I move:
That Dáil Éireann approves the following Order in draft:—
Trustee (Authorised Investments) Order, 1992,
a copy of which Order in draft was laid before the House on 30th January, 1992.
The purpose of the draft order before the House is to amend the list of investments in which trustees may invest funds under their control. The order is being made under the Trustee (Authorised Investments) Act, 1958. The principal purpose of this legislation is to protect the beneficiaries of trusts by offering a range of suitable and prudent investments. Although a trust deed may specify wider powers of investment by the trustees, many trusts and similar funds are confined to investments authorised under the Act. In addition, the funds held by the courts can only be invested in trustee authorised investments.
Under section 2 of the 1958 Act, the Minister for Finance is empowered to amend the list of trustee authorised investments by order. A draft of the order must be laid before each House of the Oireachtas and a motion of approval passed by each House before the order can be made. The list is kept under review and changes are proposed when appropriate. The last amendment was made in 1990.
The existing list is quite long and detailed and I can make copies available to the House if this is desired. The 1958 Act sets out the original series of investments and the list has been amended by order 11 times since then. The typical investments authorised are gilt-edged securities, deposits with banks and building societies and certain unit trusts. This type of investment is very much the safe and secure sort, which is as it should be in the case of trust fund investments.
I now ask the House to approve the addition of three new investments to the list. The first of the investments I propose to add is investments in interest-bearing deposit accounts with ABN AMRO Bank NV. In September 1991 the Netherlands' two largest banks, Algemene Bank Nederland NV and Amsterdam-Rotterdam Bank NV merged to form ABN AMRO Bank NV. The merger has made ABN AMRO the largest bank in the Netherlands and the sixth largest in Europe. ABN has had a subsidiary operation in Ireland since 1972. The subsidiary, ABN AMRO (Ireland) Limited, own a majority stake in stockbrokers Riada and have established a number of companies in the Irish Financial Services Centre.
ABN AMRO Bank NV applied to the Central Bank to operate a branch in Ireland to which certain parts of the business of the existing subsidiary have been transferred. The Central Bank gave permission for the branch to commence operating on 1 February 1992. Interest-bearing deposit accounts with the subsidiary have trustee authorised investment status and ABN AMRO want the same status for interest-bearing deposit accounts with the branch.
The Central Bank supported the ABN AMRO request and I have no doubt that the inclusion of the bank on the list is warranted.
I propose also, to add to the list Irish Life's Charité Unit Trust, Cash Fund and Fixed Interest Fund, and the following three AIB Unit Trusts: Allied Irish High Income Bond; Allied Irish Capital Growth Fund; and Allied Irish Charicash.
There are a number of unit trusts already on the list. The guidelines in these cases require that the unit trust should invest only in trustee authorised investments. Both Irish Life and AIB have given undertakings that the unit trusts will invest only in cash or gilts which are trustee authorised investments.
It might be helpful to the House if I outlined the manner in which applications for admission to the list of trustee authorised investments are dealt with and the particular criteria which apply to the examination of applications.
Given the reasons for the trustee legislation, I have to be careful in examining applications to ensure that the investments placed on the list are, in so far as possible, sound, reliable and remunerative. To enable the assessment of applications on objective grounds, a set of criteria has been drawn up for banks, building societies, life assurance and unit trusts. The criteria for deposits with a bank or building society are as follows: the bank or building society must be authorised to operate in Ireland and must have carried on business for at least three years; the bank or building society must have complied with the statutory requirements laid down from time to time; the Minister for Finance after consultation with the Central Bank must be assured that the bank or building society has a satisfactory record of compliance with the Central Bank's prudential standards and requirements; and the bank or building society must have (i) gross assets of at least £35 million; (ii) a minimum capital of £2.5 million; or (iii) if the applicant is a subsidiary of another credit institution, the parent institution must have gross assets of at least £100 million.
In order to be considered for listing as an authorised investment, a unit trust must provide a suitable application outlining the legal, financial and administrative arrangements in relation to the trust, e.g. a copy of the deed of trust. In addition: it must be an authorised unit trust under the relevant UCITS or unit trust legislation; it must have been in operation for three years; the Minister for Finance, after consultation with the Central Bank must be happy that the company has a satisfactory record of compliance with the supervisory requirements of the Central Bank; the unit trust may only invest in Government securities or/and deposits placed with licensed banks or building societies; the unit trust must offer to buy back units from trustees at the quoted market rate; and the criteria for admission to the list be met on a continuing basis.
In relation to life assurance products, the applicant must supply specific information on the particular investment product to enable the Department to assess its suitability for listing. In addition, the life assurance company must satisfy the following criteria: It must hold an authorisation to transact one or more of the main categories of life assurance business in the State; it must have been established and actively trading with the public for at least three years; as in the case of banks, building societies and unit trusts, the Minister for Finance, after consultation with the Minister for Industry and Commerce, must be satisfied that the company have a satisfactory record of compliance with the supervisory requirements of the Department of Industry and Commerce; the company must have in each of the two years preceding the application assets of at least £50 million within the State and exceed by 50 per cent or more the required EC minimum solvency margin requirements for life assurers; the company must provide the Minister for Finance with a certificate of solvency, signed by at least two of the directors and the appointed actuary, in respect of the year immediately preceding the application; the product should be based exclusively on Government securities or cash deposits with deposit taking institutions authorised for trustee investments; the product should have been on the market for at least three years preceding the application and the company should be committed to maintaining the product on the market for the foreseeable future; and, finally, the criteria must be met on a continuing basis.
These are stringent requirements and rightly so. They are not excessive, however, in the light of the probity and financial soundness which one would expect of any well established financial institution.
The Department seek to supply the criteria in a reasonable manner. Thus, in applying the three year rule, the Department will take into account whether the business is being transferred from one authorised firm to another. In this case, it is reasonable to give credit for the period before the transfer in applying the three year rule.
The purpose of setting out these criteria is to be helpful to applicants and to ensure, as far as possible, that there is a level playing field for each type of applicant. The criteria were drawn up after consultation with the Central Bank and the Minister for Industry and Commerce.
After an application has been processed, I am obliged, under the terms of the Trustee (Authorised Investments) Act, 1958, to consult a number of referees in regard to any proposed order to amend the list of investments. These referees are the Governor of the Central Bank, the Public Trustee, the President of the Irish Stock Exchange, the President of the Incorporated Law Society, the chairman of the Irish Banks' Standing Committee and a judge of the High Court nominated by the President of the High Court.
The referees have all been consulted and no objections have been raised to the terms of the present draft order.
The additions I am proposing will expand the investment options available to trust funds and will facilitate the operations of trustees and, in particular, charities who are affected by this legislation.
While the additions to the list concerned specific institutions, the opportunity should not be allowed to pass without a mention of the financial sector generally. We have seen in the last two years the passage of a series of legislation which will enable Irish financial institutions to compete more effectively in the EC internal market and will improve the protection available to persons dealing with those institutions. The success of the International Financial Services Centre, where domestic firms are strongly represented, shows that the Irish financial sector can compete with the best abroad. The 1990 "Europen" report on financial services also reinforced this conclusion. However, it is up to the individual firm to plan its own response to the opportunities and challenges involved. I am encouraged by the moves made by particular firms to gear up to meet the challenge and I know that the financial sector will remain an important contributor to employment in the State.
I have no doubt that the products and deposit accounts being added to the list will prove their worth to trustees and, accordingly, I recommend the Order to the House.
