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 remaining sections of the Central Bank and Financial Services Authority of Ireland Bill 2003, and all amendments thereto, be recommitted to a committee of the whole House.

In recent days we have heard an extraordinary number of additional revelations regarding what has been going on in parts of our banking sector, which is much valued for its contribution to the economy and for the employment it generates and which has large sections of the pension funds of Irish workers under its care.

The Minister has introduced a number of amendments on Report Stage which significantly water down the sanction and penalty procedures of the Bill. In particular, it now appears that large elements of the sanctions regime is at the discretion of the Irish Financial Services Regulatory Authority, IFSRA, so that once again there will be behind the doors discussions in which the guilty may get away with no more than a slap on the wrist. The Minister of State has spoken about fines and potential disbarment but the Minister's Report Stage amendments would allow much of the structure of disciplinary action and sanctions to be discretionary rather than mandatory.

The primary role of the Central Bank is prudential. It is to safeguard the standing of our banks. It is not primarily an advocate for the interests of bank customers. It is there to protect the banking organisations. This means that when a scandal happens in a bank, rather than having a full and open discussion and an attempt to clear up the matter, the closed culture among the golden circle who run our banks and financial institutions comes into play. Many of the members of this golden circle sit on each others boards. As a consequence, public debate is stifled. The public has no confidence that the issues involved will be addressed, and there is a long-term serious risk to the viability of our banking industry.

The Minister's amendments were rushed. IFSRA is carrying out an important inquiry into the foreign exchange charges of Allied Irish Bank in the past ten years. We now know that IFSRA has been involved with AIB since last September in an inquiry into a company called Faldor in the British Virgin Islands and the actions of ten former and current executives and directors of AIB. As a result of the Minister's amendments, which allow get-outs, let-outs and back doors for the banking industry, being introduced on Report Stage, we are rushing through the legislation without due consideration by the Dáil. It was bad enough that, last week, the Opposition's motion to recommit amendments tabled on Report Stage was not accepted by the Government. After what we heard last weekend, it will be a disgrace for the Government to fail to recommit the Bill.

We need to hear from IFSRA what went wrong in Allied Irish Banks and whether or not the problem exists in other banks. The Governor of the Central Bank stated today that, until recently, an important area of the operations of banks, including AIBIM, was unregulated. For all of these reasons, I ask the Dáil to accept the Labour Party's motion to recommit the Bill, in the interest of a proper discussion and evaluation of the various disclosures made last weekend.

Today, the chairman of Allied Irish Banks refused to appear before the Select Committee on Finance and the Public Service until the IFSRA investigation is complete and the bank has had time to consider it. Despite this, the Government is railroading this legislation through the Oireachtas and giving no opportunity to consider whether the watering down of the procedures of IFSRA by the Report Stage amendments introduced by the Minister at such a late stage should be proceeded with. I speak in the interests of the customers of the banking system, of the 50,000 employees of the financial services industry and of the long-term viability of the sector. This is in all of our interests.

I call the Minister of State. We can only hear a statement from the Member who moved the proposal to recommit the Bill.

Last week when I submitted a similar motion to recommit, a spokesman from each of the Opposition parties was given an opportunity to comment.

I will accommodate the Member.

I thank the Leas-Cheann Comhairle. I will be brief. The Minister of State has been thrown into this matter at the 11th hour. This Bill has been coming along the track for a long time. There was, supposedly, deep consideration within Government circles of making the financial system robust and getting it up to a standard of best practice. The Minister's recent replies outlined that consideration. Nonetheless, at IFSRA's very first test, it was discovered that there was no sanction in any legislation for the offence of overcharging consumers.

The Minister of State will later move a hastily cobbled together offence in that regard. It is abundantly clear that systems we believed were working were not and are not working. We believed, following Rusnack, that strong internal compliance procedures within the banks were monitoring such matters and that they were being escalated to the highest level so that when problems arose somebody would take responsibility for them. That is not happening.

The Governor of the Central Bank said the culture has changed and that everything has been transformed. However, we find it is like pulling up an ivy root in that every time one pulls it, something else comes up with it. We need to apply a little caution in terms of how we debate this issue in that such debate should not be confined to a general statement and two minute contributions. Members should be provided with an opportunity to tease out the legislation.

On the last occasion, the Minister gave an extremely brief introduction of the legislation, Members asked questions and the Minister, who was confined to two minutes when responding was unable to answer them. We then proceeded to a vote and sanctioned provisions about which Members had several questions unanswered in this House. The Minister of State has been around the law for a long time in terms of practising and making it. He has experience on both sides of the fence. It is clear that if we rush through this legislation without providing Members with an opportunity to consider it or to hear from outside opinion in terms of the lessons to be learned from what is happening before our eyes, we are likely to make mistakes. A little prudence in handling this matter, coupled with a little flexibility from Government would go a long way to achieving the best possible answer at this stage.

I support Deputy Burton's motion to recommit the Bill. Events since our last discussion make it imperative that we give every consideration to it. I have several questions which I believe would best be answered on Committee Stage.

The substantive ministerial amendment, as referred to by Deputy Bruton, is 11.5 pages long, longer than much of the legislation which comes before this House. It was introduced on Report Stage and the manner of discussion and debate was as described by Deputy Bruton. It is unacceptable for any legislator to stand over such a process. I would like to think the Minister of State also believes it is unacceptable. On those grounds alone, serious consideration should be given to recommit the Bill.

However, that issue is outside what we have learned since our last discussions on this Bill. There are serious issues, despite Opposition arguments, in terms of the need to provide IFSRA with true independence and powers to implement badly needed provisions in the financial services sector. We are rushing through legislation which includes amendments that weaken IFSRA's ability to put those powers into action. What has happened in the time since we last discussed Committee and Report Stages to influence the Minister to draft such amendments? Has the Minister and Department received correspondence on the matter from the Central Bank? Have they received correspondence or representations from the Irish Bankers' Federation or from the large financial institutions? If so, what was the nature and effect of the representations? The Minister is, at the last minute, introducing a substantial amendment which not only alters much of the nature of the Bill but renders null many of the amendments which Members of the Opposition tabled to it on the last occasion we discussed Report Stage.

The Minister for Finance has not allowed a fair assessment in terms of the passage of this legislation. No legislature in the world would be governed by the principles we have been following on this legislation which is badly needed if we are to have an effective regulatory authority for our financial services sector.

I, too, support the proposal to recommit the Bill. The substantive amendment tabled by the Minister which we did not have an opportunity to address on Committee Stage is reason enough to recommit. Unfortunately, a previous proposal was rejected.

Much has unfolded since we last discussed this legislation. When I raised a related matter with the Minister on the back of a Private Notice Question earlier today he indicated that I would have an opportunity to address some of my concerns during the course of Report Stage. With all due respect, damn the chance of it. The reality is, we will not have such an opportunity. The Minister of State is not accepting amendments, a common practice of the Department of Finance. Some Ministers accept the wise counsel of Opposition voices. However, that is something which Department of Finance representation in this House has yet to do.

The Minister of State said earlier he is being dropped in at the deep end. I do not accept that. He is a part of this process and we will offer him no escape clauses. Let there be no doubt about what we are speaking of: in excess of 500 mortgage holders have been charged, without their approval, up to €50 per month for mortgage insurance; senior AIB executives have evaded tax by way of special offshore accounts set up by their co-employees in the British Virgin Islands. We know the names of some of the beneficiaries. However, we do not know who devised the financial packages, the apparatus for tax evasion. We do not know who they are. Unless penalties are to apply in such a way as to create a disincentive for employees to co-operate in these practises, they will continue. When I speak of employees, I do not mean the ordinary at the coal face bank employee but those from executive level down, those who devised these scams and who continue to operate them.

I have no doubt as I stand here this evening that all these scams have not been exposed. There is more to be revealed. I have no doubt that is the case. As we speak, people working within the financial services sector continue to perpetuate these practices. The culture continues. I do not believe this legislation, as currently drafted, will be sufficient or adequate to change that culture. Recommitting the Bill will provide us with an opportunity to reconsider it together because, it is only together that we can ensure the passage of legislation that will effectively address such scams and ensure the public has confidence in the financial services sector to succeed and perform its important role.

I move amendment No. 1:

That the Bill be recommitted in respect of amendments Nos. 125 to 128, inclusive, and amendment No. 134.

The onus is on the Opposition to establish why we should recommit the Bill. We had a lengthy and detailed Committee Stage debate for two days. I accept that the Minister has tabled further amendments. That said, they are clearly and self-evidently required. There was a great deal of consultation, negotiation and drafting during preparation of this Bill. This complex legislation required a very considerable effort to balance the needs of consumers, good regulation principles and the particular perspectives of a wide range of industrial and consumer groups. Also, constitutional and complex legal issues arose at various stages in the development of the Bill with regard to the penalties and disqualification procedures. All of this takes time and effort but the Bill is a much better product as a result.

A substantial number of actions have been taken or are under way on the part of the authority. The Government's actions will continue to speak for themselves. Last year was the time for a radical overhaul of the institutional structures for financial services regulation. This year, we are in action again with the Bill before us. It complements the legislation enacted last year. The Minister is anxious to make a change to the Consumer Credit Act to rectify a deficiency highlighted by recent events in the banking sector, of which Deputies are fully aware. However, he is anxious to proceed with the legislation in general and consequently he opposes the motion.

Reference was made to statements made earlier today by the Governor of the Central Bank. He has indicated the importance he attaches to this Bill as part of the comprehensive regulation legislation he considers necessary in this sector.

Does the Dáil not have a duty of care?

The events of recent days should remind us of the urgency of this legislation and should oblige us, as a matter of care, to proceed with it as quickly as possible. I do not draw the inference drawn by Opposition Deputies that we should delay and reconsider this Bill in greater detail. The events of recent days make it all the more important that we proceed with it.

The Minister does not need the Dáil at all.

Far from it.

He will ram it through.

Two days have already been spent on this Bill on Committee Stage.

We had only two minutes in which to hear the Minister's response to dozens of questions on the key sections.

Order, please. Allow the Minister of State to proceed without interruption.

The Minister is anxious to proceed with the legislation and he opposes the motion, save where it relates to his amendment No. 128.

I understand from the Minister of State's reply that he was just landed with dealing with this Bill today and therefore he may just be answering to the Minister's tune. However, what the Minister is doing is deeply unwise and totally anti-democratic.

There are a number of Report Stage amendments that have not yet been considered and they have a profound effect on the structure of the regulatory penalties and sanctions. In addition, the Minister has tabled an amendment dealing with compliance statements by directors. We have not considered it either. Bearing in mind the events we heard about this weekend, the reality is that we now have a financial services regulatory authority Bill and a penalties and sanctions Bill that make no serious reference to the internal audit or to the role of audit committees within the banks. There are references to options that banks may wish to exercise in this regard but no mandatory requirements.

We know from today that none of the disclosures of recent weeks emerged as a result of any kind of investigation by IFSRA. Rather, in the case of foreign exchange they emerged because of the activities of a whistleblower and, in the case of the activities of the offshore investment company Faldor, the tax implications of which are so profoundly repugnant to ordinary, decent taxpayers who are now paying tax at 42% in the euro, I understand they emerged because of moves on the part of one of the parties involved in Faldor to clear up his own tax affairs with the Revenue Commissioners.

IFSRA is now beginning to run after the hare although others have already started running. The Minister of State is now proposing to give to the authority penalties and sanctions powers that are profoundly discretionary, do not require publication and are not, according to the legislation, subject to freedom of information. Therefore, we may never know when things go wrong. We will proceed no further than Mr. Hurley's confessions to the committee today. He stated that, until 1995, there was no way of enforcing regulations regarding companies such as AIBIM. This is an astonishing revelation. The governor was at pains to assure us today that circumstances have changed. How can they really have changed if guilty people who hold powerful positions, who, in the case of many of the directors and executives, earn more than €1 million per year, more than many workers earn in half a lifetime of work, are not seriously held responsible?

Today I had an opportunity to examine what Mr. Douglas, one of the parties to the Faldor controversy, had to say. On 14 September 1999, it was reported that he denied that the Ansbacher procedure was a fairly extraordinary legal construct, as it was described by the leader of the Labour Party, Deputy Rabbitte. He said he believed it concerned the simple straightforward set of relationships that exist between a depositor and a bank. This is what he had to say about the Ansbacher scandal in 1999. He himself was a beneficiary of an offshore investment scheme, apparently without his knowledge.

The Minister of State is now implying that Fianna Fáil will ram through a set of amendments but these amendments fail to take account of the most recent revelations. We will only get a crack at this once. The Minister has already softened his tune substantially. We do not know if the banks got at him, but we do know that if they come forward and put their hands up, the system that will apply will be discretionary. We now know that the penalties and sanctions process will be discretionary if any of the penalties give rise to a risk of bankruptcy on the part of a financial institution or an individual. The penalties are not discretionary in the case of a motorist who breaks the speed limit and travels on a four-lane highway at 60 mph rather than 50 mph.

The Opposition, including the Labour Party, is prepared to sit down and have a reasoned discussion but it has been receiving a drip-feed of allegations and scandalous information from AIB in recent weeks. IFSRA is exercising its limited inquiry powers. It cannot sanction. For God's sake, will the Minister not wait until we receive the report so we can give powers to the internal auditors, for instance, and reconsider why the financial services ombudsman will also be under the thumb of the Central Bank? We should consider why the Minister's amendments deal only with compliance statements by directors given the confession made in the past two days that two of the bank's most senior directors knew absolutely nothing about the offshore vehicle.

In 1989 one of the directors, through his wife, invested approximately €79,000 in an offshore scheme, which at the time would have bought a four-bedroom house in Rathgar. They claim they did not know anything about it. They popped it in as one would pop a cake into the oven. Did the investment produce fruit? It doubled in value at a time when many workers' pension funds were earning less than 3% or 4% per year, and even less still when the charges were deducted. The top executives had a vehicle available that had miraculous rates of return, yet nothing in these late amendments tabled by the Minister addresses these issues. For the sake of sense we ask that the Bill be recommitted so that the Minister along with the officials from the Department of Finance and the Central Bank can re-examine the very clear gaps and lapses in this legislation. It will also allow us to reconsider the outcome of several current inquiries.

I refer to a person the Minister knows and for whom he has expressed admiration in the past, Ms Dorothea Dowling, chairperson of the PIAB. The Government has referred to her work in a laudatory manner. She put the following questions to members of the committee today by e-mail:

What commission earnings are there for the bank, then and now, for selling "payment protection insurance" which the media says was sold to customers without their prior knowledge or consent when top-up loans were being sought? If the original loan was 40k and top up was 5k, was an insurance policy sold for just the extra 5k or a new policy effected for the full 45k and could the sum insured on the original policy not just be increased to 45k for those who wanted such insurance; do higher rates of commission apply for selling a new policy than renewing an existing one?

The Chair was tolerant to the Deputy in allowing her to speak a second time. There is no provision to speak a second time.

I accept your point a Leas-Cheann Comhairle. I will finish on this point. Dorothea Dowling is one of the most respected figures in Irish financial regulation. She has put the most serious questions to the Oireachtas Joint Committee on Finance and the Public Service. We have had no opportunity to examine those questions and determine whether more scandals are yet to be revealed. Yet Fianna Fáil and the Progressive Democrats — the party that was supposed to keep an eye on Fianna Fáil — are ramming through this legislation even though it has serious gaps and holes. I originally said the IFSRA legislation was like a camel. It now appears to be a camel with eight to ten humps. We have no idea how they link with each other or how they seek to seriously protect the consumer.

I ask the Minister of State to clarify the matter.

I object to one expression Deputy Burton used in suggesting that the Minister had been "got at" by the banks. The Minister has not been "got at" by anybody. He tabled amendments based on advice he received from the Attorney General about very difficult issues. It was stated that we have only one opportunity to address this matter. Deputies are concerned about the scandals that have emerged in the banking system. However, it is to the credit of the Minister that he introduced legislation last year and that he has further legislation before the House now.

It is seven years late.

It is to the credit of the Minister that legislation is enacted and another Bill is well on the way towards enactment. I do not see any case for delaying the process of enactment of the measure before the House. At least it will improve the structure that exists. As a result of further investigations into the scandals we are discussing it may be that further legislative change may be required. However, I believe the Minister will act with expedition if that is the case. For the present this is fine legislation, which is well conceived and addresses many complex issues. It is important that we put it in place. If we can improve the regulation system here and now, we should do so.

I oppose the motion except where it relates to the Minister's amendment No. 128, which forms part of a group of amendments Nos. 125 to 128, inclusive, and 134.

The question would appear to be that the Bill be recommitted in respect of amendments Nos. 43 to 124, inclusive, and 129 to 133, inclusive. Is that what Deputy Burton is moving?

We have the Minister's amendment.

I ask Deputy Burton to state her proposal. We will take the amendment first. If it is carried, it becomes the substantive question. Is that agreed?

On a point of order. This might not be the right sequencing and should be re-examined. I would wish to see the Bill recommitted in whole, as Deputy Burton proposes. However, the Minister is suggesting that a particular section dealing with his own amendment and the allied amendments would be recommitted.

As my amendment effectively negatives the Deputy's motion, I assume it must be taken first.

The Minister's amendment only deals with amendments Nos. 125 to 128, inclusive and 134.

My amendment negatives the Deputy's motion and it is put on that basis. The amendment should be taken before the substantive question.

However, the Minister is agreeable to allow those amendments to be recommitted.

The amendments Nos. 125 to 128, inclusive, before the House——

And amendment No. 134, which is associated.

And amendment No. 134. Is that agreed?

Amendment put and declared carried.
Motion, as amended, agreed to.