Trustee Savings Banks Bill, 1989: Committee Stage (Resumed).

Question again proposed: "That section 5 stand part of the Bill."

I want to make one final, brief point on section 5. I had an opportunity last night of looking at the constitutional aspect of what the Minister is proposing in this section. While undoubtedly the Constitution makes provision for delegated legislation, on reading the appropriate constitutional provisions it seems to me that it does not envisage giving to any person or authority power to amend, detract or in any way take from the legislative role given to the Oireachtas. It seems to me that what the Minister proposes is a category of delegated legislation of a type not envisaged under the terms of the Constitution. I have very serious doubts about the provision to enable the Minister to amend or modify an Act of the Oireachtas. I think it would be unconstitutional.

At some stage, the Minister should look at this again and consider that point. The Constitution is quite clear in laying down the legislative function and vesting it in the Oireachtas, and in the Oireachtas alone. It provides that the Oireachtas may delegate powers to do certain things under it. Giving powers to do things under the umbrella of the Oireachtas is one thing but giving power to put a subordinate authority on a par with the Oireachtas in constitutional terms is not envisaged under the Constitution. For that reason alone this provision would have to be opposed.

(Limerick East): We all have had the opportunity to reflect on the section overnight. My reflection only confirms me in my opposition. The Minister quoted many precedents, but the difference between those examples and the Bill before us is that the provisions of those Bills to a very great extent were transparent. One simply read the Bill and the provisions were clear. In this Bill there are whole areas left to the discretion of the Minister, or to the discretion of the Minister in consultation with the Central Bank, or to the discretion of the Central Bank. When we add to that powers as wide ranging as to modify each and every section of the Bill, if there is any difficulty in bringing the provisions of the section into operation it is so sweeping as to put the Oireachtas in a position of not knowing what we are doing if we accept this section of the Bill.

I continue to hold the view that I expressed yesterday. It was I who made the remark about it being unprecedented, and I stood corrected by the Minister. Having looked at two of the precedents he quoted, I do not think the situation is analogous. The correct way to deal with the matter is to bring in amending legislation if that is necessary. The provisions of this section are entirely too sweeping. Deputy Taylor has now raised the spectre of their constitutionality. Notwithstanding that, if the Minister refuses to take on board the pleas from this side of the House at this stage, we have no alternative but to oppose the section and call a vote on it.

I wish to reply in particular to Deputy Taylor's point on the constitutionality of this provision. We must take into account that the highest law officers in the land have been involved in drafting this Bill.

They have been proved wrong before.

Agreed. I accept that the Supreme Court will interpret the law in any situation. Similar provisions have been contained in other Bills. The section contains the best wording possible and it is similar to that in other Bills. Provisions similar to this are contained in section 71 of the Social Welfare Act, 1952; section 13 of the Canals Act, 1986; section 25 of the Farm Tax Act, 1985; section 10 of the Valuation Act, 1988. The provision was included verbatim in the Building Societies Act, 1989, which got very strong, detailed debate and discussion in this House. In the end it was accepted that there was no intention of using this provision to subvert the original legislation. The provision is intended merely to enable the Minister to deal with any unforeseen technical difficulties which might arise in giving effect to any provision. In addition, it is provided under section 4 of this Bill that any regulation made under this section will be placed before both Houses of the Oireachtas, who will have the power to annul the regulation if they so wish. Taking all that into account and the fact that the provision is contained in four other Acts, I suggest to the House that we should be able to accept this section.

Question put.
The Committee divided: Tá, 70; Níl, 63.

Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies Howlin and J. Higgins.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Calleary, Seán.
  • Callely, Ivor.
  • Flood, Chris.
  • Gallagher, Pat the Cope.
  • Haughey, Charles J.
  • Hillery, Brian.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • Martin, Micheál.
  • McCreevy, Charlie.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Molloy, Robert.
  • Morley, P.J.
  • Nolan, M.J.
  • Clohessy, Peadar.
  • Collins, Gerard.
  • Coughlan, Mary Theresa.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Noonan, Michael J.
  • (Limerick West).
  • O'Connell, John.
  • O'Dea, Willie.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Rourke, Mary.
  • O'Toole, Martin Joe.
  • Quill, Máarín.
  • Reynolds, Albert.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilson, John P.
  • Woods, Michael.

Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies J. Higgins and McCartan.

  • Ahern, Bertie.
  • Ahern, Michael.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Calleary, Seán.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Connolly, Ger.
  • Coughlan, Mary Theresa.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • de Valera, Síle.
  • Ellis, John.
  • Fahey, Frank.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Gallagher, Pat the Cope.
  • Haughey, Charles J.
  • Hillery, Brian.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Leonard, Jimmy.
  • Leyden, Terry.
  • Lyons, Denis.
  • Martin, Micheál.
  • McCreevy, Charlie.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Molloy, Robert.
  • Morley, P.J.
  • Nolan, M.J.
  • Noonan, Michael J.
  • (Limerick West).
  • O'Connell, John.
  • O'Dea, Willie.
  • O'Donoghue, John.
  • O'Hanlon, Rory.
  • O'Keeffe, Ned.
  • O'Rourke, Mary.
  • O'Toole, Martin Joe.
  • Quill, Máirín.
  • Reynolds, Albert.
  • Roche, Dick.
  • Smith, Michael.
  • Stafford, John.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wilson, John P.
  • Woods, Michael.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies J. Higgins and Howlin.
Question proposed: "That section 6 stand part of the Bill".

Ahern, Bertie.Ahern, Dermot.Ahern, Michael.Aylward, Liam.Barrett, Michael.Brady, Gerard.Brady, Vincent.Brennan, Mattie.Brennan, Séamus.Briscoe, Ben.Browne, John (Wexford).Calleary, Seán.Callely, Ivor.Clohessy, Peadar.Collins, Gerard.Connolly, Ger.Coughlan, Mary Theresa.Cowen, Brian.Cullimore, Séamus.Daly, Brendan.Davern, Noel.Dempsey, Noel.Dennehy, John.de Valera, Síle.Ellis, John.Fahey, Frank.Fitzgerald, Liam Joseph.Fitzpatrick, Dermot.Flood, Chris.Gallagher, Pat the Cope.Haughey, Charles J.Hillery, Brian.Hilliard, Colm.Hyland, Liam.Jacob, Joe.

Kelly, Laurence.Kenneally, Brendan.Kitt, Michael P.Kitt, Tom.Lawlor, Liam.Leonard, Jimmy.Martin, Micheál.McCreevy, Charlie.McDaid, Jim.McEllistrim, Tom.Molloy, Robert.Morley, P.J.Nolan, M.J.Noonan, Michael J.(Limerick West).O'Connell, John.O'Dea, Willie.O'Donoghue, John.O'Hanlon, Rory.O'Keeffe, Ned.O'Kennedy, Michael.O'Leary, John.O'Rourke, Mary.O'Toole, Martin Joe.Reynolds, Albert.Roche, Dick.Smith, Michael.Stafford, John.Treacy, Noel.Tunney, Jim.Wallace, Dan.Wallace, Mary.Walsh, Joe.Wilson, John P.Woods, Michael.

Níl

Ahearn, Therese.Barnes, Monica.Barrett, Seán.Barry, Peter.Bell, Michael.Belton, Louis J.Boylan, Andrew.Bradford, Paul.Bruton, John.Bruton, Richard.Byrne, Eric.Cosgrave, Michael Joe.Cotter, Bill. Gilmore, Eamon.Gregory, Tony.Higgins, Jim.Higgins, Michael D.Hogan, Philip.Howlin, Brendan.Kavanagh, Liam.Kenny, Enda.Lee, Pat.Lowry, Michael.McCartan, Pat.McCormack, Pádraic.McGahon, Brendan.McGinley, Dinny.Mac Giolla, Tomás.McGrath, Paul.Mitchell, Jim.Moynihan, Michael.Nealon, Ted.

Creed, Michael.Currie, Austin.D'Arcy, Michael.Deasy, Austin.Deenihan, Jimmy.Doyle, Joe.Dukes, Alan.Durkan, Bernard.Farrelly, John V.Fennell, Nuala.Ferris, Michael.Flaherty, Mary.Flanagan, Charles. Noonan, Michael.(Limerick East).O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Gerry.O'Sullivan, Toddy.Owen, Nora.Pattison, Séamus.Quinn, Ruairí.Rabbitte, Pat.Reynolds, Gerry.Ryan, Seán.Sheehan, Patrick J.Sherlock, Joe.Spring, Dick.Taylor, Mervyn.Taylor-Quinn, Madeleine.Timmins, Godfrey.Yates, Ivan.

Question declard carried.
SECTION 6.

(Limerick East): This is another section which would empower the Minister to do certain things by regulation which are inappropriate. It would allow the Minister to modify the provisions of this Bill for the purpose of assimilating the law relating to trustee savings banks to the modifications of the law relating to companies, banks or building societies. The Central Bank Act and the Building Societies Act are already on the Statute Book, so if any modifications were necessary to assimilate the law in so far as it is written in the Building Societies Act or in the Central Bank Act, they should be included in this Bill. The Companies Bill is now going before a special committee. If it becomes necessary to take on board certain provisions of the Companies Bill at a later date this should be done by way of amending legislation rather than by way of regulation.

The arguments I have to make on this section are similar to the ones I made on the previous section, section 5. If anything, the powers it is proposed to give to the Minister to modify the provisions of this Bill are even more extensive than the ones contained in section 5. I am quite appalled by this. The Minister would even have the power to provide for the charging of fees, although not in the nature of taxation. Subsection (4) is particularly invidious. It would enable the Minister to modify or alter Acts. The section is so wide ranging that it is quite impossible to encompass it. My party and I are totally opposed to this section.

We can anticipate the Minister giving the same response to points made on section 6 as he gave on section 5. This is regrettable. If that is the response the Minister gives, the disposition of my party would be to call a vote. However, having regard to the fact that some other important sections of the Bill remain to be dealt with, that perhaps is not the most expeditious way of registering one's dissent at the all-embracing and sweeping powers which it is proposed to confer on the Minister by way of this section. It is inappropriate that provisions relating to other Acts should be imported into this Bill in the manner suggested here. Certainly, we are opposed to this section.

Section 6 would empower the Minister to modify provisions of this Bill by regulation to take account of relevant changes in company, banking or building society legislation. This provision is necessary because many of the provisions contained in this Bill have originated in company, banking or building society legislation and trustee savings banks legislation will almost inevitably require amendment in order to keep up with any changes in these areas. Instead of having to return to the House to amend the Bill, this provision would allow the Minister to make such amendments by regulation. This would in no way undermine the authority of the Oireachtas as it would apply only to legislation which has already been adopted by both Houses of the Oireachtas. It would not involve providing any new legislation. These regulations would also be subject to section 4, where they would be placed before both Houses of the Oireachtas which would have the power to annul the regulations within 21 days of the regulations being placed before them. The intention is not to allow the Minister to change existing law but where changes may be made to an Act, such as the Central Bank Act, which would have implications for trustee savings banks as they would for building societies or other institutions, this section would allow the Minister to make the technical adjustments necessary.

Why could that change not be included in an amended Central Bank Act? That would be the appropriate place to put it.

If we do not allow the Minister to make these technical changes under this Bill, we will have to bring in an amending Bill.

What I am saying is that if the Central Bank Act has to be amended, why not put in a section in that amending Bill to cover the Trustee Savings Banks?

Cognisance must be taken of the interpretation of the law of the courts. We must make sure that laws we are introducing would not be at variance with other Acts if changes were made in other Acts. In the case of an amendment to the Central Bank Act or some other Act which would impinge on this Act, the Minister must be given the power to make any technical adjustment necessary in order to ensure balance and equity within the effects of the Act vis-à-vis other Acts.

The Central Bank is by definition the supervising authority. The Trustee Savings Banks are now under the aegis of the Central Bank. The Central Bank can intervene to achieve the same effect.

Not necessarily. The Central Bank would be the supervising authority but there may be some technical matters relevant to the Minister and unless we give the power to the Minister to make the technical adjustments it may not be possible for the Central Bank as the supervisory authority to impose the technical changes desired.

(Limerick East): The section is suffering from an overdose of prudence on the part of the Minister and his advisers. There is nothing here about technical matters although the Minister replies to our comments by saying that it is to deal with technical matters. The Bill says that if there is a modification in the law in parallel legislation the Minister may be regulation apply that modification to the Trustee Savings Banks. That is not a technical matter. It is a major provision dealing with the Trustee Savings Banks. If a change is made in the way building societies are treated in legislation that change may be applied to the Trustee Savings Banks in accordance with this section.

As Deputy Taylor pointed out in the Bill before the House, there is nothing to stop the Minister for Finance saying that the provisions of a section will also apply to the Trustee Savings Banks and that would be the appropriate way to legislate, but here again we have sweeping powers being taken by the Minister, and the Minister of State is unable to outline the circumstances in which he envisages they would be used in any reasonable fashion.

The Minister's point is a particularly poor one. The only possible reason advocated for the need to have this section in the Bill is that, for example, he will be bringing in an amending Act dealing with the Central Bank and that it could affect the position of the Trustee Savings Banks under this Act and that therefore the Minister would need power to enable him to bring in regulations to modify the Act. If the Minister is introducing an amending Act in respect of the Central Bank, he will have the opportunity then to put in a clause covering that point, and that would be the right way to do it. Obviously the way to amend an Act of the Oireachtas is by an Act of the Oireachtas and not by ministerial regulation which is what is being advocated here.

The Minister made the point on section 5 and will probably make the same point on section 6, that the Minister has good intentions and that he would not abuse the powers given to him under these sections. That may well be true, and I am certain it is true so far as the present Minister is concerned, but that is not the point. The point is that when making a provision like that it must be done in an orderly way. There is no point allowing this go through because this Minister will not abuse it. It is inappropriate that a Minister should have that power. The sole reason given here this morning for giving this power is that there could be an amending Central Bank Act which would require modification to this Act. That is singularly uninspiring and most unimpressive. I cannot see any force in that argument.

We must accept that similar provisions have already been included in company, banking and other building society legislation. When dealing with financial legislation it is important to have similar provisions included.

(Limerick East): Why not write them in, then?

We are writing them in.

(Limerick East): You are not.

In the section we are empowering the Minister to make regulations modifying any of the provisions of the Bill he considers necessary following any relevant modification of the statutory provisions relating to companies, banks or building societies.

(Limerick East): If there are provisions in existing legislation and the Minister wants to apply them under the Trustee Savings Banks Bill, the Minister should insert separate sections covering those provisions. What the Minister is saying is blatantly incorrect.

I do not accept that. We are being consistent and what we are doing here is in line with legislation already passed. If we examine the other legislation and look at the detailed subsections included here, it is fairly clear that the powers being conferred on the Minister are not above and beyond those normally conferred on any Minister in any Act.

(Limerick East): They are.

Question put and declared carried.
Sections 7 and 8 agreed to.
SECTION 9.

I move amendment No. 12:

12. In page 8, between lines 40 and 41, to insert the following subsection:

"(2) A trustee savings bank may, with the consent of the Central Bank, carry on business outside the State.".

As amendment No. 13 is consequential on amendment No. 12, we can discuss amendments Nos. 12 and 13 together. Agreed.

The purpose of this amendment is to confer on the Trustee Savings Banks the power to undertake any of the activities or provide any of the services permitted under this Bill abroad, subject to the consent of the Central Bank. The banks would, of course, be subject to whatever regulatory and supervisory régimes operate for analogous financial solutions currently operating in other countries. This provision is based on section 33 of the Building Societies Act, 1989.

(Limerick East): We agree with the section.

The Minister indicated that he wanted the Trustee Savings Banks to operate on a level pegging, equal pitch arrangement with the other banks. That is acceptable and welcome. Is this section not restrictive on the Trustee Savings Banks having regard to the fact that the other banks can operate outside of the State without any such consent? Why do the Trustee Savings Banks require the consent of the Central Bank? Can the Minister clarify for the House if this consent will be required once or would consent be required for every transaction carried out abroad?

The same control will apply to the Trustee Savings Banks as applies to the existing commercial banks. Under the Central Bank Act, 1971, as amended by the Central Bank Act, 1989, the Central Bank are the supervisory and licensing authority. If the Trustee Savings Banks wish to operate abroad they will apply for a licence to do so and that application will be considered by the Central Bank. I am sure that if it is meritorious it will be duly sanctioned.

It is a once off?

Amendment agreed to.

I move amendment No. 13:

In page 8, between lines 40 and 41, to insert the following subsection:

"(3) In the exercise of any of its functions under this Act the Central Bank shall not be required to treat assets or liabilities of trustee savings banks outside the State as if they were held in the State."

Amendment agreed to.
Section 9, as amended, agreed to.
SECTION 10.

On section 10, we have amendment No. 14 in the name of Deputy Rabbitte. Amendments Nos. 15 and 16 are alternatives and I am suggesting, therefore, that we discuss amendments Nos. 14, 15 and 16 together.

I move amendment No. 14:

In page 9, lines 47 to 51, to delete subsection (8) and substitute the following:

"(8) The grant of a licence shall constitute a warranty as to the solvency of the institution concerned and the Central Bank shall be liable in respect of any losses incurred through the insolvency or default of a person to whom a licence is granted or the trustee savings bank in respect of which it is granted."

In my amendment I am suggesting that where a licence is granted it shall constitute a warranty as to the solvency of the institution concerned and that the Central Bank shall be liable in respect of any losses incurred through the insolvency or default of a person to whom a licence is granted or the Trustee Savings Bank in which the licence is granted. Subsection (8) as it stands will come as a great shock to the overwhelming majority of clients of the Trustee Savings Banks and their depositors. Like other aspects of the functioning and administration of the Trustee Savings Banks at the moment, it is rather difficult to establish precisely what the position is in law. Certainly, the public perception is that such a warranty applies at the moment and depositors with the banks believe that their savings are under-written by the Exchequer. I instanced last night one case where that was brought into effect.

I cannot see any reason why we should change the position. It seems to me that compatible with the remarks we made last night about what is the end purpose of the Bill is the fact that all distinguishing characteristics that mark out the Trustee Savings Banks, and their role in the banking community, are gradually being removed. I am all in favour, in so far as is consistent, of maintaining the banks effectively in public ownership and in removing whatever restrictions there are in terms of enabling those banks to compete. We know that the rules of the marketplace, especially as practised by the Associated Banks, are ruthless. I am all in favour of removing the restrictions and I do not see how that requires the removal of the warranty which people believe exists. It has been part of the attraction of the Trustee Savings Banks for a particular type of saver or client who does business with them rather than with the Associated Banks that they believe that such a warranty exists. Their confidence will be undermined if that subsection is passed. I hope the Minister will change his view about it. I cannot imagine why it is considered necessary. Presumably, it will have some relation to section 59 which relates to whether or not the banks may advertise the fact that this security exists.

I support Deputy Rabbitte's amendment and I should like to point out that my amendments, Nos. 15 and 16, would have the same effect as his. We take the view that the Central Bank should be responsible to compensate any saver or investor in the Trustee Savings Banks in the event of a failure or of any saver or investor losing money as a result of the failure of the Central Bank to carry out its task of properly supervising the banks which has been given to it under the Bill. Is there anything unfair or inequitable about that? Section 4, which has been adopted, states that the Central Bank may give a direction to a trustee savings bank in relation to any matter. In other words, the Central Bank is taking full control of the Trustee Savings Banks. That is fair enough, but to what end can it give a direction to them? It can do so in the interests of the orderly and proper regulation of the Trustee Savings Banks. It will have to ensure that they organise their financial affairs in a proper manner and that they made wise and sensible investments. The Central Bank can supervise and control Trustee Savings Banks.

If the Central Bank has those powers and it exercises them badly or something goes amiss — those things can happen; we all remember the PMPS, the banks and the insurance companies that have gone — and ordinary savers lose their money as a result, is there any reason on earth why it should escape its responsibility to compensate those people for failing to do a job properly? If the Central Bank does its job properly and exercise the exhaustive and wide ranging powers it is taking under the Bill, there will be no loss. It follows therefore, that if a saver loses money the Central Bank would not have done its job properly. It would not have issued directions on matters that it should have, or seen to it that the affairs of the banks were carried on in an orderly and proper manner. It would not have seen to it that regulations were introduced or supervised the banks sheets properly. It would not have supervised the range of investments of the banks or who the banks were lending their money to.

It is all very well to take power and responsibility but there is another side to that coin. When the Central Bank take on responsibility, like any other citizen of the State who does not carry his or her affairs in a proper manner or is negligent or careless, it must pay up to the person who suffers. If one is not prepared to exercise that power in a responsible manner and stand over what one is doing, or not doing, one should not seek supervisory powers from the House.

The Central Bank is not going to issue licences to somebody to take people's savings and put them at risk. The Central Bank is a fine body of men and women who would take great care in regard to whom they would grant licences. People do assume, and are entitled to assume, that when a body like the Central Bank not only issues a licence but takes on itself the power to supervise to such a detailed exhaustive extent, that their savings are safe. There are two sides to the question, one is the taking of the power and other is the responsibility to compensate, and I say that when they take those powers they must at the same time be responsible if they use them badly, incorrectly or wrongly and unfortunate savers lose. We do not want any other PMPS type situations in the country; one was enough.

(Limerick East): I have a different view from that of my colleagues. I do not think it follows that when the Central Bank takes to itself a regulatory role over the Trustee Savings Banks they subsequently have a liability if the Trustee Savings Banks get into difficulty. There are various licensing authorities and if licensing authorities act prudently and in accordance with the law I do not see why they should have a liability subsequently if something goes wrong. The licensing authority for public houses is the District Court, and the enforcement agency is the Garda Síochána. Nobody has ever suggested that if a publican becomes bankrupt the Garda and the court should have liability to the creditors.

One does not deposit one's savings with a publican.

(Limerick East): A lot of people do. Some of the best people I know have deposited quite a proportion of their savings with the local publican.

The licence there is a licence to sell alcohol. This is a licence to take in people's money.

(Limerick East): On the other hand, while the arrangement at present in existence, that the Trustee Savings Banks are de jure obliged to lodge the totality of their deposits with the Minister for Finance and then the Minister returns 20 per cent to the banks for their various banking activities, even if the designated proportion changes, it seems to me that the Minister for Finance and the Exchequer has an absolute liability for 100 per cent of all deposits in the Trustee Savings Banks. The 80 per cent is either on deposit with the Minister or in Government paper and both are totally under-written, so there is a full guarantee for 80 per cent.

Government paper could go down as well as up.

(Limerick East): No, it is backed by the Exchequer. As I understand it, that is what was outlined in 1984 when there was a run on the Trustee Savings Banks. The Minister for Finance of the day went on the 1.30 news on radio and said that every pound of depositors' money was under-written.

It seems to me that in section 59 the Minister, for reasons best known to himself, is drawing attention to the fact that the Trustee Savings Banks are not supposed to advertise this guarantee and is forbidding them to publicise the fact that deposits are under-written; he is not saying that the deposits are not going to be underwritten. There is also provision in the Bill whereby the designated proportion, the 80-20 proportion, can be changed after consultations between the Minister for Finance and the Central Bank. I presume it will be and I presume it will be changed in relation to the Trustee Savings Banks to give them a larger proportion for the increased banking activities which are being allowed to them under the provisions of this Bill. If the de jure mechanism remains the same, that all deposits are notionally deposited with the Minister for Finance and he then returns a designated proportion for banking activities to the Trustee Savings Banks, it seems to me that the guarantee remains in place, and that under the terms of the legislation proposed — the Minister may correct me if I am wrong — there is a guarantee from the Exchequer to cover the full amount of all deposits in the Trustee Savings Banks, and that position remains. The focus here on the fact that the grant of the licence shall not constitute a warranty from the Central Bank underwriting depositor's funds is not saying there is no warranty because so far as I can see there is a remaining guarantee from the Exchequer, not from the Central Bank, and that is the way it should be.

Could the Minister just clarify that one net point? After this Bill is passed — and I think this is something savers would be very interested in — is the Minister the guarantor of deposits with the Trustee Savings Banks?

Section 10 follows section 9 of the Central Bank Act, 1971 with the European Community's licensing and supervision of bank regulations 1979. This provision alters the current situation where the Trustee Savings Banks are supervised by the Department of Finance. Under this and subsequent sections this function would transfer to the Central Bank as the principal authority supervising the banking system. This would be a major step in the evolution of Trustee Savings Banks as it would put them into the same bracket as other banking and financial institutions and enable them to compete with them on a more equal basis.

An equally important aspect of this change in the banks' situation is that the banks' performance and growth would be monitored by the Central Bank with its overview and deeper knowledge of the banking and financial sector in Ireland, that the Central Bank would be responsible for the prudent supervision of the Trustee Savings Banks; but it is going much further than beyond the bounds of acceptability to accept that the Central Bank should be legally liable for Trustee Savings Banks' losses. In that event the Central Bank would, effectively, have to run the Trustee Savings Banks on a day-to-day basis.

The present position, as the Minister for Finance has already stated in referring to section 59 on Second Stage, is that there is no State guarantee of deposits to depositors. As 80 per cent of deposits are lodged with the Minister for Finance, these are, in effect, guaranteed to the Trustee Savings Banks against default. The remaining 20 per cent of the resources of the banks are invested prudently and profitably and it would be the function of the Central Bank to ensure that this continues. When this legislation is put into effect the proportion of the deposit lodged with the Exchequer will only be reduced to the extent that there are opportunities for prudent and profitable expansion of Trustee Savings Banks business.

We must look at the situation pertaining to the other banks. The other commercial banks are obliged to place 10 per cent of their deposits with the Central Bank. They are obliged to use 25 per cent of their deposits for buying gilts and other Government paper. That means they have total flexibility with regard to prudent investment with the other 65 per cent. We must give the Trustee Savings Banks credit for the fact that they have been able to operate on a very narrow 20 per cent of money available to them for lending and other purposes; they have not had the same flexibility as the other banks, and it is that we want to improve. It is not proposed that the ratio will be reduced dramatically but as the Central Bank, as the supervising authority, in consultation with the Minister for Finance considers requests from the Trustee Savings Banks, the ratio would be reduced over a period giving a similar opportunity to the Trustee Savings Banks to operate in a similar financial environment and manage their affairs efficiently and prudently to the benefit of their investors and of the public at large. Where difficulties are restrictive impositions on any banking institution it is not possible for that banking institution to operate on an equal basis. We must respect the performance and the track record of Trustee Savings Banks and of the other banks. The Central Bank as a supervising authority would be there to supervise, in consultation with the Minister for Finance, the situation pertaining to the Trustee Savings Banks. I do not think investors have anything to fear from putting their money into a Trustee Savings Bank.

This legislation is not the stuff that sets the world on fire, but a great number of people outside will get a very rude shock from what has been elicited from the Minister now. I have no doubt that the perception of the public, especially that section who are banking with Trustee Savings Banks, is that their savings are guaranteed. It was to maintain that status quo that I put down this amendment.

I was interested in Deputy Noonan's interpretation of it. Deputy Noonan's distinction between the Central Bank as the licensing authority and the liability of the Exchequer for the full amount of the savings would go some way towards meeting the motivation for putting down this amendment. If that were the case and if it could establish that the Exchequer had full liability, that would largely meet the situation but I think the Minister has answered unequivocally that that is not so. I do not have the breakdown of the make-up of the clients of the Trustee Savings Banks but I suspect a majority of them would be known as small savers. It is puzzling when you have the instance that has been given of what happened in 1984 when there was a run on the banks caused by the rumour machine and so on, and the Minister for Finance of the day went on radio to assure depositors that not one penny would be put at risk. That is the public perception of the Trustee Savings Banks. What the Minister has now said — that 80 per cent of funds on loan to the Government are safe and prudent management would look after the rest — may be so. It may well do.

It has to date.

It has not in other areas to date. Even professionals working in the maelstrom of the financial area in a bigger pool than the Trustee Saving Banks have made mistakes in the past; for example when the taxpayer was expected to bail out ICI to the extent of £146 million if I recall correctly the latest figure given by the then Minister, Deputy John Bruton. Mistakes can happen, especially as it is proposed that the ratio may be changed. I do not know what change in the ratio is proposed, but I do not think an improvement is suggested. I do not think it is suggested that the ratio be 90:10 or anything like that. It is likely to be a worsening of the ratio, and therefore an increase in exposure. This is something of a revelation for the people banking with the Trustee Savings Banks. I see no reason the change is necessary. I thought the Minister was going to advance some reasons it would impede the competitive capacity of the Trustee Saving Banks vis-à-vis the Associated Banks if we did not do this, but he has not advanced that. Therefore I see no reason we should be prepared to relinquish this.

I presume this has emerged from discussions that have taken place not only with the Central Bank but perhaps with the lobby for the Associated Banks as well. Section 59, which I submit is related expressly prohibits the Trustee Savings Banks from advertising this warranty, which I thought would be of advantage to them. Presumably this was the result of a lobby from the Associated Banks who would say that that would give the Trustee Savings Banks an unfair advantage. My disposition is to press the amendment.

(Limerick East): I do not think the Minister is correct. I think there is a 100 per cent guarantee on the Trustee Savings Banks deposits at the moment, and that was the legal advice to the Minister's predecessors. The Minister and his Department might prefer if that was not so but it seems it is. I do not know whether he intends to change that. At present he seems to suggest that only 80 per cent of the deposits in the banks are guaranteed. I think the other 20 per cent is guaranteed as well because whatever happens in practice, the de jure position is that it passes through the hands of the Minister and is returned to the Trustee Savings Banks for banking activities.

Be that as it may, the uncertainty which runs right through this Bill concerns me. The stated intention of the Minister is that we will have a level playing field between all the banks, and that will include the Trustee Savings Banks. If that were so, one would expect provisions here for liquidity which apply to the commercial banks. We would have something to the effect that there would be primary liquidity and secondary liquidity and that would have to be up to 35 per cent of all deposits. After that the Trustee Savings Banks would be free, as other banks are, to invest prudently on behalf of their depositors the remaining 65 per cent which is on deposit.

However, the Minister does not say that. He says that new arrangements will be made for the designated proportion which can be used for banking activities. The present de jure position is an 80:20 proportion; 20 per cent is designated for the banking activities which the Trustee Savings Banks can engage in at present, and it seems reasonable that that 20 per cent would be expanded since we are expanding the range of activities they can become involved in. I understand the de facto position at the moment is that the break is about 75:25, that the Trustee Savings Banks have been operating ahead of the 20 per cent proportion and about 75 per cent of depositors' funds are being invested prudently at the moment. We are not clear what the Minister's intention or that of the Department is, and there are conflicts.

The Department of Finance have a vested interest in keeping a very large proportion of the depositors' funds in the hands of the Minister for Finance and in Government paper because that is a relatively inexpensive way of financing part of the Exchequer borrowing requirement, particularly when you apply DIRT to it. I do not think DIRT applies to Government paper but it applies to deposits in the Trustee Savings Banks as it does to those in other banks, and there will be a conflict between the Trustee Savings Banks and the Department of Finance as to what proportion should be invested prudently.

I agree with the Minister. It will be a long time before the Trustee Savings Banks get a significantly greater proportion than the 25 per cent they are using already because there is a conflict of interest which has little or nothing to do with banking. There is a conflict of interest between the people who run the Government debt and the EBR. The State must be run, it needs money and this is a source of funding they will be reluctant to let go. The provisions here are that a new designated proportion will be arrived at only in consultation with the Minister and the Central Bank, but there is no level playing field. There should be a provision here that the Trustee Savings Banks be treated for liquidity purposes by the Central Bank in exactly the same fashion as the Associated Banks. I accept it will take time for them to invest prudently a proportion of deposits which at present is around 25 per cent and bring it back up to 60 or 70 per cent because at the moment they do not have the investment opportunities to do so and there is a loss to the Exchequer on the other side. However, a provision should be written in so that they will arrive at the level playing field with all the other banks. That is not being done here.

I do not want to start some kind of scare here today, saying depositors' funds in the Trustee Savings Banks are not secure, because I think the Trustee Savings Banks at the moment are as safe as Fort Knox. People can feel quite safe about leaving their money in the Trustee Savings Banks and I would hate an impression to be created in this House that people should switch their money to other banks as they did in panic in 1984. There was no reason to do it in 1984 and there is no reason to do it now, but the Minister would need to be very clear in what he says and he would need to state in this House that there is no change in the present position. In case there is any contrary impression given, the Minister of State should get up and say that as far as he is concerned the Trustee Savings Banks, both before and after the Bill is enacted, will be as safe as Fort Knox and there should be no fear for any depositor who has money in them.

I agree absolutely with Deputy Noonan when he says that, as far as he knows, and I say as far as I know, funds deposited in the Trustee Savings Banks are absolutely 100 per cent secure. It is because we know they are secure — and I hope the Minister will confirm that when he replies — there is no reason on earth why the guarantee sought here in these amendments should not be given, because we know there is no question of any such guarantee ever having to be called in. The purport of the amendments is not to provide for a situation where such a guarantee may have to be called in but rather to enhance the position of the Trustee Savings Banks as State-owned banks — that is something we want — that they have a State guarantee. Because the funds are secure there is no potential loss whatsoever on the Central Bank or on the Minister by confirming that the guarantee exists. There appears to be a woolly feeling in the House on whether this guarantee exists or whether it does not. The Minister said there is no such guarantee and that there will be no such guarantee.

Deputy Noonan thinks that the Minister's advice on this matter is wrong or is different from what it was when he was in Cabinet. There appears to be a direct conflict on this issue. Quite frankly it is a net point and it ought to be clarified one way or the other. People are entitled to know which of the two versions is the correct one.

We are dealing with a new situation that will pertain after the Bill is enacted. Why should people not be enabled to go into a State-owned bank, a bank for all practical purposes in public ownership, which is only one technicality away from it and, as the Minister said, their assets are within the disposal of the Oireachtas. In my book that makes them, for all practical purposes, State-owned banks. Nobody else owns them, there are no shareholders and they are at the disposal of the Oireachtas. They are a State-owned bank and why then should investors and small depositors not be able to invest their money in them in the secure knowledge that there is a State backed guarantee for it? There is no exposure on the Minister or the Central Bank. The Central Bank had itself exposed on non-State owned institutions, as Deputy Rabbitte pointed out, in the case of ICI and so on. How much more would this apply in the case of a State-owned enterprise such as the Trustee Savings Banks? Is it not entirely appropriate that it should be clear that the public should know that their money is 100 per cent safe, firstly, because the investments are wisely made under the controlled direction and close supervision of the Central Bank and, secondly, because the guarantee is there? It would be a tremendous help to the Trustee Savings Banks in carrying out their operations because it would be a great encouragement to achieve more and higher deposits which would enable the Trustee Savings Banks to expand their activities.

The 18:20 position has been referred to. I would regard it as a complete breach of faith on the part of the Minister if the Trustee Savings Banks were not in a number of years allowed to operate on a level pegging system so far as deposits with the Government were concerned, as are the cartel banks. Clearly, the Minister is conveying to the House in the entire course of this debate that he wants the Trustee Savings Banks to be able to compete on a level playing pitch with the cartel banks. The clear implication of that must be that there will be no constraint put on the Trustee Savings Banks in any way which is different from that which applies to the cartel banks. I accept that that is not something that could be done overnight, because we are talking about hundreds of millions of pounds which are involved in these deposits. It may take some little time to achieve that parity of position on deposits as between the Trustee Savings Banks and the cartel banks. I would like a clear indication from the Minister to confirm that in the short to medium term the parity position will be achieved because otherwise his wish that the Trustee Savings Banks should have an equal opportunity to compete with the cartel banks would prove to be entirely hollow.

There are now two questions which the Minister must answer, the first relates to whether or not deposits are guaranteed at present. As recently as 1984 the Minister of the day assured the public that they were guaranteed; now there appears to be some doubt about that position. Second, if they are guaranteed does subsection (8) change that position? Deputy Noonan submits that it does not. The Minister has already said it does. We need to clarify the position. The investors and depositors and so on with the bank believe the guarantee exists. I did not say their savings were at risk or were not secure. What I said was that they believe them to be guaranteed. I am satisfied that the overwhelming majority of depositors with the Trustee Savings Banks believe that guarantee exists. That is a different matter from commenting on whether the funds are secure. I believe they are secure but does the guarantee exist? Does subsection (8) change that position or not? On that basis, I will make up my mind on whether to press the amendment.

The ownership — the property or the assets of the Trustee Savings Banks — is vested in the trustees at present since the foundation of the Trustee Savings Bank by the original Act. It is invested in the trustees and they own it.

The trustees do not own it, they are trustees of it.

It is vested in them. The hold it in trust.

They hold it in trust but they do not own it.

Only the Minister for Finance can dispose of it through the Oireachtas.

This can only be changed by the Oireachtas and we are making provisions under section 58 should it arise. Eighty per cent of deposits are lodged with the Exchequer. Only 80 per cent of the deposits come to the Minister. The remainder are retained by the Trustee Savings Banks and do not come to the Minister. As 80 per cent of the deposits are lodged with the Exchequer, through the Minister for Finance, these are in effect guaranteed to the Trustee Savings Banks against default, the remaining 20 per cent of the resources are invested by the banks. If the Central Bank and the Minister after consultation decide to reduce that ratio this Bill will give them the power to do so. Let there be no doubt or ambiguity about it.

Deputy Noonan raised this matter on Second Stage and referred to assurances given by the Minister for Finance in 1984 when there was an exceptional level of withdrawals of deposits from the Dublin Trustee Savings Bank. In 1984 the then Minister for Finance was satisfied that the Trustee Savings Banks were entirely solvent and were in a position to repay all their depositors in full. I am very happy to say that this continues to be the case today and I have no doubt will continue to be the case in the future.

Deputy Rabbitte made comparisons with the ICI. I do not think one can make comparisons with the ICI because that is an insurance company and the business of insurance is to take high risk and to provide high risk financial cover.

It was the AIB who showed bad management.

I am not going to refer to that matter as it received a major airing in this House. I am not going to comment as to who showed bad management except to say that it was a disaster.

If the AIB can make such a mistake surely the people in the Trustee Savings Banks could make that mistake.

The Deputy is talking about a subsidiary body of a parent company. The matter got a thorough airing in this House and as far as I am concerned we cannot compare the Trustee Savings Banks with the ICI. The function of the Trustee Savings Banks is to take in deposits. They are obliged by law to place 80 per cent of those deposits with the Minister for Finance. Deputy Noonan referred to the Exchequer borrowing position and the fact that it suits the Department of Finance and Governments to have those deposits at their disposal because they are a reasonably cheap means of Exchequer borrowing. I appreciate that. The ratio of Trustee Savings Banks money available for Exchequer borrowing vis-à-vis total Exchequer borrowing would be small. If the playing field is improved for the Trustee Savings Banks I cannot see that there will be any detrimental effect on Exchequer borrowing requirements. It would be possible for the Exchequer to make alternative arrangments which would not cost the taxpayer a lot more money. It is unfair to compare the Trustee Savings Banks with the ICI. We must not put them into a straitjacket but must judiciously and carefuly remove the impediments and restrictions, under the supervision of the Central Bank and in consultation with the Minister for Finance. We must slowly reduce the ratio of investment with the State and move towards the area which the associated and commercial banks enjoy. This must be done carefully, not in a very dramatic manner. People who have deposits with the Trustee Savings Banks can be absolutely certain that their money is safe. If the proportion of Trustee Savings Banks funds with the Minister falls significantly, they will be brought into the deposit protection scheme under the Central Bank Act.

(Limerick East): Where is the provision for that?

In the Central Bank Act. The Central Bank would be able to apply the powers they have. In fairness to the Trustee Savings Banks we must not impose further restrictions and keep them away from the level playing field which is in the interest of economic opportunities. If Deputies are worried about the reduction in the ratio of funds to be placed with the Minister they should remember that we are improving the conditions under which the Trustee Savings Banks operate.

There are no worries about that. We want it.

The risk is eliminated by the fact that they will have a better opportunity to invest judiciously and prudently the extra funds available to them.

I do not want to waste too much time on the question of the AIB analogy, not the ICI. I submit that the business of acquisition could very much become the business of the Trustee Savings Banks in the future. One cannot glibly say that the kind of mistake made then could not be repeated. I would ask the Minister, in attempting to make up my mind whether to press this amendment, to state clearly that the depositors will be protected to the extent of the 80 per cent of funds invested with the Exchequer and that as regards the remaining 20 per cent the Minister is free to have discussions with the Central Bank, following which he could and would guarantee the remainder. That is presumably what happened in 1984. Is the Minister saying that nothing in subsection (8) changes the position? It is necessary for the Minister to say clearly that nothing in subsection (8) changes his ability and freedom to act as in 1984.

Because 80 per cent of the deposits are left with the Minister, the suggestion is made that the 80 per cent is safe. That does not make sense. Theoretically the Trustee Savings Banks could make a very bad investment by lending a substantial sum to somebody. They could invest 30 or 40 per cent of their assets and lose that amount. The 80 per cent would not then be safe because it would be called in to cover the loss that had been made. We should not proceed with the debate on the basis that the 80 per cent is fully protected.

Under present conditions the Trustee Savings Banks are obliged to lodge 80 per cent of their money to the Exchequer. The funds are virtually guaranteed because they are in the Exchequer, but the Trustee Savings Banks can prudently invest the other 20 per cent at their discretion. These people are in the banking business to make money and return the investment to their depositors. Like other banks, they have reserves and a bad debt provision. They engage in normal commercial activities like other banks, except that they are restricted as to the amount of money they can use in that area. In 1984 when there was a certain withdrawal of funds from the Dublin Trustee Savings Bank the Minister for Finance was able to say that the bank was solvent if the depositors wanted their money, taking into account the money in the Exchequer, the bad debts provision, the reserves and the overall management of the Trustee Savings Banks. That position prevails today and will prevail in the future. We must not place more restrictions on the Trustee Savings Banks and put them at a disadvantage vis-à-vis other financial institutions.

A guarantee from the Minister would be an advantage, not a disadvantage.

How far more have I to go? I thought I had clarified the position.

What is the purpose of subsection (8)?

The purpose of subsection (8) is that the Trustee Savings Banks should be in a parallel position to other banks under the supervisory control of the Central Bank.

This is a State-owned bank. It is different.

It is a banking institution held in trust by people on behalf of the State. Subsection (8) states that the licence is not a guarantee of a bank's solvency and absolves the Central Bank from any liability for losses incurred through the fault of one of its licensees.

We are preparing it for privatisation.

I do not accept that.

Is the Minister giving a guarantee that he is not doing so?

(Limerick East): We might be.

I cannot give any guarantees like that. We must not strangle a bank by bringing in restrictive legislation. Flexibility must be given to manage financial affairs in the best way possible. We must not impose restrictions or impediments on one group as against another. Why disadvantage one group of depositors as against another or one institution as against another? As legislators we must not do it.

(Limerick East): The Minister mentioned in the course of his previous reply that a deposit guarantee scheme was introduced in the last Central Bank Act and that it could be applied to the Trustee Savings Bank if the designated proportion of depositors' funds now lodged with the Exchequer were to change. Has the Minister any information on the profile of the size of deposits in the Trustee Savings Bank? The general impression is that these banks are for small savers and that the amount on deposit by any individual would not be huge. I ask the question because is there no limit on the deposit protection scheme in the Central Bank Act? If I recall correctly, it is protected up to £10,000 with some variation after that? I am vague about the details. Perhaps the Minister will indicate the amount an individual depositor would have in a trustee savings bank and explain the deposit guarantee fund and its provisions?

The Deputy is correct in saying that many of the investors — 75 per cent — are small investors.

(Limerick East): Are the savings in the order of £10,000 or £5,000?

I do not have figures but I presume "small" means under £25,000.

Many people in my constituency would not consider that a small sum.

The same applies to my constituency. Perhaps it applies more than in Deputy Taylor's constituency.

I know both constituencies and I agree with Deputy Taylor. However, we have proceeded as far as we can in relation to this matter as we finally extracted the figure of 75 per cent from the Minister. I would love to know about the £25,000 limit as I am sure that is not the case. My perception remains that a majority of the people who have deposits and who bank with the Trustee Savings Banks, are very small investors. The Minister's answers have been too woolly and we must press the amendment.

From the limited knowledge I have of the financial world, it is my perception that compared with credit unions, building societies and other institutions, there is a higher number of average small investors with the Trustee Savings Banks.

Question put: "That the words proposed to be deleted stand part of the Bill."
The Committee divided: Tá, 70; Níl, 64.
Question declared carried.

Níl

Ahearn, Therese.Allen, Bernard.Barnes, Monica.Barrett, Seán.Barry, Peter.Bell, Michael.Belton, Louis J.Boylan, Andrew.Bradford, Paul.Bruton, Richard.Byrne, Eric.Carey, Donal.Connaughton, Paul.Cosgrave, Michael Joe.Cotter, Bill.Creed, Michael.Currie, Austin.D'Arcy, Michael.Deenihan, Jimmy.Doyle, Joe.Dukes, Alan.Durkan, Bernard.Farrelly, John V.Fennell, Nuala.Ferris, Michael.Finnucane, Michael.Flaherty, Mary.Flanagan, Charles.Gilmore, Eamon.Gregory, Tony.Harte, Paddy.Higgins, Jim.

Higgins, Michael D.Hogan, Philip.Howlin, Brendan.Kavanagh, Liam.Kenny, Enda.Lowry, Michael.McCartan, Pat.McCormack, Pádraic.McGahon, Brendan.McGinley, Dinny.Mac Giolla, Tomás.McGrath, Paul.Mitchell, Jim.Moynihan, Michael.Nealon, Ted.Noonan, Michael.(Limerick East).O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Gerry.O'Sullivan, Toddy.Owen, Nora.Pattison, Séamus.Quinn, RuairíRabbitte, Pat.Ryan, Seán.Sheehan, Patrick J.Sherlock, Joe.Spring, Dick.Taylor, Mervyn.Taylor-Quinn MadeleineYates, Ivan.Yates, Ivan.

Amendment declared lost.

Since amendment No. 14 is now negatived, amendments Nos. 15 and 16 fall and cannot be moved.

Amendments Nos. 15 and 16 not moved.
Section 10 agreed to.
Sections 11 and 12 agreed to.
SECTION 13.

I move amendment No. 17:

In page 11, subsection (1), lines 18 to 20, to delete paragraph (e) and substitute the following:

"(e) if the trustee savings bank is convicted on indictment of an offence under this Act or is convicted of an offence involving fraud or dishonesty,".

The purpose of this amendment is to replace the revocation of a licence and conviction of a trustee with revocation of a licence and conviction of a Trustee Savings Bank. This provision is based on section 34 of the Central Bank Act, 1989, and I hope the House can accept it.

Amendment agreed to.

I move amendment No. 18:

In page 11, subsection (1) (h), line 31, after "Bank", to insert "under this Act".

The purpose of this amendment is to clarify that revocation of a licence may ensue if the trustee or the Trustee Savings Bank fail to comply with the direction of the Central Bank made under this Act. Without this clarification failure of a Trustee Savings Bank to comply with any Central Bank direction might have been interpreted as a cause for revocation of a Trustee Savings Bank licence.

Amendment agreed to.
Section 13, as amended, agreed to.
SECTION 14.

I move amendment No. 19:

In page 12, subsection (1), line 22, after "shall", to insert ", unless the Central Bank consents to its omission".

The purpose of this amendment is to provide for a situation where the composition of a Trustee Savings Bank's business may have changed and the Trustee Savings Bank concerned do not wish to have to use the savings bank title in all their transactions. Making the provision subject to Central Bank consent will ensure that the Trustee Savings Bank will be obliged to continue using the title where the Central Bank think it is necessary to draw attention to the distinctive nature of the Trustee Savings Banks and to avoid confusion with other types of financial institutions.

Amendment agreed to.

I observe that amendments Nos. 20 and 21 are related. I suggest, therefore, that amendments Nos. 20 and 21 in the name of the Minister can be discussed together.

I move amendment No. 20:

In page 12, subsection (2) (c), line 41, to delete "or"

The purpose of this amendment is to clarify the text by omitting an unnecessary "or". The purpose of amendment No. 21 is to correct a drafting error and to clarify that a person other than a Trustee Savings Bank shall not use the title "Trustee Savings Bank" or "savings bank" in advertisements, circulars, etc.

Amendment agreed to.

I move amendment No. 21:

In page 12, subsection (2) (d), line 42, before "use", to insert "shall not".

Amendment agreed to.
Section 14, as amended, agreed to.
SECTION 15.

Amendments Nos. 22 and 24 are related. Is it agreed to discuss amendments Nos. 22 and 24 together? Agreed.

(Limerick East): I move amendment No. 22:

In page 13, subsection (1), line 4, after "determine." to insert "The Central Bank shall take account of, the rates of interest charged and paid by other licensed banks and building societies in fixing these rates.".

Section 15 makes provision for the setting of interest rates for Trustee Savings Banks. It provides for the setting of rates of interest to be charged by a Trustee Savings Bank on loans provided by them and the level of interest to be paid for money on deposit. It allows the Central Bank to decide these matters at its own discretion.

One of the purposes of the Bill is to put all banks on the same basis. I understand there is a mechanism for the setting of interest rates in the commercial banks, as a particular matrix of interest rate, which apply to the banks, and I would like a similar provision to apply in relation to the Trustee Savings Banks. I cannot understand why a separate provision should be made for the Trustee Savings Banks. This amendment provides that the Central Bank in setting the interest to be charged and paid by the Trustee Savings Bank should be obliged to take into account the rates of interest charged and paid by the other licensed banks and building societies carrying out the same business.

Section 15 deals with the rate of interest charged and paid by the Trustee Savings Banks, gives them power to borrow and specifies that Central Bank approval is necessary for any activities other than the taking of deposits. The amendment proposed by Deputy Noonan provides for Central Bank control over the rates of interest on loans and deposits. Deputy Noonan proposes that there should be a link between the Trustee Savings Banks' rates and the rates charged by the associated banks and building societies. Obviously there will be a link and there is no need whatever to provide for this in legislation. The Central Bank will, of course, take account of developments elsewhere on setting the Trustee Savings Banks' rates. They will have to take the whole financial scenario into account when they are making decisions.

(Limerick East): I accept the Minister's assurance and I will withdraw my amendment.

May I move my amendment?

We have already agreed to take both amendments together for discussion purposes, and the Deputy would not be in order in moving his amendment.

The purpose of amendment No. 24 is to give a person borrowing money from a Trustee Savings Bank the same protection a person borrowing money from a moneylender has under the terms of the Moneylenders Act, 1933. Some important protections are given to people who borrow money under sections 11, 17 and 20 of the Moneylenders Act and I do not understand why people borrowing money from a Trustee Savings Bank or any of the commercial and mercantile banks should not have the same protections given to them.

I want to refer in particular to section 11 which requires that any contract of loan must be in writing, otherwise it will be void. It also provides that the APR, the annualised rate of interest, per cent per annum, must be specified in that written contract otherwise it will be void. I know that many of the merchant banks who carry on their lending business in the State avail of the provision whereby they are not obliged to comply with the Moneylenders Act and they do not state on their loan notes the true annual rate of interest. They put down the monthly rate — I have seen this many times — of 2.2 per cent per month and many of the unfortunate people who take out loans with them do not realise that that amounts to about 36 per cent or 37 per cent per annum. Section 11 of the Moneylenders Act says that that is not allowed and they are obliged to state the annual rate of interest per cent per annum.

I am not hitting in particular at the Trustee Savings Banks on this — maybe they do this already — but I want it as a marker that not only should the Trustee Savings Banks but all banks who lend money to people should, as a basic consumer's right, be obliged to specify the amount of the annual rate of interest. That is the purpose of amendment No. 24.

I enthusiastically support amendment No. 24 in the name of Deputy Taylor. It is the first worthwhile amendment to be put down to the Bill so far and I cannot imagine why the Minister would not want to take it on board. I can validate entirely what Deputy Taylor has said. Members of this House have had people come into their clinics and explain to them the terrible circumstances they are in because they bought a washing machine or some other machine and did not understand, had not explained to them, or had concealed from them, the effective annual interest rate. I imagine that is the general experience of Deputies with the exception of a small number who represent rather exclusive constituencies. I suspect it is not within the everyday knowledge of people drafting legislation such as this that there are a great many people who have serious numeracy problems and do not appreciate the implications of entering into this type of contract. I am satisfied that many people concerned with the drafting of this legislation simply do not come into everyday contact with people who end up being victimised by their inability to read such contracts or by the fact that central elements such as this are concealed from them. It is probably true to say that the Trustee Savings Banks are by no means the worst culprits. Various subsidiary companies and hire purchase companies owned by the major associated banks are the main culprits. The precedent being set by Deputy Taylor's amendment is worthy of the support of this House. I do not see how it is inconsistent in any way with the purpose of the Bill as outlined by the Minister. I sincerely hope that the Minister will take this amendment on board.

I have listened with interest to what Deputies Taylor and Rabbitte have said. I want to assure Deputy Rabbitte that I come from a constituency where many people borrow money. I am sure the vast majority have to borrow money so no one can claim exclusiveness in that regard. Deputy Taylor proposes that the Trustee Savings Banks be brought under the Money Lenders Act, 1933, and he refered to three sections in particular; section 11 where loans must be secured by written contracts, section 17 where if the rate of interest exceeds 39 per cent per annum, there is recourse to the courts, who can deem it excessive; section 20 allows the court to enforce compliance with the contract. So far as we are concerned such provisions are inappropriate. Section 136 of the Central Bank Act, 1989, provides that any person carrying on bona fide the business of banking will not come under the Money Lenders Act. This is an established practice and to single out the Trustee Savings Banks would not be in their interest in competing with others who are excluded from that Act.

The Central Bank supervision of the Trustee Savings Banks makes Deputy Taylor's amendment unnecessary because a structure of interest rates would have to be agreed with the Central Bank, which lays down the rules within which the Trustee Savings Banks operate. The interest rates to be charged and the interest rates to be paid to depositors are agreed under the Central Bank Act. The bona fides, the composition and the resources on the banks vis-à-vis money lenders are different. It would be inappropriate to put the Trustee Savings Banks under the provisions of the Money Lenders Act, in particular when their competitors are not covered by that Act.

I found the Minister's reply seriously disappointing. I am not talking about controlling the rates of interest. Let them charge what rates they like, be it 150 per cent or 350 per cent. That is not the point I am making. My point is that they should spell out the rate of interest charged in language that the ordinary person borrowing money from them understands. That is all I seek. I do not seek to control the rate of interest but I ask that they should spell it out. Why pull the wool over people's eyes by saying that the rate of interest is 2.2 per cent per month, when in actual fact this means an interest rate of 36 per cent per annum? I know that institutions who have a banking licence under the Central Bank Act do not have to comply with the Money Lenders Act, but quite frankly that is a disgrace. It is utterly beyond me how that ever came about because in effect these institutions are moneylenders. They may be seen as banks but in fact they are moneylenders. There are two distinct categories of banks that get the same licence. The Allied Irish Bank, Ulster Bank, Bank of Ireland etc. are in one category. However a very different category get the same licence, and are also exempt, yet carry on a radically different type of business. Those include Allied Irish Finance, Mercantile Credit, Merchant Banking Ltd., UDT Bank and others. They are very different from the first category. They do a different type of business yet, because they hold a licence under the Central Bank Act, they are exempt from stating the annualised rate of interest — that important protection to which any consumer should be entitled is denied to them, because they have a licence on the same basis as the associated banks, such as the Ulster Bank or Bank of Ireland. I was trying to set down a marker to try to rectify that situation. Let me tell the Minister that people are being hurt and hurt badly. They are losing their homes because of it. It is not good enough to say that the Trustee Savings Banks should be free to operate in the same way as their competitors. I had hoped that this amendment would be accepted as a start in rectifying that situation under which the hire purchase type finance companies rank in the same way as the Ulster Bank or Bank of Ireland although their business is radically different. I was entirely wrong. This is very disappointing.

Deputy Taylor, you are not pressing the amendment?

I did not say that.

I did not intend to say that the Minister did not appreciate the phenomenon we are talking about. I believe he does and it is for that very reason he should accede to this amendment. One gets the impression that no matter what is within the Minister's experience, regardless of whether he agrees with the points made in this House, the Department of Finance officials are impervious to being made aware of the facts of life as they apply to a great number of people. The fact that this does not apply in the case of the associated banks is no argument to make as to why it should not apply in the case of the Trustee Savings Banks. It should be imported into the associated banks, having regard to the hardship and suffering being caused to so many people.

I am sure the Minister is also aware that the effect of the failure to be provided with this information when one is engaging in a contract to buy whatever, is that people are being driven into the arms of illegal moneylenders in order to pay off unforeseen and unexpected additional charges arising from the fact that the annual rate of interest is being concealed in the manner that has been described. I ask the Minister to reconsider his approach to this amendment.

Amendment, by leave, withdrawn.

I move amendment No. 23:

In page 13, subsection (2) (a), line 5, after "money", to insert "including, with the consent of the Central Bank, money in a currency other than the currency of the State.".

The purpose of the amendment is to ensure that the Trustee Savings Banks will be able to borrow foreign currency but only with the approval of the Central Bank which would monitor their exposure in this area.

Amendment agreed to.
Amendment No. 24 not moved.
Section 15, as amended, agreed to.
SECTION 16.

Amendment No. 25 is in the name of the Minister, amendments Nos. 26 and 28 are related. It is, proposed, therefore with the agreement of the House to take amendments Nos. 25, 26 and 28 together for discussion purposes. Is that agreed? Agreed.

I move amendment No. 25:

In page 13, subsection (1) (a), line 27, after "business", to insert "or, in the case of a trustee savings bank that immediately before the commencement of this section was a former bank, not later than 6 months after such commencement".

The purpose of this amendment is to copperfasten the requirement that former Trustee Savings Banks draw up rules subject to Central Bank approval for the management and administration of the bank no later than six months after the commencement of the section on rules. Without this amendment there would be no explicit direction to a former Trustee Savings Bank to revise their rules.

Amendment agreed to.

I move amendment No. 26:

In page 13, subsection (1) (b), lines 47 and 48, to delete "any rules being amended or not being revoked" and to substitute "the rules that would be in force following the proposed amendment or revocation".

The purpose of this amendment is to clarify that the Central Bank shall approve the new body of rules that would be in force after any proposed amendment or revocation. As drafted, it could imply the need to approve the originals of rules being amended.

Amendment agreed to.
Amendment No. 27 not moved.

I move amendment No. 28:

In page 14, lines 24 to 29, to delete subsection (5) and substitute the following:

"(5) Rules of a former bank in force immediately before the commencement of this section shall continue in force for the period of 6 months immediately after such commencement and may be amended or revoked during that period by the trustees of the trustee savings bank concerned as if made pursuant to this section and shall, during the said period, be deemed to comply with the provisions of this Act.".

The purpose of this amendment is to clarify that a former bank's rules can only continue in force for six months after commencement. This relates to the obligation imposed on them by amendment No. 25 concerning this section which requires a former bank to draw up rules no later than six months after the commencement of this section.

Amendment agreed to.
Section 16, as amended, agreed to.
SECTION 17.

Amendments Nos. 32, 33, 34, 35 and 37 are consequential on amendment No. 29 and amendments Nos. 30, 31 and 36 are alternatives. It is proposed therefore to take amendments Nos. 29 to 37, inclusive, for discussion. Is that agreed? Agreed.

There are some differences between amendments Nos. 29 and 30 but I will accept that they be discussed together.

The Deputy is free to make any comment on the amendments but for discussion purposes we will take them together.

I move amendment No. 29:

In page 14, lines 32 and 33, to delete subsection (1) and substitute the following:

"(1) There shall be not less than five and not more than ten ordinary trustees of a trustee savings bank and in addition there shall be two worker trustees.".

This amendment provides that in addition to the ordinary trustees of a Trustee Savings Bank, there shall be two worker trustees on each board of the bank. As I have said, the Trustee Savings Bank, for practical purposes, is a State-owned institution or a semi-State type body. The trend is and should be that there be worker directors or trustees, as they are in this case, on such boards. There are large numbers of employees in the Trustee Savings Banks who have done a very fine job in those banks and built them up to their present size and the very respected and worthwhile organisations they are. It is entirely right and proper that they should have representation on the board to espouse the interests of the workers in those various institutions.

Heaven knows the manner of appointment of the trustees ordinarily leaves a lot to be desired and is undemocratic. The public and the Minister have no say in the appointment of the trustees of the Trustee Savings Banks at present. How are they appointed? They are a self-perpetuating body. When a vacancy occurs, the old boy network no doubt comes into play and some friend or acquaintance of one of the remaining close knit group of trustees, some person of no known qualifications, is co-opted to the board. That is how these boards of trustees are perpetuated year after year and decade after decade. It would be like a breath of fresh air to bring worker representatives on to the board of trustees of those banks. That would be a very good and democratic trend. These people would be democratically elected by the workers in the bank.

I support the amendment. It would be in keeping with all modern trends in voluntary negotiations and indeed, to an increasing extent, in legislation if this provision was accepted. We have had this arcane argument about trusteeships and whether the banks are in public ownership. For example, we know legislation has been introduced in various areas to permit worker directors to become members of the boards of various State enterprises. Notwithstanding the arcane distinction we have been making, I continue to argue that these banks are effectively in public ownership at the moment and therefore the provision I have referred to regarding other enterprises should also apply here. We are not talking about Mickey Mouse institutions; we are talking about assets of approximately £1 billion, vested admittedly in the trustees but at the disposal of the Oireachtas. I, like Deputy Taylor, am unhappy with what I have managed to learn about the position regarding trustees at present. It seems to be surrounded in a fair amount of mystery and secrecy and is most definitely undemocratic.

The workforce in the Trustee Savings Banks have increased very significantly in recent years. I can see no good argument why they ought not be facilitated through this mechanism by electing directors or trustees as in this case. We do not want to see the kind of situation that has been permitted in the building societies where one effectively has oligarchies where families seem to have retained control. I cannot accept that that is in the interests of the consumer or in the interests of society. The row that can be caused by attempting to have a woman elected to the board of the building societies is a very good example of what ought not be allowed happen here. I hope one can anticipate a positive response from the Minister to this amendment.

Section 17 deals with the number of trustees of a Trustee Savings Bank, the provisions in respect of commencement of the section, the amalgamation of Trustee Savings Banks and where the number of trustees falls below the minimum level. Under existing legislation there would appear to be no legal limits on the maximum number of trustees in a Trustee Savings Bank, although a minimum of four is required for the authentification of the savings bank rules under the Savings Bank Act, 1904. The main requirement is that for the future the number will be between five and ten and the consent of the Central Bank should be required for their appointment.

In the amendments, both Deputies Taylor and Rabbitte want to provide for the election of worker trustees. This is a variation of the worker directors in various State and semi-State bodies at present. Deputy Taylor also proposes that those trustee directors who are not elected should be appointed by the Minister with the consent of the Central Bank. The trustees are in effect a selfappointing body as existing members coopt new members but it is not an ideal arrangement. It may have been in the past when trustees were well known local people who served in a voluntary capacity in the interests of the community but this is now changing, especially as they can be paid for their work.

In defence of the existing system it must be said that the record of trustees over many years is very good indeed. The Central Bank will be exercising a supervisory function over the trustees and Central Bank consent will be required in the appointment of new trustees. On the question of worker appointees, which the Deputies seem to hope for, this is really a matter for the trustees to consider in consultation with the Central Bank. The Minister for Finance should not be involved as the Trustee Savings Banks are not State bodies. Consequently I regret I will not be able to accommodate the Deputies with this amendment.

(Limerick East): I have listened with interest to the Minister's reply. It seems that if the management and staff of the Trustee Savings Banks were to negotiate a position whereby trustees would be co-opted to the boards of Trustee Savings Banks, that can be done. I have no information to suggest that the management or staff of the Trustee Savings Banks see this as a priority in their industrial relations. I would be inclined to think it is very low down on their list of priorities. If they want to do that, the proper way is to negotiate with the management and the trustees and there is provision for that. I do not think this House should force on institutions which are not State institutions a formula which was derived from the arrangements which were made in certain State bodies and semi-State companies for worker directors. I would be far more interested if the Minister, when he is incorporating the Trustee Savings Banks under section 58, would make provision for an appropriate allocation of shares to all who work in that bank. It seems that workers are far more motivated by having a stake in the company in the form of a share than they are by helping whatever trade union or association is involved to form a power base for the leaders of the trade union movement. While the trade union as an institution is very interested in the idea of worker directors and worker trustees, those who actually work in institutions would be far happier if they were beneficial shareholders in the institution. I know the Minister has not time to reply now but we might take this matter up on another occasion.

We will consider the matter and refer it to the Minister for consultation with the Central Bank.

The question is: "That the amendments set down by the Minister for Finance for Committee Stage and not disposed of are hereby made to the Bill; in respect of each of the sections undisposed of, other than section 57, that the section or, as appropriate, the section, as amended, is hereby agreed to in Committee; that the First and Second Schedules and the Title are hereby agreed to in Committee; that the Bill, as amended, is hereby reported to the House; the Fourth Stage is hereby completed and that the Bill is hereby passed.

Question put.
The Committee divided: Tá, 68; Níl, 62.
Question declared carried.

Níl

Ahearn, Therese.Allen, Bernard.Barnes, Monica.Barrett, Seán.Barry, Peter.Bell, Michael.Boylan, Andrew.Bradford, Paul.Bruton, Richard.Byrne, Eric.Carey, Donal.Cosgrave, Michael Joe.Cotter, Bill.Creed, Michael.Currie, Austin.D'Arcy, Michael.Deasy, Austin.Deenihan, Jimmy.Doyle, Joe.Dukes, Alan.Durkan, Bernard.Farrelly, John V.Fennell, Nuala.Ferris, Michael.Finnucane, Michael.Flaherty, Mary.Flanagan, Charles.Garland, Roger.Gregory, Tony.Harte, Paddy.Higgins, Jim.

Higgins, Michael D.Hogan, Philip.Howlin, Brendan.Kavanagh, Liam.Kenny, Enda.Lowry, Michael.McCartan, Pat.McCormack, Pádraic.McGahon, Brendan.McGinley, Dinny.Mac Giolla, Tomás.McGrath, Paul.Mitchell, Jim.Moynihan, Michael.Nealon, Ted.Noonan, Michael.(Limerick East).O'Keeffe, Jim.O'Shea, Brian.O'Sullivan, Toddy.Owen, Nora.Pattison, Séamus.Quinn, Ruairí.Rabbitte, Pat.Ryan, Seán.Sheehan, Patrick J.Sherlock, Joe.Spring, Dick.Taylor, Mervyn.Taylor-Quinn, MadeleineTimmins, Godfrey.

Sitting suspended at 1.45 p.m. and resumed at 2.30 p.m.
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