Central Bank and Financial Services Authority of Ireland Bill 2003: Motion to Recommit.

I move:

That Dáil Éireann, pursuant to Standing Order 128(1) of Standing Orders Relative to Public Business, directs that the Central Bank and Financial Services Authority of Ireland Bill 2003 in whole be recommitted to a committee of the whole House.

I move that this Bill be recommitted to Committee Stage in order to consider whether its provisions regarding enforcement under Part 2, corporate governance under Part 3 and sanctions under various Acts delegated to IFSRA, constitute best practice for the protection of consumers in their dealings with financial institutions in light of the serious compliance and regulatory failings highlighted by the recent overcharging by one of the leading Irish banks.

Most people were shocked to discover that not only was there overcharging but there was no compliance sign-off within AIB under which directors of banks would be obliged to indicate in the audited reports or other reports to the regulatory authority that they certified their bank was compliant with consumer protection law. The bank continued to be non-compliant for eight years in respect of consumer protection law. There was no response from within the bank to this non-compliance. There seems to be no understanding within the bank of its obligations and no State obligation on the banks to issue compliance statements.

More seriously, it has been discovered that this clear offence under the Consumer Credit Act 1995, is an offence that carries no sanction. The Minister for Enterprise, Trade and Employment and the Minister for Finance, as they wrestled with what was best consumer protection and best practice in the run-up to the introduction of the IFSRA Bill, in a debate that continued for four years, did not address the issue that the Act contained no sanctions for dealing with this type of offence. Worse still, it has been discovered that over a period of eight years——

I ask the Deputy to make a brief comment at this stage. This is a discussion on whether the Bill should be recommitted or not. It is not necessary to go into too much detail.

It is necessary to understand the background. A regulatory authority was supposed to police a certain standard within the bank. It did not apply any monitoring over the eight years and had no sanctions to apply. Customers were double-charged over a period. This calls into the question the basis on which the IFSRA Act has been debated to date. We need to learn from this dreadful experience whether we are now using best practice. The indications are that the Minister had to rip up and abandon all the provisions on enforcement we debated on Committee Stage and propose instead an entirely new set of procedures on Report Stage.

In addition, we have not had an opportunity to examine the area of sanctions. The Minister's proposals amount to a band aid response to the discovery that the sanctions sections of the Bill around which he placed a big bulldog clip had not been vetted or audited to ascertain whether they conformed to best practice. The Minister is trying to mend his hand at five minutes to midnight, that is, on Report Stage. The House needs more time to scrutinise whether the proposals before us represent the best approach to addressing these important issues. For this reason, I propose we recommit the Bill and have a proper discussion of all these issues.

We will take a brief comment from one Deputy from each Opposition party before the Minister replies.

It is regrettable that we have not had an opportunity to receive a detailed briefing from the Minister and his officials on the significant changes he proposes to introduce on Report Stage. The Minister is engaged in fire brigade action to try to respond to disclosures made in recent weeks, specifically with regard to Allied Irish Bank. The Government took a political decision to place the governance of IFSRA within the remit of the Central Bank. The McDowell report largely proposed that consumer protection for both individual and business customers of bank services should be guarded within the remit of the Department of Enterprise, Trade and Employment, rather than the Central Bank which has a significant prudential role. The current failures and lapses originate in the failure of the Government to make the decision recommended in the report.

IFSRA has been established with a staff of more than 90 persons and is an expensive superstructure.

The Deputy is departing from the motion before us.

Report Stage——

I ask the Deputy to listen to the Chair. This is a narrow motion on whether the House should recommit the Bill. I ask the Deputy to briefly outline reasons it should be discussed in committee.

The reasons are that the disclosures in recent weeks have revealed a further crisis in Allied Irish Bank and demonstrated that IFSRA, the regulatory authority, has no teeth. The Minister is proposing to introduce important amendments on Report Stage introducing significant sanctions but also significant changes which the Select Committee on Finance and the Public Service did not have an opportunity to discuss in detail on Committee Stage. I therefore support the motion to recommit the amendments as it would give us an opportunity to examine these important matters in detail.

We have always known that owning a bank gives one a licence to print money but it now appears that one also has a licence to steal it with impunity. We need to address this issue. In recent weeks, we have heard a great deal in the debate on the proposed referendum about loopholes. If we do not have sanctions to deal with the types of behaviour reported recently, there is clearly a loophole which the House must address. Deputies will be in dereliction of our duty if we do not recommit the Bill to examine these important matters. For too long, bank customers have been treated like chumps. It is time we put the matter right and this is an opportunity to do so.

I support Deputy Richard Bruton's motion to recommit the Bill. The House must recognise the continuing revelations concerning widespread overcharging of customers by AIB. The initial €14 million estimate of the extent of overcharging has increased to €25 million. We learned this week that between August 1995 and April this year purchases of travellers cheques to a value in excess of €600 were overcharged by a staggering 1.5%. This indicates that the extent of the rip-off is probably even greater than estimated. These are very serious matters and unquestionably——

We are discussing a narrow motion.

I am coming to my point. The Bill, as presented, does not adequately ensure the protection of customers. Against this backdrop and the continuing series of revelations, of which I do not believe we have heard the last, there is unquestionably a requirement to ensure that the most stringent protections of the customer's interest are built into the legislation. IFSRA will have insufficient powers and a deficit in the legislation needs to be addressed. Recommittal would allow the necessary debate to take place.

I apologise to the House as I have a heavy head cold. Perhaps the Ceann Comhairle will give me some of the medicine he prescribed in his former life.

During the course of preparation of the Bill a great deal of consultation, negotiation and drafting work took place. This complex legislation requires considerable effort, taking into account the needs of consumers, good regulation principles and the perspectives and views of a wide range of industry and consumer groups. Constitutional and other complex legal issues arose at various stages of its development. All this takes time and effort but the Bill is a much better product as a result.

A statutory list of actions is to be undertaken by IFSRA. The Government's actions will also continue to speak for themselves. Last year was a time for radical overhaul of the institutional structures for financial services regulation. This year we are taking further action with the Bill before us which complements legislation enacted last year. IFSRA will be given powers with appropriate constitutional safeguards to apply financial sanctions to miscreant financial institutions and responsible individuals within them. For institutions the penalties proposed may be up to €5 million, while individuals may be disqualified from working in the financial sector.

In addition to provisions on penalties, the Bill provides for significant additional powers for IFSRA to require formal statements from institutions in regard to their compliance with legislation. IFSRA may also require compliance statements to be signed off by auditors. This provision is in addition to provisions of the Companies (Auditing and Accounting) Act 2003, which impose an obligation on the directors of companies to prepare and publish a directors' compliance statement.

Moreover, the new legislation will place the Ombudsman's remit for financial services on a stronger footing, ensuring for the first time that a single scheme operating on a statutory basis will serve the full range of financial services to consumers. For all these reasons, I am anxious to proceed with legislation and must oppose the motion.

To clarify several points, IFSRA came into being on 1 May 2003. The specific problems referred to by Deputies arise from the Consumer Credit Act 1995. The Central Bank and Financial Services Authority of Ireland Act of last year took on board the relevant sections of the Consumer Credit Act 1995 and put them into effect. The latter Act did not have the sanctions to which Deputy Burton referred and I am sure she will be anxious to learn that the person responsible for placing it before the House was the leader of her party, Deputy Rabbitte.

The Bill has nothing to do with the Central Bank and Financial Services Authority of Ireland Act. Matters will be dealt with much better now that they all come under one umbrella body. The Bill as it stands contains many of the items some Deputies complained about in recent weeks. It was published last December, with Second Stage debated on 29 December. We spent a considerable period dealing with Committee Stage and the Bill has returned to the House for Report Stage. Many of the matters to which Deputies referred are included in the Bill. The specific powers to which Deputy Burton, in particular, referred with regard to events in the past two weeks were not provided for under the Consumer Credit Act 1995, for which I was not responsible.

May I make a brief comment?

We must put the question.

I wish to respond to the Minister before the House makes a decision on this. We were informed the Attorney General signed off on the first enforcement method proposed by the Minister but then found constitutional flaws in that and has proposed another method. What assurances can be given, without reverting to Committee Stage, that this method will not fall at the same hurdle? It is reckless of the Minister to push this truncated Report Stage format.

All Bills that go before the House are assumed to have constitutionality.

That was assumed on the previous occasion but the Minister changed his mind.

As Deputy Burton pointed out on Second Stage in regard to sanctions, there might be difficulties in this regard on the basis of legal advice available to her. We can never be certain, therefore, that if a matter goes before the courts, it will not be found wanting. That relates to all Bills, not only this one.

I must put the question. The Standing Order allows for the proposer and a Government member to speak on the proposal. The practice has developed where one member from each party is allowed to make a contribution but we cannot have a debate.

Question put.
The Dáil divided: Tá, 49; Níl, 62.

  • Allen, Bernard.
  • Breen, Pat.
  • Broughan, Thomas P.
  • Bruton, Richard.
  • Burton, Joan.
  • Connaughton, Paul.
  • Connolly, Paudge.
  • Costello, Joe.
  • Cowley, Jerry.
  • Crawford, Seymour.
  • Deasy, John.
  • Deenihan, Jimmy.
  • Durkan, Bernard J.
  • English, Damien.
  • Enright, Olwyn.
  • Ferris, Martin.
  • Gilmore, Eamon.
  • Gormley, John.
  • Healy, Seamus.
  • Higgins, Michael D.
  • Hogan, Phil.
  • Howlin, Brendan.
  • Kenny, Enda.
  • Lynch, Kathleen.
  • McCormack, Padraic.
  • McGinley, Dinny.
  • McGrath, Finian.
  • McGrath, Paul.
  • McManus, Liz.
  • Mitchell, Olivia.
  • Murphy, Gerard.
  • Naughten, Denis.
  • Neville, Dan.
  • Noonan, Michael.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O’Shea, Brian.
  • O’Sullivan, Jan.
  • Perry, John.
  • Quinn, Ruairi.
  • Rabbitte, Pat.
  • Ring, Michael.
  • Sherlock, Joe.
  • Shortall, Róisín.
  • Stagg, Emmet.
  • Stanton, David.
  • Timmins, Billy.
  • Upton, Mary.
  • Wall, Jack.


  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Barry.
  • Ardagh, Seán.
  • Brady, Johnny.
  • Brady, Martin.
  • Brennan, Seamus.
  • Browne, John.
  • Callanan, Joe.
  • Callely, Ivor.
  • Carey, Pat.
  • Carty, John.
  • Cassidy, Donie.
  • Cooper-Flynn, Beverley.
  • Coughlan, Mary.
  • Cregan, John.
  • Curran, John.
  • Dempsey, Noel.
  • Dennehy, John.
  • Devins, Jimmy.
  • Ellis, John.
  • Fitzpatrick, Dermot.
  • Fleming, Seán.
  • Gallagher, Pat The Cope.
  • Grealish, Noel.
  • Hoctor, Máire.
  • Jacob, Joe.
  • Keaveney, Cecilia.
  • Kelleher, Billy.
  • Kelly, Peter.
  • Killeen, Tony.
  • McCreevy, Charlie.
  • McDowell, Michael.
  • McEllistrim, Thomas.
  • McGuinness, John.
  • Moloney, John.
  • Moynihan, Donal.
  • Moynihan, Michael.
  • Nolan, M.J.
  • Ó Cuív, Éamon.
  • Ó Fearghaíl, Seán.
  • O’Dea, Willie.
  • O’Donnell, Liz.
  • O’Donoghue, John.
  • O’Donovan, Denis.
  • O’Flynn, Noel.
  • O’Keeffe, Batt.
  • O’Keeffe, Ned.
  • O’Malley, Fiona.
  • Parlon, Tom.
  • Power, Peter.
  • Power, Seán.
  • Sexton, Mae.
  • Smith, Brendan.
  • Smith, Michael.
  • Treacy, Noel.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Woods, Michael.
  • Wright, G.V.
Tellers: Tá, Deputies Durkan and Stagg; Níl, Deputies M. Ahern and Kelleher.
Question declared lost.