I move:
That Seanad Éireann approves the following Order in draft:
Trustee (Authorised Investments) Order, 1974.
a copy of which Order in draft has been laid before the House.
Trustee (Authorised Investments) Order, 1974: Motion.
The Trustee (Authorised Investments) Act, 1958, defines the investments in which trustees may invest trust funds unless expressly forbidden by the instrument, if any, creating the trust.
The Minister for Finance may vary the authorised investments by order. The primary qualification for trustee investments is that they should be secure, and, subject, to this, that they should give a favourable income to the life tenant.
The purpose of the order before the House for approval, is to add Bank of Ireland loan stock 1991-96 to the list of trustee authorised investments. The loan stock was issued to raise additional capital to provide for the future growth of the bank. It will be repayable at par between 31st March, 1991, and 31st March, 1996. In addition to interest at 10 per cent per annum, it carries subscription rights to capital stock of the Bank of Ireland. The capital stock of the bank has been a trustee security here and in Britain for more than a century and the 7 per cent loan stock 1986-91 issued by the bank in 1966 was added to the list of trustee investments by the Trustee (Authorised Investments) Order, 1967 (S.I. No. 285 of 1967). The new loan stock is quoted on the stock exchange and I am satisfied that is is a suitable stock for addition to the authorised trustee investments in this country.
The Minister for Finance is obliged under the Act to consult with the following persons in regard to the terms of any order he proposes to make to vary the list of authorised investments—a judge of the High Court nominated by the Chief Justice, the Governor of the Central Bank, the Public Trustee, the Chairman of the Irish Banks' Standing Committee, the president of the Incorporated Law Society of Ireland and the president of the stock exchange (Irish Section). I have consulted these persons and they have welcomed the proposal and raised no objections to the proposed order.
I am considering some further widening of the investment powers of trustees. I have indicated to the Irish Building Societies' Association the financial and management requirements that I would regard as appropriate for the granting of trustee status to the societies and these are at present being examined by the association. I hope to reach agreement on suitable conditions in the near future. The other main area where change is desirable concerns banks authorised to accept trust funds on deposit. Since the 1958 Act was passed there has been a considerable increase in the number of banking institutions operating here and there is now in force a comprehensive system of bank licensing and supervision under the aegis of the Central Bank. I am satisfied that, in principle, the list of banks should be widened subject to a suitable arrangement being worked out to take account of the position of the Central Bank as the banking supervisory authority.
It is my intention also to have a more wide-ranging review of the operation of the 1958 Act to see if there is a need for amending legislation. The Act, in the main, restricts trustee investment to fixed interest securities, unless the trust deed provides otherwise. Charity trusts also are governed by separate legislation, the Charities Acts. Gilt-edged securities are less attractive now than in the past due to the erosion of capital values by continuing inflation. As a result the cult of the equity developed, with its prospects of capital appreciation. The sharp fall in share prices on the stock exchange and the difficulties encountered by some well-known firms shows that such investment is not necessarily the solution to a trustee's problem. In fact holders of Government securities are probably in a somewhat better position than holders of ordinary shares at present.
The problem is to find an investment formula that strikes a balance between the need to ensure the security of the trust fund and the provision of a reasonable income to the beneficiary. I am not certain that there is any really satisfactory solution in present economic circumstances. It is a complex subject, which will require close study and there is clearly every reason for proceeding with great caution.
I am satisfied that the Bank of Ireland loan stock is a suitable security to be added to the list of authorised investments and that it is desirable that trustees should have power to invest trust funds in it. I commend the motion for the approval of the House.
Question put and agreed to.