I call Deputy Mary Lou McDonald who has 28 minutes remaining in the slot.
Central Bank (Supervision and Enforcement) Bill 2011: Second Stage (Resumed)
Question again proposed: "That the Bill be now read a Second Time."
I will not need 28 minutes. I am pleased the Bill protects whisteblowers from civil liability and victimisation. I am pleased also that this protection extends not only to employers who are implicated in the detail of information provided but also to those outside the employer-employee relationship.
The Bill goes further in providing a mandatory regime for those with senior or important functions within financial service providers. There should always be a compulsion to disclose any information relating to breaches of law or good practice, particularly by those holding senior management positions. One concern I have with this section is the absence of any compulsion on the Central Bank to act on information provided by whistleblowers. I understand that it is not possible to act on every single piece of information provided, but the experience of many whistleblowers under the previous regulatory regime suggests that some form of obligation to act should be inserted into the Bill. Sinn Féin will bring forward sensible amendments on this matter, in the spirit of the Bill itself, on Committee Stage and I hope the Minister will give them due consideration.
I am also pleased to see the significant increase in penalties available to the Central Bank for persons or financial service providers in breach of their legal requirements. That should go some way to giving the regulator the teeth that were so badly lacking in the years preceding the financial crisis of 2008.
Sinn Féin is often critical of legislation laid before this House by Government, but we have always said that we would support proposals that are positive. The Central Bank (Supervision and Enforcement) Bill 2011 is one such proposal and is a welcome addition to the regulatory powers available to those bodies and individuals tasked with ensuring that financial service providers behave in a way that is correct, responsible and in the public interest.
I wish to take this opportunity to make a few more general remarks about the regulation of financial service providers. As highlighted in the Government's own report of the commission of investigation into the banking sector, our recent financial crisis was caused by a range of factors. Regulation did exist that could have been used by the regulator in the years leading up to the crash of 2008. However, neither the regulator nor the Ministers of the day were willing to fully use the powers already vested in them to address the reckless and inappropriate behaviour in our financial institutions. While it is clear that there is a need to strengthen the regulatory code there is also a need to strengthen the obligations on the regulator, the Central Bank and Government to ensure they act in an appropriate and timely manner to any breaches of existing regulations. While the recent intervention by the regulator on the issue of mortgage interest rate charges is an example of this, it must become a more frequent practice and one that is fully backed up by the strong support of Government.
There is also a need to recognise that regulatory breaches or bad practice can be incentivised by other areas of Government policy, such as monetary policy and tax policy. Reckless behaviour by financial institutions prior to the 2008 financial crash was incentivised by the excessive tax breaks provided for by successive Finance Acts under the previous Government and, crucially, by lax monetary policy pursued by the European Central Bank. If the policy and legislative environment in which our financial service providers operate actively encourages them to behave in a way that is detrimental to society in general, then that policy environment must also be subject to change.
I make these brief comments in order to demonstrate an important point, namely, that a responsible financial services sector requires much more than strong regulation. It requires the political will to enforce, from the regulator's office through to the Governor of the Central Bank and up to the Minister for Finance and the Taoiseach. It also requires an end to reckless and unsustainable tax policies, particularly with respect to tax breaks, many of which continue to be on our Statute Book. Crucially, it also requires an end to the one-size-fits-all monetary policy imposed on by the European Central Bank. While the policy of cheap money pursued in the early years of the euro is no longer with us, the one-size-fits-all policy is still in place. The pendulum has clearly swung too far, much to the detriment of small and medium-sized enterprises and those who rely on this sector for employment. Excessively restrictive lending is just as bad for society and the economy as excessively loose lending.
I wish to again place on the record Sinn Féin's full support for the Bill and our intention to seek to amend the Bill in a constructive and positive spirit on Committee Stage but I also urge the Government to go much further in ensuring that the conditions that led to the financial crash in 2008, and in particular the fiscal and monetary environment which incentivised the crash, are subject to real policy and legislative change so that the terrible events of the crash are never ever repeated.
I wish to share time with Deputy Catherine Murphy.
Is that agreed? Agreed.
I thank the two officials from the Department of Finance for going through the Bill with me for approximately an hour and a half and trying to explain its dense content. As I understand it the Bill must be introduced in the context of a complicated situation in terms of the more than 200 legislative items relating to the Central Bank and the financial services sector. Anyone who can work his or her way through that body of legislation deserves much credit. Whatever I may think about the ultimate content or policy direction of the Bill it must be considered a step forward at some level to move towards a situation where we can at least understand what the laws are that govern the banking system in this country. Perhaps it is somewhat telling that this is the situation; that we do not understand the legal situation surrounding banking — that it is incomprehensible. That is not a great place to be and it may be somewhat explanatory of some of the problems we face.
Without having forensically analysed what I heard at the briefing or having forensically gone through the Bill, there may be aspects of it that need to be queried, but its general direction is at least moving the right way. I accept that it is a positive move, in so far as there is an acknowledgement of the need to regulate the banking sector to a greater degree than has been the case until now.
It is a step in the right direction, in so far as the Bill refers to an increase in penalties on financial institutions and individuals who are guilty of inappropriate or illegal malpractice or behaviour. Anything that might encourage and provide legal backing for more whistleblowing among people in the industry is to be welcomed.
The context of the Bill is important because if all this legislation is not to be just tokenism it must tackle the problem we have had. I do not believe that this Bill or the credit institutions legislation will tackle the problem we now face. It is not a problem. It is a major, and possibly catastrophic, financial and economic crisis.
The legislation is tokenistic and does not address the key problems. Let me say why this is true. I find it difficult to credit the Government or the troika, which demanded the legislation, being serious about reining in the banking and financial sectors. With the new supercharged bailout facility for the banks and the talk of greater recapitalisation of the banking system across Europe, the Government is telling banks that no matter what crimes they have committed, how irresponsible they have been or how much damage they have done to our economy they will be bailed out and there is no end to the extent of the bailout. A trillion euro is now being spoken of while it was originally €440 billion. Some people say the figure could be €2 trillion. There is no end to the bank bailout.
Austerity policies are currently being implemented and are inflicting terrible suffering on ordinary and vulnerable people in Greece and Ireland, and soon in Italy and elsewhere in Europe. We can do those things with gusto. We can lash into the innocent and vulnerable, massacre jobs in the public service and privatise like crazy because we are able to pay. As the Minister of State, Deputy Creighton, said, "We can pay". She means ordinary people can pay. She and the troika think we can pay. That assessment is questionable. Can ordinary people pay? The question of payment is not abstract. It is a matter of livelihoods and even of lives if the cuts apply to health and education.
When Europe and the Government are engaged in an ongoing and endless bailout of the banks that caused this crisis, would anyone in the financial sector take seriously the intent of a Bill such as this? It is laughable to suggest that our Government or the European political establishment are serious about taking on the malpractice, sharp practice and irresponsible and reckless behaviour of the bankers and the financial system. How can they take the legislation seriously when we are saying that no matter what they have done we will bail them and make society pay for the bailout?
Yesterday, the Minister for Finance said the Bill was based on various analyses of why the crisis had taken place. He referred to the Nyberg report. Some of the measures in the Bill relate to points made by Peter Nyberg. In so far as these measures represent moves in the right direction they are to be welcomed. However, the fundamental points made by Nyberg — Nyberg does not go half as far as I would go in his analysis — are not addressed in the Bill nor in the previous one.
Deputies on this side of the House continually raise issues with regard to the financial and banking crisis but the Government does not want to engage on these issues. Opposition Deputies have raised the issue of markets. In the second paragraph of his report Peter Nyberg says the crisis arose from "group-think reinforced by a widespread international belief in the efficiency of financial markets". The observation is repeated on page 2 and several times throughout the report. Nyberg says, "The paradigm of efficient financial markets provided the intellectual basis for the assumption that financial markets would tend to be stable and efficient". He also repeats this observation on a number of occasions throughout the report.
This point is not addressed in this Bill or in the previous Bill dealing with banks and credit unions. Everything indicates that the policy of the Government and the European Union is to continue to defer to those financial markets. We heard the Minister of State and the Taoiseach saying precisely that. The entire strategy of the Government in dealing with this unprecedented economic crisis is to get back to a point where the financial markets will be pleased with us and happy with what we are doing. Government strategy is to prove to the financial markets that we are, so called, competitive.
The Government refuses even to entertain a debate about the merits of competition. Members of the Government are addicted to the idea that competition is a good thing and they will not even acknowledge the role played by competition in the crisis. I argue that it played the pre-eminent and crucial role, which is what Peter Nyberg says. He says, "Globalisation of markets and EU membership increased foreign competition in the Irish financial market putting pressures on bank margins" and so followed the reckless behaviour. Why do we not address this matter or even acknowledge that it may be an issue or that competitive pressures are not always be a good thing?
We saw how concrete and practical this view is when we heard representatives of the Irish Bank Officials Association, IBOA, speaking at a recent meeting of the Joint Committee on Finance, Public Expenditure and Reform. Despite all the legislation, which is quite technical and tries to reduce the problem down to being a technical one, the IBOA, the people who work on the shop floor in the banks, tell us that nothing has changed in the banks. The culture is just the same. There is pressure to sell, sell, sell and to persuade people to use credit cards and buy products whenever and wherever possible. That is the banking culture. Workers feel under major pressure to behave in that way. Why has the culture not changed? It is because of the pressure of competition and profit.
If one questions these practices, as we do, and asks the Government to address these fundamental questions and their contribution to the financial crisis, we are told we are being ideological and utopian and do not understand how things really work. Pardon us if we think, given all that has happened, that the question of what really works and is realistic should be thrown back at the Government.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.