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Dáil Éireann debate -
Wednesday, 4 Jul 1979

Vol. 315 No. 11

Trustee Savings Banks Bill, 1979: Second and Subsequent Stages.

I move: "That the Bill be now read a Second Time."

There are four trustee savings banks operating in the State—in Dublin, Cork, Waterford and Limerick. A fifth bank—the Monaghan Savings Bank—operated until 1976 when it amalgamated with Dublin. All the banks were founded between 1816 and 1820 and although they are private bodies the Trustee Savings Banks Acts provide for their supervision by the State and set out how they should conduct their business.

The Trustee Savings Banks Act, 1863, which was a consolidating Act, is with certain amending Acts the governing statute. Amending Acts passed in 1958 and 1965 brought the legislation up to date in such respects as then seemed necessary. The question of consolidating the legislation is being examined.

Section 3 of the Trustee Savings Banks Act, 1965 provides that:

The trustees of a trustee savings bank may, with the consent of the Minister for Finance, undertake any business which is, in the opinion of that Minister calculated to encourage thrift and within the financial capacity of the bank.

Under this section the trustee savings banks were authorised to grant short-term personal loans—for periods up to five years—and bridging loans to depositors.

In connection with a proposal to extend the personal loans service to include long-term housing loans the law officers advised that there was no objection in law to the use of section 3 of the Trustee Savings Banks Act, 1965 for that purpose. As announced in this year's budget the trustee savings banks have been authorised to grant house mortgage loans.

One of the savings banks was advised by counsel that in his view the 1965 Act did not empower the Minister for Finance to sanction loan schemes and that new legislation was required. The matter was referred to the Attorney General who now advises amending legislation.

The Bill amends section 3 of the 1965 Act by providing that any business sanctioned by the Minister for Finance under that section may include the making of loans, including house mortgage loans, and the using of depositors' funds for that purpose. For the protection of the savings banks it is necessary that the amendment should have retrospective effect to cover loan schemes sanctioned to date.

I commend the Bill to the House.

We welcome this Bill, but I was surprised to find that it was necessary in view of what the Minister had said. We understand that one of the banks concerned got advice that was contrary to the general interpretation of section 3 of the 1965 Act. In these circumstances the best course to adopt was to have sought the advice of the Attorney General and, as the Minister has said, it is on his advice that this amending legislation is before us.

During the budget debate the Minister for Finance told us that the banks would be confined within their deposit limits regarding the amount of money they can lend. However, there is going through the House a Housing Bill which provides that the Minister for the Environment may prohibit lending institutions from providing mortgages if CRVs are not forthcoming in the case of the houses for which loans are sought. I presume that the savings banks will come within the terms of that scheme also.

That is so.

It is a good step to provide that the savings banks may lend money. Perhaps at another time we could consider going further and restructuring completely the savings banks, considering perhaps all the legislation governing them. It has always been a bone of contention with the savings banks in the Cork area for instance, which is the area with which I am familiar, that they were not free to use in the Cork area the money that was deposited there but had to return it to the Treasury for use in the general pool of finance available to the Government. I expect that when the savings banks were set up more than 100 years ago there was a need for that stipulation having regard to the explosion then in the number of banks being opened but many of which had a very short life. However, that was not the case in Ireland other than in respect of one or two notable exceptions. The collapse of the savings banks in many areas caused much hardship so perhaps that was the reason for the imposition of restraints regarding the use of money. I expect that originally these were philanthropic organisations and if one has regard to the composition of the boards of these banks down through the years one would agree, I think, with my assessment of the situation.

However, the more finance that is made available for housing the better. Regrettably though, what will probably be harmful to the housing industry in the next 12 months is not that sufficient money will not be available—I think there will be sufficient money—but that the cost of borrowing the money will have an adverse effect on the building of houses in that time. It has been estimated that if mortgage rates increase in line with lending rates generally, a £15,000 mortgage would cost as much as £190 a month to service, which is almost £50 a week. The Minister should bring to the attention of the Ministers for Finance and of the Environment the necessity to provide, at least temporarily, a subsidy on mortgages. The £1,000 grant was obviously of some help when houses were costing £11,000 or £12,000. Now that the price of houses has increased and mortgage interest rates are so high, many young couples have no hope of buying homes.

We welcome the Bill because it widens the availability of funds for people who build their own homes.

I thank Deputy Barry for his contribution and assure him that his remarks will be conveyed to the Minister concerned. The Bill is a simple one. It removes doubts about the Minister's order and safeguards banks against any legal actions that may arise.

Question put and agreed to.
Agreed to take remaining Stages to-day.
Bill put through Committee, reported without amendment and passed.