However, to put in, for instance, the word "constant", as admitted by Deputy O'Higgins, means that in the event of a dispute such as we had last year the Central Bank would have to revoke that condition, because otherwise the banks would be in breach of this legal obligation. If one accepts the present position, it seems to me that nothing is achieved by putting in this condition, considering it has to be withdrawn if there is a dispute. It does not help us in dealing with an industrial dispute in the banks if there is such a condition and it has to be taken out again once a breach occurs. Maybe Deputy O'Higgins does not have this in mind, but I understood from what Deputy Tully and Deputy O'Donovan said that what they had in mind—and maybe I will be corrected afterwards—was that the banks, because of their importance to the community, should not be allowed to close in any circumstances. If that is what they had in mind, I am saying it does not work under our system of free collective bargaining. You would have to suspend free collective bargaining for the banks if you wanted to ensure they would continue in all circumstances. If that is not what Deputy Tully and Deputy O'Donovan had in mind, and if it is simply something like what Deputy O'Higgins indicated, I do not think anything is achieved by applying a condition which you have to withdraw the moment it comes under test when there is a dispute.
Surely the Minister will agree that the banking system should be informed that it is the opinion of this House that it is essential for the country to have a constant and efficient banking system. If it fails, the regulations under subsection (2) of section 10 can alter the practical end, but surely the policy should be made known to the Central Bank and the commercial banks, and that is the purpose of this amendment.
The Minister is being very native, because what he appears to be doing is forgetting the fact that last year there was a prolonged dispute, a dispute which was caused by the banks which have been described here as a private enterprise organisation or group of organisations who for profit motives refused to pay a just demand. Not alone did they close the banks and get away with it, but they made fantastic profits on the overdrafts of unfortunate people——
That is not true.
I do not know whether the Minister has been dealing with people who never had an overdraft, but I have been dealing with people who had overdrafts and I know what happened. Not alone were the small business people told, but big firms also, that either they paid the overdrafts which were due or eventually some kind of deal would be done with them by which they would pay a certain portion of it. No matter what way one looks at it, the banks did made very substantial profits as a result of the bank strike. What made matters a lot worse was that when the strike, or the lock-out, which more correctly describes it, was over the banks settled with their employees on better terms than would have been accepted before the lock-out occurred, which goes to prove that, in fact, there was no need for this dispute. The amendment which has been proposed here this morning would mean that before the banks could again lock-out their employees they would have to justify such action to the Central Bank. That is where the catch comes in. The Minister has been ignoring that aspect of it, deliberately or otherwise. If the Central Bank agreed that they were entitled to disrupt the whole economy as they did last year the banks would have great justification for strike action. There is no doubt that if this clause had been in legislation last year the bank lock-out would not have occurred. It is evident to everybody that the cause of the dispute was not what the banks had claimed it to be at the beginning. In effect, by paying out sums which exceeded the original demands the banks showed that there was no reason for the lock-out.
I do not agree that this proposal interferes in any way with free collective bargaining. If it did I would oppose it, but it puts the onus on the banks to satisfy the Central Bank that they are justified in taking action of this sort. There are people in this country who had overdrafts during the bank strike but who would not have had them under normal conditions. When the bank strike was over many people were able to clear their overdrafts. Some people were unable to do so because they had not estimated properly whether cheques which they were receiving were creditworthy. Many people had cheques which were not worth the paper they were written on. Many firms had to close. Some of the banks, whether at local or national level, put firms out of business by telling them that there was no future for their business and that, having cleared their overdrafts, they should close down.
I do not know whether the wording of the amendment is exactly as the Minister feels it ought to be in order to do the job. It is not just good enough to say that it is not the correct type of thing to do, and that, therefore, the amendment should not be accepted. Unless the Minister is prepared to accept the amendment, or to agree to bring in something similar before the next Stage, I would suggest that this amendment should be put to the House.
(Dublin Central): It is only a matter of clarification. Deputy O'Higgins mentioned that this is only a guideline which should be included in the Bill. The amendment states that a constant and efficient banking service for the public should be provided. Deputy O'Higgins's point is that if a situation arose, as happened on the last occasion, where a backlog was built up and where it became impossible for the banks to carry on the Central Bank could possibly withdraw this.
Power is given under section 10 (2). I do not want to keep on discussing this point. The Minister seems to have adopted a position, but I am never without hope that argument can succeed. None of us wishes to take sides in relation to a past dispute. Banking is a very sensitive area in the economy. It affects each one of us. During the last bank strike people learned certain facts. Five years ago the banks were closed. Cheques were drawn, but everything went smoothly and when the strike was over all the cheques were cashed and there was no great difficulty. This time, however, people were in a state of euphoria. They became their own bank managers and allowed themselves vast credit. People were seriously hurt. As the Minister has shown now in retrospect it is quite clear that serious damage was done to the economy. Looking at that background it is evident that we must point to policy. We must try to ensure so far as possible that there will not be a repetition. The Central Bank by this legislation are being put into a position of overlordship in relation to the banking system by having the right to supervise, to take deposits, to impose conditions and to make sure that the system works. In the interests of the economy I am concerned that we should include something to provide for an efficient and regular banking service. Nobody can ensure success. It is important that an attempt should be made. I am disturbed because the Minister said quite clearly that as things are now the Central Bank would not advert to industrial relations in the slightest under its powers in order to provide for the orderly and proper regulation of banking. The Central Bank are to be concerned with liquidity and ratios, et cetera. Who else should be thinking about the proper, harmonious provision of banking service through the banks with the staff and personnel working together, unless it is the Central Bank? The Central Bank under this Bill are being made the supervising, licensing body. Surely they should be concerned, whatever may be in the Fogarty Report which points out areas which could be improved, with such matters? I am not taking sides one way or the other. There may have been fault on both sides. A similar situation may arise in the future. I understand that despite the best intentions another dispute could arise and industrial relations between the banks and staffs could break down. Whatever policy has been put into operation, whatever conditions have been imposed and whatever good intentions have been expressed they might not succeed. I can understand that the Central Bank would have to act.
Deputy Tully asked why in those conditions should not the licensing bank have to go to the Central Bank and explain that they cannot continue to provide the service necessary. The Central Bank would have to act responsibly and look carefully at section 10 (2) of this Bill. Common sense eventually prevailed at the end of the long bank dispute, which possibly should have prevailed from the very beginning. If an amendment on the lines proposed were accepted there would be greater concern, and those engaged in the banking system would realise that whatever disagreements they have there is a third party involved, and that is the ordinary public of this country. The people have no power except the power they exercise through their representatives in the Dáil. During the banking dispute there was no concern shown for the public and they were the people who had to suffer. When legislation dealing with banking is being passed the point of view of the ordinary citizen should be made known. It can only be made known by somebody having a concern imposed on him by statute to provide a constant and efficient banking service. That is the purpose of this amendment.
There are one or two points raised by Deputy Tully which I should like to deal with first. The information available to me is that the banks did not make money out of the dispute. They may have lost money but they certainly did not make money.
Does the Minister believe that?
Yes, I do.
I do not believe it.
Does the Minister mean that the banks did not make as much money as they would have had they remained open?
No. What I mean is that they did not make a profit out of it. In other words, the cost of the dispute to them balanced whatever advantages they gained.
They lost a considerable amount because of the settlement they had to make. I grant the Minister that point.
The other point I wish to mention is that to the best of my knowledge any person who had an overdraft which he would have discharged at a particular date if the banks had been open, and if he was able to prove this, did not have to pay interest after that date. If he had to pay interest he has only himself to blame. He should not have paid it.
I know of one case where a person got a bill. Eventually a deal was done and he was allowed a certain percentage off.
That is fair enough. In other words, if a person could demonstrate to the bank that he would have cleared the overdraft on a certain date had the banks remained open he got an allowance of interest from that period.
This applies only in the case of a complete sale, not for the normal weekly lodgments. There was no allowance whatever given for this.
In the case of the normal weekly lodgments there would be normal weekly drawings also.
There was no allowance made by the banks in regard to profits. The banks had the money but they made no allowance.
Of course people were entitled to pursue this with the banks if they wished.
It is easy enough to pursue it but the result would be that the banks would not give an overdraft.
The banks took no notice of the fact that firms kept the cycle of credit going at a time when the banks failed to do this. As a result of this the firms suffered when they cashed dud cheques. The banks gave no credit to firms who gave a valuable service during the banking dispute.
In my experience firms which suffered substantially as a result of the banking dispute were establishments that went to town while the banks were closed——
The Minister has made an irresponsible statement.
Some relatively large firms amazed me by the lack of financial control they exercised. I know the facts because they came to me looking for money to get them out of their difficulties. I had to go into details and I discovered that some firms—I am not saying many—simply cashed in on the fact that there was no control being exercised by the banks.
There may have been half a dozen.
I am mentioning this point in reply to what was said by Deputy Tully.
The person who was running a small business was stuck for his full overdraft.
Not if he was not liable. If he allowed that to happen he can only blame himself.
He could not do anything about it.
Of course he could do something. Many firms, large and small, did something about it.
A valid point is that one of the services a bank provides is to ensure that cheques are cleared quickly and promptly. They charge for this service as they are entitled to charge. During the strike this service was withdrawn and it caused a substantial amount of harm to many firms. However, at the end of the dispute these firms were called on to pay the full interest. This is most unjust.
I think the Deputy is raising another point here. On that matter all I will say is Deputies will recall that during the dispute and after the reopening of the banks and the fixing of the date from which the accounts would be made up and interest charged, many Deputies were saying that there would be widespread closures of businesses as a result.
This is what happened.
What about the increase in redundancy? Surely that had something to do with the situation that existed.
Can Deputies tell me if there were widespread closures as a result of the banking dispute? We should be realistic about this.
The closure of the Hibernian Transport Company is one case. Some 800 people were affected.
That is one case. We were told in this House that there would be widespread closures.
What about the subsidiary businesses connected with the Hibernian Transport Company? I know of three concerns that were affected.
Does that conform in any way with the impression created in this House by various Deputies who put supplementary questions at Question Time and stated that there would be widespread closures?
There were widespread closures.
At any rate this is irrelevant to discussion on the amendment. One point that has emerged from the debate is either I misunderstood the purpose of this—although I think I was construing it as it would operate legally—or else Deputies opposite have changed their arguments somewhat.
That is unfair. Our arguments were set out straight and fair.
I do not know if the Deputy listened to what I said. I said either I misunderstood or Deputies have changed their arguments. What is clear is that so far as Fine Gael speakers are concerned they are saying that what they want is to lay down policy in this Bill, to make it clear that the banks remain open. However, they agree that if a situation is reached in which there is a dispute then at that stage this condition must be withdrawn because otherwise the legal effects would be impossible. What is involved is laying down policy.
So far as Deputy Tully is concerned, what he wants to see is that if there should be a dispute as we had before, the Central Bank would have to say yes or no to the banks closing before they actually closed.
If we take the Fine Gael view first, it seems to me self-evident that what everyone requires is an orderly and efficient system of banking and that clearly implies there will not be closures of the kind we have been subjected to heretofore. I do not think a single thing is gained by putting this phrase in as a directive of policy which would be withdrawn when difficulties are encountered. On the point raised by Deputy Tully where the Central Bank would say yes or no to the banks' closure, on the face of it this seems a reasonably attractive proposition but we should examine it further. If we examine it we find that we are saying (a) the Central Bank must involve themselves in the industrial relations of the commercial banks, and (b) in the event of a dispute the Central Bank will, in effect, have to arbitrate and say to the banks:"You are justified in resisting this claim", or "You are not justified in resisting this claim." I do not think the Central Bank are qualified to make such a judgement.
Take, then, a third possibility—(c) : suppose, having examined the situation, the Central Bank say to the banks: "You are justified in resisting this claim and, therefore, you can close," will this be something acceptable to the bank employees? Will it help settle the dispute? I do not think it will. The fallacy here is to imagine that the Central Bank have or could have any kind of effective role in the field of industrial relations.
It is true, as Deputy O'Higgins said, that under this Bill the Central Bank are being given overlordship of the banking system. They will operate as the licensing authority. They will be watching over the normal operations of the banking system. They will have considerable powers enabling them to interfere but it does not follow from that, as it does in other cases in which you have licensing and supervisory authorities, that that means that such licensing body should be involved in all aspects, including industrial relations, because, when you come to the field of industrial relations, there are many other bodies, such as the Labour Court, concerned with industrial relations. To give this power or impose this obligation on the Central Bank seems to me to be not only cutting across the bodies responsible in this regard but to be imposing on the banks an obligation quite foreign to them and to their qualifications. Frankly, I do not see any advantage whatever in this amendment.
First of all, it must be remembered that people paid their full overdrafts. They got no allowance. If they lodged per week or per month and there was a 10 per cent or a 15 per cent profit they did not get the benefit of that. That is not the point. The ordinary employer when a strike occurs makes no profit of any kind. He must pay his bills. The banks, on the other hand, go on making money, possibly as much as they were making before the strike. Overdrafts are paid and they have no wages to meet. Any other business in similar circumstances can make no money of any kind.
The Minister mentioned industrial relations. Thinking today is in the direction of having a strong trade union group to speak for workers in general and an employers' group. If this is the evolution there will be an end to a great many unofficial strikes which very often result in putting a great many workers out of employment. Latterly the banks have appointed some of the staff as directors. One man is appointed, at a very high salary, to deal with industrial relations where the banks are concerned. If he advises that the workers are looking for too much his advice will be taken by the other directors. He has an almost dictatorial power. Surely it should be possible to appoint some authority, not necessarily the Central Bank, to act in a situation like that. Up to four or five years ago the banks, unlike ordinary business, had no competitors. There is an odd competitor now and some of them allowed people during the bank strike to open limited accounts. The banks can go on strike any time they like and they lose nothing. I dislike either side having a sanction which it is almost impossible to break.
I agree with a good deal of what the Minister and Deputy Belton have said about a comparison between the trade unions and the banks vis-á-vis the Central Bank. Everybody knows the drill with regard to disputes. If a union branch serves a demand on an employer and fails to get agreement and it is then decided to have a strike that decision must be referred to the executive of the union. The executive will discuss the matter, taking all the merits into account, and two things will eventually come out of that discussion. First of all, the question will be whether it is in the interests of those concerned to have a strike and, secondly, will it improve or disimprove conditions on a long range estimate? There is a third one: what effect will the strike have on the finances of the union?
Here we have a group of individual banks and they can act together without referring to anybody and they can decide to close their doors, as they did last year. A number of speakers here have said they were not taking sides one way or the other. As far as last year's dispute is concerned, I am making it quite clear I took sides at the start and those are the sides I would take if a similar situation occurred. I believed the workers were right. I still believe they were right. Is there any good reason why the Central Bank, like the executive of the union who must look at the effect of the strike on the people employed, on the economy of the country and on its financial position, should not have a say as to whether or not a dispute should continue or a lock-out allowed to go ahead?
Nobody suggests that the governer of the Central Bank or any of the directors should decide wages and conditions for the employees nor has it been suggested here, but what has been suggested is very sensible. No matter what the Minister says, the banks have found that closing their doors to employees and the public for an extended period has allowed them to make profits. Nobody can deny that although the Minister attempted to do it today. Is it not reasonable to imagine that those people, having got away with it not once but twice or three times, will be tempted to do it again and for that reason should there not be some body or group who can say finally: "We consider this reasonable" or "We do not consider it reasonable"? I am particularly referring to a lock-out because if the dispute goes to the extent that the employees decide to serve strike notice because they want to take strike action that is a different matter. On the question of the banks threatening to close as they closed before there should surely be some way for somebody to say: "This is unreasonable; it will do the economy too much harm."
I cannot see how any Minister for Finance should attempt to defend a group of people who, no matter what we say, are only interested in profit making. Finally, neither can I see why the commercial banks should be allowed to continue with this because as Deputy Belton says up to now there has been little or no opposition to them from like organisations. Is it not only reasonable to expect that if they do something like this again, banking, as we know it, will fall into such disrepute that the whole system will be changed? It is not a Bill like this to fill small loopholes that will be brought in but somebody will bring in a Bill setting up an entirely new monetary system because it is not possible for any country to carry on as we did last year. There was a group of Swedish bankers here last year and they could not understand how the country could continue for six months without the banks.
All banks were not closed. That is one of the reasons we were able to carry on.
One of the Swedish bankers said that it was not so much that the banks were closed but that the printing presses were not also closed.
I appeal to the Minister to accept the amendment. Formerly it was incumbent on all commercial banks to remain open under an old Act. That had a bludgeoning effect; it practically eliminated the industrial relations problem.
I do not understand the Deputy.
Banks were formerly required to stay open on specified days and could not close without permission.
They were entitled to close any time they liked but they were only protected as against claims by customers when they were authorised to close. I think it is the reverse of what the Deputy is saying.
They had to provide a service.
They had not a legal obligation to the community to provide it.
The point I wish to make is still valid. The Central Bank is the governing bank for the commercial banks and this should be so. It is important from the community stand-point that written into this Bill should be our wishes in relation to the service which the commercial banks should give to the public. The Central Bank should know quite clearly the position in this respect. I see no objection to a condition under section 10 (2) being included in a banker's licence that they should have a certain industrial relations procedures. This would be good from the community's point of view.
(Dublin Central): The more I look at the section the more complicated appears what will happen as regards the Central Bank. We know banking cannot operate unless industrial relations work properly. We are inserting a section in the belief that we can cure the ills of industrial relations in the banking sector. We are inserting something in this section and taking it out under section 10. Here, we are placing the Central Bank in the position in which it will become practically the Labour Court for the employees and employers of the commercial banks because what the commercial banks will automatically say when a claim comes before them is: “We will resist it and refer it to the Central Bank.” They will say to the Central Bank: “We must resist this claim.” We would put the Central Bank in the place of the Labour Court.
Not at all.
The Deputy is right. May I interrupt him for a moment? Deputy Tully said that the Central Bank would have to express a view before allowing the banks to close. How can they do that unless they express a view on the offer?
Surely they can express the view that the commercial banks may or may not have gone the full length of the negotiating machinery and that is a valid view to express.
(Dublin Central): This section is in the Bill and the negotiators at this point will look at this section and see that the Central Bank have made no statement as to whether the commercial banks may open or close. Naturally, the section negotiating have their hands tied by virtue of the fact that the Central Bank have not said anything. It would be normal procedure that the employees would keep this in mind in their negotiations and eventually I think the commercial banks would put the onus on the Central Bank of making a decision as to whether they should close or not.
I fear you would complicate the situation more than you would simplify it by putting in this section because under section 10 they can take it out again and tell the commercial banks to close. I do not think it will serve any purpose. As Deputy O'Higgins said, it is just a guideline for the commercial banks. We all agree that closing the banks is detrimental to the economy and I would be the last to make a case for the banks. I know the trouble that was caused to unfortunate shopkeepers and others and if I thought for a moment that by putting in that section we could avoid a repetition of what took place in the past I would welcome it. I doubt very much if this will solve labour relations problems with the banks as you expect it to do. I do not believe it will work.
I do not think anybody is suggesting that it will solve labour relations. I think they can go through the normal channels. They can go to the Labour Court and at the stage when they are at that is when the Central Bank look at it and that is the point when they can go one way or the other. Let me take up the Minister: he said there were other banks open. There were, but they had an agreement with the Irish banks not to take new customers and would not facilitate other customers except those who had been dealing with them before a certain date.
They took many deposits.
How many cheques did they take?
The merchant banks took deposits and many people took their money, brought it across the Border and put it into banks. It was not the foreign banks who kept the economy going, it was the merchants and business people who cashed cheques for big employers who could not get large sums of cash. These people did not get any recognition for the service they provided and if they cashed any dud cheques they had to suffer the loss themselves. The Revenue Commissioners are likely to tax people who cashed dud cheques because they treat the money as profits. This means that people who kept the country going are going to be taxed on money they never got.
I cannot add anything without repeating the points I have already made and I do not think that is going to help.
Will the Minister admit that the banks are one of the few organisations which by closing can make some money?
No. They are in a better position, admittedly, than other people. The Deputy said that an ordinary business with a strike on its hands not alone does not make a profit but is likely to lose business and this was a very big factor with the commercial banks. They lost a great deal of business and the extent to which they have got it back will not be known for quite some time. Anybody who thinks the commercial banks can contemplate a dispute in the way of a strike, lock-out or anything else with equanimity and feel they are going to hold on to their business is mistaken.
The banks know that they will get interest on their short and long term loans even if they close and they will also save on wages. The banks make their money on overdrafts, which is one of their main functions. Banks are one of the few businesses which can make money while their staffs are on strike. I know that people who collect rent make money in that they eventually collect the arrears but there are very few trading firms able to make money while they are on strike.
Is it not a fact that the banks are using the argument that they did not make money, and that in fact they lost money, in order to hold the lending rate at the highest rate in Western Europe?
Will the Minister give a good reason why it is so high?
It is approximately the same as it is in Britain.
No, it is not.
There is a question down today about it and I shall be giving details.
(Dublin Central): This particular section could go right across the board to other sections of industry and if it is accepted on this small scale we must be very careful.
Deputy Fitzpatrick did not make that argument when the ESB Bill was before the House.
Deputy Tully is in effect making the same argument as he did on the ESB Bill.
The banks are different from any other business.
(Dublin Central): It could go right across the board. If it is applied to one it could be applied to all.
Not at all.
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Would the Minister explain the phrase: "but without prejudice to the validity of anything previously done hereunder"? It seems peculiar to me, if an order is to be laid before each House of the Oireachtas, that nothing should be done until that order is effective.
This is a usual provision in regard to orders of this nature. If one did not have this provision one could have chaos because action taken on foot of it could be set aside and the consequences of that could not be measured. The alternative suggested by the Deputy of no action being taken until after it had been laid before the Houses of the Oireachtas could also lead to very considerable difficulty. This is in accordance with the usual provisions of this nature in any Bill.
The fact that something has appeared previously in a Bill does not mean that it is correct, as the Minister knows. I was intrigued to read that, while the Bill cannot become law until it has been passed by the Oireachtas and signed by the President, and cannot be operated until the House has approved an order made under it, something may be done with no authority and, even though there is an annulment of the order, what has been done without authority is not to be interfered with—if that is a proper interpretation of it.
Yes, in effect, although the Deputy has perhaps overstressed one aspect of it. As I have said, this is normal. Deputy Tully is correct in saying that the fact that it exists in other statutes does not mean that it is right, but he will agree that the fact that it exists in many other Acts and has not led to difficulty is a fair argument that it is a workable arrangement.
I take that point but I suggest that we should not accept something just because it has appeared previously especially if it appears to be a bit stupid. The Minister is correct in saying that it does not appear to have caused any trouble but it is still dangerous because if the Minister wants to do something which would be strongly objected to by the House he can do it before it comes before the House and this is making it legal. This makes it look a bit peculiar.
It could become important if some constitutional question came up. A decision should be made by the House before any action is taken on the important issues at any rate.
It could become important in view of the fact that it is a Central Bank Bill.
Section 5 repeals section 23, subsection (2) of the Central Bank Act. This deals with certain matters concerning industrial relations within the bank. What is going in instead of it?
To which section is the Deputy referring?
Section 23, subsection (2) of the 1942 Act which relates to the remuneration of the directors.
It is not exactly industrial relations.
What is being substituted for that?
There is nothing going in in place of it.
They will work without directors?
They will work without remuneration?
That is not what it says.
Somehow I thought they would not.
Is the Minister satisfied that the time period for changing over to the new Act is sufficient for a smooth change-over?
It should be, especially with this particular provision which, as the Deputy realises, is intended to facilitate the change-over. The advice available to me is that it should be sufficient.
I do not quite follow the Minister's reply. If I understand the section correctly it is whichever of these three shall first occur. Therefore there is only until 31st December. Is that right?
No. In the normal case it would be to the 31st December. The other cases envisaged are where there is the granting of a new licence or the revocation of a licence in the intervening period.
That means that the Minister only has until 31st December to settle up this question of grants of licences.
Unless the Bill does not become law until after 31st December.
I am assuming that it will become law this year although, in view of the pace of the Bill since 1968, that is perhaps optimistic.
This is simply applying the provisions of the Bill during this interim period.
There has to be a date anyway.
There has to be some date for the change-over. If in fact the passage of the Bill were to be long delayed I would have another look at the section.
Would it not be better to provide six months or three months rather than fixing a date which could be an embarrassment?
Would it not be better to have some leeway which would allow any legal problems that might arise in the intervening period to be solved?
It is preferable if at all possible to have the 31st December—the end of the banking year.
We can leave it for the moment and it can be raised again.
It is the Minister who will have to deal with it—or some Minister for Finance will have to deal with it.
That is more correct.
There are a number of questions I should like to ask the Minister. Subsection (1) provides:
Subject to the provisions of this Act, a person, other than the Bank, shall not, on his own behalf or on behalf of any other person in or outside the State...
I should like clarification on this. The word "bank" appears in subsection (2) (a). A person could carry out a banking business without having the word "bank" in the title.
A finance company.
(Dublin Central): Or a credit union.
That could be a way of getting around this Bill. What is the position in relation to insurance companies and hire-purchase companies? Are they included as banks?
Or credit unions?
A credit union is another one. Would the Minister also clarify the position in relation to an investment trust company and a unit trust scheme under this Bill?
I am not sure that I understand what kind of clarification the Deputy wants on the phrase "any other person in or outside the State".
How could such circumstances arise?
There could be a company in some other country with some person or some company here acting as agent.
We have a number of them.
We have, in fact. It is to cover all persons carrying on banking in accordance with the definition in the Bill whether the principal is within the jurisdiction or outside it.
Would the Minister agree that in section 7 (1) we should put in the words "person, company or partnership" as opposed to just leaving it as "person"?
I dealt with that already. The word "persons" imports "company" under the Interpretation Act.
A "person" outside the State may be a limited company and that may not have the same meaning outside the State.
Under the Interpretation Act the word "person", unless the contrary appears, includes a company.
Inside or outside the State?
It may not be the legal position outside the State.
That is the legal position in this State. It does not matter what is the law in any other country. Therefore, a company from outside the State but who are operating here are covered and caught by the word "persons" regardless of what may be the law in the country in which they are situated.
On subsection (2) could the Minister explain if these four headings are the only ones that constitute holding oneself out as a banker or are they merely examples of activities which, if carried out, would constitute this? Can one hold himself out to be a banker by means other than (a), (b), (c) or (d)?
This was the point I was making when I said that a finance company could be a bank.
Are these specific ones or are they examples of what will be excluded?
These are the kinds of activities which, if people engaged in them, they will be deemed to be persons holding themselves out as carrying on banking. Activities other than these would not be deemed to be carrying on banking but subsection (4) deals with specific exemptions—this covers one of the points made by Deputy Collins—of people who might otherwise be within this but who are exempted specifically. I think we must take it that the activities described in (a), (b), (c) and (d) of subsection (2) are exclusive of any other activities. In other words, activities other than those would not be demeed to be banking activities.
Why must we take that? The Minister says "I think" and then says "we must take it".
I cannot lay down the law but I understand that to be the position.
The Minister can lay down the law.
I cannot lay down the law for the courts.
That is the trouble with Acts of this House. We should lay down the law.
We may attempt to but we cannot do so.
It should not be a question of what the courts say should be done; it is what this House says that should be done.
This House has to say it in such a way that if the courts want to find another way, they cannot get around it but that is virtually impossible.
In accordance with an established principle of legal interpretation as in the case of (x), (y), (v), the terminology used here is of its nature exclusive but the Minister has not said that.
In the Bill?
Yes. The wording used here is:
For the purposes of this Act a person shall (save as is otherwise provided by this Act) be deemed to hold himself out as a banker——
That is open to two interpretations. It could be that these are the only activities which involve holding oneself out as a banker or it could be what it is intended specifically to catch, but there may be other ways of holding oneself out as a banker which, if it could be established before the courts dealt with the phrase, would come within the section. Either it is or it is not a well-established legal interpretation of the use of words of this kind in an Act which, if used in this way, are exclusive and constitute a complete list to which nothing else can be added. We should know one way or the other. If this is not an exclusive list the question arises as to what is a banker and that is not defined in the Bill. It seems to me that what happened was that in the drafting of the Bill some trouble was taken to avoid having to define the word "banker" but the trouble taken may not have been sufficient if these four are not excluded and if it is possible for a court to hold that the wording used does not exclude the possibility of certain other actions constituting the act of holding oneself out as a banker.
The Minister is backing the game of pontoon.
I do not know about that.
It is a very valid point that there might be firms indulging in these kinds of activities which would not have any of the words "bank", "banking" or "banker" in their title.
That is true but it is covered. This section must be read in conjunction with section 2 which defines banking business as business which consists of:
(a) the business of accepting deposits payable on demand or on notice or at a fixed or determinable future date, but excluding deposits with a trader from persons employed by him in his trading business or from his customers in the normal course of his trading business and deposits or instalments in respect of the letting or selling of goods under a hire-purchase agreement or a credit-sale agreement, or
(b) the business aforesaid and any other business normally carried on by a bank,
Is clause (c) of section 7 not needed at all?
If the Minister reads what follows, it may help him.
Is the Deputy referring to companies?
It is the next phrase that is likely to help the Minister.
and "banking" and words cognate thereto shall be construed accordingly.
One must read these two together. Section 2 defines what is meant by banking business and section 7, subsection (2) defines what is meant by holding oneself out as a banker. They are different concepts but in regard to subsection (2) of section 7, my advice is that these items set out, (a), (b), (c) and (d) are exclusive. That is that other matters not described therein do not constitute holding oneself out as a banker but such activities which might not come within that might well come within the definition of banking business in section (2), in which event such activity would be banking business subject to this Act.
The point is that subsection (1) of section 7 goes to some trouble to make a clear distinction between the carrying on of banking business and representing oneself as a banker. The only purpose of including the phrase "or holding himself out as a banker" is because that includes something not covered by "carry on banking business or holds himself out or represents himself as carrying on banking business". Clearly, there is a distinction intended. The words "representing himself as a banker" would not have been put in unless it was intended to catch something not covered by banking business. That being the case, there are two categories of activities being tackled here. It is legitimate to ask for an assurance, with respect to the exclusive character of (a), (b), (c) and (d), when "banker" is not defined. The Minister might have argued that the use of the words and ‘banking' and words cognate there to shall be construed accordingly" would warrant a failure to define the word "banker". I would have thought that it does not and that the words "cognate thereto" could not apply to other words that happen to begin with "bank..." Therefore, had the Minister argued that, I was about to rebut him but happily for me he did not make the argument so I had to make the argument in order to rebut it. Having done that I have made the case that the Bill tackles the activity of holding oneself out as a banker separately from the other activity and that it is not sufficient for the Minister to say that he is advised that the effect of subsection (2) of section 1 is exclusive. We need to be told what is the basis of that advice. Is there a well established legal principle and, if so, established in what case?
I cannot do that. It is a well established legal principle but I certainly cannot undertake on every section here to bring up the particular legal authority for it. This is not a function of the Dáil. It is a function of the courts.
I am sorry. This is where I am afraid we disagree. Our job is to make legislation so clear that even the courts cannot construe it differently from our intention. That is what we are here for. If there is a doubt as to whether a certain interpretation could be put by the courts on something and this doubt leads to ambiguity which could frustrate the intentions of the Oireachtas it is our job to remove that ambiguity. The only way we can discover if there is an ambiguity is to ask the Minister, whose job it is to tell us, whether in fact there is a firm legal interpretation of this type of phraseology in an Act which precludes the courts from deciding, as the phraseology here is, other than exclusive. I think we are entitled to be told more than "I think" or "we must interpret it in that way" or "I am advised that it has that meaning". The very use of these three phrases implies on the Minister's part a certain doubt or hesitation or lack of information on something on which we are entitled to information because if, in fact, those doubts on his part, reflected in the language he has chosen to use, are well-founded it would be necessary for us on the following stage of the Bill to incorporate some appropriate amendment. I would ask the Minister—perhaps he cannot do it at the moment—if he could at a later stage give us the information that we need.
I have already indicated why I used the words "I think" because whatever I may say I cannot guarantee that on every possible case that comes before the courts the court will interpret the matter in the way that it would normally be interpreted on the basic principle involved. That is the reason for the hesitation, and the only reason. I have said quite specifically that I am advised that the phrasing that is used here precludes any other activity being brought in and that this is a settled legal principle but I cannot undertake, in relation to this and various other matters that will come up, to produce the legal authority for each such statement.
If it is a settled legal principle of interpretation of Acts of the Oireachtas, the normal procedure in this House and the other House is that the Minister gives the precedent and tells us what it is.
No. Will the Deputy give me one example of that? I am not aware of any such.
I have had this experience before.
May I make the point that, in fact, what we are doing here is establishing something which is legal? It does not have to be legal. If we say it here and put it into the Act, it then becomes——
Deputy Tully should appreciate that it only becomes legal if we say it so clearly that the courts cannot interpret it in any other way.
But what has been said by a legal luminary outside has no bearing on it at all.
There are settled principles of interpretation of Acts. If there are settled principles then it is open to us to use a phraseology which to a layman may appear ambiguous in the knowledge that the courts will and must interpret in a particular way. But if there is not such a settled legal principle we should avoid ambiguity and this could be done, I suggest, by inserting the word "only" after the word "banker" in line 12. That would eliminate the ambiguity. If there is an ambiguity, let us get rid of it.
(Dublin Central): It is putting the Minister a very difficult proposition to try to define “banker”. This section would remind me of part of a Finance Act in regard to income tax. I see the problem that you are trying to get around in trying to define what exactly a banker is. When this becomes law you will get people trying to get around it and we may have to come back to the House when we see that there are certain loopholes in the section. It is very difficult for the Minister to define exactly what a banker is.
(Dublin Central): We can make provision for what we see clearly in front of us but when this becomes law I can see certain people sitting down and saying, “This is what the Act says. How do we get around it?” Here we will have to come back with an amendment. It is very difficult to define.
I entirely agree with the Deputy and I have every sympathy with the Minister in trying to avoid the problem of defining "banker" by the methods used. It seems to me that in order to complete that and make it certain it is necessary to change the phraseology so that in line 12 it would read "to hold himself out as a banker if and only if" and delete the "ifs" under (a), (b), (c) and (d). Then you would have achieved it without any ambiguity or doubt and I will propose that on the Report Stage.
Deputy FitzGerald referred earlier to precedents in this and the other House for producing the legal authority in such cases. Could he give me one example of that because I am not aware of it?
Frankly, offhand, I could not. I notice that when I have questioned official interpretations of this kind before I have received slightly more conclusive answers from Ministers including statements that this is established precedent in such and such cases. But I could not give examples.
I am not aware of any such precedent and I think that, if we accept it, we will find that the business of this House will just grind to a halt.
I would not think so.
Could the Minister clarify for me the position in relation to insurance companies and hire-purchase companies?
Licensed or unlicensed?
Both. There are not many unlicensed. The Deputy must not have read the report.
In the case of insurance companies the normal insurance company are not carrying on activities which would come within either the definition of a banking business in section 2 or holding themselves out as bankers in this section. There can be, perhaps, some insurance companies carrying on business which would come within either of these definitions, in which case they become subject to the provisions of the Bill but, as I say, the normal activity of insurance companies would not be deemed to come within either section 2 or section 7.
In the case of an insurance company who lend money on life expectancy surely there should be some way to define whether or not they are in or they are out. There was the famous chips scheme and all this sort of thing which were operating with some insurance companies. I do not know whether this will be necessary or not but it does appear that if we are writing something into it we should be very definite about it so that there would be no misinterpretation. I quite agree on that.
There is just one question I might ask the Minister. Does he consider, in fact, that section 7 (2) is necessary because, in fact, I am quite sure people will succeed in inventing a new name and words cease to have the same meaning? That applies to this House particularly. Would the Minister not agree that people will use a different name and invent a name to get around this, even though he refers to derivations of the word? Section 2 seems to have tied it up very tightly. Does he consider that section 7 (2) is necessary?
Yes. You see, it is possible that people might hold themselves out to be bankers but not come within section 2 and would thereby get such benefits as accrue from holding themselves out to be bankers but, because they would not come within the definition in section 2, would not become subject to any control at all.
It would be better to have it in then rather than to have an inquiry on it.
That is right. That is my feeling, that it should be in.
What is the position about the hire-purchase companies and moneylenders?
The hire-purchase companies, I think, are specifically excluded in section 2. Moneylenders, in so far as they do not come within this definition—the business of accepting deposits payable on demand or on notice or at a fixed or determinable future date—do not come within it. Again, there could be some moneylenders that would come within it but the normal activity of moneylenders would not come within that definition.
Could I ask the Minister to explain the purpose of subsection (3) of section 7? I am not clear what it is for.
It is to exempt from the licence any person holding himself out as a banker within the meaning of subsection (2) but who is not actually carrying on a banking business. The exemption is to apply to such period as may be determined by the Central Bank. It would apply to a banker who might decide not to carry on in business, a person who already has a licence, and also to a licence holder whose licence was revoked under section 11. It is to give such people time to wind up their business.
Would the Minister not think that the Central Bank should have control over such undertakings as investment trust companies, unit trust companies and insurance companies. Are there any controls over the activities of these firms who deal in money?
All of the kinds of bodies listed in subsection (4) are already controlled by separate legislation except unit trusts in respect of which the Department of Industry and Commerce exercise control because they have brought in legislation and I think it has been enacted. We can take it that all of the bodies mentioned in subsection (4) are controlled by separate legislation.
I accept that but surely it may be desirable that the Central Bank should have, to say the least of it, some form of liaison with bodies dealing in money.
There is provision later whereby the Central Bank can get certain information in a certain form from all of these bodies. It is information rather than control of their operations.
Would the Minister not think it desirable that some type of control might be necessary in certain circumstances? I cannot specify the circumstances. There are firms who affect the monetary scene, who could cause inflation, perhaps only marginally, but nevertheless they are becoming more important within our economy.
They would not have licences.
There is statutory control over them under separate legislation. If it were necessary, for instance, to conform with Central Bank advice on credit this could be operated through the various controlling bodies which at present exist under separate legislation.
That is very cumbersome.
It would be more cumbersome to have them under two masters.
I did not quite follow the Minister's explanation on subsection (3). How does one read the last two lines? I read them in two different ways. One is as follows:
and who held a banker's licence in force immediately before the commencement of this section or a licence which has been revoked.
Or one could read it in an alternative way:
and who held a banker's licence in force immediately before the commencement of this section or the commencement of a licence which has been revoked.
Which is meant?
I do not think I heard the different inflections.
I am sure they will both read very well in the report. Is this designed to enable the Central Bank to exempt temporarily someone who holds himself out as a banker but who does not carry on a banking business, whose licence has been revoked?
It covers both a person who had a licence before the commencement of the Act and a person who will have a licence after the operation of the Act but whose licence has been revoked.
Why would it be revoked?
There are provisions for allowing for revocation. There is the case of somebody who has a licence at the moment and who may well decide on the coming into operation of the Act to get out of business because the impositions under the Act may be too onerous.
He has not enough money?
There will be bankers who will not carry on after the commencement of this Act. There may be somebody who now has a licence and in, say, three years after the commencement of the Act has it revoked. He ceases to carry on and the purpose of this provision is to give him breathing space during which the business will be wound up.
(Dublin Central): Let us assume that the Royal Bank, for instance, may want to merge with another bank, the Ulster Bank. At the moment they both hold separate licences and the Royal Bank can say: “We want to merge with the Ulster Bank. We now have a licence.” Will they be at liberty to transfer that licence to any other group?
Nobody can operate under licence without the consent of the Central Bank and certainly they will not be allowed to trade in a licence.
I move amendment No. 5:
In page 6, between lines 26 and 27, to insert a new paragraph as follows:
"(d) when the Minister decides to withhold his consent he shall so notify the applicant who shall thereupon have the right of appeal to the High Court within twenty-one days of such notification, the decision of which Court shall be final."
The section deals with the granting of licences and as Deputies will see the procedure is there set out that whenever the Central Bank propose to refuse to grant a licence to a person they must notify the person in writing and representations in writing by the applicant to the Minister may be made within 21 days and the Minister is asked to decide whether he will allow a licence despite the Central Bank's refusal. This Bill is dealing with the very important industry of banking, with a very important right, the right to engage in banking, and in relation to matters as important as these I think there should be some procedure whereby the courts set up under the Constitution should have a general supervisory position. That would be good in the sense of appearing to be right and I think it would remove any suggestion that a particular group or syndicate secured a licence from the Minister when the securing of such a licence might be open to suggestions of one kind or another. The amendment seeks to have procedure enacted under which the High Court could decide a matter of this kind.
Deputies will see that section 9 confines the Central Bank to refusal of a banking licence only if the Central Bank are satisfied that the granting of the licence would not be in the interest of the orderly and proper regulation of banking. In the event, the applicant must be notified of the refusal and the applicant is then given 21 days in which to make representations to the Minister for Finance and the Minister must consider the representations. An application could not be refused until this has been done. The Central Bank cannot issue a refusal without the formal consent of the Minister.
There is a specific appeal and review procedure laid down. There cannot be any question of a licence being refused without good reason. It is thought that the main type of case in which the question of refusal of a licence would arise is the kind of case in which the applicant's financial bona fides would not be satisfactory. Information bearing on a matter of that nature could well be of quite a confidential nature, perhaps obtained from abroad, and it might be such that it could not be proved in court to meet the full degree of the requirements of legal evidence. In such a case the court might well find it would have to give the benefit of the doubt to the applicant who would then commence business with a serious loss not only to the depositors but may be reaction in confidence in the whole banking system and the other banks.
In view of the particular nature of banking and the importance of ensuring that depositors do not suffer loss it is probably reasonable to allow the Central Bank to determine the applications with the right of appeal to the Minister. I say probably because I have a good deal of sympathy with this particular amendment. Like Deputy O'Higgins I would prefer, where it is possible, that an applicant should feel that it should be seen that he has a right of appeal to the courts. My main hesitation in accepting this amendment is the point I have made that there could well be a situation in which the information that would justify the Central Bank in refusing the application is such that it would not meet the required test of evidence in court in which case the court would find itself having to grant the licence with all the ill consequences that would flow for depositors and perhaps, as I say, for the banking system. This is my difficulty in accepting this amendment. My mind is not closed on it. If Deputy O'Higgins wishes I will have another look at this before the next stage to see if we can overcome it.
I understand the point made by the Minister. Perhaps he would bear it in mind.
I am glad the Minister has decided to have another look at this. We are all in sympathy with the idea that the investors' money must be protected. This reminds me of an argument we had here in the House over the Planning Bill when something similar was introduced where the Minister had the last word. God knows the mess made of that should have been enough to scare any other Minister from ever attempting to do the like again. I am not saying we will have, as we had in the Planning Bill, hundreds of appellants waiting for 12 months or longer for a decision. I feel in any case the Minister should be very careful before he takes to himself a decision which though he says he feels the courts might not be in a position to decide fairly I would question the right of a Minister, not just the present Minister but any Minister for Finance, being the correct person to decide on something like this. We must give the courts the right to decide matters which are very important. The courts would be just as interested in protecting the interests of the investors as the Minister or we in the House would be.
I have indicated that I favour the principle involved. Perhaps I did not convey to Deputy Tully the difficulty I see. I could well imagine a judge hearing such an application saying to himself: "I would not put my money into this but because of the law of evidence I am not allowed to decide on that basis and in the interest of depositors I am compelled to allow this application" although he might have the greatest misgivings about it. That is the particular difficulty I see.
Would the Minister say if he would not make a comment when he would be giving a decision in favour of the applicant which would keep anybody else from putting their money in as well?
I do not think he could do that. He is bound by the rules of evidence.
They do it every day in the week.
We had some of this already but would the Minister indicate what kind of thing will be regarded in relation to the refusal of the granting of a licence that would not be in the interests of the ordinary and proper regulation of banking? What, on the obverse side of the coin, would be regarded as being the orderly and proper regulation of banking?
As the Deputy indicated, we have had something on this. I indicated earlier that I do not wish to have this phrase "the orderly and proper regulation of banking" defined too narrowly and I have indicated the reasons for that. In general, one may take it that financial instability or doubt in regard to the standing of the applicant would clearly be one matter that would lead to a refusal. An undue concentration of banking companies in a particular field or in a particular area leading to wasteful duplication but bearing in mind the value of competition would be factors that the Central Bank would want to take into account. The degree to which the economy is served at the moment by a particular specialised kind of banking applicant would be another factor. I certainly could not purport to give an exhaustive definition of what would or would not be deemed to come within the definition of the phrase "the orderly and proper regulation of banking".
Would the ownership, the origin or source of banking interests come into it?
Yes, it could. In relation to ownership if all the owners or directors were not resident in this State although it would not be a ground for refusing it would be a factor which would have to be done in mind in conjunction with other factors.
Is there not a serious objection to a matter I raised the last time, that is, the secretary of the Minister's Department being a director of the Central Bank will be telling the Minister all the views of the Central Bank? Who will advise the Minister otherwise? Who will be the advocate to the Minister on behalf of the person who is appealing to the Minister? This is a most serious matter. Here we have a serious reason in relation to what I objected to the last day. I said that the Minister for Finance is entitled to the sole advice of the head of his Department. It is quite common that the best secretaries in Government Departments have always refused to go on outside bodies and companies. I am not referring in this case to the Department of Finance in particular. There are much worse cases than the Department of Finance in this respect— the Department of Industry and Commerce was notorious in this regard. I take it that, when this comes to the Department, the man through whom it will go to the Minister will be a person who is a director of the Central Bank. This is wrong.
It does not necessarily follow that because the secretary of the Department of Finance is a member of the board of the Central Bank he would in all cases take the same view as the board. In fact, there have been occasions when he did not agree entirely with everything the board of the Central Bank said.
The Minister is quite correct. The NIEC are the only body who agree 100 per cent but I think the man is on that board also. The members of the NIEC continuously sign unanimous reports.
That body is being reconstituted.
Not before time.
On the point raised by Deputy O'Donovan about an applicant who was refused, it is the applicant himself who makes his case to the Minister, it does not come through the Central Bank.
I served a long time in the Department of Finance and I know exactly how things are examined there, unless everything has been changed in recent times.
What is envisaged in this section is a statutory obligation on the Minister to consider the case made. There is no doubt—and this is what Deputy O'Donovan has in mind—that the Department would make a submission to the Minister on the matter but no Minister worth his salt in such a case is simply going to rubberstamp what he will get from his Department. He will examine the case made by the applicant.
The Minister is an innocent man. The Minister is a corporation sole and corporations work through their officials. It might happen that the Minister might never hear of the case, it could be turned down in his name.
No, that would not happen.
I do not agree with the Minister. It could happen.
I do not believe it could happen. There is a statutory obligation involved in this.
The Minister is a corporation sole and he operates through his officials, as does any other corporation.
I know of no case in which there is this kind of provision. There are numerous statutes in which it operates, in which such cases do not come personally to the Minister. I might be able to throw a little more light on the question asked by Deputy O'Higgins regarding what is meant by the orderly and proper regulation of banking. It is intended to mean—and it means, depending on the point of view one takes—the regulation of banking activity in a way that ensures so far as possible that it is carried on and develops in an orderly way and in accord with the national interest. This means ensuring that only competent and responsible people who can command adequate capital and appreciate national economic needs and aspirations would be permitted to engage in banking and that the ownership, control, operation and management of banks should be consistent with the common good.
Obviously that is a fairly generalised definition but the phrase itself is fairly general. I understand from the Central Bank that they intend when it is vested with the authority to grant or refuse a licence under this Bill to apply certain criteria in granting or refusing a licence. Regard would be had to the following factors: (1) the standing and personal suitability of the directors and chief executives, their financial standing and record, and their experience in banking and related fields; (2) the competence, integrity and experience of the proposed management; (3) evidence of adequate provision for management succession, particularly important in the smaller banks; (4) adequate fidelity guarantee insurance for all staff; (5) evidence that the proposed business was soundly based and planned with clearly defined and adquately researched objectives; (6) the Central Bank would require to be satisfied that the objectives of the business would be consistent with economic and monetary policy, the safety of depositors' funds and fair trading in banking; (7) satisfactory projections over a three-to five-year period of services to be provided, employment, balance sheet and profits. There would require to be paid up share capital of at least £500,000. There would also be suitable requirements regarding commencing capital, free resources and secured loan capital.
These proposed requirements are necessary if the Central Bank are to carry out properly their functions as proposed under this legislation, namely, of protecting the public and ensuring the orderly and proper regulation of banking. In addition, the bank are anxious to apply criteria bearing on the control of banking businesses, in relation to the content of external shareholding, to the extent of shareholding by a particular individual or group— except where the business is a subsidiary of a bank—and the nationality of the directors. I cannot commit the Central Bank to specific criteria on this but I am trying to indicate to the House the general factors the bank will bear in mind in operating this section.
I am obliged to the Minister. From what the Minister has read out—which I realise is merely advice or an indication from the Central Bank—it appears that there is going to be involved to some extent consideration of how an applicant for a licence will be circumstanced from the point of view of staff in providing the services indicated, and there will have to be a consideration as to the relationship between staff and management. I have forgotten the words used by the Minister but satisfactory projection of the provision of services over a stated period taken in conjunction with management succession indicates some consideration of what the internal set-up will be as between management and staff in order to assume that the projection in relation to services will be carried out.
As the Deputy knows, such projections are made and assessed in relation to various businesses, State companies and so on, where an application is made for a loan or grant. In the absence of specific information about, say, poor industrial relations, the assumption has, I think, to be made in all cases that industrial relations are normal.
Suppose the Minister is short of money and some foreign bank, the Bank of Nova Scotia, for example, makes an offer to provide the Government with a certain amount of money and the Central Bank does not regard that as being "in the interest of the orderly and proper regulation of banking"—that phrase appears twice in the same paragraph; to put it mildly, that is rather unusual in legislation—and the Minister is appealed to by the Central Bank and, having made a deal with the Bank of Nova Scotia, he says: "You are all out in the wet. I have allowed these fellows in. They are giving us £5 million or £10 million and I am afraid your banking, economic and policy regulations must take a back seat because I am very badly in need of the money and I propose to allow these people to come in and set up their bank" what check is there in this section against that kind of operation?
I do not visualise the situation arising, certainly not so long as there is a Fianna Fáil Government in control.
I can visualise it arising very shortly.
I cannot visualise such a thing happening. We have not, I am glad to say, experienced any exigencies of that kind and we have no reason to anticipate that we will in the future. Furthermore, even if such a situation were to arise with some other Government, it seems to me that the kind of borrowing that would be done by a Government would not be done on this basis at all.
But it was done with the Bank of Nova Scotia. This is exactly what was done.
The bank was allowed to operate here? A bank has to pay only £1 for a licence.
The Bank of Nova Scotia gave the Government a sum of £5 million.
But the bank was operating here at that time.
It was not. I cannot say that that was the ground for allowing it to come in, but the two things were certainly contemporaneous. They happened at the same time.
I presume the Deputy realises that until the passing of this Bill virtually anybody can get a banking licence on payment of a fee of £1; in other words, there is nothing to prevent any bank coming in here if it wants to. There is the question as to whether or not they can participate in the scheme for the clearing of cheques and so on. That is another factor. Coming in as banks, as a number of them have, they are not controlled at the moment.
So it was out of the goodness of their hearts the Bank of Nova Scotia contributed £5 million to the Government.
I assume it was just good business. I am not familiar with the particular transaction. I do not assume that is the kind of problem at all; I assume the kind of problem we will have is doubtful people coming in and wanting to set up.
I appreciate that is what the Minister has in mind.
If one cannot trust the Central Bank and the Minister for Finance one might as well give up.
The case I am making is where there is disagreement between the Central Bank and the Government: the Minister, being short of money, like all Ministers for Finance very often are, and the Central Bank, thinking the thing out, say: "We are turning this down" the Minister then says: "I have made a deal with these people. I am going to get £10 million from them and I think they should be given a licence."
As I say, I cannot visualise such a situation arising but, if it were to arise, how does the Deputy suggest it could be overcome?
I have not thought about that aspect of it, I do not mind admitting, but by not having the Minister alone in this position——
I did indicate, in response to an amendment tabled by Deputy O'Higgins, that I was in sympathy with the idea of having a right of appeal to the High Court and I explained what the difficulty was. I am looking into that, but that would not answer the Deputy's point.
No, not really.
I am not quite sure what remedy, if any, is available.
I do not know what way it could be tackled but I regard it as quite a possibility.
Could the Minister explain the need for subsection (5)? I accept that the granting of a licence would not be an indication of the solvency of a person or a company, but surely a licence would not be issued to an insolvent person or company. This subsection appears to be superfluous. I was wondering if there was anything behind it.
It is possible that such claims could not arise, but this may be just making assurance doubly sure. I can visualise two cases, one in which a company gets a licence and is solvent, and then becomes insolvent, I think this would be a bit remote, but it is possible that a creditor or a depositor with that company might claim that the Central Bank should not have given a licence and thereby has incurred a legal liability. This is remote. The more likely case is if the Central Bank were to give a licence to people who, as a result of all investigations, appeared to be solvent but subsequently turned out to have been insolvent at the time of the granting of the licence; it is a very unlikely possibility, but it is something that could happen. In that case someone might think he had a right of action against the Central Bank. The subsection is designed to guard against that kind of possibility.
It seems a very remote possibility. It is, I think, drawing attention to a possible legal commitment which is not, in fact, there.
So long as it draws attention to the fact that it does not exist I do not think it is a bad thing.
Amendments Nos. 6 and 8 are related amendments and can, perhaps, be discussed together.
I move amendment No. 6:
In page 6, line 34, to delete "conditions (if any)" and substitute "conditions (which expression in this and the next following subsection does not include a condition of the kind specified in subsection (4) of this section), if any,".
The purpose of this amendment is to give power to the Minister, at the request of the Central Bank, to make an order providing that it should be a pre-condition of the granting of a licence that the applicant should be a company. Any order so made may be amended or revoked. Following a review of the licensing position, in conjunction with the Central Bank, we decided it was desirable that these powers should be available as individuals should not in future be accepted as eligible for banking licences. In the case of individuals there is no guarantee of continuity and that could be a disadvantage from the point of view of depositors. It is only by having a corporate body that assets and liabilities can be positively identified. Moreover, banking nowadays is so complex as to require a broadly based organisation with a number of persons having different skills taking responsibility. At present all banking businesses holding licences are companies so that no great hardship should be involved for individuals by confining future licences to companies. However, in the past few months some licences have been taken out by individuals, who are not, in fact, carrying on a banking business.
For what purpose?
To beat the legislation.
Time will tell. It does not beat the legislation really.
It does not, when the licences expire.
If there should be individual licence holders when the section comes into force the Central Bank would allow them a reasonable time to turn the businesses into companies. I think the House will accept in general that, having regard to the banking business, for the reasons I have mentioned it is desirable that holders of banking licences should be companies.
I do not think I disagree with the Minister; perhaps it is better to have companies. In relation to the question of insolvency, what would be the difference between an unlimited company and a limited company and what are the safeguards set down to protect depositors of banks?
Are we discussing the amendment?
Amendment No. 8 is being taken with amendment No. 6.
I agree with the Minister about the amendment.
I move amendment No. 7:
In page 6, after line 42, to insert the following subsection:
"() Whenever the Bank proposes to impose a condition in relation to a licence or to amend or add to the conditions of a licence—
(a) it shall notify in writing the person who holds the licence or to whom the licence is intended to be granted that it intends to impose a condition in relation to the licence or to amend or add to the conditions of the licence, as the case may be, and of its reasons for so doing and that the person may, within twenty-one days after the date of the giving of the notification, make representations in writing to the Bank in relation to the imposition, amendment, or addition, as the case may be, and shall specify in the notification, the condition or the amendment or addition, as the case may be,
(b) the person may make such representations to the Bank within the time aforesaid, and
(c) the Bank shall, before deciding to impose the condition or amend or add to the conditions of the licence, as the case may be, consider any representations duly made to it under this subsection in relation to the imposition, amendment or addition, as the case may be."
This requires the Central Bank to give prior notice to the banks of any intention to attach a new condition to banking licences or to vary existing conditions and to consider any representations made by the banks. The intention is to ensure that the banks will get a full hearing when any change in conditions might make difficulties for them. I think it is a reasonable requirement and, in relation to a Supreme Court decision some time ago, it may be necessary.
Do I understand that these licences have to be renewed periodically? It is some time since I read this Bill but my recollection is that, once you had a licence, you had it, and it was not renewable. When the Minister talks about new conditions does he mean conditions for newcomers?
No. The Deputy is right in thinking the licences are not renewable. Once granted they are there unless revoked but there is provision for the Central Bank to lay down conditions connected with the granting of a licence and also from time to time to vary those conditions. It is in relation to the procedure for varying or amending the conditions that I propose this amendment.
For new licensees?
No, for existing licensees.
The purpose of this thing is to give freedom of action to the Central Bank?
They have freedom of action under the Bill but this is to say that if they are operating that freedom they will give notice and the right to make representations before taking action.
What type of conditions or amendments are envisaged to any licences? Could the Minister indicate this in broad terms?
They will vary depending on the size and nature of the banking business but they will certainly include, in the case of major banks, conditions about the proportion of deposits which must be deposited with the Central Bank for the purpose of controlling the degree of liquidity and also conditions which will enable the Central Bank to enforce policy on credit. I speak in very general terms. These will be applicable to major banks. In the case of merchant banks and others different conditions would apply.
Surely the control which the Central Bank will exercise over the commercial banks will not be subject to conditions laid down in the licences. The control we are giving here to the Central Bank will be broadly within this Bill, and will not need to be and should not be included in the licences.
There is a section in the Bill which deals specifically with requirements in relation to monetary policy but the method of enforcement arises because of the conditions under the licence. One of the conditions that I imagine would be in every licence would be that the banks would comply with general directives issued from time to time by the Central Bank in regard to, say, credit. The method of enforcement is under the licence and the conditions attaching to it.
Surely the Central Bank has statutory powers to enforce monetary policy in regard to such things as the granting or reduction of credit?
It does not have at present: it will have under this Bill, but in practice, having issued the directive, if it is not complied with, the method by which teeth are applied is under the licensing system and conditions attaching to licences.
The real difficulty about this is in relation to the gentlemen who impinge on the banks—not that I have much sympathy with commercial banks. The real nigger in the woodpile is the Minister for Finance, not the ordinary banks and their customers: they are the people who are being pushed around. If we have this kind of joining of forces there is no use in talking about the control of credit because the people who do not control credit and who are demanding more credit all the time are, in fact, the Government. They want more and more. I see no provision in the Bill to control the Government or the amount of credit to be made available to them. Going back to a major policy declaration of the Minister we will have more and more inflation so long as there is no control over the amount of money made available to the Government, or the amount of money the Government can demand.
I do not wish to become involved in a detailed and, perhaps, academic dispute with the Deputy about this but let me make first principles clear. The Government is elected by the people and as such it will not be subjected to the Central Bank or anybody else.
Yes, but it can hand over certain powers to the Central Bank if it so wishes.
It can, but it certainly will not hand over to the Central Bank power to control the Government. Further, I must point out that at present the demands on credit being made and to be made this year by the Government are considerably less than most people, probably including Deputy O'Donovan, anticipate.
I do not agree at all because this year particularly with what I see looming up in connection with transport organisations there will be most serious demands by the Government for additional credit. The losses of the three major transport companies are going to run to about £20 million. If the money cannot be found by the Government raising a national loan—and there is no evidence that it can be found—the Government will either borrow the money from abroad or obtain it from the commercial banks by the creation of credit or through the Central Bank.
I still disagree with what the Minister says about the different clauses which can be imposed within the licences. I would prefer to see that each licensee is equally subject to the Central Bank in relation to matters of monetary policy rather than have the clauses within the licences varying and the Central Bank not having equal powers over different banks.
I may not have made myself quite clear when I said that the conditions would be different. I did not mean there would be less power vested in the Central Bank in relation to them but rather that the conditions which would be applied to normal commercial banking would not be appropriate to an investment bank or merchant bank. That is all I meant.
Perhaps I should add that some examples of the matters which might be covered by the conditions attached to the licences are a time limit within which certain requirements, say, capital structure of the company, should be met; conditions designed to secure the prudent conduct of the business— these might relate to such matters as the period of notice required for repayment of deposits; a limitation on the deposit liability to any one depositor; a similar limitation on advances to any one borrower; restrictions on advances to directors or to firms with which they might be connected; conditions designed to prevent an undue concentration of assets in any one category; a general condition that the licence holder will comply with the directives and requirements of the Central Bank. As I indicated earlier I would anticipate this being in every licence.
The section would also enable the Central Bank to regulate the opening of branches by banks should it be considered desirable to exercise supervision in this regard. It might be achieved by imposing a condition that the prior consent of the Central Bank would be obtained before the opening of any branch office. These are some examples of the kind of things which might be covered by the conditions attached to licences.
I move amendment No. 8:
In page 6, after line 42, to insert the following subsection:
"() (a) The Minister may by order, if the Bank so requests, provide that it shall be a condition of every licence (whether granted before or after the making of the order) that the holder thereof shall be a company.
(b) The Minister may by order, if the Bank so requests, amend or revoke an order under this subsection, including an order under this subparagraph.
(c) Licences shall have effect subject to and in accordance with the terms of any orders for the time being in force under this subsection.
(d) The Bank shall not make a request under this subsection unless it is of opinion that the grant of the request is calculated to promote the orderly and proper regulation of banking."
In this section we again meet the words, "the orderly and proper regulation of banking". They are quite unnecessary in subsection (2) of the section. What objection is there to making the section read:
The conditions of a licence may be amended, revoked or added to and conditions may be imposed in relation to a licence from time to time by the Bank if in the opinion of the Bank the amendment, revocation, addition or imposition is required.
The continuous repetition of these generalised words, "the orderly and proper regulation of banking" does not cause one to have undue respect for the method of drafting the Bill.
The Deputy can take it that the repetition of this phrase is not an accident.
It might be due to laziness.
No, it is not.
It could happen.
It is due to the decision of the Supreme Court in the marts case. It would otherwise have been drafted on the basis of generally giving the Central Bank power to operate conditions in the interests of the common good and thereafter it would not have to be spelled out but because of that decision this phrase is necessary. I know it seems a little cumbersome but I am advised that is the reason why it appears with such frequency.
That is why we do not have "the integrity of the currency" in, or something like that.
I move amendment No. 9:
In page 7, between lines 13 and 14, to insert a new paragraph as follows:—
"(j) on demand made by a majority of the depositors."
The purpose of this amendment is quite clear. The first duty of any bank must be to their depositors. If depositors are not satisfied with the activities of the bank they should be entitled to demand the revocation of a licence and the winding up of the firm. It is a reasonable situation for any bank to find themselves subject to their depositors. I would ask the Minister to accept the amendment.
I have a few objections to this amendment. First of all, in practice it would be very difficult, if not impossible, for the majority of depositors to come together for the purpose envisaged in this amendment since the depositors' names and addresses are confidential to their banks. Attempts by depositors to come together for this purpose would very likely become known and could seriously damage their own interest by causing a run on the banks and at the same time they might not even succeed in getting a majority together because of the practical difficulties of finding out the names and addresses. Furthermore, I doubt whether depositors are people qualified to initiate action in regard to the revocation of a licence. This is a matter much more for a body such as the Central Bank who are skilled in the complex activities which make up modern banking. The loss of a licence is a heavy penalty and it should be confined to serious, specific reasons as are set out in the Bill. Of course, depositors are creditors of a bank and if the bank should fail to make due repayment of money due to them they are covered as creditors by section 11 (1) (f) under which a licence may be revoked if a bank becomes unable to meet its obligations to creditors. Deputies can take it that with the powers being provided in this Bill the Central Bank will keep a close watch on the activities of all banks and get detailed returns from them quite regularly. This will enable the bank to take action at an early stage if any bank should show any signs of becoming unsound. I would expect the revocation powers to be used only rarely. Because this would not in practice help depositors and also because I have grave doubts in theory as to whether depositors should have the right to initiate the action to revoke a licence, I am afraid I cannot accept the amendment.
I move amendment No. 10:
In page 7, subsection (1), line 48, after "cent" to insert the following:—
"or such other percentage not being greater than five as may be determined by the bank".
The purpose of this amendment is to allow a variation in the percentage on the total deposits which must be deposited by the bank. In certain circumstances 5 per cent could be a penal rate on commercial banks to deposit with the bank. In certain circumstances it may be, in the interest of the orderly pursuance of banking policy, that a lesser percentage would be more satisfactory. I think this is a fair point to make and I would ask the Minister to consider it favourably.
I doubt very much if it can be said that 5 per cent, a minimum of £20,000, is a hardship even for a small bank. The figure of £20,000, which is the minimum, already exists under the Central Bank Act, 1942. Of course, at that time £20,000 was worth a great deal more than it is today so there could well be a case for a higher figure than £20,000. Substantially it could be said that a bank which cannot afford to make the deposit of 5 per cent is probably a doubtful proposition and maybe ought not to be encouraged anyway and one should remember that the deposit is not simply dead money as far as the bank is concerned but will be earning the current rate of interest. I am afraid I cannot see that there is a very strong case for this. It seems to me that to accept it would simply be opening the door to encouraging people to enter into banking who are not financially equipped to do it and that is not in their interests or in the interests of the people with whom they deal.
The purpose of the amendment is not to allow that type of situation to develop. The purpose of the amendment is quite simple. If, say, in a reflationary position you wanted to revamp the economy it might be a good thing to release 1, 2 or 3 per cent of these deposits back to the commercial banks to allow them to increase credit. This might be desirable in certain circumstances. The purpose of the amendment is to allow a certain amount of flexibility to the Central Bank in the matter of monetary policy.
I think we should distinguish between the deposit envisaged here, which is the sum that is to be available for creditors, particularly depositors, on the one hand, and on the other the deposits which are provided for in another section which have to be made from time to time to the Central Bank in conformity with monetary policy. In those cases certainly this could vary from time to time and it is envisaged that it would vary but the particular deposit that is involved in this section is in the nature of the deposit or guarantee that is entered into by, say, an auctioneer on taking out a licence. It is not the kind of deposit that is going to operate to any noticeable degree in relation to control of credit or monetary policy. It is too small.
I disagree in so far as the difference between a commercial bank and an auctioneer is that an auctioneer can put up a bond in relation to his deposit but this is hard cash and, in fact, a figure of £500,000 in cash if released could lead to a credit expansion in the region of £5 million which could be desirable in certain inflationary circumstances. I wish to emphasise that it could be used as a weapon of monetary policy and the Central Bank should, if necessary, have the flexibility in the operation of this deposit to use it if and when necessary.
I made a serious point on this section in my Second Stage speech.
We are on the amendment at the moment.
But this relates to the amendment.
I am sorry.
The amendment reads:
or such other percentage not being greater than five as may be determined by the bank.
I take it, I would ask the Minister to confirm this, that the two big commercial banking groups in this country are now legally Allied Irish Banks and the Bank of Ireland. Judging by the notices I see on the outside of banks, that is the position. Therefore, each of these big groups will only have to deposit £500,000, about one-tenth of 1 per cent, but an unfortunate group of people starting up a bank may have the minimum amount to deposit. Before you go into the banking business you are supposed to have a minimum amount available for carrying on your business. Speaking from recollection, that minimum amount is £200,000. Am I right?
It will operate in practice as £1/2 million but there will be a special provision in section 13 for small banks whose capital does not exceed £15,000.
The point I want to make is that if you take the bank which has a capital of £1/2 million it will have to put up 5 per cent, £25,000, but these great colossi will only have to put up £500,000, which is one-tenth of 1 per cent of £500 million. With the inflation which the Minister is so fond of defending the day will come very shortly when £500,000 will be very small cheese. The assets of these two big groups are now four times what they were even ten years ago and in another ten years they will probably be ten times what they are today. This pandering to the existing commercial banks runs through the Bill a bit. The Minister may not realise this but an outsider like myself reading the Bill as a whole——
Perhaps the Deputy would retain that for the section.
I am satisfied with what I have said.
It is quite true that the proportion of deposits required from a big bank is smaller than the proportion required from a small bank but we must remember that we are dealing here with what might be called the deposits to qualify a bank which will be held and used if necessary in ease of depositors if the bank gets into difficulty. We must distinguish between that and the other deposits which are dealt with later which are required in relation to monetary policy. In this case I think it is clear enough that there is normally a higher margin of safety when banks have much greater resources and a much wider spread of investments. Consequently, the proportion required is not unreasonable. Furthermore, I would say that the actual amount required and the minimum figure is very small in relation to small banks. In fact, the minimum figure is the same as it was in 1942. In so far as the compulsory depositing of money with the Central Bank is concerned for purposes of monetary policy, the bigger the bank the bigger the deposits they will have to make. That will cancel out the apparent anomaly that has been pointed out in relation to this section.
Amendment No. 12 meets amendment No. 11 in part and, perhaps, the two could be discussed together.
I move amendment No. 11:
In page 8, to delete subsection (5), lines 12 to 14 and to substitute therefor the following:—
"(5) The deposit shall carry interest at a rate equivalent to the rediscount rate of the Central Bank of Ireland and shall be payable at such periods not being greater than six month intervals."
I am pleased to note that the Minister has taken account of our amendment in relation to the declaration of the rate of interest on deposits. In amendment No. 12 he has not taken account of the dates of payment of the interest. Because of that, perhaps, amendment No. 11 is more appropriate than the Minister's amendment.
As the Deputy says, the principle involved in amendment No. 11 has been accepted by me. However, it would appear that the wording of amendment No. 11 is not very satisfactory. Amendment No. 12 has been drafted by the parliamentary draftsman and agreed with the Central Bank. The reason for the omission of the reference to payment at six-monthly intervals is that it might well not suit some banks. The amendment submitted by me leaves it open to the payment being made at intervals which will suit the bank.
In the Minister's amendment there is no specified time at which the payment is expected to be made.
That is right.
There should be a specified time, whether it be annually or at six-monthly or three-monthly intervals.
The point I am making is that by not specifying the time it is left flexible so that arrangements can be made between the Central Bank and the bank making the deposit to make the payment at intervals convenient to the bank making the deposit. These intervals will vary with different banks.
I take it that it is not the intention to defer the payment of any interest.
No. It is intended to make arrangements which will suit the convenience of the depositing bank.
I still prefer amendment No. 11.
I move amendment No. 12:
In page 8, subsection (5), line 12, after "rate" to insert "(not being less than the Bank's minimum re-discount rate for the time being for exchequer bills fixed and published by it under section 7 (1) (g) of the Act of 1942)".
Will the Minister explain what is envisaged in subsection (6) which provides that any charge purported to be created on the deposit shall be void?
The intention is that the deposit cannot be mortgaged. If we did not have this provision, a bank which was in dire difficulties might well pledge its deposit with the Central Bank as security for some assistance it was getting. The object is to ensure that the deposit with the Central Bank will be reserved to meet possible claims by persons who deposit money with a bank or a finance house.
It does not seem to be very real.
Apparently it is possible.
I do not think the Minister really dealt with the point which I made. As I said, £500,000 is negligible in relation to a group of banks which are now one legal entity with assets of £500 million. On the other hand, a sum of £25,000 would be a sizeable amount to a bank with assets of £1/2 million. The Minister and I did first year economics at some time or other and we know the theory that a bank lends nine times as much as its assets. The Minister is taking away a great deal of power from incoming competitors of the giants that have now been created, doubtless because they had notice and knew what was coming. They might have done it anyway. I am not saying they would not. Presumably they knew what was coming from the influx of American banks and others.
The section provides that the amount of a deposit maintained by a holder shall be 5 per cent of the total deposits at offices in the State of the holder but shall not be less than £20,000 nor more than £500,000. What is the point of including "nor more than £500,000"? I am giving the Minister a hint as to how he might lay his hands on some money and I have not the slightest doubt that he is in dire need of money. This is not my purpose in querying him on this section. There are references to equality of competition in the Bill. We should attempt to create conditions that are even for all comers. This is not an even condition by any means. This is an uneven condition. It has nothing to do with what the Minister says about banks being required to make deposits for reasons related to monetary policy. This is a different thing.
That is what I was pointing out. I am not disagreeing with what the Deputy has said. In fact, I agreed already that it is uneven under this section. I drew attention to the fact that under this section the deposits are not the kind of deposits involved in later sections required by monetary policy. These are deposits which are required in the form of some kind of protection for depositors. I pointed out that the larger the bank and the wider the spread of its investments, the less risk there is for depositors, and that the risk in the case of small banks is higher for the depositors than in the case of big banks. That does not mean that every small bank is a bad risk and every big bank is a good risk. I am not saying that.
I am saying that the risk is higher in the case of small banks. Therefore, in this section which is dealing with that risk situation for depositors the deposit is higher. I am not suggesting that it is realistically sufficient to protect all depositors. Of course, it cannot be. I am saying that in so far as one is talking about equality of treatment, then one can have regard to other deposits which are made for the purpose of monetary policy, in which case the deposits from the big banks will be far greater than the deposits from the small banks and, in proportion, may well be higher than in the case of the small banks. We make the provision, particularly for the small banks, that they do not have to make the deposit in cash if they are below a certain size. I think that, taking the whole thing on balance, one finds that the balance is not against the small bank.
Unfortunately for the Minister's case a gentleman named Mr. Bernie Cornfield has been around. Was it £5,000 million he had scattered all over the world?
He was not subject to the Central Bank of Ireland Act.
He certainly undermines the Minister's case. The Minister said they would have larger assets scattered all over the place. I suppose he had more assets than any organisation ever had.
The Deputy will agree that he was not subject to the kind of control we are providing here.
I do not think he ever came to this country, although there were strong suggestions that he was operating in England in recent times. Admittedly, he collected a great deal of money. He does undermine the Minister's case to some extent. I am all for the small man appearing to be treated equally with the bigger individual. It is very hard to achieve that but at least we ought to try to achieve it.
With your permission, a Cheann Comhairle, I should like to raise on the Adjournment the subject-matter of Question No. 32 on the Order Paper of Thursday, 17th June, 1971.
The Chair will communicate with the Deputy.