Amendments 1 and 2 are Government amendments.
1.—Section 2. Before the word "issued" in line 28 to insert the words "heretofore or hereafter."
PUBLIC BUSINESS. - CURRENCY BILL, 1927—REPORT.
CATHAOIRLEACH
Amendment agreed to.
2.—Section 2. Before the word "carrying" in line 33 to insert the words "for the time being."
Amendment agreed to.
Amendment 3, as follows, appears on the Order Paper in my name:—
Section 4, sub-section (1). To delete the sub-section and to substitute the following new sub-section therefor:—
"(1) The unit of value of Saorstát Eireann shall be the Saorstát pound, which shall be issued as hereinafter provided in the form of a gold coin having a standard weight of 123.27447 grains of gold eleven-twelfths fine."
This amendment is the result of the debate that we had in Committee on the sub-section. The real question is whether the definition of "unit of value" is put in the best way or not. I have had an opportunity of discussing the matter very fully with the Minister for Finance. After that very full discussion each of us is of the same opinion still. I think that my definition of "unit of value" is the better one, but the Minister thinks that his is the better one. I do not think it is worth fighting about, and I ask the leave of the House to withdraw the amendment.
I regard this as a very important matter, and I beg to move the amendment which Senator Brown has asked leave to withdraw. The unit of value—we want to be clear about this— is the standard set up, and it has certain merits that are essential if it is to be employed as the permanent unit of value. As I said before, precious metals were chosen for this purpose, gold as being a commodity which was not subject to fluctuations in value to the same extent at any rate as that of other commodities. As a matter of fact, it was found, in approaching the subject and in considering the setting up of a unit of value, that the cost of the production of gold was practically uniform over a long series of years; that it was a metal or a commodity for which there was a universal demand, and the prospects were that it would maintain that uniformity and not fluctuate to any considerable extent. If it happened, through the opening of new gold mines or because of fresh discoveries, that the supply of gold at any time did slightly exceed the demand for it for commercial and minting purposes or that the general demand was very great and universal, then whatever little fluctuations took place would very soon adjust themselves and it would soon get back to normal.
I think Senators will see that is a very sound basis upon which to found your unit of value, because its relation to all other values and to every other commodity is relative, as it were. It is relative to this standard unit of value which, so far as it can be made, is an unvarying unit. But in the section here in the Bill it is tied, as it were, to legal tender notes. You are tying it to a thing that is incompatible with it. The one, as I have said, is stable and not liable to fluctuations to the extent of other commodities. All values are relative to that standard unit of value. The section says: "The standard unit of value of Saorstát Eireann shall be the Saorstát pound, which shall be issued as hereinafter provided, either in the form of gold coin having a standard weight of 123.27447 grains of gold eleven-twelfths fine, or in the form of a legal tender note, or in both forms."
I would like to have a clear explanation from the Minister for Finance on the alternative—legal tender note. The legal tender note has not the same elements of stability to maintain purchasing power as the gold sovereign. The gold sovereign is a commodity subject only to the laws of supply and demand. We all know that you can bring a gold coin to any part of the world, and no matter how the rates of exchange fluctuate in the different countries, no matter where you go, the gold coin has the same purchasing power. Of course, its purchasing power is relative to the exchanges in the different countries. You cannot do that with your legal tender note. In our case here the legal tender note has a restricted circulation to start with, and its face value may be subject to ordinary fluctuations.
From our experience of a paper currency in other countries, it is affected by the credit of the Government, by political considerations, and a number of things that in no way affect the gold sovereign. It is not affected. It has its own intrinsic value as a commodity and cannot be effected by extrinsic things. When you, as you propose it in this Bill, put the legal tender note on a parity and say it shall be at a par practically with the sovereign, you introduce an element there that disturbs the unit of value entirely. The unit, the gold sovereign, is staple and will have its own value anywhere and under any circumstances, but the other will not, and you are tying it up with the other and saying these things are equal. They are subject to entirely different influences as to their quality as a unit of purchasing power. That is really why the unit of value is set up as a standard unit of purchasing power. I therefore maintain that, unless there is some good reason which the Minister may advance, Senator Brown's conception of this unit of value is the true one unless it is clearly shown to the contrary.
Senator Kenny is confusing two things, the standard of value and the unit of value. The whole principle of the Bill is that the standard of value is sterling or sterling exchange. The unit of value, with which this particular section deals, is a different thing. This lays down that the standard unit of value is going to be in future not the dollar or franc but the Saorstát pound. The object of the section is to lay down that the unit of value and account shall be the Saorstát pound, and then it goes on to say that this pound shall be issued in two forms. The Banking Commission's Report recommends the adoption of the pound sterling as the standard unit of value. It goes on to say that provision will be made for the actual coinage to be minted in gold of equal weight and fineness with the British pound sterling. The standard of value is the pound sterling. The whole provisions of the Act tie our currency to sterling. The standard unit of value is quite another matter. It is the Saorstát pound, for which we have made provision to be equal to the pound sterling, but, as Senator Brown confesses, this particular amendment of his would not suit because it says that there shall be issued a gold coin. We hope and believe that ultimately there will be issued a gold coin which will come into circulation, but that may take a considerable time. I have given a great deal of consideration to this matter because of the questions that were raised, and I did indicate that I saw myself no particular objection to dropping the word "standard" from before "unit of value," but people who are concerned with drafting the Bill thought it was better to leave it there. Consequently I prefer to let the section remain as it stands.
Amendment, by leave, withdrawn.
Amendments 4 and 5 not moved.
Amendment 6.—Section 24, sub-section (3). After the word "nominate" in line 29 to insert the words "after consultation with each of the Shareholding Banks and with each of the ordinary Commissioners."
Agreed.
In the absence of Senator Dowdall, I move:—
"Section 29, sub-section (2) (inserted in Committee), to delete the words ‘and not being a shareholding bank or a bank having a controlling interest in a shareholding bank.'"
As I have tabled an amendment exactly similar to this, I desire, with permission of the Chairman, to move it in the absence of Senator Dowdall. As it originally stood the sub-section stated:—
"The Commission may, at any time and for such time as it thinks fit, in lieu of establishing or of maintaining (as the case may be) such office or branch as is mentioned in the foregoing sub-section, employ a bank having an office in London, and not being a shareholding bank or a bank having a controlling interest in a shareholding bank, to be the agent in London of the Commission, and to perform as such agent for the Commission such of the functions of the Commission as are required by this Act to be performed, or can, in the opinion of the Commission, be most conveniently performed in London."
I want to have deleted from that the words "and not being a shareholding bank or a bank having a controlling interest in a shareholding bank." When I saw that Senator Brown's amendment had been passed through the Senate in Committee I was very anxious to see what arguments he brought forward to show why the shareholding banks should be excluded from acting as our agents in London. There are two Irish banks with their head offices in London, and one would naturally think that they should get preference over outside banks. I fail to see why banks with no connection with Ireland should get preference over Irish banks. The Irish banks with offices in London are the Provincial Bank and the National Bank. Both these banks deal with millions of Irish money and are in direct connection with every phase of Irish financial life. It would be natural to suppose that they should get a share of our agency business in London, but by Senator Brown's amendment they are expressly excluded from performing that function. Senator Brown gave no reason why that should be so. People would like to know why these banks should be excluded. It stands to ordinary common sense that out of national considerations banks dealing with millions of Irish money should be given a preference as regards our agency business in London instead of being explicitly excluded from it.
I received a wire from Senator Dowdall expressing regret that he was not able to be present to move his amendment. He asked me to move it, but as I understood from Senator MacKean that he had tabled an identical amendment it is only proper that he should move it. The idea of the amendment is that any bank having a predominantly Irish interest should be available to act as the agent of the Saorstát in London. That was the original intention, so far as I can understand, in the Bill, because the section provides that: "The Commission shall establish and maintain in such manner and form as it thinks proper such office, branch, or agency (in this Act called the London Agency) as it considers to be necessary or expedient for the performance of such of the functions of the Commission as are required by this Act to be performed or can in the opinion of the Commission be most conveniently performed in London."
The position is that there are two banks available, predominantly Irish, with Irish directors and with a large body of Irish shareholders, and I think the amendment inserted in the Bill in Committee is not, on mature consideration, desirable, because I fear the tendency will be to take away from the Saorstát such knowledge, if I may say so, of Irish affairs as may be involved in the liquidation of Saorstát loans or any other business which may arise. I think that we who are interested in Irish affairs should try so far as can be to maintain in financial circles any body whose interests are preponderatingly Irish as long as we are satisfied of their financial stability. Nobody can question the position of these two banks and their ability to supply the needs of the Saorstát. The Provincial Bank and the National Bank are in a position, financially and otherwise, to perform the functions required of our London agents.
I wish to support the amendment and to express my astonishment that it should be necessary. The clause in the Bill as it left the Dáil was unobjectionable and contained nothing that would prevent the Shareholding Banks with offices in London becoming eligible as London agents or the bankers of the Currency Commission in London. The clause, however, as it now stands, seems to imply that no Irish bank need apply and that our accounts must be kept by a purely English bank. I fail to see the justification for that. There are, at least, two Irish banks with headquarters in London, and is it suggested that neither of them is fit and proper to perform Irish banking business in London? Is it to go abroad that the Seanad of the Free State considered that no Irish banks were competent to act as its agent in London and that we deliberately excluded them from doing so. I presume that there is a profit to be made on this as on other accounts. Are we going to make a present of that profit to English banks and deprive Irish banks from participating in it? The passing of this amendment will not necessarily mean that the Currency Commission must appoint as its agent an Irish bank, but it is not fair that we should exclude an Irish bank from being appointed. Surely, the Currency Commission can be relied upon to appoint the most suitable bank as its agent. If we pass the amendment, the Currency Commission can choose whatever bank it likes. The deliberate exclusion of any Irish Shareholding Bank in this connection is an unwarrantable slur on our Irish banks, and I trust the Seanad, by passing this amendment, will remove such slur.
I sincerely trust that the Senate will not go back upon the decision to which it came in Committee on this section. That decision was founded on principle. It was founded on so obvious a principle that I did not elaborate it, and I am sorry now that I did not, because it would enlighten Senator MacKean as to the reasons for it. We are now asked to go back on a decision deliberately come to in Committee in the alleged interests of two Irish banks in London. The Provincial Bank and the National Bank have offices in London. The National Bank does a large business in London. The Provincial Bank has really only a company office in London. It is common knowledge that the amendment just moved is in the interests of the National Bank. I wish to make my position perfectly clear. I have no hostility to the National Bank or to any other bank. On the contrary, most of the directors are personal friends of mine, and I wish them and the bank nothing but good This question, however, is one of principle. I may explain the principle that underlies the amendment which was carried by this House in Committee. It is not right that any one particular Shareholding Bank should be in any different position in relation to the Currency Commission to any other Shareholding Bank. The relationship between the Currency Commission and the Shareholding Banks will be an extremely delicate one.
The Currency Commission is really going to be in a judicial position with regard to those banks. They will have to decide, for instance, on the amount of the maximum issue of ordinary consolidated bank notes, and the amount of each bank's quota. They will have all sorts of questions to decide with reference to the interests of any Shareholding Bank. It would be wrong to put any Shareholding Bank in that intimate connection which exists as between a principal and his agent, having regard to the position which the Currency Commission ought to hold with reference to all these banks. This is a question of principle, and it ought not to be decided in the interests of any particular bank. We agreed, when the Bill was in Committee, and also on the Second Reading, that it was of the utmost importance to keep the Currency Commission free from the control of the Government. It is just as important to keep them free from the influence of any Shareholding Bank.
The question of the London agency is extremely important. It will have to be decided by the Currency Commission. They will, I hope, have only two alternatives. They will have to choose between the setting up of an office of their own with the name of this little country on its door—and there are sentimental reasons in favour of that. The other alternative is to have as their agents some of the great banks in England which are already engaged in the great affairs of international exchange. I ask the House not to put the Currency Commission in the position of being disturbed in making that choice by any question of the interests of any of the Shareholding Banks.
My view of the amendment is that it specifically lays down that any of the Shareholding Banks would be eligible to hold the office of London agent. The amendment does not, as Senator Brown seems to suggest, narrow the selection down to a certain bank. That is not the position, as any of the Shareholding Banks would be eligible if appointed London agent to open an office in London. The amendment only says that the Currency Commission should have a free hand in the appointment of the agent. Senator Brown stated that because of the delicate nature of the relations between the Currency Commission and the Shareholding Banks it would not be right to appoint one of them as their agents in London. I take the contrary view. The fact that the Shareholding Banks would be under such obligations to the Commission, and would have to depend so much on the Commission, would, if any one of them was appointed to the agency, be a guarantee that everything would be square and everything would be right, and in the interests of the Commission and the country. That would be an argument in favour of one of the Irish Shareholding Banks being appointed. We ought not to tie the hands of the Commission and say "No Irish need apply." If we do not pass the amendment it means that one of the great banks in England will be appointed to the London agency. I think we ought not to place the Currency Commission in that position. You should give them freedom in the matter, so that an Irish bank, if competent to do the business, could be appointed to the London agency, or, if thought better, that one of the English banks should be appointed.
One point of view the Senator is losing sight of is the question of the standing our legal tender note will have. I do not think it will have the same standing in the London market and in the eyes of the world if it is exchangeable by one of our Free State Shareholding Banks in London, I do not care how good the bank is, as it will have if it is exchangeable in one of the great English banks in the habit of carrying on that business. One of the reasons for Senator Brown's proposal was to take care that if any bank was chosen by the Currency Commission it should be a great English bank. Just as we have made our legal tender note dependable entirely on British currency and securities, so it will be exchangeable for sterling, and we will add greatly to the reliability of our note if, coupled with that, on the face of the note must be printed where it is redeemable. An ordinary person getting one of our ordinary legal tender notes can see it is redeemable for sterling at one of the great English banks, or redeemable at one of the Shareholding Banks. Undoubtedly it would not be in the interests of the State that any of the Shareholding Banks should be selected by the Currency Commission. If the Seanad now is in favour of re-opening the question, and voting against the amendment which we adopted on the last day, they are going to a certain extent to invalidate the value and credit of our legal tender note. That alone ought to weigh with the Seanad. I think it would be fair to the Currency Commission that, as Senator Brown says, they should be removed from any possibility of any pressure, by touting or otherwise, by any of the banks with which they have to deal.
We have to be very careful about what we do in this matter. I would ask the Seanad to remove this question from all these Shareholding Banks and to keep us out of this business altogether. The opposite course will do no good to the country. It will not improve the credit of our legal tender notes. To a certain extent, it will damage it. In addition, it will bring in a species of dealing between the banks and the Currency Commission which we should endeavour to avoid. That is one of the reasons why the Oireachtas ought to deal with the matter itself and take it away entirely from the Currency Commission. There is no question whatever as to what the right course to follow is. Senators who vote for this amendment can only do so because of some feeling that an Irish Shareholding Bank should get whatever money there is in this matter. There can be no money for any individual bank that can possibly compensate for the national loss that will be sustained if you do not take a great English bank and name it on the legal tender notes as the bank where those notes will be exchanged for sterling. We will then be on a par with all the other nations who carry out these exchange transactions and we will certainly add greatly to our Government's credit. The Government will doubtless have to issue a loan, and if they are in the habit of transacting business with a great London bank, with all its influences in the London market, if they are their agents and understand all their affairs, if they are always ready to exchange for sterling the legal tender note, we can easily imagine what assistance that will be to our Government when they go into that market. I do not think even the strongest supporter of the National Bank—to rid the matter of all subterfuge—can dispute that. Those of us who have not got offices in London could not very well open offices for this purpose. The Provincial Bank would have to alter its office arrangements to deal with it, so that there is only one bank to consider. As far as the National Bank is concerned, no money that that bank could make would compensate the country for the loss it would sustain if this selection is left entirely in the hands of the Commission, and if the Seanad does not take the responsibility of saying that the right thing to do is to leave all the Irish banks out of the matter.
Senator Jameson advances a very important argument from the expert's standpoint in respect of this matter. I venture to urge that there are other standpoints which are also worthy of consideration. This is a matter in which the layman can claim to have a voice. Senator Jameson spoke of the necessity of maintaining our credit on the London market. It seems to me that the credit of the Free State will not hang upon anything that will happen in the London market or in a Threadneedle Street counting house, but that it will depend on what happens in Ireland. It will depend more upon the order maintained in Ireland, and on the confidence reposed by the people in the Government of the country and in our national banking institutions than upon anything that may happen in a London office. We are all aware that one of the strong arguments used against the Government at the last election was that the Free State financial policy was dictated from London. That, in my judgment, did the Governmen itself, and the Free State in general, a good deal of damage. I ask the Seanad to consider whether, if this provision is allowed to remain in the Bill, that argument will not be greatly strengthened. We are also told by Senator Jameson and Senator Brown that it would be wrong to have an Irish Shareholding Bank holding this agency in London, because it would be occupying a fiduciary position, and that that would be unfair to other banks. Let us examine that proposition. Irish banks which have not offices in London have, when they deal in the London money market, agents representing them who are London banks. If we were logical in this matter we could enlarge this provision so as to exclude those London banks which are the agents of Irish banks from holding this agency. Let us assume, as Senator Brown advocated, that one of the great English banks is employed as agent for this Commission. Would it be too much to think that the Irish bank whose agent it was would be much in the same position as Senator Brown complains that the Provincial Bank or the National Bank would occupy under this provision and would obtain an advantage over the other banks? The same thing would apply. I need not have any hesitation in assuming that if the Irish banks are not selected, the Bank of England will get this agency. Let us assume that the Bank of England is appointed agent. It is well known that the Bank of England is the London agent for the Bank of Ireland.
Does the Senator know that?
It is generally stated.
The Senator should not make statements about matters of which he has not knowledge. The Bank of England do a great deal of business for us, but they are not our agents.
I accept the Senator's correction.
We have business relations with the Bank of England, but our business is done with two or three London banks on a certain business basis.
The suggestion is made that if an Irish bank is selected as agent of the Currency Commission in London, it will have an advantage over other Irish banks. I do not think it is stretching the argument too far to say that a similar position would arise in the case of the Bank of England or any other bank that was agent in London of an Irish bank. Apart from that, it seems to me that if an Irish bank were appointed to represent the Currency Commission in London, it would have a greater interest in maintaining Free State credit at a high point than would any English bank. The more Irish credit rises, the better it will be for all the Irish banks, including the bank which will be agent in London. There is also the question of confidence in the Irish banks, both in this country and across the Channel. During all our troubles in recent years, one of the bright spots was the stability of the Irish banks. Professor Parker Willis, who presided at the Banking Commission, referred to that fact in his Rotary address last year. Now, the Houses of the Oireachtas are asked to advertise to the world that none of these Irish banks is fitted to hold this agency. That, I should say, will have a very bad effect upon Irish credit and upon the position of Irish banking institutions.
I spoke of London banks holding agencies for Irish banks. Let us suppose that some London bank, X, is appointed an agent for this Commission, and let us assume that there is an Irish bank which has as its London agent a bank, Y. When it happens that not Y, but X, is appointed as London agent for the Commission, what is there to prevent the Irish bank from transferring its agency from Y to X and therefore getting all the advantages such as it is suggested here the London agent would be able to give to its Irish house? It must also be clearly understood that what is asked for in this amendment is that the Commission should have restored to it the discretion which it had under the original Bill. That was the opinion of the Government originally. An amendment was introduced ten days ago removing that discretion from the Commission. Senator Brown spoke of the decision taken then and of our being asked now to reverse that decision. It would be well to remember the circumstances under which that decision was taken. Speaking for myself and others, it was understood that all these amendments were agreed amendments as between the bankers and the Government, and naturally Senators were not inclined to scrutinise the various amendments so closely as they otherwise would. I venture to say that if they had done so the amendment which was then inserted would not be overlooked and we would not be in the position to-day of having to reverse the decision taken on that day.
It may be very venturesome for one who has so slight an experience of the banking world as I have to say that he is opposed to Senator Jameson or Senator Brown. I intend, however, to support this amendment, and I do so for these reasons. It seems to me that Senator Brown, in his support of the amendment which it is proposed to remove to-day, said that that decision was deliberately come to. I think Senator Hooper has disposed of that statement, because it could hardly be said to have been come to deliberately in the circumstances in which this amendment was accepted the other day. It was hardly discussed at all. I think it was practically passed by consent. I would like to assure the House that I approach the consideration of the amendment moved by Senator McKean with an absolutely open mind. I have not got a share in the National Bank, nor have I any interest in that concern direct or indirect. The bank with which I am associated has no office in London and it is absolutely immaterial to me what decision this House arrives at. It seems to me, however, that if Senator Brown's amendment remains in the Bill we are actually casting a slur on the Currency Commission, because if Senator McKean's amendment, which he moved on behalf of Senator Dowdall, is adopted to-day, it does not follow that the National Bank or the Provincial Bank will be appointed as agents of the Currency Commission. The matter remains in the unfettered discretion of the Currency Commission.
To insist on the retention of Senator Brown's amendment implies—I am not saying that that is the intention of it, but it is implied—that this House has no confidence in the Currency Commission. That is as much as to say that we believe they will appoint as their agents in London a bank which they should not appoint. I am sure the House would be very slow to come to a conclusion of that kind or support that view. There is one ground upon which one would be thoroughly justified in opposing the appointment of a Shareholding Bank as agent for the Currency Commission. That would be that they would thereby acquire an undue influence in respect of the work of the Currency Commission or would occupy a position superior to the other Shareholding Banks. I submit that, far from that being the case, the duties which the agents in London will have to perform will be purely administrative and mechanical duties. They will certainly have no voice whatever in the policy of the Currency Commission. Much less will they have any vote in its deliberations. They will simply act as agents in London for the operations consequent upon the setting up of this new financial machinery.
Quite frankly, for the last two or three days I have been exercising my judgment as to what course one should take on Senator Dowdall's amendment, and I can see no reason whatever for voting against it. On the contrary, as other Senators have said—I do not want to repeat what has been stated already—if we do this, not only shall we be impliedly expressing doubt as to the competency of the Currency Commission, but we shall be, in effect, stating that no Irish Shareholding Bank having an office in London is fit to discharge these duties. For these reasons I certainly will support the amendment.
Amendment put and declared carried on a show of hands.
I wish to withdraw amendment No. 8. I believe that my objection to this section will be covered by two subsequent amendments by the Government.
Amendment, by leave, withdrawn.
Government amendment—Section 37, sub-section (1). To delete all from and including the word "and" in line 34 down to and including the word "business" in line 36.
Amendment put and agreed to.
CATHAOIRLEACH
The Government have altered the form of the next amendment, and they propose in lieu thereof the following:—
"The Commission may require any bank which is mentioned in the Third Schedule to this Act or which though not so mentioned is for the time being a Shareholding Bank or any bank which holds a controlling interest in or in which a controlling interest is held by any such bank, to afford the Chairman or a permanent officer of the Commission specially authorised in that behalf in writing by the Chairman such access to the books and records of the bank to which such requisition is made as the Commission may consider necessary or desirable for the due discharge of its functions under this Act."
I would like to point out that it is possible the Minister may be taking powers which he cannot enforce. I believe there is at least one English bank which controls an Irish bank. I do not see how the Minister could, for instance, control the actions of the Midland Bank.
It can only be enforced in the Saorstát. If the controlling bank is not within the Saorstát it does not apply to it.
Amendment put and agreed to.
The following Government amendments were agreed to:—
Section 37, sub-section (2). To delete in line 41 the word "or" where it first occurs and to substitute therefor the words "lawfully required of him by the Commission under this section and every bank which fails within the time limited in that behalf by the Commission."
Section 37, sub-section (3). To delete in line 47 the word "banker" and to substitute therefor the word "bank."
Section 37, sub-section (3). To delete in line 53 the word "banker" and to substitute therefor the word "bank."
Government amendment.—Section 52, sub-section (4). To delete in line 9 the word "may" and to substitute therefor the word "shall."
"May" and "shall" are two very different things.
This amendment was put down with the intention of trying to satisfy Senator Jameson, but as I do not seem to have satisfied him I will not press it.
Amendment, by leave, withdrawn.
I move:—
Section 52. To add at the end of the section a new sub-section as follows:—
(7) In this section the expression "liquid advances" means advances fully covered by marketable securities, or advances to a solvent customer by way of discount of bills repayable at a fixed date and not renewable by custom."
This amendment attempts to define the term "liquid sound advances," which we have often discussed. To me, at any rate, there is a mystery surrounding the whole of this liquid sound advance test. The Commission recommended that the note issue should, in some respects, be linked up with a bank's active operations. I am reading from the report of the Commission:—
"We have in the main accepted as an abstract proposition the view that note issues should bear some definite relation to the active operations of the bank and, on the whole after considering a great variety of measures of this kind involving various combinations of deposits, advances, loans and the like, have come to the conclusion that advances may best be taken for convenience as the proper measure."
It is rather difficult even to discover what the meaning of these words is, or whether there is a hidden meaning behind them. "Advances" in this relation appears to be a very misleading term. In order to get any foundation on which to examine this question you have to get back to the fundamental principles of note issue. Why are banks given a note issue?
I might say that banks are given a note issue for services rendered. In the early days before banking was quite as secure as it is now, there might be a desire to get banks to come into a country and risk their money for the general development of trade and business, and as an inducement for that purpose they were given a note issue. In those days these note issues were very unregulated and very often led to great disaster. Finally, the whole thing was regulated by various Acts of Parliament, so as to control the power of unlimited note issue, and in this country it was done, I think, by the Banking Act of 1845. That is all right. Of course, the real test of note issue is the power of the banks to be able to redeem the notes on demand, and that should have regard to the solvency of the bank, not merely to one aspect of its operations. Throughout this Bill there appears to be some attempt to induce banks to lend money in order to earn a larger note issue. That is a totally new departure from sound practice. I say that advisedly, because in the debate on one of the stages of this Bill in the Dáil the Minister used words to justify my assumption. In apologising to a certain extent to the banks, he said that they had not on the whole, although they had done good service up to a point, met the national requirements, and this was the means by which they were going to be brought to a better sense of their duties to the community. Let us take it at that—that the banks are going to be made to serve the community better through this inducement, whereby the more they lend the bigger issue they will get. I do not quarrel even with that, provided the nature of these loans is carefully safeguarded. But if there is any suggestion that through unsound or risky loans the banks are going to earn a greater note issue, I challenge the whole principle.
So long as "liquid sound advances" mean liquid sound advances and is so defined I do not think we need worry ourselves very much. If the Minister will accept the amendment I think the whole position will be fairly safe, but I am uneasy, because it is not liquid sound advances that the country has ever wished to press banks to make. Banks are always anxious and willing to make them. It is lack of accommodation the public complain about, and not liquid sound advances—advances of a very speculative character which banks should not be asked to undertake: advances on frozen loans, to finance building, for the creation of fixed property which cannot be realised, and which should be procured by way of share capital and not by way of overdraft. It is on account of the danger that may be read into this that I think it is most necessary to define "liquid sound advances," and that the position should be made water-tight. The amendment provides for advances in two groups: those which have good marketable securities behind them which can be sold, provided the fluctuation is not very great, at short notice, or short bills taken out by a solvent customer and repayable on a fixed date. The object of saying "not renewable by custom" is that there is a custom whereby certain classes of farm bills practically become stagnant. They are renewable and go on year after year. The ordinary commercial bills are paid off in three or six months. The farm bills, by custom, run to five or six years by periodical small reductions, if they can be obtained. These are not liquid sound advances and should not be made any test of loans which can be quickly realised and will become a sound asset, on which those who wish to present their notes for repayment can rely.
I think if we set out to give a definition of "liquid sound advances" we could not hope to do it in a line or two. If this were a country in which there were plenty of bills, the definition might still be difficult, but, circumstances being what they are, a definition that would cover everything that we would want to cover would be a very ticklish task indeed. So that in the ultimate it is a matter of judgment. No matter how we would define it, the question of the judgment of some persons dealing with the actual advances would come into play. There is, I think, as much obscurity in the Senator's definition as in the phrase which he attempts to elucidate. "Marketable securities"—I do not think that is a very clear phrase. All sorts of securities are marketable. They might not be marketable at a reasonable price when you would want to market them. Then there is the question of a solvent customer. You will have to depend upon someone's judgment as to who is a solvent customer. There are just as many difficulties in the interpretation of this particular definition as in the interpretation of the phrase itself. I believe we must leave it, and that we ought to leave it to the judgment of the Currency Commission. The Currency Commission, we must assume, will consist of reputable and capable people. If we do not assume that, of course, anything may be done by the Currency Commission. But the Commission will consist of capable and reputable people, three of whom will be elected by the bank, three appointed by the Minister for Finance, of whom two will be representative of or interested in trade or commerce. One of them, presumably, will be an official of the Department of Finance. I thing that anybody who serves for any length of time in the Department of Finance is bound to get some kind of conservative outlook upon these things. We will have a Chairman who will normally be elected by the Commissioners, and I think we must assume that they will exercise some discretion and judgment and that they will carry out the Act in such a way as to get the maximum benefit and the maximum security for the country. I could not myself undertake to put forward a definition of liquid sound advances which would be sufficient and adequate, and which, at the same time, would not unduly tie up the hands of the Commission. I would not think there would be any advantage at all in adopting the definition suggested by Senator Sir John Keane.
I should like to point out that in using the expression "liquid sound advances" the word "liquid" will be really imposing upon the Commission or the people who have to undertake the work an almost impossible task. If you delete the word "liquid" and keep the words "sound advances" it would then give the Commission far more latitude than it has under the phraseology of the Bill. Senator Sir John Keane tried really to define the word "liquid" for the benefit of the Commission in his amendment. On the other hand, if the Minister was prepared to delete the word "liquid" and leave the words "sound advances," the Commission would have scope for their work. At present, no matter how experienced they may be, they are tied down and they will have to confine themselves to investigating nothing but "liquid sound advances.""Liquid sound advances" are exceedingly technical things Several Senators spoke on the subject during the Committee Stage and pointed out that "liquid sound advances" are something of which there are very few in this country. If you take away the word "liquid" and leave it at "sound advances" I think the Commission has ample scope without being tied down to what is a technical thing in banking, that is, "liquid sound advances" or advances that can be turned into money ad hoc, for that is what it means.
It seems to me that Senator Sir John Keane and Senator Guinness are approaching this thing from a very different angle. If we were to take it that they were acting together, they would be simply arguing that the Bill should be changed anyhow, no matter how the change came about. I presume that they are not acting in that sense.
No we are not.
I would not like to leave out the word "liquid." I think Senator Sir John Keane's whole argument may be taken as an argument against the deletion of the word "liquid." His definition as suggested here would exclude certain advances by way of overdraft to first-class business houses of undoubted standing and security, but who did not happen to have, shall we say, stock to deposit.
When the Minister talks about the obligations of the banks and so on I think we should take a look at what I call the report of the Chairman of the Banking Commission, because it was he, really, who wrote out that report. Here is what he said about the things upon which bank notes should be issued:—
(1) Upon the transfer to the Commission of satisfactory bills or evidence of indebtedness, arising out of Irish or English trade, domestic or foreign—such bills to have the endorsement of the depositing bank and to be satisfactory to the Commission.
We told the Chairman, but he did not believe us, that if he was to try and found the bank note issue of the Free State on such documents there would be no bank note issue.
(2) Upon the furnishing of due bills or contract obligations made by the bank itself in favour of the Commission and representing liquid sound advances to customers on overdraft or otherwise; or in cases where so desired, upon approved securities satisfactory to the Commission.
There is where the liquid sound advances comes in, and there, again, the Chairman thought that we bankers could take overdrafts and bills and things which we had either granted to our customers or discounted for them and take them over to the Currency Commission. Anybody who knows anything about Irish banking knows that if our customers thought that we were handing to another individual the right of collection of their overdraft or their bills the whole business of Irish banking could be no longer maintained. We told the Chairman over and over again that those things which he called liquid sound advances could not be made liquid and that we could not place our customers' wants at the mercy of the Commission to call them in when they liked. We must be able to guarantee our customers so that they can depend upon the banks to make arrangement when they shall repay. That is the nature of our Irish business, and that is where the introduction of these words "liquid sound advances" is wrong. There is no question about its being wrong. If the Minister will look at the method with which the Irish banks carry on their business he will see that we cannot make our sound advances liquid to the satisfaction of the Currency Commission. He is going to ask these high-class gentlemen to look at our advances and see if they are in that shape and to say "If you cannot render them liquid, to us, we cannot give you the note issue." We are trying to save the Minister having to ask the Commission to do such a thing as that.
I disagree with the principle that notes ought to be granted on sound advances which cannot be called in. The principle is wrong. Notes ought to depend on totally different things, which you cannot put your hand on at a moment. They cannot be called in, and should not be depended upon. That is the inherent thing wrong in the Bill. I am not arguing that at present, as the Oireachtas is against what I call the sound principles of banking. The country will find it out before long. But when you ask the Commission to issue notes on a thing that does not exist the higher the class of men put on the Commission the more difficult the position will they be put in. I wish the Minister would look into the matter so that he would put this clause in the Bill on a business basis on which the Commission could act.
I do not think it is correct to say that at the time the report was drawn up the Chairman of the Commission was ignorant of the actual conditions of Irish banking. I would also like to say that the report is signed by the other members of the Commission, and I think they were capable of understanding what was put down. Certainly they understood that when they were putting their signatures to the report it was likely to be acted upon. They appended their signatures with a full sense of their responsibility. I would not like to take the view that a number of responsible people and representatives of the banks would allow a Chairman who is brought in as an expert from outside to draw up a report and sign it without understanding its meaning or implications. We cannot get anywhere on the basis that this is the report of the Chairman. This is the report of the people who signed it. Before the words which Senator Jameson quoted, at the bottom of page 24, the report says:—
"To put this more briefly, we recommend that no bank shall receive notes unless it be able to prove the existence in its portfolio of a fully equal amount of liquid sound advances. In those countries in which current advances to customers take the form of Bills of Exchange, or short-dated promissory notes, it is customary to exact as protection for notes a transfer of such bills or obligations. In the Saorstát banks custom does not permit of the actual application of this principle in a technical way. Much of the business done by the banks, many of their soundest and most beneficial loans, take the form of overdrafts, and are not represented by individually-executed obligations."
From that it seems to me that the Chairman and members of the Commission who signed the report understood perfectly well what the conditions were here.
That and what I read are diametrically opposed. The conclusions I read out were founded on what the Minister quoted, and I believe any sensible person will find it impossible to make one agree with the other:—
"Many of their soundest and most beneficial loans take the form of overdrafts and are not represented by individually-executed obligations."
In clause 2 the report states the only way in which these things are dealt with is
"upon the furnishing of due bills or contract obligations made by the bank itself in favour of the Commission and representing liquid sound advances to customers on overdraft or otherwise."
Is not that giving the Commission a lien on something which, according to the previous sentence, he has said you cannot give a lien on—they are not negotiable.
I should like to refer to Senator Sir John Keane's explanation of liquid sound advances. The explanation does not appear to satisfy the Minister. It seems to me Senator Guinness has offered the best advice, to delete the word "liquid" altogether. Why necessarily "liquid" in connection with an advance which can be described as sound? The question is: What does "liquid" mean? No one has explained that. I do not see any great necessity for having that word in the clause.
There is practically no difference between sound advances and liquid sound advances. Take land. It does not follow because land is depressed in the market that it ceases to be sound. There is the potentiality of its recovery. The security recovers when the depression passes away, and the advance still remains sound. Advance on liquid security for the purpose of this Bill must be available any time. What I mean is, that the security must be realisable in the sense meant in this Bill. When legal tender notes or consolidated notes are presented you must be able to go to the market to realise the security on which you gave an advance. Most advances are founded on agricultural securities, such as bills by farmers, but there is scarcely any advance founded upon that class of security to-day. That is not liquid security at all. Farms are being sold considerably under the advances made against them, and also considerably under what they cost six months, twelve months, or two years ago. In any event, none of these advances, based mainly upon agricultural property, are to-day liquid sound advances. In the previous discussion my point was that if the margin for consolidated note issue is to be defined by the liquid sound advances in Irish banks, I think it would eliminate those to which I have been referring, sound enough, possibly, in their way, from the books of the Irish banks, and you would have a very narrow margin against the consolidated bank notes. Sound advances will sometimes be liquid, but purely liquid advances will always be liquid, because they are short bills. Before they fluctuate in value you can go into the market and realise, and if you watch the market closely you will never be caught out to a serious extent in securities of that sort.
When we were discussing this at the outset, the Minister was asked to define what these liquid sound advances were, but he said he could not do so. A time will come in the operation and procedure of the Commission when they will have to approach a bank for an issue of notes, and they will have to see exactly what margin there is in that bank's books. A crux will then arise at once. The only terms of reference will be this vague "liquid sound advances," of which nobody seems able to give a definition, not even the Minister himself, the author of the Bill, and when the Currency Commission and the bank directors meet there will be a wrangle. The directors will maintain that certain things are liquid sound advances, and the Commission will say something else. You must have a definition. That is the position in which the Minister is leaving this very serious matter, and I can quite appreciate the anxiety of those interested in banking in trying to maintain some sort of definition as to what the term means.
Amendment put, and, on a show of hands, declared lost by 15 vote to 12.
Will you take an amendment to delete the word "liquid" where it occurs?
I think that is what we debated before.
CATHAOIRLEACH
I will not prevent the Senator from moving it now, if he wishes.
I move it, then.
CATHAOIRLEACH
I think this word occurs in more sections than this.
"Wherever it occurs."
CATHAOIRLEACH
If we have already passed a section in which the word stands, you might raise considerable confusion if this amendment were carried. I think I noticed the word in earlier sections.
Very well, sir.
Amendment, by leave, withdrawn.
I move:—
To delete the words "and such other matters as it considers relevant," in Section 53, sub-section (4), and to substitute for them the words "with due regard to the other assets and the liabilities of the Shareholding Banks."
The reason I put that forward is that these words "and such other matters as it considers relevant" open up two very large questions as regards the matters that have to be taken into account in settling the maximum amount of the consolidated note issues that are given to the banks. On investigation of the matter one finds that in this lies the whole question of granting to the banks an extra amount of consolidated bank notes to give them till money. That is one item. The Minister and I discussed the matter the other day, when I discovered that in these words lay concealed—at least I said it was concealed; it was not stated publicly— the fact that the Currency Commission have the right to grant an increased amount of consolidated bank note issue to give till money, at a rate which is quoted afterwards at 2 per cent. instead of having to put up, for that increased amount of notes, cover which could be invested and could make some money for the Government, if that till money were not given.
In this Bill we have got to remember that there are some things that are pretty hard on the banks. It is proposed that they are to give larger advances to customers, and so on. One would have thought that if they meant the banks to do so they should deal with them at least as well as the banks had been in the habit of being dealt with for the last eighty or ninety years. But the consolidated bank notes that will be given to them, instead of costing 7/- per cent., are going to be 30/- per cent. Also, as long as the banks printed their own notes they were never debited with a note for the taxation account until they issued it to the public, and that is what we call free till money. All our branches were supplied with notes which were unissued and which were kept there to meet the needs of the bank whenever it would want to issue them. But they paid no tax of any description on that until they were issued to the public. The Banking Commission are taking away from the banks the right of printing their own notes and handing it over to the Currency Commission, from which the banks have to get these notes. The moment they are issued to the banks from the Currency Commission they are at once put into circulation. Therefore, the members of the Commission who signed this document, signed the death-knell of their own free till money. I do not know why the bankers did it, but they did it. Apparently that has been taken into account, and there is some arrangement by which under this phrase—and such other matters as it considers relevant— the Currency Commission can give an extra issue of consolidated bank notes to the banks at a rate of 2 per cent., and these notes are to be in lieu of the old free issue. Even then it is going to cost the banks a great deal more than it ever cost them before. Therefore I hold that if the Government pass this Bill, following the advice of our American Chairman, they are doing a very foolish thing. If you want the banks to give a great deal more accommodation to their customers, and if at the same time you are taking away £100,000 to £120,000 a year from these banks in taxation of notes and free till money, you are looking for an impossible thing. If our customers, after this Bill has been passed, find out that the banks are not able to give as much accommodation under the new methods as under the old, they should know it will not be the fault of the banks. When we are passing a Bill such as this, which leaves undecided the giving of half a million or one million of consolidated bank notes, I say that is wrong and that we should not leave undefined so important a matter in the way in which it is left undefined there.
If the Seanad will look at the amendments that I have put down to Section 53 (8), that is, amendment 24, they will see what I mean. My name is not to these amendments, but I am attending to them. The object of these proposed sub-sections is to take care that if a bank is given extra issues of the nature I am describing, that in so far as that extra issue is concerned there should be a cover for it to the Currency Commission and a cover of which the Currency Commission can approve. The object of that is this: The bank gets a largely increased note issue, a taxation note issue for which it puts up no cover. Under this section of the Bill which I am discussing on the amendment and which puts a limit of four millions on the legal tender note and makes it practically necessary for the Commission to reduce the consolidated bank note issue down to within one million of the legal tender notes, we might see a bank that had a lot of notes out for which it put up no security whatever, notes being given to it on its solvency and position and its liquid sound advances—we might see that bank suddenly being called upon to lower its consolidated note issue and replace it with legal tender notes. For legal tender notes you have to put up a lot of solid security, and it is quite possible that when a demand was made on it the bank might find itself in straitened circumstances and might not be able to put up such security required to cover these notes. My theory is this, that if we take care that extra notes given for this purpose or any other purpose over the six millions, are covered, then when the bank is called on to replace its consolidated notes with legal tender notes, while the cover is lying there, it is to provide this cover and therefore all the banks will be in a much safer position.
I am taking the three amendments together because I believe the Seanad will adopt amendment 24—to add new Sections 9 and 10 to Section 53, sub-section (8). It will leave the other sections of the Bill in, because we will have provided a means which will prevent a bank getting into a difficult position because it is called on to reduce the amount of its consolidated bank notes. It is rather a highly technical matter, but it is a serious matter, because we, in this country, cannot afford to see any of our banks getting even a shake. If anyone can foresee anything in the Bill which makes it possible that a bank might get a bad shake we ought to provide for it now and not later on.
CATHAOIRLEACH
Do I understand the Senator to say that if amendment 24 is adopted amendment 17 will not be necessary?
That is the situation.
CATHAOIRLEACH
Then had we better not postpone amendment 17 till we see what happens amendment 24?
Yes.
With reference to Senator Jameson's amendment, 17, I would like to say if he were content to put it in a slightly different form I would have no objection to it. As the amendments stands he proposes to delete the words "and such other matters as it considers relevant." I would not like that deleted, but if he would put it this way, to substitute the words "having due regard to the total amount of the liquid sound advances of the Shareholding Banks to persons in Saorstát Eireann then existing, and of the other assets and liabilities of the Shareholding Banks, and such other matters as are considered relevant," I would be prepared to accept it. The matters that the Commission must take into account are the assets of the Shareholding Banks, but I think it should be free to take into account such other matters as are relevant, including this matter of till money. My view is that this question of till money has been fully taken into account in fixing the consolidated note issue at six millions. That six millions is a tentative figure. The Commission confessed that it could not get accurate information which would enable it to come to a conclusion on this matter. It may be that that six millions is too low, and that the question of till money might not be taken sufficiently into account in fixing it. I said, in the Dáil and to the bankers, that I would not have any objection to an increase in the amount of the consolidated note issue if it were necessary. Such questions as are relevant to the volume of note issue should be taken into account by the Commission. Consequently I would not agree to the deletion of the words "and such other matters as it considers relevant," but I would consider the words the Senator wants in.
Nothing above the six millions is covered. That is my point, and it is tied up with the whole question.
CATHAOIRLEACH
That arises on amendments to sub-section (8). Let us first dispose of amendment 17. The Minister has offered to insert your words "with due regard to the other assets and the liabilities of the Shareholding Banks" before the words "and such other matters as it considers relevant."
I am quite willing to accept it, but not in lieu of the other. As long as the words are left in "and such other matters as it considers relevant," I am satisfied.
CATHAOIRLEACH
You can slay those other words when you come to amendment 24. The present amendment would now read:—
"Section 53, sub-section (4). To insert in line 54, after ‘liquid sound advances then existing,' the words ‘and other assets and liabilities of the Shareholding Banks and such other matters as it considers relevant.'"
Amendment, as altered, agreed to.
CATHAOIRLEACH
Would Senator Jameson like to take amendments 18 and 24 together?
I think the two are tied together, because amendment 24 tries to minimise the danger of the situation created by sub-section (6).
CATHAOIRLEACH
If you can get sub-section (6) deleted your danger is gone.
The trouble is that I think the Government has certain things connected with that that I do not wish to interfere with, but the Bill does not provide for the dangers which, in getting the thing they want, are implied in that sub-section. These dangers are only to be avoided by the alterations I propose in amendment 24.
CATHAOIRLEACH
Suppose you let sub-section (6) stand and try to do away with these dangers by your amendment to sub-section (8)?
I believe that is right.
Amendment 18, by leave, withdrawn.
The following three amendments are put down in pursuance of an undertaking that I gave during the discussion the last day, that I would substitute for "legal tender notes" the words "legal tender," as Deputy Brown put it; that is, both legal tender notes and gold coin taken together:—
Section 53, sub-section (6). After the word "half-year" in line 12 to insert the words "together with the average amount of gold coins which are for the time being legal tender under this Act in Saorstát Eireann for unlimited amounts estimated by the Commission to have been in circulation or held by bankers in Saorstát Eireann during such half-year."
Section 53, sub-section (6). After the word "of" in line 15 to insert the words "the aggregate of."
Section 53, sub-section (6). To delete in line 15 the word "amount" and to substitute therefor the word "amounts."
The trouble in this case is that it is absolutely impossible to arrive at any estimate as to the average amount of gold coin estimated by the Commission to have been in circulation or to be held by the banks during the half-year. There is no man alive who could say what the amount of gold coinage in the Free State is at the moment.
It has to be an estimate, I admit, and that is put down in the Bill. The Commission will have the best opportunity that anybody can have of estimating it. I admitted in reply to the point Senator Jameson put forward the other day that the mere substitution of legal tender notes by gold coin and the consequent disappearance of legal tender notes ought not to lead to a reduction of the consolidated note issue. This enables the Commission to estimate on whatever figures they can get.
I am perfectly satisfied with the Minister's statement.
Amendments put and agreed to.
Amendment 22 (Senator Jameson), by leave, withdrawn.
Amendment 23 agreed to:—
Section 53, sub-section (7). To delete in line 30 the words "such other matters as it considers relevant" and to substitute therefor the words "with due regard to the other assets and the liabilities of the Shareholding Banks."—(Senator Jameson).
I move the following amendment:—
Section 53, sub-section (8). To insert after the sub-section two new sub-sections, as follows:—
"(9) If and when the maximum issue exceeds the sum of six million pounds the Commission shall require each Shareholding Bank to give security for the amount by which its quota of such maximum issue exceeds its quota in relation to the sum of six million pounds.
(10) The security mentioned in the foregoing sub-section shall be given by the transfer to the Commission (by way of security only and not absolutely) of assets of the bank acceptable to the Commission or by such charge in favour of the Commission on such assets of the bank as shall be acceptable to the Commission."
The House will understand the danger I am trying to provide against. The proposed new sub-section (9) was a very difficult one to draw, because the standard we are fixing is the quota that each bank has of this six millions. I hold the banks individually are reliable and sound and are quite ready for the quota of the six millions put down opposite their names. The Minister has met me practically to the extent of admitting that, and what is known as the fiduciary issue is not going to be disturbed. But I do not know his attitude as to where we go above that. These two new sub-sections take care that anything over the six millions is covered, and, when a bank gets notes over and above its quota for any special reason, care has to be taken because of the basis on which the notes are issued. The notes cannot be met out of these advances, and therefore it is highly important where the total issue goes above the six millions that it should be covered at the initial time when they are issued.
As regards the proposed sub-section (10), I believe one of the objections the Government have to this amendment is the implication that if you call for cover for any amount over the six millions you are therefore not entitled to call for cover on any amount in the six millions. They foresee a time— this, I take it, is more in the case of a particular bank than anything else— when it might be necessary to call on a particular bank for cover even for its quota, and I can see the hesitation of the Government in allowing any such implication that the Commission should not have a right to call on any bank for cover for its quota of the six millions as well as for any amount above.
There is another sub-section that I believe gets over that difficulty. I submit to the Minister that the difficulty I have foreseen cannot arise if the Seanad would pass this sub-section (10). This is the other sub-section:—"The obligation imposed on the Commission by sub-section (9) of this section shall be construed as in addition to and not in derogation of the power to require security from a Shareholding Bank under Section 52 (4)." If the House will pass those three sub-sections giving power to the Commission to call for security on the quota from any bank, I believe the increases over the six millions will make the banking situation under this Bill far safer than it is in the Bill at present. I hope the Seanad will agree with that view of the case.
I would like to support Senator Jameson's amendment, and to go a little further. At the present time, as Senators are probably aware, there is what is known as the fiduciary issue, which is now going to be called the consolidated note issue. It amounts to approximately six million pounds, and any notes required for the purposes of issue beyond that sum of six millions have to be paid for pound for pound on the same basis as the legal tender notes are to be issued in the future. If that system, which has been in force now for nearly one hundred years, is going to be changed, in doing so the Government, by allowing the issue of more consolidated notes—that is, increasing the fiduciary issue—will thereby lose a certain amount of revenue. Under the present system, if they had kept it going, any notes that were required over the fiduciary issue would be legal tender notes and would have to be paid for pound for pound. I take it that the Government realise that, and that they are prepared to stand that loss. Why there should be a change I cannot understand. It is said to provide for till money. Well, that may be so, but in providing this till money the Government will thereby be losing revenue. Formerly the money held in the treasuries of the banks was not subject to taxation in any form. That was the till money, but now, under the present Bill, currency so held will be subject to taxation.
I hold that the principle that has been in force for such a very long time, and which worked so admirably, should not be departed from. I hold further that if the banks at any time require more currency than is involved in the consolidated note issue, that this currency should be issued as legal tender notes which would correspond to the excess issue of to-day and paid for pound for pound. I have no hope that the Minister will accept my view, but I desire to point it out, as I consider it a very important matter. If the Government do not agree to accept my view, I would like to support Senator Jameson's amendment. I consider that anything over and above the quota, if not paid for pound for pound, should certainly be covered by ample security.
I admit that the third sub-section which Senator Jameson now suggests makes this particular amendment less objectionable to me. I do fear, however, although he states in it that these particular duties or rights are "in addition to and not in derogation of any other right," that the moral effect of that will be to weaken the position of the Commission in the matter of requiring security from any bank for notes within the quota which is related to the six millions. It is laid down under sub-section (4) of Section 52 that the Commission may "require any Shareholding Bank to give to the Commission securities to such amount as the Commission shall direct for consolidated bank notes, theretofore or thereafter issued to such bank by the transfer (by way of security only and not absolutely) to the Commission of assets of such bank acceptable to the Commission or by such charge in favour of the Commission on such assets of such banks as shall be acceptable to the Commission."
That is the sub-section which gives the Commission power to take the required securities for the consolidated note issue to any bank. It may be well to point out that, even although the consolidated note issue is only six millions or less than that, in the case of some particular bank, or in case of some portion of the quota of a particular bank, it may be desirable that the security be required. The feeling I have is that if this new section is inserted, in spite of any safeguarding words that may be put into it, the tendency will be for it to be regarded as harsh on the part of the Commission if it demands security in respect of any notes other than those referred to in the sub-section.
By an amendment which has been accepted we have put specifically in the Bill that the Commission, in fixing the limit of issue of consolidated notes and in fixing the quota, shall have regard to the other assets and liabilities of the shareholding banks, so that there is a specific duty put on the Commission—it was there already, but we have put it more clearly now by the new words we have added—to have regard to the other assets and liabilities of the banks. I think with that duty put on them, and with the power that is given them under sub-section (4) of Section 52, a power which they will be able to exercise more freely than they would be if there was a new special power, requiring security in every case, given to them, there will be no such danger as Senator Jameson apprehends. I do not think that we are going to have the Commission suddenly reducing the quota of the banks without warning them. That would not be a businesslike proceeding. It would be a dangerous proceeding, and therefore I think we must trust the Commission not to resort to a proceeding of that kind.
It is the business of the Commission undoubtedly to see that nothing goes wrong. They are given ample powers to inquire into the business of the banks, into the amount of their liquid sound advances, and to ascertain what their assets and liabilities are, and they are also required not to allow the total amount of notes to exceed the liquid sound advances of any particular bank. They are authorised to require security for any part of the note issue where they think that desirable. I think it may be taken that if they find it necessary to reduce the quota of any particular bank, or to reduce the total consolidated note issue that they will give due warning to any bank concerned. I think it would be an unthinkable thing that the Commission, knowing the state of affairs of any particular bank, should suddenly, out of the blue, require that bank to reduce its consolidated note issue and to reduce the number of its notes in circulation by such an amount as would bring it into difficulty.
It would be the day-to-day duty of the Commission if it believes that a bank had more notes out than it ought to have, to warn that bank that it was in for a reduction. I think we must assume that that would be done. I do not think we should at all assume that the Commission is going to exercise its powers as if it had no touch with the banks but worked in some sort of abstract way. There will be representatives of the banks on it who will be concerned with the stability and security of all banks and we may take it that other members of the Commission will be concerned not to do anything which will create a panic or smash a bank. I think we may take it that there will be co-operation between the banks and the Commission and that if the note issue, because of shrinkage of trade or something like that, or because of the affairs in a particular bank, is going to be reduced, timely warning will be given to the bank and it will be enabled to make its arrangements well in advance. We must assume all along whether in this six millions or in any sum above it that the Commission will take care to see that it will not issue to any bank more than the assets and liabilities of that bank justify. If there is a change in the conditions of the bank it will have that element of security. I do not like to take a rule-of-thumb sum of six million pounds. It may be that in certain circumstances it would be as desirable to demand security for any notes in excess of four millions as in another year it would be desirable to ask for security for the notes in excess of eight millions. Circumstances may change, and I do not see any particular sanctity about the sum of six millions. The Commission fixed the consolidated note issue tentatively at six millions. It confesses that it could not get the statistics required in coming to that conclusion. I do not want to give some particular sanctity to that six millions. I prefer to rely on the Commission with the powers it has and the responsibility that devolves on it all along of seeing, as it is required to see by the Bill, that the total issue of notes shall not exceed the liquid sound advances, that they shall be such as are justified by the other assets and liabilities of the bank and that they will exercise the power they have in any other circumtances to regulate the securities. I believe there might be circumstances when the total issue would not exceed six million pounds, that it would be very desirable in the case of some particular bank or in regard to some portion of the quota that securities would be demanded. I say, although I recognise sub-section (3) is an improvement on this amendment, no matter what words are put in sub-section (3) there will be a reluctance on the part of the Commission to demand securities from any bank so long as the quota is under six million which would not be there if we had not put in the section which seems to point to six million as the danger line. The feeling is bound to grow that if this new section is put into the Bill so long as the note issue is under six million all is serene, but if the note issue goes above six million there will be grave danger. My contention as regards a particular bank is that before we reach the six-million limit there might be danger and there ought to be nothing which would tend to influence the Commission against exercising their powers under sub-section (4) of Section 52.
We all agree that this Commission will act in a reasonable way, but it is because we believe that that this amendment has been proposed with the addition which Senator Jameson proposes. The time when this danger may arise is the time when under Section 53, sub-section (6), the aggregate amount of legal tender notes goes below four millions. In that case it is almost incumbent on the Commission to call in the outstanding consolidated bank issue till it comes down to a figure of five millions. That is the time when danger will arise. If those consolidated bank notes are called in suddenly a perfectly solvent bank may get into difficulties, but as long as the consolidated note issue or the quota of that bank over its quota in relation to the six millions is secure, then danger cannot arise. So far from taking away any power or any discretion, the Commission has to call for its security in the case of any particular bank under the preceding part of Section 52, and I do not think there is anything in the Minister's objection. We had here in sub-section (11), an express statement that it is to be in addition to and not in derogation of their other power, reminding them that they have this power in sub-section (52). On the contrary, banks will recognise that it is meant for their protection and that of the country in the case of a sudden calling in of consolidated note issues.
CATHAOIRLEACH
Before I put this amendment I may say that it might be taken, more or less by implication, as repealing or weakening the provisions of the previous Section 12, sub-section (4). Senator Jameson has also got leave to add to the present amendment a third sub-section, No. 11. The amendment is to insert after the sub-section the three new sub-sections moved.
Amendment put and, on a show of hands, declared lost.
Government amendment:
Section 58, sub-section (3). After the word "Commission" in line 13 to insert the words "by general regulation or particular direction."
This amendment is pursuant to an undertaking given in Committee.
Amendment put and agreed to.
I move:—
In Section 58, sub-section (3), to delete in line 14 the word "unanimous" and to substitute therefor the word "majority."
I move the deletion of the word "unanimous" because I think it is rather putting a slur on the Commission to declare that it requires a unanimous vote to make general regulations in connection with such a matter as the exchange of notes by banks at fairs.
I would like to let the word stand. I have tried to meet the banks so far as possible, but I do not see why, wherever it is giving a privilege to the banks, it should be only a majority vote, and in the case of anything to which the banks might object it should be unanimous. I think that the question of unanimity should cut both ways. The general principle in the Bill is that a bank only pays out its own notes, and we make a provision for allowing a departure from that. Where we adopt the principle of allowing a bank to pay out its own notes it should be unanimous. Where a case arises in which it is shown that it is in the interest of the public that a bank should pay out other notes than its own, regulations will be made, but I think that should be done by unanimous vote. It is one of the cases in which we might have three banking representatives voting for general permission to pay out the notes of other banks and, in view of that, I think we should require more than a majority.
CATHAOIRLEACH
Will not the Commissioners have great trouble in construing the meaning of this? A unanimous vote might mean, prima facie, the vote of every Commissioner present. On the other hand, it might be said that you would require to have the whole seven Commissioners there.
That is defined elsewhere.
The Minister must remember that what we are trying to meet in this case is public convenience. The banks are not going to make much out of this. The Government may make some paltry sum by forcing a few legal tender notes into circulation. If a bank in the country has not sufficient notes it could not send to a neighbouring bank to get some of its notes.
I agreed to the previous amendment partly to meet this point. As a matter of fact, I would not put the amendment in only I understood that there was going to be a compromise on it. I understood that Senator Guinness would not press it.
I am not pressing it. Its intention is to convenience the public.
The definition of "unanimous vote" means the vote of all the persons for the time being members of the Commission.
It means the vote of the entire Commission. When general regulations are being made I think that it is desirable the entire body should concur in making them.
Amendment by leave withdrawn.
The following Government amendments were agreed to:—
Section 60, sub-section (3). After the word "authorise" in line 7 to insert the words "by general regulation or particular direction."
Section 60, sub-section (3). To add at the end of the sub-section the words "and the Commission shall make regulations under this sub-section for the purpose of enabling reasonable facilities to be given by banks to persons about to travel out of Saorstát Eireann for obtaining bank notes other than consolidated bank notes."
I move:
Section 61, sub-section (3). To delete paragraph (d) and to substitute therefor a new paragraph as follows:
"(d) British Government securities maturing within twelve months."
This is merely a drafting amendment.
Amendment agreed to.
The following Government amendments were agreed to:—
Section 65, sub-section (1). After the word "issue" in line 28 and within the bracket to insert the words "or by way of special excess."
Section 65, sub-section (1). After the word "issue" in line 35 and within the bracket to insert the words "or by way of special excess."
Section 65, sub-section (1). Before paragraph (d) to insert a new paragraph as follows:—
"(d) if any consolidated bank notes were during such half-year outstanding with such bank by way of special excess, a sum calculated at the rate of three per cent. per annum on the amount of consolidated bank notes so outstanding from day to day with such bank during such half-year, and".
Section 65, sub-section (2). To add at the end of the sub-section the words "save in so far (if at all) as the same is determined by the Commission under this section to be outstanding by way of special excess."
Section 65, sub-section (3). To insert before the sub-section a new sub-section as follows:—
"(3) Whenever the quota of a Shareholding Bank is reduced under Part VI. of this Act the Commission in its discretion may, where the circumstances appear to it so to warrant, determine that during any specified period ending not more than six months after such reduction of such quota a specified portion (not exceeding the amount by which such quota is so reduced) of the amount of consolidated bank notes outstanding otherwise than on an extraordinary issue with such bank in excess of the amount permitted by or under this Act to be so outstanding shall be deemed for the purposes of this section to be outstanding by way of special excess."
CATHAOIRLEACH
The Fifth—the final—Stage of this Bill will be on the Order Paper to-morrow.
The Seanad adjourned at 5.30 p.m. until 11 o'clock on Wednesday, 10th August.