Central Bank and Financial Services Authority of Ireland Bill 2003: Report Stage.

Amendments Nos. 1 and 83 are consequential on amendment No. 11, amendments Nos. 12, 13 and 16 to 28, inclusive, are alternatives to amendment No. 11, and amendments Nos. 76 and 77 are related. Amendments Nos. 1, 11 to 13, inclusive, 16 to 28, inclusive, 76, 77 and 83 may be discussed together by agreement.

I move amendment No. 1:

In page 5, lines 8 to 10, to delete "PROVIDING FOR THE ESTABLISHMENT AND FUNCTIONS OF THE REGULATORY AUTHORITY SANCTIONS PANEL,".

Amendment No. 11 replaces the existing text of section 10, which inserts the new Part IIIC enforcing the designated enactments and designated statutory instruments. The main reason for doing so is advice from the Attorney General that the original text might have been vulnerable to challenge on the grounds that it did not take sufficient account of the prerogatives of the courts regarding the imposition of significant financial penalties or disqualifications from employment. The redrafted Part IIIC, therefore, provides for confirmation procedure by the courts.

The second major change is the elimination of the regulatory authority sanctions panel in view of the new confirmation order procedure. There is no longer a need for such a formal mechanism. However, the authority must comply with the rules of natural justice in proceedings leading up to the imposition of a sanction. The elimination of the sanctions panel involves a change to the Title of the Bill, which is contained in amendment No. 1, and the elimination of Schedule 4A, which is provided for in amendment No. 83.

The third set of changes provides for three distinct mechanisms that may be used by the regulatory authority to impose sanctions on a financial institution. First, the authority may agree with a financial institution that the institution should pay an appropriate penalty not necessarily requiring the institution to formally acknowledge its guilt. Second, where an institution admits that it has committed a contravention, the authority can agree an appropriate penalty with that institution without going through a formal inquiry process. Third, if either the financial institution or the authority does not wish to avail of either of these options, there is provision for a formal inquiry by the authority leading to a formal determination. If the determination involves the imposition of a sanction, the financial institution has the right of appeal to the appeals tribunal with a further right of appeal from the tribunal to the High Court. If the institution does not exercise its right to appeal nor acquiesce in the imposition of a sanction, the authority must seek confirmation of its determination from the courts.

The structure provided for in the revised Part IIIC is largely modelled on that envisaged in the McDowell report. It retains all the essential elements of the text it replaces, notably the power to impose significant fines and other sanctions on financial institutions and on senior management for breaches of laws and regulatory codes. This is compatible with the powers reserved for the courts under our Constitution.

Has the Minister addressed all the grouped amendments?

I am impressed with the brevity of his contribution given that this is such a departure from what we discussed on Committee Stage, at which time we had a sanctions panel. I accept there was a frailty and Deputy Burton rightly pointed this out on Second Stage. I am reassured.

However, I would have preferred to have had some independent legal people look over this new procedure so the House would have had the benefit of information, from sources other than Government sources, as to whether the new procedure is robust. I accept the Minister has had consultations on this but as I indicated in the earlier motion I would have preferred a Committee Stage type of debate, perhaps incorporating a delay in which Members of the Oireachtas could have heard other legal opinions on the matter.

It is unusual for a Minister to come to the House with a proposed approach, which presumably was approved by the Attorney General, and then, on Report Stage, to tear it up and present a different one.

I mentioned it on Committee Stage.

The Minister said he was considering it but from the point of view of Members' capacity to hold Government to account and scrutinise the proposals it makes, it will be a truncated debate. We first saw the amendments yesterday and it is proposed to proceed with them today.

The introduction of enforcement fills a massive gap that was cruelly exposed in the recent AIB case. Short of withdrawing the licence from AIB to continue banking, the regulatory authority had no powers to deal with a clear breach of consumer law, namely, AIB charging double the rate it had been sanctioned to charge for certain transactions. I welcome these enforcement procedures.

However, we appear to be introducing a single, one size fits all enforcement procedure and it will apply under a myriad of Acts. When the first Central Bank and Financial Services Authority of Ireland Bill was introduced, it involved putting a bulldog clip around dozens of legal provisions, each of which had separate enforcement procedures and sanctions. Now we will have a one size fits all enforcement approach. That might be correct but if, for example, the Consumer Credit Bill had specified a maximum sanction of €1,000 fine plus €1,000 for every day the offence is continued and the Minister introduces a new enforcement mechanism overriding that, which allows for the possibility of a €5 million fine, the issue of proportionality arises. Can one move in one swoop without amending the earlier legislation to provide that, in future, sanctions which the Oireachtas had decided in its wisdom merited a fine of €1,000 now become part of a procedure where the possible maximum penalty is €5 million? It seems a strange procedure. The Oireachtas is not considering the scale of the offence or trying to square the penalty with it.

Some offences are so grave that a penalty of €5 million would be too little, while some offences are of a minor nature and would warrant a fine but discretion could be used. The Minister is currently considering, in respect of the Revenue Commissioners, establishing an exact protocol within which certain penalties are imposed. Here, however, he appears to be forgetting his wisdom in respect of the Revenue Commissioners and providing for a single, uniform penalty provision. If it is good for the Revenue Commissioners, and the report of the review of the Revenue Commissioners' powers recommends that there should be hierarchies and grades of offence and enforcement, the same wisdom ought to be applied in this case. However, the Minister appears to be opting for a different approach.

One of my amendments deals with the credit unions. They are concerned that this type of enforcement mechanism, with the possibility of a €5 million penalty, is one that is geared to deal with institutions such as the AIB but is not equally appropriate to deal with a largely voluntary credit union, which seeks to comply with best practice and whose members are voluntary. To involve them in the same enforcement procedure without including a mechanism to ensure it is applied in a way that is proportionate to the type of operation run by a credit union appears to be mistaken. I understand why the Minister wants a single, unified enforcement system but is it appropriate in all cases to apply the same mechanisms to a huge financial institution, such as AIB or Bank of Ireland, as to the local credit union operating locally through voluntary workers?

Another striking issue is that there is no proportionality in the offences. Some financial institutions would not consider a penalty of €5 million an injury to its financial prospects whereas it would be the ruination of other financial institutions and, possibly, mean the end of their ability to continue operating. Did the Minister consider having penalties that are proportionate to turnover or to the turnover of the item in respect of which the offence was found to occur? Did he consider such a graded approach to enforcement?

In a later section, the Minister proposes to amend the Consumer Credit Act which was found wanting in that it had not specified any sanction for the breach of this charge. That gap appears to have survived through all the so called best practice scrutiny by the Minister's Department and the Department of Enterprise, Trade and Employment, which lasted over four years as they argued about who would best protect the consumer and how to do so. It appears that this weakness in the Consumer Credit Act was not spotted. How does the introduction of a sanction in that respect gel with the new enforcement power? Does the Minister intend, under the new system, to use the new penalty under the Consumer Credit Act or will this supersede those powers?

The Minister is establishing an appeal procedure. Where a decision of the regulatory authority is challenged, there will be an appeal to a tribunal. However, the tribunal can only either approve the decision of the regulatory authority or advise the authority to reconsider the issue. Does that constitute a fair and adequate appeal mechanism? The argument we have heard from the Minister's officials is that the Minister would not proceed with a full appeal to this body because of a fear that it would become the regulatory authority and, over time, its decisions rather than the decisions of the authority would become the principles of regulation. If that is the case, the Minister is not providing an independent appeal mechanism. He is simply providing that the tribunal either rubber stamp the decision or return the matter to the same procedure from which the decision arose. It does not appear to be a robust or fair appeal mechanism if only one decision can be made, namely, rubber stamp the matter or reconsider it, after which the next decision will be rubber stamped.

There are many examples of appeal mechanisms in a number of areas. The fact that there is an appeal mechanism for medical cards does not mean that every decision is now made at the appeal level. That is clearly not the case. The appeal tribunal sets broad outer limits or the geography within which officials can then operate. That is perfectly satisfactory and acceptable. I do not understand why the Minister chooses not to apply the type of appeal mechanisms which have been found to work satisfactorily in many other areas.

The appeal mechanism proposed by the Minister is limited and truncated and, as a result, many disputes will have to go to the courts for resolution. At a time when the Minister and his colleagues are encouraging insurance companies to refrain from going to the courts and to seek to resolve issues through the cheaper means of an appeals bureau, they appear not to offer that type of cheaper operation to the financial institutions and to want to see issues thrashed out in court.

I would like to hear more of the rationale behind this amendment. As this is Report Stage, we get only one opportunity to speak. In the very short contributions we are allowed, if we do not spot issues we will not get another chance. Even at this stage it may make sense to recommit these provisions to committee so that we can go through them individually and hear the Minister's view on each section. The House should consider that option if at the end of a period of discussion we have not got all the answers we need.

I wish to point out the difficulties faced by Opposition spokespersons on finance like myself. On Report Stage, the Minister is allowed to table a range of amendments that fundamentally affect the Bill, a matter to which I will return. However, in the course of the committee proceedings, I and other Members mentioned in great detail the impact of the Bill on the credit union movement and that the Minister had created a very expensive superstructure for IFSRA, which ultimately will be paid for by bank customers as it will be funded through the regime of bank charges.

This is fine for commercial banking. However, the credit union movement provides small-scale loans to people with no previous credit history and is extremely important for those who get into trouble with moneylenders and may have been helped by the MABS for people with difficulty with financial debt. Typically people are introduced to their local credit union, given small loans and encouraged to save. The Minister for Social and Family Affairs was wrong in significantly cutting back provision for the MABS in this year's Social Welfare Act.

The problem now arises that the credit union movement is included as an integral part of the Bill because the Minister, in responding to the latest AIB crisis, wanted to present a posture of tough guy in a situation where IFSRA's parent body, the Central Bank, has for years kept its eyes and ears closed to the irregularities going on in various banks. It missed what happened in Ansbacher and various other scandals. In recent times it seems to have missed AIB's overcharging for critical services over many years. However, the Minister's architecture is that the credit union movement is an integral part of this very large regulatory structure.

I tabled two amendments as a consequence of the Committee Stage debate, when I discussed in detail the role of credit unions and in particular the impact of this structure on the credit unions' role of providing small-scale loans. I was told by a number of credit unions that supporting IFSRA charges may make the provision of small-scale loans uneconomical and therefore impossible.

I am disappointed that following the debate on Committee Stage, the Minister and his officials seem to have persuaded the Office of the Ceann Comhairle to rule my amendments Nos. 2 and 3 out of order even though they formed part of the detailed discussions and other amendments tabled by me and the Labour Party on Committee Stage.

The Office of the Ceann Comhairle is totally independent of the Government.

While I know your office is totally independent, as you know, Departments are at liberty to offer views as to whether a matter comes within the remit.

The Deputy is correct, but the——

I am in no way reflecting on the independence exercised by you of your office.

The Office of the Ceann Comhairle is totally independent and makes an objective assessment on its own.

I am reflecting on the view clearly taken by the Department of Finance in trying to stop a detailed examination of the likely impact of the Bill on credit unions. Under Dáil rules, the Minister is free to table any amendments he likes. However, even though we debated these matters in full on Committee Stage and they were the subject of Labour Party amendments, I regret that they have been ruled out of order, which is wrong.

I will now deal with the Minister's amendment No. 11. I thank the Minister for acknowledging the validity of the points I made about the separation of powers in Article 34 of the Constitution. In the context of other matters this issue will greatly exercise the country in the future. The regulatory authority is seeking to impose severe penalties, including large monetary fines and in particular prohibiting people from working in financial services. To deprive people of their livelihood is a very severe penalty normally only applied by the courts. The Minister sought to address this by creating a more defined procedure and a form of appeal. I accept the Minister must have taken advice from the Attorney General.

While I appreciate the Minister is suffering from a cold, I was not able to follow fully everything he said. Therefore as a courtesy to me and the other members of the Opposition, I ask him to supply his written notes so that I can understand the detail of what he said. These are very important changes in the regulation, which we have had no time to study. I understand and accept that in part they form a response to Labour Party proposals.

I ask the Minister to go one step further as there are a number of points I want to explore. He has correctly changed the structure to introduce a more transparent scheme and a fairer legal procedure to address possible constitutional injustice to persons who stand accused of financial malpractice. He has also introduced an appeals mechanism, which is helpful in seeking to provide a constitutional framework that may be successful in this most important area. However, the revised provisions do not address the issue of proportionality, which requires us to seek to administer justice in a way that is proportional both to the offence and to the resources of the person who is offending. With due respect to the Minister's officials and those in the Office of the Attorney General, on a quick reading of this provision they may have produced a potential dog's breakfast.

On the concept of proportionality and constitutionality, the Labour Party tabled an amendment proposing that the fine be up to €5 million or up to 10% of turnover. I have no problem with a €5 million fine as there are many large institutions for which that level of penalty may well be appropriate. However, there are small institutions like credit unions for which that would be an impossible level of penalty. The Labour Party amendment would introduce an element of proportionality regardless of whether the turnover of the institution was €1 million or €1 billion. Last week AIB was able to place €25 million on deposit as it realised that the latest mess cost customers €25 million and not €15 million. A sum of €25 million is nothing to our large financial institutions. However, it would put a credit union in Monaghan or west Dublin out of business. The Minister has not addressed the question of proportionality.

Section 33AT of Part IIIC, inserted through section 8, provides that the regulatory authority shall conduct an inquiry with as little formality and technicality and as much expedition as proper consideration of a matter will allow. The Minister is providing that an inquiry shall be conducted with as little formality and technicality as possible to get around Article 34 of the Constitution. If I faced losing my job as a financial adviser and found myself in the dock, I would hope to heaven that there was a proper, formal procedure in place. The wording is quite extraordinary. I understand that it seeks to get around the provisions of Article 34 of the Constitution by, apparently, providing for all classes and cases of persons and financial institutions.

The Bill provides for mitigation in section 33AF. If proposed fines constitute such an amount that an individual or financial institution is in danger of becoming bankrupt, they will not be imposed to the full extent. One cannot have it both ways. One cannot say one is bringing in swingeing penalties if those penalties will not be enforced where there is a danger of bankruptcy. The Minister's officials can tell me if this refers to company liquidation and forced liquidation. This provision is one of the reasons I agree that the Committee on Finance and the Public Service and the House need more time to be briefed. The Minister is trying to make three or four provisions together, but he is not pulling off the trick. The provision will mean one will be able to mitigate severe penalties by saying one may become bankrupt if they are imposed. Can a doctor who is guilty of misconduct tell the Medical Council that it cannot find against him because if it does, he will lose his livelihood and may be bankrupted? This is a foreign concept of which I have never heard before in the context of professional misconduct. The Minister can bear me out. I have never heard of such a provision where an accountant is charged with professional misconduct.

I would like an explanation from the Minister as to how this concept was conceived. There is a problem with proportionality. The Labour Party suggested that a way to solve it would be to impose fines as a percentage of turnover. In case people are unclear as to what I am saying, the Bill provides that where the regulatory authority decides to impose a monetary penalty on a regulated financial service provider under section 33AQ or 33AR, it may not impose an amount which would be likely to cause the provider to cease trading. The Bill also makes provisions on the bankruptcy of individuals. The notions are contrary to and at odds with everything I understand about professional regulation. This is driving a coach and four through regulation as I understand it. There is a serious fault in the regulatory structures as they relate to companies.

We have a great deal of experience in west Dublin of developers who build faulty estates. When one approaches the builder at the next development, one finds that the original company has gone into liquidation. Every Deputy is familiar with this process and the lack of further legal recourse. The Bill uses the phrase "a financial service provider to seek business". Where is the definition of connected financial institutions? If one were seeking technically to breach the regulation, one would create a series of defined companies, as builders do, to handle every little part of a business process. We have not had an opportunity to obtain separate legal advice as we only received the revised regulations yesterday and this morning. However, I warn the Minister that if he thinks the Bill will address holes in regulations, he is wrong. Lawyers will earn tens of millions of euros from the financial institutions to have fun taking the revised regulations through the courts as a result of the clauses the Minister has included to address the issue of proportionality.

I ask the Minister to reconsider his proposals. In particular, he should give serious consideration to amendment No. 28 which seeks to insert into the regulations the provision that a fine should constitute 10% of a person's actual or estimated turnover. He should seek legal advice on how best to address some of the difficulties he has in making this Bill work. While the Labour Party is very critical of elements of this Bill, it is anxious to see the overall regulation of the financial services industry proceed. It should proceed in a manner which provides for serious penalties for malfeasance by individuals, companies or banks in financial matters. There was a dispute between the Minister and the Tánaiste about the institution which won control, which was the Central Bank. We should have an omnibus Central Bank Bill to deal with all of the material involved. The regulations are spread over several different Acts and it is extremely difficult to know where the final recourse lies.

The provisions of the Bill are constitutionally dubious. It is almost certain that as soon as a significant penalty is imposed, there will be an appeal to the courts. As the Minister acknowledged, the courts will decide. That is not acceptable when we are trying to establish a financial structure we hope will last and deter wrongdoers in the financial services industry from cheating customers whether they be businesses or individuals. These are the priorities the Labour Party identifies as being most important. Every customer of every financial services institution will pay a large amount for this regulatory structure.

The Labour Party has also tabled amendments on credit unions and consumers. Another major theme of my Committee Stage contribution related to the significant number of persons due to be appointed to the various boards, bodies and panels established under this Bill. I counted a potential 65 appointments and the Minister did not disagree with me. He said I was probably right. I asked the Minister if the usual suspects would be appointed including senior people from the financial services industry and political appointees from Government parties. As I told the Minister, while I have no problem with the appointment of people from the financial services industry and qualified persons from Government parties, I have a major problem with such persons constituting almost 100% of appointees. There will be a significant problem if such people constitute almost 100% of panel appointees.

After a year's debate, the Minister for Finance finally appointed one woman to the board of the Central Bank. She wears both a consumer representative and a gender hat as the first woman appointed to the board.

The first woman appointed by any Minister for Finance in the past 60 years.

Well done to the Minister, even if it took him a year to do so. We are delighted with this great achievement that after 60 years, the suits made way for one woman. The country is going places fast.

The former leader of the Labour Party and Minister for Finance, Deputy Quinn, was not able to get around to making such an appointment either.

That the people appointed are not the usual suspects is of critical importance to building confidence in the new institution. The panels must comprise representatives from consumer organisations. They must comprise those with an active knowledge of the operation and management of credit unions to implement the regulatory mechanisms fully. There must be full representation for women.

There has been much discussion in the past several weeks about the crisis in AIB's overcharging of foreign transactions. Another crisis, as a recent Central Bank report disclosed, is that this economy is floating on a sea of debt. The financial services industry must be operated in a fair way and not push products that subsequently land consumers in terrible hot water. Young people, in particular, are having credit facilities thrown at them by some unscrupulous product advertising. Elderly people have been advised by banks to buy into derivatives. They would be better off going to Celtic bookmakers to put €100 on a horse race. It will not be good enough if these panels and boards are made up of financial industry representatives and political appointees from the Government parties. The people needed on these boards are those who know what it is like to run a credit union, who are advocates of consumer rights and representatives of small businesses that are ripped off by the banks. This includes men and women. There is no excuse for not having equal representation of 40% for men and women.

It is regrettable that the Minister has not indicated if he agrees to these points. If some of these points had been agreed to, the debacle of AIB of overcharging customers would not have occurred. An overcharge of 1.5% on traveller's cheques is an incredible figure, particularly when one sees the overall charges for these services. This Bill gives an opportunity to put in place a mechanism that will help commercial, industrial and individual consumers. By kow-towing to the Central Bank, the Minister is missing these opportunities.

Report and Final Stages of the Bill had commenced when an usher presented me with correspondence from the Ceann Comhairle. It advised me that three of my amendments were ruled out of order as they may involve a potential charge on the Revenue. Two of these amendments concerned the section now being debated. The first of these proposed that the legislation would come into operation no later than 12 months after its enactment. It strikes me as odd that this would result in a financial charge on the Revenue. It is in the Minister's interests and those promoting this legislation that it comes into operation at the earliest opportunity. I would not have believed that the 12 month implementation was restrictive.

As the Government's amendments were tabled late, Opposition Members did not have the opportunity to appraise them properly. The detail of the amendments offers a more focused approach in terms of the role of the regulatory authority. However, that can only be determined in practice. Deputy Burton highlighted the different case histories of taxation effects presented by the Minister. The Minister has tabled an amendment proposing an alternative to the regulatory sanctions panel. Has the Department of Finance examined the effects of the Minister's alternative in light of concerns regarding financial services providers? If not, then a substantive judgment on the Government amendments can only be made when the legislation is in operation.

Amendment No. 1 seeks to delete the establishment and the functions of the regulatory authority sanctions panel. Amendment No. 19, in my name, proposed that the sanctions panel should comprise members with expertise in credit union matters as an accommodation of the concerns of the credit union movement. This was already recognised in the 2003 Act. However, a different position is now presented as the Minister has changed the proposals first presented with the Bill. Will the Minister address the concerns of those in the credit union movement?

I must declare my interest as a member of my local credit union. The credit union movement proposed either a dedicated credit union sanctions panel or a specific provision for credit union expertise in the make-up of the sanctions panel. The original proposal saw the panel limited to nine members, which my amendment proposed to raise to 12. However, it has been ruled out of order while the Minister has changed the composition of the regulatory authority investigation procedure. This is an area that not only concerns Members present but the wider public which appreciates the unique position that the movement holds within the economy and the role it plays at community level.

Amendment No. 11, in the name of the Minister for Finance, will make substantive changes to the sanctions panel as first mooted, which concerns me. The amendment creates a new section, 33AT, which states that a financial service provider, and so on is not to be liable twice for the same contravention. The word "may" is used frequently throughout the construction of the text of this amendment. I am concerned that in a number of instances the word leaves much to discretion. There is the potential for leniency where the wider public might prefer to see a more strident approach. Subsection (2) states:

The Regulatory Authority may not impose a monetary penalty on a financial service provider, or on a person concerned in the management of the financial service provider, in accordance with section 33AQ or 33AR, if——

(a) the financial service provider or other person has been charged with having committed an offence under a law of the State and has either been found guilty or not guilty of having committed the offence, and

(b) the offence involves a prescribed contravention.

There are probably concerns among the public that there may be an easier option in terms of the exercise of legislation and charge as against what might be, given the gravity of any contravention, an appropriate financial penalty. This is indicative of a looseness in the construction of amendment No. 11. Another example of this is the opening of Chapter 2, section 33AO, in the same amendment. This section states: "[The] Regulatory Authority may hold inquiry into conduct of [a] regulated financial service provider or person concerned in its management." The use of the word "may" concerns me. The section goes on to state:

Whenever the Regulatory Authority suspects on reasonable grounds that a regulated financial service provider is committing or has committed a prescribed contravention, it may hold an inquiry to determine whether or not the financial service provider is committing or has committed the contravention.

The position is then addressed further in section 33AR. The regulatory authority may hold an inquiry or, if the financial service provider of a management representative of such "acknowledges that the person is participating or has participated in the commission of the contravention, the Regulatory Authority may ... dispense with an inquiry" and, by agreement, come to a settlement with the provider. That is a favourable position for the financial service provider, which gives it a possible way out. On acknowledgement, the provider can enter into negotiation with the regulatory authority about a settlement and an inquiry is not required.

However, an inquiry is the only way in which we can establish the full facts. We must bear in mind recent events such as the revelation that AIB had been overcharging customers on foreign exchange transactions since 1995, netting an amount originally estimated to be €14 million but now standing at €25 million and more, and its further admission that people purchasing travellers' cheques to the value of €600 or its equivalent were, up to last month, being charged in excess of the permissible charge by 1.5%. This is not the whole story — much more will unfold. If the new provisions applied in this case, AIB could choose to enter into an acknowledgement of its contravention with the regulatory authority and the authority might then decide not to initiate an inquiry. This is wrong. An inquiry is the only means of getting to the rotten heart of these abuses.

This is a deficiency within the Minister's amendment. It provides a way out. With all respect to those who make up the regulatory authority, it is deficient because the matter is left to human choice. I have no doubt that in time a comfort factor will evolve that will render that option the preferred one rather than proceeding with an inquiry as prescribed in this legislation which is endorsed by the Houses of the Oireachtas. The choice should be removed to ensure an inquiry is held and that the full extent of the abuse is properly recorded an exposed. Only in this way can public confidence be guaranteed into the future, not only in the matter of service provision by the financial services bodies such as banks, but in the Central Bank and Financial Services Authority itself.

I ask the Minister to address those matters and to advise the House whether there has been some cursory examination of how this proposition would apply in current circumstances. That would be an interesting exercise and I would be surprised if something of the sort had not been undertaken to try to identify the deficiencies and pitfalls in the proposal. While I am not in a position, due to the reconstruction of the Minister's position, to press amendment No. 19 as it is presented, I would like to hear the Minister's position on the credit union movement and the concerns expressed by me and other Deputies on Second Stage, Committee Stage and this morning's Report Stage.

Are we dealing with the amendments in order? If so, amendment No. 13 should have been discussed by now.

I am calling people in the order they indicated they wished to speak.

I will allow Deputy O'Keeffe to continue.

I thank Deputy Boyle.

It is a pity we cannot discuss this Bill on Report Stage in a more mature way. The discussion is being overshadowed by the difficulties that have arisen in one of our banking institutions. If it were not for that, Report Stage would go more smoothly. I agree with Deputy Burton's comments about the extra bureaucracy we are creating and the major cost to the ordinary customer. Somebody will have to pay for these regulations. The Minister for Finance, Deputy McCreevy, is my good friend and colleague who holds an Executive office. He should stay at the Cabinet table. He should slow down the pace of regulation because people are getting fed up with it. This is what happened in Russia many years ago. It resulted in the break-up of the Soviet Union because people were afraid to go out and about.

Regulation is becoming so serious in this country that people are beginning to react against it. The Tánaiste recently deregulated one area of the Casual Trading Act to allow people sell strawberries, apples and so on in the streets and by the roadside. The change happened because people were defying the legislation by selling strawberries on the streets.

Who will pay for all of this? Bank profits are criticised on a regular basis but are they sufficient to allow the business expand into the future? If one examines the turnover of banks, one will see that profits are not keeping pace with turnover in marginal terms. The draconian measures being introduced are not the answer to the problem. Would the free market and deregulation work better with regard to bank charges? A number of years ago when I was a private citizen, the economy in this country was in a bad state. However, the economy is thriving under the present Minister. In the past the prices commission was welcomed both inside and outside this House. However, it resulted in higher charges because there was no competition. Many cartels and organisations met the different bodies, including the Department of Enterprise, Trade and Employment. Many good Ministers who have made a name for themselves in other areas of business came out of the Department in these years. Will the Minister deregulate this section of the Bill and let banking charges operate in a free market? This would mean that people would get much better value for money. I understand the AIB charges, if operated properly, would have been lower than in other banks. I do not know what errors occurred in this area but I understand the charges were more competitive.

Stringent penalties solve nothing. What is happening on our roads is a good example of this. Even though more and more regulations are introduced each day, deaths and accidents continue to occur. There must be a certain amount of maturity involved in making decisions.

The IFSRA Act was introduced a few years ago because of what was happening in the intermediaries area where people were being ripped off and so on. This type of regulation is probably necessary in regard to licensing. Some people who were involved at the time are now writing articles in the newspapers on how the system should work. They were not very vigilant in the organisations. Someone who was involved in one of the major organisations, and who served a prison sentence, writes regularly in the financial pages on how the system should work. AIB made a statement that it would put €25 million on deposit in the Central Bank, which was fair enough.

While I support the Minister, I have asked him a few questions. I work with and do a bit of banking with the credit unions, which are quite competitive. I come from Mitchelstown, where one of the largest credit unions is located, which has had its problems. However, I do not want to say any more on that issue. Given the scale of business being done by credit unions and the amount of money involved, it is necessary to have some tightening of the regulations. From time to time, there are complaints from people who are worried about their situation. Charges are one aspect but it is a major issue if people lose their deposit or investment. We must be vigilant in this regard and I support the measures the Minister is endeavouring to introduce.

There are two banks in this country which have served the island well. I claim to be as much a Nationalist and republican as Deputy Ó Caoláin, and I work within the framework of the Constitution. We could end up in this country with no Irish bank because we could make them totally uncompetitive. The banks have served this island well for generations and decades. We know what happened in New Zealand many years ago. Today there is no New Zealand banking system but they are trying to put a system in place — I am open to correction on that. That is in the South Pacific and we are in the North Atlantic. This issue should be examined.

I read last week in the Financial Times that there will be more and more amalgamation of banks in Germany. I do not think such an arrangement would be good for competition in this country. While I admire much of what Deputy Burton says, she made a point about selling derivatives of bonds. We live in an age when people try to invest money. I congratulate the Minister on the success of his investment scheme. The SSIA scheme has been a wonderful investment for people.

It is not a derivative, it is a sure thing.

Yes. Many people in the private sector who get redundancy payments and so on look for ways to invest their money. They are begging for someone to give them advice because there is no return on deposit accounts, which is just 1% or less. People have asked my advice on where to invest. I advise these people to buy shares in Bank of Ireland and AIB because I believe they are a good investment. There is no point blaming the bank because it told Mrs. Murphy, Mrs. Jennings or Paddy Murphy where to invest. He or she asked for an opinion, which was given freely. In many instances, no commission accrues to the banks from these investments. I know many people in the private sector, as I am sure the Minister does, who sold farms and pubs and invested the money. They thought the investment would bring them over to the next world, or as far as it. They now find themselves in hospitals and institutions, while their capital is being eroded because there is no return on their investment. This is the fault of the world economy and the success of the European economy. These people are looking for a good return on their investment but they are often told there are difficulties and their investment has collapsed.

I like to see fair play but there is no fair play in this discussion because it is being clouded by what happened a few weeks ago in regard to bank charges. These things should not happen but, human nature being what it is, they do happen. In fairness, we get a good return from our banking system. We must examine the employment figures. In Cork city in excess of 2,000 people work in financial institutions, even though it is not the biggest city in Ireland. Each day we try to attract financial services into the country. We have the finest financial services business in the world on the quays. There are many financial services centres throughout the country, including Kilkenny and Leitrim. These banking institutions invest in this country and provide high levels of salaries. If we continue to attack the financial institutions, particularly our own institutions, these people will not continue to come to this island. They may even pack their bags and move out because of our hostile environment.

I advise the Minister to be prudent in this regard. I have no doubt he will answer my question on the deregulation of charges which is a contentious political issue. I do not think that Fianna Fáil will ever again be in Opposition, but it would do the same even if it was. It is a hobby-horse to attack the banks and the man on the street likes it as he often has difficulty with them. If that area is removed, we will have greater competition within the system.

I gave the example of the prices commission and how people thought it was a model that worked, yet it failed miserably years ago. It was abolished through deregulation and we now have the free market where farmers can buy feed and fertiliser at the best prices. The Minister should therefore look at that area of the Bill. As he is a man of integrity and character, he should have the courage to have it deregulated. He will get the support of those involved if he does so.

I will start on a positive note. It has to be acknowledged that the existence of the Irish Financial Services Regulatory Authority, albeit with limited powers, has been a factor in bringing recent events to light. It is unfortunate that we have not got the legislative order and priority right. Many of us made the argument that the initial Bill should have dealt with both the prudential and the consumer protection role. That argument has been vindicated by subsequent events. The Minister's amendment No. 11, which is over 14 pages long and almost a Bill in its own right, would not have arisen had we chosen that course of action. It was a mistake to put the prudential role ahead of consumer protection because this was the area which was most in need of proper regulation, as many of us realised even before recent events — Deputy Ned O'Keeffe might disagree with that.

I declare an interest here as my wife is an employee of AIB, albeit on leave of absence and not involved in the setting of fees or rates of payment with that institution.

The thread that runs through this grouping of 19 amendments is the need to have in place proper measures on consumer protection. It was hoped that this could have been done with the original sections of the Bill despite or even in parallel to the standard judicial procedures. The laws of natural justice state otherwise, and the concerns many of us expressed on Committee Stage are now being addressed to some extent. There is a danger in going through this type of detail on Report Stage as the sections might become the cause for protracted legal dispute in subsequent cases. Deputy Burton stated that and I would prefer if we took more time. It has to be acknowledged that the Minister's officials made contact with the spokespersons last week and supplied the necessary briefing material. However, there is much detail to be assessed before a Bill is agreed by this House and it is unfortunate that we have gone down that road.

The other thread of these grouped amendments relates to how the regulatory authority and its panel properly represents the interests of those who are involved in the financial sector. There are many amendments that require the panel to have proper representation of consumer advocacy groups and the knowledge and participation of the credit union movement. I would like to see the Minister specify who can and should be a member of the authority's panels on the basis of their experience in these areas. To keep membership open will lead to the fear that many have expressed in this House and elsewhere that the authority and the panel will be constituted mainly with people whose interest in banking and financial institutions is strictly from the prudential viewpoint. The authority will not be well served, nor will the interests of consumers, unless that specification is put in place.

Amendment No. 13 is my first amendment. The Minister was not supportive of this on Committee Stage and I have resubmitted it. It has added currency in light what has gone on in the banking sector with the setting of rates, fees and foreign exchange transactions. I am still asking for the regulation of non-deposit taking financial institutions. I do not accept the Minister's argument that bodies that deal with consolidating loans charged at higher rates to people in difficulty with other lenders should not be included in this legislation.

The Minister argued that this type of financial institution was covered by the Consumer Credit Act 1995. This has been exposed by the disappointment expressed by the Director of Consumer Affairs about the exposure of AIB. The type of supervisory arrangement on fees for foreign exchange transactions that existed with the Director of Consumer Affairs was carried out by correspondence. The director wrote to AIB and asked for its rates, she received a written reply but it turned out that the rates were nothing like what was reported in the correspondence. Not only was there no mechanism to deal with such untruthfulness, we still lack a proactive supervisory role where an office, be it the Director of Consumer Affairs or IFSRA, can enter an institution, discover what is being charged and act there and then.

This continues to be a huge flaw in the legislation in this area. There is a particular need for regulation of non-deposit taking financial institutions — I stress that this amendment has been demanded by those working in free legal aid centres who have had experience of people in debt who have been taken for a ride by these institutions. Unless such an amendment is accepted, the current legislation will not deal with this situation and I appeal to the Minister on those grounds.

My second amendment in this grouping is amendment No. 21. Particular representatives from consumer protection advocacy should be appointed, as I already argued. In other legislation, when bodies and panels within bodies are being established, not only are there vague references to people with experience in a particular area, non-governmental organisations of which they can and should be members are also named. They might even have nominating rights, and this has existed throughout the partnership process in several items of legislation.

I see no reason the Consumer Association of Ireland cannot have a direct nominating right to IFSRA and to the panels that are subsequently formed. They have undoubted expertise that would help inform the workings of the organisation. The authority will come into confrontation with the Consumer Association of Ireland if it does not have direct input, yet both organisations should work hand in glove.

Amendment No. 22 is my third amendment. It is one line that I would like to see inserted into the Bill. However, it has the same effect as the Minister's 14 pages in amendment No. 11. It states: "The regulatory authority shall have due regard for upholding the public interest in the expeditious execution of proceedings." This is a concern that we all share in this House as we want the authority to have supervisory and even prosecutor powers. We want to see action being taken in a quick and efficient way in terms of any failure by financial institutions to live up to their responsibilities. Since we need to examine the constitutionality of the original Bill, there is a fear that the procedure being put in place might be constitutionally correct but leaves open the possibility of unnecessary, prolonged investigations when it is in the consumer's interest to have these issues sorted out as soon as possible.

My amendment No. 27 is included in the Minister's amendment No. 11 as part of his overall proposals to change this section. I wanted the €5 million to be part of the cost incurred by the financial service body if it is a body corporate. That view is shared by Deputy Burton as well in the subsequent amendment, that it should be 10% of the turnover of profit earned by that corporate body.

I am uncertain as to the reason the Minister makes the distinction in the second section of this Part between the individual person and the body corporate in that the figure for the body corporate is €5 million but for the individual person it is for €500,000. The figure of €500,000 might appear to be a great deal of money to people now, but we are passing legislation without any degree of index-linking, and it is unlikely a Bill like this will be changed for many years. That €500,000 will be quite a small sum in a short period when we consider the type of gain made by some individuals engaging in financial transactions. They might decide it is worth the potential risk if they get caught and penalised by State authorities.

The final grouping of amendments is Nos. 76, 77 and 83, one of which is a technical amendment of mine to delete the term "and responsibilities" and substitute "responsibilities and the Sanctions Panel established". In passing the Bill it is important that we give the sanctions panel as many teeth as possible because it will be an important instrument in determining the level of consumer confidence that will follow its passage into an Act and, it is to be hoped, avoiding the type of scandals we have seen far too regularly in the past and which are before us.

On those grounds I hope the generality of this debate will get the prioritisation right in a way that we have not seen in the debate on the original Act and this Bill, that it will put a greater emphasis on consumer protection and put the prudential role, important as it is, on the back burner so that it is part of the mix rather than the dominant part of the mix. In that way we will have a representative body that can restore public confidence, which many of us on this side of the House fear has been badly dented by continuing events in the financial sector.

I am glad Deputy Boyle referred to the fact that my officials gave a briefing to the Opposition spokespersons on Friday last. They were contacted with our amendments and a briefing was offered. As far as I know, Deputy Richard Bruton was the only one who took up the offer of the briefing but such an offer was made by my officials last Friday on the series of amendments tabled in my name.

Reference has been made inside and outside the House to the background to the first Central Bank and Financial Services Regulatory Authority Act, now known as the Act of 2003, in terms of the lead-up to it, the discussions that took place and the difficulties that arose. There have been differences of opinion between myself and the Tánaiste over many years but I assure the Deputy there were no differences of opinion on this matter. However, there were differences among a wide range of bodies on this matter. I set up an expert group comprising nine people and I received three separate reports on how we should proceed. We could not get agreement in the House as to the structure of the Bill. Deputy Michael Noonan of the Fine Gael Party had one view, the Labour Party had another and I am not sure about the other parties. Different views were put forward by the various institutions and, when we came forward with the new regulatory authority, we believed it was the best compromise that could be reached at that time, and I believe it has worked well.

In case I forget to mention it at the end of my contribution, I cannot agree with what Deputy Boyle said at the end of his contribution, although I agree with some of what he said about the prudential function being put on the back burner and the consumer focus being more important. I would be in Deputy Ned O'Keeffe's camp on that matter. I somehow guessed, and Deputy Boyle may find out too, that while people might wish that their bank official or financial institution staff would say "Good morning" to them, send them statements every day of the week and look after them very well, and that they would complain a great deal if things were not done in certain areas regarding consumer protection, it would be nothing like the screaming we would hear were the prudential role to be left aside and a financial institution to go belly-up, and rightly so. The prudential function must be to the forefront of the authority's concerns, and I believe the Deputy was wrong when he made that particular remark.

I said "less important".

I would say——

It is about getting the balance right.

——the prudential regulatory function is more important. I have no hesitation in nailing my colours to that particular mast. The Deputy should think about the great days of the wild west, when there were runs on banks. People are more concerned about the protection of their money than whether the bank manager says "Good morning" to them or sends them a Christmas card.

Regarding the wide-ranging debate on these amendments, Deputy Richard Bruton asked how I could justify curtailing the appeals tribunal power in relation to IFSRA supervisory functions. Experience shows that legal challenges to supervisory decisions are rare. Financial institutions which need to maintain a reasonable relationship with the regulator would rarely find it in their interest to challenge a regulatory decision head-on. However, in providing for a special appeals tribunal instead of the courts we are making it somewhat easier for financial institutions to challenge a decision of the regulator. Furthermore, a special tribunal is more likely to delve into the merits of a decision by the regulator.

The regulator has a serious concern that its authority and effectiveness could be undermined if its supervisory decisions could be reversed by the appeals tribunal. I emphasise that this concern only extends to supervisory decisions. There is no difficulty with the new powers of sanction being subjected to the full rigours of an appeals process.

There was a concern on the part of the regulator that in having an appeals tribunal, the tribunal itself would become the regulatory authority. It was felt that would not be in the best interests of protecting the reputation of the regulatory authority. I am not prepared to take the risk that the authority could be undermined by having its supervisory decisions reversed by an appeals tribunal. It is sufficient that the tribunal's power in this area be confined to suggesting that the regulator think again, as it were, by referring any decision back to the regulator for review. I would expect that the regulator would pay close heed to any such decision by the tribunal. Furthermore, if it fails to come back in accordance with the tribunal's view, this would strengthen the financial institution's hand in any subsequent appeal to the High Court. I emphasise that any decision of the tribunal is subject to a full right to appeal in the High Court.

Deputy Burton and others referred to the credit unions. As in previous debates and not just those on this Bill and the previous Act, people take confused positions regarding credit unions. For obvious political purposes we must say all the nice things about them. If one does not, one is in danger of being slapped in one's constituency. I have recognised the politics of this issue. In my own and Deputy Keaveney's party, no matter what trouble one was in, if one said a few appropriate words about events of 50 or 60 years ago one was safe. The situation is similar with regard to the credit unions. We must say we are all in favour of them, and we are.

On the other hand, when it is proposed that credit unions be properly supervised some people are reluctant to upset them too much. Some credit unions are as big as some banks. The credit union movement's latest report showed, I believe, deposits of €10 billion. That makes credit unions a substantial player in the financial market. The difficulty arises from the fact that the movement includes very small and very large credit unions and it is difficult for the organisation to pull all these strands together and accept the difficulties which arise. We do not want to see credit unions going belly up, if at all possible.

The Minister has not replied to the points I have made.

He has no time.

I would have done so but my time is up.

The Minister is making his second contribution. Members now have two minutes each. The Minister will then have the right to reply.

It is impossible, without having heard the Minister's reply——

This arises from the unsatisfactory nature of Report Stage amendments.

We raised a number of technical matters and the Minister has not had an opportunity to reply to them.

The Minister proposed the amendment in the first place. The Chair is carrying out the rules of the House, which is the Chair's obligation.

Does the fact that we have grouped 19 amendments together not mean that we have 19 allocations of time?

Surely that is the case.

There is no time limit on initial contributions of the Minister or of other Members. The only time limit is on the second contribution, which is two minutes. The Minister will then make a final contribution. That is the procedure for Report Stage amendments.

The Minister has rejected the proposal that the Bill be resubmitted to Committee. However, I propose that the Minister's substantive amendment be dealt with in a committee style debate so that the Minister can fully reply. I do not wish to delay matters unduly but that would allow us to hear the Minister's full reply.

I am not prepared to do that. I have had a previous experience of giving in on a subject like that and having the procedure abused by a Deputy. Deputy Bruton would not abuse that procedure but others would, and have done so.

This is not a Committee Stage debate. The House has already decided on this matter.

May I raise a point of order? My next contribution would ordinarily respond to the Minister's reply to my first contribution. I have not heard the Minister respond to any of the points I have made, other than his address of the credit union issue. I made other specific points with regard to amendment No. 11 and I hope he will respond to the points raised. How do I respond without having heard what the Minister has to say in reply in the first instance?

The Minister proposed the amendment and there is no time limit on that. Deputies may then speak for as long as they wish. After the Minister's second contribution, Deputies may then make a two minute contribution and, finally, the Minister has a right to reply, as any proposer of an amendment has.

I do not mean to be obstructive. However, so many amendments have been grouped here that the Minister must be accorded additional time to reply to each of the Deputies who have spoken. Any other approach does not work.

The Chair works within the rules. It is a matter for the Minister to reply to the points raised by Deputies in his final summation.

When I contribute next time.

Correct. The proposer has the right to reply.

Each Deputy has two minutes to speak now and we will have an opportunity to make a substantial contribution when we have heard the Minister's contribution. Is that correct?

No, Deputy. You have had your opportunity to make a substantial contribution.

I thought the mover of the amendment could make a final contribution.

The mover is the Minister. He will make the final contribution.

Other amendments are being moved. Each of us has amendments.

Only the mover of the amendment has the right of reply.

The first amendment?

That is correct.

We are all moving amendments. They have not been reached but they will be moved.

Deputies may move their amendments when they are reached but the discussion occurs now.

We are being penalised. We have no right to wrap up because our amendments have been bunched together.

I do not make the rules. They are made by the House. I enforce the rules of the House.

We did not vote on whether this grouping was acceptable to the House. We expected more latitude to contribute. Perhaps we will be more prudent and not agree to future groupings.

It is a matter for the Chair and not the House to decide. The Chair does not require the agreement of the House to group amendments. Once these amendments are proposed their proposer has the right of reply at the end of the debate on the amendment. Other Deputies have the right to propose an amendment but the discussion takes place when the first amendment is proposed.

When a Minister introduces an amendment which completely tears up what was debated on Committee Stage and replaces it with a new approach, to apply rules of grouping of this nature denies the House the opportunity to have the sort of debate it should have. In this case the Chair has erred and has restricted our ability to deal with this debate properly. I know Deputy Cowley was not in the Chair when this decision was made. However it has damaged the quality of the debate and that is regrettable.

The decision was made before I took the Chair.

I accept that.

The decision was made by the Ceann Comhairle. My obligation is to enforce the rules of the House. If Members wish to change Standing Orders they have the power to do so in a different setting.

In this instance the Chair erred in denying the House the opportunity to have the sort of debate which is appropriate when the Minister is introducing a radical redirection of the Bill as debated on Committee Stage. In the normal course of events, if this had occurred a Minister would have accepted recommittal and we would have had a free ranging debate. The combination of the Chair's decision and the Minister's refusal to recommit means that the House is not properly debating this issue. That is unfortunate because these are important issues.

The House has already ruled on this matter.

The grouping of motions is determined by the Minister and his Department. Members receive a piece of paper saying groupings are proposed but they are never voted upon. While there may be a logic to grouping motions with common themes, the fact that 19 are included in the first set of motions and the Minister has two minutes to reply means the Minister can give only six seconds to each amendment. One of those amendments is fourteen and a half pages long and is being proposed for the first time on Report Stage. Members of the House should have more rights in determining these amendments as they come before us.

This is a long-standing arrangement of the House. If Deputy Boyle wishes to change it he has the opportunity and the right to make a submission on the matter. I enforce the rules as they are.

The rules of the House say nothing about grouping amendments. The grouping of amendments is a practice that has developed in the House. It is not mentioned in Standing Orders and only exists for administrative convenience. Grouping amendments in a certain way can undermine the ability of Opposition Members properly to contribution to legislation.

The amendments are related.

It is determined elsewhere whether they are related or not.

This is a matter for the Chair. It is a long standing convention that it is the prerogative of the Chair to group amendments.

Standing Orders do not mention the grouping of amendments. We are entitled to take each of these amendments one by one. We can say we are discussing only amendment No. 1 and then proceed to amendment No. 2.

Members are entitled to propose that the question be put to the House. The amendments are grouped for the purposes of discussion, a long-standing tradition in the House. If Members wish to change that tradition they should, as they are entitled to do, make a submission on the matter. The Chair must observe the rules.

We need clarification on the matter. It is my understanding that Standing Orders do not refer to the grouping of amendments and that the practise is more a common practice than a legal requirement in terms of how we order the business of this House. I believe we are entitled to speak to the amendments individually. There has been no vote on the matter.

The Deputy has made his point and is entitled to make a submission in that regard.

I reiterate the points I made earlier. The Minister has not dealt with my concern that while the legislation proposes wide-ranging penalties in different sections, this omnibus enforcement mechanism does not address proportionality to the offence, the capacity of the credit union, company or person to bear it. The Bill states that the regulatory authority will not drive people to bankruptcy, an admittance of the problem I pointed out in terms of the lack of proportionality. The only concession it makes in terms of proportionality is to state it will not bankrupt people. That is an inadequate response to the issue.

I reiterate my frustration at the Minister's refusal to allow the Bill to be recommitted to allow the type of debate to which Deputies who have sat here for the past two hours are entitled. We take part in the process of enacting legislation. It is not something cooked up by Ministers and their officials, taking into account the consultations which take place behind the scenes. We take part in the statutory process of legislating. This is a truncated debate which does not do justice to the issue being introduced at the last minute by way of ministerial amendment.

It is traditional for the House to deal with matters in this way. If the Deputy wishes to change that, he is entitled to make a submission in that regard.

It is not traditional for the Minister to introduce such a substantive amendment and to refuse to recommit the Bill. Such a proposal would allow the Chair off the hook. That is what most Ministers would do in such circumstances.

The Deputy has made his point.

I regret the Minister is unable to reply to any of the substantial issues I raised. I welcome the appeals structure which ensures the legislation is constitutionally safe. I believe the Minister for Finance has been got at by the financial services industry and its agents, and I will state my reasons in that regard.

The current regulations contain elements of discretion. If a financial services institution puts its hands up and admits its guilt the regulator may effectively withdraw. Earlier I pointed out that if the penalties are so swingeing they potentially bankrupt a person, again the financial regulator may withdraw. The Minister has refused to accept the Labour Party's reasonable amendment that proportionality be addressed by relevant percentages. In that regard, we suggested a figure of 10%.

I do not understand why the Minister has not accepted the Labour Party amendment. As stated, a €5 million fine for AIB or the Bank of Ireland is not a great deal. However, a fine of €500,000 is, to most credit unions and individual financial service providers, a huge amount. I agree that the penalties ought to be severe and graduated. I would like at this stage to return to what I said previously on this issue. My remarks are pertinent to the recent disclosures in terms of AIB.

I am aware, as I am sure is the Minister, that it is the responsibility of the audit function within a bank to spot fraud and know if customers are being ripped off and if executive or senior directors are misbehaving. The audit function exists to protect not alone the bank, its owners, shareholders and employees but its customers. Banks are powerful organisations. It is interesting to note from recent reports that this may have come to the attention of the internal audit structures in the banks. I agree with Deputy Ned O'Keeffe that the regulatory structure is an expensive one. We will only become aware of its cost as the years pass. The Bill makes no reference to the internal audit function, the cornerstone of regulation in any financial services body. It is absolutely critical to that sector and prevents staff from defrauding the bank of money and from abusing its charter in terms of customers' rights and so on.

There is no reference in the Bill to audit committees, which are convened by banks' board of directors and which are the cornerstone of Stock Exchange regulation of banks and financial institutions from the United States to Australia and around the world. In that regard, one has only to read the published books on what happened to Barings Bank. I share the Minister's concern that the prudential element of a bank is the most important in terms of supervision. It is disastrous when, following a run on a bank, depositors and investors lose their money. However, that does not mean one cannot provide alongside for proper regulation which primarily serves consumers' interests. The Minister should remember that consumers are individual customers and, more importantly, commercial and business consumers, and we must ensure they get a fair deal.

It is wrong that we do not have enough time to tease out this issue in a Committee Stage debate. The Minister has failed to provide for an audit function. Audit functions are expensive, with banks employing large teams of people to check paper records and carry out continuous computer checks. A whole industry is devoted to this area. In setting up our regulatory structure, we are not enhancing in any respect internal audit or the audit committee function in terms of the board of directors, particularly in big institutions.

I agree with the Minister that depositors in credit unions must be protected. However, that protection is best afforded by the provision of a proper audit function. The regulatory authority will follow many years later. The regulatory authority will, in this case, also report to the Central Bank and will have, as the Minister rightly said, as its most important duty safeguarding of the bank's security. The Minister has not resolved those conflicts and he could have done so.

I am dealing with a vacuum in so far as the Minister has not yet responded to the points I raised. However, I would like to focus on the issue of the entitlement of the regulatory authority to dispense with the requirement of inquiry in circumstances where the offending service provider acknowledges its misdeeds. That is a little like the legislation which provided that up to 20% of new housing development be given over for social housing purposes. Following pressure from construction companies and their respective representatives the Government introduced a buy-out clause for housing developers whereby they could pay to the local authority a sum of money rather than provide housing units. The losers in that case were, unquestionably, local authority housing waiting list applicants.

The regulatory authority is offered a similar proposition, an opportunity for a service provider to acknowledge contravention of its responsibilities and, in so doing, not face a full inquiry. In this case, the losers will be all those who depend on a trustworthy financial services sector.

Debate adjourned.
Sitting suspended at 1.35 p.m. and resumed at 2.30 p.m.