I move:
That Seanad Éireann approves the following Order in draft:
Trustee (Authorised Investments) Order, 1990,
a copy of which Order in Draft was laid before the House on 29 August 1990.
Trustee (Authorised Investments) Order, 1990: Motion.
The purpose of the draft order before the House is to amend the list of investments in which trustees may invest funds under their control. The order is being made under the Trustee (Authorised Investments) Act, 1958. The principal purpose of this legislation is to protect the beneficiaries of trusts by offering a range of suitable and prudent investments. Although a trust deed may specify wider powers of investment by the trustees, many trusts and similar funds are confined to investments authorised under the Act. In addition, the funds held by the courts can only be invested in trustee authorised investments.
Under section 2 of the 1958 Act, the Minister for Finance is empowered to amend the list of authorised investments by order. A draft of the order must be laid before each House of the Oireachtas and a motion of approval passed by each House before the order can be made. The list is kept under review and changes are proposed when appropriate. The last amendment was made in 1986.
The existing list is quite long and detailed and I can make copies available to the House if this is desired. The 1958 Act set out an original series of investments and the list has been amended by order ten times since then. The typical investments authorised are gilt-edged securities, deposits with banks and building societies and certain unit trusts. The type of investment is very much the safe and secure sort. This is as it should be in the case of trust fund investments.
I now ask the House to approve the addition of three new investments to the list. The first of these investments is in interest-bearing deposit accounts with two deposit-taking institutions — the Irish Life Building Society and Equity Bank Limited. These two institutions join the many banks and building societies already on the list. The inclusion was recommended by the Central Bank based, among other things, on the size and backing of their reserves and their record of compliance with Central Bank requirements. In the case of banks and building societies, to which common criteria now apply, an institution must have gross assets in excess of £35 million and minimum capital of £2.5 million, unless it is a subsidiary of another credit institution, in which case the parent institution must have gross assets of £100 million or more.
There are a number of unit trusts already on the list. The guidelines in this case require that the unit trust should invest only in Government securities or cash funds and that it should have been operating for three years with a satisfactory record of compliance with supervisory requirements. This limitation on the type of investment is a basic prerequisite and applies to the two unit trusts already on the list.
I propose, therefore, to add to the list the Investment Bank of Ireland's Corporate Unit Trust. They have given an undertaking that the unit trust will invest only in Government securities and cash deposits.
There is on hand a number of applications from life assurance companies for inclusion of particular life assurance products on the list. These applications are under examination at present and, if necessary, I will propose a further order to the House to add these investments to the list.
Under the terms of the Trustee (Authorised Investment) Act, 1958, I am obliged to consult a number of "referees" in regard to any proposed Order. These are the Governor of the Central Bank, the public trustee, the President of the Stock Exchange — Irish, the President of the Incorporated Law Society, the Chairman of the Irish Banks' Standing Committee and a Judge of the High Court nominated by the President of the High Court. These referees have all been consulted and no objections have been raised to the terms of the draft order.
The addition I am proposing will expand the investment options available to trust funds and will facilitate the operations of trustees, solicitors, accountants and the courts who are affected by this legislation. Unfortunately, because of the cumbersome nature of the legislation, it takes some time to complete the process of adding new names to the list. Perhaps if we were drawing up trustee legislation now we might proceed by way of a "negative" order i.e. an order not requiring the prior approval of each House. On the other hand, the House may feel, rightly, that the powers of trustees to invest funds on behalf of their principals is an important matter and that the House should be given the opportunity to see that the list of such investments is reasonable and prudent.
The Houses, indeed, in all cases have agreed with proposed orders which have come before them. Accordingly, I ask the House to give this draft order a speedy passage and I commend the motion for approval by the House.
I welcome this order and in so doing I congratulate the Equity Bank, the Irish Life Building Society and the Bank of Ireland in their further expansion and the success of the Bank of Ireland Corporate Unit Trust. It is good to see more financial houses meeting the criteria. As the Minister has said, it augurs well for the state of the financial sector that there is such a long list of finance houses, institutions and building societies who meet the rather stringent criteria laid down and reviewed under the 1958 Act.
The Act has more or less levelled the playing field between the different types of finance houses and institutions in providing for all of them to operate under common criteria. I should like to ask the Minister if this policy has proved beneficial both to the investors and to the smaller developing finance institutions. The Minister has very kindly offered to make available a list of all those institutions and I would like to take him up on that. The long list of registered banks and finance institutions indicates that there are fewer banks on the list than there were in 1958, mainly because we are down to perhaps the big four commercial banks.
I would disagree with one thing the Minister has said in his Second Reading speech and that is as regards section 2 (2). I support the original legislation directing that the order should be made in a positive fashion, that the Houses should have the opportunity of confirming the order rather than what we are more used to, namely, a situation where if an order is not annulled within 21 days of it being laid before the House it falls.
I think the House is certainly correct in being more prudent. It is important in dealing with the funds of trustees that every possible piece of information should be made available and that people dealing in trust funds should have the latest information on all of the various financial institutions. The fact that a financial institution will have assets in excess of £100 million does not count for very much in present times in trading, because you see multi-billion institutions coming a cropper with regard to market trends when you have these Black Mondays or whatever occurring. I think that dealing especially with trust funds there has to be the utmost of prudence. I would not like to see subsection 2 (2) being changed because, as the Minister pointed out, on each of the occasions, that a Minister for Finance has come to the Oireachtas seeking for approval for orders the orders have been approved.
Looking at the list of all the institutions that meet this criteria I think it would indicate that the business of finance and the money market here is very much alive and vibrant and the people in charge of trust funds have a very wide range of options before them. I hope that situation will continue for a long time. On behalf of my group in the House I welcome the order as proposed by the Minister. I wish the three additions to the list continued success and many years of profitable trading in their business.
I basically welcome the order, specifically the extension of investments to the Equity Bank, Irish Life and the Bank of Ireland Corporate Trust Unit and again reiterate what the Minister has said that the principal purpose of this legislation is to protect the beneficiaries of trusts by offering a wide range of suitable and prudent investments. I would, like my colleague on the opposite benches, wish these banks well and hope that in future prudent investments will prove very fruitful for those who have confidence in them.
I would like to thank the Members for their very positive comments. I certainly take the point made by Senator McDonald in reference to the remarks I made at the opening stages of the debate. On previous occasions here the Senator had similar views on other legislation. We understand fully the Senator's views about this. Really he is referring to the necessity in many of these cumbersome pieces of legislation to find ways in which the procedures might be speeded up a bit.
I certainly welcome the positive contributions we have had here. I would like to comment as well in relation to a point the Senator made about discrimination. There is not any discrimination between large and small institutions. A reading of the list will show that there are both large and small deposit-taking institutions on the list. Investors are well protected in relation to the deposit-taking institutions and there is a depositor protection scheme for savers introduced by the Central Bank Act and the Building Societies Act of 1989.
Senator McDonald also queried whether there were common criteria laid down. The answer to that is yes. For example, the exact same criteria apply to banks and building societies. In the case of unit trusts obviously there will be differences to reflect the different nature of unit trusts. The criteria applies equally and I want to assure the Senator on that.
I would like to thank the Senators for their very constructive remarks and to express my appreciation for their comments.
Question put and agreed to.
Sitting suspended at 4.35 p.m. and resumed at 6.30 p.m.