Dáil Éireann debate -
Tuesday, 5 Nov 1996

Vol. 471 No. 1

Central Bank Bill, 1996: Second Stage.

Minister of State at the Department of Finance (Mrs. Doyle)

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

The Central Bank Bill provides for a range of new measures relating to the powers and obligations of the bank. The main Acts relating to the Central Bank are the Central Bank Acts, 1942, 1971 and 1989. The last major revision of Central Bank legislation was the 1989 Act which, as well as updating the charter of the bank itself, also extended considerably the powers of the bank to supervise banks and other financial institutions and introduced a deposit protection scheme for depositors.

The present Bill includes provisions relating to payment systems and cross-border credit transfers, as well as dealing with a number of other matters in Central Bank legislation which require updating and amendment. These include provision for the accountability of the Governor of the bank, extension of the bank's supervision and enforcement powers, including new provisions for the supervision of bureaux de change, and a number of miscellaneous technical provisions.

A limited number of amendments are included to ensure compatibility with certain defined provisions of the Treaty on European Union, which took effect with the start of the second stage of European Monetary Union on 1 January 1994. However, the Bill does not address the legal issues arising from the move to stage 3 of European Monetary Union. Although extensive preparatory work has been done on the legislation required in connection with the move to stage 3 of European Monetary Union it would be premature to finalise it at this stage.

Article 108 of the Treaty requires each member state to ensure, at the latest by the date of the establishment of the European System of Central Banks, that their central bank legislation is compatible with the Treaty and the Statute of the ESCB. With stage 3 of European Monetary Union commencing on 1 January 1999, this will be early 1998. The legal division of the European Monetary Institute is currently drafting guidelines for the adaptation of central bank legislation in all member states to Treaty provisions. It is not yet clear when these guidelines will be finalised. It has been decided to wait until these guidelines are available before legislating for stage 3 of European Monetary Union. The EMI has been consulted and they have agreed with this approach. Therefore, the Bill now before the House is largely a technical one.

As the volume and speed of large-value payments messages has been increasing, their speedy settlement at central banks has become more and more important. This has led to an increasing concern world-wide about the settlement process for these payments and the systemic risk implications resulting from the possible inability of a bank to settle its payments obligations at a central bank. This concern led to a group of payments and settlements experts, representing EU central banks, producing a report which recommended a set of standards for the settlement of large-value payments.

There is a major drive in Europe to standardise and co-ordinate national initiatives in this area. The Central Bank has been involved in this process and has committed itself to installing a real time gross settlement system in Ireland by the end of 1996. The essential feature of RTGS is that the settlement of a payment instruction and its transmission to the receiving bank are simultaneous. Currently, seven of our EU partners operate RTGS and all but two of the rest have committed themselves to having it in operation by the end of 1996. The other two will have RTGS in 1997.

From a competitiveness point of view, it is important that the processing of Irish large-value payments is at least equal to that of the other EU member states. Also, from a purely prudential point of view, RTGS would reduce substantially the systemic risk associated with the system of end-of-day settlements currently operating in Ireland.

The powers of the Central Bank to oversee the collection of cheques and other payable orders by licensed banks are contained in section 26 of the Central Bank Act, 1971. While these powers have been of service, they are limited in scope to three licensed banks and to the terms and conditions and rates of charges applied to the collection of such cheques and instruments. The Central Bank has no role in the approval of payment systems nor a direct right of supervision and intervention. The growth of international trade, the size of daily settlements, the increased use of electronic payments and the volatility of trade flows have caused individual central banks to take steps to address the various risks arising in their own domestic payment systems, in particular the risk of default, breakdown and liquidity shortage which would have grave implications for the security and stability of the banking system.

Similar steps are now required in Ireland, particularly for large-value transactions. The current payments system which has served well to date is not properly equipped to respond adequately to the increasing pace of change in money transmission services. Discussions on the restructuring of the current system have been ongoing for some time and are at an advanced stage. The Government is particularly concerned to ensure that payment systems in the State are effective, efficient and open and that the systems themselves do not add to, or cause, instability in the operation of financial markets. To this end, in addition to facilitating the introduction of RTGS, the Bill provides for a significant change in the area of payment systems generally. In brief, the bank will be given the power, for the first time, to approve the establishment of payment systems and vet their rules. These powers will also apply in the case of existing payment systems.

Apart from those which form part of a bank's operations, bureaux de change have been effectively outside the scope of any official supervision since the abolition of exchange controls some years ago. The need to introduce a supervisory regime at this point arises from our international commitments in the area of money laundering. The Financial Action Task Force of the OECD, the international body set up to combat money laundering, has strongly recommended that those countries which do not currently supervise bureaux de change should do so because of their potential use in the money laundering chain. While we are not bound to follow the views of the FATF in this matter, failure to do so would undoubtedly leave Ireland open to criticism.

The Government has, therefore, decided to include provisions in the Bill to give the bank the appropriate powers of supervision. These provisions are based very closely on existing provisions relating to the supervision of moneybrokers as set out in Chapter IX of the Central Bank Act 1989 and will require bureaux de change to be authorised by the Central Bank with the standard provisions regarding appeal to the Minister for Finance where the bank proposes either to withhold or revoke an authorisation. The degree of supervision of the operations of bureaux de change would largely be a matter for the discretion of the Central Bank under a general framework set out in the Bill.

The Trustee (Authorised Investments) Act, 1958, contains a list of investments in which trustees are empowered to invest. It gives to the Minister for Finance power to designate other investments or to delete investments. This is done by ministerial order. Such orders require a motion approving them to be passed by both Houses of the Oireachtas. The list of investments which are currently designated is largely confined to fixed-rate securities, bank or building society deposits and a small number of unit trusts whose investments are restricted to Government securities and bank or building society deposits. The only equities on the list are the shares of the two main banks — Bank of Ireland and AIB. Following a request some time ago for the designation of certain other company shares, the existing approach to the designation of trustee investments was reviewed. It was concluded that the approach adopted to date was no longer appropriate and that a revised approach should be adopted. This would have the following main features: as far as possible designation should be in respect of categories of investments rather than individual investment products to avoid the appearance of giving an official endorsement to individual products; the powers of trustees should be widened to include investment in equities, whether directly or indirectly, through collective investment schemes; the investment powers of trustees should be subject to certain conditions regarding the level of their foreign and equity investments.

While the Trustee (Authorised Investments) Act, 1958, gives the Minister for Finance power to amend the list of investments by order, it does not give him power to impose conditions on the investment powers of trustees. Provisions in this Bill amend the 1958 Act to give the Minister this power. The requirement in the 1958 Act that each order made under it must be approved by both Houses of the Oireachtas is also being removed. Effectively, a legislative procedure is required for what is essentially a regulatory matter. Instead of the requirement for the passing of a motion approving ministerial orders made under the 1958 Act, the normal procedure which is used for orders made under the Central Bank Acts i.e. that they are laid before both Houses of the Oireachtas and become effective unless an annulling resolution is passed within a specified time, is being inserted. These are, essentially, enabling and simplifying provisions.

Several other matters requiring attention are also incorporated in the Bill. The extension of the supervisory and enforcement powers of the bank is proposed to bring them up to date with best current practices. Provision for the accountability of the bank is also included. The Bill also provides for the formation or acquisition by the bank of subsidiary companies. A number of the central banks enjoy such a facility. The provision is an enabling one only, and the exercise of this power by the bank will require the prior permission of the Minister for Finance whose approval will also be necessary for the terms of the memorandum and articles of association of any such company. The Bill also provides for the amendment of certain provisions of a number of Acts.

I will now move on to a more detailed description of the Bill.

Part I contains the usual provisions on citation, interpretation, regulations and repeal clauses. Part II provides for authorising the establishment and supervising the operation of payment systems in the State. Briefly, these provisions will require all payment systems to be approved, and have their rules vetted, by the Central Bank. The bank may impose conditions on approval, revoke approval and issue directions to the system or its members. In circumstances where the bank proposes to refuse or revoke approval, an appeal may be made to the Minister for Finance. This will complement the capacity of the Competition Authority and the European Commission to examine the competitiveness of any proposed arrangements.

Part III gives authority for the formation or acquisition of subsidiary bodies by the bank. The provision is an enabling one only, and the exercise of this power by the bank will require the prior permission of the Minister for Finance, whose approval will be necessary for the terms of the memorandum and articles of association of any such company.

Part IV deals with the accountability of the Governor of the Central Bank, while having due regard to the independence of the bank. It provides for the attendance by the Governor of the Central Bank, if so requested, before the Select Committee on Finance and General Affairs and the furnishing to that committee with such information as it may request. Provisions are also included in relation to the provision of advice and assistance to the Central Statistics Office in relation to the compilation of balance of payments statistics as well as minor amendments concerning the terms and tenure of office of the Governor of the Central Bank.

Part V provides for the supervision, by the bank, of bureaux de change. Part VI amends a number of provisions of the Central Bank Acts, 1942 to 1989, the Cheques Act, 1959, the Building Societies Act, 1989, the Bills of Exchange Act, 1882, and a number of other enactments. I will now turn to the detail of these changes.

Sections 1 and 2 are the usual short title and interpretation provisions. Whereas these usually do not call for any special comment I would like to make particular mention of section 2 (2) which defines "deposit". "Banking business" is defined essentially as the taking of deposits. There is, however, no Irish legal definition of what constitutes a deposit. It seems incredible that we have come this far without a definition. As the savings market becomes more competitive, the distinction between deposits and other forms of investment is becoming blurred and the lack of a legal definition of a deposit is causing concern. This anomaly caused particular concern during a recent successful prosecution of a finance company by the Central Bank. Section 2 (2) provides for such a definition to be incorporated in Irish law by means of an amendment to section 27 of the 1971 Act.

Section 3 deals with the laying of regulations before the Houses of the Oireachtas. Section 4 sets out the legislation being repealed by this Bill. In particular the section provides for the repeal of sections 12, 13 and 14 of the Central Bank Act, 1942. These sections deal with "associated Banks" and as this term no longer applies these sections are not required.

Section 5 defines "payment system" and "rules" for the purposes of this Bill. Section 6 allows the bank to become a member of, or be a party to the establishment or operation of a payment system. Section 7 provides that no new payment system can be established without the prior agreement of the bank. Section 8 deals with existing payment systems and provides that, within three months of the passing of this Act, the rules of existing payment systems must be approved by the bank or the system will be deemed to be disestablished.

Section 9 provides that the Central Bank may approve the rules of a payment system subject to conditions or requirements and that the application for approval may be in such form as the Central Bank may determine. It also provides that the approval by the Central Bank of the rules of a payment system does not constitute a warranty of the solvency of the system.

Section 10 outlines the procedure where the bank proposes to refuse to approve of the rules of a payment system. Section 11 provides that the provisions of section 17 of the Act of 1971, which relates to the keeping of books and records, shall apply to payment systems and members of payments systems as if they were holders of a banking licence. Section 12 empowers the bank to direct a system, or any member of a system, to cease activity, or to cease operating as a member as the case may be, in certain circumstances. The section provides for an application to the courts, by the bank — for confirmation of a direction under this section — or by a payment system, or members thereof, for the setting aside of a direction.

Section 13 provides for the revocation of approval by the bank of the rules of a system in certain circumstances, subject to the agreement of the Minister. It also sets out the procedure to be followed by the system in these circumstances. Section 14 is an offences and penalties provision. Section 15 allows the bank to impose certain requirements for membership of a payments system. Section 16 amends section 26 of the Central Bank Act, 1971, which deals with the collection of cheques. The powers of the Central Bank to oversee the collection of cheques and other payable orders by licensed banks are contained in that section. While these powers have been of service, they are limited in scope to licensed banks and to the terms and conditions and rates of charges applied to the collection of such cheques and instruments. This amendment allows the bank to extend the scope of section 26 to other parties or instruments and extends the meaning of licence holder to include a credit institution within the meaning of Regulation 2 of the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992, Sl No. 395 of 1992, i.e. any undertaking, other than a credit union or friendly society, whose business it is to receive deposits or other repayable funds from the public and to grant credit on its own account.

Section 17 provides that the Minister may, after consulting with the bank, prescribe fees to be paid by all entities supervised by the bank under any enactment.

Section 18 provides that once payments have been debited from a credit institution's account in the Central Bank on the instructions of the credit institution concerned, the payment becomes final. This is to ensure that once payments have entered a payment system they cannot be revoked. Revocation of a large value payment could result in the unwinding of a number of other related payments within the system and this could have serious consequences for the system as a whole.

Section 19 allows payment instructions and authorisations to and from the Central Bank to be of a form other than in writing. This allows for electronic, or other, transmission of instructions.

Section 20 substitutes a new section for section 7 of the Central Bank Act, 1942, which provides for certain particular powers of the Central Bank. It is necessary to provide the bank with specific powers relating to its increased involvement with payment systems. The opportunity is also being taken to express other specific powers of the bank in a clearer fashion to better reflect modern practice and conditions.

Section 21 is a technical provision to allow the Minister transpose into Irish law the proposed EU directive on cross-border credit transfers.

Section 22 gives authority for the formation or acquisition of subsidiary bodies by the bank subject to the consent of the Minister. This provision is an enabling one only, and the exercise of this power by the bank will require the prior permission of the Minister for Finance. Approval will also be necessary for the terms of the memorandum and articles of association of any such company. The functions of any subsidiary company established or acquired under the terms of this section will be restricted to those of the bank, and any guidelines or obligations applicable to the bank will also apply to such companies.

Section 23 provides that the Governor shall attend before a Select Committee of Dáil Éireann — currently the Finance and General Affairs Committee — and furnish that committee with any information requested, having due regard to the independence of the bank and subject to any restrictions imposed on the Governor under the Central Bank Acts, for example, the confidentiality provisions of section 16 of the Central Bank Act, 1989. This statutory obligation on the Governor to attend before the committee will replace the informal arrangement which is currently in place and the terms of reference of the committee will have to be amended accordingly.

Section 24 empowers the bank to assist the Central Statistics Office in the collection, compilation, analysis or interpretation of balance of payments, national accounts or any other financial statistics including, where appropriate, the actual collection of data for this purpose.

Section 25 amends section 19 of the Central Bank Act, 1942, which deals with the appointment and tenure of office of the Governor of the Central Bank and extends the prohibition on the Governor from being a director of a licensed bank to all commercial credit institutions, financial institutions or insurance undertakings. This is in view of the bank's new role in supervising a wide range of other financial institutions under recent legislation, for example, the building societies, TSB, ACC, and ICC Acts, as well as the Stock Exchange and Investment Intermediaries Acts. The section makes it clear that the prohibition does not apply to the Governor being a member of the European Monetary Institute. Furthermore, the prohibition does not apply to shares held by the Governor in any commercial credit or financial institution by means of an insurance policy, ordinary savings account with a building society, or units in other collective investment schemes purchased by him or her, although we will be waiting for that.

Section 26 amends section 20 of the Central Bank Act, 1942, which prohibits the holding of shares by the Governor in a bank, and extends that prohibition to credit institutions, financial institutions or insurance undertakings. Section 27 is an interpretation and definition section.

Section 28 makes it illegal to carry on the business of a bureau de change without authorisation from the Central Bank and sets out the procedure involved in the grant or refusal of an authorisation by the Central Bank. This section also provides that existing operations will have a period of six months after this section comes into operation to obtain authorisation from the bank.

Section 29 requires bureau de change businesses to comply with any requirement laid down by the Central Bank. Section 30 applies the provisions of section 17 of the Central Bank Act, 1971, to bureaux de change in relation to the keeping of books and records.

Section 31 outlines the powers of the court to deal with failure by a bureau de change to comply with a requirement or condition of the Central Bank. Proceedings may be held otherwise than in public if the court consents. Section 32 requires the Central Bank to publish a list of bureaux de change once a year and to publish notice of any revocation of an authorisation as soon as possible.

Section 33 is an offences and penalties provision. Section 34 relates to the revocation of authorisation of a bureau de change by the Central Bank. The Central Bank must seek the consent of the Minister to the revocation unless the revocation has been requested by the person who was authorised or where the revocation is as a consequence of the withdrawal of authorisation by another member state of the Community in which the bureau has its head office.

Part VI deals with various miscellaneous provisions. Sections 35 and 36 amend the Bills of Exchange Act, 1882, and the Cheques Act, 1959, to confer legal status on cheques marked "account payee only". This will help to counteract fraud and should also ensure more speedy transfer of cheques to recipients. Section 35 also provides an indemnity to banks arising from any refusal to cash the cheque or to transfer the cheque to another in pursuance of an endorsement on the cheque to that effect.

These provisions have been requested by the Insurance Industry Federation, the IIF. The IIF wishes to ensure that cheques made out to policyholders and transmitted via insurance brokers etc. must be handed on to the client and cannot be converted in any way to the use of the intermediary. The federation believes that this is a basic safeguard for the ordinary investor and will reduce considerably the fraudulent conversion of clients' money.

Section 37 provides that a uniform term of office of five years from date of appointment will apply to all directors of the bank, other than service directors. At present, section 24 of the Central Bank Act, 1942, prescribes a term of office of five years from the expiry of the term of office of the previous incumbent. Where a new director is appointed during the term of office of his predecessor the term lasts only until the term of office of his predecessor would have expired. These provisions are unnecessarily cumbersome and have led to difficulties and uncertainty in practice if there has been a delay in filling a vacancy.

The section, therefore, provides that a uniform term of office of five years from date of appointment will apply to all directors including the current directors. In the case of a service director on the board, that director will have no set period of office but will hold office at the pleasure of the Minister and may be removed at any time. The only current service director is the Secretary of the Department of Finance.

Section 38 amends section 28(2) of the Central Bank Act, 1942, transferring responsibility for notifying the Minister of vacancies on the board from the board to the secretary of the bank.

Section 39 extends the provisions of section 16 of the Central Bank Act, 1989, which relates to non-disclosure of information by the bank. Various amendments facilitate the disclosure of information in relation to the conveyance of statistical information to the Central Statistics Office, the disclosure by the bank of information received from another regulatory authority where that authority has given permission, the ability of the bank to request information from entities it supervises in response to requests for such information from regulatory authorities outside the State, the bank's obligations under the money laundering provisions of the Criminal Justice Act, 1994, and the conveyance of information to the European Monetary Institute in accordance with the Maastricht Treaty.

Section 40 applies the duties of auditors, as set out in section 47 of the 1989 Act, to all entities, financial institutions, exchanges and moneybroking businesses supervised by the bank. The effect of this amendment is such that auditors of entities supervised by the bank will be required to furnish information to the bank in certain specified circumstances, namely, where the auditor comes across matters likely to affect the solvency of the entity; where there are material deficiencies in the financial systems of control; where there are material inaccuracies or omissions in returns to the bank, or where the auditor proposes to qualify his or her certificate. The auditor must also notify the bank if he or she proposes to resign as auditor. The bank may also seek specific information from the auditor in relation to the affairs of the entity.

Section 41 facilitates the protection of the payment system in the event of a liquidation by requiring that the Central Bank be notified of any petition for winding-up before the petition is presented. In a number of countries there exists a provision in law called the "zero-hour rule" whereby a liquidator of a defaulting bank can ask the courts to set aside all financial transactions and payments made by the bank between the time the liquidator was appointed and the previous midnight, zero hour. Among EU authorities there is a general concern to involve the central bank at an early stage so as to limit the potential damage to payment systems of any such rulings. There is no precedent for such a ruling in Ireland but it is not precluded. The requirement that the bank be notified of any petition for winding-up before the petition is presented should ensure the protection of the payments system in such cases.

Section 42 extends the provisions of section 75 (2) of the Central Bank Act, 1989, which sets out the application of Chapter VI of that Act dealing with acquiring transactions, to include acquiring transactions entered into with the prior approval of the Central Bank, Section 43 amends section 76 of that Act, which sets out the limitations on the validity of acquiring transactions. This provides that in all cases a person can apply to the High Court to seek relief from the null and void provision where the failure to get the bank's prior approval for an acquisition arose from inadvertence or oversight and where the circumstances are such that, had the Central Bank been notified in time, it would have given its approval. These sections of the 1989 Act require that any person proposing to acquire 10 per cent or more of the shares of an Irish bank must obtain the prior approval of the Central Bank. If no such approval is sought or obtained, any acquisition is null and void and title to the shares involved does not pass to the new holder.

Section 44 amends section 90 of the 1989 Act, which relates to the supervision by the Central Bank of firms established in the International Financial Services Centre to allow the bank to enforce its supervision from an earlier date specified by the bank. Under the existing legislation, Central Bank supervision commences when the tax certificate is issued by the Minister. However, several firms operate in the centre in advance of receiving the certificate. This section allows the bank to enforce its supervision from an earlier date specified by the bank, for example, the date on which a firm's application to set up in the centre is accepted. The practice whereby firms are approved in principle and start operations prior to certification has become well established and the supervisory law must recognise this.

Section 45 provides that the Minister may, by order, exempt certain firms or services in the IFSC from supervision by the bank. Section 46 allows the bank to exempt certain firms or services from the application of supervisory requirements in part or in full where the application of such requirements is not practicable or necessary to safeguard the public or the reputation of the IFSC.

Section 47 provides that where a firm in the IFSC has had its certificate withdrawn it will, nonetheless, remain subject to supervision and direction by the Central Bank until it has discharged its liabilities in whole or in part to the satisfaction of the bank. This will ensure that the bank retains supervisory control over these firms during the winding-up process.

Section 48 amends section 104 of the Central Bank Act, 1989, which relates to the publication of prospectuses by the promoters of any new financial futures or options exchange in the State. The amendment empowers the bank to require any such promoter to put a "health warning" on the prospectus to the effect that, if such be the case, the exchange has not yet been approved by the bank and that such approval should not be taken for granted. Section 49 amends section 139 of the Central Bank Act, 1989, to enable the Central Bank to engage in the provision of settlement facilities for the buying and selling of securities and other instruments by financial institutions and to act as a depository or custodian of such securities and instruments.

Sections 50 to 54 delete provisions in Irish law which conflict with Article 104 of the Treaty on European Union which prohibits monetary financing of the public sector by central banks. Section 55 provides that no employee or member of the board of the bank will be liable for damages for anything done or omitted in the discharge of duty unless it is shown that the omission or act was in bad faith. This provision is similar to ones incorporated in the recent Stock Exchange and Investment Intermediaries Acts and is designed to bring the Central Bank Acts into line with those enactments. Section 56 is consequential on section 2(2) and provides for an adjustment of the definition of "Banking Business" contained in section 29 of the 1989 Act.

Section 57 amends section 11 of the Central Bank Act, 1971, to allow the Central Bank to revoke a banker's licence if the bank organises its business or corporate structure in such a way as to avoid or escape effective supervision by the bank. This amendment caters for the lacuna in prudential supervision shown up by the BCCI affair in the UK. In this case the BCCI organised its operations so as to divide them among a number of states and thus avoid and confound effective financial supervision by any one state.

Section 58 amends section 48 of the Central Bank Act, 1971, which allows the Central Bank to issue bonds to licence holders by extending the facility to issue bonds to all credit institutions which, of course, includes building societies. It is desirable to extend this definition in the interests of consistency with the wider supervisory role of the bank. Section 59 provides relief to the Bank of Ireland, at its request, from certain restrictions imposed by its charter and by legislation. Section 60 provides for the conferring on the Central Bank of a statutory power to apply to the civil courts for an injunction in respect of the taking of, or advertising for, deposits by a person not licensed or authorised to do so under the Central Bank, building societies, TSB, ACC or ICC Acts. A recent prosecution by the bank against a finance company, although successful, highlighted a weakness in the bank's powers. The offence related to the advertising for deposits by a company which had no authorisation to do so. A substantial delay occurred between the date on which the advertisement was first noted by the bank and the final hearing of the prosecution, during which time the bank had no power to prohibit the company from accepting deposits. This section seeks to overcome this delay by way of the injunction procedure.

Section 61 confers on the bank the same powers of inspection as provided for in the Investment Intermediaries Act, 1995. That Act conferred on the bank strong powers of inspection of certain investment business firms. This measure was designed as a reaction to the growing number of firms engaging in nonlegitimate investment business. The banking sector does not have comparable regulation of potentially illegal deposit takers and there is a genuine concern that some firms, particularly those which heretofore operated investment business, may turn their attention to the banking area where they may perceive a legislative weakness. This section will remove that weakness.

Section 62 is consequential on section 61 and provides that a judge of the District Court may issue a warrant authorising a member of the Garda Síochána and any others named in the warrant to enter a specified premises to search for and take possession of documents which an officer of the Central Bank of Ireland believes are held on the premises. The warrant will have effect for one month from date of issue and any documents seized may be retained for a period of three months or until the conclusion of criminal proceedings. It will be an offence to obstruct the exercise of the warrant.

Section 63 provides for the bank to be subject to value-for-money audits under the Comptroller and Auditor General (Amendment) Act, 1993. In order to facilitate separate arrangements to make the bank accountable to the Select Committee on Finance and General Affairs an order was made under section 21 of the Comptroller and Auditor General (Amendment) Act, 1993, which had the effect of excluding the bank from examination by the Committee of Public Accounts. This order, in turn, had the unintended effect of removing the bank from the list of bodies subject to the value-for-money audit under the Act. This section provides for the bank to be subject to such audits.

Section 64 amends section 101(a) of the Building Societies Act, 1989, to provide for more equitable treatment of certain joint account holders as respects voting rights and the issue of free shares in the context of future conversions of building societies. The need for this amendment arises from experience with the conversion of the Irish Permanent to a public limited company. There was controversy regarding a number of joint account holders who did not qualify for free shares because of the order of the names on an account or shareholding following death or marriage of a joint account holder, even though the joint account would have otherwise met the relevant qualifying criteria, in particular being a shareholder for two years.

Section 65 imposes a requirement to supply the Minister for the Environment with information and returns for the purposes of his functions in relation to the national housing programme to all credit institutions, which includes banks, and mortgage lenders. This amendment arises as a consequence of the fact that banks now account for a significant share of the mortgage market. The bank is already permitted to disclose this information in relation to building societies.

Section 66 amends the Trustee (Authorised Investments) Act, 1958, to enable the Minister for Finance to impose conditions on the investment powers of trustees and the requirement for positive Oireachtas approval of orders made under the Act will be removed in favour of the standard provision that such orders take effect unless annulled by the Oireachtas.

Section 67 provides for the last stage of the implementation of the European Communities (Deposit Guarantee Schemes) Regulations, 1995. These regulations afford protection to customers in the event of the insolvency of a credit institution by providing that their deposits, up to a maximum of 15,000 ECU, will be refunded. Optional exclusions from the cover of the scheme, contained in Annex 1 to the Deposit Guarantees Directive, require primary legislation and thus could not be implemented by the regulations in July 1995. For example, deposits which will not now be covered by the scheme include those made by financial institutions, insurance companies and collective investment schemes.

Section 68 is a technical amendment to the ICC Act, 1992, and specifies that references to "the Company" in section 3(1) of that, or any regulations made thereunder, are to be construed as including any subsidiary of ICC Bank plc.

Section 69 amends the Stock Transfer Act, 1963, by the substitution for the "Gilts Settlement Office" of "Central Bank of Ireland Securities Settlement Office" and provides that the Minister may change the name of that office by regulation.

Section 70 allows banks from states outside the EU to establish representative offices in the State, subject to certain conditions. Such offices will not be allowed to accept deposits in the State or provide banking services and may only provide advice and information on the services which are provided from outside the State by the banks in question. There is no need to cater for the establishment of representative offices by EU banks as such banks already may do so as a result of the implementation of the relevant banking directives. The existing law is unclear about the status of non-EU representative offices. Such offices are common in other member states and are a feature of all the main international financial centres. Apart from helping to fulfil our GATT obligations, this section will open up the facility of a representative office to major US, Japanese and other non-EU banks wishing to establish a presence in the IFSC but which may not wish to seek a banking licence in the State.

I commend the Bill to the House.

Mr. McCreevy

I thank the Minister of State for her detailed exposition of the Bill. I am sure it was not a deliberate intention to avoid gender proofing it. Legislation on the Central Bank is unlikely to raise the temperature of the public. The activities of the bank and the echelons of higher finance are beyond the comprehension of most people. However, the bank has a pivotal role in the lives of almost all because the decisions it takes on interest rates, monetary policy, etc., directly impinge on the lives of everybody. Any legislation on the bank deserve serious analysis by the Oireachtas.

The Central Bank Act, 1989, was the last legislation in this area. This Bill is entitled:

An Act to make provision for the regulation by the Central Bank of Ireland of payment systems and bureaux de change, and to amend and extend the Central Bank Acts, 1942 to 1989 and other enactments, and to provide for related matters.

Over half of the 70 sections to the Bill do not relate to the Central Bank and it is only by the greatest stretch of the imagination that one could describe any or all of the amendments as being related to it. I am not happy that we should legislate in this way, with over half of the sections falling under a miscellaneous heading, and with some of the earlier sections having no connection with the bank.

Most of the Bill comprises bitty amendments without any discernible pattern or cohesion. I understand the desire of the Department of Finance to use the opportunity presented by the Bill to clear up other legislative areas and introduce amendments to other Bills. This tendency, which is not confined to the Department, is not the correct way to proceed with legislation. It means that practitioners in given areas face enormous work in researching primary legislation and amendments thereto.

This can sometimes lead to interesting developments, especially in the Finance Acts. If I recall correctly, nobody paid much attention to a section of the Finance (Miscellaneous Provisions) Act, 1968, until a tax consultant used its provisions as a basis on which to establish skilful avoidance schemes. Others followed over subsequent years. These allowed the purchase or building on and development of land to create an annuity on same which effectively allowed one to charge the cost of the land many times against the profits of the business. They were challenged and fought by the Revenue Commissioners until well into the 1980s when a compromise was reached with most of the construction companies involved. The courts never finally decided who was right. It is an example of how a section of a Finance Act, not directly related to the area of taxation, was capable of being used in a manner which was unintended.

This Bill lists Acts referred to which include the Central Bank Acts, 1942 to 1989, the Companies Acts, 1963 to 1990, the Cheques Act, 1959, the Bills of Exchange Act, 1882 and the Data Protection Act, 1988. This makes it difficult to comment on the Minister of State's speech because the expertise and resources required to research such legislation are beyond anybody on this side of the House. A plethora of officials from the Department of Finance, for whom I have the highest regard, must have been involved in researching these Acts. It is not a satisfactory way of proceeding with legislation.

There are some sections about which I have specific concerns, which I will refer to later. I suspect that the Bill is part of a feather bedding operation to ensure that the Central Bank will have functions to perform in Ireland when most of its traditional or historic jurisdiction will disappear to Frankfurt upon our entering European Monetary Union. The bank must face the fact that its role will be diminished in a couple of years and it should not now be contemplating diversification with a view to guaranteeing job security.

All politicians have faced the fact that if and when European Monetary Union occurs the traditional jurisdictional powers of the Central Bank, as with other central banks, will disappear. The Minister of State said that the Bill does not cover the transfer of such power, but that provision for this will be made in a later Bill to be introduced in 1997 or 1998, major legislation for the bank and for whichever Minister brings it to the Oireachtas.

Mrs. Doyle

It is unlikely to be I.

Mr. McCreevy

As the Minister of State is aware, I am an advocate of close alliances between Fianna Fáil and Fine Gael. Who knows who will be in this position in the future?

Mrs. Doyle

The present incumbent.

Mr. Cullen

That is highly unlikely.

Mr. McCreevy

I doubt that. I am sure the Minister of State's husband, with whom I have more than a passing relationship, would not even venture to bet on that matter.

As a result of economic and monetary union many of the Central Bank's powers will be transferred to the European Central Bank. Many of the Bill's provisions are mere feather bedding and give the Central Bank a wide range of new roles because it will lose its traditional ones. I learnt a great deal about agencies, semi-State operations and the Civil Service while I was Minister. Ministers may not get excited about losing certain powers to other Departments, but civil servants will convince them — if they are Ministers for long enough — that it is more or less a badge of honour for a Minister not to lose powers to another Department. The Minister is sent to Cabinet fortified by troops and a leak to a newspaper may result in a report that a certain Minister is taking powers from another Minister. This is guaranteed to inspire the Minister concerned to ensure that he or she retains the powers of the Department. The same applies when dealing with Estimates. I have referred on a number of occasions to the dearth of political comment in many of our newspapers and other media in this regard. Some idiotic correspondents — I say that in the kindest terms — are fed this type of information and may report that a particular Minister has lost out to another in terms of a scheme, while very few examine if the scheme was necessary in the first place. Nobody examines if it might have outlived its usefulness. This legislation gives more powers to the Central Bank in the knowledge that most of its powers will be transferred to the European Central Bank in due course.

I am conscious of the need to deregulate the economy in line with our competitors all over the world, rather than the converse. It is not satisfactory for the Minister to introduce a provision, such as that contained in section 20 which lists the new powers of the Central Bank, without identifying which of the powers listed are new and which were not contained in the Central bank Act, 1942. The explanatory memorandum merely refers to the new section 7 of the Central Bank Act, 1942 which provides for "certain particular powers of the Central Bank". Are we expected to research this matter for ourselves? At a minimum, the explanatory memorandum should set out the powers that are new and why such changes are deemed necessary.

It would be naive to discuss changes relating to the Central Bank without referring to the debate on economic and monetary union. In the past few weeks some commentators and academics expressed concern at the lack of debate relating to the concept of monetary union. I refute this allegation in so far as it relates to politicians and this House. I am at one with the Minister for Finance who stated at a dinner last Thursday night that he had availed of every opportunity in the past two years to address this subject. Furthermore, for the past 18 months Question Time and meetings of the Select Committee on Finance and General Affairs have been largely dominated by economic and monetary union. The Select Committee on Finance and General Affairs devoted some months earlier this year to bringing before it a number of experts and commentators, the meetings with whom were televised. It has not been through lack of effort on behalf of the Oireachtas that the debate on economic and monetary union has not lit up the general public. I doubt it ever will, but I join others in hoping that there will be a wider debate in this area in the next 12 months.

The conference of economists which took place recently in Kenmare, one of the most beautiful parts of the country, concentrated the minds of the public somewhat on the development of economic and monetary union. On a weekend that lacked other stories, the newspaper editors gave the conference greater coverage than they would normally. The financial pages of most national newspapers and certain magazines have given economic and monetary union a good deal of coverage. A number of institutes and bodies, such as the Institute of European Affairs, have run many successful conferences which have devoted a great deal of time to teasing out matters relating to economic and monetary union. Unfortunately, however, the debate has been confined mostly to financial experts and those who take an interest in European affairs. A number of business people are not very enthusiastic about the matter, notwithstanding the fact that IBEC, ISME and other organisations have held seminars to develop the topic. I hope there will be a wider ranging debate on economic and monetary union in the next year and that it is not confined to those with a particular interest in the matter.

Because of my involvement in politics, I might not have kept up to date with all events in the financial area in the past decade or so, but the development of economic and monetary union has intrigued me for a long time. I have taken a professional interest in the development of the internal market. I have also taken an interest in the foreign exchange markets because I am aware of the changing operations of many institutions, businesses and individuals over time. This debate has interested me for many years.

There is always a danger, particularly in Ireland, that if one raises questions about a concept which everybody perceives to be good, one is likely to be accused of damaging it. That does not apply only to financial matters, such as the debate on economic and monetary union. I am well aware that in politics, given the party of which I am a member, the questioning of tenets can give rise to difficulties. Politicians should be to the forefront in opening up the debate and posing serious questions on economic and monetary union and that should not be construed as mischievous but for the betterment of all. If everybody agrees with an idea and has the same approach to it, nobody offers an alternative viewpoint. A number of angles of economic and monetary union have not been faced by the official side of the Irish argument and it is time this was done.

I referred to the Kenmare economic conference which was attended by many economists. They have the luxury denied to politicians of being able to change their minds from week to week. They have the bonus of never being held accountable. Journalists also have this unique cop out clause but politicians must make the tough decisions and they will be blamed ad infinitum if a decision is wrong. To prove my point about economists, one only has to read their utterances this year on the probable rate of the IR£ against sterling in late 1996. Good manners prevent me reading into the record the views and predictions of respected economists on this matter; they would prove very embarrassing.

I am sure economists can put forward good reasons why the position in November 1996 is not as they predicted. However, it is unusual that economists and journalists are the only people who can get over this problem but the same facility is denied to politicians and Ministers in particular. If they make a mistake regarding economic and monetary union, the Ministers and Government of the day, not the economists or civil servants who advised particular courses of action, will be held responsible. My only reason for highlighting their erroneous predictions regarding the exchange rate is to show that economics is not an exact science. In the recent past, some have questioned whether it is a science at all. This is a debate for another day but, at a minimum, it is fair to state that there is a plethora of conflicting views on economic and monetary union and each view can be justified in its own right.

The most interesting development this year was the publication of the ESRI report regarding the implications for the economy. Stripping away the verbiage, it can be said that the benefits to the economy of joining economic and monetary union, not withstanding whether the United Kingdom joins at the outset or stays outside, are marginal. Even those who prepared the report for the ESRI were surprised by the results of their investigation. Most commentators would have been of the view that the benefits would be far greater but the ESRI report shows that any benefits are within the bounds of statistical error. We are fooling ourselves if we believe that joining economic and monetary union without the UK as a full member will be a panacea for the economy into the next millennium. There will be casualties and many industries and firms will go to the wall.

I was taken aback by the small gain to the economy of economic and monetary union, even if the UK joined at the outset. One of the authors of the report, Mr. John Fitzgerald, appeared before the Select Committee on Finance and General Affairs. He supports the idea of economic and monetary union and he said he was also taken aback by the findings. In a best case scenario the benefit to the gross national product would be approximately 1 per cent. Some tenuous suppositions and assumptions underline that theory. If the UK stays outside from the outset, the benefit to the economy, as suggested by the ESRI model, would be much less.

In a best case scenario under the ESRI model, the maximum number of jobs which could be created is 20,000. According to the Labour Force Survey and other independent assessments in the last two years, up to 50,000 jobs have been created, but we have not noticed a dent in the live register. The changes in the register probably do not relate to the growth in the economy but, at its kindest, to adjustments people are making to their signing on arrangements. There will be casualties as a result of economic and monetary union — the ESRI makes no bones about that matter — and it is time we broadened the debate to ensure people are aware of the fall out from joining economic and monetary union. This is the position even in a best case scenario, which from the Irish perspective would be if the UK joined from the outset.

I am an ardent advocate of the Maastricht criteria and economies and governments should fulfil such criteria even in the absence of economic and monetary union. This will not come as a surprise to anybody who has listened to me during my political life. I favour tight financial and monetary discipline and it is only since the State adopted such a discipline from 1987 that it has been possible to turn the country around. People in the Department of Finance agree with this view and probably did so in the 1970s and 1980s but nobody listened to them. Politicians were inclined to listen to them afterwards so I am preaching to the converted in that regard.

In recent times it is good that all the political parties in the House, from the far right to the far left — if such a difference continues to exist in Irish political ideology — have come to realise that tight financial discipline has produced positive results. We were told for years that it was not possible and would not work. I favour the Maastricht criteria and we must be in a position in 1998 to satisfy them. I am sure we will satisfy the criteria and the only blip on the horizon recently has been inflation. This relates to the appreciation of sterling against the IR£.

An Leas-Cheann Comhairle

The Deputy has two more minutes.

Mr. McCreevy

I was not aware that there was a time limit on the debate.

An Leas-Cheann Comhairle

I understand there is a time limit.

Mr. McCreevy

I have a copy of the Order of Business.

An Leas-Cheann Comhairle

There is a 30 minute time limit. The speech of the Minister or Minister of State and spokespersons from Fianna Fáil and the Progressive Democrats shall not exceed 30 minutes.

Mr. McCreevy

There is nothing in the copy of the Order of Business before me about a time limit on the debate.

Mr. Cullen

The Deputy is correct that there was no time limit.

Mr. McCreevy

I am certain there was no time limit. I speak ex cathedra on the subject because I was present for the Order of Business.

An Leas-Cheann Comhairle

There is a 30 minute time limit on the speeches of the Minister or Minister of State and spokespersons from Fianna Fáil and the Progressive Democrats. The Deputy commenced his speech at 5.22 p.m. and my note states that he should conclude at 5.52 p.m.

Mr. McCreevy

I would have hurried up if I had known that at the start of my contribution. The Order of Business did not specify a time limit and the record of the House will show that.

An Leas-Cheann Comhairle

The Deputy can take it that, as I outlined, the time limit on this type of business is as scheduled, half an hour.

Mr. J. Mitchell

I am sure the House will agree to some flexibility.

Mr. McCreevy

The Minister spoke for——

An Leas-Cheann Comhairle

It is not up to the Chair to advise Deputies as to the position, but a time limit applies. If it is in order and agreed to allow the Deputy additional time — I gather that is what is being proposed — that is acceptable. Quite categorically a time limit applies.

Mr. McCreevy

Where is that categorically stated? It is not specified in the Order of Business.

An Leas-Cheann Comhairle

The Chair has indicated the position to the Deputy and I am not prepared to argue about it now. It has been agreed by the House that the Deputy may have some additional minutes to conclude his remarks.

Mr. McCreevy

I do not wish to argue with the Chair either, but the Minister of State was not subject to a time limit.

An Leas-Cheann Comhairle

She was.

Mrs. Doyle

I ran over the time allocated by five minutes.

Mr. McCreevy

I accept the ruling of the Chair. The Order of Business specifies the time limit that applies to Members' contributions, but a time limit in regard to this matter was not specified in today's Order of Business. Does the Chair accept that?

An Leas-Cheann Comhairle

No. I do not accept that. I accept a time limit applies to Second Stage speeches in accordance with normal procedure. It has been graciously agreed by the House that the Deputy may have some additional minutes.

Mr. McCreevy

I wish to point out that a time limit for this business is not specified in today's Order of Business which regulates the business of the day.

An Leas-Cheann Comhairle

The Chair has clarified the position for the Deputy.

Mr. McCreevy

European monetary union must have some mechanisms to deal with asymmetric shocks to an individual economy. There is little point in setting down rules for a stability pact, which envisages penalties for lax fiscal discipline, when an individual economy might be dealing with, for example, a BSE crisis. Those and other matters relating to economic and monetary union will be debated again in this House, but it is important to set down a few markers at this stage.

One of the principal features of the Bill is the introduction of a new licensing arrangement for so-called payment systems and bureaux de change. Those areas are to be controlled by the Central Bank and the Bill contains a number of standard provisions about the licensing authority being able to grant or refuse to attach conditions and so forth. There is a certain amount of interparty play acting relating to the sections on the payment systems. Some time ago the Democratic Left arm of the Government made some noises in this area and that, I believe, is the background of these sections.

There is a case to be made for the Central Bank to have some role in this area, but many of the sections are a reflection of empire building by a number of State agencies. Within the public service there are many conspirators who think nothing of involving as many bodies as possible in the exercise of a particular power, irrespective of the cost or bureaucratic inconvenience of such a construction. For example, in section 66 the Minister for Finance is required to consult six different persons or bodies.

The regulations pertaining to the licensing of a payment system are fraught with legal problems. The Central Bank will be involved in the process at a very early stage. In the event of fraud, collapse or some other circumstance which causes loss to a private individual, it is certain that the Central Bank will be a defendant in the proceedings. In that regard I notice the usual "get out" clause for employees of the Central Bank. Such a "get out" clause has become a feature of nearly all Bills relating to agencies coming before the House in the recent past. The purpose of such "get out" clauses is to ensure that no employee or director, no matter how incompetent or stupid, can be held responsible or prosecuted. In recent times an enormous amount of effort seems to have been put into all Bills to ensure that civil servants and employees of State agencies are never held responsible for mistakes.

Can the Minister of State explain how she can justify giving the Central Bank jurisdiction in the matter and at the same time, by way of section 6, provide that it may become a member of such a system? It does not take too much thought to conjure up a complaint by a disappointed applicant that the Central Bank is favouring its own application — the application in which it is involved as against the application of the disappointed applicant.

I am not too happy about the provisions of the Bill extending the powers of the Central Bank. In a nutshell, why have those additional powers become necessary since we last legislated in this area in 1989? What has happened in the meantime that has necessitated the pushing through the Oireachtas of those additional powers?

I await the views of the Minister of State regarding whether existing payment systems need to be regulated. I need to be convinced that such regulation benefits the public, unless regulation of the system by the Central Bank will in some way guarantee no major frauds at the consumers' expense. Everyone knows that no such regulatory system — whether self-regulatory or supervised by the Central Bank — can ever give such a guarantee.

There are numerous provisions relating to the payment systems, but only two sections dealing with the single most important provision of the Bill will affect ordinary people in their daily personal or business transactions. I refer to sections 35 and 36 which introduce the notion of non-transferable cheques. I am aware that position exists in the United Kingdom. The effect of these sections will mean that cheques marked "account payee" can be dealt with only through that person's bank account. Will the Minister of State inform the House which banks asked for that protection? I note from her speech that it was the Irish Insurance Federation. This relates to policy cheques, which constitute only a very small amount of the total cheques written in a year. At least the Minister of State put on the record the institution that requested that provision.

In the United Kingdom there is a thriving business for the encashment of account payee cheques at a discount of 4 per cent on the basis that the company cashing them indemnifies the bank against any loss. Is the Minister for Finance not running counter to the general trend of policy in the social welfare area, which is to encourage people to accept payments by cheque encashable in their local supermarket or post office? The proposals in the Bill will erect another barrier between the rich and the poor, those with bank accounts and those without them. This proposal is ill thought out and runs counter to the general trend or policy in many other areas and I ask the Minister to consider deleting this section.

Mrs. Doyle

The Deputy should recheck what I said.

Mr. McCreevy

There are many other instances of special pleadings from sectional groups. In this era of openness the Minister must tell the House the institutions that lobbied for certain changes. For instance, which building society lobbied for section 64 and why are we being asked to comply with its request? Did the Central Bank plead for the provisions of section 22 empowering it to form or acquire a company? What functions does the Central Bank consider it cannot currently perform without being empowered to form a company? Does it have particular proposals in mind as to companies it would like to establish or companies whose shares it would like to purchase?

Sections 44 to 47 relate to companies in the International Financial Services Centre. I have no objection to changes relating to IFSC operations, but it is important to mention some pertinent points relating to the existing regulatory framework. The IFSC has been our major economic success in the past ten years. I adverted to that on a number of occasions in the House and congratulated the persons who backed the concept from day one. One of the main reasons for its success was the ready access to decision makers from intending applicants and the speed at which decisions could be made by the authorities and licences granted. Any of the players in the centre would put that forward as probably the key factor in locating in Dublin in the early years as against competing centres. The competition has copped on and other countries now provide as speedy a service as Dublin did in its early years. However, within the past few years the speed and accessibility in Dublin has not been what it used to be. There is more bureaucracy and red tape and it is becoming increasingly harder to get a decision. A conversation with any of the players would confirm that the foregoing is correct, but new applicants are afraid to speak out because of fear of offending some powerful official or body.

There are also too many committees, subcommittees and layers of bureaucracy. The worldwide competition for new entrants to this business is growing. If we do not return to the system of the early days Dublin will lose out heavily.

I need to be convinced that a number of provisions in the Bill are necessary. A Bill entitled "Central Bank Bill, 1996" should not include many of the miscellaneous items which, I suggest, have nothing to do with matters relating to the Central Bank. Neither am I convinced that the new powers are needed. I look forward to hearing the views of the Minister of State on the matter.

An Leas-Cheann Comhairle

Before I call Deputy Jim Mitchell I wish to clarify for the record that Standing Order 108 (3) provides that Second Stage speeches by spokespersons shall not exceed 30 minutes and other Members' contributions shall not exceed 20 minutes. The Order of Business refers to time limits only where it is intended that they should differ from those in Standing Orders.

Mr. J. Mitchell

I very much welcome the Bill dealing with the Central Bank. As Deputy McCreevy illustrated, it affords us a rare opportunity to discuss one of the most important issues facing this country and the European Union, an issue which is largely ignored in terms of debate in the national media and among the public at home and in the other 14 member states. As soon as European Monetary Union is established and assuming Ireland joins from the start, the Central Bank will be reduced to a small branch office of the European system of central banks based in Frankfurt. That relegation, although profound for the Central Bank, is the most obvious and tangible surrender of the national sovereignty since the Act of Union 176 years ago. It took 121 years to revoke the Act of Union, and then only in respect of part of our country. European Monetary Union will be irrevocable. In 1800 the parliament in College Green was unrepresentative but even so, according to reports, it had to be bought, bribed, flattered, ennobled and coerced into making its fateful decision.

In contrast, the decision on European Monetary Union has been made. That was one of the nuggets — some would say time bombs — within the bounds of the Treaty on European Union, otherwise known as the Maastricht Treaty. Not alone will no one have to be bought, bribed, flattered, ennobled or coerced to give effect to a decision to enter European Monetary Union, it will not even require a debate. Apparently the precise legal and constitutional position is that provided the European Monetary Institute deem that we meet the criteria set down we have no choice but to join with effect from the commencement date. That is the view of purists and Euro enthusiasts but it is also the common sense reading of the constitutional amendment giving effect to the Maastricht Treaty. Little detailed consideration has been given by this House to the implications of European Monetary Union for Ireland or the European Union.

It is not only Euro sceptics who wish to raise questions on this vital subject, but many like me who are deeply committed Europeans have serious concerns. I support the widening of the European Union. I also support in principle the idea of a single currency, but I would argue strongly that if it is ill-timed or ill-designed it has the potential to create havoc and even to undo the European Union. This issue was discussed in great detail on two occasions at the Select Committee on Finance and General Affairs and some very interesting points were raised. With the exception of one extensive report in the Irish Independent the debates on this issue have been notable for their lack of reportage by RTÉ and the media in general, particularly The Irish Times. There is an astonishing lack of awareness in the media of the fundamental importance of this issue.

Two major factors are emphasised by those driving forward the idea of a single currency: first, the timetable and second, the criteria. We are forced to meet a timetable regardless of the consequences. There cannot be a European single currency unless Germany and France are members, but at present neither of those countries meet the criteria set down. The French budget as approved by the Assemblée Nationale barely meets the 3 per cent borrowing requirement and only after major fudging of the figures by including once-off payments for the sale of France Telecom. It is clear the figures were fudged in France and fudging may be necessary in the Federal Republic of Germany.

I would ask Commissioner De Silguy what would happen in the event of a conflict between the timetable and the criteria? No conflict will be entertained or even envisaged. Member states, particularly France and Germany, are prepared to fudge the figures to meet the timetable, but therein lies a mortal danger. If we establish a single currency based on falsified or fudged figures we are building on a weak foundation. We have become the prisoners of a timetable. I am in favour of the principle of a single currency but not regardless of the implications.

In addition to those factors there are other major concerns. What would happen in the event of an unforeseen economic shock in one of the member states, such as an earthquake which causes great damage, as happened in Japan in recent years? What would happen in the event of an unforeseen major crisis in an individual country? We had the BSE crisis this year. What would we do if our beef market completely collapsed? We could not increase our borrowing because it is controlled by the Maastricht criteria and the proposed stability package criteria and we could not devalue. There is no contingency fund at European level to meet such events. What would happen if non-member states entered competitive devaluations or their currency drifted down as the Euro currency, which is expected to become a reserve currency, drifted up? What will happen to the Single Market if, as is expected, some member states of the European Union join European Monetary Union while others do not? Would that not effectively undermine the Single Market or render it no longer a Single Market? What about the political implications for those countries that are not politically able to join the Single Market now or in the immediate future? I raise these questions because they are important and because I am a committed European. I want a lasting widening and deepening of the European Union. I have raised this matter repeatedly.

Another valid point was raised at the Select Committee on Finance and General Affairs by Deputy McCreevy to which no satisfactory answer has been given. It has always been the practice to announce changes in currency ratios and relationships without notice, so as to avoid speculation on the currency. The current situation is that a date has been fixed well in advance for the irrevocable linking of currencies. Is it not possible or likely that there will be speculation against some currencies in the run up to this date? What happens to the prospective single currency and the membership thereof?

In order to maintain the momentum for a single currency while overcoming all of these problems, I have raised, as have others, the question of a longer period of a parallel currency. Why do we not introduce a European currency with notes and coins in parallel with our national currencies for a period of three to five years? Why do the over enthusiastic Europeans dismiss completely the idea of a parallel currency? I was recently in Croatia where there is a very good economy. They use their national currency and the German currency is also accepted. I was in Slovakia recently where the Austrian currency is accepted. In Russia, Israel, Argentina and many other countries the American currency is accepted.

I see many great advantages in having a parallel European currency. I would like to see this idea proceeded with according to the timetable set down for the euro. It would be possible for all member states to accept a parallel currency as well as their own national currency, so it offers the prospect of having the euro accepted throughout the European Union. It also gives more time for economies to adjust to the new realities. It avoids the partitioning of the Single Market. It avoids or minimises the likelihood of competitive devaluations and it allows time for the European Union to address the question of contingency funds to meet any economic shocks.

I call on the Government to ensure that this is a major issue for debate at the European Council to be held in Dublin in early December. It is time for the European Council to address the question of the timetable, the criteria, the methodology and the alternative ways of achieving a single currency.

An Leas-Cheann Comhairle

The Deputy appears to be majoring on European Monetary Union, which is not involved in this Bill.

Mr. J. Mitchell

I make no apologies for that.

An Leas-Cheann Comhairle

The Deputy may refer to what is in the Bill or what could relevantly be put into it. As the Minister said in her speech, the Bill does not address the legal issues arising from the move to the third stage of European Monetary Union so perhaps the Deputy could make his point. He seems to be majoring in an area which is extraneous to the Bill.

Mr. J. Mitchell

I am making the point that this Bill is being introduced partly in preparation for the single currency, although it is not the major Bill and another one is due. It is another landmark along the road to making the Central Bank merely a branch office of the European system of central banks. That profound change in the status of the Central Bank has even more profound implications for the future of our country and its sovereignty and for the future of the European Union. I make no apology for spending all the time allotted to me on that important subject.

The next European Council meeting, to be held in Dublin in early December should debate this issue. All aspects of the issue should be considered, including the possibility of a parallel currency. Rather than looking in dismay at the political problems in countries like the UK and Denmark, the Union should be trying to understand, facilitate and overcome those problems. We will not do so if we proceed with a timetable that is impossible for them. This is a vital subject for discussion at the European Council. I hope we will have an opportunity for a prolonged debate on the subject in this House before too many more weeks elapse. We should be given enough time not only to make statements but also to ask questions and to seek answers. It is not good enough to sleep walk to Frankfurt and end up with a nightmare.

Mr. Cullen

When this Bill was first mooted I was under the impression that it would largely deal with preparation for economic and monetary union. I was surprised when it was published to find that so little of it dealt with that area, which I understood was its original intention. It was inevitable that in the discussion on this Bill, which by and large deals with regulations and is technical in nature, Deputies would discuss monetary union as it arises within the context of this Bill.

As Deputy Mitchell and Deputy McCreevy have stated, this is a very important topic for this House and for the business community. No group has discussed this issue more than the Select Committee on Finance and General Affairs. I can think of no other group that met in public session to hear the views on monetary union of eminent speakers from Ireland and abroad. It is regrettable that much of that discussion and learning process has gone unreported by the media, with perhaps one or two exceptions.

My colleagues in the House know that I have an interest in monetary union. I have listened to my colleague in the Select Committee on Finance and General Affairs, Deputy Mitchell. The questions that he raised are very important and should be raised, but it is wrong to say that nobody else has raised these questions. I reject that. Questions are being asked. As we move closer to monetary union questions will become more focused and answers will be demanded. The ESRI report surprised even its authors, who said when they analysed it that they did not anticipate huge benefits or a sudden surge of benefits to the Irish economy because suddenly one has a single currency. That is an inherent strength because it shows the stability of what we have achieved over the last ten to 20 years in the EU. Monetary union and the single currency is part of the process. We do not want chaos as a result of monetary union, as Deputy Jim Mitchell outlined. Events and various treaties over the past ten to 15 years have been the building blocks leading us to monetary union. We should embrace the process of absorbing ourselves into monetary union, which will benefit this country and Europe generally.

Those who argue we could have chaos forget the other side of the coin; that if we fail to proceed with monetary union there would be chaos in the banking systems throughout Europe. We thought we had it rough some years ago when the IR£ was under sustained pressure and interest rates were astronomical in trying to sustain it but if monetary union and the single currency do not proceed, leaving us on our own, the consequences will be far more serious than anything that might come from organising ourselves to be one of the first round of countries to participate in the single currency.

I also reject the notion that this is creating a trap within the EU; that there will be a divided Europe of those within the single currency and those outside. That is simplistic analysis that does not stand up to scrutiny. If one reads all that has been said by Ministers and Governments of various countries discussing monetary union, there is deep recognition that there must be some convergence for those outside. There has to be stability between those using the Euro and those initially outside the single currency. The majority of countries that will be outside it have stated it is their intention to participate in the single currency. The UK and Denmark are the only countries which may meet the criteria and opt to stay out of the first round. All other countries in the EU are anxious to be part of the single currency. We can anticipate that beyond the establishment of the single currency those countries will want to ensure that the disciplines laid down within the Treaty and the stability pact criteria, however they are finalised, will be met by those countries. Therefore, I am not as concerned as some would be at the consequences of the single currency. The effects on the EU's structure, institutions and everything achieved by it over the last number of years if monetary union does not proceed would be of more concern.

Much of the argument in this country has been coloured, rightly in some respects, by what may happen with the UK and monetary union. It has a substantial effect on our economy because it is one of our major trading partners but the debate in the UK over the last number of years has not focused on the consequences of the single currency and its effects. It has focused on the single currency not coming about, the date not being met, the criteria not being fulfilled and that, therefore, it will be dealt with on that basis. It has also been coloured by the political difficulties within the British Government concerning the Eurosceptics and Tory backbenchers using many European issues, particularly monetary union, as the major political stake. Much of their argument is unrelated to the single currency but is concerned more with domestic policy in the UK. This is regrettable as there are other views. Today in The Irish Times, Sir Leon Brittan, EU Vice-President for External Affairs, who served in a British Cabinet, said: “Britain will be propelled into the single currency because it will not be able to afford to remain outside”. That is another view but it is not in isolation. The CBI in the UK would also be of that view; that will have to be taken into account. The City, as it is euphemistically called, in London is also deeply concerned about the consequences for the UK if it remains outside the single currency. It is not as black or as simple a picture as has been painted here today of currencies that, like sterling, might remain outside and use their positions to devalue because they feel like it.

That is not the reality of operating within Europe. They would damage their own economy internally and on the world market. It is a simplistic view that they would not take and does not stand up to scrutiny. It has been put forward over the last number of years. If the UK stays out of the first round, which seems likely, it will not be for very long. Neither will it drive sterling to undermine those involved within the single currency. The consequences for their own position would be equally horrendous. It is not true that remaining outside gives it all the options and that those of us inside, especially Ireland, will suffer the consequences of it calling the shots, The argument is not that simple and the UK opting out is not likely to be permanent and have serious effects on this country.

We have followed a policy over the last number of years, particularly since 1987, which has forced a discipline on this country. All Members are willing to claim the benefits of our present economic situation. In reality, the disciplines were imposed on us because of our desire to be a player in Europe, albeit a small one and that has seen the tremendous growth in our economy.

Some time ago there was a reference to the independence of the Central Bank. The reality of "Ireland Incorporated" over the last number of years is that it is an insignificant cork on the tide within Europe. Whatever decisions are taken in Europe will have a serious effect on us. It would be better to be involved in the decision-making process than be outside. One of the benefits for this country will be the setting up of the European Central Bank. The fiscal policy is narrow and marginal. The irony is that setting up a European Central Bank in which Ireland will be a legitimate partner on the board, so to speak, may give us a stronger voice than at present since such an institute does not exist and we are basically at the whim of the deutschmark. That is a prospect which Ireland should move forward with and about which it should be confident.

One of the reasons we want to move the monetary union process forward at the present pace is that it is essential that the European economy be as unified as possible to take on the might of the American and Japanese economies and, in particular, the economies of the emerging Pacific Rim and the ASEAN countries which have grown substantially in the past few years. No economic entity in the European Union, perhaps with the exception of Germany, has the capacity, resources and strength to act alone against those economies. It is essential that Europe progressively form as a bloc. Monetary union underpins and is an essential cornerstone in that process.

That is not to say that asking questions is wrong or that one is negating one's desire to strengthen Europe and to be part of the European process. However, it must be done in a balanced way. I noticed recently that economists, particularly those employed by large institutions, tend to put forward their arguments based on the narrow vested interest of the institution or body by which they are employed. Banking economists are raising questions and concerns and are becoming pale in the face as regards Europe because monetary union will mean that aspects of banking which are highly profitable at present, such as foreign exchange and dealing in foreign currencies, will be less so.

We could all take a narrow view, look at what deeply affects us, go against the overall picture which has emerged in Europe and write off all the substantial benefits which have accrued over the past number of years. It is wrong to base the argument on monetary union. If one looks at an ESRI report, one may say the benefits are not great. However, we are reaping the benefits of what has occurred in Europe over the past ten to 20 years. This is part of that building process. It is also wrong to say there have been few debates and reports. The debate, particularly at the Select Committee on Finance and General Affairs, has been extensive. The ESRI, banks and Europe have produced reports and the Central Bank has commented. I receive many reports which I do not have time to read. This currency will become reality in time.

If the UK were committed to monetary union, how would it affect the axis of France and Germany, the countries seen as the play makers and without whom this cannot happen? It is a pity the UK did not involve itself more deeply in the process because it may have given it and countries like Ireland more options and may have influenced the final process, when it takes place and its consequences. Another worrying consequence that has not been as highlighted as it was in the past because of the concentration on monetary union is the enlargement process. I cannot see how enlargement will fit into the present structure in the Union and the single currency.

What I do not like about the Bill is that it introduces more regulations to what should be a deregulated market, something which was referred to earlier. Why does the Central Bank require these new structures, regulations and controls? Section 22 empowers the bank to involve itself in and acquire a company. What type of company would the Central Bank involve itself in or acquire? Obviously, it will be in the financial market, but what role will it have? Will it be a competitor with other legitimate banks? How will it regulate against itself if it is a participator in the market place? I do not understand this section and I was surprised by its inclusion. Perhaps it will be teased out on Committee Stage.

I hope the contributions which will be made and which will form part of our thinking on monetary union to which the Central Bank will be central are level-headed and are sufficiently broad-based to take account of the overall picture. I hope people do not get up on their high horses over the next 12 months and focus on monetary union from a narrow vested interest viewpoint which will completely miss the argument. It would be a shame if that happened. I regret there are signs of that occurring in some institutions.

Mr. M. McDowell

I welcome the legislation. I was surprised by the definition of "deposit" in section 2 (2). Although similar words are used in connection with the concept of deposit for deposit interest retention tax, in this context some things might amount to a deposit which ordinarily people would not accept as a deposit. Would a debenture be distinguishable from a deposit receipt or would a redeemable preference share amount to a deposit for the purpose of this definition? Would a sum of money received on terms that it will be repaid with or without interest, whether on demand or at a fixed or determinable future date, not cover a redeemable preference share, for instance? I wonder if the definition of "deposit" is too broad.

Like Deputy Cullen I have a difficulty with section 22 and the idea of the Central Bank setting up companies. I imagine it could set up companies to run a mint, transport cash or provide international consultancy services to emerging banks in the Third World. We should know about the area in which we are being asked to authorise the formation of such companies. It is not a good enough safeguard for this House to say it will not happen unless the Minister agrees. This House should know the business of the Central Bank. Part III of this Bill, which states companies can be set up and acquired with the consent of a Minister, is a blank cheque. What will happen when they are asked to acquire a lossmaking company to bail it out? That is the concern I have when I see a blank cheque of this kind proposed.

Mr. S. Brennan

Supervising themselves.

Mr. M. McDowell

If there is something in mind, let us hear about it and legislate for it. Just because the Bundesbank or somebody else has a right to create subsidiaries we in this House should not loosen the reins on the Central Bank and give it a blank cheque, subject to ministerial approval, to buy or to set up business anywhere in the world for any purpose. I am not happy with that. Part III is far too widely cast. The Central Bank is our property. It has its board of directors but in another sense we are its political board of directors or at least its shareholders.

Mr. S. Brennan

For another year or two.

Mr. M. McDowell

In that context, for as long as it exists and whatever functions it discharges post economic and monetary union, I am concerned that this notion of setting up companies may be a way to redeploy redundant surplus staff in Third World banks under the aegis of the Central Bank of Ireland. I do not like the notion that the Central Bank is being given the degree of autonomy to set up subsidiary companies and acquire companies irrespective of the state of those companies. That worries me considerably.

It is a good idea that there should be some overall capacity to supervise — presumably in a minimal way —bureaux de change. I presume as long as it concerns compliance with money laundering legislation they will be left to do their own thing. I hope there will be no need for detailed supervision of those bodies. The amendments to the law relating to cheques and negotiable instruments is reasonable and seems appropriate.

The Comptroller and Auditor General seems to be given extra powers in relation to the Central Bank. Will the Minister indicate whether the Comptroller and Auditor General will be entitled to audit any companies established under section 22 by the Central Bank or in which the Central Bank is a joint partner? Listening to the Minister's contribution one might think the Central Bank, under section 22, will be merely the owner of small companies and can establish the companies. This section allows it to take part in the formation or establishment or to own shares in a company. It will be a minority shareholder as well. I am a little sceptical of the Central Bank undertaking liabilities of this kind without some degree of control by the Comptroller and Auditor General unless we are talking about joint ventures with other central banks which would have a satisfactory degree of financial supervision and a satisfactory auditing function.

Whereas I cannot profess to understand the detail of what the Minister said about the new payments system, it is appropriate that such a payments system be established and that Ireland should not be inhibited from participating in a type of payments system that applies throughout the EU. It is satisfactory that the Central Bank should have a leading role in establishing, supervising and maintaining access to such a system.

I do not propose to dilate to the same extent as Deputy Cullen on my view of the European Union but we should not be either Euro idealists or Euro sceptics in this House. We should be Euro realists. Being a Euro realist involves us in taking a much more clear headed view of Ireland's interests at any given stage. We are probably coming to the end of a period in which Ireland has been the unquestioning and unquestioned recipient of huge sums by way of transfers from the EU, and although it is an exaggeration to say EU transfer payments are about to come to an end in the next few years, it is nonetheless the case that Ireland's capacity to draw down through political influence huge sums of money from the European Union is limited. In that context, therefore, Ireland has to adopt a slightly less starry-eyed view of the European Union and our interests in the European Union.

Deputy Cullen raised the question of enlargement. I was a member of the Joint Committee on Foreign Affairs when the question of enlargement arose and a report was prepared. It struck me that it was entirely idealistic and unmindful of Ireland's real basic interests. The assumption was that the bigger the European Union became, the better it was for Ireland. We now know there are down sides to enlargement of the European Union and that we will have to share the cost of enlargement of the European Union.

There are questions such as the degree to which the European Union can expand while remaining a cohesive political unit. These words may come to haunt me in the future but I have my doubts as to whether one can go from the Black Sea to the tip of Scandinavia and say that is one manageable political entity. The larger Europe becomes, the more it will become a Europe of nations rather than some kind of federal super state, and I am happy with that.

It might be thought that economic and monetary union will create such a significant common element, that is, the currency, that there will have to be a compensating significant devolution of democratic control to control that currency. The Euro sceptics in England would be concerned that by creating a Euro currency we are effectively taking a giant leap by implication down the road to a federal united states of Europe type model. That is not necessarily so. A currency union does not necessarily imply in the long term that type of close political union. It is possible to have a Europe of nation states bound together in what is a currency as well as a customs union without necessarily establishing a superstate at the heart of that economic and political entity.

I welcome the development of economic and monetary union and, unlike some of the Kenmare economists, I am not concerned about the sacrifice Ireland is making politically in giving up currency exchange rate policy to join in economic and monetary union. I do not believe in the capacity of this country, certainly on our performance to date, to engage in Keynesian macroeconomic stimulation of our economy. I would be just as happy if many years ago we had managed to persuade the Germans to allow us to use their deutschmark.

I do not care what we use as long as it is a stable, low interest currency. I do not care either whether the pound in my pocket is sterling or some other currency. It is a conceit, particularly on the part of politicians who like to believe they know something about economics, to think that we have huge macro-economic policy options. We are a small open economy, part of the European Union, and the sacrifice involved in giving up certain options to have a stable currency is not a huge political sacrifice.

Let me make a second point on economic and monetary union. There is a game show on television called "Gladiators".

Mrs. Doyle

I did not think that would be the Deputy's taste in television viewing.

Mr. M. McDowell

Anybody who has three boys in the house watches "Gladiators". At the very end of this hour long trial of strength and skill, the competitors, who are extremely fatigued by that time, have to run up what is called a "travelator" and crash through a paper barrier to end up lying prostrate on the ground at the point where they have won. In the period 1997-2000, the lifetime of the next Government, we will have a unique opportunity to ensure that Ireland does not end up like the "Gladiators" and crash exhausted into EMU after a crash diet of compliance with the Maastricht convergence criteria.

In order to ensure that we hit the ground running in terms of EMU and are competitive thereafter and have no great difficulty in complying with the requirements of the stability pact in the wake of our entry into EMU, we must, between 1997 and 2002, undertake radical reform of our economy. We must take steps now to ensure that Ireland is lean and fit to be an active participant in the post-EMU economy if we join the EMU.

To that end it is absolutely essential to do something about taxation on work. Post-EMU much of our capacity to ameliorate the effect on our economy of our system of high tax on work will be swept away. Post-EMU, in an ever more closely integrating European Union, Ireland will have a skilled and substantially young workforce available to it. What that workforce will not have is the advantage of geographical location or of being part of the larger economies and the economies of scale that go with that. Ireland will have disadvantages which flow from our peripherality, our geographical location and our demographic composition. Our workforce, which is the one advantage we have, deserves to have a Government and a political system which recognises that that workforce must be given a competitive advantage within Europe of a radical kind, not just 1p in the £1 more than a worker in the United Kingdom or in the Ruhr, but a radical advantage where the State takes less out of the employment contract between employer and employee, and substantially less than the German, Belgian, Dutch or English states where capital may choose to locate in preference to Ireland. We have to give our workforce a dramatic advantage in terms of their tax treatment over other places in Europe. Otherwise the laws of economic gravity will apply and capital will go where it gets the best return in terms of geographical location coupled with a benign tax system. That is why PAYE workers should look to the next Government, whatever its composition, to deliver on the one thing the political system can deliver to the people as a whole, that is, a system whereby employment is situated in a zone which is tax advantageous to the worker and the employer and thereby gives Ireland, in so far as it lies within the power of an independent state within the European Union, a significant advantage as a location for employment compared with the rest of Europe.

That is the one thing that the Irish political establishment can do for the economy, and that carries with it significant implications in relation to taxation policy, public sector pay policy, public expenditure generally and the like. If in the period 1997-2002 we undertake a radical transformation of the way in which we run our country, control public spending and tax work, and the way in which Government does or does not opt to regulate, operate, own and capitalise huge areas of our economy, I am confident we will not be like the athletes in "Gladiators", collapsing at the moment of supposed victory. On the contrary, our entry into EMU will be a circumstance that will give rise to greater opportunity for growth.

In that context it seems that there is precious little apparent understanding that we cannot have a three-year wage deal at 10 per cent and regard taxation policy over the next three years as a residual, that we cannot allow public spending to grow at the rate at which it is growing now, that if we fix targets for public spending growth we have to stick to them and that something has to give in order to do that, and that politically we cannot be in the hands of people who are unwilling to face up to the implications of controlling public spending and instituting radical tax reform — those two things are political twins.

I do not intend to argue about who was the worst or best at controlling public spending in the past. I am a positive politician.

Mrs. Doyle

The Deputy has selective amnesia.

Mr. M. McDowell

I will not throw at the Minister the fact that she supported a Government that doubled the national debt between 1982 and 1987. I hope she will not throw against me the fact that during our last period in office public spending grew faster than we would like. Politicians should be positive and look to the future.

Mr. Power

A good soldier never looks behind.

Mr. M. McDowell

Exactly. All I would say in this context is that those five years between 1997 and 2002 offer us not merely a window of opportunity, they demand from us the making of radical changes in how this country is run. Therefore, on the occasion of the introduction of the Central Bank Bill, I wish the Minister well. Subject to the few niggling points I have made, particularly about Part III of the Bill, I hope it will come into effect. I believe the Minister will enjoy the co-operation of the parties on this side of the House so that it can become law as soon as possible.

Debate adjourned.