Central Bank Bill, 1969: Committee Stage (Resumed) and Final Stages

Question proposed: "That section 15 stand part of the Bill."

I should like to raise a small point on section 15. It provides that if the Registrar under the Companies Act considers that a company's memorandum and articles of association contain a provision which might suggest that it is going to carry on the business of banking, it has the right to refer the matter to the Central Bank and that pending a decision by the Central Bank no certificate shall be issued by the Registrar of Companies.

I suggest that there might be a hold-up here if a company required urgent registration, and I was wondering if any provision could be made to issue some form of limited certificate which would exclude the right to engage in the banking business, but would enable a company to carry on normal commercial activities.

Such a certificate, even if it were feasible, might have to be done by amendment of other legislation, rather than through this Bill. Even if it were feasible, I doubt if it would be of much use to a company in the kind of circumstances envisaged by Senator Russell. It seems to me that a company in search of such a grant would be living in a kind of limbo until the final position had been determined. It would be impossible for a company in those circumstances to get on with its business or to deal with other people in circumstances in which it could transpire that its temporary registration might not be effective later on. I doubt if this would be of much assistance.

Does not the Minister visualise that the bank would act promptly if it received a request from the Registrar of Companies? The more bodies and institutions that have to refer to these things, the greater the delay in these matters. There are occasions when prompt registration of a company is highly desirable.

It is not visualised that there would be any particular delay in such cases. What it is hoped to achieve is that by the inclusion of this section the practice which at present exists of including banking as one of the objects of many companies, just as a matter of course, would cease. However, in cases where it was included, and the Central Bank was notified by the Registrar, what is envisaged is that the Central Bank would immediately get in touch with the promoters of the company, in order to discuss the matter with them and to determine if it is intended to carry on a banking business.

I could not give a firm undertaking that in those circumstances they would not be delayed, because I could visualise circumstances in which the discussions between the Central Bank and the promoters of the company might lead to further questions and need for clarification. By and large, however, it certainly is not envisaged that there would be any delay as a result of this procedure.

Question put and agreed to.
SECTION 16.
Question proposed: "That section 16 stand part of the Bill."

The same point arises again—where there is a question of a change of companies, the Minister shall consult the bank.

The House may take it that the procedure in this case would be the same as under section 15. There is no reason why there should be any undue delay in such cases. Again, it is hoped that as a result of this section the type of cases in which this kind of consultation would be necessary will be few and far between, because of the existence of the section.

Question put and agreed to.
SECTION 17.
Question proposed: "That section 17 stand part of the Bill."

The section provides:

An officer of the Bank duly authorised in writing in that behalf by the Governor of the Bank or a person who holds a recognised qualification in accountancy duly authorised in writing in that behalf by the Governor of the Bank may, for the purpose of the performance by the Bank of its statutory functions, upon production of his authorisation, at all reasonable times, inspect and take copies of or extract from books....

Does "at all reasonable times" mean that an authorised officer could walk in at any time without prior notice and begin to inspect the books, or would he be required to give some previous advance notice of his intention to inspect the books of a company? I presume "all reasonable times" means times in which the company would be open for business.

This phrase "at all reasonable times" is a very common and indeed a hallowed one in legal terms. It does not necessarily imply that notice of inspection would be given. I would visualise that notice in normal cases would be given but certainly there is nothing in the section which would oblige the Central Bank to give notice of inspection. I would normally interpret this phrase as Senator Russell has interpreted it, that is, during normal business hours. I could not undertake in all cases that notice of inspection would be given.

Question put and agreed to.
SECTION 18.
Question proposed: "That section 18 stand part of the Bill."

Section 18 (1) provides that the bank may ask for information from any of the bodies that they have licensed. Subsection (2) states:

A person shall not furnish information or returns under this section which he knows to be false.

That is a bald statement. So far, I have not found any penalising procedure in the Bill, if such false information is given. What is the purpose of putting in subsection (2) unless there is some method of penalising the person or company involved?

I refer the Senator to section 58 (1) which reads:

Any person who contravenes section 7, 14, 17, 18, or 27 of this Act and a holder of a licence who—

(a) contravenes section 19, 20, 26, 31 or 33 of this Act,

(b) commits a breach of a condition attached to a licence,

(c) fails to comply with a direction under section 21 or 22 of this Act, or a requisition under section 23 of this Act, or

(d) contravenes regulations under section 24 or 25 of this Act,

shall be guilty of an offence and shall be liable—

(i) on summary conviction, to a fine not exceeding one hundred pounds, or

(ii) on conviction on indictment to a fine not exceeding five thousand pounds,

and, if the contravention, breach or failure in respect of which he was convicted is continued after the conviction, he shall be guilty of a further offence and shall be liable on conviction on indictment to a fine not exceeding two hundred and fifty pounds for each day on which the contravention, breach or failure was so continued.

That is fair enough.

In section 18 (1) (i) it is stated:

at such times as the Bank may specify from time to time.

What does that mean in effect? The bank has the sole right to decide when it shall seek such information?

What is envisaged is that it could be monthly or quarterly or half-yearly or yearly. It would depend on the kind of information sought.

Question put and agreed to.
SECTION 19.
Question proposed: "That section 19 stand part of the Bill."

I am not clear what is meant by the publication of business statements. Is this a form of account and if so, is it to be standardised by the bank? Also, what is the significance of subsection (2) which states:

Different forms may be specified by the Bank for the purposes of this section in relation to different holders of licences.

How are these business statements different from the financial statements in that section?

The purpose of the subsection is to give suitable information to the public regarding the business being carried on. This is regarded as being an important safeguard for the public.

Section 49 of the 1942 Act, which is being repealed, gives the Minister power to make regulations requiring licensed bankers to prepare and publish balance sheets and to prescribe the form of the balance sheet and the time, but not the manner of publication. These powers were not exercised. They appear to have been envisaged for statistical purposes and to establish uniformity of presentation of content rather than for the protection of the public.

The purpose behind this section is the protection of the public and the giving of information to the public rather than the statistical requirements which are dealt with in the previous section. The reason for the provision in subsection (2) is to enable the Central Bank to specify a simple form of statement for smaller businesses while specifying a more elaborate statement for the bigger banks.

Question put and agreed to.
SECTION 20.
Question proposed: "That section 20 stand part of the Bill."

The section prescribes that:

A holder of a licence—

(a) shall display and at all times keep displayed in a conspicuous place in every office, branch, or other place in which he carries on banking business and also, if the holder is a limited company incorporated in the State, in the registered office of the company, a statement (in the form required by this section) in relation to the banking business carried on by him, and

(b) shall furnish on demand to each of his creditors and, if the holder is a limited company incorporated in or outside the State, to each member of the company, a copy of the latest such statement.

What about the customers of the bank? Will they be entitled to a similar privilege?

Does this mean that the non-associated banks will have to have copies of their balance sheets available?

Yes. As holders of a banking licence they would be so required. In the case of customers of banks, as was raised by Senator Russell, some of them will be creditors of the bank in terms of having deposits. There may be others in a different position, but those who are creditors will be covered by the provisions of the section. Those who are not, I presume, on some occasion will visit the premises of the bank and will see the statement of the bank's affairs displayed.

I am suggesting that a customer of the bank, be he a depositor or a borrower, should have the same right as a creditor. In other words, on demand, the bank should supply him with a statement of its affairs. It is only right that he should have it. I know if he goes into the bank he will see it displayed but suppose he does not go into the bank he has not got an opportunity of seeing the statement of the bank's affairs, which it might be very desirable for him to see. On demand, he or a person authorised by him, should have the right to be supplied with a statement of the bank's affairs just as a creditor or depositor.

The principle involved here is that a person who has deposited money with, or is owed money by a bank, is entitled to be kept informed of the financial position of the bank. I am not sure that the same principle applies to somebody who might be borrowing from the bank. I do not know any cases where people, having borrowed from somebody, want to repay their loan quickly and get out because the person who lent the money is in bad financial circumstances. There is a different principle involved here. Such a person can find out the position at the bank by visiting the bank premises to see the latest statement. There is a distinction between those who owe money to the bank and those to whom the bank owes money.

The Minister has touched a point I was about to make. You can visualise a situation where a person owes money to a bank and has lodged with that bank certain securities. If the overdraft is not of a substantial nature, of course the securities will be worth far more than the overdraft. Is there any danger in not informing these people who have this accommodation at the bank of the precise condition of the bank at any stage? Would the securities be in danger? Has the Minister accepted the principle that all customers of the bank should be notified? That would cover everything. I am not sure there is any validity in what I suggest about the securities being in danger, but what Senator Russell has said about notifying the customers of the bank as a whole, might cover everything.

There is the point that a bank loan is repayable on demand. Therefore, a person who borrows money, even though he is in the red, has the right to see the statement of the bank's affairs. If the bank were in such a position that it might of necessity have to call in its loans peremptorily, a borrower would like to know that.

He might know it before he would get the statement of account. I should think that where a person has deposited securities as security for an overdraft, that person is a depositor of the bank and would be entitled to the statement. I do not think we should oblige banks to give a copy of their statement to every customer. There is a distinction, in principle, between the depositor and others. In practice, it is likely that in order to comply with the section banks will supply a copy of their statement to every customer, if asked, but they should not be compelled to do so.

Maybe I am slightly ignorant about this but are deeds of securities, shares and so on, deposited in lieu of the accommodation given by a bank, considered a deposit? I think that is what the Minister has said, that they are considered as a deposit and the owners would be looked upon as depositors.

I think that is correct.

There are different forms of deposit, if you like to use that word. The Minister would understand this better than I. There are different ways in which the bank can hold securities for accommodation given, and with all the different ways that can come under the heading of a deposit——

I should think that whatever way the documents, or deeds of securities are deposited, whether by formal mortgage or by equitable deposit, in any such case the bank is, subject to its charge on the security, indebted to the person concerned for the documents lodged and would, in any statement of account, have to allow for these as liabilities which the bank have. On that basis, these people would constitute creditors who would thereby be entitled to the statement envisaged in this section.

I am still not completely satisfied by the explanation. I envisage a situation where certain deeds are lodged with the bank. I know what the Minister is getting at but——

They are lodged for safe keeping.

I am not sure that the Minister's statement covers every type of transaction which comes by way of the bank lending money and receiving securities. There are many different ways in which this may be done with a bank. I am still wondering if all are covered by the Minister's statement. I do not dispute that the Minister is telling me what he thinks is right. I am just not sure yet whether what he has said covers every type of transaction in lending money to a customer whereby securities are held in different ways. The Minister is a lawyer and understands there are different methods by which a bank can hold securities. Are they all covered here? I am dubious about this.

All I can say is that if there are cases which are not covered, at least they are covered in the sense that the bank will be obliged to display the statement on their premises. They are not being completely excluded from all knowledge of the financial position of the bank. Their security cannot be sequestered by the bank without due notice to them, on the basis of what has been a contractual obligation by the bank. The section goes as far as possible to cover the situation which is aimed at the protection of people by information, and is, of course, going much further than the present provision.

Question put and agreed to.
SECTION 21.
Question proposed: "That section 21 stand part of the Bill".

The Minister may have been expecting me to comment on this section. If one reads it, it can only be contrasted with section 11 which we were discussing last night and with the amendment which I proposed to section 11, which the Minister did not see fit to accept, that there should be recourse to the court. I note in section 21 the provision "where the bank is of opinion that the holder of a licence has become, or is likely to become, unable to meet his obligations to his creditors"—and I would refer the Minister back to section 11 (f). In other words, there is exactly the same determination here as we had in section 11 (f). One of the findings of fact that the Minister referred last night was that the bank may direct in writing "to the holder to suspend, for such period, not exceeding two months, as shall be specified in the direction, either or both of the following that is to say, the taking of deposits or the making of payments which have not been authorised by the Bank."

In other words, section 21 is a halfway house to section 11. The licence would not be revoked, but the bank could direct the suspension of the taking of deposits or making of payments. There is a remedy in the section of recourse to the court. The holder of the licence to whom the direction is given under subsection (1) of this section may apply to the court for, and the court may grant, an order setting aside the direction. "Court"is defined as the "High Court" in the definition section.

The bank may apply to the court and the court may, in addition to making an order make any other order as may appear to it to be necessary. The court is given the discretion in relation to this direction on the basis of the finding which is identical to the finding in paragraph (f). I should like to ask the Minister very seriously arising out of this why he has seen fit to give recourse to the court here, why he is adamant in his refusal to do so in the more serious circumstance of revoking a licence for identical reasons under section 11 and whether he would reconsider the position.

I am sorry to have to disagree with Senator Robinson's statement. I do not think the two situations are the same. Section 11 deals with the issuing of a licence and where a licence was rejected and Senator Robinson at that stage wanted to have the ultimate resort to the High Court. This involved two points, as the Minister said. One was the communication of confidential information.

Section 11 deals with the revocation of a licence. The other matter arises later but for the reasons given in section 11 it is identical to the reason in section 21. The point is he is not granting the revocation of the licence. It is the second of the amendments.

I hope Senator Robinson will recall that when I was dealing with section 11 I referred to the first eight grounds as being matters of fact and some of them at least would be determined by the court. I specifically instanced this particular one as one where it was envisaged that the court would make the determination of fact. I specifically said that last night.

The Senator may also recall that I said the phrase used here is one which is long known to banking law. It is somewhat similar to the phrase used in relation to bankruptcy. It is one on which the court makes the determination. It is essentially the same situation here. The only point involved in what Senator Robinson has said, and she is confirming what I said last night, is that in this and some other cases there would be a judicial determination of the facts related to section 11.

We seem to be at cross purposes here. It is the bank which makes the determination. Where the bank is of the opinion that the holder of a licence has become or is likely to become unable to meet his obligations to his creditors, the bank may give a direction. It is only if the holder of the licence to whom the direction is given appeals to the court within the section, and I agree with this. But what I wanted to do in section 11 was precisely the same thing—that when the bank made that determination, to grant the right to appeal to the court. But it is not the court that makes that finding in the initial stages in section 21. It is the bank.

This is in section 11?

It is in section 21.

This is analogous to a creditor filing a petition for bankruptcy on the grounds that the person or trader concerned is unable to pay his debts. This is the statement that is made by the creditor. But if the trader concerned knows he is unable to pay his debts he cannot do anything about it. Then he lets this matter go and the statement by the creditor that he is unable to pay his debts goes unchallenged. It is very much analogous to the situation in which, if the Central Bank is of opinion that the holder of a licence has become, or is likely to become, unable to meet his obligations, the bank gives the direction in writing. If the holder of the licence accepts that that is so and he cannot do anything about it, I presume he will do nothing else. But if he does not accept this, then he will contest it in the court. What will then happen will be that there will be a judicial determination as to whether he was unable to meet his obligations. The failure by the licence holder to take any action in regard to such a direction by the Central Bank would be accepted by any court as clear evidence of the fact that he was unable to meet his obligations.

The only point in support of Senator Robinson's contention is that section 11, paragraph (f), is one of the reasons under which the bank may, with the consent of the Minister, revoke a licence and it reads:

if the holder becomes unable to meet his obligations to his creditors or suspends payments lawfully due by him.

The wording in section 21, subsection (1) reads:

Where the Bank is of opinion that the holder of a licence has become, or is likely to become, unable to meet his obligations to his creditors, the Bank may give a direction in writing to the holder to suspend, for such period, not exceeding two months, as shall be specified in the direction, either or both of the following, that is to say, the taking of deposits or the making of payments which have not been authorised by the bank.

In the first case there is no recourse to the High Court; in the second case there is. Surely there is an analogy here?

Again, if I may refer back to section 11, subsection (1) paragraph (f) which reads: if the holder becomes unable to meet his obligations to his creditors or suspends payments lawfully due by him.

In section 21 we are talking about "where the Bank is of opinion that the holder has become or is likely to become". We are talking about the Banks' opinion. In section 11 we are talking about "where the holder becomes unable to meet his obligations." What is envisaged there is, as I have indicated, that there has been, in fact, a determination that he was unable to meet his obligations but in section 21 we are talking about "where the Bank is of opinion that". There is a distinction here. In section 21 "the Bank is of opinion" but the person may contest this in court. What is envisaged under section 11 (1) (f) is that "he has become unable to meet his obligations" and such a determination has, in fact, been made. There is a substantial distinction between the two situations.

Should section 21 not come first? The Bank's opinion is that he cannot fulfil his obligations to his creditor. It suspends his operations for two months. The licensee concerned can appeal to the courts. If, in the final analysis, the courts decide he is unable to meet his obligations section 11 presumably then comes into operation. The Bank then may, with the consent of the Minister, revoke his licence but only after the courts have decided that he cannot meet his obligations. In fact, the courts do play a part in deciding whether or not he can fulfil his obligations. They do decide it as a matter of law. Is that not correct?

In relation to that particular ground for the revocation of a licence, yes.

I do not wish to delay the House on this as I think we are not going to reach agreement on it. Take the last paragraph (i)—

if, since the grant of the licence, the circumstances relevant to the grant have changed and are such that, if an application for a licence were made in the changed circumstances, it would be refused.

It would be the opinion of the Bank that this was so and the Bank would probably be in a good position to have an informed opinion on it, but the person might like to dispute it in the court; similarly if the holder is convicted on indictment of an offence under any provision of this Act or an offence involving fraud, dishonesty or breach of trust. That is not purely a matter of fact. There might be quite a difference of opinion as to whether a person had been convicted of an offence involving dishonesty or breach of trust and the person might like to contest that in the High Court. I still submit that section 21 procedure and machinery is a halfway house to revocation and that in that circumstance a person has the right of appeal to the court but in the case of revocation a person does not have a statutory right to appeal to the court and that is regrettable.

Under subsection (3) the holder of a licence has the right to apply to the court to satisfy the direction suspending his operations for two months. What happens during that hiatus? There will be a period during which the court has got to sit and adjudicate on his appeal. Is the bank open or closed at that stage?

It depends on a number of factors here, including the nature of the banking business. What is envisaged in subsection (1) is that there would be a suspension of the taking of deposits or the making of payments which had not been authorised by the bank. That does not necessarily mean a complete closure by the licence holder, although it could mean that.

What would they do? Would they be open?

They could be operating under the direction of the Central Bank so that they could only make certain payments and receive certain moneys. Senators will of course appreciate that it is envisaged that this operation is likely to arise very seldom, if at all. It is a most unusual situation we are envisaging here.

People could, for instance, pay an overdraft and take out their documents.

The Central Bank would be expected to try to allow the bank to carry on to create the minimum difficulty for the customers and creditors of the bank, also to ensure that the necessary work of the bank is carried on and to enable creditors to be paid as quickly as possible. It would be something analogous to a receivership of a company.

It does say it cannot take payments or take deposits.

Which have not been authorised by the bank.

If a person owed the bank an overdraft and the licensee held documents on any security, the overdraft could be paid and the documents handed over without the consent of the bank. Is that possible?

I think no transaction in the nature of the making of payments or the receiving of deposits could take place in such circumstances without the consent of the Central Bank.

Then what transactions could take place?

Such as would be authorised by the Central Bank.

What transactions could they be? This is something I cannot visualise?

Payments, for instance, by customers could be authorised.

And to staff?

I could visualise that and payments to the bank's own staff, yes.

Question put and agreed to.
Sections 22 and 23 agreed to.
SECTION 24.
Question proposed: "That section 24 stand part of the Bill."

I am dissatisfied with the powers of the bank under section 24. The section appears to give power to the bank. It states:

...that it is expedient so to do, the Bank may, with the consent of the Minister, make regulations requiring every holder of a licence to make with the Bank, in addition to the deposit under section 7 of this Act, a deposit (not bearing interest) of an amount specified in the regulations or calculated in a manner specified in the regulations if and whenever after a date specified in the regulations the assets of the holder within the State fall below such proportion in relation to his liabilities within the State as is specified in the regulations, and to maintain such deposit so long as such assets are below the said specified proportion.

In those circumstances there would be a requirement to maintain a deposit in the bank, in addition to the deposit under section 7, and this deposit would not bear interest. What I am not satisfied with then is subsection (2):

Regulations made under this section may prescribe different requirements in respect of different holders of licences.

I would submit that it might well be construed that to make a deposit without interest is in some way almost a confiscation of property. The deposit is not bearing any interest, therefore it is penal in that sense. To be able to do so by regulation which particularises between applicants for licences would seem to me to be discriminatory. It would be possible for the Bank's regulations to require a particular banking concern to make a very large deposit without interest. This could be challenged on the basis that it was a discriminatory deprivation of property in the sense that property would be the interest-bearing possibilities of that amount.

This is a re-enactment of a power already available in section 50 of the Central Bank Act, 1942. The fact that it provides for deposits which would not bear interest makes it clear that it is intended to be a provision of a penal nature. The power has not in fact been used so far, but what was envisaged when it was originally introduced was to provide a means of inducing the associated banks to repatriate some of their external assets for investment at home. As I say, the power has not had to be used but it is a power which could well be of importance at some time in the future in relation to some possible holders of banking licences. As regards subsection (2) prescribing different requirements in respect of different holders of licences, this would of course have to comply with the rulings of the Supreme Court in regard to the classes of licence holders who would be affected. But clearly the operation of a penal clause should be confined to people who ought to be penalised and not, because some people ought to be penalised, applied to everybody. It would not be reasonable to provide that any operation of this section would apply to all holders of licences. That could not be justified.

Could I ask the Minister if there are provisions to ensure that people who hold licences to operate a bank maintain a substantial proportion of their assets inside the State.

It is envisaged that if necessary this section could be used to ensure that.

Could I ask, from the depths of my abysmal ignorance in matters financial, whether or not the penal clauses of this section could also be invoked—where the bank felt that the holder of a licence was, in relation to the proportion of his assets as against his liabilities, running into financial difficulty—to ensure that he might get back on the right road, so to speak? If he were running into difficulties and the proportion of his assets were not correct they would be less likely to become correct by introducing the penal clauses of section 24.

I think the last point that the Senator made was the one I was going to make in reply to what he was saying. It would not seem to me, in the kind of situation he envisages, that the operation of this section would improve it. On the contrary, I think it would make it worse. I think we may take it that it would not be improved if this section were operated in that kind of situation. There are other remedies available to the bank under other sections, but I would not visualise the operation of this section in circumstances in which a licence holder was in financial difficulty.

The main difficulty with this section is that it could be operated that way.

Yes, but one must have some faith in the discretion of the Central Bank in the operation of the sections.

Question put and agreed to.
Section 25 agreed to.
SECTION 26.
Question proposed: "That section 26 stand part of the Bill."

Could I ask—I was not following too closely and perhaps it is in relation to section 25—whether this is the section which would allow the Central Bank to operate as the clearing house?

It is not envisaged that the Central Bank as such would operate as a clearing house. It may be that what the Senator has in mind is section 25, which gives powers to the bank in respect of the clearance of cheques between banks. It is not envisaged that the Central Bank itself will act as a clearing house. By its regulations it could apply certain conditions relating to the clearing of cheques. It could be a condition of the granting of a banking licence that a licence holder would participate in clearance of cheques on certain conditions. This is certainly a possibility.

Again I am in a difficulty because I am speaking from abysmal ignorance of the topic. I had understood that one of the purposes of the Bill, and one of the provisions which was welcomed very much by the non-associated banks, was the fact that the Central Bank would now be in a position to operate as the central clearing house for all cheques because of the fact that heretofore the clearing house had been operated by those banks which are members of the Irish Banks Standing Committee. We had a situation which existed for a long time last year whereby the members of the Irish Banks Standing Committee engaged in an industrial dispute with their employees and caused what some people may prefer to call a strike but which I call a lock-out, and in the process of which they closed the clearing house, which meant that the financial affairs, not only of their own companies but also of the non-associated banks, were seriously interfered with. The clearance of non-associated bank cheques did not take place for as long as the dispute lasted. There is also the situation in which the clearing house, which in effect is a private company operated by the Irish Banks Standing Committee for their own benefit, charge a commission rate of 5p per cheque for clearance of cheques from banks which are not members of the Standing Committee. I have been given to understand that those other banks were very anxious to see this situation done away with. If the facts as I have outlined them are correct, surely that is understandable.

I think what the Senator has in mind is substantially correct, except that the Central Bank as such will not operate a clearing system. What is being provided is that it will no longer be possible for a member of the Banks Standing Committee, or indeed any other bank, to refuse clearing facilities to other licence holders or to the trustee savings banks, provided that the instruments are presented by its own customers. In addition, we are providing for the supervision of the charges for this service by the Central Bank to avoid any exorbitant charges. This is, I think, meeting the point that Senator Boland mentioned. The only difference is that the Central Bank itself will not be operating the clearing system but will rather be supervising it.

Is this situation to continue whereby this private company is operated by a group of licence holders in the country over which the other licence holders have no control? I appreciate that the Central Bank will endeavour to represent their interests there. As the Minister has outlined the situation now, the obligation would be upon the licence holder, and in this case, presumably, the clearance house, to clear a cheque provided it was presented by one of its own customers.

What would be the situation with the clearing house as it exists if a cheque were drawn on one of the non-associated banks and made payable to a customer of another non-associated bank? Would the clearing house in that case be entitled to refuse to handle the cheque? What—and I think this is the most important part of it—would the situation be in the event of another maniacal decision by the members of the Irish Banks Standing Committee to engage in an industrial dispute as they have done several times in the past five or six years?

I should like to support Senator Boland in the point he is making. The position is at the moment that the non-associated banks feel that they are being discriminated against. I understand that they have made submissions to the Minister that the Central Bank should assume a statutory obligation to ensure fair competition and fair arrangements between all the banks who are licensed to operate within the State. That is a fair request and it would be necessary and desirable that the Minister would ensure that such conditions obtained in the State. I am not in a position to say whether or not the submission of the non-associated banks is correct or if they have been operating at a disadvantage. They say they have and if that is so this gives the Minister an opportunity, through the Central Bank, to ensure fair and free competition between all the banks who have been licensed or who will be licensed to operate in the State. That is what the non-associated banks are seeking to achieve and I consider it a fair request.

That is precisely what we are doing in this section. We are ensuring that it will no longer be possible for a member of the Irish Banks Standing Committee, or any other bank, to refuse clearing facilities to other licence holders, provided that the cheques are presented by the bank's own customers. In addition, we are giving the Central Bank supervisory power over the charges for the service provided by the clearing house. We are, in this way, ensuring full and free competition under the supervision of the Central Bank. We are thereby meeting precisely the objections that have hitherto existed in this regard.

I do not wish to labour the point, but surely the situation still obtains, in the event of there being another strike or lock-out, that the Banks Standing Committee would close down the operations of the clearing house. By so doing they would seriously impede the operations of the non-associated banks which would still be open to their customers for business. They would find it extremely difficult to carry on the ordinary business of banking because of the unavailability of the clearing facilities which are provided by the clearing house.

Presumably the non-associated banks would like to have a say in the management and control of the clearing house itself. As things stand at the moment they cannot do this, because the clearing house is run by the standing committee members to the definite exclusion of the non-associated banks. I appreciate that the Central Bank will have control over the operation of the clearing house and I would hope that the suggestion, whereby the standing committee would charge 5p per cheque for clearance of non-associated bank cheques, will be one of the first matters on which attention will be focused. That still does not overcome the situation where the clearing house will be closed in the event of the standing committee deciding to close their banks during industrial action.

I think Senator Boland is quite right in this. The Central Bank will control the terms under which clearings between the banks will take place but it does not control the actual operation of the clearing arrangements. As Senator Boland has said we cannot tell it to stay open. It merely controls the operations and the terms under which the clearing house arrangements will operate but it does not exercise complete control over the opening or closing of the clearing house. That is as I understand it.

Of course, no clearing system can operate if the banks are closed because the transactions concerned cannot be debited and credited and value given. It should be understood that the clearing system at present is a separate company. Even if it were controlled by the Central Bank there could be an industrial dispute there. There can be no safeguard against an industrial dispute. That is the first thing one has to realise. All of the right is not on the side of the non-associated banks in this case. We ought to be clear on this. There is a certain amount of right but, in all fairness to the associated banks, it should be said that the associated banks have branches throughout the country which enable them to provide a clearing system. A non-associated bank which establishes itself with one branch in Dublin and which wishes to utilise the benefits of the whole system should have to pay a great deal more for it than the banks that are providing this service all over the country.

It is at this juncture that the Central Bank comes in to determine what is a reasonable charge having regard to both of these factors. It is the duty of the Central Bank to do so and they have the expertise to decide that. I am saying that because the tenor of the discussion on this section has tended to give the impression of being very much anti-associated banks. I want to make it clear that there are two sides to this story. I repeat that in the event of a closure of the banks there cannot be a clearing system. Of course, there is no reason why, if the associated banks are closed, the non-associated banks should not operate a clearing system between themselves. There is nothing to prevent them from doing so. However, I do not think this would provide any great relief for the customers because the numbers of non-associated banks, their location and the extent of their operations would not be such as to provide any substantial relief for the ordinary bank customers in a situation like that. On the other hand, if banks are closed down no clearing system can operate in relation to those banks which are closed.

That is accepted. There is just one remark I should like to refute, and I am sure Senator Boland will agree with me here. There is no question of any anti-associated bank trend in any submission I have made. We have been dealing with the banks in this country for too many years now not to appreciate the service they are giving to the community. The point I was endeavouring to make was that if you give a licence to a statutory body to operate a banking system they should be allowed to operate on a par with their competitors. The Minister made the valid point that the associated banks operate branches throughout the country—in fact some of them operate too many branches because many of them were established in conditions which are far different from present-day conditions—but it should also be pointed out that the non-associated banks are prohibited from opening branches. Therefore, they cannot offer the same facilities. I accept the Minister's point in that regard. I want to place emphasis on the fact that there is no question of any anti-associated bank tenor in anything that I have said. I am sure the same can be said of Senator Boland's contribution.

I am sure the Minister was referring to my remarks because I have a tendency to be critical of people who, I feel, are operating in monopoly circumstances. As the Minister has pointed out, the clearing house is a separate company but, rightly or wrongly, I am led to believe that it is a separate company owned by those companies who form the Irish Banks Standing Committee. That being the case, the licence holders who are not members of the Irish Banks Standing Committee are forced to use the services of this company but they are actually using the services being provided by the associated banks. If the associated banks enter into an industrial dispute that company is affected and the whole system stops because that company is really an arm of the Irish Banks Standing Committee which was set up originally to provide exchange facilities between the branches of their own banks.

We now have a very different set of circumstances in which there are a very small number of non-associated banks here. As Senator Russell has pointed out, this is a smaller number than the non-associated would wish. I understand that there are moves in that direction in the southern part of the country. The situation is that the non-associated banks would like to see one or other of two things happening. Either they would wish to be allowed to become part-owners or directors of the company which runs the clearing house, or—and I think this is the reason why they were clapping themselves on the back—they would like the Central Bank itself to operate clearing house facilities, so that in the event of an industrial dispute closing down some of the banks in the country, the Central Bank would still operate clearing facilities for those banks which remained open.

There is another point which, in fairness, ought to be remembered in this case. A great number of people and business firms suffered grievously in that last long industrial dispute. Perhaps this is part of the reasons for my unkind remarks about the Irish Banks Standing Committee members. However, a great number of companies and individuals were only able to continue in financial existence because of the fact that there were non-associated banks operating. It is as well to realise that they were operating in extremely difficult circumstances because they were not effectively able to clear between themselves, because the clearing house was closed. They do not want to see this happen again. Unfortunately, with the best will in the world, as the Minister has explained the section and its provisions, the section will not provide the Central Bank with the power to ensure that some form of clearing facilities still take place in the event of the Irish Banks Standing Committee members closing their doors to the public again. I should like the Minister to look again carefully at the point.

Question put and agreed to.
Sections 27 to 30, inclusive, agreed to.
SECTION 31.
Question proposed: "That section 31 stand part of the Bill."

This section deals with the duties of a holder of a licence on termination of banking business. Subsection (1) states:

(1) Where a holder of a licence ceases in circumstances other than those specified in paragraphs (a) to (d) of section 30 of this Act to carry on banking business, he shall, as soon as may be——

I wonder what that is intended to convey.

——notify all persons having deposits (including deposits on current accounts) with him of such cesser and he shall, if any such person so demands, pay to that person forthwith the amount of his deposit together with the amount of any interest accrued thereon.

I should like the Minister to explain what that terminology means: "as soon as may be." To my mind, that leaves it very wide open, if a person is going to cease business and must notify his depositors. Subsection (2) of the same section, says:

Where a holder of a licence proposes to cease carrying on banking business, he shall notify the Bank in writing of the proposal not less than three months before the date of the cesser.

What about notifying his staff or the staffs of the bank? Is there any provision made for that? There certainly is not in this section. I was wondering if there is any other section. Everybody seems to know that the bank is going to cease business except the people employed in the bank. I should like to suggest very strongly to the Minister that some provision should be made for notifying the staffs, if such cessation of business was to arise.

In connection with the phrase "as soon as may be," that can be interpreted as meaning "as soon as reasonably possible." In other words, on the one hand, any undue delay would not be complying with it, especially in the sense of operating to the detriment of customers of the bank. On the other hand, it could not be reasonably required that immediately, that is, within an hour of closedown, action would be taken. In any case of dispute it would be a matter of interpretation by the courts. These would be the two extremes that the court would take into account and it would decide that compliance with the section lay in between these two extremes.

In regard to the notification of the staff concerned, this is strictly speaking a matter for another Bill rather than this. I cannot honestly visualise, in practice, a situation in which a bank is closing down, has given three months' notice to the Central Bank, in which it has to prepare notices to go to its customers, and in which the staff would not know about this. Even assuming that there was no approach by the management of the bank to the staff to discuss this, which would be the normal course, I cannot imagine its being kept a secret in the circumstances.

Does the Minister not think that "as soon as reasonably possible" should be included in the Bill, because provision is made elsewhere in connection with the transfer of the business of one bank to another? In that case there is provision in section 38 for the transfer of officers, clerks and servants. It is considered desirable to make provisions for the transfer of officers, clerks and servants in section 38. It would be a rather strange situation if the bank staffs and their unions were not aware of their pending closure. I wonder if it should not be written into the Bill? If you make provision for the situation arising out of the transfer of one bank's business to another, should you not make similar provision in regard to the staffs where a bank intends to cease trading?

We are providing here for a bank ceasing to trade for reasons other than bankruptcy or winding up. In other words, they would be repaying all their creditors in full. I cannot see in such circumstances the staff being left uninformed, or, indeed, specific arrangements not being made in respect of the staff for either transfer or redundancy payment. It is inconceivable to me that it could happen in such circumstances. I am not sure that it is relevant to this section.

I am not thinking so much of a bank that has been operating perhaps for some years in the country, with local connections as of some outside individual or corporation who, having secured a licence, decided, after a while, to pack it up. Under this section they just give three months' notice, pay their creditors, collect their debts and off they go.

Question put and agreed to.
Section 32 agreed to.
SECTION 33.
Question proposed: "That section 33 stand part of the Bill."

I am wondering if subsection (1), (a), (b) and (c) are in the right order? These all deal with the transfer of banks. Subsections (a), (b) and (c) state:

(a) the transferor and transferee may, not less than four months before the date on which the transfer is intended to take effect (in this Part referred to as the transfer date), submit to the Minister for his approval a scheme for the transfer,

(b) the transferor and transferee shall, not less than one month before the transfer date, publish notice of the transfer in at least one daily newspaper published in the State,

(c) the Minister, after consultation with the Bank, may, not less than two months before the transfer date, either approve of or decline to approve of the scheme by order,

Should not paragraph (c) precede (b)? The first thing is that he may submit to the Minister "not less than four months". The Minister then "after consultation with the Bank" should surely come next with his "not less than two months before the transfer date" The final thing should be the "month' notice that the transfer will take place published in at least one daily newspaper". It seems to me that they could publish the notice before the Minister's two months are up during which he consults with the Bank.

It is purely a matter of drafting. I think the reason is that subsections (a) and (b) refer to actions taken or to be taken by the transferor and transferee. Subsection (c) refers to action to be taken by the Minister. In view of the fact that the time limits are set out, I do not think that there can be any difficulty or confusion about it. I do not think that is what the Senator is suggesting. He is merely talking about tidy drafting. If he looks at it on the basis of putting together the duties of transferor and transferee, on the one hand, and those of the Minister, on the other hand, he will find that it is tidy enough from that point of view.

As it reads, they can publish their notice not less than one month and then a month later the Minister can come along and decline to approve of the scheme.

No, because all of these time limits are related to the transfer date. Under subsection (b) the notice shall be published "not less than one month before the transfer date". Subsection (c), which relates to the Minister approving or declining to approve says he must do it "not less than two months before the transfer date". There is not any connection between (b) and (c) in the sense that (c) can only take place when (b) has taken place. That is not what the section says.

Question put and agreed to.
Section 34 to 37, inclusive, agreed to.
SECTION 38.
Question proposed: "That section 38 stand part of the Bill."

There does not appear to be any provision for giving notice to the staff or providing any consultation with the staff before a transfer takes place. I know that the provision is made for the staff that the terms and conditions of their prospective jobs will be safeguarded and will be the same under the new ownership, but there seems to be no provision here as to when there will be prior notice or prior consultation with the staff.

Again, I think this is a matter of good industrial relations practice and also is something that I cannot envisage being omitted. In this section we are dealing with the basic rights which must be given to the staff in any such transfer. This does not preclude consultations and negotiations whereby rights superior to those laid down here are given to the staff or certain sections of the staff.

What we are doing here is providing the basic minimum right of the staff in any such event. I do not think that we can hope to lay down here the precise procedures and the precise terms to be followed and given, so this could well be the result of negotiations which might take place between the staff and the management in circumstances of this kind.

Does the Minister think that the staff are not entitled to notice that there will be a change of employer? Their conditions are safeguarded, but there is no provision for telling them that they will have a new employer after a certain period. I feel that in common justice they are entitled to that information.

It is the usual practice nowadays, as the Minister will agree, that if there will be some change in administration of a business the staff are brought in and it is discussed with them. The advantages of the change are pointed out to them together with the disadvantages. In this particular case a change could take place without the staff getting any prior notice or any reasons being put forward as to why a transfer was taking place.

In this day and age the broader the consultation is, not only between directors of respective companies but also between the staff of the companies concerned, the better, and I am sure the Minister would agree with that. The Minister's answer probably will be, if I can anticipate him, that he could not imagine this thing happening without their unions, if necessary, entering into discussion with the owners of the transferor company and the transferee company.

Senator Russell's description of the normal procedure in this case is correct. I shall go further by saying that I think the management of any bank which proposed to have their staff transferred to another bank without notice and consultation with their staff would be very unwise. They certainly would not last long in business if they tried to do such a thing. It is inconceivable that any bank management, be they an old established or even a newly established bank, could do a thing like that without consulting the staff.

I do not think any staff would accept it. Therefore, the management would be simply creating enormous problems for themselves if they failed to do so. Most managements nowadays are sufficiently enlightened in their own self-interest not to make that kind of mistake.

Question put and agreed to.
Section 39 to 42, inclusive agreed to.
SECTION 43.
Question proposed: "That section 43 stand part of the Bill."

This is one of the most significant sections in the Bill and one that has had a great deal of publicity and which received quite a lot of discussion in the other House.

I should like to refer to the speech made by the Minister's Parliamentary Secretary when he introduced this Bill to the Seanad a few days ago. What he said is relevant to what I propose to say on this section. I quote from his speech:

The 1942 Act also gave the Central Bank the general function and duty of taking such steps as it deems advisable from time to time to safeguard the integrity of our currency and ensure that in the regulation of credit the aim shall be the welfare of the whole community.

That sentence was repeated later on in his speech. When he came to consider Part IV of the Bill, and specifically section 43, he went on to explain the purposes of the section. He said:

There has been some misunderstanding of this provision. What is intended is solely a technical change. The existing position is that the 1927 Currency Act established a fixed parity between the Irish pound and the pound sterling. Under this provision, the exchange value of the Irish pound, while remaining the same as against sterling, automatically follows changes in the value of sterling, vis-á-vis other currencies.

This position is inconsistent with the obligations arising from our membership of the International Monetary Fund. At a later stage in his speech he goes on to say:

The present Bill will remove the contradiction between that Act and the 1927 Currency Act. As I have already made clear, the question of devaluation of our currency in relation to sterling does not arise. The Government have no intention whatsoever of changing the existing parity with sterling and the policies we are committed to following will ensure that no such eventuality will arise.

I would suggest with all due respect to the Minister that, if the Government are so emphatic that the situation will not arise where there will be any change in the parity between the Irish pound and sterling, then it is unnecessary to include this provision in the Bill. There have been, from time to time, suggestions that we should change the parity of the Irish pound and some years ago there could have been strong argument advanced in favour of this. But with the development of our trade with Great Britain over the intervening years, nobody can envisage that in the years ahead the bulk of the trade of this country will go otherwise than to the sterling area, particularly to Great Britain. Any doubts there might be about a possible devaluation, or possible change in the parity between the Irish pound and sterling in the future, would be removed if this section were removed from the Bill.

The Minister may correct me if I am wrong, but as I see it there is nothing to prevent the Oireachtas, as such, passing an Act at any time if it should be found necessary in the national interest and in the interest of the community as a whole to vary the parity of the Irish pound with sterling. Returning again to the words of the Parliamentary Secretary, this Bill has been drafted with the interests of the community very much in the forefront of the Government's mind. I should think the representatives of all the people, that is the Members of the Dáil and the Seanad, should decide if an important step such as this should be taken. It should not be left to the Government of the day, who may be in office by a small majority. A drastic step like this should be one which only the Dáil and Seanad should decide by majority vote.

Frankly, I am not enamoured by the reason given in the Parliamentary Secretary's speech: that it is purely a technical matter. If we did not write this into the Bill, would it make any fundamental difference? In view of the Government's emphatic assurance, and I accept this, that no change in the parity of the Irish pound and sterling is visualised either now or in the future, and that the Government are committed to following policies that will ensure there will be no change, I do not see the reason for writing this in. It gives a sense of uneasiness; and in our very open economy nothing should be written into the laws of the land which might suggest, in any way, that we were departing from a well-established precedent in regard to our currency.

While I do not completely rule out in the years ahead, because nobody can attempt to see into the future, the possible necessity of a change in parity, that change should be left to the Oireachtas to decide and to put into effect. I do not wish to talk too much about the Partition issue but anything that would suggest that we were moving away from the practice in the North of Ireland would be an undesirable step. That would not prevent me from making a change if a change were necessary. The point I wish to make to the Minister is that, in view of the Government's very adamant attitude to any possibility of a change in the years ahead, this section, to my mind, is unnecessary. It should be excluded from the Bill.

There are, of course, no grounds for unease arising out of this section other than such as might be created by persons who are either mischievous or ill-informed. There have been some such attempts by people outside this House. If I thought there were any serious misgivings, I would certainly delete this section. There are just a few fringe situations which have arisen.

Some doubtful things have happened in this connection. A certain magazine devoted a whole issue recently to the alleged devaluation of the Irish pound and suggested ways in which this could be dealt with. One of the ways suggested was to buy silver bullion. They had an advertisement to that effect. Investigations I made showed that the company offering to sell it was owned partially by the editor of the magazine. This sort of thing is really not worth talking about. The reason for this section is, as the Parliamentary Secretary stated, a technical one. There is at present a conflict between section 47 (2) of the Currency Act, 1927, on the one hand, and the Bretton Woods Agreement Act, which was passed in 1957. The 1927 Act has provisions which make it mandatory on the Central Bank to issue Irish legal tender notes to the same nominal value as British notes presented to them, which maintains a continuing parity with sterling. Other provisions of section 47 of the Act also have the effect of maintaining the same parity, in that, while they give a permissive authority to the Central Bank to issue legal tender notes, the notes must be issued on the basis of parity with sterling—for example, the issue of notes to an associated bank against payment in a sterling draft. In this way, the 1927 Act requires us to change the value of the Irish pound in line with changes in sterling. That is the effect of the 1927 Act.

On the other hand, our membership of the International Monetary Fund obliges us to consult with the Fund before making any change in the par value of our £. The Fund's consent is required to any change. Our obligations to the International Monetary Fund are as set out in article 4 of the Fund's articles of agreement in sections 1, 5 (a) and 5 (b). Acceptance of these obligations was approved by the Bretton Woods Agreement Act, 1957.

In this way there is a conflict between the Currency Act, 1927, on the one hand and the Bretton Woods Agreement Act, 1957, on the other. Section 43 is designed to remove this conflict. That is its sole purpose. It is purely a technical legal matter. We lived without it before. We could live without it again and go on with the conflict in our law.

This is what I would wish to do if I thought that there was any danger whatever but I am quite satisfied that it is now fully understood by everybody who wishes to understand and those who count that there is no question whatsoever of any devaluation of our £ and that this is purely a technical operation to remove this conflict between two of our laws. That is all that is involved, nothing else.

In addition to that it is, of course, normal that a sovereign State should have the right to be able to propose changes in the par value of its currency and not have it tied to that of another currency. This is purely a theoretical point. The primary problem we have is a technical one that there is a conflict between the 1927 and the 1957 Acts. There is no other reason for this section.

I should like to assure the Minister, firstly, that I was not trying to be in any way mischievous and, secondly, I did not read the article he referred to, which I gather was more in favour of my point of view than against it. The Minister in his reply said that we could, in fact, continue as we are. Ministers of Finance and Chancellors of the Exchequer have made very emphatic statements from time to time, as we recall, but we will not always have the same Minister. One does not know what the future holds. I would rather leave it not to the Government but to the Houses of the Oireachtas to make any change, if such a change is desirable. I do not set my mind against a change.

The Minister said this is purely a technical adjustment to bring us in line with our obligations to the International Monetary Fund. I accept the Minister's word on that, but I wish to reiterate my point of view that I would feel happier in my own mind if any change was to be projected that it would be brought about by a majority vote in both Houses of the Oireachtas. It will not happen in this case. It is the Minister of the day, whoever he happens to be, who will decide it.

I would like to say a few words in support of the Minister and this section. Much of the criticism of this section I fail to understand and indeed it seems to be in many ways ironical. I regard it as an important part of the sovereignty of a state that the state has the power to establish the value of its currency. In the same way I regard it as an important part of the role of Government to be able to make decisions in this respect. I disagree with Senator Russell that this could ever be a matter of legislation. Speaking as a layman, it seems to me that anyone looking at a situation in any country where a change of value of currency has been involved, will see that it has had to be a matter of instant Government decision in complete confidence. The complications which could arise if it were a matter for legislation would completely defeat the purpose.

May I also say that I am confident about the Minister's assurances regarding our views on this currency matter. Indeed, it seems that our whole attitude towards entry into Europe shows that we are committed to maintaining the value of our currency. Another irony in this situation is that the very people who are anti our entry to the EEC are those who are critical of our attitude towards sovereignty and our attitude towards economic matters generally. It seems that a situation in which we might be fighting a severe economic battle would be if our application to enter Europe should be unsuccessful. and Britain's application successful. Yet the very people who talk, using change in value of currency as an economic weapon, are those who are running the anti-Common Market campaign.

On every count I am fully behind the Minister and fully support the provisions of this section. It is a matter of importance where sovereignty is concerned. It is important that the Government's attitude should be supported in this. Our economic policy shows our commitment to maintaining the value of our currency and the arguments put forward in this House and elsewhere for leaving the existing situation do not hold water at all.

I should like to assure Senator Keery that I am pro-EEC.

It is a marvellous thing that one has to be pro and anti everything.

Question put and agreed to.
Sections 44 to 52, inclusive, agreed to.
SECTION 53.
Question proposed: "That section 53 stand part of the Bill."

I spoke on the Second Stage of the Bill about the composition of the Central Bank. I am not too happy about it. The Minister spoke of the expertise which the Central Bank would provide for the important tasks which they would be charged with in regard to the orderly arrangements of the financial affairs of the country and the banking system. This section proposes to reduce the number of representative directors from the associated banks from three to two, presumably due to the amalgamations that have taken place leaving just two groups of the associated banks, the Bank of Ireland Group and the Allied Irish Banks Group. Six other directors will be appointed after consultation between the Minister and the Governor.

I am not quite clear as to the procedure. Is the Governor appointed first, then consultations take place with him? Perhaps the Minister might answer that point in due course. The point I want to make more strongly is that, if you give representation to the two associated banking groups, in all fairness representation should be given to the other banking interests in the country, such as the non-associated banks, trustee savings banks and other smaller bankers who would be operating under licence from the Central Bank. If the Central Bank is to represent, control and properly regulate the banking system it should be either one of two things. It should either be representative of the banking industry, giving all sectors fair representation, or else there should be no banking representatives on it. It should be composed completely of people with the necessary expertise and experience in banking business outside of the banks altogether. I do not think the scales should be tipped in favour of one sector or other of the banking system. There is a lot to be said for having no banking representatives on the board. Possibly those who had been actively engaged in banking and were no longer bank directors should be on it, together with people from other sectors of the economy. There could be people representing the industrial sector, the agricultural sector or the trade unions and the Department of Finance, economists and people of that kind. In this way there would be a completely independent board to direct the banking affairs of the country.

If you start to give representation to the banking fraternity, then in equity all sections should be represented. That may be the Minister's idea. We do not get from this Bill any hint beyond the fact that the first two directors appointed will be—at least I assume they will be—one from each of the large associated banking groups. But I do not know who the other six will be. Perhaps the Minister might enlighten us on that point. What are the actual mechanics of the appointments? First of all, at what stage is the Governor appointed and then at what stage does the Minister consult with the Governor about the other appointments? Frankly, I am a little in the dark about that section of the Bill.

The Governor is appointed by the President, acting on the advice of the Government. The other appointments require consultation with the Governor, which would imply that the Governor must be there before the other appointments can be made. At the moment the non-banking directors represent the kinds of groups Senator Russell has mentioned. For instance, industry, agriculture, the Department of Finance, are all represented on the Central Bank Board at the moment. It may not be realised that the provisions of this section are reducing the banking representation on the Central Bank from three to two. We are not starting to give representation to banks; they have had it all along. What we are doing is reducing it. I cannot say at this stage how the Central Bank will evolve and develop. I am sure that it will evolve and develop and that this Bill is not the last word on the Central Bank, but I cannot say quite definitely yet in what direction. I certainly would not rule out the possibility of excluding all representatives of commercial banks from the board of the Central Bank. This is a possibility that I could certainly conceive of, although I am not saying that it ultimately will happen because I am not yet sure. We will have to see how this operates, how the whole system of banking develops in this country, because it is developing and changing quite fast.

On this question of the representation of the non-associated banks there are at least two good reasons, in my view, why this should not be done. Firstly, they are a very diverse group and it is extremely doubtful if they could agree among themselves on one person to represent them because they have such divergent interests. Even assuming that they could, it yet remains to be proved as to whether this would be a wise step. As of now the non-associated banks in the main are controlled from abroad, are recently arrived in this country, and their head office interests need not necessarily coincide with the interests of the economy of this country. In those circumstances I do not think that the case is proved yet as to their right, if one might put it that way, to representation on the board of the Central Bank. This again is something that could well develop in the future. As of now I do not think that a case for making that kind of appointment is sufficiently strong and I would prefer to await the further developments and evolution of the banking system before considering further any such step.

I did not intend to specifically confine additional representation to the non-associated banks. I mentioned other banking interests, such as the trustees savings banks, which perform a very useful function, as the Minister will agree. However, I accept his point. It must evolve.

Question put and agreed to.
SECTION 54.
Question proposed: "That section 54 stand part of the Bill."

This section provides that the Central Bank

may provide that an award may be made under that scheme to or in relation to a person who is less than sixty years of age when he ceases to hold office as Governor for reasons other than death, infirmity of mind or body or abolition of office...

I would like to ask how is it proposed to calculate that award or is that left completely open to the Bank to decide. This is like a golden handshake. Is it related to his years of service with the Bank or is it on some other basis?

The award in question would be calculated in accordance with the terms of the scheme already made and referred to in this section under section 31, subsection (1) (c) of the Central Bank Act, 1942. It sets out the manner in which such awards are calculated. If any award were to be made under this it would be calculated in accordance with the terms of that scheme.

That begs the question of what that scheme is.

It is a scheme which is on record. We are not saying here that the Central Bank has to think of a figure and decide it, as it is in here.

I assume that it is related to the salary of the post of Governor and the term of office he spent in it?

Question put and agreed to.
Sections 55 to 60, inclusive, agreed to.
Schedule agreed to.
Title agreed to.
Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

There is a matter that was mentioned by Senator Alexis FitzGerald. Unfortunately, he cannot be here today. I was not aware of it, but he mentioned on Second Stage that there is a provision whereby the Bank of Ireland cannot be taken over by any other interests. Is that correct?

Yes. Under the Bank of Ireland Act, 1929, that is true.

The Bank of Ireland cannot be taken over by any other interests inside or outside of the country. Is that correct?

It enjoys, and quite rightly, that immunity from takeover. In this day and age even the Bank of Ireland, which is an enormous institution by our standards, is quite a small one in comparison with financial institutions or banking institutions in other countries. I understand that the same provision does not apply in relation to the Allied Irish Banks group. In this age of the massive takeover I should like to suggest strongly to the Minister that the provisions which relate to the Bank of Ireland should also relate to the Allied Irish Banks group and possibly to some other native banking groups. There is a greater danger now than there has ever been before that institutions of all kinds— financial, industrial and, indeed, agricultural—are wide open to very attractive offers from very powerful interests, particularly outside this country. We would need to be very wide awake to ensure that these essential institutions, which safeguard our sovereignty to a great degree, are not threatened by these takeovers.

We are living in very extraordinary times. The pace of the takeover and merger will increase and the units will tend to become even bigger and bigger, so that these supranational concerns will now be making more inroads into Europe. This country will tend to offer a very attractive vehicle for entry into Europe if and when—and I think it is "when"—we join the European Economic Community. I should like to suggest very strongly to the Minister that this is a point which deserves close consideration by him and by the Government. It is all very well to talk blandly about national sovereignty and all these beautiful phrases which are trotted out, not only in the Seanad but also outside. Unless we protect our financial institutions, political sovereignty can mean very little in this day and age.

I should like to support what Senator Russell has said in regard to the Allied Irish Banks and the other Irish banking concerns. As he has said, political sovereignty is to a great extent dependent on our control as a State and as a Government over the financial institutions. We know what is happening and what can happen to money. I would urge the Minister to take an early look at this situation, particularly in relation to our possible commitment to the European Economic Community, because any situation that exists at the stage where we are committed to membership is a situation that we would not be in a position possibly to change. Therefore, I would urge the Minister to take a look at that situation in relation to the associated banks.

I have to approach this topic in an apologetic sort of way because I have to speak very much as a layman on a very complicated and age-old profession. It would be wrong if I were to allow the last Stage of this Bill, which is a Bill to make further provision in relation to banks and banking, including provision for the licensing and supervision of banks by the Central Bank, to be passed without going into some further detail on my remarks at an earlier Stage concerning the operation of the commercial associated banks in the country. This Bill gives to the Central Bank in a clear way the power to issue licences and to revoke licences through section 11, subsection (1) (b), which states:

The Bank may with the consent of the Minister revoke a licence if the holder fails or ceases to carry on banking business.

We all remember the situation which existed in this country for an absolutely ridiculous length of time, whereby— and I speak as one without any vested interest—the ordinary people of the country were deprived of normal banking services because of a trade dispute between those operating the associated banks and their staff. It was generally referred to as a strike. In my opinion it was a lock-out on the part of the banks. Whatever it may be called, it caused great hardship to the general public.

This Bill will give power to the Central Bank to step in in a situation like this. Perhaps the Minister will let us know if he envisages the provisions of section 11 being used, in any future strike or industrial action by banks, be they the associated banks or any other banks, who may decide to withdraw their services for any internal reason of their own, to ensure that the strike will not continue for such a protracted length of time. I am not, by any means, suggesting that the right to take industrial action either by employees or in certain cases by employers ought to be interfered with or removed.

The banking service is basically a public service without which the economy and finances of the country cannot operate successfully. I do not think it is good enough that certain private concerns can interfere seriously with the finances of the people of the country. I am sure every Member of this House knows of cases where small firms have been obliged to close down with resultant great personal hardship because of the long industrial dispute that took place.

There are many people in this country —and people who are now outside the country—who have cause to remember the bank strike of 1969 and 1970 and will remember it for a long time to come. Perhaps the Minister would elaborate on whether he thinks the Central Bank in any similar future situation would be in a position to step in and, by whatever power it receives under this Bill, ensure that some type of adequate banking service will remain available.

I have already spoken on a section which is related to this field, that is the operation of a clearing house. I am not too happy with the situation as outlined by the Minister. I would suggest that the position whereby certain banking interests are not represented in the clearing house company is not in the best interests of the public at a time when an industrial dispute might involve the clearing house and its facilities. I would suggest to the Minister that he look again at section 25.

I should be very grateful, at the risk of being boring, if the Minister would explain again to the House how he envisages section 25 operating and if he would say whether, in the event of a future strike involving the members of the Irish Banks Standing Committee, he envisages the Central Bank setting up a clearing house which would clear the cheques of the non-associated banks so that there might at least be a very limited exchange of cheques drawn on one non-associated bank and made payable to somebody who had an account in another of those banks. That did not happen during the last bank strike.

I am not clear on whether the Central Bank would have the power to set up such a clearing house if the necessity arose. I am also not too clear on whether the Minister feels it would be desirable for the Central Bank to set up a clearing house in those circumstances. If the Minister would give the House his views on that theme it would be of great interest to me and of interest to the general public who might not take too keen an interest in the Central Bank Bill in normal circumstances.

There are a few points I want to mention which have been raised on this and other Stages of the Bill. I undertook to have a look at a question that was raised about whether the operation of a credit account with the Tote came within the provisions of this Bill. I am sure it does not, for two reasons. Firstly, it would amount to a trade and secondly—and more importantly—the placing of a sum of money with the Tote by a customer for the purpose of keeping his account in credit does not constitute the making of a deposit in the sense implied here. A deposit with a bank is generally regarded as being a sum of money entrusted to a banker subject only to the condition that an equivalent sum be repaid on demand or after an agreed period of notice. It is not placed in consideration of the performance of a specific service or the supply of goods. Therefore, I do not think that problem arises.

I omitted to mention to the House when we were passing section 51 that that section was introduced in this Bill although, strictly speaking, it relates to the Decimal Currency Act which the House passed, on foot of an undertaking which I gave here at that time. There was a point raised which dealt with contracts, formal and informal, and I undertook if it appeared necessary, before the changeover period to full decimal currency, that I would take steps to deal with it. We are not absolutely sure that it was necessary but, at any rate, it has been done in section 51 of this Bill.

I should now like to deal with the question of the Bank of Ireland as raised by Senator Russell. The position is that the Bank of Ireland operates under certain Acts and a Charter and some of the provisions are quite archaic and operate quite unfairly to the Bank of Ireland as against its competitors. The object of section 51 is to place the stockholders in the Bank of Ireland in the same position as the shareholders of other banking companies with regard to the management of the bank's affairs and changes in its objects.

There are restrictions on the stockholders to the extent that stockholders may vote only as individuals at a general court, that is at a general meeting of the bank, and they cannot vote by the size of the stock holdings as is usual in limited companies. No banking company registered outside the State, which is a stockholder, or carrying on its principal business outside the State, may vote at a general court. The Governor, Deputy Governor and at least three-fourths of the other directors must be domiciled and resident in the State. The bank may not absorb any other bank without the prior written consent of the Minister for Finance and the bank may not be absorbed by any bank or other company.

There are other restrictions which I shall not go into here but which make it rather difficult, if strictly adhered to, for the Bank of Ireland to compete with its competitors. The effect of section 51 has been to remove these restrictions and to place the Bank of Ireland in the same position as other banks. This may not be quite what Senator Russell had in mind when he was talking.

However, I should like to remind him of the provisions of this Bill in regard to the granting and revocation of licences. I should also like to remind him that any approach that we have to make in regard to the takeover, and so on, of the banking system can really only be operated under this Bill. There are restrictions on what we can do, but certainly the orderly and proper regulation of banking, which is the phrase used in this Bill, will be the criterion by which the Central Bank will have to operate.

I do not think that at this stage I need to elaborate too much, but I should remind Senators that in the discussions we had on those sections I indicated that what was involved was, in some cases anyhow, a matter of policy and not a matter of law. This was part of what I had in mind. The whole question of the control and regulation of our banking system will now be very substantially in the hands of the Central Bank.

Of course there has been a considerable evolution in the role of the Central Bank. It has been a quiet evolution and one that I think has been quite effective. Perhaps there are provisions in this Bill and there are powers given to the Central Bank which, if they had been proposed ten, 13 or 15 years ago, might have been regarded as revolutionary. However, they are now accepted because it is realised that it is not the object of the Central Bank or of the State to create havoc in our banking system. Rather it is to regulate it in the interests of the community and to take powers which may never be exercised but which are there to ensure that in certain circumstances effective action can be taken to ensure that the banking system will operate for the benefit of our own community.

There has been quite a development and this Bill represents a very substantial advance on what would have been thought possible not so many years ago. However, I do not regard this Bill as the last word. The whole system is evolving and it is certainly conceivable that in the lifetime of people here in this House there will be another Central Bank Bill, perhaps giving quite a different structure to the banking system in this country. We must wait and see how it evolves.

If I might interrupt the Minister for one moment, what he has said in no way precludes, as far as I can see, the Allied Irish Banks group being taken over on the grounds of anything that can be done in this Bill, provided that the new owners continue an orderly banking practice. Is that true?

It is true to say that the criteria which would be applied in any such cases would be such as are set out in this Bill. I do not wish to elaborate too much on the manner in which it might be interpreted, but I should not exclude the possibility of control under the terms of this Bill being exercised in such circumstances on the grounds that the orderly and proper regulation of banking may in certain circumstances require us to ensure that, say, some very large international banking group would not control a half or more of our banking system. I am just giving this as an example. I certainly do not rule out the possibility of this Bill being operated for the purpose which Senator Russell envisages.

Section 25 gives the Central Bank power to collect foreign cheques. The Central Bank could have power to set up a clearing system; whether it should do so is quite another matter. It should be realised that a clearing system is simply an extension of a bank's own activities. In London, some banks clear cheques by simply walking every day, with the cheques to the other banks. It could be by post or by computer. The development of the computer may well abolish the whole clearing system. The essential thing to realise is that in this Bill we are ensuring that any licence holder of a bank can participate in the clearing system. We are also ensuring that the charges which will be made for availing of that service will be reasonable.

However, in the circumstances in which all licence holders are participating in that way in the clearing system and in which, say, an industrial dispute takes place among the associated banks, there is nothing at all to prevent the other banks then remaining open from operating a clearing system as between themselves. One should understand quite clearly that if the associated banks are closed, then no clearing system in relation to their banks can operate. What we are talking about in those circumstances is a clearing system for other banks. There is nothing whatsoever to prevent that being operated. Whether such banks would want such a system to operate is another matter; if they did, there is nothing here to prevent that happening.

Did the Minister say that the Central Bank, under the Bill, would have power to set up a clearing arrangement, if they so desired?

Yes, I would think they would. There is one final matter to which I should like to refer. It arises out of something said by Senator Boland, but it has been said by many other people, too. This is a comment on the industrial dispute in the banks. Many people are schizophrenic about this. On the one hand, they accept that you can have industrial disputes; that workers have the right to strike or that employers have the right to lock out. That is part of our industrial system. On the other hand, they say that a banking system is essential to the community and should carry on in all circumstances. These two things cannot be reconciled and we must face up to it.

If the banking system must carry on in all circumstances, it can only be done by taking away the right to strike, and requiring, say, compulsory arbitration. I have not heard anybody advocate that, but let us recognise this dichotomy: if you are to accept the existing system of industrial relations, free collective bargaining that we have in this country, you cannot guarantee in all circumstances the continuance of a banking system. We may do a great deal to improve the situation and to reduce the risk of a close-down. By all means this should be done, and is being done. However, let us not fool ourselves into thinking that we can guarantee a banking system in all circumstances and at the same time accept the system of free collective bargaining which exists here.

Question put and agreed to.
Business suspended at 1.10 p.m. and resumed at 2.30 p.m.