The first grouping of amendments Nos. 1 to 5, inclusive, have already been discussed. Amendment No. 1 has already been voted on.
Trustee Savings Banks Bill, 1989: Committee Stage (Resumed).
Could you clarify exactly where we were when we concluded yesterday? My understanding was that we had called a vote on amendment No. 2.
My understanding is that amendment No. 2 was discussed with amendment No. 1.
Was amendment No. 2 not voted on? I called a vote yesterday on the understanding that it was amendment No. 2 because that is the amendment in my name.
I understand amendment No. 1 has already been voted on and no decision has been taken on amendment No. 2 as of this time. Will the Senator please move amendment No. 2 in her name.
I move amendment No. 2:
In page 6, lines 40 to 46, to delete subsection (2) and substitute the following:
"(2) Where it is proposed to make regulations under this Act, a draft of the regulations shall be laid before each House of the Oireachtas and the regulations shall not be made until a resolution approving of the draft shall have been passed by each such House".
Regrettably, the main thrust of my contribution yesterday and, indeed, which will run through other amendments in relation to the Minister changing the Act by regulation — and the whole point I was attempting to make was to get affirmative motion or positive regulation to be the vehicle through which the Minister could change the Act. I will be calling a vote on this if you are advising me that we have not already done so. It is my understanding that that was the matter we voted on yesterday but I will stand corrected by you.
It is my understanding that amendment No. 2 had not been pressed to a vote. We are now dealing with that amendment.
- Bennett, Olga.
- Bohan, Eddie.
- Byrne, Seán.
- Cassidy, Donie.
- Cullen, Martin.
- Dardis, John.
- Fallon, Seán.
- Farrell, Willie.
- Fitzgerald, Tom.
- Foley, Denis.
- Honan, Tras.
- Hussey, Thomas.
- Keogh, Helen.
- Kiely, Dan.
- Kiely, Rory.
- Lanigan, Michael.
- McCarthy, Seán.
- McGowan, Paddy.
- Mooney, Paschal.
- Mullooly, Brian.
- Ó Cuív, Éamon.
- O'Keeffe, Batt.
- Ryan, Eoin David.
- Wright, G.V.
- Costello, Joe.
- Doyle, Avril.
- Harte, John.
- Howard, Michael.
- Jackman, Mary.
- Kennedy, Patrick.
- Manning, Maurice.
- Naughten, Liam.
- Norris, David.
- Ó Foighil, Pól.
- Ryan, Brendan.
- Staunton, Myles.
- Upton, Pat.
In view of the similarity in the approach is it agreed that we discuss amendment No. 6 and section 5 being opposed together? Agreed.
I move amendment No. 6:
In page 7, line 33, to delete "3 years" and substitute "one year".
I think the amendment is fairly self-explanatory. It relates to the main substance of the debate yesterday in dealing with any amending of this Bill by way of regulation. I am suggesting that the three years that are being given to the Minister to amend, I presume, any technical difficulties that may appear — that is my understanding, it may not be so — should be limited to one year rather than three years.
Given the outcome of the vote we have just had, I think this makes my proposal even more important. I have a deep distrust of regulations laid before the House that must be annulled within 21 days, passive regulations, if you would like to put a name on it. I would like to limit the Minister's powers — not just this Minister but any Minister of any Government — to amend legislation in this fashion. In this case I want to limit his powers to within one year of the passage of the Act rather than three years as suggested in the section.
We are opposed to this section. The reason we are opposed to it is quite simply that we believe the people who formulate these types of Bills should have the capacity to understand the problems as they exist rather than trying to have to cope with stuff which emerges somewhat down the road. We have a very competent Civil Service in this country and I certainly believe it is within their scope to anticipate the problems, provide means through which those problems can be dealt with rather than to set the thing up and figure it out as it goes along. It is for that reason that we are opposed to this amendment.
Very briefly, I want to add to what Senator Upton has said. From the way these sections are set out I am a little bit puzzled as to whether the Central Bank is the real authority or the Minister. The only way we can look at it is that whoever has control is the owner. It would seem as though the Minister for Finance has the control, and yet throughout the Bill it seems to be that when any modification is called for it means that the Minister considers it expedient that they function in the same way as other banks and become compatible with them. The whole essence of that is that it is the means to achieving privatisation, even if it is not privatisation in itself. This is a major concern to us. Once the Trustee Savings Banks become compatible with other banks, because the Minister, or the Central Bank, can make regulations, it means we are into the area of bank charges, the hidden charges; it is not a question of what can we do for you, it will be a question of what can we do to you, just as it is with the other banks at the moment with all the hidden charges. Certainly, there are concessions for the "Golden Years" people. While it is not actually privatisation, it is the means to achieving privatisation. As soon as the value of Trustee Savings Banks are assessed, and having regard to the regulations that will be made to facilitate them in the marketplace, the fact is that they will be open for a takeover by the giants in a few years' time. In other words, the State is making the way clear for the privatisation of these banks. For that reason we are opposed to the section.
In this amendment Senator Doyle wants the three year limit changed to one year. I note the Labour Senators are opposing the section. I think at the outset we must accept and understand that the whole thrust of this Bill is to create a level playing field situation for our financial institutions. For far too long the Trustee Savings Banks have been in a very difficult situation, with serious impediments imposed on them, whereby their lending ratio is only 20 per cent of their investments and deposits. We cannot in modern commercial life expect any society or any institution to serve the nation in a proper financial environment with these outdated, outmoded impediments imposed on them.
The provisions that we are requesting here are already in the recent Building Societies legislation, which at that time gave rise to some adverse reactions in its passage through the House. For that reason it is important for Senators to be quite clear on the purpose and intention of this section. The section provides that if any difficulty arises in bringing any provision of this Act into effect then the Minister is empowered to remove that difficulty by way of regulation, which may also modify the legislation to such an extent as may be necessary to facilitate its enforcement. The existing Trustee Savings Banks legislation is both antiquated and labyrinthine and the present Bill is the first major reform of that legislation in this State.
There is a strong possibility of unforeseen technical difficulties arising in giving effect to the provisions of the present Bill. This provision which we seek here is to enable the Minister to deal with them. Advice is that this power can be effectively exercised only within the context and intentions of the present Bill. There is no possibility of the provision being used to subvert the intention of the legislation and there are precedents for it.
Attention should be drawn to the time limit of three years in this section and to the fact that it is provided in section 4 of the Bill that any regulation made under this section would be placed before both Houses of the Oireachtas, who have the power to annul the regulation within 21 days if they so wished. Precedents for a provision of this type are to be found in the 1952 Social Welfare Act, the 1985 Farm Tax Act, the 1986 Canals Act and the 1988 Valuation Act. The Building Societies Act of 1989 has a three year limit and a similar limit is appropriate in this case. Limits and other precednets cited varied: Social Welfare Act, one year; Farm Tax and Valuation Acts, two years; and the Canals Act a limit of three years.
Regarding the scope of any amendments, all the precedent legislation referred to limited the scope of amendments under this section to the Act in question except for the Canals Act, which allowed for the possibility of amendment to any other enactment. I trust this helps to clarify the situation and I trust that the Senators can accept this section.
First of all, I do not intend to drag this out, to start nit picking or anything else like that; but, with all due respects to the Minister, the fact is that when you quote these other Acts you are not comparing like with like. Examination of those other Acts would reveal that the State is still in control. There is confusion here now as to where control has gone. That is the confusion I have in my mind — perhaps it is because I left school early. There is confusion in my mind as to where the actual control lies; and, if you control, you own. In my opinion, from the way sections 5 and 6 are framed, it may modify any provision. You go into the whole question of modification again and the question of, if you like, driving them in the direction of modifications of the law so that they will come into line with the building societies, etc. Because it is tied in with the Central Bank, the Central Bank are going to break down a lot of the policies. The fact is that we will be in and out of this place making regulations that the Central Bank will suggest from time to time. This exposes the Trustee Savings Banks to the whole question of mergers or takeovers from the giants eventually. I think we are actually facilitating this by the way these sections are worded.
I can understand that in this day and age you cannot have the Trustee Savings Banks operating on the basis it is operating on at the moment, with a very tight knit sort of family structure rather than a large business. I do not mind it going into the open field, but it is a question of who has the control. Quite frankly, the way the sections read to me — the Bill as a whole, in fact, but the sections give emphasis to it — is that the door is open now for the Trustee Savings Banks to embark on a series of developments that will, in fact, increase its valuation. Once it increases its valuation people will know where they stand, what its assets are valued at, etc. This is the road we are leading them down. When you lead them down that road you are actually saying to the other giants in the banking business: "Here is a lovely thing that the State has set up for you. It is working in the right direction, it is compatible and I think you should move in and take it over." That is the way I see it in about four or five years' time, that we are giving the Trustee Savings Banks to the other banking giants.
I think what we have to remember every moment of this Bill is that we are talking in a world of changing and challenging financial services. The whole scene will change in the years ahead, that everybody knows. Over the past year we have had the Building Societies Bill, the Central Bank Bill, the ACC Bill — all preparing us for the years ahead. This is a natural follow-on to what has been developing in the other areas. We are putting the Trustee Savings Banks under the proper umbrella, the supervisory role of the Central Bank, as is proper and correct. We are trying to put them on the same playing field as the other banks, the Bank of Ireland, Allied Irish and the rest of them. That is what the Bill is basically about.
None of us has a crystal ball. In my opinion, what would happen first in regard to the Trustee Savings Banks is that you would have the Dublin, Limerick and Cork Savings Banks coming together, merging, amalgamating, call it what you like — again a natural part of what is happening in business, whether it is the business of co-ops, finance or whatever. It is going on; it is happening daily.
In regard to talking about privatisation now, as I said, neither the Minister nor any of us in this building has a crystal ball. It may well happen in ten years' time, or in 20 years' time. But at the moment what we are saying in the Bill is that we are trying to give them, no more or no less, the same playing field, the same playing area as the other banks, and to give them the same opportunities of getting the type of business that the other banks are procuring every day, whipping it away from under their noses. We are helping them to stay in business for the future. That is what this Bill is about. Privatisation might well be a reality, as I said, in 20 years' time. Who knows? However, at the moment this Bill is purely about the matters I have discussed and I think that is all we can discuss at this time. We cannot be talking about something that might never happen or, if it does happen, it is a long, long way away.
Regardless of the overall merits of what this Bill is trying to achieve, I think there are many sections within it that some of us disagree with profoundly and we do not need lecturing at all as to how the financial world is changing or the new challenges ahead, because there is no argument; we are not debating that. We want to stick to specifics without the lectures, if we can at all.
There is an amendment down in my name that purports to reduce from three to one year the length of time the Minister can have effective carte blanche to do what he likes with this Bill. The more we talk ourselves around this amendment the more I am inclined to support what the Labour Party are trying to achieve, because I am seriously concerned that in any democratic system we should hand to any Minister, regardless of his political leanings, the powers to do what he likes with a Bill. You only have to read the language in this section, and I quote:
If, in any respect, any difficulty arises in bringing any provision of this Act into operation or in relation to the operation of any such provision, the Minister may by regulations do anything which appears to him to be necessary or expedient for removing that difficulty....
And he may have these powers for three years. That is an incredible latitude and an incredible power to give to any Minister. It is amazing stuff when you even read the language that is written into it. Here we are trying to justify quoting the Central Bank, the ACC at the other end, the Companies Bill and something else. Just because there may be precedent does not always mean it is right. What it may mean in giving the Minister this — we are only giving it to him for three years; that is what is being asked. If it was so good that a Minister needed these powers for the expeditious enactment of legislation such as this, why restrict him to three years? Why not leave it an openended provision, if it was that good, as is trying to be justified here by the Minister, with respect, and his colleagues? If it is as the Minister says, then remove any three year restriction and give the Minister these powers. But I am saying he should have none or limited to one year, as I am saying now, for the very reasons that have been said on this side of the House.
The Minister's argument defeats itself, if you really follow it through. If what the Minister is saying is so essential, do not restrict the Minister or any subsequent Minister to a three year time limit on this provision. But the Minister's argument does not stand up at all in any democratic society. What we are doing under section 5 is extremely dangerous — to let any Minister have carte blanche to do what he likes with this Act or the Companies Act or the Central Bank Act or all the rest that will be thrown into the pot. If he needs the three years to see where the problems will be, why was the groundwork not done in advance? Why did we not co-ordinate this type of provision or co-ordinate better the enactment of legislation, to ensure that, if difficulties are thrown up with some of the other Acts, they will not appear in this Act and that we can sort out the problems before they arise?
As I understand this section, because the Ministerial advisers, the parliamentary draftsman and those who put a piece of legislation like this together are not quite sure where the difficulties will lie, be they technical, legal or of any other nature, they need a provision to allow the Minister, by regulation, to sort out these problems as they arise, regardless of the implication of the particular changes. It certainly is not a very democratic way of behaviour. We have four or five sections in this Bill whereby the Minister is acting by way of regulation and in only one section is an affirmative motion required later on in the Bill. The whole point of our vote this morning was that what we wanted was that any change by way of regulation should be by way of affirmative motion. I accept democratically we were defeated on that; but the defeat of section 4 makes what we are saying here all the more important if we are to respect democratic procedure at all.
I listened on the monitor to what Senator Farrell and Senator Harte had to say and I have just heard what Senator Doyle had to say. I have a general concern about the very wide-ranging nature of these powers and the capacity given to the Minister to deal with what may be legislative matters through regulation. I am not sufficiently versed to go into the technicalities of this, but it seemed to me from what many of the Senators said, that there was concern, as was expressed very clearly and very forcibly in the Dáil, that this machinery, bland as it may appear on paper, is a preparatory stage in the process towards privatisation. It seemed to me from what Senator Fallon said that this simply was not being ruled out by the Government side.
I would be concerned if this is the case, because one is morally bound to consider the origins of these funds. The resources and the funds of the Trustee Savings Banks have a clear origin in the mutuality concept, in the idea of trust and trusteeship. It seems that it would be regrettable if these regulations were a kind of Trojan horse intended to allow, not that far down the line, for the privatisation — in other words, for the acquisition by the powers of greed, of capitalism and of self-interest of a resource that was built up by the small people of this island. For that reason I feel that the arguments advanced by Senators Harte and Doyle are quite persuasive.
I listened with interest to what the Senators had to say. In response to Senator Harte, I have to say that it is not true to say that what you control you own. The Houses of the Oireachtas have given various controls to various Ministers, by law and by statute, and those Ministers do not own what they control. A very simple example is the building societies, which are owned by the shareholders; but yet control was with the Minister for the Enviornment and now the supervisory authority has gone to the Central Bank.
I want to clarify exactly what we are talking about here. Basically, we are handing over the present supervisory function, which is carried out by the Minister, but the Minister will, however, retain the right to determine the rate of interest he pays on Trustee Savings Banks moneys lodged with them. He will be consulted by the Central Bank on the proportion of depositors' funds to be lodged with them. At present the Minister determines this proportion, but it has always been subject to review in the light of the prudent opportunities open to the Trustee Savings Banks.
However, these opportunities have been limited to a large extent by the legislative framework under which the Trustee Savings Banks have been operating up to now. The status of the Trustee Savings Banks regarding ownership and the vesting of the property in the trustees is not changed by this legislation. It is very important that we recognise that. However, if and when an order is made under section 57, which we will come to later, ownership will change in one way or another. The Trustee Savings Banks will then be owned either by the Minister or by an individual or body other than the Minister.
I find it hard to reconcile Senator Doyle's contribution. I may be incorrect, but I think that, when she was Minister of State at the Office of Public Works, she put through the Canals Bill. At that time we included in that a similar provision giving a three year right to the Minister to make decisions pertaining to the canals. This is exactly the same. The Farm Tax Bill was put through when her party, with the Labour Party, were in the Coalition Government and again a provision was put in there on the farm tax situation.
We are consistent. We must recognise that we are moving into a totally new financial regime. We are not here to lecture; we are only here to inform one another and to ensure that we pass the best legislation possible. We are asking here for a three year provision for the Minister. We must recognise that that three years will conclude in 1992. We must recognise that we will then have the single market. We must recognise that we must now create an environment for the Trustee Savings Banks to be able to expand their range of services to remove the impediments and to give them much more flexibility in the financial field and in the market place, something they have not got now. If we do not do that and give this flexibility to the Minister and to the Trustee Savings Banks over the next three years, then we will be putting them in a very difficult and restrictive environment. This Bill is here to remove that situation and create an open environment for the Trustee Savings Banks.
It is vitally important that, as the new legislation is passed, as to the new environment is created for the Trustee Savings Banks as they do their day-to-day business and change their options under the new ratios which will be agreed between the Minister and the Central Bank, that during the three years the matter can be reviewed. The Minister has the flexibility to ensure that in the interests of the Trustee Savings Banks, of depositors and in the interests of the nation, the Trustee Savings Banks have the same quality of opportunity and financial environment as have the Associated Banks and the other international banks, who will locate in this country after 1992. I see no reason why we could not be consistent and allow this provision which is in other legislation.
I move amendment No. 7:
In page 9, subsection (4) (b), line 41, after "information" to insert "but, in any case, the Bank shall, not later than 12 months after the receipt of an application for a licence, either grant the licence or give a notification under subsection (3) (a) to the persons who made the application.
I have been concerned for some time that in the very competitive business world that, hopefully, our various interest groups of different sectors are now performing no official difficulty or delay should be put in the way of them proceeding with their business.
I have in mind the fact that at the moment if you are looking for planning permission you go through your local authority, the matter is appealed to An Bord Pleanála and there is no statutory time limit within which An Bord Pleanála must consider third party appeals and various other appeals before them. I accept, if the Minister would consider what I am trying to achieve, that he may prefer to re-word it to achieve the objective.
I would like a finite time limit on this section, for obvious reasons. I make the comparison with the An Bord Pleanála situation. I would like the Minister to take that on board and to consider it. What I am trying to achieve now in this section has rationale and logic on its side and I do not see technical difficulties in putting in the finite time I have requested. If the Minister feels that I am being unreasonable in the length of time I am suggesting, I would prefer if it were possible to tighten it; but, if that cannot be done, I will accept any case he can make so long as there is a finite time limit on the issue. It is only a matter of time before An Bord Pleanála is statutorily restricted in the length of time it may consider. Indeed, there may be other examples in officialdom at the moment in this regard.
I concur with what Senator Doyle has said, that she wishes a provision for an outside limit of 12 months from the date of application on the granting or refusing of a licence on the basis that this limit applies in the case of banks seeking a licence under the Central Bank Acts. The existing Trustee Savings Banks would be granted a licence straightaway under subsection (7). Given the unique structure of the Trustee Savings Banks, it is very hard to see how a new Trustee Savings Bank would be set up or why anyone would want to do so, even though the Act would not preclude it. New banks wishing to set up here would do so as companies and so would come under the Central Bank Act rather than burdening themselves with the Trustee Savings Banks structure.
I want to assure the House, and give this personal assurance to Senator Doyle and her colleagues in this House, that if such an occasion should arise a 12-month overall limit would be strictly observed because strictly the Trustee Savings Bank would come under the control of the Central Bank. The Central Bank has its own Acts to operate. It also has international agreements and international law, particularly Community law, to operate under. Taking all those into account, I want to assure the House that in regard to the totality of legislation, both national and international, under which the Central Bank operates the 12 months limit will be strictly adhered to.
I thank the Minister for a positive response to the objective of my amendment. Would it not be possible very simply either by using the words I have suggested or alternative wording if the Minister or his advisers see fit, to incorporate the point I am making and, if I understand the Minister correctly, a point he subscribes to as well? I accept there will not be a clamour for people to open new Trustee Savings Banks et al. I fully accept the point the Minister makes, but it makes for far tidier legislation, particularly if we are going to restrict by time the length any official body may have to sit on decisions such as this and other similar type of decisions in the future.
The advice available to me is that the commitment has been given for an overall limit of 12 months and it will be on the record and must be honoured. Taking into account the Central Bank Acts and the other international financial rules, regulations and directives under which the Central Bank, as a supervisory financial authority in this country, must act it would be unnecessary to include this provision in the Bill. Once we give the assurance that it will be operated on the 12 months limit, once the other laws, rules and regulations are there it would be automatic and, therefore, it is unnecessary to have it enshrined in the Bill.
Is there a difficulty in enshrining it in the Bill?
There would be a technical difficulty only.
What is that?
If we enshrine it in the Bill here it means we have to go back to the Dáil and it means we come back in here again——
The Minister is suggesting the Seanad is irrelevant. The Minister will not change any thing because of the inconvenience of going back to the Dáil.
No. In order to ensure the best legislation possible is available for the Trustee Savings Bank and taking into account that the three year limit, which we have now agreed to, is enshrined at this stage, that puts the Trustee Savings Bank into a particular category for the next three years. If we are to delay that, it means we are pushing them further down the road and we believe that would be detrimental.
I thought we were making very good progress. I thank the Minister for accepting the point I am trying to make, if he will not accept it by amending this legislation. However, he said something that concerns me dreadfully. Are we wasting our time here today until 1.30 p.m., and next week also if we do not get through all the amendments today in trying to achieve any amendments to this Bill? Some of us have put a lot of time, effort and work into studying the Bill and proposing amendments that we think would improve it. The Minister may not agree and we may have to agree to disagree ultimately but if the Seanad is to make any sense in terms of scrutining legislation that has come to this House from the Dáil, we must at least feel that what we are saying will be taken at face value, debated on merit and that, if necessary, the Bill can go back to the Dáil and be amended. If all the amendments are to be rejected only because either we have not got the time——
We are dealing with amendment No. 7 at the moment.
Yes. It was on that amendment that the Minister made the remark. If this amendment and all the amendments we will be discussing today cannot be accepted because of the logistical difficulty of getting the Bill back to the Dáil——
We cannot anticipate what the Minister will say on the following amendments. We are dealing now with amendment No. 7.
I am sure the Chair knows the point I am making. I will say it on this amendment and I will repeat it 65 times with all the other amendments if you prefer, but that would seem to be futile. I would like to feel that in speaking on this amendment what I am trying to achieve will be taken at face value. It is either worth doing or it is not worth doing. I would hate to think my amendment was being rejected because of the logistical difficulties of getting the Bill back to the Dáil to have any change made and then back into this House before Christmas, as is obviously what we are talking about here. Either it is worth doing or it is not worth doing. Let us overcome the logistical difficulties on another day.
The Senator is misinterpreting what I say.
I made it quite clear that what the Minister purports to establish by way of effect on the Bill by the amendment which the Senator has put down has been categorically put on the record. He has given an assurance that a 12 month overall limit will be strictly observed and adhered to. If the amendment was not down, then that categoric assurance would not be given. This was not given in the Dáil. Of course, the Seanad has a clear effect on this legislation. The opinions expressed here in a very positive manner, and in a very sincere and dedicated way, are being incorporated so far as is possible. Taking into account the totality of legislation which affects the Central Bank, both internationally and nationally, and the rules and regulations under which it must operate, I am saying that it is unnecessary to enshrine the amendment by way of legislation because the other laws are already there. We give the assurance that the 12 month limit will be observed so the effect of the amendment will be operable.
I accept that and I sincerely thank the Minister for taking it on board. He will not include the amendment because of the difficulties of getting the Bill sorted out before Christmas. I would prefer if he did, because that is the point of what we are trying to achieve here. It augurs for goodwill between the Government and the Opposition if we feel we can get some of our amendments taken on board. While I accept what the Minister has said, I would love him to go the final step and accept my amendment, which effectively he is doing by putting on record his acceptance without changing the Bill. I cannot understand that.
It is a new type of generosity.
It is giving with one hand and taking a small bit back with the other, but I thank the Minister and accept it in the spirit it was given. We have all had a lot to say about these regulations. How about a regulation to resolve this problem? That will not involve the logistical problems the Minister referred to. Could we not test the regulations, which I do not agree with, and see if we could first change this? The voting strength of this House points up that the Minister and the Government will get their way in relation to the regulations being laid before the House. Here is one the Minister can change straightaway by way of regulation. Perhaps the Minister will take that up.
I will give an assurance to the Senator that I will be recommending to the Minister for Finance, his officials and the Central Bank and its officials that they would consider incorporating this by way of regulation.
Thank you, Minister.
Amendment No. 8. Amendment No. 9 is consequential on amendment No. 8 and they may be discussed together.
I move amendment No. 8:
In page 10, subsection (8), line 5, to delete "not".
The position is that as you look through the Bill a tremendous amount of power is given to the Central Bank with regard to the question of laying down policy on how the Trustee Savings Banks should function. The Minister will be involved in a substantial amount of consultation with the Central Bank with regard to the behaviour and policies of the Trustee Savings Banks. The Minister will be taking the advice of the Central Bank. There is a tremendous amount of power being handed over to the Central Bank in the Bill. Without raising that as a major objection, the logic of it seems to be that, if you give somebody power and authority, if after long and detailed consideration they embark on certain policies and if something goes wrong with those policies, they then shall not be held responsible for what went wrong with them.
Section 8 states that the grant for the licence shall not constitute a warranty as to the solvency of the institution concerned and the Central Bank shall not be liable in respect of any losses incurred through the insolvency or default of a person to whom a licence was granted or the Trustee Savings Banks in respect of which it is granted. We have had some very bad experiences in the past, such as the problem with the AIB, etc. The Central Bank laid down their policies on how they behaved, but it all fell back on the State in the final analysis.
We are saying here is that the word "not" is an out for the Central Bank. They are allowed, in a very extensive way, to lay down the policy that the Trustee Savings Banks will have to make themselves compatible with the other financial institutions. They have all that power. They have all that authority delegated to them. By and large, the type of consultation they have with the Minister is a lot better than the type of consultation a worker will get with his employer. It will be consultation and agreement. The worker gets consultation but not necessarily agreement. They have a lot going for them in the Bill; yet we want to take them off the hook. If, as a result of their policies and of putting pressure on the Trustee Savings Banks, this exposes the Trustee Savings Banks to the others, then they should be responsible. I cannot see the need for the wording "shall not constitute a warranty" and "shall not be liable in respect of any losses incurred through the insolvency or default of a person to whom a licence is granted". You can control how a business develops, expose it to the market place and to the EC. Somebody may decide to go into another area because of the pressure put on him to be competitive. Policy is laid down by the Central Bank and yet the Central Bank is not to take any responsibility for it. I cannot see the value of the word "not" in the subsection I have very strong objections to it.
I listened with interest to what Senator Harte has said.
Thank God, somebody listens.
Of course. The proposed amendment would effectively make the Central Bank liable for the solvency of a Trustee Savings Bank and for any losses it incurred. This would not be acceptable. The law, as it stands, does not put this position on the Central Bank. The Central Bank would be responsible for the prudent supervision of the Trustee Savings Banks, but it is going much further and beyond the bounds of acceptability to expect that the Central Bank should be legally liable for Trustee Savings Banks losses.
In that event the bank will effectively have to run the Trustee Savings Bank on a day to day basis and this would not be on. The present position is that there is no formal legal State guarantee of deposits to depositors. As 80 per cent of deposits are lodged with the Minister for Finance, these are in effect guaranteed to the Trustee Savings Banks against default. The remaining 20 per cent of the resources of the banks are invested prudently and profitably, and it will be the function of the Central Bank to ensure that this continues. When this legislation is put into effect the proportion of deposits lodged with the Exchequer will only be reduced to the extent that there are opportunities for prudent and profitable expansion of Trustee Savings Banks business.
This is not a new situation. It is based on the existing section 1 of the 1891 Savings Banks Act which states that a Trustee Savings Bank may not be designated or described in any manner which imports that the Government is responsible or liable to depositors for any money placed in the safe keeping of the bank. Going back to 1891, the law is clear. It does not in any way designate, describe or import that the Government or the Minister for Finance would be responsible or is responsible or liable for depositors' money or for its safe keeping.
Reference was made to assurances given in the past by the Minister for Finance in 1984, when there was an exceptional level of withdrawals of deposits from the Dublin Trustee Savings Bank. In 1984 the then Minister for Finance was satisfied that the Trustee Savings Banks were entirely solvent and were in a position to repay all their depositors in full. I am happy to state that this continues to be the case today.
As the proportion of Trustee Savings Banks funds invested with the State gradually reduced, the Trustee Savings Banks will be brought under the deposit protection scheme provided for in the recent Central Bank Act. We can be absolutely certain that, due to the prudent and professional management which has been exercised so well for so long by the Trustee Savings Banks and which we now hope will be expanded and enlarged in the new financial environment, there will be no risk as such to depositors' money.
Reference was made by Senator Harte to the situation pertaining to AIB and a subsidiary of it, the ICI. That was a different situation in that ICI, due to its own risk taking, found itself in financial difficulty. The AIB, acting on the direction of the Government and under the supervision of the Central Bank were able to provide resources and the State acted as a catalyst which protected the ICI situation. There is no real comparison in that situation. We can be absolutely certain, on the performance of the Trustee Savings Banks in the past, of their solvency, of their professionalism and of their expertise. In the future, when this legislation is passed, they will only expand and confirm the great work they have already done.
We are not pressing the amendment. When the AIB and the other institution got into trouble, sorting themselves out was not of immediate concern. The public were to be held responsible. It was because of a lot of screaming and rejection of the attitude of the AIB and other institutions, that finally they got around to taking the responsibility.
I want to briefly comment on the amendment. As we know, the proper supervisory role for the future of Trustee Savings Banks will be the Central Bank. When you have such a wide range of financial institutions, including the banks and the building societies, they all should come under the one supervisory authority. It would be unfair and unreal to expect the Central Bank to be liable in respect of any losses incurred through the insolvency or the default of a person to whom a licence is granted or the Trustee Savings Banks in respect of which it is granted. The logic of Senator Harte's amendment is that they would have to be liable to every building society and to all of the other commercial banks that come under their control in a supervisory role. I am not disputing for one moment, the Senator's right to put down the amendment, but I honestly feel it is something that could not be taken on board for the reasons I have given.
I move amendment No. 10:
In page 11, between lines 14 and 15, to insert a new subsection as follows:
"(5) Notwithstanding anything to the contrary contained in the provision of this section a person who holds a licence or to whom a licence is intended to be granted may appeal in writing to the Minister against any decision by the Central Bank to impose a condition in relation to that licence or to amend or add to the conditions of that licence and the Minister before deciding on the appeal shall consider any representations duly made to him and his decision thereon shall be final and conclusive.".
This deals with the whole area of the granting of a licence by the Central Bank. We are not talking about a bit of business that is likely to be done too often, if ever, in the future, but we must have our legislation tidy and correct. If we are providing for it at all, the provisions should be sufficiently detailed to satisfy everyone.
There are two points here. One is in relation to the appeal procedure. What the Minister is providing for is an appeal to the Central Bank against conditions on licences. I am requesting that that appeal should be to the Minister and not to the Central Bank. There is an anomaly here, too, because the conditions we are referring to in relation to the licences, and which may be attached to licences issued by the Central Bank, are not provided for in this Bill. We do not know what conditions — the reference is only to "a licence shall be subject to such conditions, if any, as the Central Bank may impose...". Perhaps the Minister could indicate to us why we will not be privy to what is in the Minister's mind or the Government's mind in relation to these conditions. It is possible that we are buying a pig in a poke here. If we transmit powers to the Central Bank which have not been spelled out in this Bill, we are again removing from the Houses of Parliament any right to question this aspect of the Bill in future. Thankfully, the Central Bank is effectively independent. Any powers we transmit to the Central Bank should be detailed in this House and in the Dáil so that we know in a democracy exactly what powers were transmitted. To allow the Central Bank to apply any conditions that may be necessary whenever is far too broad a statement and too broad a power to transmit. I do not object to the principle of the Central Bank attaching conditions, providing we debate in this House and in the Dáil what those conditions are and on what basis they may be imposed. We respect the independence of the Central Bank but we do not transmit powers without detailing them in this House before we transmit them.
There are two points — one of relinquishing power from the Houses of Parliament to the Central Bank without detailing what those powers are and why they are being relinquished, and secondly I would like the appeal procedure to be to the Minister and not to the Central Bank, as is the case in the Central Bank Act. The Minister has quoted the precedents and the need to have different bits of financial legislation behaving in the same way. We talked about the Companies Act, the ACC Act, the Building Societies' Act and all of these other things. By having the appeal procedure to the Central Bank in this Bill we are doing something that is not done in the Central Bank Act. Under the Central Bank Act the appeal procedure is to the Minister. I would like to ask the Minister to consider my amendment very carefully. To appeal to the very body that has just imposed such conditions on you against those conditions makes very little sense.
Who would the Minister consult?
That is another point. The Minister would have the final say in the appeal. I accept the Minister will negotiate and consult with the body. We can go back to the planning appeals procedures. When one appeals to An Bord Pleanála, An Bord Pleanála go back to the local authority that granted or refused. They have to do so to find out what went on. If that did not happen they would be very foolhardy. I do not think the ultimate decision in relation to the appeals should rest with the Minister rather than the Central Bank. There is a precedent for that. So taking the Minister's words, I am asking first that we detail any conditions which we are now going to allow the Central Bank to attach to licences — if we are relinquishing the power we want to know what power we are relinquishing. In any parliamentary democracy, that is only fair. Secondly, I would like the appeal procedure to be to the Minister rather than to the Central Bank who will, after all be the body issuing the conditions originally.
At the outset I want to assure Senator Doyle that I am, and have, and will give the maximum consideration to all amendments put down by her or any other Member. The Central Bank will have broadly the same supervisory powers as in the case of the Building Societies and the licensed banks in this country in relation to the Trustee Savings Banks' situation. This provides for conditions in this section 12 which we are debating, to be attached to licences at the discretion of the Central Bank. Senator Doyle wants an appeal procedure to the Minister for Finance incorporated into this section. The consent of and appeal to the Minister is included in the sections 10 and 13, where a refusal to grant a licence or a revocation of an existing licence arises. This follows the exact same procedure as the Central Bank Acts, section 9 of the 1971 Act and sections 32 and 34 of the 1989 Act. The question of conditions attaching to licences is essentially a supervisory matter and as such is appropriate to the Central Bank without the involvement of the Minister. The provision in this Bill reflects the position in the existing Central Bank Act, section 10 of the 1971 Act as amended by section 33 of the 1989 Act. Among the areas which could be covered in the conditions attaching to licences are a requirement to get Central Bank approval for branch expansion, limits on lending to particular sectors, an upper limit on the amount of individual loans, the extent of a bank's exposure on any particular area, conditions on loans to trustees, and so on. I stress that in all of this the Central Bank are guided by what is prudent for the institution under their supervision. They must retain discretion here. This is exercised in the interest of the prudent and orderly regulation of all the banks under their control.
I still feel very strongly that if this House cannot examine the type of conditions that may be attached to any such licences, we should be loath to relinquish any democratic power in relation to them. Once this matter is handed over entirely to the Central Bank we will not be in a position, in this House or the Dáil, to question any matters. In the Dáil they have the parliamentary question procedure and the response will be "Sorry, it is not a matter for the Minister for Finance. It is a matter for the Central Bank." There can be no discussion in relation to the matter if we agree with what the Minister is proposing. I ask him to reconsider and include in the legislation an expanded version of his reply to me just now, when he gave an indication of the type of conditions that might attach to the licences. He still has not explained why it is not possible to be more specific in relation to the conditions involved. Perhaps he could respond to me on that.
In relation to my second point covered by my amendment, I still cannot see how an appeal to the Central Bank against conditions imposed on a licence makes any sense from the appellants' point of view. The Central Bank will be the body that will have initially imposed those conditions. They are not going to make liars of themselves by rejecting any conditions they have initially imposed and say: "sorry, we were wrong, you were right, all right, here goes." You need an arbitrator. You need a third person in relation to appeals like this. I am suggesting, as there is provision for another section in this Bill — and the Minister pointed that out — that we allow the appeals in this section to go to the Minister for Finance, rather than back to the Central Bank, the body that issued those conditions originally. That makes common sense. It is fair and it is equitable. You do not appeal to the body which originally imposed those conditions. You need a fair third party appeal and the Minister would provide that function in this case.
In response to Senator Doyle, I would have to say we must, as a Legislature, be consistent in the type of laws we pass, particularly in relation to financial matters. In all the other situations pertaining to banking licences and building society law, we have given supervisory powers to the Central Bank. We have been consistent in the Trustee Savings Banks Bill. It is important that the right of appeal is there. This is enshrined in sections 10 and 13.
While one can appreciate Senator Doyle's idea and motives to have a third party appeal, it is important in any democratic situation that, if a person puts forward a proposal and makes an application for a licence, the Central Bank would not be in a position to give a robotic answer, whether it is yes or no. If they refuse, the applicant should have the right to appeal, to make their case and to expand on the proposal. They should be in a position to show that they are people of repute, that they have the necessary expertise and resources and, perhaps, are in a position to be able to persuade the Central Bank to give them this licence and to give them the opportunity necessary to operate in a financial environment. The fact that we have done this gives the right to a body, a group or an individual applying under this section for a licence to appeal and to have an opportunity to make their case in a broad open, oral manner.
In most cases I would accept that the bona fides, resources and expertise of the applicant would ensure that they are not going to make an application for the sale of making it to the supervisory financial authority in our country. In most cases if an application is put forward they would know themselves that they had the competence, expertise and the resources to be able to operate. We have here given this appeal system. We have been consistent with the Central Bank Acts and with the supervisory position pertaining to other financial institutions. I regret that I will not be able to accept this section. I hope the fact that we have the appeal mechanism will allay the fears of the Senator.
Could I just say, finally, that the Minister's need to be consistent in defence of his argument perhaps should be questioned. If by being consistent the Minister is, in fact, compounding irrational behaviour, irrational decisions or illogical decisions taken previously, we need to examine it very carefully. If I were applying for a licence and conditions were attached to it under this section by the Central Bank, I would not like to have to appeal to the very body that attached those conditions against some of the points I considered unsatisfactory. If what the Minister says makes sense, why is it that we do not allow planning applicants appeal against decisions of local authorities back to that local authority itself? There is a very good reason why we do not. For the very same reason and with the same logic I am asking the Minister to allow the appeal be to the Minister. There may be only one or two such applications in our lifetimes, if any at all. But there should be an outside third party. The Minister could barely be considered a third party. It is more like the Minister for the Environment when he used to decide on planning appeals before we instituted An Bord Pleanála to remove it altogether from the political system.
Was that a good decision?
It was, although we need to tidy up a lot of areas. At this stage the Minister has referred to the need for consistency, but there is a precedent in other areas for going to the Minister. The Minister has told us that in other areas there is a type of self-determination on appeals, but in this case I am appealing to the Minister to allow the decision on an appeal to be made by the Minister. After all, the Minister will consult with the Central Bank. At least we should remove the final decision on appeal from the body that imposes the conditions initially. It makes no sense, Minister.
Could I just respond briefly to Senator Doyle on that? It is important that we are consistent. We are dealing here with a financial institution. If we are to give it the same level playing field and create equality of opportunity for it as for other institutions, we must be consistent. We must ensure that we have the same supervisory authority and the same type of appeal mechanism. We cannot compare a planning situation to a financial situation. Planning situations are very individualistic. They are very local and are totally different. They have an environmental impact. We are talking here about finance. The rules of finance are controlled by solvency, security, supply and demand and the rules of commerce. The financial environment operates in that totality. If the Central Bank is the supervisory authority for other licensed banks and for other financial institutions, with the same rules and regulations broadly across the board, then it is important that consistency is enshrined here and that we have the same rules, regulations and controlling mechanism for the Trustee Savings Banks as we have for other financial institutions.
I move amendment No. 11:
In page 13, subsection (1), line 17, after "determine" to insert "The Central Bank shall take account of the rates of interest charged and paid by other licensed banks and building societies in fixing these rates.".
I am not suggesting that my attempt at parliamentary drafting could not be vastly improved on, but there is a point which I want to make here which I believe is very important. We have been quoting the need for introducing a level playing field in relation to the handling of the different financial institutions and in the financial area generally. That has been used as a defence and as a reason for a lot of the sections we have discussed and will be discussing here today.
Section 15 details certain controls and requirements of Trustee Savings Banks. This is not the case with the other financial institutions in their legislation. I would like an explanation as to why we are treating Trustee Savings Banks differently to the other financial institutions and at the same time insisting that there is a level playing field generally in this area.
This section requires Central Bank consent for the fixing of interest rates, maximum liabilities and a number of other matters in relation to Trustee Savings Banks generally. It could be suggested that these requirements draw on the special position of the Minister for Finance in guaranteeing the debts of Trustee Savings Banks. The Minister made an interesting point on this aspect in his concluding statement on Second Stage yesterday. Perhaps he could expand on that today as we deal with this section.
This section refers to consents. It is the view of many that these are not helpful in achieving the level playing field position which we all state we aspire to for all financial institutions. Perhaps the Minister could state again where the Government stands in relation to the guarantee, notwithstanding what he said yesterday and expand on what he said yesterday. Was it ever there? With the powers we are now transmitting to the Central Bank they will never be answerable again to the Houses of Parliament unless this legislation is amended. Could the Minister deal with this entire section while responding to my amendment and say why we are treating the Trustee Savings Banks differently in terms of the specifications that are laid out under this section? There are informal arrangements with other banks. There are monthly and quarterly returns and so on, but there are no explicit requirements of the other financial institutions such as we are now requiring under this section of the Trustee Savings Banks Bill.
In direct answer to one of the questions posed by Senator Doyle, that in relation to the guarantee situation, I thought I had clarified that earlier.
The Minister did, but I would like him to expand on it. It is important that we should clear that up.
Going back to the 1871 Saving Bank Act, that Act ensured that nothing could be described, included or imported that would make the Government or the Minister for Finance liable for the security or the solvency of funds in the Trustee Savings Banks situation. It was for the Trustee Savings Banks, in consultation with the Minister for Finance, to decide on various matters and, through their professionalism and man-agrement and careful, prudent operation of their business, ensure that they had a solvent operation. They have proved that conclusively over many years. What the amendment is providing for is that the Central Bank should have control over the rates of interest on loans and deposits.
Senator Doyle proposes that, in determining how Trustee Savings Banks interest rates should be fixed, the Central Bank should take account of the rates charged and paid by other licensed banks and building societies. It would not be possible for the Central Bank to fulfil its role or to implement regulations or supervisory powers over any institution if it did not take into account the day to day financial markets, the day to day interest rates, and all the criteria that affects the whole money market situation. This will be done in any event. Therefore, it would be inappropriate to provide for it in legislation. The Central Bank will have to take account of, and does take account at all times, the general market rates in settling the Trustee Savings Banks rates.
Because the Trustee Savings Banks is a unique structure, totally different from other financial institutions, this section is enshrined here. The Central Bank has an agreed mechanism with the other Associated Banks vis-à-vis how interest rates are arrived at and when they have to be increased. Of course, the Central Bank itself at times, due to international and other pressures, has to push their rate up. The other banks, in a normal trading commercial pattern, have no option but to allow their rates to be increased also. Consequently, for some reason, be it good management of our national finances or whatever, interest rates may drop. The Central Bank rate may go down and obviously the other banks would follow suit. The same situation would prevail here with the Trustee Savings Banks. Consequently, it is unnecessary and inappropriate to enshrine it in the legislation.
Do you accept that we are departing from the level playing field concept in this section? I must recognise it as such.
I would not accept that at all. As a matter of fact, I would see the situation that the Central Bank will ensure that the Trustee Savings Banks will definitely play within the level playing field and will not be a situation that would be either detrimental to its depositers or borrowers or, indeed, would confer any particular favours on those same people vis-à-vis investors in or borrowers from other institutions. The fact that the Central Bank will have this supervisory role and will have this consultancy situation in controlling performance, will ensure that the playing field is level and that equality of opportunity will prevail right across the board.
Are you suggesting that for some reason the Central Bank does not trust the Trustee Savings Banks and their trustees to the same extent it trusts the other banks and, therefore, we need more detailed conditions tied into the legislation, conditions and terms that do not appear to be necessary for the other financial institutions?
I cannot understand where Senator Doyle took that inference from. I thought I had clarified it clearly during the debate.
Level playing field?
Not alone has the Minister for Finance and successive Ministers for Finance and successive Governments had the utmost confidence in the Trustee Savings Banks but the Central Bank itself would be only too delighted to ensure that the level playing field opportunities, in consultation with the Minister for Finance, will be there. What I am saying is that the flexibility so vitally important and needed for supervisory financial control of all our institutions will be given to the Central Bank and that no impediments are placed on it.
In section 17, we have amendment No. 14, and there is a grouping of amendments as follows: 15, 17 and 18 are consequential on 14. Amendments Nos. 14, 15, 17 and 18 can therefore be discussed together.
I move amendment No. 14:
In page 15, lines 5 and 6, to delete subsection (1) and substitute the following:
"(1) There shall be not less than five and not more than ten ordinary trustees of a Trustee Savings Bank and in addition there shall be two worker trustees.".
Amendment No. 14 provides that there shall be two workers directors or trustees of the Trustee Savings Banks. The other amendments are basically knock-on effects from that. Amendment No. 15 provides that these worker directors shall be elected as soon as is practicable after the passage of the Bill. Amendment No. 17 provides that the trustees of the Trustee Savings Banks shall be appointed by the Minister with the consent of the Central Bank. That is simply a safeguard to a second safety net to ensure that whoever is appointed should be appropriate for the position. They should have, as well as the consent of the Minister, also the consent of the Central Bank. The burden, of course, of this amendment is that the people who work in the Trustee Savings Banks should have a say at the top table. They should have a say as to how decisions are made.
The Trustee Savings Banks, despite the fact that they were not working on a level playing field, to use the Minister's term, have been a considerable success. They have certainly been a great success in relation to how they have responded to the customers' needs in regard to customer facilities, etc. They have provided long opening hours. All of these facilities for the people who deal with those banks could not have been provided were it not for the help and co-operation of the people who work in the Trustee Savings Banks. Were it not for the commitment of the workers right across the board at all levels in the Trustee Savings Banks, they would not have been — to use a computer term — as consumer friendly or as user friendly as they have turned out to be.
If the Minister would accede to these amendments it would be a recognition of the tremendous contribution that the workers at all levels in the Trustee Savings Banks have made to the development of the banks to their present state. Of course, there are other reasons why this amendment should be accepted. They relate to the fact that in enlightened industrial relations now it is widely accepted that workers need to be involved right up to the very highest levels in the management of the company. It is important that their views should be taken into consideration if we are to avoid industrial conflict. Those who look at the history of industrial relations in the banking world over the last 20 years or so are only two well aware of the industrial relations difficulties which have arisen in banks other than the Trustee Savings Banks over that period. People are still familiar with companies which have gone to the wall — and indeed, dare I say it, organisations that the Minister would be familiar with from his farming background. Cattle marts went "bang" during one of those bank strikes arising from difficulties in relation to cheques.
It is absolutely fundamental that industrial relations harmony is preserved in the Trustee Savings Banks. It is a time of turmoil for them. They are bound to be worried and concerned. The workforce must be concerned as to the impact of the changes which are taking place. It is very important that reassurance be provided for them that their interests will be defended and spoken for at the top table where the crucial decisions will be made.
There are people who have suggested to me that when this Bill is enacted there may be possibilities of redundancies. There certainly were redundancies in the Trustee Savings Banks in Great Britain when they were privatised.
I want to say very clearly that we are opposed to any notion of privatisation and are also opposed to the provisions in this Bill for privatisation. I do think that, one way or the other, it is very important that the workers' views — and that is all the worker's views — should be expressed in what I think is a relatively modest proposal; simply that there should be two of the ten directors elected by the workers. There are worker directors, as we are all aware, in a whole series of semi-State companies — CIE, ESB, Bord na Móna, the Sugar Company, to name but a few. The place has not caved in since they took over. People suggested that there would be all sorts of problems. There have not been. The experience has been a useful one. I have absolutely no doubt that their contribution has been very worthwhile indeed. I certainly think that the contribution they have made in relation to the development of those companies has been very worthwhile. We have seen a period of industrial relations harmony in these companies since worker directors came in. They have improved the whole industrial relations situation in those companies. It would be an example for the other banking institutions if worker directors were appointed or a provision was made for their appointment in the Trustee Savings Bank.
Having said all of that, I hope the Minister will be able to accede to these amendments and will be able to accept them because as I believe strongly, they would improve the industrial relations climate in the Trustee Savings Banks and would enhance the opportunity for development in the Trustee Savings Banks.
I would like to comment on this briefly and ask the Minister a query or two. Before dealing with the specific amendment, we would probably all agree that for varying reasons, amalgamations and so on, there has been a tendency to increase the number of trustees over the last years to a point where they have become excessive at times. The right balance is being struck in having a maximum of ten. As the previous speaker has said, the contribution by many trustees over the period that the building societies have being operating in bringing the trustees to the level that they are today is a matter for congratulations.
Going on to the amendment, in the knowledge that the Trustee Savings Banks are not corporate bodies, are not companies within the Companies Act, and mindful of what is contained in section 57 of this Bill, that an order may authorise the reorganisation of one or more Trustee Savings Banks into a company referred to in subparagraph (i) or (iii) of paragraph (c), would the Minister comment on this aspect, if it is feasible for this amendment to be taken on board or must they go fully into the company situation?
Section 17 relates to the number of trustees. The main requirement is that for the future the number will be between five and ten and the consent of the Central Bank should be required for the appointment of trustees.
Senator Upton and his colleagues have tabled amendments to provide for the election of worker trustees. This is a variation of the worker directors and I concur with what Senator Upton has said about the contribution of worker directors on various boards and bodies. They have made a vast and wonderful contribution and we look forward to further contributions.
The Senator has also proposed that these trustee directors, who are not elected, should be appointed by the Minister for Finance with the consent of the Central Bank. Under the existing legislation the trustees are in effect a self appointing body as existing numbers coopt new members and it proposed to continue this arrangement. It is not an ideal arrangement. It may have been in the past when trustees were well-known local people who served in a voluntary capacity in the interests of the community. This is now changing, especially as they can be paid for their work on these boards.
In defence of the existing system it must be said that the record of trustees over very, very many years is excellent indeed. The Central Bank will be exercising a supervisory function over the trustees and the Central Bank's consent would be required for the appointment of new trustees.
In response to Senator Fallon, I should say that if the Trustee Savings Banks convert to company status in the future under section 57 then the normal company procedures regarding directors will apply.
On the question of worker appointees, this is really a matter for the trustees to consider in consultation with the Central Bank, and the Minister for Finance should not be involved. The Trustee Savings Banks are not State bodies; they are a unique structure set up under specific legislation with specific, clear guidelines. If we are to create a level playing field environment for all financial institutions the supervision must be uniform and standard. It is only reasonable to expect that that supervision be given by the authority which already controls and supervises the other institutions.
Therefore, in this situation it would not be possible to accept these amendments. I regret that this cannot be done. If, however, the Trustee Savings Banks do convert in the future under section 57 to company status then, of course, the director situation would be what the Senators aspire to.
I do not want to repeat what I have said already. I am suggesting that the worker directors be appointed because of the fact that we believe it would improve the situation. We are putting the amendment forward as a way of improving the Bill and we are also suggesting that the trustees should be appointed by the Minister rather than that you should have a situation where the lads, as it were, go on co-opting more people. That is not desirable. It is a question of control. Who is responsible? In the last analysis, if the Minister appoints the trustees, then it is the Minister who will be answerable. If the trustees go on co-opting one another, what is the story? It seems to me to be much more important that somebody should be pinpointed as holding the responsibility, in the form of the Minister, rather than that people should go on co-opting one another indefinitely. That is the main burden of these amendments — this concern that there should be worker directors. I am happy to see the Minister agree with me in relation to the general principle of the value of worker directors. There is no doubt that they have made an immense contribution in the organisations that they have been elected to. This is a useful situation in which we can continue to exploit the developments which have taken place and provide for their election.
On the section generally, I welcome the fact that the Minister did make some attempt at detailing the procedure for the appointment of trustees. If I interpret him correctly, they will continue to self-appoint, full stop. Perhaps he could expand on that because this was a glaring omission from the section, that no details were given in relation to the procedure for appointing.
In the next section there is provision for an upper age limit, which I will have something to say about shortly. What is the lower age limit, if any? We need to clarify that for the record. Does one assume that, providing they behave themselves and do not act fraudulently or anything else, they will have tenure for life? Can I assume that these trustees when self-appointed by the board of trustees will, in fact, have tenure for life if they do not behave fraudulently? That is my question. Do they come in at 18, 21 or any age in theory, and sit it out until they are 70, regardless of their competence? Apparently we do not question competence as a requirement at any stage. This is important, for two reasons mainly because we are limiting the number of trustees to ten. If you have a majority — I will not call them incompetent — of people lacking in forward vision and unable perhaps to face into the nineties and the next century that we are talking about now, there is no procedure for removing them unless they behave fraudulently. I am subject to correction on that. As far as I can read in the Bill, I do not think there is any procedure. They may sit it out until they are 70; and with the upper limit of ten you cannot, either through the Minister or by self-appointing or whatever is the procedure, add to that board the breadth of experience that may be necessary.
The second point is that in relation to amalgamation, where temporarily there may be more than ten trustees, they may be allowed to wither naturally down to the ten that is suggested here rather than having a broad section representing community workers, perhaps, a doctor, a businessman or an accountant or two. You could end up with a total board of accountants, for example, and you would not be able to bring in outside experience even if the particular Trustee Savings Banks happened to need that experience. There could be logistical problems in providing the right experience and the breadth of experience that any board of trustees will need with the restriction to ten and the fact that we are now saying that at 70 you go. You come in at some bottom age limit and can sit it out. Maybe the odd blast might struggle in there somewhere but knowing Irish society there will not be too many of them. You can sit it out until you are 70 and if you do not act fraudulently you will be tolerated.
Well, will the Minister tell me where in this Bill there is a method of getting rid of people who are not contributing to the extent that the board needs contributions? If there is a lack of experience and you are tied to ten, how can you bring in the experience you need from other fields? You cannot. The tenure for life in the absence of doing something strange is effectively what we are talking about. I understand that the UK and Northern Ireland Trustee Savings Banks behave differently in this area. Perhaps we could learn from their experience. Perhaps there is something there we could piggyback on and borrow from.
I have listened with great interest to what Senator Doyle has said. I find it amusing, indeed, and I am reasonably confident that some of the very brilliant women in our society will make their way on to the boards of these institutions.
If the level playing field is to be taken again and if it takes them as long to get on Trustee Savings Banks boards as it did in the case of some of the banks, we will be waiting, a long time.
The Minister, without interruption.
We must recognise the fact that Trustee Savings Banks have served the country and the banking system well over the years. They have operated in a very restrictive environment, with a 20 per cent lending ration, which is virtually impossible. I cannot understand how they survived and did so well in that very restrictive operation that they had. I am sure they have their own mechanism as to how they can promote people upwards or sideways and eventually give them a bequest or a presentation or going away document that will indicate that their time has come to move on and give opportunity to new blood.
This Bill is putting a lot of control over the Trustee Savings Banks. It is giving supervisory authority to the Central Bank. There will be consultation between the Minister for Finance, his Department and the Central Bank pertaining to their operations over the years ahead. Up to now there was no control over the trustees. Senator Doyle is right — I do not want to deny that fact — that trustees once appointed may remain there unless the trustees themselves decide to replace them. We are providing an upper age limit. There is no lower age limit but I am sure the age of majority would have to operate at the very least. I think they would be well into the summer of their career before being appointed to a board of this type. Basically, the situation is that the trustees would remain there if they so wished or if the trustees themselves decided to remove people or unless something went wrong, that the Central Bank itself had to intervene and give a directive to the board through the trustees that a certain person or persons for some reason or other were not suitable or not reputable to be a member of the board of a Trustee Savings Bank.
As I said earlier, under section 57, if the Trustee Savings Banks did convert to corporate status, then the rules of directorships would apply to that situation.
On the basis of the Minister's last statement that the Minister concerned has and will continue to have consultation with the Central Bank, which is a Government bank, would the Minister not accept that the Minister should have some responsibility in the appointment of worker directors? Senator Fallon suggested that we must await the company aspect. In view of the fact that the Minister has a responsibility to one of the bodies which will be the main body following the Trustee Savings Banks being incorporated, surely the Minister should have some responsibility or some say in whether or not there should be worker directors in the revised bank if he is responsible for the Central Bank?
I am not sure that it would be appropriate for the Minister to intervene in the appointment of trustees. The law, as it stands at the moment, gives special status to the trustees and to the Trustee Savings Banks. We are changing that law now but we do not propose to change the status of trustees. We are giving supervisory powers to the Central Bank. Taking into account the role they play with other financial institutions, it is really a matter for the trustees in this case to decide what is best unless the Central Bank otherwise decides. It would be an unnecessary incursion by the Minister for Finance if he were to be in a situation where he was to be appointing trustees to a financial institution when it is not his function to appoint other people in other areas, apart from the Central Bank. The fact that he would be appointing directors to the Central Bank, the fact that there would be consultation, is significant and the fact that we are at least putting new controls over the Trustee Savings Banks in line with the other banks.
I will take the wishes expressed here to the Minister for Finance and to his officials and, hopefully, to the Central Bank from there, so that these wishes can be expressed and maybe eventually incorporated.
Will Senators claiming a division please rise?
More than five Senators stood.
The division will proceed.
- Byrne, Hugh
- Dardis, John.
- Fallon, Seán.
- Farrell, Willie.
- Fitzgerald, Tom.
- Foley, Denis.
- Honan, Tras.
- Hussey, Thomas.
- Keogh, Helen.
- Kiely, Dan.
- Kiely, Rory.
- Lanigan, Michael.
- McGowan, Paddy.
- Mooney, Paschal.
- Mullooly, Brian.
- O'Brien, Francis.
- Ó Cuív, Éamon.
- O'Keeffe, Batt.
- Ryan, Eoin David.
- Wright, G.V.
- Costello, Joe.
- Harte, John.
- Norris, David.
- Ross, Shane P.N.
- Ryan, Brendan.
- Upton, Pat.