Section 1 says that in this Act the Principal Act means the Agricultural Credit Act. Has the Minister addressed himself to the possibility of changing the title to the National and Agricultural Credit Act? This would present the image we were talking about to the ordinary investor and borrower out there that, although the corporation would be specialising predominantly in agriculture, they are not ruling out any other sector. As a result, this would become a national as well as an agricultural credit corporation.
Agricultural Credit Bill, 1987: Committee and Final Stages.
I rise to support Senator Ferris on his creative suggestion that the board of ACC should consider, in the light of their now extended function, changing their name to reflect that new reality. It seems to me that the ACC will always be considered in the minds of the general public to be solely for agricultural investors if the name remains the same. It seems to be a very worthwhile suggestion made in the course of his speech by Senator Ferris. I am disappointed that the Minister did not respond to it. It could very usefully be taken on board and perhaps promoted and suggested to the board of the ACC by the Minister for Finance. I hope the Minister will respond positively to what I feel is a very useful suggestion from Senator Ferris.
The suggestion to change the name, to leave out the agricultural element presumably——
Not necessarily. It can be included.
——would be a very good one, were the actual terms of what the company are doing to be broadened. It is not appropriate yet that the name should be changed because we are only making a minor change in what the company can do. If the ACC could lend on competitive terms with the other banks and not still be lending 80 per cent to the agricultural sector, this would be appropriate. Until that happens I do not think this should come about.
I thank the Senators for their contributions. I apologise to Senator Ferris for inadvertently failing to respond to this very imaginative suggestion. I regret that I do not think I could take it on board at this time but it should be given consideration. Taking into account the fact that the corporation are 61 years in existence and have made a major contribution to the development of agriculture and to the development of our national economy, and now that we are proposing to liberalise the company and give them an opportunity to diversify it is something that can be considered in the future.
I ask the House to allow the name to continue, to allow the corporation to proceed as we propose. I hope that we can come back in the not too distant future with other proposals to expand the role of the ACC still further as a result of the profitable operations of the company when they move to diversification. Perhaps at that stage, when we have had an opportunity to consider their performance as an agricultural corporation and their performance now in their new role, we could consider rechristening the operation.
I thank the Minister for his response. I am quite serious. Because 75 per cent of ACC business will deal with agriculture and 25 per cent will deal with other national interests I thought it was appropriate that it should at least be considered. I hope the board of the ACC will read this debate and take on board the suggestion. It will be in their interests if we convince them that they are now more than just an agriculturally based operation. I know the Minister did not mean to exclude me. He was so obsessed with the good terms being offered by the local authorities vis-à-vis the private sector, which are being supported here by Senator Ross, that he forgot this little item about the change of name.
My worry about the other aspect is that, before people can benefit from the improvement in interest rates offered by local authorities, they have to suffer the trauma and the humiliation of going to the private sector to ask them first for consideration and to be rejected in writing. The private sector interest rates are about 14½ per cent or 15½ per cent. When they are rejected in writing they can then turn to the Minister for his better terms. I was worried about the fact that we had put that proviso in, giving priority to the private sector and that this Bill was doing the opposite, which I welcomed. I could never understand the other change. The Minister has explained his position and I am satisfied that the Minister for Finance has a different attitude, that the ACC are predominantly agricultural and we are not ruling out anybody else. You do not have to be rejected by somebody in the private sector before you can borrow in the high risk area of agriculture. I was only drawing a comparison. I welcome the fact that the Minister has not ruled out a change of name in the future. Of course, Senator Ross will think that is nationalisation of the banks by stealth but that would not worry me.
The Chair would be obliged if the Senator did not try to invite interruptions.
May I refer to something which needs to be urgently clarified? I have copies of the Bill as initiated and then as passed by the Dáil. I also have the Minister's excellent speech. There is some problem. Section 2 (2) limits the amount of non-agricultural lending which the ACC may do, up to 25 per cent of their business. In the Bill, as initiated, there was talk about 20 per cent. The Minister's speech today refers to 20 per cent. Would the Minister please clarify the exact position? Is there an error in his script? Is it 25 per cent? Is there an error in the Bill as passed by the Dáil? Before I proceed I would like clarification on that.
I regret that the script which was circulated carried the figure of 20 per cent. The Senator probably noted that in my speech I referred on two occasions to 25 per cent. The proposal in the Bill was to limit the on-lending to 20 per cent of the agricultural lending. The Dáil amended that last night to 25 per cent. The Minister for Finance accepted an amendment from the Senator's own party to change that to 25 per cent. The Bill, as coming from Dáil Éireann to Seanad Éireann has been amended in the Dáil from 20 per cent to 25 per cent. I regret the inadvertent typographical error.
Obviously I am gratified that my own party's amendment was accepted by the Minister for Finance last night. We were in a difficult position because this Bill was not listed in the Whip we got this week. It was announced yesterday that it would be taken today. It is hard for us to keep absolutely up-to-date with what happens in the Dáil and the difficulty in the Minister's speech did not help the situation. I thank him for the clarification and I express my gratification at seeing the 5 per cent increase as a consequence of my party's amendment.
Would the Minister indicate, under section 2, what he feels are the specific benefits of having an agricultural bank owned by the State? He did not really touch on that in his speech. I know it is a wide question but he may wish to give one or two pointers in relation to the specific advantages there are. Perhaps he could allay some of the difficulties which Senator Ross appears to be experiencing. I want to know what the advantages are of retaining the ACC in the public sector. There is a need to know what the long term thinking is in relation to where the ACC are going.
In the debate in the other House there was talk about bringing all of these State banks together into a conglomerate. Perhaps other people would have notions that it might be a good idea to consider in the long, medium or short term privatising such a bank. The point has been made by people who contributed to the debate that farmers nowadays seek credit and funding from banks in the purely commercial sector. Therefore, the question must be asked whether we need a purely agricultural bank. With reference again to the limits on lending outside the agricultural sector, perhaps the Minister would like to give reasons as to why he feels there should be a limit. Do we, in fact, need a limit at all? It would be interesting to hear what he has to say on that.
I would like to supplement some of the things Senator Bulbulia was saying on this Bill. To expect of the Government long term thinking is asking a bit much. There is absolutely no long term thinking on this at all. That is why we have got this piecemeal Bill. What the Minister said in his reply — I apologise for not being here; he caught me unawares but I heard it in my office — is that the Bill was introduced in the Dáil five months ago and was not, therefore, a response to the 1987 performance of ACC. I do not know very much about agriculture but I could have told the Minister five months ago what in 1987 performance of ACC was going to be like that it was not going to be a very good performance. A Bill of this sort was probably going to be necessary. I understand that the figures were not available but it was transparent at the time what the situation in the farming sector was like and what the ACC was going to produce.
What Senator Bulbulia did actually touch on was a very interesting point as to why we need an ACC to all under this sector. I think that is important. The Minister might comment on the suggestion made in the other House, first of all as to whether we need State banks, secondly, whether they should all be put into one bank and, thirdly, why we should have specific State banks lending to specific sectors in the State. It seems to me that this is now anomalous in the present financial world and that at the least they should be brought together and should be able to compete with the banks on the same terms.
There needs to be some serious long term thinking on this. I do not think we should see a series of Bills of this sort in response to current events. We should see a long, comprehensive Bill about State banks. I would just like to hear what the Minister has to say about that.
I should like to ask the Minister one question. Before that, I would like to say that I certainly support and endorse the provisions he is making in this Agricultural Credit Bill. The one great deficiency I see is that the State does not know exactly what the worth of the agricultural sector is at present. It is high time that the Kilroy report — if my memory serves me correctly — of the late fifties, possibly 1957, which was the last attempt at assessing the worth of Irish agriculture and Irish farmers, was looked at.
During the course of the debate to which I listened very attentively many of my colleagues mentioned the difficulties and the experiences that farmers had, not only with the ACC but with the commercial banks, over the last seven or eight years. I must readily admit that people in the banking business have had difficulties in getting their interest and their moneys back by virtue of the fact that there was a serious decline in agricultural incomes. Here we have a State bank and the sister bank, the ICC. They both continue to do very good work. They were established in the late twenties or early thirties, but even taking them in conjunction with the Central Bank, no effort has been made to my knowledge over the years to assess exactly what it is they want to enhance, or what particular percentage of capital or worth they want to inject into the agricultural or any other sector of the economy.
Surely it is not possible to do that unless one is able to make an assessment. The State does not know at present how many farm holdings there are in this country, nor do they know the overall acreage. They do not know how many units, because many farmers have three, four, five and six different receivable orders in different parts of the land. The whole thing is a mess. The big problem is that the farming community are attributed with being a very wealthy sector when, in reality, the people living on the land and, indeed, the people working on the ground in ACC know very well that there is an acute cash flow crisis and shortages in regard to a large number of farms.
A Chathaoirligh, could you clarify something for me? Are we on Committee Stage or on Second Stage at the moment?
On Committee Stage. I will judge whether the Leas-Chathaoirleach is out of order.
I was only asking a question.
Many thanks. I would like to develop the point on subsection (1) of section 2. I should like to ask the Minister if his Department have looked at the German experience, where the Bundesbank seems to grow in stature and in size day by day. It seems to take equity in most of the companies it assists. This means that the Bundesbank controls a huge percentage of the economy of the Federal Republic.
We have the ground work done here, inasmuch as we have the Central Bank, the ICC and the ACC, but they have to paddle their own canoes. I am very happy that here we are branching out a bit wider than the narrow agricultural sector. I would hope that perhaps the ACC might consider very seriously, in conjunction with the Department of Agriculture and Food, introducing a system of subsidised credit facilities, as opposed to State grants for the development of agriculture. I would like to ask the Minister if his Department have given any thought to that. The farming sector are looked upon by people who are not too worried about the incomes or, indeed, about the worth of the agricultural sector, as being a sector that are generously fed with grants and subsidies. I would like to see the grants being dropped altogether and, perhaps, people getting credit at a rate they can afford to pay.
Just for the record of the House, before I call on the Minister, there is a long-standing practice that the Cathaoirleach does not rule on the Leas-Chathaoirleach because it is presumed that he or she knows the rules of the House. The other point, for all my colleagues and not just for you, Senator Ross, is that there is a disadvantage sometimes. There are advantages to being Cathaoirleach and Leas-Chathaoirleach but there is the disadvantage that when you would like to be on the Floor of the House participating on some Stage of legislation you cannot be. The Leas-Chathaoirleach knows the rules. I, too, knew he was drifting a little bit but I did not need your guidance, Senator Ross, on how far I should allow him to drift. The atmosphere here is so nice that we do allow a little of that.
I thought the atmosphere was very pleasant. I would be most disinclined to disturb the harmony which exists between you and the Leas-Chathaoirleach.
Between the Cathaoirleach and every Senator, not just the Cathaoirleach and the Leas-Chathaoirleach.
Without exception, but I was simply asking a question. I understood the Leas-Chathaoirleach was not in the Chair at the time. It struck me he was making a Second Stage speech. If what you are saying is that the Leas-Chathaoirleach is entitled to make a Second Stage speech on Committee Stage, that is all right.
No. I presume he knows the rules.
So he is entitled to a presumption of knowledge of the rules, whatever he does.
I am not a lawyer and I do not want you questioning me. Will the Senator resume his seat?
May I ask the Minister a brief question? He used the words "far out from agriculture". Just for the record, perhaps the Minister might identify to us a few examples of where the ACC might lend in the future and give us some examples so that we can have greater understanding of that particular new activity of the ACC?
May I come in here, to assist Senator Fallon? Inadvertently, I expect, he was not here when the Minister replied on Second Stage, but the Minister, in fairness, did make reference.
I want to get back to the Bill. It is rarely one has a chance of getting one's own back on the Leas-Chathaoirleach and I could not resist it. I would like the Minister to explain how the process of consultation is going to work. In section 2 at the bottom of page 2 it refers to all these particular things which the ACC can do. It says:
...for such purposes as the Minister after consultation with the Central Bank of Ireland may from time to time determine and subject to such conditions as the Minister considers appropriate.
The only thing that concerned me here was whether this will act as some sort of a delaying factor in the activities of the ACC. In the commercial world it is very important that these decisions are made fast and quickly and that there is no delay. It appears that for some reason the ACC are not being given their head. I understand the need and the pressures on the Minister to monitor the specific activities of the ACC but it does concern me that this form of consultation, and the Minister giving it a certain amount of thought, and the bureaucracy behind it may act as a delaying factor on the ACC's activities and that they will not be again competing on fair terms. How is this process going to work? Is it going to work quickly? Is it going to work slowly? What is envisaged by the Minister in this area?
There is wonderful harmony in this House and I enjoy that harmony. Many questions have been raised by a number of Senators, including the Leas-Chathaoirleach. I will do my best to respond in as harmonious a fashion as possible. Senator Bulbulia asked the reasons why we need an agricultural bank, and if the Minister would outline these reasons. Senator Ross also asked a similar question during his Second Stage contribution. Basically, in my Second Stage speech and in my response to the debate, I tried to cover that area. The reasons for it today are not as important or as relevant as the reasons were 61 years ago, in 1927 when it was set up and when farmers were regarded as a very high risk credit and when the associated banks and the normal commercial banks were not interested in considering them for loans. The State at the time, in order to stimulate economic growth and agricultural development, created the ACC.
Many of the reasons are still relevant today. Some of the reasons that I myself would regard as being important for the preservation of the ACC would be the specialised role that they play in the development of agriculture, the specialised expertise they have garnered over the years in dealing with agricultural matters and in dealing with individual farmers right across the country, and the store of information and resources they must now have available to further contribute to the development of agriculture. They can also stimulate agricultral and economic growth through government agricultural policy.
The Government can liaise, through the Department of Agriculture and Food, with the Agricultural Credit Corporation in specific, sepcialised areas. I would see the ACC playing a key role in responding to EC directives and quickly responding to EC opportunities, providing specialised finance for specific agricultural projects or schemes and handling and administering EC financial aid and packages for farmers in special situations.
The Leas-Chathaoirleach, Senator McDonald raised the question of farmers availing of credit facilities rather than grants as subsidies from the Community or from the State through an institution like the ACC. An opportunity has been provided in the past, but the percentage of farmers who wanted to use this facility was minimal. It is something that the ACC are still in a position to consider through co-operation with the Department of Agriculture and Food and with the individual farmers themselves. The interest of farmers in a scheme like this does not seem to be too great.
Senator Ross asked the question why this is an ACC at all. I tried to respond to that before, but the fact is that it is there. It is in legislation. The ACC are active. They are a corporation and are doing a job. We cannot abolish them and there is no reason why they should be abolished. They have a specific purpose to fulfil and we are enlarging the opportunities and the role they can play. We cannot sell the ACC or dispose of them until they reach proper profitability. It would be a disservice to the community and to the economy, and particularly to the agricultural community, if we were to impede the role which the Agricultural Credit Corporation can play in the development of agriculture.
Senator Fallon spoke of identifying the role the ACC can play and the areas of lending they would consider. Hopefully, after the House will have passed the Bill, that will create new opportunities for the ACC. It will attract many more investors due to the fact that there is State equity and State security. Personal investors will be able to avail of personal loans from the ACC in a variety of areas and thereafter the ACC can consider other areas of lending such as house mortgage loans and various other loans. We would see it as purely a matter for the board of ACC and their executives to constantly monitor and to be constantly aware of the needs and the financial opportunities that are in the marketplace and to come up with policies, and to put those policies before the main shareholder, the Minister for Finance.
Senator Ross referred to section 2 (f) of the Bill and to the consultation role the Minister for Finance has with the Central Bank. The situation is that the Minister for Finance is the main shareholder on behalf of the taxpayer and the State. The Central Bank are the governors of banking in the country and the people who have expertise in this role. The Minister would have to consider proposals coming from the ACC. If these proposals were very new or outside the scope of any activity which had been passed by the Houses of the Oireachtas, he would consult with the Central Bank to see that what had been proposed by the ACC's board would be feasible and suitable for a corporation like the Agricultural Credit Corporation, and that it would not be in conflict with the role they have to play in the development of our economy, and particularly the development of agriculture.
We would see no conflict between the Minister consulting with the Central Bank. That should not cause delay. As far as we are concerned the ACC are an efficient organisation with particular expertise. They should be able to respond to given situations quickly. They should be able to put proposals before the Minister and to read the financial climate. Given a reasonable period of time, the Minister should be able to consult with the Central Bank and either give a positive or negative response to any proposals the board of the ACC would have. This has been the position right across the board in all areas of banking in the country particularly with the ACC, which has key State involvement. There should be no reason why there should be any delay. Senator McDonald made comparisons with various other banks in the European Community. The ACC were started by the State. Many banks in member states throughout the Community were formed as farmer co-operative banks. A number of these smaller co-operative banks, either on their own initiative, or with State initiative, or with State equity, formed new companies. In France the Credit Agricole is now the biggest bank in France. It is the ninth biggest bank in the world. In Holland their bank is the second largest Dutch bank. In Spain the agricultural bank, or the farmers bank, is one of the top banks in Spain and, indeed, in the Community. The situation is the same in Sweden.
Many of Ireland's European trading partners can boast of successful banking institutions which began as exclusively agricultural organisations. Their diversification into other areas has not led to the withdrawal of credit from farmers but rather to the development of a healthy business whose base is broad enough for risks to be widely spread. We believe that as a result of the passage of this Bill, similar opportunities will be created for the Agricultural Credit Corporation and that they will be in a position to re-finance agriculture in a better way through diversification and by providing opportunities for the many new investors we hope they will garner in the years ahead.
I would like to thank the Minister for that reply which was very helpful. I would like to ask the Minister about the past role of the ACC, before we finish section 2. We heard on Second Stage from Senator Ferris that the ACC had been very sympathetic to many farmers in the restructuring of loans. I would like to hear the Minister's reply to my question as to what the priority of the ACC is? Primarily, are they lending in an unprofitable and difficult sector? If so, are they under pressure to lend willy-nilly to that sector, regardless of commercial criteria? Are they more sympathetic than commercial agencies in their lending? In other words, are they there to lend to farmers? Do they, therefore, feel that they are under an obligation to lend?
The numbers of loans which have been restructured have been far too numerous. Restructuring of a loan of this sort means that the loan in the first place was a bad loan. It was a badly judged loan. There may have been factors which have intervened beyond the control of the ACC and of the borrower. What I am not quite sure of is whether the ACC lend purely as a commercial bank, or whether there is a charitable element there as well, in other words, that they should lend to the agricultural sector come hell or high water.
I am somewhat bemused at Senator Ross's use of the word "charitable". As a man who has tremendous financial expertise himself, he would readily admit that there is no charity when you are dealing with any financial institution.
There is sometimes more than others.
That would depend on the individual person you are dealing with. The ACC are a State corporation set up to play a financial role in the development of the economy with particular emphasis on the agricultural sector. We propose in this Bill to diversify and to make the situation more liberal for the ACC. They must operate purely on commercial terms. They take regard of serious individual cases and the circumstances of any borrower. Sympathy and compassion only come in the same way as in any other commercial institution, associated bank, building society or whoever else, when a person finds himself in trouble.
The ACC do not lend willy-nilly. They do not lend without taking due cognisance of the commercial criteria under which an application must be scrutinised. The executives or managers make a decision based on the ability of a person to pay, on the collateral being put forward and on the request being made based on the amount of money and the number of years being considered and, of course, the age of the applicant and after all other family circumstances have been taken into account, in a similar manner to the criteria being used by commercial institutions right throughout the country and the world. The ACC have a role to play as a commercial organisation controlled by the State in order to stimulate economic growth and operating on commercial criteria.
On section 3 I wish to ask the Minister a brief question about the articles of association and memorandum. These will obviously have to be amended in order to cope with the changed situation brought about by this legislation. I wonder will the ACC have to wait until this is done before they can initiate extension of credit outside the areas to which they were hiterto bound, or can they act on the powers given in section 2? In other words, will there be a time lag while the articles of association and memorandum are amended, or can they go ahead under the powers given to them in the legislation?
Basically, when the Bill is passed — hopefully today — the Corporation can then take the necessary steps on the policy field to move forward, but particularly immediately in the administrative field by amending their articles of association and memorandum. That would only take a very short period of time. They cannot proceed to diversify until such time as they lodge those changes in their memorandum and articles of association with the companies office. We would not visualise any delay whatsoever. We would see the two moving together quickly — first, the changes in the Companies Act and then the policy changes.