Dáil Éireann debate -
Thursday, 2 Dec 1976

Vol. 294 No. 9

Trustee (Authorised Investments) Order, 1976: Motion.

Minister for Finance (Mr. R. Ryan)

I move:

That Dáil Éireann approves the following Order in draft:

Trustee (Authorised Investments) Order, 1976.

a copy of which Order in draft was laid before the House on 16 June, 1976.

The Trustee (Authorised Investments) Act, 1958, defines the investments in which trustees may invest trust funds unless expressly forbidden by the instrument, if any, creating the trust. Equally the trust deed may confer wider powers of investment but many trusts and analogous funds are restricted to the investments authorised under the Act.

The Minister for Finance may vary the authorised investments by order. The draft order before the House for approval would add Allied Irish Banks Limited loan stock 1985 to the list of trustee authorised investments. This stock was issued in 1975 to raise additional capital to provide for the future growth of the bank. It will be repayable at par on 1st August, 1985. In addition to interest at 10 per cent per annum, it carries the right to convert into shares of Allied Irish Banks Limited in any of the years 1977 to 1985. The shares of the bank were granted trustee status in 1969 by the Trustee (Authorised Investments) Order, 1969 (S.I. No. 241 of 1969). The new loan stock is quoted on the stock exchange and I am satisfied that it is suitable as regards both security and income for addition to the list of authorised trustee investments in this country.

The Minister for Finance is obliged under the Act to consult with the following persons in regard to the terms of any order he proposes to make to vary the list of authorised investments—a judge of the High Court nominated by the Chief Justice, the governor of the Central Bank, the Public Trustee, the chairman of the Irish Banks' Standing Committee, the president of the Incorporated Law Society of Ireland and the president of the Stock Exchange—Irish. I have consulted these persons and they have raised no objections to the proposed order.

Under the Trustee (Authorised Investment) Act, 1958, "securities guaranteed as to capital and interest by the Minister for Finance" are included in the list of authorised trustee investments. The question has been raised in some quarters as to whether certain interest-bearing deposits which are guaranteed by me, as Minister for Finance, come within the scope of this definition. In order to remove any doubt, therefore, I am advised that investment in interest-bearing deposit accounts with the Agricultural Credit Corporation Limited and with the Industrial Credit Company Limited should be specifically added to the authorised list. I propose to do so by means of this order.

As Deputies may be aware, I have been considering some further widening of the investment powers of trustees. My Department have been engaged in consultation with the Irish Building Societies Association regarding the terms on which trustee status should be extended to building societies. The Building Societies Bill will provide the necessary framework and I intend, as soon as possible after the enactment of the Bill, to bring a draft order before the House for approval. The other main area where change is desirable concerns banks authorised under section 1 of the 1958 Act to accept trust funds on deposit. Since 1958 there has been a considerable increase in the number of banking institutions operating here and as a result of the 1971 Central Bank Act, there is now in force a comprehensive system of bank licensing and supervision conducted by the Central Bank. I am satisfied that in principle the list of banks should be widened and my Department are examining the matter with the Central Bank. I hope it will be possible to deal with the banks and the building societies together.

Meanwhile, I am satisfied that it is desirable that trustees should have power to invest trust funds in Allied Irish Banks loan stock 1985 and that it should be added to the list of authorised investments and also that interest-bearing deposits with the Agricultural Credit Corporation Limited and with the Industrial Credit Company Limited should be specifically added to that list. I commend the motion for the approval of the House.

Mr. Haughey

Allied Irish Banks have been doing very good turns for the Minister recently.

Mr. R. Ryan

Yes, for their country and their shareholders too.

Mr. Colley

We on this side of the House have no problem in agreeing to the addition of Allied Irish Banks loan stock 1985 to the list of authorised trustee investments. The only thing I want to say in regard to what the Minister has said is to refer to his stated intention of widening the list of banks that would be involved as trustee investments and of bringing in an order in due course, perhaps, in conjunction with a similar order relating to building societies. I welcome this and I trust that what the Minister has in mind is to ensure that there will be no discrimination in future between different institutions. There are at the moment certain institutions which are on exactly the same basis as far as the Central Bank is concerned as regards licensing, the kind of business they carry on and so on, and some of them are on the list of authorised trustee investments and some are not. I take it that what the Minister has in mind is to put them all on the same footing. If that is so I would certainly support it. If it is not we will hear about it in due course.

I do not know if the Minister recalls what I am referring to. I did have some correspondence with his Department in this connection, but I am not asking him to comment on it at the moment. I am simply putting down a marker that this is a problem which for quite reputable banking institutions is considerable, not just because of the immediate consequences of being on the list, so to speak, but also because failure to be on the list when their competitors are on the list may suggest a certain lack of confidence in official quarters in these institutions, a lack of confidence which in fact does not exist. I am merely putting down a marker in that regard and reminding the Minister of this problem, trusting that that is what he has in mind to remedy when he says he intends to bring in a further motion. If that is not what he is doing I will be talking about it when the motion comes in.

Mr. R. Ryan

I would have liked to anticipate at this stage what specific organisations or institutions I would be adding to the list. One has to ensure two things, first, total security and, secondly, an adequate return on the investment of the investor. This means that you cannot give blanket approval to a description of institutions.

Mr. Colley

I did not say that.

Mr. R. Ryan

This problem is likely to arise in relation to building societies. What we will be doing in that connection is laying down criteria which will have to be met to qualify for trustee status. It is highly desirable that all building societies would conform to the criteria which will be laid down. If they do not they will not get trustee status and undoubtedly investors will then have to make their decision as to whether they wish to remain with a society which has not trustee status, which does not fulfil the criteria, or to transfer to a building society which has trustee status.

Trustee status is a guarantee that the State will meet any default if it should occur, and so it is something worth while in its own right and not something which should be lightly conferred because it imposes a risk on the State which the State would have to meet and to meet out of its own resources. Those who enjoy trustee status have an important obligation that they have to fulfil both to their own investors and to the State. I think we can, as ordinary, practical, pragmatic people of the world, knowing something possibly about commerce and financial matters generally, recognise that there are some financial institutions at present who do not enjoy trustee status and who are admirable and secure and do not give cause for any worry. I will consider it appropriate that the people would have the widest possible choice of investments enjoying trustee status. This will be the way in which we approach further consideration of this matter.

Mr. Haughey

Is it that the Minister will not be just authorising building societies as building societies, that it will be specific investments in building societies?

Mr. R. Ryan

Yes, we will have to be satisfied that these criteria are met and that they continue to be met.

Mr. Haughey

Up to now the Minister has specified securities and not institutions. Is that the way it is?

Mr. R. Ryan

Yes. The Deputy says securities and not institutions. Sometimes it is institutions, deposits with certain institutions, but then there are specific investments named as well.

Mr. Haughey

For instance a deposit with XY building society?

Mr. R. Ryan

Yes.

Mr. Haughey

It will not be a deposit with building societies simpliciter?

Mr. R. Ryan

No. Certainly not.

Question put and agreed to.