Dáil Éireann debate -
Wednesday, 5 Feb 1997

Vol. 474 No. 4

Central Bank Bill, 1996: Instruction to Select Committee.

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

I move:

That it be an instruction to the Select Committee on Finance and General Affairs in the case of the Central Bank Bill, 1996, that it has power to make provision in the Bill for the supervision by the Central Bank of Investment Intermediaries; and to provide for related matters.

The Committee Stage of the Central Bank Bill, 1996 is scheduled to be taken by the Select Committee on Finance and General Affairs tomorrow, Thursday, 6 February. The Minister for Finance has circulated a number of Committee Stage amendments to the Bill. The Minister of State responsible for commerce, science and technology announced on 3 January that the Government had accepted his recommendation that responsibility for the regulation of all investment intermediaries should be allocated to the Central Bank. He indicated he had made this recommendation in the light of the Taylor affair and earlier financial scandals which had shaken public confidence in its ability to invest safely through the system of investment intermediaries operating throughout the country. He also noted that the Irish Brokers' Association has decided to cease to act as a self-regulatory body in respect of its members and that the Insurance Intermediary Compliance Bureau had earlier decided not to undertake a regulatory role under the Investment Intermediaries Act.

In deciding to transfer responsibility to the Central Bank, the Minister of State responsible for commerce, science and technology indicated that the Government had regard to a number of factors, including: the need to take strong and decisive action to restore confidence in the investment intermediary system; the experience to date in the implementation of the existing regulatory structure under the Investment Intermediaries Act, 1995; the fact that the regulatory regime envisaged when the original legislation was drafted was no longer feasible because of the decision by the Irish Brokers' Association to cease to act as a self-regulatory body in respect of its members and the earlier decision of the Insurance Intermediary Compliance Bureau or IICB not to undertake a regulatory role under the Act; recommendations made to the Minister with responsibility for commerce, science and technology by the authorised officer carrying out an investigation into the circumstances surrounding the Taylor affair; the need to maximise operating efficiency and ensure consistency in the approach to legislation; and, most importantly, the expertise and resources available to the Central Bank for the regulation of financial concerns generally and investment business firms specifically.

To give effect to the Government decision as soon as possible, the amendments to the Investment Intermediaries Act needed to transfer responsibility for the regulation of investment intermediaries from the Minister for Enterprise and Employment to the Central Bank are being put forward as Committee Stage amendments to the Central Bank Bill.

As Deputies will be aware, the Central Bank is responsible, under the Intermediaries Act, for the regulation of investment intermediaries who have discretionary control over client funds. The proposed amendments to the Act will make the bank the sole regulator of investment intermediaries.

The long title to the Central Bank Bill, 1996, does not contain any reference to amending the Investment Intermediaries Act, 1995. This motion will, with the approval of the House, remove any doubt as to whether the Select Committee on Finance and General Affairs has power to discuss the proposed amendments to the Investment Intermediaries Act.

I recommend the motion to the House.

Mrs. O'Rourke

I thank the Minister of State for her speech, a copy of which I have just now received. We will be opposing this and calling a vote in the Dáil. I will outline the reasons.

We are quite well aware of the Taylor collapse. It was I who asked at the Select Committee on Enterprise and Economic Strategy — and the chairman, Deputy Michael Bell, agreed — for the setting up of a process to review what went wrong and the role for the future. We had several meetings on the matter during the course of which Mr. Maurice O'Connell, the Governor of the Central Bank, the Garda Fraud Squad, the Irish Brokers Association and other interested parties gave evidence.

During the course of questioning at the committee the Governor of the Central Bank made it clear that the ring-fencing of investment intermediaries would not be feasible, and that was duly reported in all the newspapers. Following that, the Industry Working Party on Intermediaries, which was set up by the Government in 1994 to advise on the ill-fated Act of 1995, made a submission which will be heard orally at 2 p.m. in full public session. It is reporting that what the Minister of State, Deputy Rabbitte, is proposing will not be operable and will be to the detriment of consumers, in respect of whom the Minister of State is properly exercised in terms of other duties that he carries out.

My party, on my advice, is opposing this simply because the 1995 Act was flawed; the IBA was faulty in putting itself forward as being able to supervise it — its chief director, Mr. Paul Carty, spoke about it at the committee; and the carrying out of the investigation into it was initially flawed and faulty. A Government-appointed group has now come out very strongly in favour of the proposition that what is being proposed cannot happen. In their submission which will be debated orally today, they say the Central Bank must have an overall remit and be the lead regulator for all savings investment intermediaries with additional devolved powers to an insurance regulator for intermediaries insurance activities. The Governor of the Central Bank and the Government's own Industry Working Party on Intermediaries say that what is proposed in these amendments i.e. giving the Central Bank responsibility for the regulation of investment intermediaries cannot happen. It can, of course, happen if the Government guillotines it as no doubt it will on Thursday morning. However, everybody who has been engaged by the Government, including our own committee, is agreed that this should not happen, that it is not operable and will lead to further fraudulent acts by other bodies.

I do not particularly find fault with the Minister of State, who was sent here to do a job. Clearly the background to it, overlapping into the Department of Enterprise and Employment in the person of the Minister of State with responsibility for science, commerce and technology, is incorrect. We are going from one flawed regulatory regime to what has been openly spoken of as another flawed regulatory regime. It is not that the Central Bank is flawed but, in the words of its own Governor, it would be well nigh impossible to ring-fence financial intermediary operations because they overlap intrinsically with the operations of the sellers of insurance products.

They are all concerned with consumers, with people's money. We had full debates with the Garda Fraud Squad and they are looking into whether this was "hot money". However, that is for a separate investigation. What we are concerned about today is the giving of power to the Central Bank to regulate financial intermediaries only which, in the words of the Governor, will be inoperable. I will oppose this at every stage. Rather than giving much needed protection to consumers this will ensure that consumers will be badly, incorrectly and erroneously regulated. It is not possible for this to work unless the Central Bank gets full regulatory powers for the intermediaries and for the sellers of insurance products. As stated in the working group submission, the Central Bank should be the lead regulator.

The working party, whose submission we will be debating this afternoon, proposes that the Insurance Act, 1989, be amended to allow the Department to establish specific criteria for the approval of an industry regulatory body, including the provision of powers of prosecution by the regulatory body and/or the Department. The timing of proposed legislative independence is obviously important, and the working party says that it can be done by amendment as the Minister of State proposes, but the amendment should be more far-reaching and embrace the financial intermediaries and the insurers who sell financial products.

I meant to say previously, a Ceann Comhairle, that I am taking the time of the other Opposition party which does not wish to contribute.

An Ceann Comhairle

The debate is scheduled to conclude at 11.28 a.m.

Mrs. O'Rourke

It may end before then because what I have to say is very straightforward. What the Government is proposing flies in the face of every expert opinion on the system of regulation. The industry working party group on intermediaries has warned that while its members, who are drawn from the intermediaries, have different views on regulation, they are all concerned that the Government's decision will be unworkable in practice.

This view was echoed by the Governor of the Central Bank who warned when he appeared before the Select Committee on Enterprise and Economic Strategy on 8 January last that what was being proposed by the Government held "unique difficulties" which should not be understated. The Consumers' Association of Ireland has also voiced its concerns, warning that the Government's proposal to split regulation is unworkable.

When the Minister of State, Deputy Rabbitte, announced the Government's decision to transfer responsibility for the regulation of intermediaries selling investment products to the Central Bank, he said he was acting swiftly and decisively to restore confidence in the investment business. However, he will achieve the direct opposite of what he hoped for if he persists with this course of action, which all expert opinion has decided is half-baked. The industry working party — the Government's own group — has also warned of the pitfalls.

This proposal is lopsided and faulty and will prove inoperable. The Minister's proposal to ring-fence investment and leave other parts of the intermediary business less regulated means that those seeking to diddle investors will opt for the business which is subject to the softest form of regulation.

The Minister of State, Deputy Doyle, seems to be in the same position as I was in the last Government, in that I was given all sorts of Bills to produce, talk about and steer through the Dáil by means of my professionalism, guile and charm — I put professionalism first lest I be taken as being sexist. Therefore, I am not referring these remarks to her but to the misguided public service and Ministers who decided this was the way to do it.

The Taoiseach lays great store on his commitment to the committee system. Various articles written about him have stated he made his name on that basis. On my first day in the Dáil in December 1982 we were in Opposition and he was the Minister with responsibility for reform of the Dáil, among other matters. I remember him speaking glowingly then of the committee system. That was 15 years ago and various committees have been set up since then by various Governments. Some would say there are too many because we meet one another on the plinth and the stairs of Kildare House running to and from the bowels of Kildare House, the Seanad Chamber and the Dáil Chamber in pursuit of the various committees. Although I am a member of several committees, I have decided that my commitment lies with the Select Committee on Enterprise and Economic Strategy, which is one of the four statutory committees.

The Taoiseach lays great store on the role of the committees which work through measures with a degree of consensus, call votes when it is necessary to do so and bring various measures before the Dáil. However, in this case the views of one of the four statutory committees have been ignored. The committee is still in session and we are meeting this afternoon to work through a document which states that the Minister's proposals cannot work. Tomorrow morning I will be at another committee meeting in substitution for Deputy McCreevy — no doubt, the Minister of State will be there also — to debate the findings of another committee which fly in the face of what the Minister of State will recommend.

How can that be proper committee procedure? I know this will be of interest to you, a Cheann Comhairle, in overseeing the Dáil. How can the committee system be judged to be for the betterment of legislation, for which it was set up, and to bring about a consensus on important matters and augment the primary work of the Dáil, particularly the statutory committees which have responsibility for legislation? There are many other estimable committees but, although I would not use the phrase "talking shops" as some people do, they are in general for putting forward policy viewpoints and aiding debate in many important matters. They do not have an input into legislation as the Select Committee on Enterprise and Employment does.

The Select Committee on Enterprise and Employment will meet this afternoon in pursuit of a duty given to it by consensus of the committee members. The committee did not vote on whether it should put forward the motion by letter first and then proceed to investigate the best way to monitor and amend legislation to deal with the insurance intermediaries — all members of the committee, who are from every party, agreed to proceed on that basis.

That process is to be completed today with the oral submission of the industry working group's presentation. That will be followed by a question and answer session and then a decision will be taken. However, that decision will be null and void because the Minister of State is seeking this morning to have this motion passed by the Dáil. Tomorrow, the Select Committee on Finance and General Affairs will seek to make the suggested amendments. The Government suggested that the motion today be taken without debate. It agreed to a half hour debate when we requested it — but we had to request it.

I am at a loss to understand how one section of the Government does not see that it is going against something the Government set up to make recommendations on amending, changing and adapting the regulation of financial intermediaries. It flies in the face of the Taoiseach's oft stated and much vaunted commitment to the committee system. I take a particularly serious view of this because the Select Committee on Enterprise and Economic Strategy is a statutory committee which, as part of its remit, has to advise the appropriate Ministers on appropriate legislative changes. We are devising appropriate changes but they are being steamrollered and ignored by another arm of Government.

I wanted to make our position very clear. The Minister of State has been sent in to do a job. The senior Ministers, Deputy Richard Bruton and Deputy Quinn, are in charge of co-operation in this field. They have chosen instead to drive a wedge between those who seek to make appropriate measures for this and those who have not done so. It is quite apparent why my party opposes this motion. Lest our opposition be described as bluster or opposition for its own sake, we are opposing it because the select committee, the Central Bank and the industry working group all oppose it. We have an anomalous situation whereby Members of this House from all parties agree with the conclusion the select committee will reach today, while a Minister of State comes to the House to push the measure through. I rest my case.

Mrs. Doyle

I note the case made by Deputy O'Rourke. The industry working group to which she referred was not appointed by the Government. The proposal to transfer responsibility to the Central Bank does not cut across any other proposals which may emerge on the regulation of investment intermediaries. A working group, representing the Department of Finance, the Department of Enterprise and Employment, the Department of Justice and the Central Bank, is examining the operation of the Investment Intermediaries Act. It will need to take account of any recommendations made by the Select Committee on Enterprise and Economic Strategy and the recommendations of the industry working group. The motion before the House is, in effect, a belt and braces motion. It probably was not necessary for me to come before the House, on behalf of the Government, to request that the Select Committee on Finance and General Affairs be instructed to make provision in the Central Bank Bill for the supervision by the Central Bank of investment intermediaries and other matters. Since the long title of the Central Bank Bill does not contain any reference to amending the Investment Intermediaries Act or on whether the select committee had the power to discuss the proposed amendments to the Investment Intermediaries Act, this motion was brought before the House to remove doubt.

Mrs. O'Rourke

It was necessary. We cannot reconvene——

An Ceann Comhairle

The Minister's reply ends the debate.

Question put.

The Dáil divided: Tá; 73; Níl, 54.

Tá

• Ahearn, Theresa.
• Allen, Bernard.
• Barrett, Seán.
• Barry, Peter.
• Bell, Michael.
• Bhamjee, Moosajee.
• Boylan, Andrew.
• Bradford, Paul.
• Bree, Declan.
• Broughan, Thomas.
• Browne, John (Carlow-Kilkenny).
• Bruton, Richard.
• Burton, Joan.
• Byrne, Eric.
• Carey, Donal.
• Connaughton, Paul.
• Connor, John.
• Costello, Joe.
• Coveney, Hugh.
• Crawford, Seymour.
• Crowley, Frank.
• Currie, Austin.
• De Rossa, Proinsias.
• Deasy, Austin.
• Deenihan, Jimmy.
• McGrath, Paul.
• McManus, Liz.
• Mitchell, Jim.
• Moynihan-Cronin, Breeda.
• Mulvihill, John.
• Nealon, Ted.
• Noonan, Michael (Limerick East).
• O'Keeffe, Jim.
• O'Shea, Brian.
• Pattison, Séamus.
• Quinn, Ruairí.
• Doyle, Avril.
• Dukes, Alan.
• Durkan, Bernard.
• Ferris, Michael.
• Finucane, Michael.
• Fitzgerald, Brian.
• Fitzgerald, Eithne.
• Fitzgerald, Frances.
• Flaherty, Mary.
• Flanagan, Charles.
• Gallagher, Pat.
• Gilmore, Eamon.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael.
• Hogan, Philip.
• Kavanagh, Liam.
• Kenny, Enda.
• Kenny, Seán.
• Lowry, Michael.
• Lynch, Kathleen.
• McCormack, Pádraic.
• McDowell, Derek.
• McGahon, Brendan.
• McGinley, Dinny.
• Rabbitte, Pat.
• Ring, Michael.
• Ryan, John.
• Ryan, Seán.
• Sheehan, P.J.
• Shortall, Róisín.
• Spring, Dick.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Upton, Pat.
• Walsh, Éamon.
• Yates, Ivan.

Níl

• Ó Cuív, Éamon.
• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Ahern, Noel.
• Aylward, Liam.
• Brennan, Matt.
• Brennan, Séamus.
• Browne, John (Wexford).
• Burke, Raphael.
• Byrne, Hugh.
• Callely, Ivor.
• Coughlan, Mary.
• Cullen, Martin.
• de Valera, Síle.
• Dempsey, Noel.
• Doherty, Seán.
• Ellis, John.
• Fitzgerald, Liam.
• Flood, Chris.
• Foley, Denis.
• Harney, Mary.
• Haughey, Seán.
• Jacob, Joe.
• Keaveney, Cecilia.
• Kenneally, Brendan.
• Keogh, Helen.
• Killeen, Tony.
• Kirk, Séamus.
• Kitt, Michael.
• Lenihan, Brian.
• Martin, Micheál.
• McCreevy, Charlie.
• McDaid, James.
• Moffatt, Tom.
• Molloy, Robert.
• Morley, P. J.
• Moynihan, Donal.
• Nolan, M. J.
• O'Donnell, Liz.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Ned.
• O'Rourke, Mary.
• Power, Seán.
• Quill, Máirín.
• Ryan, Eoin.
• Smith, Brendan.
• Smith, Michael.
• Treacy, Noel.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Woods, Michael.

Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.

Question declared carried.