As Seanad amendments Nos. 1, 2, 7 and 8 are related, they may be discussed together by agreement.
Seanad amendment No. 1:
Section 4: In page 19, line 30, to delete "(wherever situated and regardless" and substitute "wherever situated (regardless"
National Asset Management Agency Bill 2009: From the Seanad.
The Dáil went into Committee to consider amendments from the Seanad.
Can I ask the Minister to explain the purposes of these amendments and the thinking behind them? We were presented this morning with 37 amendments to the National Asset Management Agency Bill 2009, including the Schedules to the Bill, along with another revised or amended version of the Bill. We have not received an updated explanatory memorandum from the Minister or his officials. Deputies on all sides of the House have repeatedly said that this Bill, which will cost €54 billion, represents the most significant financial decision the Dáil will ever make, outside the annual budgetary process. We have not been told who the amendments were moved by, or what the purposes of them are. I ask the Minister to set out in some detail the purposes of these amendments. How did they arise?
The Members of this Parliament are not being treated as well as contestants on a television quiz show. We would get more information if we were participants in a reality show. The officials have given the Opposition — certainly the Labour Party — no information about these amendments. It is a disgrace and in total contravention of the requirements of democracy. Some of the amendments relate to the valuation board, which will be responsible for valuing NAMA's assets. It will have a hugely important role in determining how NAMA performs and behaves. Some of the amendments are so confused, particularly the ones dealing with people employed or acting within NAMA who commit an offence, that they are a dog's breakfast. That is the only way I can describe it. Three amendments on the later pages are entirely contradictory with each other and with the sections 220 and 221 to which they relate. We are being asked to accept this without any information. If the Minister now has any information available that he could give to the Members of the Dáil that would be most welcome. It is disgraceful that we have had no briefing on these amendments.
Does the Minister wish to intervene?
Perhaps I could assist Deputy Burton. Does she have the grouping of the amendments?
We have just got that now.
We are discussing amendments Nos. 1, 2, 7 and 8.
Can we take a moment to consider what the grouping is likely to mean?
There are ten groups of amendments before the House that relate to amendments accepted in Seanad Éireann. Under the procedures of this House, subject to the ruling of the Leas-Cheann Comhairle, each amendment is considered separately.
I have five groups of amendments as follows: Nos. 1, 2, 7, and 8; Nos. 4 to 6, inclusive; Nos. 11 to 13, inclusive, and 15; Nos. 17 to 23, inclusive; and Nos. 24 to 37, inclusive. All others are to be discussed individually.
Yes and there are five individual amendments.
They are not grouped.
They are not grouped so there are ten substantive items of discussion.
The first item of discussion comprises minor technical amendments. The second substantive item relates to the question of sustainable planning, which was an amendment the Labour Party sought in Dáil Éireann and has now been inserted at section 12 of the Bill. The third substantive heading relates to the provision of a finance committee for the board as well as the risk and audit committees. The fourth——
I ask the Minister to refer us to the numbers of the amendments.
I will. The minor technical amendments, which comprise the first item for discussion, are Nos. 1, 2, 7 and 8. The Deputy should have a paper with this detail before her. The second amendment on sustainable planning is amendment No. 3. The third item, which provides for a finance committee for the board of the agency, comprises amendments Nos. 4 to 6, inclusive. The fourth amendment on qualifications for membership of the valuation panel is amendment No. 9. The fifth amendment on laying the lending guidelines before the Houses of the Oireachtas is amendment No. 10. The sixth item comprising amendments Nos. 11 to 13, inclusive, and No. 15, affecting section 222 and the Schedule, relates to the whistleblower legislation.
That is the most significant set of amendments. It seems to contradict——
We are having a general debate about procedure for the moment.
These amendments——
I ask the Deputy to allow the Chair to speak. I am anxious that we would have a general discussion in order to agree the format of taking matters for the day. On that basis, I call Deputy Burton.
These amendments constitute amendments to section 222 and appear to seriously contradict section 221, about which we had a brief discussion. They also amend the Schedule. They are highly contradictory with each other because they seem to impose protection for whistleblowers as well as penalties. They also contradict part of section 221. Does the Minister have a memorandum of explanation to give us on these sections? These are substantive amendments and are extraordinarily confusing. They will be a minefield and great for the lawyers, who will dine out on what is put before us. It is little more than a dog's breakfast of a set of amendments.
Given the timeframe in which this came back before the House, we have had little or no time to consider the amendments. Many of the major Dáil Report Stage amendments were never discussed, including the subordinated debt, about which we hold very strong views. Some €7 billion over market value is being paid, only €2.7 billion of which is subordinated. We feel it should be €7 billion. The taxpayer is taking the bulk of the risk. On the issue of the Comptroller and Auditor General effectively reporting to an Oireachtas committee, we consider that the Oireachtas committee should have been put on a statutory footing. We had tabled amendment No. 43 on the register of bank assets, which will be a big issue when NAMA becomes operational.
There is also the issue of security and performing loans going into NAMA. If there is any further activity by those individuals in dealing with mainstream banks they will have no security with which to operate and they may not be able to get loans. We never got to debate in any great depth the issue of the surcharge. The Minister tabled an amendment, which means that a bank levy may never be paid because it is in the form of a surcharge on corporation tax. We had no proper time to debate the issue. Instead of the surcharge being based——
On a point of order, is this the Second Stage speech again?
This is by way of explanation leading up to our amendments.
At the outset I determined that we would have a few minutes on how the debate will proceed because people are getting groupings as we come in. The Chair is getting amendments to amendments and has been advised that there is to be an amendment to an amendment to an amendment. The Chair is finding its way and I am trying to give room to all Deputies to find their way through a difficult and complicated piece of legislation. It is not straightforward as the Deputy will appreciate.
Would the Chair not cede to Deputy Mulcahy to chair this session as the Deputy seems to wish?
The Chair is content to focus on a general overview of the work programme we are covering now. The Minister has very helpfully grouped——
I had not completed the work programme.
I will allow the other Deputies and then the Minister to come back in.
I thank the Leas-Cheann Comhairle for his common sense approach. More of that around here would be very much welcomed.
The surcharge is based on a surcharge on corporation tax that may never be payable because the banks will have losses forward. It should have been based on operating profits before adjustments for any losses forward. It should be on the basis of a charge rather than a tax surcharge. We never got to debate it properly. It is important we put it on the record of the House.
We have tabled amendments to the Minister's amendments that came from the Seanad. Amendment No. 9 in section 119 deals with the qualifications for membership of the valuation panel. We consider that should be referred for consideration before an Oireachtas committee. It is regrettable that the Minister has not put the Oireachtas committee on a statutory footing. Anything requiring funding of the order of €54 billion would require that.
Regarding amendment No. 10 in section 210, we welcome that the Minister has put into the legislation guidelines for credit flow but they are not sufficiently detailed. We have tabled an amendment covering what should be included in those guidelines. We have added a further area covering credit for small businesses and mortgage holders.
Very good.
The issue of protection in terms of the whistleblower elements of the legislation——
I ask the Deputy to keep his overarching comments brief.
We are reaching the conclusion of the debate on the National Asset Management Agency Bill. My difficulty is that many of the sections that are very relevant have never been properly discussed in this Chamber. We should be given time to discuss those areas in some detail again.
I call Deputy Morgan for a brief general comment.
On Report Stage of the Bill in this House, we got through only a small number of the more than 200 amendments. In other words, we did not have an opportunity to debate the proposals sufficiently, and today's Order of Business ensures that we will not have time to debate the Seanad amendments adequately. Given that €54 billion of taxpayers' money is involved, it is critical that this House should have an opportunity adequately to scrutinise, debate and, above all, amend the legislation. We will all have to live with the consequences of these measures for a long time.
Will the Leas-Cheann Comhairle confirm that we will now proceed to deal with the detail of the amendments?
Yes. As soon as the Minister concludes his contribution, we will proceed to the first group of amendments.
I am aware that Members wish to focus on various general and specific matters. Before proceeding, I remind Members of the proposal in some quarters for the abolition of the Seanad. In that regard, it should be noted that Seanad Éireann was able in a much shorter time than the Dáil to move through all Stages, with each section considered in detail in committee, including——
It is not appropriate for Members of this House to pass measurement or judgment on the other House or how it works.
I stand corrected.
The sixth item is the group comprising amendments Nos. 11 to 13, inclusive, and 15, relating to the whistleblower provisions. I will be pleased to address the concerns expressed by Deputy Burton as to how these provisions relate to another section. Deputy O'Donnell has pointed to the omission of a reference to the NAMA group entity in these provisions. I am willing to accept an amendment in that regard.
The seventh item is amendment No. 14 which relates to the Irish language. Deputies will recall that we agreed not to provide for simultaneous publication of an Irish language version of the Bill. However, an amendment was accepted in the Seanad to ensure that the Irish language version will be published as quickly as possible. The eighth item is amendment No. 16 which relates to the Central Bank provisions and underlines the independence of that institution. This measure was suggested by the European Central Bank on the basis of its analysis of the provisions.
The ninth item is the group comprising amendments Nos. 17 to 23, inclusive, which relate to planning issues. The Bill as passed by the Dáil includes, under one of the Schedules dealing with planning, the scope for NAMA to extend the duration of planning permissions. The Minister for the Environment, Heritage and Local Government has similar legislation before the other House and the opportunity was taken to introduce a substantial harmony between the two items of legislation. The tenth item is the group comprising amendments Nos. 24 to 37, inclusive, which relate to the 80% windfall tax on profits arising from rezonings.
These are the ten items that fall for discussion in the House today.
We will now focus on the first group, comprising amendments Nos. 1, 2, 7 and 8.
Amendments Nos. 1, 2, 7 and 8 are minor technical amendments introduced on Committee Stage in the Seanad for clarification purposes. Amendments Nos. 1 and 2 clarify the definition of "development" and remove any doubt that land and development loans given by participating institutions in respect of developments outside the State are eligible for transfer. Amendment No. 7 was introduced to clarify that the undertaking required of applicant institutions is to obtain consents in accordance with any applicable law which may have particular relevance to subsidiaries incorporated in foreign jurisdictions. Amendment No. 8 clarifies that where a subsidiary is bound by a foreign law which would prevent it from complying with an obligation under this legislation, it is not required to act illegally in order to comply with the obligation.
We have no issue with these technical amendments.
Will the Minister outline the implications of these provisions for individuals or institutions subject to the NAMA process in regard to items or assets that are offshore? I raised this issue in the course of the debate and have not yet received a clear response. If I understand the Minister correctly, these provisions are intended to cater for a variety of situations, both onshore and offshore, within the scope of the legislation. It has been extensively reported in the media, as I am sure the Minister and his officials are aware, that various developers and perhaps also financial institutions have undertaken significant movement of assets in an effort to protect them. For example, there are indications that viable and positive assets have been segregated and, in some cases, transferred to spouses and other family members.
These sections deal with the application for designation of an institution, that is, the application by a credit institution or bank to partake in the NAMA process. What powers will the Minister have arising from these provisions to address the reality that in the 14 months since the institution of the guarantee to financial institutions, developers and financial bodies have been preparing their assets in anticipation of the NAMA process? For example, we saw in the High Court and Supreme Court cases in regard to Liam Carroll's Zoe Group that only 30 or 40 of the 200 or 300 companies in that group were subject to proceedings. Is it the case, under these provisions, that developers who are part of the NAMA process may only have part of their empires committed to NAMA, and that where they have been successful in transferring assets to spouses or other family members, that those assets will fall outside the NAMA process and will not be available as collateral for outstanding liabilities? I have not received a satisfactory answer from the Minister on this point.
In regard to designated credit institutions and their offshore activities, we are aware that some Irish institutions have made extensive use of offshore banking facilities. For instance, Mr. McErlean, the former internal auditor to Allied Irish Banks, described extensive transactions in the Cayman Islands and other tax havens. What will be the status of those types of activities once the credit institutions come within the remit of NAMA, as set out in these sections? The public has an entitlement to be informed by the Minister regarding his oversight of such activities, which were central to the failure of the banking and construction systems. Those involved in the operation of NAMA must be in a position to command this information. I would like an explanation and a detailed commentary from the Minister on these matters.
I remind Members that we must deal with the narrow confines of the Seanad amendments as much as possible, although I am willing to allow some leeway.
I agree with Deputy O'Donnell that these are technical amendments, although I have some concerns.
They are not solely technical but relate also to the designation of financial institutions.
I very much share Deputy Burton's concern about this matter, given the potential to draw many implications, but later amendments are more important and I do not propose to delay the House.
The amendments deal with the designation of assets in participating institutions and, therefore, their purpose is to clarify as a matter of legal definition what assets are transferred to the agency by a participating institution.
Deputy Burton raised two entirely separate questions. One relates to the persons who owe money to participating institutions and she suggested by inference they were preparing for NAMA. They have no function in this regard because the institutions are preparing the assets for transfer, not the borrowers. The Deputy is rightly and properly concerned that some of the borrowers may be structuring their assets and internal affairs to minimise their exposure in respect of the liabilities they owe to the institutions. Although it does not arise under these amendments, we have gone in the legislation as far as we can go under the Constitution to ensure when the assets are transferred to NAMA, the agency has powers to deal with such borrowers.
With regard to family matters, section 211 permits NAMA to apply to the courts to set aside the disposition of an asset which was designed "to defeat, delay or hinder the acquisition of NAMA or a NAMA group entity of an eligible bank asset, or to impair the value of a...bank asset or any rights . . . that NAMA or the NAMA group entity would have acquired or increased...[but] for that disposition". It empowers the court to set aside that disposition. Ample provision is made in the legislation for the avoidance of transactions designed by borrowers to evade compliance with their obligations.
The other issue raised by the Deputy is the offshore operations of banks. The word "offshore" is used but the three principal banks in Ireland all have operations in other jurisdictions, which are fully regulated in those jurisdictions and which are part of the ordinary course of banking in them. I am not quite clear on this aspect of what the Deputy is probing, as this does not arise under these amendments. Clearly a designated class of assets will be transferred to NAMA but if the Deputy has information about improprieties in domestic banks in connection with their overseas and external operations, then naturally those matters should be brought to the attention of the regulatory system.
With regard to the designation of assets taken over by NAMA, the Minister mentioned that implicit in the valuation of the loan will be the level of security attaching to it. Has the Minister the authority to take over all the security? Could a bank state it wished to transfer less security, which could result in the value of the loan decreasing accordingly? Has the Minister a veto on deciding the level of security they can provide?
NAMA does.
Could the agency decide to leave certain of the security with the individual institution?
Theoretically it has the power but I cannot envisage its exercise. It is an unlikely position for NAMA to adopt. The agency has an option not to take particular assets and I can see where that could arise.
Has NAMA the legal authority to ensure banks disclose all the security attaching to the loans?
Yes.
How will that be done?
It is provided for in the legislation.
With regard to applications for designation of assets of participating institutions, amendment No. 7 states this will be done "in accordance with any applicable law" while amendment No. 8 states it will be done "subject to any prohibition in any applicable law". Under the legislation, Allied Irish Banks, Bank of Ireland, Anglo Irish Bank and Irish Nationwide Building Society will transfer loans to NAMA. Anglo Irish Bank and INBS will account for €34 billion of the €54 billion being transferred.
The figure is €28 billion.
These banks will be processed first.
They are not being done first.
The top ten to 15 developers listed in the Minister's draft NAMA management plan will be dealt with in the first 30 days and, therefore, possibly by Christmas. According to everything I have heard about Anglo Irish Bank, the top ten to 15 developers were heavily supported by this bank. Is that not so? I do not say the other institutions are not also involved with these developers but Anglo Irish Bank was the developers' bank. It was a development bank. The Minister and I or the people on the main streets of Cahirciveen or Dundalk did not obtain loans from this bank. The top developers in the State, not couples buying a house, secured loans from the bank.
INBS will transfer €8 billion in loans to NAMA. It is a little building society that was set up to enable people to save and purchase a family home in which to live and not to speculate on. Anglo Irish Bank, INBS, their associates and customers used extensive tax avoidance mechanisms onshore through tax breaks that the former Taoiseach, Deputy Bertie Ahern and Mr. Charlie McCreevy gave to them to boost the bubble that has destroyed the economy and offshore in the Isle of Man, to mention one little local offshore island that is heavily involved in assisting persons who wish to avoid and evade tax. What is the meaning of the two amendments, particularly the reference to "prohibition in any applicable law"?
If the little subsidiaries in the dear little Isle of Man say it is prohibited by their law to give information to NAMA, the Revenue or anybody else, will NAMA be forced to accept that and to accept that both the credit institutions they deal with and the customers of the credit institutions with bad loans can say the agency cannot examine their offshore activities in nice little tax havens such as this because the Minister's amendment made provision for acknowledging "prohibition in any applicable law"? This is a problem because securing full disclosure of assets will be critical to whether the agency is taken for the biggest ride ever by those who caused the property bubble to burst or to whether it is capable of securing to the full extent the assets and liabilities, genuinely helping to clean up our banking system and restoring Ireland's reputation. It is a very simple question and I would like a simple answer.
These sections deal with applications for designation as an institution and with the designation of assets. A legal definition of an asset is provided in the Bill. The purpose of that definition is to ensure there is a uniform categorisation of the assets which are transferred to NAMA. The reference to local law must be read in that context.
Deputy Burton raised the question of the Isle of Man. There is a memorandum of understanding between our authorities and those in the Isle of Man on the exchange of information in tax matters.
Not only are Anglo Irish Bank and Irish Nationwide going into the NAMA process but there is also discussion in the media, and this is permissible under the Bill, about the possibility of institutions such as Ulster Bank having assets up to €15 billion parked in some kind of quarantine process which may, at some stage, enter the NAMA process. Given that Ulster Bank is owned by Royal Bank of Scotland and that a number of other institutions are foreign owned, what is the reference to prohibition in "any applicable law"? In my reading of the section it means that when a bank or credit institution applies to join the NAMA scheme it is, correctly, required to supply information and so on. However, the Minister has introduced an amendment to qualify that requirement by taking into account prohibitions in applicable laws. These exist in many jurisdictions where there is banking confidentiality, not to mention tax confidentiality. Such jurisdictions, which are used for tax avoidance and mitigation, specifically have such prohibitions.
This measure reminds us of the special purpose vehicle measure. This kind of stuff is being added to the Bill at this point to limit what NAMA can do to receive full accounting from those institutions which will benefit from the taxpayers' guarantee of €54 billion. Why is the Minister adding more measures to enable applicants to hide behind overseas legislation and to qualify consents?
The amendments are very clear. They are technical.
Technical amendments are fierce important at this stage. Let me tell the Minister that.
There is no conspiracy in my Department. These amendments have been checked by the Attorney General and are viewed as drafting amendments. I said that in good faith in the House.
I will go through the points raised by Deputy Burton, amendment by amendment. First, amendment No. 2 would insert the words "or applicable law" after the word "enactment" in section 4. That simply clarifies that an enactment includes an applicable law because, as we know, an enactment can have subordinate legislation.
Second, amendment No. 7 to section 62 would insert the words "in accordance with any applicable law" after the word "consents". If the applicant requires a consent to any particular step it must be obtained in accordance with the applicable law to that transaction. Under the system of international law and the comity of nations, respect is given by one State to the laws of another. The amendment merely recognises that when consent is required under the law of another State it is obtained in accordance with the applicable law. That seems to me to clarify an issue rather than introduce a matter of materiality.
Third, Deputy Burton's main point refers to amendment No. 8, which would insert the words "subject to any prohibition in any applicable law" in section 63. That amendment clarifies that where subsidiaries are bound by a foreign law which would prevent them from complying with an obligation under this legislation, they are not required to act illegally in order to comply with the obligation. That is a matter of sense. We cannot enact legislation which compels others in other jurisdictions to act illegally in those jurisdictions. It would be an extraordinary step for the Oireachtas to do that. It was never the intention to seek to impose obligations on subsidiaries in foreign jurisdictions which would cause them to break local laws. That must be clarified explicitly in the legislation.
That is the purpose of these amendments, nothing more. We live in a world of different legal systems and countries respect each other. Within the European Union it is the practice to respect other legal systems, although we can debate their merits and demerits. That is the effect of this matter and it is important that it is understood and placed on the record of the House.
I will call both Deputies who are offering in turn. I call Deputy O'Donnell.
May I continue the point? We are not talking about ordinary law. We are talking about banking and international global banking systems which have crashed, to the detriment of millions of ordinary people throughout the world. We are not talking about ordinary law but about banking institutions which have used their might and main to have part of their transactions and part of their subsidiaries in jurisdictions which are established almost entirely for tax avoidance, commercial secrecy and flouting the ordinary commercial law of many countries. That is why President Obama, after his election, said that if we are to make progress on a regulated international financial structure of banking and trade we must get rid of tax havens.
What advice has the Minister taken from his officials on the use of tax havens in the organisational structure of banks? I include those banks which are in the guarantee scheme, and therefore automatically fall into the framework of the NAMA legislation, and the Irish subsidiaries of foreign owned banks which, we understand, may also apply. This is a perfectly clear question. What advice has he taken on this thorny problem?
At last week's meeting of the G20, people who had laughed at the notion of the Tobin tax as a nutty professor's idea, were speaking in favour of a Tobin type tax on currency transactions or some other kind of levy or penalty. Even people like Gordon Brown——
Deputy, please confine your remarks to the amendments before us.
Gordon Brown was the only one talking about it.
No. The Minister should read French literature in some detail. People at the G20 recognised that the availability of offshore mechanisms and tax havens have rendered the supervision and regulation of banking, in this country and throughout the world, very difficult.
Why is the Minister giving specific recognition to prohibition in any applicable law without being able to tell us if he, his officials and the Attorney General have given due consideration, on behalf of the Irish taxpayers, to the issue of avoidance? I refer to avoidance of disclosure and accountability by whole parts of bank empires and people who are the subject of the distressed loans. This is a simple question and I would like an answer.
With regard to amendment No. 8 to section 63, has the Minister looked at the structures of the covered institutions whose loans are being transferred to NAMA? Effectively, one could have performing loans in those banks which may never be taken over by NAMA. One could have a situation where the banks would maintain certain performing loans through legal structures they have offshore and in countries with which we do not have memorandums of understanding in terms of tax law and laws of discovery. Has the Minister looked into that area in great depth?
The Minister would have to be concerned that the initial view taken was that there was €120 billion of developer or property loans in the covered institutions. We now find the figure has been reduced to €88 billion. Where has that more than €30 billion in developers loans gone? Some €120 billion was the gross value of the developer loans in the institutions whose loans were being transferred to NAMA. That is now down to €88 billion. If one takes out the rolled up interest, it is down to €77 billion. We want clarity on where that missing €32 billion has gone.
Has the Minister looked into the legal structures in regard to the loans? We cannot have a situation where the banks keep the cherry, the good stuff, and the taxpayer ends up with the chaff in NAMA.
I am afraid we are well beyond the scope of the technical amendments.
It is very relevant.
Deputy O'Donnell asked what due diligence we have done. We have done substantial due diligence on the loan book. At the beginning of Second Stage, a document was circulated which outlined the location of the loans which were overseas. The vast bulk of them were in the United States and the United Kingdom and not in offshore island jurisdictions.
Does the Minister mean the draft business plan?
No. I refer to the document that was circulated on Second Stage designating where the assets were. That made it very clear where the assets were located. Let us be clear about this.
I thank Deputy O'Donnell for his initial question because it gives me the opportunity to say that we have been going through these loans, examining where they are and ensuring they are regular and proper in form. Deputy O'Donnell moved on to this curious issue of a phantom loan book of more than €30 billion which was not in the statement circulated on Second Stage.
With due respect——
I am entitled to reply.
Allow the Minister to speak. Deputies may speak again.
That phantom loan book does not exist. The figures that exist were circulated to the House when the Bill was introduced on Second Stage.
From where did the €120 billion come?
That was an indicative figure used for debating purposes over the summer. Obviously, my officials continued to work on the figures and the figures in the document circulated on Second Stage are those which reflect our assessment of the loans involved and which will be transferred to NAMA.
Deputy Burton raised the Tobin tax and the tax liabilities of the banking system. With respect, and with the exception of the windfall levy, this is not a taxing statute. The Finance Bill is the vehicle and forum for a debate on whether banks are engaged in tax compliance or non-compliance. It does not arise here. We are talking about bank assets located, for the greater part, in this jurisdiction — two thirds. The other one third is located predominantly in the United Kingdom and the United States with some other countries involved, mainly European Union member states. That is the position in regard to these bank assets being taken over. The whole debate on how one taxes financial transactions and whether banks are compliant in terms of tax and whether they facilitate tax schemes, tax avoidance or tax evasion is a matter for the Finance Bill.
Did the Minister look into the legal structures of the banks in terms of offshore subsidiaries, where those offshore subsidiaries are located and whether there are legal disclosure requirements in respect of those countries? The figure of €120 billion as the gross loan book was mentioned by the Minister on a number of occasions. That loan book transpired to be €77 billion. That is a difference of €43 billion. That is a 36% shortfall which is significant and requires explanation.
Section 62 is about applications for designation as a participating institution and section 63 is about the effect of application for designation. These are two very powerful sections because they give the banks, the credit institutions in the one year guarantee scheme, and Irish-owned subsidiaries of foreign banks the right to apply. Section 63 states: "By making an application under this Chapter the applicant credit institution and all of its subsidiaries shall be taken to undertake to comply with the provisions of this Act (including this Act as amended from time to time)" subject to any prohibition in any applicable law.
The Minister said throughout the summer that the Attorney General, his officials, etc., worked very hard on NAMA, and I accept that they did. However, he did not see fit to bring this particular restriction on the requirements for information before this House. He put them in at the last minute in order to make it easier for institutions to withhold information because some of their structures may be held overseas in jurisdictions such as Switzerland, Bermuda and the Isle of Man as well as the other places to which the Minister referred. He has still not explained why this has gone into the legislation.
It appears to bring into the legislation the power of an institution to state that banks in some offshore location are not entitled to communicate, because that is the mark of an offshore banking location. Very often they are not entitled to communicate with authorities in other jurisdictions. That is what makes those banks so powerful and so secretive and that is part of the reason the financial system failed. The Minister has still not given an explanation as to why he brought this in at this point given that he has had all these lawyers crawling all over it.
The Minister has still not commented on whether it is true that there have been significant movements of assets to spouses and family members and to offshore locations out of the powers of this jurisdiction. There is no point in the Minister telling me to go the Garda; he is the Minister. Unless he can respond to the contrary, what he is doing is enabling more of that to happen.
It might be worth remembering that the figures changed more often than the weather in an Irish summer. Sometimes the authorities did not know because the financial institutions did not tell them and sometimes it was to deliberately mislead us and to try to cause some confusion in the area.
I support what Deputy Burton said. There are rumours and speculation about what is going on. It is important that NAMA has a significant investigative element attached to it which will get to the bottom of what is going. I am not in a position to state whether these rumours and this speculation on the transfer of assets to spouses and family members, etc., is correct. I would not be in a position to give the Minister information on that because I do not know how well-founded those rumours are and it would not be fair. What I do know is that it requires to be tied down and to be dealt with in this Bill. This an opportunity to do so.
Section 62(2) provides for credit institutions to decide which subsidiaries——
We are strictly dealing with the amendments from the Seanad and how they impact on the section. If the Deputy was not quite so specific he might be able to make his contribution.
Why are financial institutions allowed to decide, to cherry-pick as to which subsidiary will go into NAMA and which will remain outside it? The section states that financial institutions must provide information to the Minister as to why they can be excluded. On what grounds will the Minister allow financial institutions to exclude subsidiaries from going into NAMA?
We have heard many a conspiracy theory over the lifetime of NAMA, that it is a bail-out for banks and a bail-out for developers. Deputy Burton seems to believe that this small little technical amendment is a conspiracy in itself whereas I regard it as crystal clear. NAMA does not operate in other jurisdictions, which is stating the obvious. There is no other way around it and there is no conspiracy. The conspiracy was that councillors from many parties aided and abetted speculators and developers in rezoning lands which led to the property bubble. This was the conspiracy and hopefully this is now over. However, we are paying the price for that conspiracy but there is no conspiracy here today with regard to Seanad amendment No. 8. There are far more important sections of this legislation which we should be discussing, such as the next Seanad amendment relating to sustainable planning which, in the practical operation of NAMA, will have more far-reaching implications——
That was a Labour Party amendment.
It is in line with Green Party thinking and I support any welcome amendments——
I thank the Deputy for his kind comments.
——and would like to discuss them——
Allow Deputy Gogarty to make his contribution.
——rather than talking about conspiracy theories. It might be helpful if the Minister could reiterate for the benefit of Members of this House and also for members of the media, the exact percentage of the overseas assets that may be held currently in jurisdictions with whom we have no agreements and no reach. Assets held in Britain, the United States and other EU states are eminently accessible.
This amendment states the obvious. I ask the Members, having made their points, not to call a vote on it and proceed to deal with the very welcome Labour Party amendments.
Deputy Gogarty will be glad to hear that the Labour Party amendment required extensive re-fashioning by Government to make it a workable amendment and a full Government discussion——
I am glad we got the Minister to do some work.
And to accept the principle.
There was also a major input from all of the Ministers of all parties in Government.
In reply to Deputy Terence Flanagan, a participating institution may request that a subsidiary be not included but the Minister does not have to comply with that request. The institution is simply enabled to make an application in that regard. Were that section not in the Bill then automatically, every subsidiary asset, no matter how irrelevant to the purposes of NAMA, if it fell within the designation, would be captured by it. That is the answer to the Deputy's question which I appreciate does not arise on the section.
With regard to Deputy O'Donnell's question about the famous black hole ——
It is a big hole.
The €120 billion included was a notional figure, based on the value of the collateral at peak; it was not a book value. It added to the book value the actual peak value of the property in measuring the decline since. This is important. This was part of the debate before NAMA but it was never suggested that this figure was the actual book value.
Deputy Gogarty expressed it well. It is simply making explicit what is implicit. It is clarifying that a bank in another jurisdiction has to comply with local law. I also reiterate what Deputy Gogarty said, rightly, that the bulk of these assets are in jurisdictions such as Great Britain, the United States, other European jurisdictions, where there is no complaint about the system of taxation or bank regulation.
I do not have the figures for the three jurisdictions referred to by Deputy Burton, the Isle of Man, Bermuda and Switzerland. In the case of the Isle of Man and Bermuda, I do not think we are aware of any assets going into NAMA from those jurisdictions. I will have to check out the situation with regard to Switzerland but any amount would probably be very small. Deputy Burton has done an intensive analysis and study of the doings of Irish developers for a long number of years and I am sure if they were very involved in any of these countries, she would have advised me what developments they were building there. The leading location is Ireland, which has 66.8%. Northern Ireland has 6.2%, Great Britain has 20%, the US has 2.7%, followed by Germany, Portugal, France, the Czech Republic, Italy and Spain. This list is then followed by a category called, "Other" which has 0.3% of the total bank assets being transferred. I am not in a position to give the Deputy the precise figures for the three jurisdictions she mentioned but they are clearly a fraction of 0.3%, if anything. One would assume there might be some Swiss building, given that Switzerland is a substantial country and one would assume that the Isle of Man and Bermuda are most unlikely because there is not very much scope for building operations in either of those countries. That is all I want to say about it.
Can we make progress?
I can only conclude that the Minister is being deliberately oblique in his reply. There is a very significant difference between where a physical asset or land bank is located and where the company or the entity that owns that land bank may be located for tax and administrative purposes. One of the reasons President Obama, following his election, was so intent on the point is that in the United States there is a long-established practice covering those who do business in the United States. Many US citizens and corporations consciously put their business offshore because the reach of the internal revenue in the United States is very wide.
I do not want to hear about ski chalets in parts of Switzerland being owned by developers as this is not relevant. What is relevant are the entities involved in these banks, the subsidiaries of these banks. The application must be to the Minister as stated in these sections and not to NAMA. I presume applications will be processed by NAMA but the Minister is the decision-maker in these sections. Unless the Minister is not as well-informed as I would have thought, I am sure he is very aware that many European banks and Irish banks have subsidiary activities in Switzerland as that country is in many ways the home of modern banking. It would be quite unusual, particularly for the foreign owners of Irish banks, not to have some of their company activities and subsidiaries located in Switzerland.
The Deputy's point is very well made.
I refer to a point requiring clarification in section 63, amendment No. 8. Why was this amendment included at the eleventh hour? It is a Seanad amendment. Why does the Minister find it necessary to include it?
The amendment states, "subject to any prohibition in any applicable law". Does this mean that the laws in a tax haven will take precedence over law in this jurisdiction?
That is the way it operates now.
Please allow the Deputy to make his contribution in an orderly fashion.
My main concern is for the Irish taxpayer with regard to NAMA and that good assets may end up in tax havens. The Minister stated that one of the reasons he was taking performing property loans into NAMA was to enable NAMA to be self-financing. I might disagree with that policy for a business plan but the basic concept was that in order to enable NAMA to have some possibility of being viable the performing loans would, to a certain extent, have to subsidise the non-performing loans. This concerns me and I believe the Minister's explanation of the €120 billion and the statement that this was the value at the peak is not credible. On what date was the peak? There has been a significant fall of €43 billion. There is a concern abroad that many of the performing loans in the banks will end up——
The same points are being made repeatedly.
Why was it necessary to introduce this at the tenth hour? Will the law that appertains to the jurisdiction in which the subsidiary of a bank is located take precedence over Irish law? What about performing loans in such jurisdictions that NAMA might try to get at but for which it has no legal basis to act?
As I made clear several times, the only purpose of this minor technical amendment is to clarify what is already the law. In other words a subsidiary operating in a foreign jurisdiction must comply with the local law. That is the only purpose of this amendment and it has no other purpose whatsoever. It simply makes explicit what is already implicit.
Deputy Burton intervened in respect of tax havens to give her analysis of how people structure their affairs. Let us begin with the fact that NAMA will acquire bank assets. The bank assets are not, to any appreciable extent, if at all, located in tax havens. The assets NAMA will acquire are based in jurisdictions that have legal systems of which we know, respect and with which we work.
We will now go beyond the assets to the collateral and borrowers and how those borrowers structure their affairs. Under the legislation NAMA is given all the powers which the Constitution permits to acquire off borrowers where they must enforce such powers and to set aside transactions which are improper.
I wish to make one more point.
We have spent one hour and twenty minutes on what are described as——
Does the Minister hold concerns that there are performing loans in jurisdictions which are tax havens? Will the Minister be dealing with countries with which we have legal agreements? Does the Minister hold concerns that there will be performing assets in tax haven jurisdictions at which NAMA and the Government will not be able to get? When carrying out due diligence in the banks did the Minister encounter specific cases in which he will not be able to access performing loans?
The assets can be transferred by the participating institution. There is no difficulty in that respect.
What if they are held by a subsidiary of the bank in a jurisdiction with which we have no legal agreement?
The assets are transferred by the bank. The bank can procure the subsidiary to do whatever is required.
Does the Minister not remember Ansbacher?
If that is the case, then why include the amendment and the reference to "any applicable law"? Surely, a subsidiary must comply with the law that appertains in such a jurisdiction?
Yes. That can be taken into account in the valuation of the loans.
Has the Minister wiped the Fianna Fáil memory disk clean of what took place in respect of the Ansbacher accounts? Those loans were off-shore but all the money was in Dublin and Ireland, circulating to the Fianna Fáil head honchos, who had their own little scheme. That was disclosed by numerous tribunals and inquiries. It is a real Fianna Fáil trick to pretend they never heard of this before. That it is amazing. Such off-shore activity was the essence of the Ansbacher accounts. When Mr. Haughey was telling people to tighten their belts in his Charvet shirt, he had a lot of funds circulating in the Ansbacher accounts. The essence of that scheme was back-to-back off-shore arrangements between this and other jurisdictions. The scam continued for a long time before it was uncovered.
Seanad amendment agreed to.
Seanad amendment No. 2:
Section 4: In page 19, line 32, after "enactment" to insert "or applicable law".
Seanad amendment agreed to.
Seanad amendment No. 3:
Section 12: In page 28, between lines 12 and 13, to insert the following subsection:
"(8) In exercise of its powers underparagraphs (s), (z), (ab) and (ac) of subsection (2), NAMA shall have regard to proper planning and sustainable development as expressed in Government policy and in any relevant regional planning guidelines (within the meaning of the Planning and Development Act 2000) and development plans (within the meaning of that Act).”.
This section was introduced to clarify that NAMA will have regard to proper planning and sustainable development in the exercise of its powers which are relevant to those concerns. It was always intended that NAMA would do so and it is appropriate to include a provision to that effect. The provision is contained in section 12.
I welcome the amendment and the comments of Deputy Gogarty because this amendment was put forward by the Labour Party to provide a context in which proper planning and development could inform any decisions of NAMA and be taken into account. In practice it will be very difficult to realise because it will be genuinely difficult to achieve proper planning and development in the aftermath of the bursting of the construction bubble.
Last night we heard from Dr. Peter Bacon, a consultant, whose report suggested that 20,000 hotel rooms must be taken out. The hotels were built on the back of tax breaks, even though people such as myself called for the Government and the then Minister for Finance, Deputy Brian Cowen, to desist. However, he could not do so, even when reports from his own Department indicated the sell by date was past.
This will be difficult to do and there will have to be a very strategic approach to cluster and re-group what is left to ensure what comes to NAMA is used in a coherent and sustainable way to assist with economic planning and development. I note the comments of the Minister for the Environment, Heritage and Local Government regarding some towns with zoning dating forward to 2040 and 2050. It will be difficult to implement this in practice. However, if we can get to a basis of sustainable planning and development, we can work it into the NAMA framework and it could make a contribution.
As a people, we must restore large areas of the economy, especially in the tourism sector. We must so do in a strategic and coherent way that is not dependant on the political power carried by many individuals involved in that industry, especially within Fianna Fáil. It is remarkable from travelling to many hotels throughout the country how many of the corridors have a photo display dominated by Fianna Fáil political figures.
We have been in office since 1997.
It is more than that. When one visits a hotel——
The President often features as well.
The former President, Ms Mary Robinson, and President McAleese feature to some degree. However, that is in the ha'penny place compared to the glowing photos of such people as Deputy Bertie Ahern.
So what? What point is the Deputy making?
The point is proper planning and development did not apply in respect of many of these hotels. Some hotels have been in the country for generations and families work in these hotels. There are very fine hotels but some of them are under very serious threat. More and more hotels were built, driven by the tax breaks, to the extent where there is now a very significant surplus of hotel rooms. There is almost a proposal in Dr. Bacon's report of a NAMA-style process for hotels.
Deputy Mulcahy should note that NAMA for hotels and accelerated tax breaks for hotels stands in marked contrast to the experience of homeowners facing repossession, who have found very little comfort in the Government benches. There is one law in this process for the bankers, the developers and possibly for failed hoteliers. The argument is that the viable sector of the hotel industry must be protected. Ordinary people whose entitlements are being cut feel this very deeply. Child benefit will be attacked, the Christmas bonus will be abolished and people's houses may be repossessed. However, if they were on the Fianna Fáil gravy train for tax breaks, someone would sit down and think about how they could save and protect these people. Proper planning and development will be extremely challenging because of the crony capitalism, in the words of Mr. Peter Bacon in his first report, that infests Fianna Fáil in particular. It has caused a large part of the property collapse. I do not know how the Minister for the Environment, Heritage and Local Government will frame a structure for returning to sensible and strategic approaches to planning. Obviously vested interests will be involved. Nonetheless, I welcome the amendment. I acknowledge that the Green Party was to the fore in suggesting and supporting this amendment.
The danger here is that NAMA will effectively become a monopoly, as the largest property developer in Ireland, Europe and the world. It is extremely challenging. The Bill refers to "acquire and dispose of property", "make any planning application in relation to land", "undertake development for the purpose of realising the full value of any asset" and "carry on any business that NAMA considers can be conveniently carried on in connection with any of its functions or is calculated directly or indirectly to enhance the value of or facilitate the realisation of or render profitable any of NAMA's property or rights". It is critical that NAMA gets best value for money for the taxpayer but NAMA in its application must examine the wider aspect such as those operating outside NAMA.
Examining the business plan, I note that nothing happens until 2013. At that point there are enormous repayments of principal, where the sum goes from €2.5 billion to €7.5 billion, a threefold increase. Within the first three years, does the Minister intend that the structure of the SPV and the NAMA will engage under the headings I have cited? I do not necessarily refer to acquiring or disposing of property but the provision to make "any planning application in relation to land, and intervene in any planning application made by another person". Does NAMA intend to get involved in that area in a quick fashion? It may also "undertake development for the purpose of realising the full value of any asset" and "carry on any business that NAMA considers can be conveniently carried on in connection with any of its functions". In respect of this section, if it is done for the common good it is good but not if it is done so that NAMA gains a dominant position in the Irish market, whereby outside of NAMA very little activity will happen. With the structure the Minister has created, with assets overvalued to the tune of €7 billion or 15% and much higher if we return to a lower value, he will create a false floor under the valuation of assets. There will be no movement and he will bring further constraints to the property market that will hinder the market returning to normal. That is why it is so important that the assets in NAMA are bought at market value. The Minister is effectively creating a false market for assets. The worry is that this will be added to by further interference in the market under this amendment. I would like to hear the Minister's comments on the practical aspects of this.
This is the essence of the Labour Party amendment moved on Committee and Report Stage. I commend Deputy Burton and the Labour Party on spotting this void in the Bill. I acknowledge the Minister's acceptance of this amendment. It is ironic that the Green Party missed what we are told is one of its core values. The Green Party has no interest in proper planning and sustainable development. It is a bit like the shared risk proposal, whereby we were told there would be equality. We know the outcome of that issue. Aside from the Green Party being somewhere else mentally on this legislation, the lack of proper planning for jobs and matters such as broadband is telling. Whatever about NAMA, it will not get us out of this mess created by the Government. A number of reports were submitted to the Government by a number of Oireachtas committees and authored by two colleagues, Deputy Martin Ferris and Senator Pearse Doherty. These would have developed the western corridor but they are sitting on a shelf somewhere. The Government is not bothered with them and the House has given priority to this shoddy legislation that is causing substantial worry. I commend Deputy Burton on spotting this gap and submitting this amendment.
I will try to stick to the amendment but if aspersions have been cast on my party in the House I presume I have a right to respond.
I would not make any presumptions but I would motor ahead if I was Deputy Gogarty.
I acknowledge and welcome the Minister's acceptance of this amendment. He pointed out that it was deliberated upon by Ministers from the Government parties. I welcome the fact that it is a Labour Party amendment and I know Deputy Burton had much to do with it being introduced at various stages of this debate. I thank her for acknowledging most graciously that the Green Party supports this and pushed for it.
I am surprised by Deputy Morgan's comments about the Green Party having no interest in this matter.
Were my comments not factual?
Regarding amendment No. 3, it is logical to have regard to proper planning and sustainable development as expressed in Government policy. In that context, we should remember that Government policy is becoming more sustainable. The Planning and Development (Amendment) Bill, published by Deputy Gormley, sets out a number of provisions to support economic renewal and sustainable development. This amendment reflects changes on the ground happening in Government policy. In order to make a variation to a development plan, the new Bill requires a two thirds majority of members rather than a simple majority. This is to ensure that proposals cannot be steamrolled. We remember the days when my colleague, Deputy Sargent, was trampled upon for waving a £100 cheque. We still have the cheque as a trophy in our office.
It is a pity he was not examining the legislation, he might have spotted this issue.
Further legislation will also be introduced. The new programme for Government will get rid of the situation where developers, bankers, speculators and trade unions can contribute to specific individuals and specific parties. I agree with Deputy Burton's comments about certain members of Fianna Fáil and other parties having their fingers in the till, being interested in speculation and supporting crony capitalism. Within six months, the incentive for supporting such crony capitalism will be gone and thanks be to God for that. Eventually, we may see proper planning for the sake of planning.
Without casting aspersions, once again Deputy Burton mentioned areas throughout the country where land is rezoned to 2083, one of which, as I mentioned in a contribution on Report Stage, is in Westmeath, home of the Mullingar accord. I am not trying to score points against the Labour Party. Rezoning happened throughout the country as councillors from various parties did not have regard to sustainable development. Including this section in the NAMA legislation will ensure that all future Governments in dealing with NAMA must have regard to Government policy. Unless a future Government changes the new planning Bill to be introduced and reintroduces corporate donations, we will have firm protection under the legislation. I hope that whoever is in government after this Government will maintain and enhance the provisions of the forthcoming planning legislation and the new systems to ensure that politicians and money are kept far away from each other. In that context, I can only welcome this amendment. I support it fully and credit where credit is due to Deputy Burton and her colleagues in the Labour Party.
I also strongly support the proposed amendment. It is very important that proper planning and sustainable development form part of the ethos of NAMA. In line with what I stated in my earlier contribution, we must always remember that the primary purpose of NAMA will be to repay the sum of €54 billion out of the proper assets back to the European Union because it remains a liability of the Irish people. I note that in the amendment it appears that sustainability in planning specifically applies to only paragraphs (s), (z), (ab) and (ac) of section 12(2). Why was it not directed towards paragraphs (u), (w) and (aa) of the section? Perhaps there is no need to do so.
I do not want to go too much further in my remarks on this but some of the more outrageous comments of Deputy Burton should not stand unanswered in the Chamber. She implied that every hotel built in rural Ireland in the past ten to 12 years was the result of Fianna Fáil cronyism. I presume she is not trying to cast aspersions on the planning authorities because I presume all of those hotels were properly built subject to local planning laws. If she has information to the contrary perhaps she will provide it to the relevant authorities.
Deputy Burton also implied that these hotels were not sustainable. Many of these hotels were excellent developments which radically transformed the tourism landscape in the country and helped to increase the number of tourists visiting the country. Although our tourist numbers have decreased this year, it is because of a worldwide tourism recession, which I hope we will get out of. To cast aspersions on the entire rural hotel industry and state it is a Fianna Fáil production is outrageous, cheap and has nothing to do with this amendment. In our contributions on these topics we should try to stick to the point and not engage in petty political speeches of the type we heard from Deputy Burton.
I did not expect to be called so soon.
Welcome.
Welcome, 86 hours later.
The amendment is very important and linking in proper planning and sustainable development should be at the heart of what we are doing with these loans. I see a strong commitment from the Minister to examine this about which I am pleased. In some cases, it is not expressed explicitly and in others it is contained in the legislation. There is scope in the composition of the board of NAMA and in the sub-committees that NAMA may establish to ensure that proper planning and sustainable development are at the heart of what NAMA will do.
The NAMA Bill, which is essentially a financial Bill, must be considered in the context of the significant changes that are coming through the Planning and Development (Amendment) Bill 2009 that my colleague, Deputy John Gormley, will bring through the Houses. Contained in that is a radical reshaping of how we address the issues of zoning and rezoning and what is proper planning and sustainable development. I am not convinced that on the other side of the Chamber there is a commitment to proper planning and sustainable development. Councillors on Dún Laoghaire Rathdown County Council are throwing out rezonings like snuff at a wake. In the foothills of the Dublin mountains adjoining Fernhill Gardens and Kilternan they are simply reproducing the mistakes that were made in the 1970s, 1980s and 1990s by Dublin County Council.
When we discuss sustainable development and proper planning, I ask Fine Gael in particular to examine what its elected representatives are doing at local level——
Hear, hear.
——and I ask the Fine Gael Members to look deep within their souls and decide whether——
Deputy Cuffe should look at his own party. It is opposed to everything.
——they and their colleagues helped to create a large part of the problems that NAMA is attempting to solve. In considering the Bill before us, it is time for Fine Gael to think long and hard about how best to address the mistakes that were made during the boom years. To that end, I reiterate that the Minister for Finance, Deputy Brian Lenihan, and the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, are producing significant measures that will help ensure that the mistakes of overzoning and housing estates in the middle of nowhere, that I suspect we will demolish over the coming years, will not be repeated.
There were faults and mistakes in what went on in the late 1990s and early 2000s. Blanket tax incentives in the upper Shannon area were a mistake because developers and investors threw money into schemes to reduce their taxes but did not think long and hard about whether the development was the right type of development in the right type of place. I would like to look forward to a day when Fine Gael will strongly commit itself to proper planning and sustainable development. The Labour Party is good on planning and many of the ideas it has brought to the public debate and its work in the Dublin area and elsewhere have been very positive. I recognise the intent of the amendment. It is worthy but it is covered in many of the measures which the Minister is bringing forward and which my colleague, Deputy Gormley, will bring to the House.
I do not have much to add to what has been said. The amendment speaks for itself.
Section 12(2)(ac) makes provision for carrying on “any business that NAMA considers can be conveniently carried on in connection with any of its functions or is calculated directly or indirectly to enhance the value of or facilitate the realisation of or render profitable any of NAMA’s property or rights”.
The Peter Bacon report on hotels found that up to 20,000 hotel rooms should be closed. The report notes that the banks which financed hotel developments were not foreclosing on the loans in order to avoid negative impacts on their balance sheets prior to their entry into the NAMA process. Dr. Bacon stated: "We cannot have a situation where zombie banks result in a zombie hotels sector or zombie-other-sectors." Although this issue was not mentioned in the draft business plan for NAMA, has further work been done on it?
Private hospitals have mushroomed thanks to widespread tax breaks. The HSE has informed us that a hospital needs 400 beds to remain viable but the country is dotted with small private hospitals as a result of tax breaks rather than medical needs. If not for tax breaks and the National Treatment Purchase Fund, some of these hospitals would be in a perilous financial state.
NAMA will have available to it €5 billion in capital that can be used to complete projects. Has the Minister reached a conclusion on the hotels and private hospital projects which are now almost under water?
Amendment No. 3 pertains to the planning of future hospitals rather than ones which are already in existence.
No, the Acting Chairman should peruse paragraph (ac).
We are discussing the effect of the amendment.
The amendment pertains to paragraph (ac).
Yes, but the amendment is concerned with the proper planning of future developments.
No, it is not. As Deputies Gogarty and Cuffe have indicated, it ties in the approach advocated by the Minister for the Environment, Heritage and Local Government. What is the position on proper planning and development in respect of surplus hotels and private medical institutions which were constructed on the basis of tax breaks rather than medical considerations? The National Treatment Purchase Fund directs considerable volumes of money to private hospitals and the Bill provides that NAMA can inject capital funding of €5 billion into developments however it sees fit. I ask the Minister to comment on paragraph (ac) in that context.
In respect of the €5 billion available to NAMA as development capital, how long will it take the Minister to develop and lay before the House a detailed business plan for the disbursement of this money?
I welcome the Green Party Members to the House. Deputy Cuffe is like a sunshine player in that he flits in and out. The Green Party Deputies remind me of Animal Farm in being more Fianna Fáil than Fianna Fáil itself. It is a bit rich for them to lecture us when they are propping up a Government which has brought the property market to the point where we have to bail out the banks through NAMA. If they were committed to the legislation, they would come into the House to debate it. I do not doubt that Deputy Cuffe’s contribution contained an element of enthusiasm for speaking on the record but he did no justice to the debate.
This is a serious matter which involves €54 billion of taxpayers' money. We do not agree with the legislation but want to ensure that it is as effective as possible. The amendment proposed by Deputy Burton is welcome in that regard. NAMA's success will depend on planning and producing a business plan for the disbursement of the aforementioned €5 billion. This should only be the start of that process. When the board is formed, the Minister should revert to the House with proper plans for the money.
I cannot do mock outrage well so I will not try. I intended to say I am shocked and astounded by Deputy O'Donnell's comments but I cannot keep a straight face. I am amused.
Is the Deputy acknowledging them?
I will not say I find them outrageous.
This is a serious debate.
It is a serious debate.
It has been proven that humour improves creativity.
A little bit of humour has already helped the Minister in amending the Bill. Deputy O'Donnell's Animal Farm analogy was previously used by Deputy Rabbitte.
I was not aware of that but I defer to the Deputy.
I am a great fan of George Orwell's slogan, "four legs good, two legs better!" I remind Deputy O'Donnell that the revised programme for Government shows that the Green Party is now running the farm. I am happy with that.
I am not sure that is a compliment.
Did Deputy Gogarty ever hear the story of the emperor's new clothes?
Yes.
It applies to our current situation. This is a serious debate and Deputy Cuffe should be in attendance.
Deputy Cuffe is not here because, as our party's Whip, he has arranged for Green Party Members to discuss the forthcoming budget between 1 p.m. and 2 p.m.
How is that going?
The debate on NAMA is still ongoing.
Is the budget more important than NAMA?
The two matters are of equal importance and I will have to make my apologies to attend that meeting. In fairness to Deputy Cuffe, at least 150 other Deputies are missing from the Chamber because, I assume, they have pressing business. Deputy Cuffe made his contribution against the clock and I thank the Chair for facilitating him.
This amendment is welcome in terms of requiring NAMA to have regard to changes in Government policy. Deputy Kenny will no longer be able to hold large fundraising events or take money from NTR or Treasury Holdings and Fianna Fáil and Fine Gael councillors will not be able to take money while rezoning lands to the benefit of developers and speculators. I prefer to be making a difference in Government than carping from the outside. A Fine Gael-led Government is bound to be elected at some point in the future but I hope the forthcoming legislation on planning and corporate donations will not be reversed by that party. We need to operate on a fair and transparent basis whereby decisions on land use and rezoning are made in the best interests of the country rather than because councillors' friends are offering money. In that context, having regard to Government policy is a key issue.
Deputies Burton and O'Donnell referred to matters not dealt with by the National Asset Management Agency, while the former referred to protection for mortgage holders. The banks issued voluntary statements yesterday. As I stated on Report Stage, the programme for Government provides for measures to ensure that vulnerable mortgage holders who are in negative equity will not lose their homes.
When will we see the relevant amendments?
One cannot tie everything into NAMA.
We must focus on the amendments.
I am trying to explain the reason the National Asset Management Agency cannot deal with everything. The agency will deal only with the banks and assets.
We are discussing a specific amendment.
Yes, I am simply pointing out that there are measures for mortgage holders, to make planning more sustainable, on corporate donations and to deal with other issues.
The Deputy is making a Second Stage speech because the Green Party was absent from the Second Stage debate.
The National Asset Management Agency should deal with assets. Other matters are addressed elsewhere. The Labour Party amendment ties external matters into the NAMA legislation. I hope that rather than sniping constantly members of future Governments will adhere to the legislation to ensure planning is sustainable because planning in the past 20 years has not been sustainable.
We are not sniping.
Given Deputy Gogarty's dissatisfaction with developers and the type of building that took place in recent years, I suspect he will vote against the Bill.
The Green Party is changing the legislation which is the reason we are in Government.
I am pleased the Green Party has been given an opportunity to catch up and make Second Stage speeches. I appreciate the majority of its Deputies missed the Second Stage debate.
It is their right to speak.
I spoke on Second Stage.
To some extent, sustainable planning hinges on the national spatial strategy. The strategy is explicit on the critical importance of some of the other matters referred to by Deputy Burton, including health care. Despite this, there has been a failure to have regard to these issues. I hope greater diligence will be shown in this respect in future.
In the case of the Louth County Hospital in Dundalk, critical services have been transferred from the hospital to other facilities, leaving a population in excess of 100,000 without these services. While the Green Party made substantial pre-election promises on these matters, they forgot about them after the election, which is most unfortunate. Perhaps I was naive in expecting more from the party. The allure of power was more attractive than looking after people on the ground and dealing with their critical needs——
Deputy Kenny asked Deputy Sargent to speak to the leader of Sinn Féin but told porkies about it afterwards.
——including acute health services, accident and emergency services and intensive care. The party is not bothered about such matters now that it has joined the bigwigs and is enjoying the paraphernalia of power and swanning around the place. I hope the amendment will ensure the relevant policy will be implemented.
I will put the amendment.
I ask the Minister to respond to the issues I raised regarding paragraph (ac), including the ability to carry on business and whether there has been any advance on the draft plan. These are important matters.
The Minister may only respond on issues relevant to the amendment.
The business plan will be drawn up by the board of NAMA. On the difficulties in the hotel sector, I have not yet had an opportunity to examine the report to which Deputy Burton referred. Clearly, the board of NAMA will have to take a commercial view on what is appropriate for the sector in the context of whatever banks assets it takes over in the sector. While I am aware that there are bank assets in connection with hotels, I am not clear on the question of private hospitals. I have not had a report to date that the bank assets to be transferred would include private hospitals. That is an issue which the board of NAMA will have to deal with in due course.
Seanad amendment agreed to.
Seanad amendments Nos. 4 to 6, inclusive, are related and may be discussed together by agreement.
Seanad amendment No. 4:
Section 32: In page 37, subsection (1), line 25, to delete "3" and substitute "4".
I ask the Minister of State to elaborate on the changes made by the amendments. What is the purpose of the finance committee? What will be its membership? I assume this ties in with the quarterly reports. What will be the precise functions of the finance committee?
Amendment No. 5 proposes that the board of the National Asset Management Agency establish a fourth committee, the finance committee, along with the three committees already envisaged in the Bill, namely, the audit, credit and risk management committees, respectively. Amendments Nos. 4 and 6 are consequential amendments.
During the Seanad debates, the Minister listened to arguments that the finance committee should be put on a statutory basis and was convinced by the arguments made. The role of a finance committee is to oversee the financial affairs of a company and review and make recommendations to the board about the financial affairs and policies of the company in question. The finance committee should help the board focus on fiduciary duties, recommend financial policies, help develop and review the budget, take the first look at financial statements, etc. Given the responsibility that will rest on the board of NAMA and the scale of the assets being transferred to the agency, it is a good idea that such a committee should be established by the board. For this reason, the Minister accepted the proposed amendments.
A finance committee was not included in the original structure. The National Asset Management Agency will have to operate on commercial business grounds. Given that finance and budgetary plans are the core of a business, it would be highly unusual not to have the full board involved in these areas. Audit, credit and risk management have specific, defined functions in banking. However, given the centrality of the finance function to everything NAMA will do, I do not understand the reason it is to be hived off.
Credit and risk management committees in a bank are to provide oversight to ensure detailed decisions on specific developers or groups of assets are taken in a manner which minimises risk and is sensible in terms of the objectives of NAMA. Finance is so pervasive to the entire activities of the agency that it is difficult to understand the reason it will be shunted into a sub-committee.
In most organisations, the chief executive has a group of people who help with the draft business plan. Does this mean that when the business plan is finalised, it will not go before the full board but will be presented to a sub-committee of the board? That would be bad practice. We should have learned from FÁS that removing central functions, other than those referred to, from the main committee will make the function of members of the main committee akin to that of flower pots. They will admire and be admired because they are not involved in intrinsic activities.
The section provides that two staff and two board members will be appointed to the committee. I do not believe it provides for external members. Will the Minister of State confirm that is the case?
What was the thinking behind this change because I am worried, given that the NAMA board will consist of senior executives, that finance matters will be dealt with by a sub-committee? This does not sound right because finance risks in a bank are normally dealt with by the credit and risk management committees, both of which are necessary. The audit committee is a standing feature of corporate governance. However, I do not get the business of establishing a finance committee. I would be worried if it meant the members of the main board have finance matters such as the business plan shunted from them.
The worst of all worlds is where a chief executive or chairman says the finance committee has already seen the information and a decision is nodded through. We are trying to escape from the mistakes made in board structures in that area. In many ways one could say Anglo Irish Bank, which was a good idea initially in terms of a developer's bank, was an institution which failed because it had an over-powerful chief executive who dictated everything that happened and came to believe he was infallible.
People who audit banks have done studies on collapses and have found a megalomaniac chief executive who founded the company often comes to believe his or her power is incredible. It is not a good idea to shunt critical financial matters away from the main board and put them before a sub-committee. This is not a situation whereby the Government has committees of Ministers going to and fro to find issues. This is the biggest property company ever created in this country and, perhaps, the world and it is proposed that the finance element of it will be dealt with by a small sub-committee. I am interested in hearing the reasons for this.
I share the concerns of Deputy Burton. The master SPV will operate on the sidelines and it is proposed that the board of NAMA will comprise much of the board of the master SPV, which we need to distinguish from all the small SPVs which are likely to appear. One would expect every member of the board of NAMA to be very involved in finance matters, so why is there a need for a finance committee? It causes me some concerns because it seems as if the Government is making an excuse or providing an escape clause in advance for such people by allowing them to argue that a recommendation came from the finance committee. That is unacceptable and the board needs to be fully accountable for its decisions. The amendment would do harm to the Bill because it proposes to corral an issue of the utmost importance, namely, the €54 billion passing through the coffers of this organisation. It is critical that all of the board examine this matter and any financial issues be discussed fully in an open forum by the board and not corralled or diverted into a side committee which may not be fully accountable.
The section statesthe members of the credit committee and the finance committee shall be members of the board or officers of NAMA and at least two members of each of those committees shall be members of the board. Normally reporting to the board is done through the financial controller, who would have his or her own team. In many cases the financial controller might also be a member of the board. Is a committee being established for the sake of it? Will the finance committee present a fait accompli to the board? Normally the financial controller would present the accounts to the board and they would be scrutinised and probed properly.
We have no idea what the membership of the finance committee will be. It is proposed that members of the board, officers of the board or officers of NAMA shall be members of the board. How many people will be on the committee? There is a large number of unanswered questions. My worry is that something unwieldy like the HSE will be created and the figures will not be properly scrutinised.
I assure Deputy Burton that the only flowerpots in the boardroom will be in the centre of the table or in the windows and will not be around the table. The membership of the committee will be a matter for the board but will be confined to officers of NAMA and board members and, as has been said, at least two board members must be on the finance committee. I have been an unpaid member of enough voluntary organisations to know what are the functions of finance committees. I understand Deputy Burton's argument but it is misplaced in this instance and a very similar argument she made could be made about the risk management committee. One could argue risk management is a matter for the whole board and therefore a risk management committee is not needed.
An amendment tabled during the Seanad debate by Senator O'Toole proposed that detailed financial reports should be first examined by a sub-committee before they come to the board. The Senator argued that his experience had shown that unless a sub-committee examined the material before the board does the executives may be left with too much power. Many organisations have a first reading or look at financial statements at committee level and one can often iron out things so they do not detain the time of the full board.
However, given the huge national responsibilities of NAMA the board will have to have a hands-on approach to every aspect of its activities. The committees are there simply to help them. In organisations of an entirely different type, Deputy Burton may be correct in stating that finance committees sometimes assume a power and effectively take over the financial running of such organisations. In this instance the responsibilities and duties of the board are simply too great to permit that to happen. The addition of the finance committee, for which an argument was made and accepted, adds to rather than subtracts from it.
I thank the Minister of State for his reply. It is intriguing that someone who was one of the architects of social partnership and would have great expertise in social partnership participation in various public boards would have made this proposal. From the material I have read about FÁS, one of its downfalls is that matters were shoved into sub-committees and because its executive was so powerful the kind of general scrutiny and oversight which was appropriate did not happen. Like many other people, in the past year and a half I have read about, met, seen and heard speak people who are on the boards of the various banks. I have scratched my head regarding some of them and have wondered what on God's earth were these people doing on the boards of the banks and why did they not shout "Stop".
The same is true of State boards such as that of FÁS. These are often people of significant reputation and experience, many of whom are professionally qualified. However, because information was shunted off somewhere else they were along for the ride, an approach which resulted in some of the disasters we have experienced.
At the commencement of Committee Stage, NAMA had a special purpose vehicle suddenly added with a week's notice. The financial structure of NAMA and the span of control, which is important from the perspective of it being a banking-type institution, is no longer what it was. We now have NAMA and the special purpose vehicle, which is the authorised decision maker; it is the holder of the loans and issuer of the €54 billion or so in bonds.
We know officers of NAMA are to be on the special purpose vehicle but the authority and control over big financial decisions is now located in the special purpose vehicle. We are now also having a finance committee which is to be a small and powerful sub-committee. The audit committee is standard for corporate governance and there are also the credit and risk management committees, which are essential in banking-type institutions. Now that we have the SPV of NAMA in control, we need to know a little more about this.
I would like to know more about Senator O'Toole's thinking and the Minister's ready agreement with the Senator on the hiving off of core critical information. We will talk about qualifications for dealing with NAMA later as they are in a later section. This is to be hived off entirely into sub-committees as there will be four such sub-committees by law. These committees will carry powers.
In a company one can set up as many sub-committees as one likes and, for example, a chief executive may put something new into a sub-committee. What is being reported as Senator O'Toole's view is that it may be better if some of this stuff could be discussed beforehand. In the context of the job that NAMA does, I would worry about this. I would like all those board members to be very seized of what it is that NAMA is proposing to do in monetary terms. We are talking about €54 billion in taxpayers' money and liability. The loans are, for the most part, damaged, distressed and limping loans and yet we are to divert all these issues to some cosy committee.
Much is riding on the officials in NAMA being sea-green incorruptibles. Given the history of the NTMA, I am hopeful about that but hiving this off to a sub-committee, which can deliver a one or two-page conclusion, could lead to difficulty. Somebody who was a member of a State board in the time of Charlie Haughey wrote to me recently. I think the person may have been friendly with Mr. Haughey and leading politicians of other parties at the time. That person was on the boards of an important national institution but because the person asked questions, he became persona non grata and a pain to the head of the board. That person very quickly became isolated for asking reasonable questions as a board member.
I would like to hear an absolute undertaking from the Minister that the full NAMA board will deal with the financial decisions to be made, bearing in mind that the SPV and span of control introduced very late in the day by the Minister has changed the architecture of NAMA significantly. I can foresee a position where the SPV would be the controlling decision maker but there would be a finance committee and general board as well. The interaction may be between the SPV and the finance committee and the issues could get to the board very late in the day.
This relates to the establishment of a finance committee within NAMA. As Deputy Burton has stated, we have discussed the SPVs at length, and they will be for all intents and purposes the operational vehicle of NAMA. The SPVs will consider day to day activity and all the powers will effectively be delegated to the SPVs. There will be a master SPV and a number of subsidiaries, baby SPVs, satellites or whatever we call them.
Will the accounts of the SPV be reported to the board of the SPV, the board of NAMA or the finance committee in NAMA? Have the implications of the amendment been thought through with regard to the workings of the SPVs on a day to day level? What value will the finance committee bring to the operation of NAMA and particularly the SPV? Will the Minister of State expand on the relationship between the finance committee and the SPV because the SPV, for all intents and purposes, will be NAMA?
There is no danger of NAMA becoming like FÁS, although I hasten to add that I have great respect for the activities of FÁS on the ground, notwithstanding what happened at board level. Deputy Burton has entirely legitimate concerns about the way corporate governance was carried out in many places, both public and private, in the past. People were sometimes put on boards because they enjoyed a high reputation and were therefore a good advertisement for the institution to which they belonged, or if they were high-profile public figures they could open doors and have contacts at home and abroad.
Many lessons will have been learned from the disastrous experiences of the past couple of years, and not alone for NAMA. People will be much more on guard and vigilant in future so that disasters of the type we have seen will not happen again. This is particularly likely to be the case in NAMA, which will become the highest profile public organisation in the country and on which so much will ride. The idea of any board members being passengers, neglecting their responsibilities or being flower pots, as Deputy Burton put it, can be excluded.
Senator O'Toole's concern was that without a finance sub-committee of the board, too much power would reside with the executive. A sub-committee of the board, which requires two NAMA board members to be present, ensures greater control. All important decisions will be referred to the NAMA board. It does not apply to the SPV but that will have to report to NAMA, including its finance committee.
Seanad amendment agreed to.
Seanad amendment No. 5:
Section 32: In page 37, between lines 29 and 30 to insert the following:
"(c) a finance committee:”.
Seanad amendment agreed to.
Seanad amendment No. 6:
Section 32: In page 37, subsection (4), line 39, after "committee" to insert ", the finance committee".
Seanad amendment agreed to.
Seanad amendment No. 7:
Section 62: In page 52, subsection (6), line 20, after "consents," to insert "in accordance with any applicable law".
Seanad amendment agreed to.
Seanad amendment No. 8:
Section 63: In page 52, subsection (1), line 31, after "undertake" to insert the following:
", subject to any prohibition in any applicable law,".
Seanad amendment put and declared carried.
I understand that Deputy O'Donnell intends to move an amendment to Seanad amendment No. 9.
Seanad amendment No. 9:
Section 119: In page 88, between lines 42 and 43, to insert the following subsection:
"(4) Without prejudice to the generality of subsection (3), a person has relevant expertise or specialist knowledge if he or she is qualified, or has experience at a senior level, in any one or more of the following:
(a) finance and economics;
(b) law;
(c) accountancy and auditing;
(d) public administration;
(e) project finance;
(f) construction and land development;
(g) property management and sale;
(h) valuation;
(i) urban and land planning;
(j) banking and investment;
(k) insolvency and restructuring.”.
This Seanad amendment arises from a commitment given by the Minister during the Committee Stage discussion in the Dáil to examine whether specific qualifications should be enumerated in this section of the Bill. The Bill, as passed by the Dáil, provides that in deciding whether a person is suitable for appointment to the valuation panel, the Minister must be satisfied "that the person has relevant expertise or specialist knowledge". This Seanad amendment inserts a list of appropriate qualifications to which the Minister will have regard when assessing whether a person has "relevant expertise or specialist knowledge", into the Bill. The list of areas in which a person should be qualified or have experience at senior level includes "property management and sale", "valuation" and "construction and land development". The Seanad amendment before the House sets out the full list of 11 qualifications.
I move amendment No. 1 to Seanad amendment No. 9:
In line 2, subsection (4), after "knowledge if" to insert the following:
"following consultation with any Committee of the Houses of the Oireachtas established to monitor Acts done in the furtherance of this Act, the Minister is of the view that".
During the Committee Stage debate in this House, the Minister took on board the possibility that an Oireachtas committee should be involved in the process of making appointments to the valuation panel. It is regrettable that he did not see fit to include a statutory provision to that effect in this legislation. Given that €54 billion of taxpayers' money is at stake, Fine Gael strongly believes there is a compelling argument for the statutory establishment of a parliamentary committee to ensure there is Oireachtas oversight of the NAMA project. We feel that the Minister should appoint the members of the valuation panel following consultation with such an Oireachtas committee.
When I examined the various categories set out in the amendment before the House, it struck me that people with expertise in taxation should have been included as being essential to the expert group. Such people would have a knowledge base in the valuation area. We are keen to ensure there is proper oversight. It is interesting that the Minister agreed to make a worthwhile amendment to give the Joint Committee on Finance and the Public Service further oversight in terms of finance and the NAMA board. If I am correct in my interpretation, the Minister has clarified that the special purpose vehicle will report to that committee as well. Nevertheless, no new Oireachtas committee is to be established by way of statute. Such a committee would provide oversight in all financial areas and make an input into the appointment of experts and members of the valuation panel. It would reassure the general public that its interests are being looked after by its elected representatives. That is why I have proposed amendment No. 1 to Seanad amendment No. 9.
I am extremely disappointed that the Minister has not agreed to provide for the establishment of an Oireachtas committee under this legislation. I am dissatisfied with his decision not to include details regarding credit guidelines in the Bill. I am disappointed that he is not taking action in this legislation to protect mortgage holders, in terms of repossessions, in their dealings with the banks. This should feed into a change in the regulation of the banking system. The banks appear to be resisting the necessary change from a principles-bases system of regulation to a rules-based system of regulation. At all times, we need to protect the people living in this country. This measure would not hamstring the banks in their operations. The Oireachtas committee would not inhibit the operations of NAMA. It would bring about proper reporting structures and legislative protections for mortgage holders. When mortgage holders go into a court of law, the judge should have a legal basis on which to make rulings that ensure they do not lose their homes. We need to include a mechanism in the NAMA legislation that will ensure people benefit from better governance, better legislation and better oversight of NAMA. I hope the Minister for Finance will take this amendment on board. Although he has given an assurance that an Oireachtas committee will be established, he should have gone further by properly assuring the general public that such a committee will have a legal basis.
I am happy to support Deputy O'Donnell's amendment No. 1 to Seanad amendment No. 9. We have argued at great length that a vetting procedure should be provided for, preferably through an Oireachtas committee. The obvious candidates would be the Joint Committee on Finance and the Public Service and the Joint Committee on Economic Regulatory Affairs, although it may be possible in certain circumstances to provide for a sub-committee of the Committee of Public Accounts. The structure of this legislation gives enormous direct and reserved powers to the Minister for Finance when disputes about valuation arise. A dispute may arise if the advisers of a person who has assets in the NAMA process believe those assets are worth €1 billion, but NAMA's view is that they are worth €500 million in light of the collapse of the property market. One party to the dispute might want to raise the value of the assets, but NAMA might want to set the takeover value at market value, or at a minimally increased long-term economic value. The valuation board panel of up to 12 people, all of whom will have been appointed by the Minister, will potentially come into play in such circumstances. They will form the essential core of the system of adjudication on disputes. Each member of the panel will be required to express his or her opinion on whether a property, basket of properties or basket of collateral for loans is actually worth €1 billion, when NAMA says it is worth €500 million. The Minister for Finance will have the tremendous power to appoint the members of the valuation panel.
Obviously, we are happy to support the first part of Seanad amendment No. 9, which sets out a range of areas in which people may have expertise. However, it does not change the core issue, which is that the valuation panel member appointed by the Minister, Deputy Lenihan, and thereby appointed by Fianna Fáil comes up with their suggested amendment to the valuation and then the Minister can either accept or reject that and send it back to NAMA if he agrees with the valuer to have it redone. The valuation panel is one of the most powerful and hidden provisions in the Bill. The Minister and the valuation panel have the power to reject the valuations set by NAMA and to opt, perhaps, for higher valuations. It must be remembered that the Minister is of a very optimistic view. I have heard people like Deputy Mulcahy say they were absolutely confident the property market would rise and rise very significantly over the next ten years. That argument would allow an optimistic property valuer to suggest that the NAMA valuation is too conservative and does not recognise that happy times are around the corner.
The Fine Gael amendment that the appointees to the valuation board should be subject to a very small level of scrutiny following consultation with a committee of the Houses is a very modest amendment and I strongly recommend it to the Minister for acceptance. The Minister for Finance is at some risk in this regard. One of the things that went wrong previously in the Department of Finance is that the former Minister, Charlie McCreevy, regarded himself as an authority on everything and he made his own decisions even if he was overruling his own officials. We do not know if they ever recommended against tax breaks. However, if they gave him advice he was not inclined to take he simply said: "I do what I do." He made designations like that in the upper Shannon. At one stage he said to me that he would make the upper Shannon like the Klondike. When I reminded him what the Klondike was like afterwards, he just waved his hands and walked off.
This section gives extraordinary powers to a Minister for Finance, who will not always be Deputy Brian Lenihan. In fact we hope that will not be so for too much longer. The Fine Gael amendment imposes a modest interaction with an appropriate Oireachtas committee in respect of these incredibly important appointments. The valuation panel is critical in setting values. If those valuers on the panel are Fianna Fáil cronies — because they will be appointed by the Minister — they might be property auctioneers and valuers, the people who built up the boom and encouraged people to keep buying at ever higher prices. They filled the back pages and property supplements of the newspapers week in and week out. These may well be the people who will dominate the valuation panel. Any of them I can think of would easily qualify under most of the qualification criteria set out in the Bill. Most of them have qualifications in this day and age.
The amendment sets out to limit the profile of people who can be appointed to the valuation panel. A person wishing to become an auctioneer does not necessarily need a vast amount of qualifications. I understand such a person just applies for a licence and starts in business. Most auctioneers have completed studies in property management and so on. However, many of them have not done any. They could just be buddies of Fianna Fáil and the Minister, and they would get to sit on this incredibly important valuation panel. This profiling of people does nothing to alter the substance of the extraordinary and excessive powers of the Minister for Finance in personally appointing the valuation panel. The valuation panel reports and recommends to him in cases of dispute. The Minister then makes the decision and sends it back. Perhaps a Minister might keep sending it back to NAMA until it comes up with the answer that agrees with the crony who is on the valuation and who sets out an alternative value. There is scope within this structure for grotesque and gross abuse of a kind that people on all sides have regretted happened in this country before. It is wrong that we are inserting it into the Bill now and that the Minister did not accept the amendments from all the parties in Opposition and possibly even amendments from the Green Party. That party's Members seem to have felt that their stuff was being funnelled privately through Government to the Minister for Finance.
Where are they now?
This is one of the most critical sections of the Bill because it is through this mechanism that the amounts NAMA will pay for certain loans, assets and so on can be jacked up to any number one might think of given that the two valuation principles are economic value and long-term economic value. I listened to Deputy Mulcahy say how much he expected property values to rise and rise. There are Fianna Fáil optimistic valuers all saying: "Ah, sure it'll be all right in a couple of months time." We know that it is part of their political skills to sell a scenario like that. However, it is also part of why Fianna Fáil has once again ruined the country. Refusing to accept the Fine Gael amendment would be churlish in the extreme.
I support the Fine Gael amendment which will add significantly to the Bill. It will provide for a committee of these Houses to examine in more detail these appointees, which is to be welcomed. The list of qualifications really represents a list of the great and the good, including finance and economics, law, accountancy and auditing — with all due respect to my two colleagues present. Why does it not provide for somebody with a competency in social policy or who had an involvement in social policy for some considerable time? Such a person with a social conscience might bring to bear some of the needs of the real people. Rather than all these speculators and heavyweight bankers why do we not have someone who deals with this from the ordinary person's angle? I know we will not get NAMA for the ordinary people — goodness knows the Government made that plain from the very beginning. However, surely to goodness there could be some level of consciousness among this group of people that would at least take cognisance of the needs of real people.
For NAMA to succeed property prices will need to rise to bubble levels again. If property prices rise to bubble levels again, we will be back in the same mess we were in to begin with. Inevitably there will be a crash. The question of valuation is the main issue for most of us on this side of the House. Certainly for me and my party, Sinn Féin, that has been the single biggest problem with the valuation. It makes it almost impossible for NAMA to work. If it works we will be victims of the NAMA success. This is crazy stuff. Therefore I support the Fine Gael amendment.
Our amendment is not dependent on the Government appointing an Oireachtas committee by statute; it could be any committee.
The amendment was purposely structured in that fashion. The reference is to "any Committee of the Houses of the Oireachtas established to monitor Acts done in the furtherance of this Act". Nothing in this amendment would affect the workings of NAMA as envisaged by the Minister. When the Minister spoke about the valuation panel he seemed to suggest that he shared our concerns regarding the appointment of individuals to the panel. This is a reasonable and constructive amendment and I thank Deputies Burton and Morgan for supporting it. I hope the Minister will take it on board. It offers leverage and power to the Minister and is in line with what he indicated was his preference in this regard.
I support this reasonable amendment. Section 119 is somewhat loose in its failure to specify the type and degree of expertise required by members of the valuation panel. This amendment will be helpful to the Minister in that regard. I note Deputy Morgan's argument that there be scope to appoint persons with experience in social policy. There should be a role for an Oireachtas committee to assist the Minister in ascertaining whether a potential appointee is suitable.
I hope I am correct in my understanding of what Members have said when I thank the House for supporting Government amendment No. 9. Deputy O'Donnell referred to taxation — I do not see how one can be an accountant without having a knowledge of taxation, and the same is true for most of the qualifications listed.
It is by way of observation.
I understand. I do not mean to make a meal of this.
I am sure there are tax experts who would not like to be referred to as accountants.
The function of the valuation panel is to valuate assets, and the qualification requirements in respect of potential appointees reflect that. There is no reason that people with the qualifications listed cannot also have a social policy perspective. The valuation panel will be appointed by the Minister for Finance, not by Fianna Fáil, as Deputy Burton suggested. This endeavour is far too important for anybody to be appointed solely or mainly on the basis of political connections. I completely reject the charge of potential cronyism in that regard.
The issue of appointments to the valuation panel, including the question of a role for an Oireachtas committee in the appointment process, was debated extensively in the Dáil. Arising from those discussions, the Minister amended the provisions relating to the valuation panel in the Seanad in order to set out the qualifications required of appointees. It should be noted that the panel will act as an appeals board in the event that the participating institution and NAMA disagree on the value of the assets to be transferred. While there are several conditions surrounding such appeals, the essence is that an institution may appeal only if it considers that the total market value of its assets is greater than the value proposed by NAMA, including the long-term economic value. Appointments to this type of appeals panel are an executive rather than a legislative matter and, as such, it is proper for the Minister to make them. Moreover, appointments to the valuation panel are not conducive to a lengthy process. Consequently, I cannot accept the Deputy's proposed amendment to amendment No. 9.
It can be taken as given that NAMA's valuations will be cautious. The Minister has made it absolutely clear that the success of NAMA is not dependent on a return to bubble prices. Based on provisional estimates and taking into account a risk-sharing mechanism, NAMA requires only a 10% increase in property prices over ten years to break even. Only the banks can dispute the valuation; debtors have no role in the matter. The transaction is between the bank or building society and NAMA. As I said, the institutions can only dispute the total valuation of their assets, not that of individual properties. This means the maximum number of appeals is the same as the number of institutions in the system. Only the market value can be disputed; the long-term economic value is not reassessed by the valuation tribunal. The Minister may ask the valuation panel to look again at a valuation only where the panel finds that the institution in question has been paid too little. Therefore, the Minister's role is very limited and should not be exaggerated.
My amendment to amendment No. 9 proposes that the Minister will appoint the valuation panel in consultation with an Oireachtas committee. As such, the committee will function as a back-up for the Minister and will ensure the appointment process is above reproach. That is precisely what the public is seeking and it is necessary to restore trust in banking institutions.
The Minister of State reassures us that NAMA's valuations will be cautious but the reality is that we are looking at valuations of 15% above market value. Moreover, there must be significant doubt regarding the reliability of assigned market values. Deputy Morgan noted the irony that the success of NAMA will depend on valuations increasing significantly into the future, but we got into the current mess partly because the valuation of property was out of control. It is difficult to accept that valuations of 15% above imputed market value can be described as "cautious". We have a business plan that was put out on the basis that NAMA will make a profit of €5.48 billion, and we are given cash flow statements for ten years and profit and loss statements for only three years. We have no idea of the write-off of interest.
In the same breath, the Minister tells us that the €47 billion market value is only an estimate and that we do not know the value at which the assets will be acquired. The bottom line is that the valuation of assets is key to the entire enterprise. If we get the valuations wrong, the horse will have bolted. If the assets were going in at market value, NAMA might have some hope of making a return for the taxpayer. Instead they are being valued at €7 billion above market value, thus burdening NAMA with assets that are significantly overvalued. Moreover, this is being done, as I understand it, in order to ensure the banks do not have to be recapitalised. The irony is that they will have to be recapitalised in any case.
The structure the Minister has come up with will do nothing for their core tier 1 capital ratio. Instead of overvaluing the loans by €7 billion, putting this amount into the banks by way of ordinary share capital would enhance their core tier 1 capital ratio and it would probably increase their capacity to lend because they would not be burdened with capital ratios that do not meet market requirements. The minimum core tier 1 capital ratio requirement of 4% is long gone with the markets dictating ratios of between 8% and 10%. Banks such as Barclays that have weathered the storm have high core tier 1 capital ratios
The Deputy is straying from the amendment.
I am following the Minister of State's audit trail regarding valuations.
That is outside the scope of the amendment.
This is critical.
This is related to the valuation.
The Deputy is going into what the committee will do.
It is critical that the appointees to the valuation panel have the expertise to ensure grossly overvalued assets are not transferred to the agency. The Minister could have demonstrated to the public that he had deferred to an Oireachtas committee. His arguments do not stand up to scrutiny. He should appoint the panel in consultation with a committee to ensure the public is absolutely assured about the calibre of those appointed and that they have the expertise to properly adjudicate on the valuation of the assets, which should not be grossly overvalued at an alarming cost to the taxpayer.
The powers provided to the Minister regarding the valuations and the valuation panel are seriously excessive and they constitute a significant threat that NAMA will overpay for assets. I was struck by the many contributions Deputy Fahey made on various Stages in which he expressed supreme confidence that the value of assets held in the US and the UK, for example, would increase rapidly. His view is that such assets are highly valuable and, according to him during his many interventions, they are increasing rapidly in value currently. There may well be a strong temptation on the part of participating institutions and individuals with an interest in what the institutions do to strongly contest values in cases. As the Minister said, the purpose of this is to deal with the parties affected by the valuation who feel it is too low and who want to bump it up to the long-term economic value. Two Fianna Fáil contributors to the debate, Deputies Fahey and Mulcahy, are incredibly optimistic about the increase in value.
I am worried about who will be members of the valuation panel and that we are setting ourselves up for round 2 of crony capitalism Fianna Fáil style. As Dr. Peter Bacon stated in his report, this was one of the factors in bringing the country to its knees. During the overnight debate on Committee Stage two weeks ago, the Minister was startled to read some of the powers he has under this section and he agreed that they ought to be tempered by more oversight. It is regrettable that the Bill will be completed without addressing that issue and it will probably turn out to be an expensive built in factor to bail out the bankers and the developers by Fianna Fáil. Green Party Members are not present and, therefore, they may not have been party to this.
I am tired of the propagandist mantras introduced at regular intervals by Opposition spokespersons. I wish the discussion was a little more serious. This is not based on optimistic assessments by non-office holding Members. If anything, the opposite is the case. Assets will be valued at market value but the Minister has noted yields are well above average, indicating prices are likely to rise over time. That is the opinion of the market at least. This is not reflected, however, in the market valuation. The NAMA business plan assumes that rents have fallen by 20% and will fall by another 20%. The main valuation of the assets will be undertaken by the agency, which has tendered for valuers. This valuation will be supervised by the Financial Regulator, which will report to the EU Commission. It will not be undertaken by the valuation panel, which will only adjudicate on disputes at the end.
The core of the issue is whether the appointments to the appeal panel are an Executive matter, as the Minister contends, or whether they are an Executive and a legislative matter, as the Opposition is putting forward. This is the considered response of the Minister to the issues raised on various Stages and I am afraid I cannot accept the amendment.
Amendment No. 1 to Seanad amendment No. 9 put and declared lost.
Seanad amendment No. 9 agreed to.
Seanad amendment No. 10:
Section 210: In page 126, between lines 29 and 30, to insert the following subsection:
"(2) The Minister shall cause a copy of guidelines issued undersubsection (1) to be laid before each House of the Oireachtas as soon as practicable.”.
I move amendment No. 1 to Seanad amendment No. 10:
1. To delete subsection (2) and substitute the following:
"(2)(a) Guidelines made under this section may include but are not limited to:
(i) credit for start-up enterprises;
(ii) the frequency of declined cases and the criteria that has been used to decline cases;
(iii) the renegotiation of existing credit lines and the terms that have been applied;
(iv) limitations on the use of the new liquidity for purposes other than extending credit;
(v) dealings with mortgages on principal private residences.
(b) The Minister shall cause a copy of guidelines issued under subsection (1) to be laid before each House of the Oireachtas as soon as practicable.”.
Arising from the debate on Report Stage in the House on the need for transparency in the guidelines issued regarding lending practices of participating institutions, the Minister has introduced this amendment to require that guidelines issued under this section should be laid before both Houses of the Oireachtas.
I welcome the Minister's amendment. In the current circumstances, the amendment needs to be prescriptive.
The guidelines should be agreed with the financial institutions before their loans are transferred to NAMA. The guidelines will not work if they are agreed after the transfer of loans. During the debate on Report Stage, the Minister assured the House that the guidelines were not merely a threat but that they would be implemented. He subsequently confirmed that he would implement guidelines. I would like clarification on that matter. Guidelines must be agreed and implemented before loans are transferred.
The purpose of NAMA, and our objective since 29 September 2009, is to restore credit to the economy. If NAMA does not cause that to happen it will have failed. A sum of €54 billion is being provided, of which a maximum of €30 billion will be available to the economy. Approximately €24 billion will go into Anglo Irish Bank, Irish Nationwide and the Educational Building Society, which is, effectively, a black hole. It is unlikely that money will ever again be seen by small businesses or the taxpayers.
I wish to deal with the two issues of small and medium enterprises and owners of principal private residences. The forthcoming revised Mazars report on lending to small and medium enterprises must be able to distinguish new loan applications from applications for the continuation of existing loans. If it does not, we will not know the number of declined applications and the criteria for declining them. The previous Mazars report spoke about cases that had been declined but I suspect that many more credit inquiries were declined, perhaps before they reached the stage of actual application. I have no problem with laying out the various stages of loan applications so long as we have full transparent disclosure.
The guidelines must apply to the renegotiation of existing credit lines and the terms that have been applied. Fine Gael is going around the country at present meeting business people. The issue most frequently raised by them is that of credit to new and existing small businesses. Businesses are going to the wall because they cannot access their existing credit facilities. Small businesses employing fewer than ten people are the lifeblood of the economy. There is nearly a quarter of a million of them and they employ between 700,000 and 800,000 people. We must protect them. They are entitled to have that protection in legislative form.
My amendment proposes that there be guidelines for limitations on the use of the new liquidity for purposes other than extending credit. We cannot allow a situation where the banks are getting €54 billion from the taxpayers and using the money to expand their enterprises and pay off bond holders. NAMA must be used to ensure credit flows to small businesses.
There must be ongoing protocols between the banks and the Minister. I note that the Minister will issue guidelines relating to a review of decisions to refuse credit facilities. The Minister can do that on an ongoing basis. I welcome the Minister's amendment and section 127 but they do not go far enough.
The issue of home owners is critical. They are worried about repossession. They must be given legal assurances regarding mortgages. Two days ago the Irish Banking Federation, which represents 11 institutions, issued voluntary guidelines undertaking to review mortgages on a six monthly basis. FLAC, the free legal aid body, said this code was not worth the paper it was written on unless it had a legal basis. There must be protocols to prevent mortgage holders getting to a point where they face repossession. Sub-prime lenders fall outside the banks' voluntary code. We need an amendment to legislation to protect home owners so that if a mortgage holder is taken to court, the judge will have a legal basis on which to make a ruling. If a judge could make a legal ruling which is fair and reasonable the balance would shift in favour of the home owner. At present, that is not the case and people are losing their homes as well as their security and dignity.
We are here to legislate for the common good. My amendment to the Seanad amendment would allow that to happen. It would not encumber the banks in carrying out their day-to-day business but it would apply to sub-prime lenders, who are extremely aggressive in giving people loans at exorbitant rates and in repossessing their homes when they cannot keep up repayments. Many of these borrowers are young couples who have been given 100% mortgages. If there had been proper rules in place they would probably not have qualified for mortgages. These mortgages have become a noose around their necks and, what is more, they are now losing their homes.
The Seanad amendment says that guidelines should be laid before the Houses of the Oireachtas as soon as is practicable. The Minister has made reference to his own guidelines. If the flow of credit is not facilitated, the legislation will have failed. The banks and their representative body want to retain the status quo. We need to move from a principles based regulatory system to a rules based system. This amendment would be part of that process. If the banks are genuine in their determination to protect home owners and are committed to ensuring that credit flows through the economy, they should not fear this measure. They should give full disclosure of new and existing loans to the Mazars team as they compile their current report. The previous Mazars report stated that €32 billion had been provided to SMEs in February 2008 and that the same figure was provided in June 2009. Much of that may have been rolled up interest. We have no figures for overdraft facilities withdrawn or renegotiated. Credit for start-up businesses is critical.
The renegotiation of existing credit lines is placing enormous pressure on businesses. If a person must go to the bank for a review of his or her facilities, whether an overdraft or a term loan, the bank is upping the rate of interest and, in many cases, it is restricting the amount of credit available. For many businesses, interest payments on facilities from banks can be the third highest expense after labour and energy costs, which is frightening. It is incumbent on us to include prescriptive details in terms of the guidelines for lending to small and medium sized enterprises and to place the issue of banks' dealings with homeowners on a legislative basis.
I welcome the amendment on Report Stage in which the Minister included guidelines to facilitate the availability of credit for classes of borrowers or potential borrowers, including small and medium enterprise, and to the review of decisions of participating institutions to refuse credit facilities. However, it did not go far enough.
Our amendment would, in no way, inhibit the operation of the banks but it would ensure we get value for the €32 billion of the €54 billion going into the two main banks which will be available, although the figure might be as low as €25 billion. Effectively, NAMA, in terms of funds flowing to small business, is really about AIB and Bank of Ireland and none of the other institutions.
I was not surprised by the attitude of the Irish Banking Federation to the change in regulation. We can never go back to the way things were. We must go for a rules based system, which applies in the UK and the United States. France, England, Canada, Australia and New Zealand all have rules based systems and none of them have the same problems we have. Our banking institutions have the lowest core tier 1 ratio of capital in Europe. The reasons for that are reckless lending and lack of proper bank regulation by the Government and the Central Bank of Ireland. If proper regulation had been in place and if the banks had been required to keep higher capital ratios from 2003, I have no doubt we would not be here discussing this Bill. That is an indictment on regulation and the recklessness of banks in terms of lending.
Of the €54 billion we are putting into the banks, at least €25 billion or more of it which is going to the two main banks — it will probably be €28 million — must be a fiscal stimulus for the economy and for small and medium sized enterprises. A legal protection must be put in place for mortgage holders. That is a major worry for ordinary people who risk losing their homes. Some 25,000 people have distressed loans with the financial institutions. Up to 200,000 mortgage holders potentially have negative equity. When they see €54 billion of their money going to the banks, they will ask what they are getting in return. They are getting nothing.
Of the €7 billion over market value, the banks will take €2.7 billion of that but they should take all of it. I understand the Green Party was looking for subordinated debt — the difference between the market value and the value of the assets being taken over. In this context a sum of €2.7 billion is a sop.
To go back to the core of my amendment, we have a duty to ensure we have a sound banking system. No one disagrees with that. However, we also have a responsibility to ensure that the €54 billion of our money going to the banks goes back into the economy and that it does not sit on the banks' balance sheets, go to pay off bondholders or be used for an acquisition trail. We have a responsibility to the hard-pressed mortgage holders who are paying interest to the banks. I have in mind the sub-prime lenders because the voluntary code produced by the Irish Banking Federation does not apply to them. They are forcing most of the repossessions.
If we put this on a legislative basis, it still allows the banks to function in terms of getting repayments on their loans. They can then put in place a six month cycle. If a case goes to a court of law, the judge will have a legal basis and a reference point to shift the balance towards the mortgage holder and to ensure everything possible is done to ensure people do not lose their homes.
On Committee Stage, we tabled an amendment that if NAMA takes over delinquent loans from developers, there should be a facility for a relatively small number of people who face repossessions. NAMA would step in and purchase what would probably be far better assets than those it will purchase from the banks. It would be like the shared ownership scheme operated by local authorities. A mechanism could be found whereby people could stay in their homes and buy them back from NAMA over a number of years. That is a reasonable proposition.
We want legislation for the common good and that ensures a sound banking system, that we look after the small and medium sized sector and homeowners and a viable economy in which the banks play their part.
The banks are getting all the gravy here without providing anything of substance in return. These guidelines must be put in place before the assets transfer. Mortgage holders must be dealt with before loans are transferred because the banks are resisting change. It is incumbent on us to set the benchmark.
If, over the past ten years, Fianna Fáil-led Governments had imposed regulation through the Governor of the Central Bank of Ireland in regard to proper, stringent capital ratio requirements, we would not be debating this Bill. I ask the Minister to accept this reasonable amendment which builds on his one and takes the small and medium sized sector and the hard-pressed home owners into account.
The more familiar I become with this Bill, and leaving aside its purpose, the scepticism that surrounds it and whether it will deliver on its objectives, the more I recognise that it is an extraordinary work of legislative architectural craftsmanship. It is amazing legislation. However, all of that will be for nothing if we do not address the issue to which Deputy O'Donnell has referred. If it does not get credit flowing again in the real economy, the whole purpose of this financial engineering and all the days and hours we spent on it will be for nothing. It may well be an innovative model of legislative craftsmanship but unless it is seen to work, it is of very little value.
There are all kinds of models for taking toxic assets out of the financial institutions but that is not the issue. From what I heard, nobody in this House opposed any methodology that would strip out the bad loans. This is not the issue. The issue is whether we have a functioning banking system at the end of this exercise. Have we fixed the banks as a prerequisite to trying to get economic growth back into the economy? In so far as this amendment proposed by the Minister goes, I welcome it and that Members of the Oireachtas will see these guidelines. However, I draw the Minister's attention to the fact that in the debate in the other House my colleagues, Senators Alex White and Ivana Bacik, raised the issue of what is now section 210 where it states that the Minister "may make guidelines". They argued that this should state that the Minister "shall make guidelines". Furthermore, the Minister said he was well disposed towards that in principle. He told the other House that he would consider tabling an amendment to achieve that purpose, but this is not what we have. I hope that what we have will work out in practice. It states that the Minister "may make guidelines". The view of this House is that we should admit that the Minister will have to make guidelines because the experience is that credit is frozen. Business is being strapped in some cases and sound business proposals are not being funded and so on.
Rarely has one seen a gulf so wide as between what small and medium-size enterprises are saying to us and what the banks are saying. The banks are saying: "No, we are lending. Look at our advertisements, look at our loan records." They say the economy has contracted and therefore there is less economic activity and less demand for loans. Demand is suppressed and it is not that they are lending less. They say they are still lending but because of the contraction in the economy, it is less and it is not their fault. On the other hand, small companies, small and medium-size enterprises, are coming to Members on all sides of this House and saying they are being greatly constrained in what they can do by the fact that lending to them, whether in terms of overdraft facilities or normal loan facilities, is being restricted by the banks. This significant gulf exists.
I accept the Minister's argument on Committee Stage that it can be very difficult to stipulate how the Minister intervenes in this logjam. Nobody is asking the financial institutions covered by this legislation to loan recklessly to imprudent propositions. Nobody is making that argument. It is the fact that sound proposals are being rejected or being curtailed that is the cause of concern. I accept that it is difficult to tailor guidelines to allow the Minister to intervene beneficially. I do not know how it is broken down either by sector, by establishing targets, by saying there will be so much finance available for start-up companies, small innovation companies or a particular category. However, I do know that this House is not satisfied, unless the Minister for Finance of the day has that authority.
The Minister has gone some way with us but looking at the wider economic situation, one can only be struck by the absence of cohesion outside of this House. A great deal of this is due to the anger that people feel about what has happened. Colm McCarthy said that anger is not a policy and I accept that. However, anger to which we are not seen to respond to reasonably can obstruct a policy. There is serious anger outside this House. The plea one hears from the people who are outside protesting and marching is: "I did not do anything to bring this down on all of our heads." They are unable to understand why it is that the law enforcement agencies of the State do not seem to be able to respond to the situation. In the home of capitalism, the United States, they were swiftly able to show that they were at least on the job but nobody's collar has been felt in this economy and that is aggravating the divisions outside this House. The people have seen blatant wrongdoing and they have not seen anybody held to account.
In a past life I had the privilege of working with the man who is now the Director of Corporate Enforcement and I have a very high regard for him. However, it seems to take forever and a day for him to bring home conclusions. This is aggravating the mood outside the House. The Government is likely to come back in here within four weeks to ask those same people outside to accept further sacrifices, yet it is seen that the people who have plunged us into this crisis are neither being made amenable nor held accountable.
Deputy O'Donnell is right; we are here because of reckless lending and blind-eye regulation. It defies the experts and the commentators to say how it is that none of the watchdogs intervened. It presumably will take more than a decade for us to find out if there is a paper trail and if there were warnings issued by the people who should have been giving the warnings. As a result we are now in the circumstances in which we find ourselves.
We want to ensure the Minister has this power and that the guidelines in question are laid before the House. The Seanad debate had a slightly different tenor than is put on it in this House. I ask the Minister when replying to deal with the arguments advanced in the other House about the proposition that the Government might take on board the suggestion from my colleague, Senator Bacik, about a credit mediator. This was the idea that she advanced based on the French model where this credit mediator model has been established in France as a sort of ombudsman when dispute arises about lending policy where the financial institutions are saying one thing and business is saying another thing. I am advised that this model or credit mediator has worked very well in France. In the Seanad the Minister stated he was minded to consider it. I have no knowledge of whether the Minister intended to do so or whether it was simply an expression of the benign amicability with which he approaches the world and the rest of us when he seeks to embrace us and tell us he is minded to take our proposals on board.
It is simply a passing phase.
The Minister stated in the other House that he saw merit in the idea. When the Minister of State replies he might indicate the view of the Minister for Finance on the matter.
One of the worst outcomes of the NAMA legislation could be a situation in which credit was being restricted or prevented from flowing by the banks. In essence I refer to the possibility of the banks using and abusing the NAMA legislation for their own purposes, strengthening their positions and ignoring the imperative to ensure credit is flowing. There is some evidence of this already. The banks have been using the time during which the debate has taken place for the purpose of restricting credit, of making new arrangements with their customers on more onerous terms and generally manoeuvring themselves into a situation in which they are the winners in all of this affair. However, the job needed for the country is not being implemented and this is why the guidelines will be essential.
I refer to one aspect of the guidelines and I call on the Minister to take it on board. This matter was referred to in the Seanad last night and I reiterate my support for it. NAMA holds or will hold a security on acquired performing bank assets. That is an essential point. If such bank assets are performing and not in arrears then the participating institutions should not be precluded from relying on that security to issue new or commercially sound loans to individuals or, more likely, to corporate bodies. It would be unjustly prejudicial to prevent participating institutions from relying on such a security.
I have strong reason to press this case because I am aware of a company which has operated in the south for the past 50 years. It has been a viable company and has paid its dues. Last year, it paid €14 million in taxes to the Revenue. It has an arrangement with a bank and the bank is now tossing the ball between it and NAMA. The bank states the preferred arrangements cannot go ahead without clearance from NAMA and without prior written consent. On the other hand, the NAMA position is that no such clearance is necessary from it, provided the money involved and the credit agreed is not for working capital. I foresee a danger in this case and this company may be caught in the crack between the banking institution and NAMA. It may find itself forced into a very difficult situation, possible liquidation, with 300 jobs at stake. This is a viable company. There is a danger because the banks may try to use this situation solely for their own benefit and to build up their capital. If that happens, NAMA will be a disaster.
This is why I support the points raised by my colleague, Deputy O'Donnell, and I highlight this particular case to the Minister. I do not intend to quote the detail in public but I seek for the details of this case to be examined by the Minister and NAMA to ensure the outcome to which I referred will not unfold. There is a danger this viable company will be left swing as a consequence of the legislation to establish NAMA, which will provide vast support for the banks. The banks may end up using the support for their own purposes.
I will refer to the Minister's amendment first and then to Deputy O'Donnell's. Section 210, which is to be amended, was inserted as a recognition of the suffering to the small business sector because of the collapse of the banks. I am unsure if the fact that the Minister may issue guidelines has any relevance on the NAMA legislation, which aims to provide credit in any event. In so far as the Minister tabled an amendment to section 210, I welcome that he will issue the guidelines to the Houses of the Oireachtas, so that we can see exactly what they are. However, as I mentioned in an earlier contribution, I welcome the statement yesterday from the major banks in respect of mortgage holders.
I take issue with what has been put down by Deputy O'Donnell in the Fine Gael amendment to the Minister's amendment. Deputy O'Donnell referred to previous amendments tabled in respect of a NAMA for mortgage holders or to adopt NAMA for mortgage holders. Unfortunately for the likes of Deputy Varadkar, that will not happen. While one may wish to have dealings with mortgages and principal private residences, the whole scope of NAMA leaves out smaller transactions, loans and assets. That is implicit in the legislation. NAMA does not cover everything, it covers the bigger picture.
I have no wish for this to be taken up the wrong way, because someone mischievous will invariably do so.
They will?
They will and, therefore, I wish to be specific. In terms of value, mortgages are small fry, as are the smaller loans not to be taken on by NAMA.
That is not much use to mortgage holders.
This is why I wish to clarify the matter because the Deputy has already begun to take me up wrongly.
That is because the Deputy is wrong.
It is not small fry for an individual earning the average industrial wage; it is an important issue. However, I do not believe the matter can be dealt with through this legislation. The programme for Government has committed to put in place firm and concrete measure to help mortgage holders who fall into negative equity.
I note Deputy Durkan is in the Chamber and I pay testament to his work in the matter of sub-prime lenders and his work to represent constituents and others who have fallen on hard times in this regard. However, I urge the Minister to consider the Finance Bill or other legislation for the guidelines he intends to issue. It may be more practicable to do that and these measures could be put in place very quickly.
To issue guidelines through the NAMA legislation or anywhere else will not make the banks change one iota. In this respect I agree with Deputy O'Donnell and he has made a valid and important point. If they can get away with it the banks will not be inclined to change. That is a fact. Why would institutions that have carried on in the same profligate way for years seek to change their systems? They got along very well and paid vast bonuses to the chairmen and directors when they were making losses. They would very much like to continue in that regard. I realise there will be a complete turnover of all the heads of all the banks covered by NAMA by the end of 2010.
I wonder if Richie Boucher knows that.
The Deputy makes a valid point and there are always exceptions to prove rules.
The Deputy is getting good.
We will not know until the end of 2010.
It proves other rules as well.
I am simply expressing a confidence that it will happen but I also offer a realistic appraisal that sometimes it may not happen. The intent exists at the top of the banking system. As others have mentioned, people have concerns. Where are the gardaí going in and grabbing people by the scruff of the neck? Why are certain people not being put in handcuffs, as the Minister for the Environment, Heritage and Local Government, Deputy Gormley, stated? I support and echo the Deputy's comments in this regard. The Minister for Finance, Deputy Lenihan, and the Taoiseach should be aware that whatever powers need to be applied should be put in place. I acknowledge it is impossible to make arrests and to charge people without firm evidence and that is probably why it has taken so long. However, as Deputy Rabbitte stated, this is no consolation to people who are on the streets protesting in anger and outrage at the budget cutbacks that must be implemented primarily, but not totally, as a result of the collapse of the banking sector. One cannot strictly equate the two. We must implement a tough budget and then we have NAMA. We have had God knows how many days of debate on NAMA, different arguments have been put forward and we are nearing the end of the process. The measures needed to recapitalise the banking system and get it working properly are separate to the measures needed to eat into our deficit. There are so many elements we would like to see in NAMA but these cannot be in NAMA. In this section, the Minister issuing the guidelines is quite welcome to——
I am loath to interrupt Deputy Gogarty but a number of Deputies are offering to contribute on this discussion of the amendment to the amendment. If we get back to Second Stage style contributions we will have a problem.
I return to section 210. I welcome the fact that the guidelines will be issued by the Minister but I would like to see more than guidelines. I would like to see the spirit of Deputy O'Donnell's amendment taken on board so that we have proper legislation to protect private mortgage holders and legislation to provide much-needed funding for SMEs. This legislative protection should not be placed within NAMA legislation but must be provided soon. I hope the Minister of State can provide some guarantees in his summation speech.
The Minister of State wishes to make a brief point.
I do not want to stifle discussion or cut across other Members but I want to make a brief intervention. For the information of the House, we are dealing with amendment No. 10 and discussing it in detail. Fine Gael has tabled an amendment to amendment number 11, which is important, and relates to whistleblowers and extending the definition in section 222 to incorporate directors and employees of a NAMA entity. This was not included in the original definition and clearly it should be. It would be unfortunate if that amendment could not be taken because we wind down the clock on this amendment. I am not proposing an extension of time but if we wind down the clock on this amendment we will not get to the next amendment. I am open to moving onto the next amendment.
The order of the House says that we will put the closing motion to the House at 3:30 p.m.
We may not get to this amendment and people have major concerns about credit.
We need to deal with this amendment.
Why not conclude this section now with the agreement of the House?
I seek the agreement of the House to do this. We can move on.
I support that, as I am sure Deputies Morgan and Gogarty do. I suggest dealing with Seanad amendment No. 10 now and we will move on to Seanad amendment No. 11 because it is important.
Does the House agree to this proposal? Agreed.
I thank Members for their agreement on this point but I seek a moment to intervene to move the amendment.
Will Deputy O'Donnell consider withdrawing his amendment? I refer to amendment No. 1 to Seanad amendment No. 10.
Does this relate to guidelines? I will press the amendment.
Amendment No. 1 to Seanad amendment No. 10 put and declared lost.
Seanad amendment No. 10 agreed to.
Seanad amendments Nos. 11 to 13, inclusive, and 15 are related and may be discussed together.
Seanad amendment No. 11:
Section 222: In page 131, before section 222, to insert the following new section:
"222.—(1) Where a person who is an employee of a participating institution or an officer of NAMA communicates his or her opinion, whether in writing or otherwise, to a member of the Garda Síochána or a member of the Board that—
(a) an offence under this Act or any other enactment has been or is being committed,
(b) any provision of this Act or any other enactment or rule of law has been or is being contravened, or
(c) there has been other serious wrongdoing in relation to NAMA, then, unless the person acts in bad faith, he or she shall not be regarded as having committed any breach of duty towards any other person, and no person shall have a cause of action against the first-mentioned person in respect of that communication.
(2) Where a person who is an employee of a participating institution or an officer of NAMA communicates his or her opinion, whether in writing or otherwise, to the Minister that a direction given by the Minister under this Act has been or is being contravened, then, unless the person acts in bad faith, he or she shall not be regarded as having committed any breach of duty towards any other person, and no person shall have a cause of action against the first-mentioned person in respect of that communication.
(3) This section applies to a communication—
(a) that would, but for this section, constitute a breach of duty by the person who made it, or
(b) in respect of which another person would, but for this section, have a cause of action against the person who made it.”.
I move amendment No. 1 to Seanad amendment No. 11:
In line 2, subsection (1), after "NAMA" to insert "or any group entity of NAMA".
I will try to be much briefer than I intended to be. I know other Members had signalled their intention to contribute so I will try to be as brief as possible. Following discussions in this House, the Minister has decided to add specific provisions to the Bill in the Seanad to protect bona fide whistleblowers if they report wrongdoing. The whistleblower protection extends to officers of NAMA and participating institutions' employees regardless of the position within the organisation. Wrongdoing can take place in any organisation, regardless of whether it is in the public or private sector, and even where the proper internal financial control structures are put in place. Unfortunately, in recent times there have been several examples of this. Whistleblower protection can be difficult to legislate for. It is a matter Deputy Rabbitte has been very much engaged in over recent years but it is important to strike a balance between protection for the individual and deterring people from making false accusations. The proposed amendment is framed in such a manner to ensure this balance is struck. The proposed amendments are largely based on the amendments to the FÁS legislation recently introduced by the Tánaiste. I commend the amendment to the House and I understand that Fine Gael wishes to alter the amendment somewhat. The Government is prepared to allow this.
I wish to make two brief comments on the discussion we had on the previous amendment. I agree with most of the comments of Deputies O'Donnell and Rabbitte in that the test for this legislation is as follows. It must put in place a structure and a system that allows the banks to move away from their very distressed state at this point in order to get credit flowing to the economy. That is agreed by all parties. It should be noted that in the context of the discussion on guidelines or mandatory directions, the most important way to get lending flowing to the economy is to allow——
Can the Minister not allow us to contribute? We know this.
I will be very brief.
We know all this, the Minister of State does not have to say it.
We must allow the banks to access capital on the capital markets. When they have access to capital——
We have moved on to the next amendment.
——on the capital markets, they should lend it out. That is where guidelines become applicable.
We are discussing the next amendment. The clock is winding down.
I said I would speak briefly on this point.
We asked to move on to this amendment.
Deputy Rabbitte made the point that——
The Minister of State has come into this debate for 20 minutes——
The last contribution took 30 minutes and I am entitled to three minutes.
No, the Minister of State is not entitled to it. We are on the next amendment.
We are grouping these amendments.
We are grouping these amendments by the agreement of the House. Deputy Rabbitte made the important point——
We have limited time, we are due to finish at 3.30 p.m. Interruptions are curtailing the time.
Deputy Power is playing out time. The Ceann Comhairle is a former footballer and is well aware of this tactic.
I am just addressing a simple and straightforward issue raised by Deputy Rabbitte. He made the point that the guidelines should be mandatory and that instead of using the term "may", we should use "shall". If we were to accept the amendment by Deputy Rabbitte and if we were to accept the amendment by Deputy O'Donnell, it would be mandatory on the Minister to make guidelines on the limited class of credit lines referred to in Deputy O'Donnell's amendment. This would not enable the Minister to examine different categories of credit impairment that may evolve over the time of NAMA. Therefore, he would have no flexibility. That would be the net result of accepting both amendments.
Regarding these amendments on whistleblowing, I am pleased that the Minister is prepared to examine this issue again. When the Minister for Finance, Deputy Lenihan, came into the House this morning he was not prepared to accept further amendments. This was to be the final stage. Is the Minister now happy to have the Bill go back to the Seanad and come back to this House one more time?
No, because the proposed amendment is from this House. It will go to the Seanad but does not need to return to this House.
If the Minister were minded to accept amendments he should have told us so this morning. It is a pity that we do not have time to sort out the mess on whistleblowing and false statements. Correctly, a whistleblowing amendment has been included and there is also an amendment on making false statements. However, under section 221(5) if an officer, director, or employee of NAMA, and presumably of the special purpose vehicle, is communicated with in contravention of the Bill or, in other words, lobbied, he or she must go as soon as possible to the Garda to state that the communication was made, the details of the communication and the name of the person who communicated with him or her. If the person does not do so he or she commits an offence and is liable to a fine of €1,000 or imprisonment for up to six months.
Deputy Gogarty spoke about bankers in chains, which we will never see in this country — it is not the United States. Rather like the beef tribunal so long ago, it will be a poor unfortunate employee of NAMA who is lobbied, who fails to understand the nature of the communication, and who fails to hotfoot it to the Garda who will be guilty of an indictable offence and will face up to six months in prison. Communication covers e-mail and receiving communication does not necessarily mean that one wanted to receive it.
They have to believe it.
We have to have proportionality in legislation and there is noproportionality in that. The individual junior clerk in the NAMA edifice who innocently receives and opens an e-mail which asks for a good price for a bit of land will be guilty of an offence.
Does Deputy Burton not agree that the person has to believe they have been communicated with?
If one gets an e-mail one has to believe it.
If one receives an e-mail it is an e-mail; it is an actual communication whether or not one believes its content.
Section 221(5) clarifies that.
We also have whistleblowing legislation.
A number of amendments to amendments have been tabled by Deputy Kieran O'Donnell and I am anxious that he has an opportunity to speak to them. I would appreciate Deputy Burton's co-operation on this.
I will but I want to clarify whether the Minister is prepared to consider this related group of amendments which are highly contradictory and in contention with each other. Why is there a provision on false statements when we already have the provision in section 221? This is like religious zealotry; it goes too far, is too complicated and will end up being able to do nothing to address this very important area.
I agree with Deputy Burton on the issues. The amendments drafted by the Minister made no reference whatsoever to the SPVs so I tabled an amendment to relate to group entities because I expect that SPVs will do all the work of NAMA and effectively will be NAMA. We could have a situation where the legislation refers to NAMA but people could be employed by the SPVs; the legislation would be unworkable outside of the contradictions that Deputy Burton indicated.
I welcome and acknowledge that the Minister has accepted the amendments. We have debated NAMA for more than 100 hours and we still have people who were involved in the banking system walking around and appearing to be above the law. Apart from dealing with NAMA's structures we have to ensure that proper regulation is introduced and people are brought to book.
Has NAMA been approved by the EU? How long will that approval take? Will the legislation be signed into law by the President before it goes to the EU? That is up in the air. We could have spent the past 100 hours debating something which the EU may not approve. These are valid questions that need to be put.
Deputy O'Donnell is holding it up.
I thank Deputy O'Donnell and Fine Gael. This is an important amendment and it adds to the section. On the general point on whether the President will sign the legislation in advance of seeking EU approval they are separate matters entirely. Once the legislation is passed in this House and in the Seanad later this afternoon, it will go to the President. The matter of EU approval does not involve the President. I agree with the general discussion we are having as part of this grouping of amendments; the test of this legislation will be whether credit begins to flow in the economy once again. Only time will answer that question.
Deputy Rabbitte made a very important intervention in his contribution. He stated that we were agreed there were a number of options to deal with distressed assets on banks' balance sheets. There are very many options to deal with those. They can be dealt with over a period of time through nationalisation, a position with which we do not agree at this stage. There are other options, including that proposed by Fine Gael. The point is that this is the option we believe best allows the banks to acquire cash quickly with the support of the European Central Bank, which we have——
Does the Government have approval?
——and the agreement of European Union. That means we can get this up and running quickly. We have had long discussions on guidelines and whether they should be mandatory or optional and whether the Minister "may" or "shall" introduce them. We could have all the guidelines in the world directing the banks to do all types of wonderful things but if the banks do not have the capital on their balance sheets and cash——
The Government is giving them the cash.
——they will not be able to lend.
We have had more than 100 hours of debate but it comes down to one very simplething.
Common sense.
That is how we relieve the banks of their distressed assets and make the Irish banking system function again. The reason it became dysfunctional is a separate matter to be debated in another way in another forum. The question which this legislation puts before the House is how to relieve the banks of their distressed assets and how we put a structure in place which allows the banks to access cash either through bonds in the European Central Bank or, preferably in our view, in a reformed banking system properly regulated as proposed by Deputy O'Donnell so that the banks, properly reformed and functioning, are able once again to access capital on the capital markets in the normal way under a new regulatory regime. I accept Deputy O'Donnell's amendment and I commend the amended amendment to the House.
What are we sending back to the Seanad?
We are returning the Bill with one amendment to it and that is the amendment which Deputy O'Donnell just proposed.
Three amendments are going back.
I am now required to put the following question in accordance with an order of the Dáil of this day: "That the amendments set down to Seanad amendments Nos. 11, 12 and 13 on the second additional list are hereby agreed to in Committee and that in respect of each of the Seanad amendments not disposed of, the Seanad amendments or, as appropriate, the Seanad amendments as amended are hereby agreed to in Committee and agreement to the amendments is accordingly reported to the House."
Question put.
The Dáil divided by electronic means.
As a teller, under Standing Order 69 I propose that the vote be taken by other than electronic means.
As Deputy Kehoe is a Whip, under Standing Order 69 he is entitled to call a vote through the lobby.
Question, "That the amendments set down to Seanad amendments Nos. 11, 12 and 13 on the second additional list are hereby agreed to in Committee and that in respect of each of the Seanad amendments not disposed of, the Seanad amendments or, as appropriate, the Seanad amendments as amended, are hereby agreed to in Committee and agreement to the amendments is accordingly reported to the House", again put.
The Dáil divided: Tá, 81; Níl, 65.
Tá
- Ahern, Bertie.
- Ahern, Dermot.
- Ahern, Michael.
- Ahern, Noel.
- Andrews, Barry.
- Andrews, Chris.
- Ardagh, Seán.
- Aylward, Bobby.
- Blaney, Niall.
- Brady, Áine.
- Brady, Cyprian.
- Brady, Johnny.
- Browne, John.
- Byrne, Thomas.
- Calleary, Dara.
- Carey, Pat.
- Collins, Niall.
- Conlon, Margaret.
- Connick, Seán.
- Coughlan, Mary.
- Cowen, Brian.
- Cregan, John.
- Cuffe, Ciarán.
- Curran, John.
- Dempsey, Noel.
- Devins, Jimmy.
- Dooley, Timmy.
- Fahey, Frank.
- Finneran, Michael.
- Fitzpatrick, Michael.
- Fleming, Seán.
- Flynn, Beverley.
- Gogarty, Paul.
- Gormley, John.
- Hanafin, Mary.
- Harney, Mary.
- Haughey, Seán.
- Healy-Rae, Jackie.
- Hoctor, Máire.
- Kelleher, Billy.
- Kelly, Peter.
- Kenneally, Brendan.
- Kennedy, Michael.
- Killeen, Tony.
- Kitt, Michael P.
- Kitt, Tom.
- Lenihan, Brian.
- Lenihan, Conor.
- Lowry, Michael.
- McEllistrim, Thomas.
- McGrath, Mattie.
- McGrath, Michael.
- McGuinness, John.
- Mansergh, Martin.
- Martin, Micheál.
- Moloney, John.
- Mulcahy, Michael.
- Nolan, M. J.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O’Brien, Darragh.
- O’Connor, Charlie.
- O’Dea, Willie.
- O’Donoghue, John.
- O’Flynn, Noel.
- O’Hanlon, Rory.
- O’Keeffe, Batt.
- O’Keeffe, Edward.
- O’Rourke, Mary.
- O’Sullivan, Christy.
- Power, Peter.
- Power, Seán.
- Roche, Dick.
- Ryan, Eamon.
- Sargent, Trevor.
- Scanlon, Eamon.
- Smith, Brendan.
- Treacy, Noel.
- Wallace, Mary.
- White, Mary Alexandra.
- Woods, Michael.
Níl
- Allen, Bernard.
- Bannon, James.
- Behan, Joe.
- Breen, Pat.
- Broughan, Thomas P.
- Bruton, Richard.
- Burke, Ulick.
- Burton, Joan.
- Byrne, Catherine.
- Carey, Joe.
- Clune, Deirdre.
- Connaughton, Paul.
- Coonan, Noel J.
- Costello, Joe.
- Coveney, Simon.
- Crawford, Seymour.
- D’Arcy, Michael.
- Deenihan, Jimmy.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Feighan, Frank.
- Ferris, Martin.
- Flanagan, Terence.
- Gilmore, Eamon.
- Hayes, Brian.
- Hayes, Tom.
- Higgins, Michael D.
- Hogan, Phil.
- Howlin, Brendan.
- Kehoe, Paul.
- Lynch, Ciarán.
- McCormack, Pádraic.
- McEntee, Shane.
- McGinley, Dinny.
- McHugh, Joe.
- McManus, Liz.
- Morgan, Arthur.
- Naughten, Denis.
- Neville, Dan.
- Noonan, Michael.
- Ó Caoláin, Caoimhghín.
- Ó Snodaigh, Aengus.
- O’Donnell, Kieran.
- O’Dowd, Fergus.
- O’Keeffe, Jim.
- O’Mahony, John.
- O’Sullivan, Jan.
- O’Sullivan, Maureen.
- Penrose, Willie.
- Perry, John.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Sheahan, Tom.
- Sheehan, P. J.
- Sherlock, Seán.
- Shortall, Róisín.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Tuffy, Joanna.
- Upton, Mary.
- Varadkar, Leo.
- Wall, Jack.
Tellers: Tá, Deputies Pat Carey and John Cregan; Níl, Deputies Paul Kehoe and Emmet Stagg.
Question declared carried.