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Dáil Éireann debate -
Thursday, 5 Aug 1971

Vol. 255 No. 19

Ceisteanna—Questions. Oral Answers. - Bank Interest.

17.

asked the Minister for Finance if he is aware that the failure of banks to pay interest on money placed in current accounts during the recent bank strike has caused hardship in many cases because such money was inaccessible to the depositors during the strike; that this failure has caused many people to discontinue saving through the banks; and that any likelihood of a strike in the future may cause a run on the banks if their present attitude is unchanged; and if he will take steps, if necessary by the introduction of legislation, to ensure that interest is paid in such cases.

I do not accept the implications in the Deputy's question either regarding hardship to current account holders arising from the bank dispute or the effect of the dispute on savings.

As regards current accounts, while it is true that the holders of the accounts did not have direct access to them in the sense that cheques which they drew could not be debited to the accounts, the fact is, as stated in the survey of the effects of the bank dispute published recently by the Central Bank, that cheques continued to be acceptable widely as payment for goods and services throughout the dispute, so that private persons as well as firms were enabled to extend credit to one another in very substantial amounts. Far, therefore, from restricting credit, the dispute had precisely the opposite effect. Many people took a credit holiday and the net result was that some £50 million of additional credit over and above the credit guidelines set by the Central Bank was pumped into the economy at a time when seriously inflationary conditions called for the opposite action.

If there should be account holders who suffered hardship because of the dispute, it is not, subject to the account holders being of good standing, because the means of obtaining cash or credit were not available but that they were not availed of. The fact that the cheque system was capable of being, and was availed of, was widely known.

On the savings side, persons having money in deposit accounts have been credited with interest on their credit balances for the period of the dispute. They have not suffered any loss of interest which might be a disincentive to saving. Persons who could not lodge funds to their deposit or other accounts in banks which were closed had available to them a wide range of alternative financial institutions, for example, the post office and trustee savings banks, building societies and merchant and industrial banks not affected by the closure. Deposits in such institutions increased during the period of the closure and, indeed, it is known that in some cases encashment through business firms of cheques drawn on banks that were closed provided funds for lodgment in deposit accounts, interest being earned on these funds.

However, in the year ended April, 1971, that is when the associated banks were functioning normally, the growth in deposits with these banks showed little change from that of the previous year. I would remind the Deputy that both parties to the dispute have undertaken to consider implementation of the findings of the Fogarty Report which, inter alia, deals with the question of steps to avoid possible future disputes. There are signs that a better climate of comprehension and understanding is emerging between the two sides. In my view it is in this way that progress will be made rather than by compulsory legislation directed against one side or the other.

Arising out of the Minister's very lengthy reply which I am sure he will appreciate I could not fully digest, what I had in mind——

Would the Deputy ask a question?

I will come to it if you will be just a little patient.

We have many questions on the Order Paper.

Will the Minister agree that a person who had only a nominal sum on deposit, who had hire purchase commitments and whose cheques would not be accepted by the hire purchase companies and who was charged excessive interest by them because he was late in the payment of his instalments, suffered a hardship inasmuch as he had to pay to the hire purchase company considerable interest while the banks were investing his money and were enjoying that interest?

The Deputy has in mind people who had money in current accounts. As I pointed out, those who had money on deposit got interest. Those who had current accounts if they had any reasonable credit standing at all were able to get cheques cashed. In the kind of case he mentioned, they could have got cash for cheques and paid the hire purchase companies if they would not accept cheques. All the figures show this is what happened. People got a great deal more credit than they would have got if the banks had been open.

Is the Minister not aware—he represents the same constituency as I do—that very many people in the lower income group had very modest savings in the banks? They were not known to other traders or hire purchase companies and so cheques would not be accepted. Since they were not normally accustomed to cashing cheques they were not in a position to get their cheques cashed and, through no fault of their own, they had to run into arrears over several months with hire purchase companies and were subjected to interest to which they would not normally be subjected if the banks had been open and they could have got the money.

The number of such cases must be very small indeed and, in most cases, it must have been due to the fact that the people did not avail of what they could have availed of or did not do what other people were doing. I would suggest that in any such case as described by the Deputy in which there was no possibility of people being able to cash cheques and pay debts, if they can establish this to the banks the banks will deal with them sympathetically in the circumstances.

Would the Minister consider a case in which a person lost close on £150 in interest because of having to pay the hire purchase company an excessive rate of interest and would he not agree that this is a grave hardship?

If the circumstances are as the Deputy indicates, and these people have no other way of dealing with them, I believe the banks would deal sympathetically with these people.

But the banks have refused.

If the Deputy will give me the details I will be glad to look into the matter.

Does the Minister mean to say that none of these people came to him?

There may not have been that many.

There is no confidence in the Minister in Dublin north-central.

The results proved otherwise.

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