Dáil Éireann debate -
Tuesday, 27 May 2014

Vol. 842 No. 1

Priority Questions

Insurance Industry Regulation

Michael McGrath

Question:

1. Deputy Michael McGrath asked the Minister for Finance to set out his views on whether sufficient protection is in place domestically for Irish customers of insurance companies which are regulated here for conduct of business purposes while being prudentially regulated overseas; his further views on the fact that Irish insurance consumers are exposed to inadequate prudential regulation of insurance companies in other countries; his views on whether greater co-operation is required between national regulators in respect of the insurance market; and if he will make a statement on the matter. [23187/14]

Deputy Michael McGrath

The collapse of Setanta Insurance, which left approximately 75,000 policyholders high and dry, has prompted this question. We already had a Topical Issue debate on the matter some weeks ago. My main concern is that Irish consumers and insurance policyholders are potentially exposed to serious risk because they are buying insurance services from firms that are not regulated by the Irish Central Bank. The purpose of my putting down this question is to gain a greater understanding and reassurance in respect of how consumers can be better protected.

Minister for Finance (Deputy Michael Noonan)

The current legal and regulatory framework for the provision of insurance in the European Economic Area and the supervision of that activity is prescribed by European Union law in the life and non-life insurance directives. The provision of insurance throughout the EEA on a freedom of services basis and a freedom of establishment basis - that is, establishment of a branch - within this framework is predicated upon the absence of internal market frontiers and the mutual recognition of authorisation of insurance undertakings by member states.

The insurance directives specify particular roles for both the home member state supervisory authority - that is, the supervisory authority that grants an authorisation - and the host member state supervisory authority - that is, the supervisory authority of the member state where an insurance undertaking conducts business on a freedom of services or freedom of establishment basis - of an insurance undertaking. Insurance undertakings authorised under the insurance directives are subject to solvency and financial reserving requirements, the supervision of which is the sole responsibility of the home member state supervisory authority. The primary objective of these requirements is to ensure that claims made in respect of policies issued will be adequately provided for by the insurance undertaking. Under Article 20 of the third non-life insurance directive, the home regulator is required to notify the host regulator if the solvency margin of an undertaking falls below the statutory requirement. In such instances the home regulator should inform the host regulator of the measures it has taken to address the solvency deficit.

Where a non-life undertaking authorised in another member state goes into liquidation and policyholders in respect of risks in this state are affected, under the insurance compensation fund, ICF, the accountant of the High Court can make an application to the High Court on their behalf and, subject to certain exclusions, distribute sums due to such policyholders from the ICF.

Following negotiations completed at European level in November 2013, a new regime under the solvency II directive will commence on 1 January 2016. This will further strengthen the EU regulatory framework. The solvency II EU directive sets out new stronger EU-wide requirements on capital adequacy and risk management for insurers, with the key aim of increasing policyholder protection. The new regime will also ensure greater co-operation between supervisors.

Additional information not given on the floor of the House

Furthermore, EEA insurance regulators are members of the European Insurance and Occupational Pensions Authority, EIOPA, and required to comply with the general protocol relating to the collaboration of the insurance supervisory authorities of the member states of the European Union. This general protocol statement was issued in 2008 and is under review by the EIOPA.

The recent liquidation of Setanta Insurance Company Limited emphasises the need for all EU member states to make a transition to the new solvency II regime to meet the January 2016 deadline. My Department and the Central Bank will be reviewing the circumstances relating to Setanta and reporting to me on what lessons can be learned and how the framework can be strengthened. The European Commission has also indicated that it will review whether any issue raised relating to the regulatory framework requires action.

Deputy Michael McGrath

The key issue is that under EU law insurance firms can be licensed to sell services in Ireland while being fully supervised by their home regulators, which in the case of Setanta Insurance Company Limited was the Maltese regulator. The firm collapsed, leaving more than 70,000 Irish policyholders high and dry and out of pocket. In a reply to a recent parliamentary question the Minister confirmed to me that 744 insurance firms were licensed to sell motor and general insurance in Ireland but that only 112 of these were fully regulated for prudential purposes by the Central Bank of Ireland. That leaves a figure of 600 plus firms. I am not an expert in this regard and do not know whether these are niche insurance service providers or, for example, IFSC operations, but the matter requires further analysis, given what happened in the case of Setanta Insurance. Do we have a handle on the 600 plus firms that are licensed to carry out insurance business in Ireland but not regulated for prudential purposes by the Central Bank? This poses a risk to consumers, as crystallised in the case of Setanta Insurance.

Deputy Michael Noonan

The role of the Department of Finance is to provide the legislative framework in accordance with EU insurance directives. Direct responsibility for regulation lies with the Central Bank which seems to be confident that it has, as the Deputy put it, a handle on the people trading in Ireland. I explained in great detail in replies to other parliamentary questions the position on Setanta Insurance. So far, however, no one has brought anything to my attention to suggest the authorities in Malta were tardy or did not fulfil their obligations. This seems to be another instance of a firm going under. I will ask the Central Bank - it is aware of my requirements - to inform us if anything untoward appears out of the Setanta Insurance situation, but so far that company seems to be a casualty in the system. There is no suggestion of culpability at the Central Bank as regulator or at the level of the Maltese regulator.

Deputy Michael McGrath

The real question is what lessons can be learned from the collapse of Setanta Insurance. Should we be making consumers more aware of the fact that certain firms licensed to sell insurance services in Ireland are not regulated in Ireland? It is mentioned in the small print and foot notes of the documentation provided, but people make a general assumption that a firm selling an insurance service in Ireland is regulated in Ireland when that is not the case. The Central Bank has confirmed to me that the ICF in Malta will not be available to Irish policyholders suffering as a result of Setanta Insurance's collapse. The Irish ICF will be available and will provide up to 65% of the amount due, but people will still be out of pocket. No one is blaming the Irish authorities, but something went wrong. A further 600 plus firms licensed to sell insurance in the State are not regulated in Ireland. I must admit this was news to me and believe it would be news to a great many consumers. I would like to see a profile of these 600 plus firms to know in which sectors they are operating. Perhaps they are not in the general business of selling insurance to consumers and are brass plate operations in the IFSC. I do not know, but we need to assess the matter further.

Deputy Michael Noonan

I do not disagree with the Deputy. The position on compensation vis-à-vis Ireland and Malta is as outlined by the Deputy. However, there is an internal market in Europe and there is a right to establish and trade. There is a free-flow of goods and services and insurance is one of the industries that benefits from the Internal Market. For example, some very large insurance companies operating here trade on the continent of Europe. Zurich is a huge employer here and trades very well. Even though its host regulator is the Central Bank of Ireland, it has various regulators where it trades. In general, the system seems to work.

In terms of the lessons to be learned, the principal lesson to be learned, as in all such situations, is caveat emptor, let the buyer beware. I would like brokers to have a more active role in advising customers because not only should they get the best deal for people who seek insurance through brokers, they should also provide a type of prudential service and advice on what they believe are sound companies and so on. Some brokers do this very well but others do not.

Credit Unions

Peadar Tóibín

Question:

2. Deputy Peadar Tóibín asked the Minister for Finance his views on whether the cumulative effect of lending restrictions on credit unions and the lack of clarity in the use of discretion by credit unions in lending is having a negative impact on the credit union movement’s ability to advance loans to its members and thereby contribute to economic recovery. [23121/14]

Deputy Peadar Tóibín

As the Minister is aware, the credit union movement is important and unique. It is at the centre of the financial ecosystem in most communities across the island of Ireland. Credit unions have been through a very rough period, but, unlike the banks, they are still held in high regard and respect among their members and wider society and we must commend their professionalism and commitment in that regard. They can play a role in breathing new economic life into the State and encouraging regeneration. This question is about their ability to do this and the State allowing them to do so.

Deputy Michael Noonan

Credit unions have an important role to play in providing credit in local communities around the country and I am supportive of safe and responsible lending by them. Acting as the independent regulator, the Registrar of Credit Unions at the Central Bank has applied lending restrictions to some credit unions.  I have been informed that these restrictions are viewed as short-term in the majority of cases and imposed as a means of allowing a credit union to address identified concerns as quickly as possible. Where lending restrictions are imposed, they tend to take the form of a restriction on individual loan size or commercial lending activity and, in some cases, a limit on the total lending permitted each month. At this time fewer than 10% of all credit unions have a restriction in place which limits the total amount of lending within the month, while close to 40% of all credit unions have a restriction on commercial lending activity. Currently, the average loan rate in the sector is just over €6,000 and about a dozen individual credit unions have lending restrictions that limit the amount loaned to less than €10,000. This ensures the vast majority of credit unions can continue to make loans significantly greater than the average loan for the sector. The Registrar of Credit Unions has assured me that restrictions are reviewed on a regular basis. 

Under the Credit Union and Co-operation with Overseas Regulators Act 2012, I introduced the right for credit unions to appeal regulatory decisions, including those related to lending restrictions, to the independent Irish Financial Services Appeals Tribunal.

Section 35(2) of the Credit Union Act 1997 permits a credit union to have up to 30% of its loan book outstanding for more than five years and up to 10% for more than ten years.  Based on the most recent information provided by credit unions for the Registrar of Credit Unions in the December 2013 quarterly prudential returns, average lending over five years as a percentage of gross loans was some 11%, while average lending over ten years as a percentage of gross loans was about 2%. These figures indicate that, in general, credit unions are well within the limits as set down in the 1997 Act.

Additional information not given on the floor of the House

I have been informed by the Registrar of Credit Unions that with regard to the impact of lending restrictions on the ability of credit unions to lend, it should be noted that data available to the registrar show that there is no material difference between the average loan-to-asset ratio of credit unions with and without restrictions. Also, where individual lending restrictions are imposed, the data show that the majority of credit unions are not lending up to the lending restriction amount, with the majority of loans granted being at lower loan levels.

The Registrar of Credit Unions has informed me that lending restrictions are, in most cases, intended to be short-term in nature and kept in place until the credit union has addressed the issues giving rise to the particular concerns advised to it and the registrar has evidence that the weaknesses in governance, systems and controls are properly remediated and solutions have been fully embedded by the credit union. The Registrar of Credit Unions has advised that a credit union that engages proactively in mitigating identified risks will find that the registrar is open to reviewing and, where appropriate, easing lending restrictions.

I am satisfied that the safety of members' savings and the security of the credit union sector as a whole are central to actions taken by the Registrar of Credit Unions.

Deputy Peadar Tóibín

Credit unions play a vital role in everyday life in urban and rural Ireland and those working within them have raised many concerns of which I am sure the Minister is aware. They have outlined these concerns to us and I have spoken to many other Deputies who have also heard them.

The movement worked with my party and others in shaping the Credit Union Act. Some of its concerns flow from the imperfections in that Act. Others are more general and could be resolved with political will, I believe.

Section 35 limitations are not working. There is a need for regulations and new rules and this is fully accepted by the movement.

An Leas-Cheann Comhairle

A question, please.

Deputy Peadar Tóibín

Under section 35 the credit unions are being treated like the banks in terms of their being disallowed necessary discretion. Will the Minister allow for a common-sense approach to be taken with regard to the discretion credit unions should use in relation to the extension and restructuring of loans and offering further credit to those who can afford to pay?

Deputy Michael Noonan

We have all heard these objections. However, the facts do not bear them out. On the Deputy's point that section 35 is not working, under section 35, 30% of a loan book can be outstanding for more than five years. The credit unions have, on average, only 11% outstanding. Also, 10% of a loan book can be outstanding for more than ten years, but the credit unions have only 2% outstanding. This suggests to me that the credit unions are operating well within the headroom provided by section 35.

With regard to the impact of lending restrictions on the ability of credit unions to lend, I have also been informed by the Registrar of the Credit Unions that the data available indicates that there is no material difference in the average loan-to-asset ratios of credit unions with and credit unions without restrictions. Also, where individual lending restrictions are imposed, this data shows that the majority of credit unions are not lending up to the lending restriction amount, with the majority of loans granted being lower than the loan levels. According to the registrar, while it might impinge on individual cases, it certainly does not impose restrictions on the general work of the credit unions.

Deputy Peadar Tóibín

The information we are receiving indicates that there is a lack of flexibility with regard to restructuring and the provision of additional credit. The figures provided by the Minister paint a clear picture but one in respect of the credit union movement as a whole rather than individual credit unions.

The Commission of Credit Unions was of the view that a three-tier approach would work best, yet the Central Bank has proposed a two-tier approach. Why has the commission's view in this regard been discarded? There is suspicion that some credit unions will be forced to merge to ease the regulatory burden. The impact of the prudent lending circular is also raising concerns in that credit unions are being forced to interpret it in a conservative fashion, thus limiting their lending further. This, I believe, does not empower the credit unions to become mechanisms of lending into the economy. Will the Minister outline what he proposes to do to address these concerns?

Deputy Michael Noonan

The Central Bank is the regulator, not the Department of Finance. The bank regulates principally to protect the interests of customers and to protect the savings of credit union members. It does not want credit unions to get into financial difficulty. There is a myth that all the banks were bad and all the credit unions were good, but this is not true. There have been credit unions that got into difficulty. The example of Newbridge Credit Union will be fresh in people's minds. Despite our having been told on several occasions how well it was trading and how prudent its lending policies were, it cost a great deal of taxpayers' money to get it out of difficulty. Following examination of the credit union, that did not appear to be the case. There are a small number of credit unions - thankfully, it is a small number - that are in difficulty. ReBo is communicating with the credit unions concerned. While there will, hopefully, be some amalgamations, these are not being driven by considerations other than the solvency and effectiveness of the credit unions. It is proposed to restructure the credit unions so that they can continue to play a vital role in our communities.

Tax Code

Joe Higgins

Question:

3. Deputy Joe Higgins asked the Minister for Finance how he reconciles the view that the income tax burden is too high on low and middle-income workers with the Government's policy of imposing new tax burdens on the same cohort, with the property tax on workers' homes and water charges; and if he will report on the income tax increases that would be equivalent to these new burdens for average workers. [23226/14]

Deputy Joe Higgins

Can the Minister reconcile the view that the tax burden on low- and middle-income workers is far too high with the fact that the Government is imposing other savage taxes, including on people's homes and water? Can he explain the contradiction?

Deputy Michael Noonan

In restoring the public finances to a sustainable path this Government has striven to ensure adjustments to taxation are made in as growth-friendly a fashion as possible. At the heart of this endeavour is the principle that the tax system maintains the right incentives for people to work and invest. Research by the OECD has shown that taxes on labour tend to be more damaging to economic growth than taxes on consumption and property. This is due to the disincentive effect it has on decisions made by individuals to work and invest in their education.

Efforts to reduce the budget deficit and increase the stability of the tax system have been guided by the Commission on Taxation, which was established to review the structure, efficiency and appropriateness of the Irish taxation system. As part of its wide-ranging review, published in 2009, the Commission on Taxation recommended the introduction of a property tax and water charges. Property taxes are a valuable component of a tax system on the basis that they offer a stable source of revenue for the State and have limited effects on people's decisions to work and invest.

With the above principles in mind, research by the OECD has shown that Ireland has one of the lowest entry points to the higher rate of tax as a proportion of the average wage within the OECD area. The point at which individuals begin paying tax at the higher rate in Ireland commences at just above the average wage. This reduces the earnings of people at this point in the income distribution, contributing to lower economic growth through reduced labour force participation and effort. An increase in the threshold at which people begin paying the higher rate of income tax would lessen the burden on people at this point in the income scale and increase economic activity.

Until the recent introduction of the local property tax, Ireland was one of the only countries in the OECD not to have a property tax. The lack of a stable source of revenue in the tax system during the recent recession placed significant strain on the public finances. The introduction of the local property tax has helped restore sustainability to the public finances while minimising the effects on people's decision to work and invest.

Additional information not given on the floor of the House

Finally, it is important to emphasise that incremental changes to a tax system should not be viewed in isolation from the tax system as a whole. Efforts to reduce the budget deficit by this Government have been guided over the period by the best available research from the OECD, the Commission on Taxation and others to achieve a sustainable budgetary deficit in as growth-friendly a way as possible. Comparing individual aspects of tax policy decoupled from the wider impacts of the existing tax system or the changes made to it over the course of fiscal adjustment can give misleading implications of wider tax policy effects on people and the economy.

As regards the request of the Deputy concerning the income tax increases which would be equivalent to the local property tax and water charges for average workers, it is not possible to be specific. Any required yield to be obtained from the income tax system could be achieved by many routes, including a reduction in personal tax credits, reductions in the standard rate bands, increases in the rates of income tax, reduction of the threshold for the universal social charge, reduction of the bands for the USC or increases in the rates of the USC. If the Deputy wishes to posit a specific alteration to the tax code in order to achieve a certain yield, I will be happy to have my officials, in consultation with the Revenue Commissioners, calculate the relevant outcome.

Deputy Joe Higgins

I am concerned about the effect on the lives of ordinary working people. The Minister has not answered my question on this. The reality is that, for workers on modest incomes, the property and water taxes will in a short period amount to anything from €1,000 upwards. This is a massive new austerity burden on their shoulders. At the same time, the Minister pretends to make a virtue of easing income tax. Does he not understand the total contradiction as far as working people and ordinary people generally are concerned? To obtain the stable revenue the Minister speaks about, why does he not turn instead to the big corporations whose scamming of the taxation system is an international scandal? We should tax the wealthiest in society rather than putting the burden on working people.

Deputy Michael Noonan

One gets less of what is taxed most. If everything is piled on income tax, there will be fewer people working. What I want is to change the tax base in accordance with the best advice available to make it more work-friendly. That means broadening the tax base and introducing taxes such as property tax. The view of anybody who comments on tax is that this is the proper way to proceed. It is not true to say that low-paid workers are totally burdened by the amount of taxes they pay.

For example, 850,000 low paid workers pay no income tax at all; therefore, the Deputy's analysis is not correct.

Deputy Joe Higgins

That is pathetic; they do not pay tax because the Minister could not with any decency demand tax from them to allow them to have some kind of a decent life. Those on low and middle incomes do pay tax. I agree with having a progressive income tax system, but, while those on low and middle incomes cannot take any more, the Minister refuses to tax wealth. Based on 2012 figures for the big corporates, for example, and the fact that the effective tax rate has conservatively been estimated at 8%, an extra 1% would bring in €525 million, which would hardly be felt by the big corporates. Equally, a progressive tax on the highest income earners earning over €100,000 or €120,000 and a tax on wealth would yield substantial resources that, when invested, could remake this broken economy and create tax buoyancy generally. Broadening the tax base, away from income tax, through the two taxes the Minister has imposed has left ordinary working people worse off, not better off.

Deputy Michael Noonan

Our tax approach seems to be effective in the labour market because approximately 1,200 net jobs a week are being created and have been created for the past 17 months and the projections are that this level of net job creation will be maintained. It is a long-standing commitment across the main parties that the 12.5% corporation tax rate will be maintained and the Government is committed to it also. This is essential to our job creation programme, the flow of foreign direct investment into the country and something like 300,000 jobs that are dependent on the foreign direct investment. The Deputy is incorrect to say the effective rate of corporation tax is 8%. The most recent study was conducted by Professor Seamus Coffey of UCC, together with officials in my Department. They made an analysis of all the work done in recent years to come up with a figure for the effective rate of tax and their figure is 10.8%, a very high effective rate of tax on a nominal rate of 12.5%.

NAMA Operations

Michael McGrath

Question:

4. Deputy Michael McGrath asked the Minister for Finance the position on the ongoing review of the National Asset Management Agency's operations; when the review will come to a conclusion; if he is considering an early wind-up of NAMA; and if he will make a statement on the matter. [23188/14]

Deputy Michael McGrath

Today NAMA issued its annual report for 2013 and it seems to be making good progress towards achieving its objectives. This question relates to the suggestion NAMA will conclude its work ahead of the 2020 timeframe initially set for it. I note that both the chairman and the CEO said today that NAMA was well ahead of schedule in getting its job done and that the Department of Finance was conducting a review of NAMA's operations, with a view to deciding whether it should accelerate the completion of its work. I am looking for an update in that regard.

Deputy Michael Noonan

As the Deputy will be aware, section 227 of the NAMA Act 2009 requires me to complete a review of NAMA every five years. The purpose of the review is to assess the extent to which NAMA has made progress toward achieving its overall objectives and decide whether continuation of NAMA is necessary having regard to the purposes of the Act. As part of this review, my officials will examine NAMA's activity and performance with reference to the purposes of the Act, the purposes of NAMA under the Act and the objectives NAMA has established in regard to these purposes under the Act.  While section 227 of the Act intends a review based on activity to the end of 2012 and every five years thereafter, owing to the intervening promissory note transaction and the liquidation of IBRC which was originally expected to have a significant and lasting impact on NAMA's operations, the report is being published in 2014 and will consider activity up to the end of 2013 in making its assessments and recommendations.

This first publication of the section 227 report roughly coincides with the first publication of the section 226 report by the Comptroller and Auditor General which I laid before the Houses of the Oireachtas following the Government's meeting on 20 May.

As a result, the section 27 report will also benefit from the findings and recommendations of the section 226 report by the Comptroller and Auditor General on NAMA's progress, as well as the soon to be published 2013 annual financial results of NAMA. 

The strategy and timing of NAMA's wind-down is one of the areas being examined as part of the review of NAMA being carried out by my Department.  In the context of this review, I have asked NAMA to evaluate its disposal timing and strategy in the context of current market demand and explore the advantages and disadvantages of accelerating its disposal strategy.  No decision will be taken on this matter until I receive feedback from NAMA on these points and my Department's review has been completed. My review of NAMA under section 227 of the National Asset Management Agency Act is well under way and I intend to lay the report before the Houses of the Oireachtas before the summer recess.

Deputy Michael McGrath

It is welcome that the report will be laid before the Houses before the summer recess because there is a big judgment call to be made on NAMA in the near future. It is clear that it has ramped up its disposal activity, is taking advantage of the more favourable conditions in the property market and ahead of schedule in the disposal of the overall loan and property book it acquired. This judgment call will have significant implications for the property market and the economy generally and it is important that all relevant factors are taken into account and that there is a careful weighing up of the different factors. I know that there are also considerations in respect of AIB's balance sheet which will be important in the Minister's considerations. It is an important judgment call and I would like to know whether the conclusions of the review in the next month or so will result in that decision being made public. Does the Minister intend to examine the possibility of setting a revised date ahead of 2020 for completion of NAMA's work?

Deputy Michael Noonan

I am committed to publishing the review before the summer recess and will make a decision shortly afterwards. The decision on the strategy for the disposal of the residual NAMA assets will be announced publicly. The Deputy is well aware of the considerations involved. First, when one disposes of the assets underpinning the loan books NAMA has, the third party purchasers frequently tend to refurbish their purchase, be it an apartment or office block. That results in additional investment and people being put back to work in the building industry. Therefore, there is a big advantage to the economy in speeding up this activity. Second, a contingent liability is removed from the balance sheet of the State. This is a very important consideration. The contingent risk or liability to the State between NAMA and IBRC was €45 billion. Given what has been done in IBRC's liquidation and to date in NAMA, that contingent liability will be down to €15 billion by the end of the year. Obviously, that is also a big consideration. The point made on the balance sheets of the banks is equally valid.

Deputy Michael McGrath

An additional point is that if the property market is on the way up, NAMA and, by extension, the State stand to be the largest beneficiary and we could lose out in a rising property market if NAMA is forced to wind up early. That consideration needs to be taken into account. My information is no better than that of anybody else on what direction the property market will take in the next few years, but if the evidence is that it is on the rise and that it is likely to continue to rise for the next few years, this might also influence the Minister's decision. While the National Asset Management Agency Act makes it clear that the primary objective is to repay the senior debt of €30 billion and the subordinated debt of almost €2 billion, we want NAMA to make a profit. I know that the Minister was initially against its establishment, but it is doing very well and seems to be completing its objectives and if it can make a profit and, therefore, make some inroads in the recapitalisation of the banks which was crystallised by the establishment of NAMA, it would be an even better day for the taxpayer.

Deputy Michael Noonan

NAMA is obliged to act in the interest of the taxpayer and that is the Government's obligation and interest as well. Considerations of a play on the property market should not be the primary concern. People who waited for the market to peak during the Celtic tiger crashed out and those who sold at a lesser price took their money with them. It is, therefore, a difficult call but it is not the purpose of governments or a Minister for Finance to play the property market. The purpose of the Government and the Department of Finance is to protect the interests of the taxpayer and to ensure that, at a minimum, no additional liability arises. NAMA is going well under those considerations. It will pay back all its senior and subordinated debt and it looks now, even though it has assets to dispose of yet, that it will show some degree of a surplus. If property prices go up, that surplus might increase; if they go down, there might be no surplus. Everything in markets is temporary. Ireland had approximately 58% of the property transactions in Europe in 2013 in value terms. That will not last either. Nothing lasts; these things never last.

Oireachtas Banking Inquiry

Peadar Tóibín

Question:

5. Deputy Peadar Tóibín asked the Minister for Finance if he will release the letter, dated 19 November 2010, of Jean Claude Trichet or give a firm commitment that it will be available to the banking inquiry; and if he will detail the communication he has with the ECB on this issue. [23122/14]

Deputy Peadar Tóibín

Six years into the economic catastrophe, the people are still seeking the truth about what happened. They want a 360 degree view of what happened and no blind spot should be created by any institution, not least the ECB. People want to know what role the ECB played and the question asks the Minister to indicate whether he will release the letter, dated 19 November 2010, of Jean Claude Trichet to the former Minister for Finance, the late Brian Lenihan, or give a firm commitment that it will be available to the banking inquiry.

Deputy Michael Noonan

In early 2014, when the ECB initially sought my views in the context of its discussion on the possible release of the letter, I indicated that the decision to release the letter was a matter for the ECB. However, it is important for relationships between institutions to be developed and sustained to allow confidential negotiations to take place especially on sensitive issues.

Requests to release the letter have been considered under our own freedom of information legislation on a number of occasions. The decision has been to refuse these requests in line with relevant sections of the FOI Acts and the refusal to release has been upheld on one occasion by the Office of the Information Commissioner.

Separately, the European ombudsman investigated the refusal by the ECB to release the letter under the ECB's freedom of information processes. I understand the ombudsman's office found that the ECB was entitled not to disclose the letter. I understand that when the European ombudsman suggested a "friendly solution" and invited the ECB to disclose the letter, the Governing Council of the ECB came to the view that it was appropriate that the letter would not be disclosed at this time but indicated that it will revaluate disclosure of the letter at a more advanced stage of post-programme surveillance.

As regards the release of the letter to the banking inquiry, any request which may be received from the inquiry will be considered, taking into account the terms of reference of the inquiry. It would be standard practice and, in line with the principle of co-operation among public institutions, for the ECB to be consulted before a decision is made on its release.

Deputy Peadar Tóibín

I am not clear whether the Minister has answered the question. The ECB responded to a question by my colleague, Ms Martina Anderson, MEP, which stated: "It would be standard practice in line with our principle of sincere co-operation among public institutions for the Irish Department of Finance to consult the ECB on potential release of the letter." It then refers to the Department of Finance and "the potential release of the letter to the Oireachtas in light of the then prevailing circumstances on the basis of the appropriate weighing of relevant European Union interests". This reads like the ECB is seeking a veto over the release of the letter and it seems the Minister is handing that veto to the ECB.

The ECB sees its responsibility as weighing the appropriate relevant European Union interests, but the Minister's responsibility is to weigh up Irish interests on this issue. I ask the Minister to stand up for Irish interests in this regard.

Deputy Michael Noonan

The Deputy is well aware that freedom of information requests operate in accordance with the law. They are not ministerial functions. The law is interpreted by a designated official within Departments and agencies. The decision not to release a copy of the letter in Ireland was made under the freedom of information law. In Europe, the decision was made by the European Ombudsman that the European Central Bank was within its legal rights in not releasing the letter. However, the ECB also said, when asked if this could be resolved on a friendly resolution basis, that as time went by its difficulties with the release would diminish. We will see where that stands when the terms of reference of the banking inquiry are brought forward and what happens at that stage.

The issue is that international communications are excepted from freedom of information. Correspondence with another country or with an international agency is treated as exceptional. Personally, I have no problem with whether it is released. It is like the third secret of Fatima - people will be a little disappointed when they see it.

Deputy Peadar Tóibín

The Minister should leave it up to people to be disappointed. Surely people should not be protected by the Minister in this regard.

Deputy Michael Noonan

I am not an actor in this. I explained that to the Deputy.

Deputy Peadar Tóibín

Does the Minister not have any power to release this letter? Do the Irish people not have an entitlement to understand the contents of the letter? This letter is important in the context of a banking inquiry. A banking inquiry should have a 360-degree view of what happened and no blind spots should be created by the Minister or the ECB. It is worrying that the ECB will not commit to providing this letter, but what is more worrying is the Minister's lack of commitment today to providing unfettered access to a complete, unredacted version of the letter. Will the Minister guarantee that he will make every effort to ensure that all his authority is used, in so far as it can be, to ensure this letter is provided?

Deputy Michael Noonan

It is a typical Sinn Féin approach to ascribe views to people that they do not hold. I have no legal power or authority to overturn the decision of an information officer who is acting under the provisions of the Freedom of Information Act. I have no legal power or authority to overturn a decision by the European Ombudsman, who is acting under her legislation. When the European Ombudsman requested a friendly resolution to this, the ECB refused at that point but said that it might be open to that suggestion later in the time sequence. When the terms of reference for the banking inquiry are established, I have no doubt there will be a request to the Department of Finance for all relevant information. If I have the power, I will deal with the issue at that point.