Central Bank Bill, 1996: Second Stage.

Question proposed: "That the Bill be now read a Second Time."

The Central Bank Bill, 1996, provides for a range of new measures relating to the powers and obligations of the Central Bank. The main Acts relating to the bank are the Central Bank Acts, 1942, 1971 and 1989. The last major revision of Central Bank legislation was the 1989 Act which, as well as updating the charter of the Bank itself, considerably extended the powers of the bank to supervise banks and other financial institutions and introduced a deposit protection scheme for depositors.

The present Bill includes provisions relating to payment systems, bureaux de change and investment intermediaries as well as dealing with a number of other matters in Central Bank legislation which require updating and amendment. A limited number of amendments are included to ensure compatibility with certain defined provisions of the Treaty on European Union, which took effect with the start of the second stage of economic and monetary union on 1 January 1994.

However, the Bill does not address the legal issues arising from the move to stage 3 of economic and monetary union. Although extensive preparatory work has been done on the legislation required in connection with the move to stage 3 of economic and monetary union it would be premature to finalise it at this stage or in this Bill. Article 108 of the Treaty requires each member state to ensure that, by the date of establishment of the European System of Central Banks, the ESCB, at latest, their central bank legislation is compatible with the Treaty and the statute of the ESCB. With stage 3 of economic and monetary union commencing on 1 January 1999, this will be early 1998. It has been decided to wait until strictly necessary before legislating for stage 3 of economic and monetary union. The European Monetary Institute has been consulted and they have agreed with this approach.

Currently, the Central Bank has no role in the approval of payment systems nor a direct right of supervision and intervention. The growth of international trade, the size of daily settlements, the increased use of electronic payments and the volatility of trade flows have caused individual central banks to take steps to address the various risks arising in their own domestic payment systems, in particular the risk of default, breakdown and liquidity shortage which would have grave implications for the security and stability of the banking system.

Similar steps are now required in Ireland, particularly for large-value transactions. The current payment system, which has served well to date, is not properly equipped to respond adequately to the increasing pace of change in money transmission services. Discussions on the restructuring of the current system have been ongoing for some time and are at an advanced stage. The Government is particularly concerned to ensure that payment systems in the State are effective, efficient and open and that the systems themselves do not add to, or cause, instability in the operation of financial markets. In brief, the Central Bank will be given the power, for the first time, to approve the establishment of payment systems and vet their rules. These powers will also apply in the case of existing payment systems.

Apart from those which form part of a bank's operations, bureaux de change have been effectively outside the scope of any official supervision since the abolition of exchange controls some years ago. The need to introduce a supervisory regime at this point arises from our international commitments in the area of money laundering.

The Financial Action Task Force, FATF, of the OECD, the international body set up to combat money laundering, has strongly recommended that those countries which do not currently supervise bureaux de change should do so because of their potential use in the money laundering chain. While we are not bound to follow the views of the FATF in this matter, failure to do so would undoubtedly leave Ireland open to criticism.

The Government has, therefore, decided to include provisions in the Bill to give the Central Bank the appropriate powers of supervision. These provisions are based very closely on existing provisions relating to the supervision of money brokers — Chapter IX of the Central Bank Act, 1989 — and will require bureaux de change to be authorised by the Central Bank with the standard provisions regarding appeal to the Minister for Finance where the bank proposes either to withhold or revoke an authorisation. The degree of supervision of the operations of bureaux de change would largely be a matter for the discretion of the Central Bank under a general framework set out in the Bill.

The Investment Intermediaries Act, 1995, established the Minister for Enterprise and Employment and the Central Bank as supervisory authorities for investment business firms. The Act also provides that the Minister and the bank are the competent authorities for the purposes of the EU Investment Services Directive and Capital Adequacy Directive in relation to those firms which are subject to the Directives.

The Government, on the recommendation of the Minister of State at the Department of Enterprise and Employment with responsibility for commerce, science and technology, Deputy Rabbitte, has decided that responsibility for the regulation of those investment business firms which are currently regulated under the Minister for Enterprise and Employment should be transferred from that Minister to the Central Bank. The Central Bank will, as a result, be the sole supervisory authority for investment intermediaries and the sole competent authority for the purposes of the Investment Services Directive and the Capital Adequacy Directive.

In so deciding, the Government took into account a number of factors, including the need to take strong and decisive action to restore confidence in the investment intermediary system after the Taylor affair and earlier financial scandals; the experience to date in the implementation of the existing regulatory structure under the Investment Intermediaries Act, 1995; the fact that the regulatory regime envisaged when the original legislation was drafted was no longer feasible because of the decision by the Irish Brokers Association to cease to act as a self-regulatory body in respect of its members and the earlier decision by the Insurance Intermediary Compliance Bureau not to take a regulatory role under the Act; recommendations made to the Minister of State at the Department of Enterprise and Employment with responsibility for commerce, science and technology by the authorised officer carrying out an investigation into the circumstances surrounding the Taylor affair; the need to maximise operating efficiency and ensure consistency in the approach to legislation; and, most importantly, the expertise and resources available to the Central Bank for the regulation of financial concerns generally and investment business firms specifically.

It is essential that responsibility for regulation of these intermediaries be transferred to the bank as soon as possible to avoid the wasteful use of resources by the Department of Enterprise and Employment in establishing an interim regulatory system to take over the role envisaged for the Irish Brokers Association and the IICB. The amendments contained in Part VI are no more than the minimum amendments necessary to effect the transfer of regulatory responsibility under the Investment Intermediaries Act, 1995, from the Minister for Enterprise and Employment to the Central Bank.

The Department of Finance is carrying out a review of the Investment Intermediaries Act, 1995, in conjunction with the Departments of Enterprise and Employment and Justice and the Central Bank. That review will also take account of any recommendations made by the Select Committee on Enterprise and Economic Strategy, which, as Members of this House may be aware, is examining the system of regulation of investment intermediaries administered by the Department of Enterprise and Employment, with particular reference to the collapse of the Taylor Group. I look forward to the report of the committee.

It is envisaged that any necessary amendments to the Investment Intermediaries Act, 1995, will be incorporated in the forthcoming Investor Compensation Bill. I should add at this point that the amendments to the Investment Intermediaries Act, 1995, which are contained in Part VI of this Bill, have been the subject of consultation with the European Monetary Institute. The institute has confirmed that these amendments will not adversely affect the stability of financial institutions and are not inconsistent with the requirement for independence of central banks.

Several other matters requiring attention are also incorporated in the Bill. The extension of the supervisory and enforcement powers of the bank is proposed in order to bring them up to date with best current practices. Provision for the accountability to the Oireachtas of the bank is also included.

To save time and to spare Senators a recitation of the obvious, I propose to restrict my remarks on individual sections of the Bill to those of substance or particular interest. First, I would like to point out that Part 1 of the Bill, which is usually a routine set of provisions, actually contains a section that is of some importance, that is section 2(2). This is a section which defines "deposit". Banking business is defined essentially as the taking of deposits. There is, however, no Irish legal definition of what constitutes a deposit. As the savings market becomes more competitive, the distinction between deposits and other forms of investment is becoming more blurred and the lack of a legal definition of a deposit is causing concern. This anomaly caused particular concern during a recent successful prosecution of a finance company by the Central Bank. Section 2(2) provides for such a definition to be incorporated into Irish law.

All of Part II deals with payment systems and the manner in which the Central Bank will implement their new responsibilities in relation to the approval and regulation of payment systems. Perhaps the most interesting provision here is in section 19, which provides that once payments have been debited from a credit institution's account in the Central Bank, on the instructions of the credit institution concerned, the payment becomes final. This is to ensure that once payments have entered a payment system they cannot be revoked. Revocation of a large value payment could result in the unwinding of a number of other related payments within the system and this could have serious consequences for the system as a whole.

Part III provides for the power of the Central Bank to form or acquire a company, and in this regard section 23 provides that, subject to the consent of the Minister for Finance, the Central Bank may become a member of and/or acquire, hold or dispose of shares in a company. The functions of any subsidiary company established or acquired under the terms of this section will be restricted to those of the bank, and any guidelines or obligations applicable to the bank will also apply to such companies.

As regards Part IV, the provision which, I suppose, hits closest to home is in section 24, which provides the Governor shall attend before a Select Committee of Dáil Éireann — currently the Select Committee on Finance and General Affairs — and furnish that committee with any information requested, having due regard to the independence of the bank and subject to any restrictions imposed on the Governor under the Central Bank Acts — for example, the confidentiality provisions of section 16 of the Central Bank Act, 1989. This statutory obligation on the Governor to attend before the committee will replace the informal arrangement which is currently in place and the terms of reference of the committee must be amended accordingly.

As I mentioned earlier, Part V of the Bill deals with the supervision of bureaux de change and I suppose the only thing to be said here is that the Central Bank will have discretion on the level of supervision to be applied. The main objective here is to make sure that bureaux are not used for money laundering purposes — not that there is any suggestion that they are at present — but to bring us into line with the recommendations of the OECD's moneylaundering watchdog, the Financial Action Task Force.

As regards Part VI of the Bill, the various provisions here are purely technical — those required to ensure that the Central Bank will be the sole supervisory authority for all investment business under the terms of the Investment Intermediaries Act, 1995.

Under the heading of Miscellaneous there are a number of sections worthy of comment. Sections 50 and 51 amend the Bills of Exchange Act, 1882, and the Cheques Act, 1959, to confer legal status on cheques marked "account payee" with or without the word "only". The intentions behind these provisions are to help counteract fraud and to also ensure more speedy transfer of cheques to recipients. Section 50 also provides an indemnity to banks arising from any refusal to cash the cheque or to transfer the cheque to another in pursuance of an endorsement on the cheque to that effect.

These provisions were originally requested by the Insurance Industry Federation. The federation wished to ensure that cheques made out to policyholders and transmitted via insurance brokers, etc., must be handed on to the client and cannot be converted in any way to the use of the intermediary. They felt that such a safeguard would considerably reduce the risk of the fraudulent conversion of clients' money.

Senators may be aware that these provisions were the subject of lengthy discussions in the course of the passage of the Bill through the Dáil. Questions were raised as to difficulties which may arise for recipients who, having safely received cheques crossed in the manner prescribed in the Bill, have no bank accounts into which to put them. Following the passing of the Bill in the Dáil, representations were received from the Irish Bankers' Federation which raised, inter alia, complex issues concerning the legality of title to these cheques. I will revert to the House on this matter on Committee Stage.

Under the terms of section 54 the provisions of section 16 of the Central Bank Act, 1989, which relates to non-disclosure of information by the bank, are extended. Various amendments facilitate the disclosure of information in relation to the conveyance of statistical information to the Central Statistics Office; the disclosure by the bank of information received from another regulatory authority where that authority has given permission; the ability of the bank to request information from entities it supervises in response to requests for such information from regulatory authorities outside the State; the bank's obligations under the money laundering provisions of the Criminal Justice Act, 1994, and the conveyance of information to the European Monetary Institute in accordance with the Maastricht Treaty.

Section 56 facilitates the protection of the payments system in the event of a liquidation by requiring that the Central Bank be notified of any petition for winding up before the petition is presented. In a number of countries there exists a provision in law called the "zero-hour rule" whereby a liquidator of a defaulting bank can ask the courts to set aside all financial transactions and payments made by the bank between the time the liquidator was appointed and the previous midnight, "zero hour". Among EU authorities there is a general concern to involve the central banks at an early stage so as to limit the potential damage to payments systems of any such rulings. There is no precedent for such a ruling in Ireland but it is not precluded. The requirement that the bank be notified of any petition for winding up before the petition is presented should ensure the protection of the payments system in such cases.

Section 59 amends section 90 of the 1989 Act, which relates to the supervision by the Central Bank of firms established in the International Financial Services Centre, to allow the bank to enforce its supervision from an earlier date specified by the bank. Under the existing legislation, Central Bank supervision commences when the tax certificate is issued by the Minister. However, several firms operate in the centre in advance of receiving the certificate. This section allows the bank to enforce its supervision from an earlier date specified by the bank — for example, the date on which a firm's application to set up in the centre is accepted. The practice whereby firms are approved in principle and start operations prior to certification has become well established and the supervisory law must recognise that fact.

Sections 66 to 70 delete provisions in Irish law which conflict with Article 104 of the Treaty on European Union which prohibits monetary financing of the public sector by central banks and this is where we reach our reference, however limited, to economic and monetary union.

With regard to section 79, I have to admit that even Homer nods. This section provides for the bank and any subsidiaries of the bank to be subject to value for money audits under the Comptroller and Auditor General (Amendment) Act, 1993. In order to facilitate separate arrangements to make the bank accountable to the Select Committee on Finance and General Affairs, an order was made under section 21 of the Comptroller and Auditor General (Amendment) Act, 1993, which had the effect of excluding the bank from examination by the Committee of Public Accounts. This order had the unintended effect of removing the bank from the list of bodies subject to the value for money audit under the Act. This section provides for the bank and any of its subsidiaries to be subject to such audits.

Section 80 amends section 101 (a) of the Building Societies Act, 1989, to provide for more equitable treatment of certain joint account holders as respects voting rights and the issue of free shares in the context of future conversions of building societies. The need for this amendment arises from experience with the conversion of the Irish Permanent to a plc. There was controversy regarding a number of joint account holders who did not qualify for free shares because of the order of the names on an account or shareholding following death or marriage of a joint account holder, even though the joint account would have otherwise met the relevant qualifying criteria, in particular being a shareholder for two years.

Section 22 is a provision to allow the Minister to transpose into Irish Law the new EU Directive on Cross-Border Credit Transfers which during the Irish Presidency of the EU, I managed to steer through the tortuous conciliation procedure with the European Parliament. I commend the Bill to the House.

I commend the Minister of State for her comprehensive presentation of the Bill. This Bill is very diverse in the range of activities it covers. The Bill purports in the terms of its Title to deal with the Central Bank, but half of the provisions are analogous to the Central Bank. The Bill is not just complex but is composite legislation which seeks a range of complex achievements. One can argue in favour of such legislative arrangements whereby certain provisions are piggy-backed, so to speak, on a central legislative provision.

The composite approach in this instance is not a good approach. It prevents us from focusing on the core issue in the Bill. Generally speaking, legislation should be as focused as possible and there is nothing wrong with short Bills seeking to achieve a specific purpose. If we are enacting legislation to consolidate a variety of related items of legislation the approach adopted in this Bill carries with it certain dangers. It makes it difficult for either House of the Oireachtas to focus in a way that will do justice to the provisions the Bill seeks to achieve.

It was suggested in the Dáil that the Bill had the appearance of being driven by the need to preserve a role for the Central Bank after economic and monetary union transfers its functions to Frankfurt. I am sure that is a little disingenuous but it is an idea that suggests itself on reading the Bill. It is hard to avoid the conclusion that the Bill is driven by territorial imperatives of the Central Bank, which faces a degree of pruning in the not too distant future with the move into economic and monetary union. It was also suggested in the Dáil that the Bill was little more than an attempt at "feather-bedding"— providing new roles for an institution which will lose some of its core functions. In her response in the Dáil I do not think the Minister of State entirely dispelled that suspicion and, although her speech this morning was comprehensive, the suspicion lingers.

Part II of the Bill deals with the regulation of payments systems. It extends to the Central Bank the right to become a party to a payments system and to become involved in the regulation of such systems. That would merit the entire focus of an item of legislation in itself. Section 15 allows the bank to impose requirements on members of a payments system and that is welcome.

The Central Bank already possesses analogous powers in so far as it currently regulates banking payment operations and charges. The Central Bank does not acquit itself well in this regard. Banking in Ireland has been allowed to operate as a cartel, in effect, since the foundation of the State. Real competition is only recently becoming evident and the extent of real competition when one compares charges must be questioned. Despite greater competition and recent profits, the Irish banking system continues to impose punitive charges on the accounts of individuals and small firms. The Central Bank has not used its existing regulatory powers to positive public benefit so there is a question mark over giving it additional regulatory powers, as is done in Part II. Perhaps it is time the Oireachtas debated the existing regulatory arrangements within the Central Bank.

Part III gives the authority for the formation and acquisition of subsidiary bodies by the Central Bank subject to the consent of the Minister. There are certain dangers in this. Over the years in the State-sponsored sector — not just in Ireland but worldwide — acquisitions and extensions into subsidiary areas have proven difficult to control. I would have imagined an arrangement to allow the Central Bank to acquire a subsidiary body should also receive the prior, positive affirmation of both Houses of the Oireachtas and I am concerned that it will only require the prior consent of the Minister. For some time there has been a rather incestuous relationship between the Department of Finance and the Central Bank, so perhaps the Minister will consider making any acquisition subject not just to the consent of the Minister but to the positive approval of Dáil and Seanad Éireann.

Part IV deals with the functions and duties of the Governor of the Central Bank. Section 23 provides he shall attend before the Dáil Select Committee on Finance and General Affairs and furnish it with any information requested. The Minister gave a comprehensive reason for including that provision, which I endorse because it provides a degree of clarity. However, one House of the Oireachtas, Seanad Éireann, is excluded, a point I have had to make on several occasions in the recent past to a variety of Ministers. Is it wise to specify in this section, with such particularity, the committee before which the Governor should appear? It is not impossible to envisage that other committees may wish to meet him. It is dangerous to specify because it would give the Governor——

It does not specify it.

The Oireachtas Joint Committee on State-Sponsored Bodies has had difficulty getting people to appear before it. I understand from the Minister's remark that this is not meant to be a constricting section and I accept that. However, whatever the current intent of the section may be, it gives rise to the danger that a future Governor who may wish to be less than forthcoming will use it to avoid appearing before other committees. If I am wrong the Minister can correct me.

Section 24 empowers the Central Bank to assist the Central Statistics Office in the collection, compilation, analysis or interpretation of balance of payments, national accounts or other financial statistics. This is an odd provision as one would have imagined the utmost co-operation between these agencies. When I was an official in the Department of Finance I was deeply concerned at the lack of co-operation between the various agencies involved in the compilation and production of national income and expenditure statistics. Shortly after I left the Department, when I worked as a consultant, it struck me that no section of Government knew what happened in other sections. An almost proprietorial attitude was adopted by each agency to the statistics and material they generated; this had no good purpose and did not serve the public interest. I am, therefore, surprised that it is necessary to give effect in statute to something which should have occurred anyway but there must be a good reason and I would be grateful if the Minister could indicate what it is.

Section 25 amends section 19 of the Central Bank Act, 1942, and extends the proper prohibition on the Governor being a director of a licensed bank. Is the extension needed because of the increased number of roles given to the Central Bank under this Bill? Arrangements which apply elsewhere could apply here. Rather than it being necessary to introduce a measure like this at each change in the role of the Central Bank, there could be a general prohibition on the Governor being a director of any institution. I have no adverse comment on section 26 but I wonder why it is necessary.

I welcome Part V which deals with the operations and supervision of bureaux de change. Some of them are little more than free-wheeling, bucket shop operations and there are considerable and inexplicable variations in their rates and charges, so I am glad the business will now be regulated. As the OECD task force warned, there is a danger that unregulated bureaux de change could become involved in major criminal activity like money laundering and, while there is no evidence of that in Ireland, the Minister is right to take note of the point. However, why did she draw back in her contribution from fully endorsing the findings of the OECD task force? Notwithstanding comments made elsewhere about Part V, its provisions are good.

The Minister acknowledged that Part VI is somewhat heterogeneous. It is like a muesli with almost everything included — it is difficult to comprehend, its diversity is unsatisfactory and it raises a number of issues. Sections 35 and 36 provide an indemnity to banks arising from any refusal to cash or transfer a cheque to another in pursuance of an endorsement on the cheque to the effect that it is "account payee only". I am not clear what the sections mean, although the Minister referred to the need to protect clients. Other sections of Part VI touch on the composition of the board and the governorship of the Central Bank, matters worthy of being debated at other times as well as on this Bill.

As I said, there has been an almost incestuous relationship between the Department of Finance and the Central Bank. The tradition has been that the Central Bank governorship has almost inevitably been a sinecure, albeit a valuable and central appointment, for a retiring Secretary of the Department of Finance. I wonder at the way governors and members of the board of the bank have been appointed. While governors have served the State well, there is a need for a wider debate on the composition of the board of the bank because, notwithstanding the advent of economic and monetary union when it will have a different focus, it will play an increasingly important role in the economic life of the nation.

Part VI also deals with important lessons that have arisen from investment intermediaries, especially from the collapse of the Taylor group. There is a recognition of failure in this section. The decision to pass responsibility from the Department of Enterprise and Employment to the bank is important. In my experience, the Department has been timid and fearful in implementing its supervisory role. On four or five occasions in this House I asked that a designated official be appointed by the Department to examine the affairs of companies concerned with Clonamannon over a number of years. This finally occurred after 18 to 20 months of lobbying. The then Minister was advised that my proposition was so novel that it was outside the law. While Ministers involved shared my concern, the advices they received from the Department were narrowly drafted and timid. It has failed in its responsibilities as an agency in this area, and Part VI of the Bill recognises that.

There is an ongoing debate on the Taylor affair. A point made is the need for the publication of as much material as possible arising from the belated interventions of the designated official and the Department of Enterprise and Employment. The Minister of State has explained that he does not wish to publish the full details of the report on the affair because he and his officials are anxious not to prejudice future action. While no public representative would wish this, there is a need for information and for details of the investigation to become available as soon as possible. Deputy O'Rourke called on the Minister of State to publish as much material as possible, without prejudicing future actions, and to let us have reference in the report to the failures of supervision. They would be helpful to formulating our views on this matter.

I have difficulty understanding the impact of sections 50 to 54 in so far as monetary financing of the public sector by central banks is prohibited. Will the Minister of State elaborate on this? I welcome section 63, which provides for the Central Bank to be subject to value for money audits under the Comptroller and Auditor General (Amendment) Act, 1993. I encountered difficulties with the bank over its reluctance to hold any debate on the issue of new coinage. Its approach did not represent best value for money. However, a lacuna which existed is now being addressed.

I have no specific difficulties with the Bill. However, a Bill like this, containing such a diverse range of complex issues, is very difficult. Where possible we should avoid dealing with complex issues in the form of composite legislation. It has proven to be dangerous and even disastrous in other jurisdictions, for example, in the US, where there is a tendency to piggy back on legislation. We should not go down that road.

I congratulate the Minister of State for steering through section 22 and the provision regarding cross-Border credit transfers during the busy Presidency of the EU. I do not have great difficulty with the Bill, which is very technical. Given this, I will deal with aspects of it in more detail on Committee Stage.

The Bill includes provisions relating to payment systems, bureaux de change and investment intermediaries as well as dealing with a number of other matters in Central Bank legislation which require updating. The Minister of State pointed out that the growth of international trade, the size of daily settlements, the increase in the use of electronic payments and volatility of trade flows have caused central banks to take steps to address various risks arising in their domestic payment systems. She went on to say that the current payment system, which has served us well to date, is not properly equipped to respond adequately to the increasing pace of change in money transmission services.

The Government is right to ensure that the payment systems in the State are effective, efficient and open and that the systems themselves do not add to or cause instability in the operation of financial markets. The Central Bank will be given the power for the first time to approve the establishment of payment systems and vet their rules. These powers will also apply in the case of existing payment systems. I am pleased that the Government has decided to include provisions to give the bank the appropriate powers of supervision with regard to bureaux de change.

Section 79 provides for the bank and any of its subsidiaries to be subject to value for money audits under the Comptroller and Auditor General (Amendment) Act, 1993. To facilitate separate arrangements to make the bank accountable to the Select Committee on Finance and General Affairs, an order was made under section 21 of that Act which has the effect of excluding the bank from examination by the Committee of Public Accounts. This had the unintended effect of removing the bank from the list of bodies subject to the value for money audit under the Act. The section provides that the bank and any of its subsidiaries are to be subject to such audits.

I also welcome the amendment of the Building Societies Act, 1989, to provide for more equitable treatment to certain joint account holders in respect of voting rights and the issue of free shares in the context of future conversions of building societies. The need for this amendment arises following the conversion of the then Irish Permanent Building Society to a plc. It generated controversy when some people who had been account holders for years did not get shares. I understand that the company will be providing approximately £14 million later this year for this area.

I am delighted the Minister has included section 80 in the Bill. I agree with Senator Roche about what happened with Taylor Investments; it was a scandal and should be debated.

Will the Minister of State elaborate on the issue of crossed cheques? People can be caused a great deal of embarrassment when they try to cash a cheque in a bank with which they do not have an account and the bank refuses.

Nobody disagrees with competition. However, there are too many financial institutions in this country. Our population is only 3.6 million but every financial institution — building societies, banks, credit unions — is represented in every town. They would not be in business unless they were making money and it is ordinary people who have to pay. We must examine the area of controlling interest rates and bank charges for lodging coins, cashing cheques and so on. I do not know how financial institutions make money because ordinary businesses can fold and go out of business as a result of competition. However, apart from Taylor Investments, it appears financial institutions do not go out of business.

I would like the Minister of State to discuss the issue of small family businesses with the Minister for Finance. If the majority of family business owners run short of money, get into financial difficulties or wish to set up a business, they approach their parents, brothers or sisters for financial aid. Tax concessions should be given to relatives who invest in family business. The majority of family members have, at some stage, contributed to their family business but have received no reward in terms of tax relief. There is great scope in that regard for immediate family members to invest in family businesses.

The first time home buyer's grant of £3,000 was introduced a number of years ago to aid the then ailing building industry. However, there has been a complete turnabout in that area and now the building industry can exploit house buyers. Recently, people have been queueing to buy houses in Dublin. However, they are only queueing to buy new houses; I do not see any queues to buy second-hand houses. I ask the Minister of State to convey to the Minister for Finance that the £3,000 first time house buyer's grant should also be made available to first time buyers of second-hand houses. There is great value in second-hand houses for the people who are setting out in life and buying a house for the first time. There have been large increases in property prices throughout the country recently, with some properties doubling in value.

I compliment the Minister on the Bill, with which I have no great difficulties. It is a very technical Bill and I would like to go into it in more detail on Committee Stage.

I welcome this very technical Bill which provides for a range of new measures relating to the powers and obligations of the Central Bank, including the provision for the accountability of the Governor of the Central Bank, extension of the Central Bank's supervision and enforcement powers and supervision of bureaux de change. These are designed to comply with the provisions of the Treaty on European Union.

Part II of the Bill provides for the regulation of the establishment and operation of payment systems in the State. Briefly, these provisions will require all payment systems to be approved and have their roles vetted by the Central Bank, which is very welcome. Part III gives authority for the formation or acquisition of subsidiary bodies by the Central Bank. Part IV deals with the accountability of the Governor of the Central Bank while having regard to the independence of the bank. It provides for the attendance by the Governor of the Central Bank, if so requested, before the Select Committee on Finance and General Affairs of Dáil Éireann. Those provisions are very welcome.

The Bill refers to electronic payments. It is possible for people in far off parts of the world, through the use of credit cards and otherwise, to move money. That must be properly controlled or else it will lead to money laundering and the transferring out of the State of money obtained by dubious methods. I welcome the controls in the Bill for this. The speed, volatility and huge volume of world trade means that Ireland cannot allow itself to be left behind.

We need tighter controls to prevent fraud, particularly the loss of clients' savings by companies which act as brokers for people who freely and honestly give them their money. The steps being taken in the Bill will help to eliminate that.

I welcome the provisions which have been made regarding bureaux de change, especially in relation to money laundering. However, the Central Bank and the authorities should also look at the rates of exchange offered and commissions charged by bureaux de change. The rate of exchange offered by these bureaux, which often do not work to the good of the customer, is often very different to that quoted in the newspapers. The requirement on future bureaux to be authorised by the Central Bank is a very welcome step in the right direction.

Sections 50 and 51 deal with the legal status of cheques marked "account payee only". It is very important to give these cheques legal status. When payments are made to a client through an agent, one dishonest person handling money that way can lead the client along the wrong road. If the legal status of these cheques, marked account payee, are strictly adhered to, the money will get to the client properly. They can easily open an account in a bank rather than running the risk of the money being handled in a dubious fashion.

I also welcome the provision for the regulation of investment firms with controls for the Central Bank as distinct from having them dealt with by the Department of Enterprise and Employment. This will lead to more safety in investment. In order to provide an nest egg for their futures, some people invest their savings and find themselves caught out as has happened in the past. The more regulation we have to prevent this the better.

I welcome and support the Bill.

I thank Senators for their support for the Bill and their constructive questioning of certain elements. I appreciate that it is a wide ranging and technical Bill.

However, I do not accept Senator Roche's point that only 50 per cent of the Bill relates to the activities of the Central Bank. This Bill is necessary to clear the decks before the publication of the economic and monetary union Bill. On the issue of economic and monetary union, this Bill is not designed to feather bed the jobs of central bankers in the post-EMU period as was suggested by the Senator. The only functions that will transfer from the Central Bank to the European Central Bank will be those relating to monetary policy. All other functions, in particular those related to the regulation of the financial markets, will remain the responsibility of the Central Bank.

Senator Roche called for a wider debate on the composition of the board of the Central Bank and the manner of the appointment of the Governor. These are issues which will have to be addressed in regard to the economic and monetary union Bill and I look forward to an extensive debate on these and other issues when that Bill is published and introduced before the Houses. The Senator also mentioned bank charges. The Central Bank no longer has responsibility for these; it is now a matter for the Director of Consumer Affairs under the Consumer Credit Act, 1995.

The provision dealing with subsidiaries of the Central Bank is an enabling one and not only is the approval of the Minister for Finance required but the possible functions of such subsidiaries are delineated in the Bill. They can only perform functions which the Central Bank is empowered to do and are subject to whatever direction or guidelines that may be given to the bank.

Senator Roche referred to the Taylor affair. I am aware the Minister of State with responsibility for commerce, science and technology has issued a statement to the effect that the report of the authorised officer of the Department of Enterprise and Employment appointed to investigate the collapse of the Taylor group of investment companies will not be published. The decision not to publish the report is based on legal constraints and I thank Senators for recognising those constraints. We must do nothing as public representatives to prejudice due legal process. The investigation into the collapse of the Taylor group is a matter for the Department of Enterprise and Employment. I am not in a position to comment further on the matter as a result.

Senator Roche referred to section 26 and inquired about its purpose at present. The Governor of the Central Bank is prohibited from holding office as a director of the bank and section 26 extends this prohibition to all other financial institutions regulated or supervised by the Central Bank.

Senator Burke referred to the crossed cheques provision. I will deal with that in more deal on Committee Stage. There are concerns about the legal interpretation of the move we have planned in this Bill in response to the insurance industry. I am looking at that again and will return to it on Committee Stage. We must do nothing to make life more difficult for individuals who wish to cash crossed cheques in banks, particularly if they do not have an account in the bank. That is not the intention of the proposal and I will also be looking at that on Committee Stage in response to representations from the banking industry on their concerns on that matter. I thank Senators for their supportive comments on different aspects of the Bill and for underlining areas of concern.

Question put and agreed to.
Committee Stage ordered for Wednesday, 12 March 1997.
Sitting suspended at 12.10 p.m. and resumed at 2 p.m.