Dáil Éireann debate -
Wednesday, 12 Mar 2003

Vol. 563 No. 2

Central Bank and Financial Services Authority of Ireland Bill 2002: Report and Final Stages.

Mr. R. Bruton

I move amendment No. 1:

In page 5, between lines 20 and 21, to insert the following:

"(2) Within two years of the coming into operation of this Act, the Minister shall present to the Oireachtas a review of the operation of the Act which will inter alia, assess—

a) the impact of the operation of the Act on the Credit Union Movement,

b) the adequacy of the system for developing a strong pro-consumer financial environment,

and

c) the quality of the reporting arrangements to provide the Oireachtas with timely information in regard to—

protection of consumer savings,

transparency of information for the users of financial services,

competition among the providers of financial services, and

efficient redress for consumer grievances in relation to the provision of financial services.".

We had a lengthy debate about this Bill on Second and Committee Stages. One of the most contentious aspects of the Bill is its effect on the credit union movement. The preferred approach, which was initially proposed by the Government as the way to regulate the movement, has been abandoned. We are no longer to have an independent regulator of the credit union movement. That regulator will, instead, be under the thumb of the Central Bank. Credit unions will depend on the Central Bank and the regulatory authority for budget. They will be subject to direction by the Central Bank and will depend on the Central Bank for staffing. Any reports that will be made in relation to the regulation of credit unions can only be made through the Central Bank and the regulatory authority. The right to report directly to the Oireachtas is being removed. This is a significant change in the traditional independent regulation of the credit union movement.

The movement has been a unique institution in Ireland. It has offered support to people who would be regarded as unbankable by the other financial institutions. Credit unions have been based on mutual trust and have been an important pillar of financial support for those whose financial means would put them in difficulties with the traditional banking sector.

The other issue which has been highly contested in the course of the debate on the Bill is whether it is appropriate to bring consumer protection within the same body as is responsible for prudential regulation. Very strong advocates have said this is wrong. These include Dr. Ray Kinsella, who was formerly an adviser to the Government and is a professor of financial matters in the Smurfit School of Business in University College Dublin. He has argued convincingly that the two roles should not be joined and that to do so would damage both the body's capacity to be effective in consumer protection and its capacity to be effective in prudential regulation.

The third issue which has been raised inside and outside the House is the extent to which the Oireachtas, which will be responsible in the long-term for overseeing the effectiveness of these bodies, is equipped or has the resources and interest to do so.

This amendment proposes that the Minister present a review to the Oireachtas within two years. We are going into uncharted territory. I believe we have taken the wrong option in respect of the regulation, both of credit unions and consumer protection for financial services. After the Act has been in place for two years and a reasonable amount of experience has been built up, we ought to insist that the Minister presents a review to the Oireachtas that will look at all these issues and the extent to which the Central Bank with all its new powers is changing its spots and delivering real consumer protection, new sources of financial information for consumers and real competition within the sector. As I pointed out on Second and Committee Stages there is a genuine conflict between the desire for a highly competitive low margin banking sector, which is good for the consumer, and one that is uncompetitive with a high margin, which is good for central banks which want to protect prudential regulation. There is a conflict here and we should test it and come back within two years when, hopefully, we will have learned something. The Oireachtas can make changes to the legislation if deemed appropriate at that stage and, if not, we can say it is working well and that the Oireachtas is managing to hold these bodies to account.

Ms Burton

In regard to Deputy Bruton's amendment, I am still not satisfied about the undertakings given by the Minister for Finance, who is at Cheltenham, and his Minister of State, who is also at Cheltenham. It is unsatisfactory that the Minister of State, who is my esteemed constituency colleague and to whom I do not wish to refer in a personal way, has been landed with this job. It is a disgrace when an important Bill is being debated on Report Stage that the Minister for Finance and his Minister of State are disporting themselves in Cheltenham for the week. The Minister of State, Deputy Lenihan is in no position to take part in any serious way in the debate. I am not satisfied with the undertakings given to the credit union movement about the regulatory authority applying to the credit union movement. We have tabled a subsequent amendment to take into account the specific ethos of the credit union movement.

In the area of consumer information I raised with the Minister for Finance on Committee Stage of the Finance Bill the fact that last year the cost to the Exchequer of capital allowances for businesses used by the banks, under leasing arrangements, was in excess of €300 million. Are we satisfied that small and medium-sized busi nesses are getting the appropriate advantage from the banks from the generous tax break and tax avoidance mechanism, which is uniquely open to banks and financial services as a consequence of their taking the benefit of capital allowances, otherwise meant for businesses? The Minister's reply last week was that the cost of these tax breaks to the banks in the year to March 2002 was €316 million. Consumers of banking services are not only individuals and families but are also businesses. I am inundated, as I am sure is the Minister of State, Deputy Lenihan by small and medium-sized businesses in Dublin 15 who say that the cost of banking services is incredibly high.

In regard to a regulatory service, the Central Bank rather than the Tánaiste and Minister for Enterprise, Trade and Employment won the argument that it would control the structure. We also have a consumer services director who comes from a Central Bank background. I am sure she will attempt to do a fine job. Where is the protection for consumers, particularly small and medium-sized businesses in relation to value for money from the financial services? We received a report from the office of the Director of Consumer Affairs which clearly indicates her unhappiness with the regime for which the Bill provides. It is a question of the Central Bank having a traditional role to protect the integrity of the banking system, which we all accept, but how does that role tally with providing the best value to consumers who pay through the nose for financial services? Yesterday we had the acknowledgment by pension fund operators and others that the equity investments market has lost €2 billion to date this year. Most of those are financial service advisers.

How is the Central Bank to regulate for the consumer, whether an individual or family, looking to long-term investments in relation to pensions or business people who are being asked by banks to give them their capital allowances because it will give them a better deal? We are not satisfied that our small and medium-sized businesses are getting a better deal. The Government has many questions to answer. We are seeking accountability from the Government on the functioning of this new body.

Mr. Boyle

I support the amendment in the name of Deputy Bruton. The points have been made already as to why it should be accepted. I welcome the Minister of State although I am not sure what role he intends to play on Report Stage or whether he has been given any plenipotentiary powers in relation to acceptance of any amendments tabled. If so, it would be a welcome relief to the acceptance or otherwise of amendments tabled on various Bills taken by the Minister for Finance. Hopefully, there will be some interaction and consideration of what is being said here.

The further clarification I sought from the Minister on Committee Stage was why the role of standard conventional banking was being lumped in with credit unions given the unique position they hold in the Irish scheme of things. I pointed out that the United States, which is meant to be the economy from which we are supposed to take our example, has a separate regulatory framework in the form of the credit union supervisory association. It is a grouping of three people who on a national and federal basis regulate credit unions in the United States. Subsequently I received from the Department a five page document as to why the United States model would not suit Ireland. The argument it appeared to make was that Ireland did not need to be considered as a nation, it needed to be considered as an American state, which is a narrow way of looking at the issue. There is a separate way of regulating credit unions at a state level in the United States and at a federal level.

The Minister has chosen to go with the state model. We should aspire to more than that. It also follows the example that the original amendments tabled by the Government, which worsened the lot of credit unions, were accepted on the basis of a submission made by the European Central Bank which did not have an understanding of the role and extent of credit unions in Irish society and were making comparisons with other forms of co-operative banking that would be found in continental Europe, particularly the German model.

The Irish model is far different from anything found in any other European model and it is in need of a separate regulatory framework. The Minister softened his cough somewhat and introduced further amendments that appeared to have met with the general acceptance of the Irish League of Credit Unions. I question whether these vague references and the commitments given are watertight. They do not change anything. We still have a situation where the credit union registrar will have a reporting relationship but will not be subservient to this regulatory authority, a position that could undermine that person's credibility.There is a need, through Deputy Bruton's amendment, to put in place an assessment procedure where we can see after a given time if it is working. I suspect it may not and there might be problems along the way.

Deputy Bruton cited the position of many individuals, including the Director of Consumer Affairs on the dichotomy between a prudential and consumer protection role. Many Deputies have also been lobbied about it by the Consumer Association of Ireland. This Bill lumps together the Central Bank and Irish Financial Services Regulatory Authority in direct opposition to the recommendations contained in the McDowell report. It is akin to the way Britain was described in the 1950s; the Central Bank has lost its empire and has yet to find its role. If we are merely giving the Central Bank something to do now that we have the European Central Bank and all the real aspects of banking are being dealt with at that level, then we are doing a bad day's work and will be introducing flawed legislation.

I commend Deputy Bruton's amendment which seeks to at least give the House an opportunity to revisit many of these concerns to see if they can be redressed in the near future.

Caoimhghín Ó Caoláin

I support Deputy Bruton's amendment. During Committee Stage I made inquiries from Mr. Liam O'Dwyer, Chief Executive Officer of the Irish League of Credit Unions about the deficiencies in the initial proposals they highlighted to the committee. They were subsequently – I made a note of this and shared it with colleagues –"relatively happy". I hope their sense of trust in the Minister's meeting the concerns of the Irish League of Credit Unions stands the test of time and that the amendments and alterations introduced to reflect and accommodate their concerns will stand up.

Deputy Bruton's amendment allows for an opportunity to revisit and appraise the actuality of the effect of this legislation on the credit union movement. I wish at this point to proudly declare that I am a member of my local credit union. The amendment would be welcomed by members of the credit union throughout the country. Subsection (2)(b) refers to the adequacy of the system for developing a strong pro-consumer financial environment. That will be a new experience for everybody. Having worked in banking for 12 years, I look forward to the pro-consumer days that may lie ahead.

Subsection (2)(c)(iii) refers to competition among the providers of financial services. What a wonderful idea. It would be great to see that come to pass so that people would have an opportunity to compare financial products in terms of the high street or main street banking choices currently on offer. It is far from the reality we know today. The majority of ordinary people are being fleeced by the banking sector and financial institutions under a raft of headings. Every possible idea for taking more and more from a citizenry that has been herded over the years into the banking sector, in many cases to access their wages and salaries, is contributing to the vast profits recorded by the banking sector. We have only to look at the recent announcement by Allied Irish Banks of profits of €1.3 billion in 2002. Some might laud and applaud that. I, too, want to see them do well but not at the costs currently imposed on and exacted from the ordinary consumer.

An earlier speaker referred to SSIAs and that element of the accounts linked to the share market. Information about the sums lost in that regard was released yesterday. Who is picking up that tab? It is not the players in the respective institutions. The real losers, not just paper losers, are the investors or consumers, depending on which word one deems appropriate.

I commend this amendment to the Minister of State and wonder, as Deputy Boyle asked, as to his powers regarding the acceptance of Oppo sition amendments as presented and argued. Is the Minister of State working from a prepared text which offers the Minister's traditional response to which Members were exposed during deliberations on the Finance Bill? We could second-guess that response. Perhaps the Minister of State will treat Opposition Deputies and the import of the amendments tabled by them by offering a different reaction and response.

Minister of State at the Department of Justice, Equality and Law Reform (Mr. B. Lenihan)

I regret to advise Deputy Ó Caoláin that I have no intention of commencing a run on the pound in the course of this debate.

Caoimhghín Ó Caoláin

We are dealing with euros now. It is time the Minister of State dealt with them.

Mr. B. Lenihan

I wish to correct a point made by Deputy Boyle that the Central Bank has no real functions regarding currency. While the pound has ceased to exist, the Central Bank has important functions in relation to the euro.

Mr. Boyle

It does not make decisions.

Mr. R. Bruton

Is the Minister of State undertaking research in relation to the pound?

Mr. B. Lenihan

I appreciate that Deputy Burton was not reflecting on my capacity to take this debate. I have consulted in detail with officials in the Department concerned. The Minister accepted the spirit of some of the amendments tabled on Committee Stage.

Deputy Bruton signalled his intention to move this amendment on Report Stage. He is suggesting in the proposed amendment that a review of the operation of the Act should take place, the results of which will be presented to the Dáil within two years of the Act coming into operation. The Minister indicated during Committee Stage discussions that any review of the legislation should wait to see how it operated following the passage of a few years. It should be noted that the Central Bank and the regulatory authority will produce annual reports to be laid before each House of the Oireachtas. The annual strategic plan of the regulatory authority will also be laid before the Houses of the Oireachtas, following which the authority must publish the plan.

Coupled with the provisions of section 33AM of the principal Act which provides for certain officers of the bank to attend before appropriate Oireachtas Committees, this will allow the Oireachtas ample opportunity to assess the operations and activities of the Central Bank and the regulatory authority. Section 33AM – I am sure many Deputies have already examined it in committee – makes it clear that the governor of the bank, the chairperson, chief executive officer and consumer director of the regulatory authority and the registrar of credit unions can be required, under the legislation, to attend proceedings of Oireachtas Committees. A substantial degree of accountability has already been written into this legislation.

The consumer director and registrar of credit unions must produce strategic plans and annual reports for submission to the regulatory authority. In the circumstances, an effective ongoing review and assessment process is entrenched in the legislation as it stands. For that reason I am not disposed to accepting the amendment. It is, as previously announced by the Minister for Finance, our intention to publish a second Bill to implement other recommendations contained in the McDowell report. That Bill will include provisions establishing consultative panels of consumers and the financial services industry. Among the functions planned for the consumer panel will be a review of the discharge by the regulatory authority of its functions, including those of the consumer director and the Registrar of Credit Unions.

Deputies naturally used the opportunity of Deputy Richard Bruton's amendment to raise wider questions in relation to the principal features of the Bill which have given rise to discussion. I welcome the fact that some Deputies noted that the Minister had gone some way towards meeting the concerns of the credit union movement. The Minister issued a four page letter earlier this year in response to representations received setting out in great detail the context of the amendments being proposed in regard to the Registrar of Credit Unions. I think Deputies received a copy of that letter.

The Minister explained in detail at the beginning of Committee Stage the reasons for the amendments he was proposing to make to the provisions of the Bill dealing with the Registrar of Credit Unions. He set out his reasoning in relation to each amendment and indicated that he intended to table an amendment on Report Stage to section 33AA(4). That draft wording was circulated to Deputies and it was the result of meetings between officials of the Department of Finance and representatives of the Irish League of Credit Unions. The agreed reports of the meeting showed that the league representatives indicated that they could live with the wording. They were told the wording was subject to amendment by the Office of the Parliamentary Counsel. The league subsequently issued a statement to all credit unions about the agreement which it had reached with the Department. Amendment No. 33 is the wording which the Office of the Parliamentary Counsel has drafted based on the draft wording agreed with the league. I will explain the background to that amendment if I have the opportunity to move it in the course of this debate.

Deputy Richard Bruton and Deputy Burton raised the issue of whether consumer protection should be in the same body which has the responsibility for the prudential regulation of the financial industry and that these are incompatible functions. Again, the McDowell group felt strongly that separating the consumer issues from the prudential regulator had two important disadvantages. It left unresolved the legal problem of passing relevant information from the authority to the Director of Consumer Affairs and that the advantages of a one-stop-shop would be lost. There would be two official bodies dealing with different aspects of financial services regulation. The Government considered that this restriction on the exchange of information was unacceptable and that is why it decided to implement the structure before the House. We may revisit this question further in the course of Report Stage.

Deputy Burton referred to leasing arrangements and the tax advantages which accrue to financial institutions as a result of the operation of these leasing arrangements and the tax treatment of them. That is really a matter for discussion on a Finance Bill rather than on this measure. The Deputy also referred to the cost of bank charges. I advise the House that a review is being undertaken by the Competition Authority on the cost of bank charges. Indeed, Deputy Ó Caoláin raised the same question. The Irish Bankers Federation has made a submission to the Competition Authority which suggests that our banks are not fleecing us. I am not giving ministerial endorsement to any particular submission – they will have to make their case – but I draw to the attention of the House that the Competition Authority has instigated a review of this whole area and on whether value for money services are being provided in the context of the competition which must exist within a sector such as this.

Deputy Boyle asked me about my plenipotentiary powers. That is very appropriate when one considers that the Minister is across the water. My powers are to deal with the amendments before the House. Deputy Boyle also raised the question of the credit unions and the approach towards them. I think I have dealt with most of the points raised in the initial discussion.

Mr. R. Bruton

It just shows how quickly Deputies forget what it is like to be a backbench Deputy working within the resources available when the Minister of State tells us there will be ample opportunities for the Oireachtas to see that the Central Bank and the regulatory authority are doing their work. He is living in cloud-cuckooland if he believes that. The Oireachtas has virtually no capacity to carry out the type of research implicit in my amendment, namely, into whether proper transparency is being delivered to consumers, whether there is adequate competition or whether the credit union movement is, in some way, being eroded in regard to the principles which were always there.

As the regulatory authority develops, there will be huge pressures from the financial institutions to see the credit unions sucked into the same obligations they claim they carry. If the Minister of State believes we have the capacity, with the type of resources available to the committees, to do that job, he is underselling the reality. The presentation of annual reports and strategic reports will, by and large, pass unnoticed in this House. That is the nature of the supervision which we are capable of delivering with the resources available to us. The simple faith the Minister of State has that the Oireachtas can adequately supervise the Central Bank and the regulatory authority is, unfortunately, misplaced, and I am sure he realises that.

To say the credit union movement can "live with the wording" is a poor achievement for a Government, which has a substantial majority in the House, to claim. The truth is the credit union movement had to come cap in hand and take whatever deal it could get. To say it is willing to live with what the Government is doing is to suggest the credit union movement is far from happy but that it has had to settle for half a loaf rather than none at all. The role of the Oireachtas is to supervise legislation and to try to get the best legislation rather than see whether the legislation can be lived with by those for whom we are supposed to be providing an environment for their development and a recognition—

Acting Chairman (Mr. O'Shea)

Your two minutes are up.

Mr. B. Lenihan

I take the point made by the Deputy about the resources available to Oireachtas committees, although again it is not a matter directly related to this legislation. Even if I was disposed to accept the amendment proposed by the Deputy, I wonder would the same questions not arise on the consideration by the Oireachtas of the report to which the Deputy referred because questions would be raised by Deputies as to whether they had sufficient assistance to consider the implications of the type of review document which the proposed amendment would generate.

Mr. R. Bruton

Not at all. It would be drafted for us on our instruction.

Mr. B. Lenihan

The other possibility with such a proposal is that the State would then embark on an expensive consultancy project because of the statutory obligation which would stem from such an amendment.

As I stated, the Minister's view is that any review of the legislation should await its operation for at least a few years. He does not consider it appropriate to write into the legislation a particular timescale or format for such a review. It should be a matter for the Minister of the day to decide how best to approach the matter. As I indicated, there are structures in relation to accountability to an Oireachtas committee where at least Members of this House can question certain designated officers in this proposed new structure.

In regard to the Irish League of Credit Unions, to summarise its position as living with the amendment is not quite the full picture. The league indicated in its statement that there is clear recognition in the amendments being proposed by the Minister for Finance of the distinct voluntary character and social and economic roles of credit unions. That is the view it has taken in correspondence and in public statements. That goes beyond living with these proposals and is an indication that it is content that recognition has been given.

Mr. R. Bruton

We are making wrong choices in this legislation, choices which have not been properly evaluated. For example, those choices were not evaluated by the McDowell report which the Minister praised earlier.

It is interesting that the McDowell report in its appendix showed that in 16 of the 19 countries, consumer protection was separated from the financial aspect. In the other three countries, it was nothing like the hook, line and sinker attachment to the Central Bank that is proposed.

The Minister is making a mistake. It is important a review is presented to the Oireachtas in a couple of years so that it can be evaluated. That will not happen automatically in the way that the Minister has simple faith in the Oireachtas to do. The impetus will be with the status quo, backed by a body with a budget of €20 million to defend its turf, as it has already admirably done against other Departments as well as Members of the Oireachtas. I am disappointed the Minister of State did not take the opportunity while the cat was away to make a significant change in this legislation, to the benefit of all.

Caoimhghín Ó Caoláin

The Minister of State is not a mouse.

Mr. B. Lenihan

I hope the Deputy will not mention rats.

Amendment put and declared lost.

Ms Burton

I move amendment No. 2:

In page 5, between lines 25 and 26, to insert the following:

"(3) Prior to making an order under subsection (2) in relation to a provision of this Act in so far as it relates to credit unions, the Minister for Finance shall report to both Houses of the Oireachtas on the implications of the operation or proposed application of the relevant provision of this Act to credit unions.".

The position set out in the Minister's amendment No. 33 is that the credit unions are being legally and formally put into this structure. There are some nice words in that amendment with regard to the role of the credit unions and to their voluntary ethos. However, the Central Bank, urged on by one or more of the large commercial banks, decided that the credit unions are competition. The banks are not comfortable with that regardless of the fact that, despite the Government's attempt to have universal accounts available to everybody, the commercial banks have been busily closing branch offices around the country. Many towns and villages, even those towns with substantial populations in the summertime due to tourism, not only no longer have a bank branch but do not even have an ATM machine. In its urge to control everything, the Central Bank moved to put credit unions into this structure at a time when they are needed, just as the post offices are, if people are to be given access to universal banking services and bank accounts, as the Government has stated they will be.

The amendment put forward by the Labour Party is reasonable. It asks that the Minister come back to the House and report on the implications of the operation or proposed application of the relevant sections of this Act for the credit unions. It would give the credit unions recourse to a mechanism for accountability. While the Minister's amendment No. 33 refers back to the correspondence and the draft amendments that the Minister and his officials made available to us on Committee Stage, it goes no further. I specifically raised with the Minister on Committee Stage not just the voluntary nature of the work of the directors of credit unions but, critically, the not-for-profit ethos of credit unions.

With regard to regulation, the Central Bank comes to this House on this Bill with a glowing reputation regarding Ansbacher deposits, non-resident deposits and so on. The role and record of the Central Bank is not glorious with regard to the carry-on that has been revealed in various tribunal reports dealing with banks such as Ansbacher and bogus non-resident deposits. Nonetheless, the Central Bank is now to be given control of the regulatory authority, not only with regard to banks, intermediaries and providers of financial services, but also with regard to the unfortunate credit unions. They will get the full whack because the Governor of the Central Bank writes a letter to say that the ECB shares its concerns in this area.

The amendment put forward by the Labour Party is simply an attempt to get the Minister, before implementing what may be a very tough regime, to recognise the unique position of the credit unions. There are different kinds of credit unions, including large ones allied to trade unions for gardaí, prison officers and teachers, and small and localised ones located in different regions. However, they will all be subject to this one size fits all measure and the regulator of credit unions will be within this mammoth structure meant for the largest financial players in the country.

I do not accept that amendment No. 33 represents an adequate deal for the credit unions. They have accepted it because Cheltenham Charlie told them: "This is it, you are getting nothing else." The Minister is not here to discuss this because he is enjoying himself at Cheltenham – good luck to him, I hope he wins a lot of money. However, this is not adequate for the credit unions and my amendment seeks to provide for accountability to this House and further important discussion with regard to the impact of the new regulatory structure on the credit unions, large, medium and small.

I do not know why the Minister did not include in his amendment reference to the not-for-profit ethos. The big banks have a clear for-profit ethos which the credit unions do not, and that is an important distinction. The Bill is subject to a guillotine tonight so the House may not get to amendment No. 33. I realise that the Minister of State is simply reading from the brief provided to him but, nonetheless, the House deserves further explanation in regard to the inadequacy and poverty of amendment No. 33 which the Minister put forward.

Mr. R. Bruton

I strongly support this amendment. The Minister should explain in simple terms why he has decided to reverse the position in the Bill as originally published. The original Bill tangibly recognised the special position of credit unions and provided for the appointment of a registrar which would be independent for its budget, have the right to report directly to the Oireachtas, the right to deal independently with evaluation of these issues and not be subject to direction by a regulatory authority. What were the arguments that convinced the Minister to change his mind? Were those arguments solely coming from the financial regulator, as would appear to be the case, and to what extent did the Minister weigh up other considerations?

The registrar of credit unions was to be appointed by the authority and was to be required to present a draft strategic plan to the authority which would be approved by the authority. The registrar would also be required to provide information to the chief executive of the regulatory authority. Did those provisions not adequately ensure that the Registrar of Credit Unions would work within the general guidelines and terms of the Act while maintaining the independence important for protecting the ethos of the credit union? Was the huge protection given in the initial legislation not dramatically watered down by this slim provision in amendment No. 33? Only one crumb of comfort is offered to the credit unions in amendment No. 33. They lose their ability to report independently to the Oireachtas and must report through the regulatory authority. The only compensation the credit union movement receives is that when the regulatory authority is issuing public directions to the Registrar of Credit Unions, it will bear in mind the voluntary ethos of the credit unions and section 6 of the Credit Union Act 1997. Thus, the credit union movement has given up huge levels of independent protection, the right to report to the Oireachtas, the right to go to the Minister for Finance for its budget and the right to be inde pendent in its operations within the terms of the Act.

The Government has thrown all this out the window and offered this minuscule protection in exchange. Why? What was the profound justification for that? I have heard none from the Minister for Finance on Committee Stage. I hope that the Minister of State, Deputy Lenihan, has come up with something better than pedalling the line of the regulatory authority that it would be more efficient for it to operate in this way. It believes that it can be more efficient than a regulatory authority that has vast experience over many years, the Registrar of Credit Unions. The credit unions themselves clearly favoured the old approach and defended it right up to the very end, until they had to concede and, as the Minister of State put it, "live with" this wording that has been offered in exchange.

Mr. Boyle

I also support this amendment. Any opportunity to assert the distinct and separate identity of credit unions, within the straitjacket of this legislation, should be availed of. I am hopeful, if not confident, that the Minister will give consideration to this. As Deputy Burton stated in moving this amendment, the Bill does not mention the not-for-profit motive of credit unions. It also fails to mention that credit unions are community based. This is significant at a time when the conventional banking system is retreating from many parts of the country, to the extent that large swathes of the country no longer enjoy close proximity to a bank branch.

In accepting an amendment of this type, we would also give recognition to the fact that in terms of local economies, reinvestment by credit unions, as community-based entities, is far more successful than in the case of any other banking structure. Most of the reinvestment activity by banks, even at branch level, tends to take money out of local communities and transfer it to the centre by investing in properties and other opportunities in Dublin. The whole ethos of a credit union, on the other hand, is that money is generated within a community and recycled within that community to the optimum economic benefit.

The effect of an amendment like this is to counteract and refine what the Minister hopes to bring forward later in amendment No. 33, which we probably will not reach because of the guillotine. I also object to the wording of that amendment, which makes the registrar subject to the control of the regulatory authority and states that it must comply with directions duly given by that authority. This enshrines a subservient relationship. It will not recognise the distinct and separate identity of credit unions. As Deputy Richard Bruton has said, the two opt-out clauses in that amendment do not give strength to the idea that credit unions can and should be treated differently.

This issue may need to be addressed in the context of a full overhaul of the Credit Union Act 1997. If the Government insists on pressing ahead with this type of regulatory framework, the challenge for many of us in the House is to put forward suitable amendments to the Credit Union Act to give the credit union movement the recognition that we, and the vast majority of people who identify with the movement, feel it deserves in legislation.

Caoimhghín Ó Caoláin

There is no mystery as to what happened here. The lobby of the banks, and those who share their ethos and interests, was clearly very active and industrious. Fearing the continuing rise of credit unions in an ever-expanding base, they would do everything possible to curtail that competition.

It is just over three decades since the two-headed hydra of banking in this jurisdiction was created, with the amalgamation, on the one hand, of the Munster & Leinster Bank, The Provincial Bank and the Royal Bank of Ireland into the AIB, and, on the other, the amalgamation of the National Bank of Ireland and the Hibernian Bank into the Bank of Ireland. We have other players today of course, such as the Ulster Bank and the NIB, but the two-headed hydra remains the key force in banking in the State. Three decades ago, customer needs and customer care was very much part of the ethos of banking. There was real competition. The customers mattered and they knew it, but that is no longer the case. How different it has become. The banking sector is unrecognisable from what I knew in my early years in it, 32 years ago.

What we have now is a big, brash culture within banking that is intolerant of the credit union movement in particular or of anything else that might, in the thinking of these people, represent a threat or, God forbid, competition. I wholeheartedly support Deputy Burton's amendment. We do not have to revisit the detail of what the credit union movement has meant to many people or of the opportunities that it has offered. However, as an elected local councillor of 18 years and Dáil Deputy for six years in a county that has the lowest uptake of third level education in the State, I am very conscious of how much the credit union movement has done in trying to address the terrible imbalance between those who can afford access to third level institutions and those who cannot. The credit unions have not been properly lauded for the role they have played in trying to address that imbalance. The Government needs to do much more in making access to third level education a fair reality for everyone, irrespective of where they are from.

There is so much that could be said on this, but I will not delay the opportunity to proceed to other amendments. I wholeheartedly support this amendment. Perhaps on this occasion the Minister of State will offer a favourable response.

Mr. B. Lenihan

I join the wholehearted endorsement by Deputies of the credit union movement. I share the sentiments of the Deputies about the unique contribution of the credit unions to social, economic and community life. However, the amendment before us is of a somewhat technical nature. It proposes to amend the commencement provision of the Bill by requiring the Minister for Finance to report to both Houses of the Oireachtas on the implications of the operation or proposed application of the relevant provisions of this Bill to credit unions. That is an unusual proposal. In general, the Oireachtas determines the principles of legislation in the relevant sections of the Bill and the issue of commencement is then an Executive matter for the relevant Minister. It is for the Minister to decide on the appropriate timing and implementation of legislation, whether on a phased or total basis. It is a most unusual amendment from the point of view of strict legislative clarity, but I accept that it was designed to allow the worthy discussion we have just had.

Deputies will be aware, as a consequence of the Committee Stage debate, that the Irish League of Credit Unions expressed concerns about the amendments the Minister proposed to make to the provisions relating to the Registrar of Credit Unions and specifically, to the registrar's reporting relationship with the regulatory authority. The Minister indicated on Committee Stage that an amendment is being introduced on Report Stage that arises from his discussions with officials from the league.

I echo the Minister's comment on Committee Stage that there is nothing new in this Bill in respect of the legislation under which credit unions operate. As Deputy Ó Caoláin acknowledged, the Credit Unions Act 1997 remains the primary legislation in that regard. The league issued a press release stating that while it would have preferred the provisions relating to the registrar to remain in the Bill as published, it acknowledges that the amendment proposed by the Minister recognises the distinct voluntary character and social and economic role of credit unions. The Minister also pointed out that the interim regulatory authority, which he appointed in April 2002, has indicated in two letters that it will take into account the unique nature of credit unions when making decisions which relate to them. The Registrar of Credit Unions will be required to appear before an Oireachtas committee and Deputies will have an opportunity to question the registrar on any issues they wish to raise. Under the circumstances, the Minister is of the opinion that, with regard to the commencement of the provisions of the Act, there is no need to single out credit unions in the manner proposed in this amendment.

The question of the discussion of the relevant section in the time available to the House was raised, quite fairly. Deputy Richard Bruton asked me to explain why the Minister has introduced the new provision. I am sure the Chair will allow me to anticipate the discussion on the section. The Bill, as published, provided that the functions of the Registrar of Friendly Societies, under the 1997 Act, would be carried out independently by a registrar of credit unions within the overall framework of the regulatory authority. The members of the interim Irish financial services regulatory authority and the Governor of the Central Bank expressed reservations about the reporting arrangements for the Registrar of Credit Unions within the proposed regulatory authority and the fact that the level of independence proposed for the registrar appeared to contradict principles of good governance.

Mr. R. Bruton

Of course they would express such reservations.

Mr. B. Lenihan

The European Central Bank expressed separate reservations about the autonomous position of the registrar within the overall structure.

Mr. R. Bruton

That was solely related to the financial solvency of the Central Bank. That argument distorts the truth.

Ms Burton

The ECB made that point in three lines of a one-page letter.

Mr. B. Lenihan

I accept that its views were circulated to the Deputies, who have reiterated the point.

Mr. R. Bruton

We accept that the Minister of State is being honest.

Mr. B. Lenihan

The fact remains that the reservation was expressed. The Minister took the various reservations into account in arriving at his conclusion on this matter.

Mr. R. Bruton

Many people in this House and throughout the country have reservations that were not given equal weight in the Minister's evaluation.

Mr. B. Lenihan

The Minister has, therefore, proposed a number of amendments to alter the reporting relationship of the Registrar of Credit Unions and to bring the matter more fully within the framework of the regulatory authority. Essentially, the registrar's reporting relationship will be analogous to that of the consumer director. The Minister met the Irish League of Credit Unions, which has accepted the conclusions he has arrived at. The league believes that terms such as "not-for-profit", "voluntary", "social and economic principles" and "mutual benefit", which were used in meetings between departmental officials and the league, describe the ethos of the credit union movement.

Ms Burton

Those terms are not in the Minister's amendment.

Mr. B. Lenihan

Section 6 of the Credit Union Act, to which the authority must have regard under this legislation, recognises the mutual nat ure of credit unions and deals adequately with the not-for-profit issue, which was raised by Deputy Burton.

Ms Burton

No, it does not.

Mr. B. Lenihan

That is the position in relation to this matter, as I see it.

Ms Burton

I am glad the Minister of State reached the net point, which is that the Minister for Finance's amendment to section 33 provides inadequate recognition of the special role and ethos of credit unions. The voluntary work of credit union officers, the overall voluntary ethos of credit unions and mutuality are specifically referred to in the Credit Union Act. There will be problems, however, as a result of the lack of recognition of the not-for-profit nature of credit unions. Two things may happen as a consequence of the new regime. It may prove difficult to establish new credit unions, as they will be subject to a banking regime which originates in the Central Bank. Second, credit unions will be subject to a regulatory regime which recognises only mutuality and voluntarism.

I cite the example of building societies. Deputy Ó Caoláin mentioned that he has 32 years of experience in banking and anyone with such experience will recognise that there was a significant mutual and voluntary building society movement in this country 32 years ago. It cannot be exactly compared with credit unions, but parts of its ethos were rather similar. Most larger building societies are now owned and controlled by the larger banks, however. Many of my constituents, who are also the constituents of the Minister of State, Deputy Lenihan, do not have access to banking facilities. Access to the benefits of credit unions will not be facilitated by placing the credit union movement in a super-structure intended for large and rapacious commercial banking organisations with an absolute for-profit motive.

Mr. B. Lenihan

I reiterate the fundamental point that the legislation under which credit unions are to be regulated is the Credit Unions Act 1997. We can all discuss threats which may exist in the future, but the Irish League of Credit Unions has declared that it is satisfied that the position of credit unions is protected under this Bill. On that basis, the Minister for Finance is not disposed to accept this amendment.

Ms Burton

I regret the Minister for Finance has taken such a high and mighty stance, which reflects his increasingly unfortunate arrogance. In a country where many poorer people cannot access a financial services institution, we are placing credit unions in the same regulatory structure as the major banks, which, in many instances, are jealous of the large volume of business the credit unions have. The Minister's failure to accept this reasonable Labour Party amendment is unfortunate.

Amendment put and declared lost.

Ms Burton

I move amendment No. 3:

In page 5, between lines 25 and 26, but in Part 1, to insert the following:

"2.–As soon as may be after the passing of this Act, the Minister for Finance shall prepare and lay before each House of the Oireachtas a report on his proposals for establishing the office of financial services ombudsman.".

The purpose of this amendment is to convince the Minister for Finance to bring before the House a report on the proposals for establishing the office of the financial services ombudsman. This Bill is one part of a two-part structure. It has already been argued that the Bill is inadequately weighted in favour of the regulation of banking and financial services in the interests of the consumer. This amendment calls for a report on the Minister's proposals for establishing the office of the financial services ombudsman to which the consumers of banking services – individuals, families and businesses – can have recourse if they wish to make a complaint.

There have been continuous reports this year of astonishing losses incurred by individuals and pension funds as a result of investment in financial services. The Minister for Finance appeared before the committee and the House on a number of occasions to say that he is proud of throwing €8 billion into the national pensions reserve fund, to be invested in equities throughout the world. This has resulted in a huge loss to the State. Because of current stock market trends, which look set to continue for another few years, consumers urgently need a financial services ombudsman to address the deficiencies and shortcomings in the financial services. Financial services operators charge very handsomely for their services and people who lose out have very little recourse in terms of righting wrongs that may have been done to them.

Mr. B. Lenihan

When the Minister for Finance published this Bill, he announced his intention to publish a second Bill which will implement other recommendations contained in the McDowell report, including the establishment of the statutory financial services ombudsman referred to by the Deputy. It will also contain provisions setting up the consultative panels of consumers and the financial services industry. The heads of this Bill have already been the subject of an extensive public consultation process and the Minister has stated he hopes to publish the Bill before the end of the year. Given that the proposals for the statutory financial services ombudsman scheme will be in the second Bill, I am not disposed to accepting the amendment.

Ms Burton

It is very disappointing that the Minister is not able to make a provision in relation to the financial services ombudsman coterminous with this Bill, particularly given that many who have invested through financial services agents and institutions are suffering heavy and extreme losses. He has gone to Cheltenham although we require this very necessary consumer protection. I do not know when we will see the Bill given that he has to go to so many race meetings.

Mr. B. Lenihan

The Minister participated in the Committee Stage discussion on many of these matters. Ministers and Ministers of State are collectively responsible for the business of Government.

Ms Burton

In respect of the Freedom of Information (Amendment) Bill 2003, the Minister of State offered a very limited definition of Government. It was a very loose definition and could even include people he meets at the races.

Mr. R. Bruton

Race meetings could be protected.

Ms Burton

They could offer advice not only on what is likely to win the race at 2.30 p.m. tomorrow, but on anything and everything. The definition of Government could extend to the whole Irish contingent attending the Cheltenham races.

Amendment put and declared lost.

Mr. B. Lenihan

I move amendment No. 4:

In page 5, to delete lines 30 to 36, and in page 6, to delete lines 1 to 4.

This is a technical amendment. The Minister for Finance announced on Committee Stage his intention to delete section 3 from the Bill. Section 3 had inserted a revised Long Title into the principal Act. It is being removed because of legal advice received from the Office of the Parliamentary Counsel which states it is not the practice in this jurisdiction to amend the existing Long Title of an Act in a subsequent Act.

Amendment agreed to.

Acting Chairman

Amendments Nos. 6, 15, 16, 37, 38 and 39 are related to amendment No. 5. Amendment No. 16 is an alternative to amendment No. 15 and amendment No. 39 is an alternative to amendment No. 38. They may all be discussed together, by agreement.

Mr. B. Lenihan

I move amendment No. 5:

In page 6, lines 9 and 10, to delete "Financial Services Appeals Tribunal" and substitute "Irish Financial Services Appeals Tribunal established by section 57C".

Deputy Burton put down amendments on Committee Stage to include in the Bill the Irish language versions of the titles of the regulatory authority and the appeals tribunal, the contents of which are repeated in amendments Nos. 16 and 39. The Minister for Finance agreed on Committee Stage to accept the amendments subject to having the proposed translations confirmed by Rannóg an Aistriúcháin in the Houses of the Oireachtas. Amendments Nos. 15 and 38 set down by the Minister for Finance are revised versions of those put forward by Deputy Burton, as amended by the translation section.

Amendment No. 15 inserts the Irish version of the title of the regulatory authority into section 33B of the principal Act, which is the section that establishes the authority. Amendment No. 38 inserts the Irish version of the title of the appeals tribunal into section 57C of the principal Act, which is where the appeals tribunal is established. Gabhaim mo bhuíochas leis an Teachta i dtaobh na leasaithe seo.

The Minister for Finance announced on Committee Stage his intention to amend the definition of the appeals tribunal within section 2 of the principal Act so the title will be consistent throughout the Bill. Section 57C of the principal Act establishes the appeals tribunal as the Irish Financial Services Appeals Tribunal. However, the appeals tribunal as defined in section 2 is amended by section 4 of the Bill as the Financial Services Appeals Tribunal. Amendment No. 5 changes the definition by inserting the word "Irish" at the beginning of the title Financial Services Appeals Tribunal and hence it will be known as the Irish Financial Services Appeals Tribunal.

There is a similar change to the title in amendment No. 37, which concerns Part VIIA of the Act. The effect of the amendments will be that the formal title of the appeals tribunal will be consistent throughout the Bill. Upon the advice of the Office of the Parliamentary Counsel amendment No. 5 includes the definition of the appeals tribunal, a reference to section 57C where the tribunal is established. As the title will appear in both English and Irish the definition in section 2 should make express reference to this section. Similarly, the definition of the regulatory authority is being amended by amendment No. 6 to include a reference to section 33B, which establishes the regulatory authority. Molaim na leasaithe seo.

Ms Burton

Gabhaim buíochas don Aire Stáit as na leasaithe a bhaineann leis na teidil Gaeilge. I thank him for accepting the Labour Party's amendments on the use of the Irish language version of the Bill.

Amendment agreed to.

Mr. B. Lenihan

I move amendment No. 6:

In page 8, line 16, after "Authority" to insert "established by section 33B".

Amendment agreed to.

Ms Burton

I move amendment No. 7:

In page 9, line 43, after "industry" to insert "and to discourage and where necessary prevent irresponsible lending by the financial services industry".

This amendment is to introduce a code of conduct that the registrar might apply in respect of irresponsible advertising and lending by various financial institutions. There is considerable understandable concern at the debts some people are incurring and the pressure this has on families. There is an incredible amount of irresponsible advertising which is forcing people to accept very high levels of credit. Some of the rates of interest that apply to credit and loan instruments are little better than those that pertain to money lending. They cause great distress to many individuals and families. If the Bill was not guillotined we could have a reasonable discussion on this serious matter in the House.

Mr. R. Bruton

It is ludicrous that our time is expiring as we deal with the seventh amendment of 47. All the substantive amendments concerning credit unions, the Director of Consumer Affairs and other issues will not be dealt with on Report Stage. There is absolutely no sense of urgency and no reason time has not been allowed. A protest must be made by the House because of this treatment.

Caoimhghín Ó Caoláin

As we are running out of time, does the Minister have good news on amendment No. 11 and any of the associated amendments that I tabled? I rarely get the opportunity to get to that point and again I am to be left wondering.

Acting Chairman

The Deputy's time is up.

Mr. R. Bruton

His carriage has turned into a pumpkin.

Acting Chairman

As it is now 7 p.m., I am required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill, Fourth Stage is hereby completed and the Bill is hereby passed."

Question put and declared carried.