I move:
That Seanad Éireann approves the following Order in draft:—
Trustee (Authorised Investments) (No. 2) Order, 1983
a copy of which Order in draft was laid before the House on 26th October, 1983.
Trustee (Authorised Investments) (No. 2) Order, 1983: Motion.
The Trustee (Authorised Investments) Act of 1958 lists a number of investments in which trustees may place trust funds unless the instrument setting up the trust forbids them to do so. Under section 2 of the 1958 Act, the Minister for Finance may amend the list of authorised investments by order. Before the order is made, a draft must be laid before both Houses of the Oireachtas and each House must pass a resolution of approval. The draft order currently before the House is in fact the second of its kind this year. The purpose of such orders is to answer trustees' needs to have the broadest possible range of suitable investment outlets.
The present draft order proposes to authorise trustees to invest trust funds in interest-bearing deposit accounts in the following licensed banks: (a) First Southern Bank Ltd., (b) Credit Finance Bank Ltd., and (c) Hong Kong and Shanghai Banking Corporation. The Central Bank, the banking supervisory authority, have recommended that trustee status should be granted to these three banks. Their recommendations are based on strict criteria covering the standing of the banks, their capital levels and record of compliance with Central Bank licensing and supervisory standards. A size criterion is also applied. In order to be considered for trustee status a bank is now required to have a minimum size of £25 million in respect of both gross assets and gross domestic assets.
The 1958 Act requires that the following referees must be consulted in regard to the terms of the draft order before it is laid before the Houses of the Oireachtas: (a) A judge of the High Court nominated by the Chief Justice; (b) The Governor of the Central Bank; (c) The Public Trustee; (d) The Chairman of the Irish Banks' Standing Committee; (e) The President of the Incorporated Law Society of Ireland and (f) the President of the Stock Exchange — Irish.
These statutory referees have all been consulted and no objections have been raised to the proposed additions. The fact that the views of these people are sought acts as an additional protection.
I am satisfied that the banks named in the draft order would be suitable repositories for trust funds. Therefore I commend the motion for approval by the House.
The order seems to be acceptable. Certainly the precautions taken to ensure, as far as that is possible, the bodies are suitable are far-reaching. As they have approved of the three banks in question there is little doubt that they will, in fact, be suitable. Consequently, the order seems to be acceptable.
I do not see any reason why this order should not be approved. I should like to take the opportunity to ask the Minister a number of questions about the way in which this procedure was previously operated. Firstly, perhaps he would tell the House what banks have achieved trustee status following the recommendation of the Central Bank. Secondly, are there criteria for removing that status from a bank if there are doubts about it maintaining the credit-worthy position that it would have to have before being nominated as a bank for trustee funds? Of the banks that have this trustee status how many of them are Irish institutions and how may are foreign-owned or controlled institutions? It would be helpful to have this information.
On behalf of the Fine Gael Party I wish to support the motion before the House and indicate our approval of the extension of the number of deposit account institutions which may be used for trustee purposes. We should welcome the fact that these are extending in number because it is in the interest of the public at large that as wide a choice as possible should be available to them in the banking area. It is for that reason in particular rather than for individual names concerned that I welcome the further extension of this element of choice for the people whose responsibility it is to invest trustee funds. There was a danger at one time that there was a contraction of choice in the Irish banking scene. It was getting to a dangerous situation where there were only very limited options available to people in the banking area. With the growth of other banks and changed attitudes towards utilising funds from banks that might have their headquarters abroad, the situation is now expanding again. This is reflected in the trustee status being acquired by banks whose headquarters are not situated in Ireland. As long as they continue to meet the criteria we set down, and which no doubt we will be told about by the Minister in reply to Senator Robinson's contribution, it should have our full support.
We are about to confer the sort of status on those banks which will enable them to attract deposits. What worries me is what they will do with the deposits when they get them. Many of our banks seem to operate on the premise that they have no part to play in solving the problems that afflict the nation and sometimes their investment policies are a source of great scandal. One of the biggest scandals, as far as I was concerned, was that at a time when the banks were squeezing not just the farming community but small businesses in particular they were able to advance a loan of about £1 million for the refurbishing of a millionaire's mansion. I hope that the status conferred upon those banks will be followed by their recognition that they have a very important social role to play here and that they are not separated from the problems that afflict us. Their investment policies should be a matter of much closer scrutiny. If we cannot legislate for this we should put pressure on the banks in other ways.
I should like to thank the House for the welcome given to this motion. The first point I wish to deal with concerns who has trustee status. The position is that the authorised investments listed in section 1 of the 1958 Act have trustee status. There are additions made to that list by ministerial order, which is what we are doing with this motion. There are the Government securities, Post Office savings certificates, the Bank of Ireland stock, ESB, ACC, Bord na Móna stock and that kind of thing. We have interest-bearing deposits with certain banks which were named at that time, the Bank of Ireland, Guinness and Mahon, AIB, Ulster Bank, Northern Bank, National City Bank which is now the Chase and Bank of Ireland International Limited, the Post Office Savings Bank and the Trustee Savings Banks. In addition, in section 1 of the Act, we have British Government securities inscribed or registered in the State. They were the basic ones listed in 1958.
There have been quite a number of additions by order since then. Various loan stocks of the banks have been authorised as being trustee securities and there was the addition of interest-bearing deposit accounts with certain building societies. We have the Irish Permanent, the Educational, the First National, Irish Civil Service, Irish Nationwide and Norwich Irish. Those building societies have trustee status. We have a very long list of interest-bearing deposit accounts with certain licensed banks, approximately 20. We have the Algemene Bank Nederland (Ireland) Limited; Allied Irish Finance; Allied Irish Investment; Bank of America; Bank of Ireland Finance; Bank of Nova Scotia; Banque Nationale de Paris (Ireland) Limited; Bowmaker (Ireland) Limited; City Bank NA; City of Dublin Bank; First National of Chicago; Forward Trust; Hill Samuel Investment Bank of Ireland; Lombard & Ulster Banking Ireland Limited; Mercantile Credit Co; Northern Bank Finance Corporation; Ulster Investment Bank; UDT; Irish Intercontinental Bank Limited; Royal Trust Bank; Trinity Bank Limited; Barclays Bank International Limited; Irish Bank of Commerce Limited and the Standard Chartered Bank Ireland. That list has been added on up to today and the purpose of the order today is to add on the three extra banks mentioned.
The question as to the criteria has been raised. As I mentioned in introducing the motion, a fairly complex procedure is gone through before anybody is added to the list. Apart from the Central Bank having to recommend trustee status there is the question under the 1958 Act of going to the various referees I listed. It may be helpful for the House to know that the criteria on the basis of which the Central Bank makes its recommendations are that all the banks are owned by institutions in which the Central Bank has a high level of confidence. Secondly, that all the banks have gross assets and gross domestic assets in excess of the minimum qualification of £25 million. In regard to the three we are proposing to add today, each of them is considerably in excess of the £25 million. Thirdly, that all the banks have satisfactory capital levels; and, fourthly, that each bank is in satisfactory compliance with the banks licensing and supervision standards.
The question was raised as to the criteria for removal. The best way to answer that is to say that a bank which does not continue to comply with those criteria will render itself liable for removal. The same procedure is gone through and a motion is brought before the House in that circumstance should such a situation arise. I am not aware that any such situation has arisen, but that would be the procedure.
Who takes the initiative?
My understanding is that the Central Bank continuously monitor the various banking and other financial institutions in the country. As I mentioned, there has not been any occasion to date when it had arisen. Therefore, I cannot quote any precedent but I believe the procedure would be that the Central Bank, if they came across any situation which suggested that these criteria were not being met, would bring it to the attention of the Minister for Finance who would then lay the appropriate motion before the House.
Does the Minister know of any other banks or other financial institutions which have sought trustee status but have failed to meet the criteria?
I am not so aware. It comes to the Minister for Finance via the Central Bank. The Central Bank will not present the case for inclusion unless they are prepared to recommend it. The position would be that they would not send on somebody without a recommendation.
In regard the question of how many of the banks are Irish, I have to say quite honestly that I cannot give a specific answer to that. From the list I have read out quite a number of these, in particular the merchant banks, are not fully Irish owned but are carrying on business. The question of whether or not they are Irish is not relevant here: the question is whether the Central Bank are prepared to recommend that they are credit worthy. I should make it clear that the fact that trustee status is extended to them does not imply any Government guarantee of the situation. The Government attempt to carry out their safeguarding role for trustee funds by establishing these various steps through which they have to go before they are given trustee status. The other point raised by Senator Magner is a broad point that could arise in the context of another debate: the whole question of the social role of banks and how they may invest their funds. What we are talking about on this motion is the entitlement of trustees actually to put their moneys into certain financial institutions. Senator Magner has a valid point for discussion, but it is more in the context of an economic debate as to what is the role of the banks and the duties and responsibilities of a financial institution in their own investment policy, taking into account the economic and social objectives of Government.
Question put and agreed to.