Markets in Financial Instruments and Miscellaneous Provisions Bill 2007: Instruction to Committee.

I move:

"That, pursuant to Standing Order 127, it be an instruction to the Committee on the Markets in Financial Instruments and Miscellaneous Provisions Bill 2007, that it has power to make provision in the Bill:

to repeal sections 9 and 10 of the Insurance Act 1936 and to make consequential amendments to the European Communities (Non-life Insurance) Regulations 1976 and the European Communities (Life Assurance) Regulations 1984;

to provide that all non-deposit taking lenders engaged in retail lending, together with providers of home reversion schemes, will be brought within the Financial Regulator's authorisation and on-going supervision regime by way of an amendment to the Central Bank Act 1997;

to allow the disclosure, under the terms of the Freedom of Information Act, subject to certain exemptions, of confidential information obtained by a person while performing duties as a member of the board or a member of staff of Ordnance Survey Ireland (OSI);

to make amendments to the Investor Compensation Act 1998 to take account of the European Communities (Markets in Financial Instruments) Regulations 2007 and of the European Communities (Insurance Mediation) Regulations 2005 and as a result of experience with the implementation of the investor compensation scheme;

to amend the definition of ‘gross national product' in the National Pensions Reserve Fund Act 2000 on which the annual contribution to the National Pensions Reserve Fund is based; and

to provide for the transfer of oversight and funding of Ordnance Survey Ireland (OSI) from the Minister for Finance to the Minister for Communications, Energy and Natural Resources.""

This motion provides that the committee be instructed to consider the Committee Stage amendments relating to the introduction of new sections to the Markets in Financial Instruments and Miscellaneous Provisions Bill 2007 that I will present shortly. The amendments have already been made available to the House and I consider them to be highly important. I will now outline the main features of my package of amendments.

On the repeal of sections 9 and 10 of the Insurance Act 1936, representatives of the insurance industry have indicated some concerns that they have regarding these two provisions and how they are having a negative impact on the operation of international companies in Ireland. For example, under section 9 a person returning to Ireland from outside the EU, who continues to contribute to a savings product structured as a life insurance policy which he had established in his former country of residence, is at risk of committing an offence. Under section 10 there is a possible negative impact for international companies who wish to put together group-wide insurance policies such as professional indemnity insurance. The Department, in consultation with the Financial Regulator, has reviewed the position and it has been agreed that the provisions have no relevance in the current business environment and should be repealed.

It is proposed to table an amendment to insert a new section 19 in the Bill. I have indicated on several occasions previously my intention to introduce a regulatory regime for non-deposit taking lenders. Under the proposed changes, all non-deposit taking lenders engaged in retail lending will be brought within the Financial Regulator's authorisation and ongoing supervision regime by way of an amendment to Part V of the Central Bank Act 1997. An authorisation from the Financial Regulator will be required for any firm whose business includes lending to the public, that is, to individuals and to small firms. Home reversion providers, who provide funds in exchange for a future interest in property, will also be included in this regime.

It was originally intended to address the regulation of this sector later this year in the contexts of the Third Money Laundering Directive and the draft Directive on Credit Agreements for Consumers, both of which would require some form of regulation or monitoring of all credit providers. However, there have been growing concerns that because some firms are not subject to specific regulation, their lending activities fall outside the scope of the Financial Regulator's consumer protection code. As a result, borrowers from these firms, which include those in the sub-prime consumer credit and mortgage lending markets, do not benefit from the additional safeguards which that code provides. I decided therefore to avail of the opportunity presented by this Bill to remedy this shortcoming as a matter of urgency.

Part V of the Central Bank Act 1997 provides a framework for the authorisation and supervision of regulated businesses such as bureaux de change and money transmitters. The amendments will add home reversion and retail credit to these regulated activities. It will also introduce some necessary additional powers for the Financial Regulator. These additional powers are needed to take account of the fact that there is a wider consumer dimension to loans and mortgages than there is to money changing and transmission.

The amendment I now introduce is a technical amendment, in line with a recommendation of the Oireachtas Joint Committee on Finance and the Public Service, which will allow the disclosure, under the terms of the Freedom of Information Act, of confidential information obtained by a person while performing duties as a member of the board or a member of staff of Ordnance Survey Ireland, OSI, or an adviser or a consultant to OSI. Ordnance Survey Ireland is already subject to FOI — as a body listed in the First Schedule of the FOI Act 1997 by virtue of the FOI Act 1997 (Prescribed Bodies) Regulations 2000.

It is also intended to introduce amendments to the Investor Compensation Act 1998. This Act had a network of legal cross-references to the pre-MiFID regime, namely, the Stock Exchange Act 1995 and the Investment Intermediaries Act 1995. With the repeal of the Stock Exchange Act and the Investment Intermediaries Act being disapplied to MiFID firms, it is necessary to ‘re-wire' the legal cross-references from the Investor Compensation Act to the new MiFID regime. Some amendments are also required to take account of the transposition of the Insurance Mediation Directive in 2005 and to deal with some technical difficulties experienced by the Investor Compensation Company Limited, the ICCL, in administering the investor compensation scheme.

The National Pensions Reserve Fund Act provides in section 18(2) for the payment of 1% of gross national product, GNP, annually from the Central Fund to the National Pensions Reserve Fund. It is proposed to amend the definition of GNP in that Act for the sake of clarity to confirm that the statutory annual payment into the National Pensions Reserve Fund is 1% of the figure for GNP published in the budget book. This is a technical amendment to avoid doubt. It will have no effect on the amount of the annual contribution to the National Pensions Reserve Fund, which will continue to be 1% of gross national product as estimated at the time of the budget.

Responsibility for the oversight and funding of Ordnance Survey Ireland is being transferred from the Minister for Finance to the Minister for Communications, Energy and Natural Resources. This transfer was one of the key recommendations emanating from a value for money and policy review of the grant-in-aid to Ordnance Survey Ireland last autumn. The Department of Communications, Energy and Natural Resources already oversees the Geological Survey and, arising from its core functions, has the structures and expertise required to monitor the activities of commercial State-sponsored bodies. All parties, including OSI, are amenable to the transfer.

It is not feasible to effect the new arrangement by way of the usual transfer of functions order. Because the OSI was statutorily established under the aegis of the Minister for Finance, the existing legislation does not provide for the usual statutory consents of the Minister for Finance in such matters as the level of annual grant-in-aid, the number and remuneration levels of staff, etc. Accordingly, primary legislation is now being brought forward to effect this proposed transfer.

This has been a necessarily brief overview of the additional policy proposals I shall bring forward by way of Committee Stage amendments. I shall also introduce some minor technical amendments to the Bill as published and I would not expect that Deputies would have any major difficulties with them.

I propose to share time with Deputy O'Donnell.

Is that agreed? Agreed.

I welcome the additional amendments the Minister is taking the opportunity to add here. It is important that non-deposit taking lenders would be subject to regulation. There is no doubt problems exist in regard to such institutions, not least in terms of whether they look properly at the suitability of the clients to whom they are lending. Will the Minister indicate the scale of regulation he envisages for these non-deposit taking lenders?

Some non-deposit lenders are in the business of securitising loans and selling them on to others. There has been a concern that this business may lead to something of a moral hazard in that lenders may take on debt where it does not really suit a particular individual but this is of little enough concern to such lenders once they can sell on the debt to someone else. This has been at the core of the sub-prime lending problem and how it became contagious right across the system.

When we get to Committee Stage it is important we ensure there is authorisation in terms of the fitness of persons to do the work, that they have proper liquidity and so on, but also that there are real tests about the suitability of the product when they are lending. This is equally true of home reversion schemes where there can be over-selling of products to persons who perhaps do not really understand what they are getting involved in or the suitability of the products for their needs. I hope the Minister will introduce a regulation that goes beyond simple authorisation but will also provide some obligations in terms of consumer protection, which is important.

Regarding the changes to the Freedom of Information Act, I cannot recall the report of the Oireachtas Joint Committee on Finance and the Public Service to which the Minister referred. I must have nodded off while that report was going through.

Given the Deputy's particular interest in that area, I am most surprised.

My recollection of the committee's recommendations on freedom of information——

It was a matter of constant criticism.

——is they were far more radical than some small change in regard to Ordnance Survey Ireland. If memory serves me, issues arose in regard to the appeal fees, for instance, and other core issues going to the heart of the adequacy of freedom of information legislation and a desire by many to see some of the recent additions modified. The aim was that, in effect, we should return to the original intention of the Freedom of Information Act when it was introduced. I am sure the Minister will have the report to show me where we signed up to whatever prompted this amendment.

I do not have any problem with the change to the Investor Compensation Act, which is for the better. However, again I return to the issue I raised with the Minister recently, namely, the deafening silence from him on the deposit protection scheme. In the UK, initially 100% deposit protection was provided to depositors in Northern Rock and for depositors in all other institutions up to the date when the protection scheme was announced. The level was set at £35,000, which is more than double our level, and there is talk of raising the amount to £100,000, which would be €150,000. Our rate would be only one seventh of that. At a time of financial crisis when people are worried about the protection of their savings, the incentive to deposit with a UK regulated institution that has this level of protection which is not available in Irish institutions will be quite tempting. If the hiatus continues for too long, as there is far greater protection for savers in Britain than in Ireland, one would expect to see some movement of savings, which could not be a good thing or be greeted with equanimity. As I stated yesterday during Question Time, there is a need for the Minister to move ahead of what other European colleagues might think appropriate and perhaps to enter discussions with the British authorities, who are not part of the eurozone but whose protection schemes would have significant influence on depositors given that Irish depositors may deposit savings in many British institutions established here.

I do not understand the Minister's reticence to move forward outside a collectively agreed EU process. I understand the argument that the Chancellor of the Exchequer of the time perhaps over-reacted and offered protection at the taxpayers' expense that was greater than might have been prudent, although he seems to be rowing back from that position. It is important that Ireland in some way keeps an eye on this issue to ensure we establish a proper deposit protection scheme.

Given the Minister is taking the opportunity to tidy up issues, I am surprised no new thinking is coming forward with regard to credit unions, the deposit protection scheme of which remains subject to question. I realise this is a political issue. Credit unions have been run in a certain way and people want to preserve their ethos. On Committee Stage I will be interested to hear of the Minister's progress in achieving some agreed structure which could offer transparency on savings protection. Issues arise with regard to transparency which we need to sort out, given the current climate.

I do not understand what is happening with regard to the National Pensions Reserve Fund. On the face of it, the Minister seems to be moving from a GDP to a GNP base. However, as he also states that this will make no difference to the contribution, this cannot be the explanation because GDP is substantially higher than GNP. The Minister might circulate a note to explain what is the change as it is not clear from the explanatory note offered, and there is nothing but the Minister's assurance that there will be no change.

I was interested in the value for money review referred to by the Minister. While the joint committee is not yet in place and I have not examined this review, I know it is the Minister's intention that value for money reviews will be laid before the committees. May we have access to this value for money review so we can at least understand the context within which this recommendation is being made? The value for money review tool is an important one but it has been underutilised by the Government. When there is a report of this nature, I will be keen to have access to it, particularly if we are making decisions on the back of it that will apply for some time.

I welcome the Minister's amendments.

I welcome the general thrust of the amendments. My colleague, Deputy Richard Bruton, has touched on most issues, although I would like to have clarification as to what is being paid to the pension fund.

The Minister is considering regulation of the sub-prime market, which is welcome. However, the Minister's speech gives no sign that prudential measures are being introduced for this area. My understanding is that this area might be regulated when the Minister returns to deal with the Central Bank Act 1997. Nevertheless, it is important that a level of comfort is given to borrowers.

The section being amended, which refers to resources, is not specific enough in terms of prudential measures. While there is an argument that this is not as necessary for institutions which do not hold deposits, this does not stand up in light of the Northern Rock case. When major difficulties arose in the sub-prime market in the US towards the end of July, this indirectly led to Northern Rock getting into trouble. Northern Rock's business predominantly concerned deposits but it was also in the mortgage business and would go to the interbank market to borrow funds to lend on to mortgage holders. However, when banks became wary due to the situation in the sub-prime market, this led to a crisis of confidence and money was no longer available on the interbank market for Northern Rock to borrow. Hence, the bank got into trouble. It is extremely important that there is prudential measures to ensure the financial base of the sub-prime market is strong, given the doubts with regard to the type of loans sub-prime institutions are making.

When the Minister brought the Bill through the Dáil on Second Stage in early October, he stated he was examining the deposit protection scheme and that it was being reviewed at European level. The UK is taking its own strides in terms of introducing a higher level of mortgage protection. We should follow suit and move ahead of Europe given that this is a very important issue.

SI 20 is the main statutory instrument in this regard, although there is also an amended statutory instrument, SI 663. Regulation 20 states that the Central Bank should introduce a code of conduct to allow the various investment houses throughout Ireland to know how to implement the Markets in Financial Instruments Directive. The word "may" is used but it should read "must" or "shall". The biggest worry in the industry is the lack of knowledge as to how it is supposed to implement the directive. The Central Bank is relying on the European model but it is important that we would reconsider the Bill with a view to amending the statutory instrument, if that is in order, to make it an obligation for the Central Bank and Financial Regulator to produce a specific code of conduct for all investment houses.

Section 123 of the original SI 60 deals with regulation of cross-border activities. For an investment house that has no branch in Ireland, the Financial Regulator relies on the home country to provide assurances on issues of financial regulation. However, if the investment house has a branch in Ireland, it must provide further requirements and is subject not only to the code of conduct but also to the money laundering regulations and it must provide details in respect of its investment compensation scheme. That does not appear to be a requirement for an institution based in another country which does not have a branch in Ireland. I am concerned a situation will arise where the Financial Regulator will have no inspection or supervisory role in dealing with investment houses trading in Ireland which might be doing significantly more business than a bank with a branch here. It is an issue we must consider. I understand the necessary powers may be available under Part V of the Central Bank Act 1997. It is important that these powers are copperfastened, either through further amendment to the Bill or the introduction of regulations. This would provide comfort to customers of such institutions.

The purpose of the Bill is to protect consumers and the changes I seek would provide additional consumer protection. It is vital that the deposit protection limit is increased. Customers of sub-prime lenders and companies which trade through the Internet and do not have branches here must be offered protection and assurance that the institution from which they are borrowing is sound. We do not want a sub-prime lender creating panic in the interbank market or causing a recurrence of the problem experienced by Northern Rock.

While, on balance, this is a good Bill, I ask the Minister to consider the issues I have raised. I look forward to exploring them further on Committee Stage.

During the debate on Second Stage on 2 October I repeated a question I put to the Minister last year, namely, whether he proposed to introduce regulation of banks and financial institutions which do not take deposits but choose instead to concentrate on lending. Last year, he vigorously defended his decision to exclude these institutions from the regulatory framework. I welcome his change of heart on this matter following the crisis in the sub-prime market, the credit crunch and the collapse in the share price of Northern Rock. Through the amendments tabled today, his decision to seek to extend the scope of the Financial Regulator's supervisory regime to the considerable number of financial institutions currently operating outside the regulatory framework is an important step forward.

Every time one turns on the television a golden blonde 60 or 70 year old man or woman, speaking in quiet tones, invites viewers to re-finance by borrowing from the equity of their homes. Radio listeners are exhorted in the same way. These advertisements offer to sell couples aged in their 50s, 60s or 70s who have paid off the mortgage on their family home a loan based on a percentage of the value of their home. The technical term used by the Minister for this type of loan is a reversion product. Most members of the public do not know what is meant when they hear the term "home reversion loan".

We should discuss the experiences of members of the public in this regard. Given rising costs, medical bills, the chaos in the health service and other costs, many of those who hear nice people from a financial institution offering them a loan on the strength of the value of their home are tempted to use this facility to fund important costs. Alternatively, they may be tempted to give their children a dowry to help them into the property market.

The hidden side of this practice is that many of the financial products offered to older people are extraordinarily costly and extremely lucrative for the financial institutions selling them. Those who buy them do not see the small print in these types of deals, although, to give them their due, many solicitors will advise families and couples that particular products are expensive and ask whether they know what they are getting themselves into. Having decided to regulate this sector, as I repeatedly advocated in the committee on finance and the public service in the previous Dáil, will the Minister now call a spade a spade? Will the Financial Regulator also use soothing advertisements featuring mature people with lovely blonde hair to inform the public that the costs and conditionality attached to these types of loans can be very expensive and asking people to consult family, take advice and give the matter careful consideration before taking out such a loan? This is an important question. With the hiving off of agencies such as the Financial Services Regulator from full Oireachtas scrutiny, it is difficult for the Opposition and Government backbench Deputies to find out the position in this regard.

Will all sub-prime lenders be covered by the legislation? As has been noted, different types of sub-prime lenders operate in the Irish market. Some of them are based outside the country but have banking or other operations here. Their advertisements do not appear to be subject to any kind of code of practice or regulation. On Second Stage, I asked the Minister whether he had discussed with the Governor of the Central Bank the issue of employees of sub-prime lenders going from door to door offering loans in local authority estates and areas where affordable housing has been sold. People who have bought a local authority house or paid off the first four or five years of the loan for an affordable home will probably have seen the value of their properties rise. The leaflets constantly pushed through letter-boxes are like those from fast food outlets selling pizza. Sub-prime and other lenders offer easy, seductive financial products to people who want to borrow to maintain a certain lifestyle.

The original mortgage taken out via a local authority on an affordable house could be €180,000, whereas the property may be worth €250,000. Sub-prime lenders will step in to offer a fresh loans of perhaps €220,000, with which borrowers can wrap up other borrowings such as a car loan or credit card debts and may even include the legal fees associated with the financing package. The loan is offered at a premium rate of interest and the borrower must pay charges, particularly if he or she defaults, at the highest rates. This problem should be nipped in the bud.

As I have stated on other occasions, bankers act like the masters of the universe. While they may tell us how everything should be, irresponsible lending will have consequences for the economy and the reputation of the lending and financial services industry which provides many of the well-paid jobs we wish to retain. Is the Minister in discussions with the Governor of the Central Bank and Financial Regulator on the problem I describe? As he is aware, borrowing for domestic credit here is enormous compared to most European countries.

The legislation does not include provisions on financial institutions such as credit unions which have been sold financial derivatives, including CFDs, by financial firms, in particular, a number of stockbroking firms. What is the position in this regard?

Is the regulator keeping an eye on what credit unions and the Central Bank have been buying to ensure their purchases are taken into account if they are affected by the purchase of financial derivatives? Credit unions are a significant boon to people who otherwise would not have access to credit. A number of financial institutions, such as stockbrokers, make healthy profits through selling financial products for investment purposes to organisations like credit unions. What is the regulatory situation in that regard? Has the Tánaiste spoken to the Central Bank, the Irish Stock Exchange or brokers, some of whom do a great deal of business with the Government?

Last year, more than 50% of transactions on the Stock Exchange were in contracts for difference. The Tánaiste pulled back from putting 1% stamp duty on CFDs. Two years ago, he stated that, at the request of the financial services industry and stockbroking firms in particular, there was a considerable boom in the sale of CFDs, essentially a form of casino gambling for people who want to gamble on shares rising or falling. There is no regulation in this respect. Many individuals have lost more than €1 million through CFD-type gambling as a result of the change from a bear market to a bull market. Has the Tánaiste considered this matter since the previous debate on the Bill?

All parties in the House want the financial services industry to grow and strengthen because it is a source of good quality graduate jobs. Our ability to stay ahead of the curve is based on reputation and losing our reputation by allowing any of these schemes to operate here will produce incredible damage. Some American firms in the IFSC have reduced the volume of their CFD activities. In the previous debate, I quoted a leading banker at one of our largest banks as stating that the bank was no longer advising individuals to get involved in this area of gambling. The Tánaiste will recall how Mr. Nick Leeson was interviewed on a number of radio shows and television shows while fronting Paddy Power's spread betting. What is the difference between spread betting with Paddy Power and betting on CFDs? Contracts for difference conducted through the IFSC and brokers have the capacity to lose people significant amounts rapidly.

What inquiries has the Department of Finance made into what has been occurring? Some of the people playing these markets are high rollers. They have no problems because they are the type of people who invest in tax breaks. They have a great deal of cash because they do not seem to pay tax. I am not worried about them, but about those who are drawn in by the lure of easy money via the home computer screen and who find that the small print reads they may lose as well as win.

I welcome the Tánaiste's amendments, but they do not go far enough. On Committee Stage, perhaps we can draw out the type of regulatory environment being proposed. Does the Tánaiste propose to leave the additional regulation to the Financial Regulator or will his Department and the Central Bank offer guidance? A political decision was made to leave the regulation of this area with the Department and the Central Bank because the latter is meant to look after the prudential aspect to ensure that banks are not forced to close down and that there are no runs on them. Northern Rock, which operated in Ireland as an Internet bank effectively, was guaranteed by the Bank of England and the British Chancellor.

I have asked the Tánaiste a number of times about the situation in respect of compensation schemes for savers. Has he had time to collect his thoughts on how he sees those schemes developing? In the UK, the level of compensation offered is higher than here, where it is limited. What will happen if there is a run on a bank?

In the Tánaiste's pre-budget outlook tomorrow, will he vary the definition of GNP or will it be the definition contained in the national development plan? Are there implications for the outlook?

I welcome the opportunity to speak on this Bill, part of an EU-wide regulation of financial services. Undoubtedly, one of the great success stories of the past 20 years has been the IFSC. Its success has been good for our economy and for the many people who work there daily. The financial services industry is built on confidence, trust and reputation and it is important for us that it is regulated sufficiently. A good reputation is the guarantee of future expansion and growth. Recently, the reputation of the UK banking industry was put under the microscope. Confidence in it was severely dented due to the Northern Rock case, which was spoken of by Deputy O'Donnell and highlights the threat we could face without proper regulation. We must learn from this case and move forward.

We must enhance the depositors' protection scheme for savers and depositors in financial institutions. Our scheme is limited to 10% of deposits with an upper limit of €20,000, which is out of sync with the UK and other European countries. We must know how to be balanced in protecting depositors and ensure that banks are not encouraged to take inappropriate risks. I welcome the EU's examination of our deposit protection scheme with a view to advising us on necessary changes.

I have significant concerns about sub-prime lending. I know of sales people who knock on doors, primarily in local authority areas, and attempt to persuade people to roll up their loans and remortgage their homes for high levels of debt. Preying on the vulnerable and getting them to take out loans is unacceptable. There are cases of applicants lying on their application forms about their capacity to make repayments in order to secure financing. It is estimated that the Irish sub-prime lending market is worth more than €1 billion. The Financial Regulator must take more control of this market to ensure the robustness of operations and that selling practices are proper.

I am aware that provision is being made in the Bill to ensure people's rights are protected. They need to know the full facts when they enter into sub-prime lending contracts. A review is needed of the regulation of complex securities and rating agencies because the lack of transparency in this process and the uncertain valuation of securities is at the heart of the current credit crunch.

Over the past number of years, many Irish people have been enticed at property exhibitions into buying second properties abroad by freeing up equity in their homes. The question arises as to whether those selling properties are providing buyers with the consumer information they require. These properties are sold with rent guarantees even though it is obvious that the wages in the countries concerned cannot support the promised rents.

The challenges faced by the economy are more serious than the Government admits. The Minister recently advised that the budget deficit will be €1 billion, which is much larger than previously expected. I hope we can be more prudent with our money while continuing to look after the neediest, such as those with medical cards and the thousands of homeless people throughout the country.

Important lessons need to be learned from the recent developments in global financial markets. The economy is slowing and we face economic challenges. We need to ensure that warning signs are heeded in the future. Therefore, while I welcome the Bill, I hope the Minister will take account of the issues I raised.

I thank Deputies for their contributions regarding the motion and the proposed amendments. It is important that I bring forward legislation to regulate the sub-prime lending sector at the earliest opportunity. However, it is not possible to legislate for every possible interaction between a customer and a financial institution. Indeed, attempting to do so could stifle innovation and competition in the market to the detriment of consumers. Instead, the Central Bank Acts and other Acts empower the Financial Regulator to prescribe codes of practice for regulated financial service providers.

The consumer protection code sets out both general principles and detailed rules on the conduct of business by financial institutions. The principles require that they act fairly, honestly and professionally in the best interest of customers. Detailed rules cover matters such as advertising, identifying customer needs and providing information. The Financial Regulator can investigate breaches of the code and impose sanctions under Part III of the Central Bank Act 1942. The process of authorisation means that retail credit and home reversion firms will become regulated financial service providers for the purposes of the code.

The Bill and its amendments can be discussed further on Committee Stage in recognition of the requirement to activate some of its provisions from 1 November to coincide with the coming into effect of the markets in financial instruments directive.

I can arrange for Deputy Bruton to be provided with a copy of each of the reports to which the amendments concerning Ordnance Survey Ireland refer, namely, the report to the Joint Committee on Finance and the Public Service on disclosure under the terms of the Freedom of Information Act and the value-for-money and policy review of Ordnance Survey Ireland.

No sooner said than done.

I always knew Deputy Bruton was amused by important documentation.

Regarding the issue raised by Deputy O'Donnell on non-deposit taking lenders, it is important to point out that they do not hold deposits taken from the public. The question of prudential regulation, therefore, does not arise in that respect. We are regulating their dealings with their customers and, as I set out in my opening remarks, by introducing a new section 19 we are requiring them to be brought within the Financial Regulator's authorisation and ongoing supervisory regime through an amendment to Part V of the Central Bank Act.

Does the Tánaiste acknowledge my point in regard to the impact of the sub-prime market on the inter-bank market? I accept they are not deposit holders but I am concerned given that a lack of confidence in the sub-prime market effectively led to a restriction on money supply through the inter-bank market to Northern Rock.

A problem certainly arose in Britain in that respect but it was not an issue in Ireland. In respect of the impact of the sub-prime market on global markets, it is important to note that the sub-prime market constitutes 15% of the US market but less than 1% here.

From a practical point of view, it is important that home reversion products and activities such as lending on the basis of acquiring future equity are brought within the existing regulatory regime of authorisations, standards and codes that apply to all other financial service providers. The Irish financial services industry enjoys a good reputation and the regulatory regime works. It is important that we take the opportunity provided by this Bill to do what I was going to do in the context of the enactment of the third money laundering directive. That is the purpose of the additional amendments which are not germane to the Bill and require the passing of this motion to come within the Bill's ambit.

Regarding the question raised by Deputy Bruton on the National Pensions Reserve Fund and GNP definitions, the custom practised in the Department in respect of the annual contribution to the fund is to consider the GNP figure in the budget each year and to send an amount equivalent to 1% to the fund. That will continue to be the practice after the enactment of this Bill, so the actual contribution to the National Pensions Reserve Fund will not change as a result of this reform. We get the GDP figure from the CSO each year and derive a GNP figure in-house by using a methodology approved by the CSO. The actual definition in the legislation as it stands is somewhat convoluted and obscure, so we are introducing this provision as a technical measure for the sake of legal clarity and simplification. It will not change what actually happens each year.

The concerns expressed by Deputy Burton regarding contracts for difference will be addressed with the introduction of regulations from 1 November under the markets in financial instruments regime because they are classified as financial instruments under Schedule 1, part 3, paragraph 9 of SI 60 of 2007. Therefore, financial spread betting on, for example, specific shares, bonds or indices of shares will become a regulated activity from that date and firms providing these services will have to be authorised. The enactment of this Bill provides us with the regulatory cover for those activities if we proceed as suggested.

Question put and agreed to.