Seanad Éireann debate -
Thursday, 26 Mar 1998

Vol. 154 No. 17

National Irish Bank: Statements.

Tánaiste and Minister for Enterprise, Trade and Employment (Miss Harney)

I am pleased to be in the House but I am not pleased to be here to discuss this subject. I had intended being present yesterday evening to discuss Senator Costello's motion on a minimum wage. I apologise for my failure to attend but it was because of a Government meeting called for 6.30 p.m. I understand the National Minimum Wage Commission will report next week and, when it does, I will be delighted to return to the House to discuss the report after a period of time for its consideration has elapsed.

The report last night on RTÉ's 6 o'clock news contained the most damning allegations ever made against an Irish clearing bank. The fact that National Irish Bank has confirmed the substance of the allegations made by RTÉ is shocking. Most people will be amazed to hear that the bank took money from its customers, that it concealed that fact from them and that it failed to repay the money. People will be shocked to know that it happened eight or nine years ago. It is worth reading into the record the statement made last night by National Irish Bank. It began by saying that the incidents referred to go back many years and do not reflect current practices. It states that they were practised:

. in a small number of branches and in a limited number of accounts. It occurred in the late 1980s and early 1990s.

We accept that customers affected by the unauthorised practice were not advised of it and were not offered recompense at that time. The Bank regrets this. NIB will seek to identify such accounts and undertakes to reimburse any customers so affected.

Most people will be very cynical of a bank which became aware eight or nine years ago that money was being taken from its clients in some of its branches, which concealed this fact, which made no effort to repay the money in question and which issued a very limp apology only after these facts became public.

Banks command enormous trust in this economy. When people place their money in a licensed bank they expect it to be safe. It is important we have trust in the banking system. The allegations are seriously damaging for the banking industry, for industry generally and for the international reputation of Ireland. It is fair to say that we have successfully marketed the International Financial Services Centre on the basis that Ireland is a very good place for a bank or financial institution to operate in. It is a serious state of affairs when the trust between a bank and its customers breaks down.

When we became aware in January of the allegations surrounding the management of National Irish Bank's insurance policies, we wrote to the bank, received a response and referred that response to the Attorney General for advice and subsequently to independent senior counsel. That became available on 10 March and it advised a certain course of action. I wish to outline to the House how we dealt with these issues.

When the insurance matter became public, we were advised in the first instance that since the Department did not have the information in our possession, we had in the interests of natural justice to write to the bank and ask it for information. Following its response, the legal advice was that we could either write again to obtain further information or we could appoint an authorised officer under the Insurance Acts. We chose the latter and he was appointed last Monday. The delay in his appointment from 10 to 19 March is accounted for because I was in the United States and the Minister of State, Deputy Treacy, who was handling this matter, does not yet have the power devolved to him to sign or to approve the signing of a warrant for the appointment of an authorised officer. That officer went to the bank on Monday.

Last night, when we became aware of the new allegations, which was the first time we became aware the bank was taking money from its customers, that it did not acknowledge the fact and that it made no attempt to repay the money in question, the Government had an emergency meeting, which is very unusual and is an unprecedented step. However, we knew that what was evolving and emerging was serious not just for National Irish Bank and its customers but also potentially for the banking industry in Ireland and for the image of the country. We sought legal advice about the best way forward. We discussed the possibility of asking the Director of Consumer Affairs to carry out an investigation because he has responsibility for bank charges since 1996. He is now carrying out that investigation and he met with a banking representative this morning.

We also explored the possibility of petitioning the High Court under section 8 of the Companies Act to appoint an inspector to investigate what was happening in National Irish Bank. The advice as regards the appointment of an inspector is significant. An inspector has been appointed on only two previous occasions and the appointment has never been sought without a preliminary inquiry first being carried out by an authorised officer. The advice was that we had to be sure we had documentation and facts in our possession which would justify to a court the appointment of an inspector under section 8 of the Companies Act.

It was not until later last night, when National Irish Bank confirmed that the allegations were substantially correct, that we knew we had facts in our possession which had been confirmed and which may warrant the appointment of an inspector.

Throughout the day officials of my Department have been meeting with the Attorney General and with independent senior counsel to prepare the case to apply to the High Court for the appointment of either a single inspector or a team. It may well be and it is my preference that there should be more than one person because both a person with competency in accounting and one with competency in the law are needed. We are preparing that case but I am not certain whether it will be ready this evening. It could be tomorrow but I hope it will be no later than that. As I have been in the other House since 12.30 p.m., I have not had an opportunity to meet with the team since early this morning. I hope to do that shortly after I leave here.

In addition, I understand the Garda Fraud Squad has opened an office to receive complaints from members of the public with a view to carrying out a Garda investigation. I believe that is appropriate.

The nature of the inquiry, of which I hope the court will approve, must include who knew about these practices, who condoned them, who ignored them, who supervised them and at what level of the bank were they known. Why was no effort made to identify the customers involved and repay the money? I would like to know if any disciplinary action was taken against any bank officials on foot of these practices. I would also like to know the role of the internal and external auditors. These are issues which we can refer to the accounting profession because they must concern any professional body.

We also want the court to examine whether the inspector can cover the insurance issue. Suffice to say we want an inquiry which is as broad as possible, which gets at the truth and which in no way seeks to minimise what happened because this is very serious.

There have been a number of inquiries under the Companies Act. There were two section 8 inquiries, one cost £1.2 million and the other cost £220,000 but neither led to prosecutions. There have been section 14 inquiries, such as the inquiry into Telecom Éireann, which cost £800,000, and again there were no prosecutions. As far as I can influence matters, because the Minister for Enterprise, Trade and Employment has powers to initiate prosecutions in a limited number of cases, and if it is the case on foot of the inspector's report that alleged wrongdoing can be established against an individual or individuals, no matter who they are, it will be my intention to use the powers available to me in the Companies Acts. It is also my intention to refer the report to any other authority.

Under the Companies Acts the High Court can make a restitution order to ensure the customers of National Irish Bank who have been treated so badly are compensated. I hope the court will consider doing that.

I thank the House for this opportunity to make this statement. I have not been very comprehensive, I may have left things out but I will be delighted to take questions about this matter as it so important. This is my tenth inquiry into banks and other institutions in eight months, which is probably a record. I have had to tread carefully because, when I sought to appoint an authorised officer to a different bank in January, that bank succeeded in getting an injunction to stop me and succeeded in delaying the case in the courts. It was only when it saw the evidence and affidavits that it pulled back and agreed to co-operate with the inquiry.

Since I initiated inquiries late last year, not a week has gone by but I received a letter from some of the leading lawyers in the State. We must tread carefully, follow the procedures and take the best legal advice if we are to be successful and that is what we intend to do.

The Central Bank is carrying out its own inquiry. It is an independent regulatory authority who monitors and licenses banks in this State.

The Revenue Commissioners, another independent body, are carrying out their own inquiry in relation to tax evasion.

My responsibilities are related to company law, National Irish Bank is a limited company and therefore the powers available to me will be fully used if the court approves the petition which we will make as soon as possible.

Acting Chairman (Mr. R. Kiely)

Before I call the next speaker, I understand it was agreed on the Order of Business that the statements would conclude at 5 p.m. I would like to get agreement on the length of time speakers will have and at what time the Minister will take questions.

Mr. Manning

Five minutes was the time agreed this morning.

Miss Harney

I do not mind staying for half an hour at the end of the statements to take questions.

Mr. Costello

I thought we agreed there would be a question and answer session rather than formal statements.

Mr. Dardis

After the Order of Business this morning, my understanding was that the Whips had agreed there would be five minutes per speaker but there would be no question and answer session. On the basis that the Minister is accepting questions I suggest we allow five minutes per speaker until a quarter of an hour before we propose to conclude. The answers will be given at that stage.

Acting Chairman

I would like clarification. If we have to conclude at 5 O'clock, we will be taking the questions at 4.45 p.m. Is that agreed?

Mr. Finneran

The Minister is agreeable to staying until 5.30 p.m.

Acting Chairman

The questions will start at 5.15 p.m. or sooner. There will be five minutes per speaker. Agreed? Agreed.

Mr. Manning

I welcome the Minister to the House and thank her for coming in today at such short notice, both to make a statement and to take questions. It is important that this matter which shocked us all last night is aired in these Houses today.

The Minister's speech was very much to the point. She raised a series of questions to which we all want answers. She may find the easier part of her job is over. Asking the questions is the easy part. The difficult part, and the part on which she and the political system will be judged, is getting answers to the questions she raised here today.

We need to be cautious at the beginning of an exercise like this. One of the facts of life is that people do not like banks. No matter how much money banks spend trying to promote their image, there is always a sense of their being a legitimate target. It is important that we do not let prejudices get in the way in this debate but instead concentrate on establishing the facts.

There are many decent people working in National Irish Bank, people who will feel themselves tarnished by the things the bank has done, things of which they were unaware and in which they had no part. Confidence in the banking system is a key element in our economy and the way our society works. Unwarranted attacks on the banking system which may prove to be wide of the mark will do no one any good.

We face one of the most serious situations in banking history. At stake is the credibility and integrity of one of our major banks. Over-shadowing that are serious question marks about our entire banking system. If this sort of thing is happening in one bank, how does the public know it is not happening in other banks? That is a question which is to the fore in the minds of people today, many of whom will not have had the friendliest of relationships with the banks. Who will they believe?

NIB faces two very serious charges. The most immediate is the charge made public yesterday. On that there has been effectively a plea of guilty, but this is not enough. Even though there has been a mild expression of repentance and a promise of some unspecified restitution, that will not go far enough. What is needed is a full, independent and effective inquiry into all the circumstances, with early publication of the findings and a determination that those who are culpable will pay. We need to know whether we are dealing with the misdeeds of a small number of bank employees striving to maximise profits and meet targets set by the banks themselves. Pressures of this kind may lead people to take shortcuts or to get involved in sharp practice.

It is possible that what has happened was inherent in the culture of this bank or part of a wider banking culture which has grown up in this country. This is a hungry bank. It prides itself on being a player rather than a gentleman in the old sense in banking. It set out to shake up the larger established banks. Perhaps there was no harm in that. It brought with it practices from its antecedent, the Midland Bank, practices which were found to be less than desirable in Britain. It brought from its parent company an aggressive Australian approach. We need to know if this has become part of the culture which brought us to the situation we are in today.

We need to know how this happened. That is the reassurance this House and the public want from the Minster. We need to be assured that the Central Bank, so long a sleeping partner in this, will have a hands-on approach that there will be more reality in its approach as our chief regulatory body. We also have to know that the taxpayer will not be lumbered with a major bill, that we, the innocent partners, do not pick up the tab for another expensive investigation.

A second charge hanging over National Irish Bank is that it engaged in illegal offshore tax evasion schemes. This has been denied. However, given the credibility of NIB, this is an investigation which must be actively prosecuted. I would like the Minister to outline what steps she and her Department have taken to establish the veracity or otherwise of the charges made by RTÉ.

What has happened to NIB has damaged all Irish banks. Banks can and do behave like bullies at times. They abuse their position of strength. They now have a major credibility problem. It is important that the public has some independent monitoring system with teeth which shows that banks can be investigated in the public interest and ensures that what is happening now will never happen again. I thank the Minister for taking questions.

Acting Chairman

I thank the Minister for agreeing to extend the time for this debate to 5.30 p.m.

Mr. Finneran

I welcome the Minister and compliment her and the Government on the swift action taken on this matter. The Cabinet met in emergency session yesterday and the Minister has had a hands on approach all day. The fact that she is in the House this evening shows her concern to deal with this matter in the Upper House.

I agree with much of Senator Manning's comments. Last week I spoke about banks in this House and I was quite critical of bank charges and referral fees. Little did I think that a far more serious situation lay beneath the surface. This case involves larceny from its customers accounts by NIB. This is a serious situation and it brings the credibility of the banking system into question. People may not like banks but they generally trust them for advice with their savings and when they take out loans. They believe that their bank will give them the best deal. The public will be very sceptical today when it discovers that one of the major banks was robbing funds from some of its customers.

I know the staff of the NIB in Athlone and I have nothing but the height of praise for them. They are the finest of people. However, what are we to make of a bank which, from the top down, allows this type of practice to occur? I hope that the Minister pursues the questions of who made the decisions, who allowed this to take place, who knew about it and who ignored it? Heads should roll over this matter because the credibility of the banking system has been put at stake.

The Central Bank is the relevant licensing authority. It must now consider whether NIB is entitled to have a licence. Someone did a job on NIB's audits over the past ten to 15 years, both internally and externally. How could these audits be ratified by a professional body, given the information that is now available? Someone has to answer for the fact that money was stolen from customers. I do not know if there has been a cover up, but it was a poor audit which prevented this information from surfacing. Nothing like this would be missed in a local authority audit.

Will National Irish Bank lose its licence if it is found to have abused it? Has the Central Bank the power to remove or revoke its licence if it can say that "Following an investigation we have proof that this bank acted improperly on a large scale"? The full weight of State authorities should come down on this bank — the Director of Consumer Affairs, the Central Bank and a hands on approach by Government. An investigation of NIB alone will not be sufficient for credibility to be restored to the banking system. More will have to be done in relation to the entire banking system if people's confidence is to be restored. We also need to re-establish Irish banking's good name abroad. Investigations and answers are needed. Tough decisions will have to be taken in the case of wrongdoings.

Mr. Norris

I compliment the Minister for her clear and rapid action. However, the greatest compliments must go to the RTÉ journalists, without whom we would not have uncovered this appalling situation. What appears to have happened is that amounts were inappropriately extracted from personal and business accounts. This was discovered and accepted by senior officials. However, no explanation was given, customers were not informed, no apology was given and, apparently, the chief executive was prepared to stand over this practice. In other words, the bank at the highest level was prepared to profit from fraudulent conversion. That is an extraordinary comment on the ethics of banking. I note, wryly, that when the Buckley review went through bankers presumed to tell this House that they were worth the same approximately as a secretary in a multinational, speaking from a position in which they had many multiples of this kind of money.

Serious questions now arise with regard to other bank practices. We are all solicited by banks to alter from the old fashioned way of paying bills and debts in favour of standing orders with variable clauses and direct debits which can be varied by the bank. What security can the average citizen have that by handing over such power to a bank we are not taking a dangerous step if the bank is prepared to remove money from an account? Look at the language used in NIB internal memorandum:

It was noted that interest charges were increased without legitimate reason or customers' knowledge on 20 accounts in November 1989 and 33 accounts in February 1990. The above practice could lead to loss to the bank through customer dispute, litigation or adverse publicity.

Remedial action required: Interest amendments may only be made to correct bank errors. The practice of ‘loading' interest in this manner must be discontinued.

Response by branch management: We note that as and from now only bank errors can be corrected using interest amendment sheets. While we only loaded interest rates for customers who were very demanding, we were certain that we were safe in applying additional interest charges. No queries ever came back from customers whose interest was loaded.

What kind of language is this? What kind of attitude does it display? NIB only added charges to customers who were very demanding. What does this mean? Does it mean people with overdrafts? What did they demand? They demanded money. They did not do so with menaces or with firearms. It is about time that banks realise what they are — they are shops which sell money. People buy money and banks are in the market to sell money. It is a customer's right to be demanding and not to be illicitly penalised for so doing. It is time that the citizens of this country made this clear. Most of the customers involved had overdrafts. The most vulnerable sections of the community were penalised most and I gather the amounts are enormous. This raises the question of ethics in the financial industry, and I hope the scrutiny will be extended to include, for example, insurance companies. I have no doubt that the same bullyingattitudes and unscrupulous and unethical approaches to customers exist throughout all financial institutions and we should examine them as carefully as possible.

Gone are the days when banks were customer friendly. Cheques are no longer returned — it is a long time since they have been. This is unhelpful in reconciling our accounts. We are told it is our responsibility to make such checks as the banks will make mistakes and decisions against our interests as personal customers. This is completely unacceptable. I also notice that it is the consistent practice of banks to prevent customers from developing a personal relationship with their manager. Accounts are moved every six months from one person to another.

I compliment the Minister on her speedy action but urge her to extend the scope of inquiries to encompass all financial institutions.

Mr. Dardis

I thank the Minister for this, her second time to come before the House. Previously she attended a debate on Seagate. It is a measure of her respect for the House that she has agreed to come before it and of her concern for the gravity of this issue.

Very serious allegations have been made against NIB which are a matter of major worry. However, more worrying is the fact that the substance of those allegations has been accepted by the bank. It gives a new meaning to the phrase "a blank cheque", as the bank seems to have written itself a blank cheque. The charges made on RTÉ in last night's news bulletin are not just damaging to National Irish Bank: they are damaging for the entire Irish banking industry and for the image of Ireland as a place of stable and responsible banking. The Tánaiste referred to trust and confidence, which are basic to the operation of banks in a democracy, where they play an important role.

It is important that the allegations be thoroughly and comprehensively investigated and that all the machinery of State is mobilised to ensure the truth is uncovered. I am glad the Government, and particularly the Minister has moved quickly and decisively on this matter. At the request of the Government the Garda Fraud Squad has opened an office to deal with complaints from the public in relation to their dealings with NIB. The Minister has also asked the Director of Consumer Affairs to ensure proper procedures are adhered to by the banking system and that customers are not being ripped off. She has also requested RTÉ to provide her Department with the information they have in relation to these matters. Most importantly, she is prepared to go to the High Court to seek the appointment of an inspector to go into NIB under section 8 of the Companies Act. I do not see how anybody could complain about the speed and decisiveness with which the Government has responded to these revelations.

I echo some of the points made regarding the regulatory and licensing functions of the Central Bank and the need to examine them. Before the Finance Committee of the Houses the bank indicated that its role is very restricted. We know that revenue issues are a matter for the Revenue Commissioners and that there are other issues which are not within the bank's competence. However, I echo the point made by Senator Finneran regarding the conditions of the licence and possible breaches of them. I hope the Central Bank will not operate a culture of voluntary blindness, a term used in relation to other matters concerning the Department of Agriculture and Food.

A special Government meeting was convened last night within an hour of the allegations being broadcast by RTÉ and within 24 hours we are well advanced in the appointment of an inspector. Such an appointment is essential. A court appointed inspector will have the necessary legal powers to conduct a thorough investigation, publish findings and make recommendations regarding appropriate action. It is vital that such an inquiry does not, like many others, run into the sand. If the inspector finds evidence of wrongdoing, those responsible must be named and face the full rigours of the law. If I or any Member were to rob a bank we know what would happen. However, what happens if a bank robs a customer? The same law should apply to each case.

I wish to draw the attention of the House to the statement issued by National Australia Bank, the holding company of National Irish Bank. It states that "The issues which have been highlighted in the past 24 hours about our subsidiary, National Irish Bank, relate to matters which occurred many years ago and do not reflect the current operations of the bank". I do not think this is an acceptable statement. It seems to ask what the fuss is about in the context of an admission having been made and to suggest that the bank has nothing to apologise about. The statement continues by outlining the huge assets — amounting to £100 billion — of NIB. There is an inference here that we are meant to be awed by such a statement. Finally, the press release says that "All deposits in National Irish Bank are safe and no depositor need have any cause to be concerned". Nobody has suggested otherwise. I note the press release was issued by a very prominent public relations company. The statement contains no apology to the account holders whose trust was abused by NIB. It should have contained a clear indication that action would be taken against the managerial personnel involved.

The Government has recognised the seriousness of the situation and it would be a great pity if NIB did not do the same. The other banks should move to allay fears among the wider community or their borrowers regarding their own operations. We must have confidence in the banking system. Trust is the essence of the system. There are many fine bankers who conduct themselves properly, but a culture of greed should not be allowed pervade this or any other industry.

Mr. Ross

I welcome the speed with which this problem has been attacked by the Tánaiste and Minister for Enterprise, Trade and Employment, but this is in marked contrast to a motion I tabled on budget day concerning an investigation of the banks. The Department concerned strongly resisted the motion. For a long time many of us have been concerned about the activities of banks in general. They are a real problem as they constitute a large cartel with almost identical charges. They are very reluctant to undercut each other. If they do so they speak the same language. Banks are part of the culture of nod and wink which exists among large monopolies in other countries.

There is a case to be made not only for sending an inspector into this bank, but to establish an open forum, be it a tribunal or public inquiry, to investigate the activities of banks. There are too many consumer stories about being bullied and overcharged. When The Sunday Independent runs stories about banks, the response from the public is devastating. There is a greater response from people who are discontent over their treatment by banks than to any other issue in the public arena. Everybody has a gripe against their bank as they feel it is an unequal relationship and that they are being exploited by a cartel against which they have very little redress.

Banks have had to apologise over a number of issues, including advertising incorrect interest rates, omitting APRs and confusing charges and fees but they do not always apologise when they should. I predict that this will not be the only case of this sort which comes to light in the near future. I have no doubt that National Irish Bank is not the only bank which is overcharging its customers and failing to notify them. I do not mean to be sensationalist but I am sure there are many more similar cases in other banks. It is part of the culture of banks to treat their customers like cattle who do not know what is going on and who do not matter.

The remedy applied in this case leaves us with serious cause for concern. Senator Finneran raised the question of the role of the Central Bank. I do not understand how banks are allowed to state, at the bottom of customers' statements, that surcharges are applied in the bank. Customers cannot find out what their surcharges are without going to a great deal of trouble. It should be compulsory for every customer of every bank to be told exactly what surcharges he or she is incurring. Customers receive a quarterly statement of fees and charges but this does not include surcharges. These are small surcharges of interest which add up to huge amounts to the bank, about which the customer can only find out with great difficulty. This is a great lack, not alone in the body politic but, in the Central Bank itself.

The detail of what happened in this case is very specific and is perhaps not known to the Minister but I shall be particularly interested to hear it. The fraud was perpetrated in individual branches against individual customers. It is very sinister to realise that certain customers were selected and others omitted.

I ask the Minister to look at the whole banking system. I do not wish to undermine confidence in the financial services or in the banking system as a whole but we must be seen to be transparent or confidence will be undermined.

Mr. Bonner

I welcome the Tánaiste and Minister for Enterprise, Trade and Employment to the House and congratulate her and the Government on the speed with which they have dealt with this very serious matter. I speak as a customer of National Irish Bank and an accountant who deals with bank statements every day. Very serious allegations have been made against one of the four main clearing banks. Last week we heard allegations concerning the financial services of the bank that they were defrauding the tax man; now we hear the allegation that they are defrauding their customers.

This problem originated with the introduction of bank charges. Prior to that banks survived on interest charges. I have raised the issue of bank charges twice in the past month — on the day that Allied Irish Bank announced record profits and during the debate on the Central Bank Bill. I raised, particularly, the abnormal and extraordinary referral charges which are being levied on customers. When these are queried, customers are told they are done by the computer. I believe nobody has the capacity to check interest charges and there has been no investigation of the collossal level of interest charges on credit card accounts. I know that credit card charges are a matter for the Director of Consumer Affairs but bank customers often do not realise they are being overcharged because they do not have the capacity to calculate interest charges.

I am glad to hear that the Garda Fraud Squad is to investigate this matter. If an individual steals money he is liable to end up in jail. At some time in the future a bank robber may justifiably claim that he is merely trying to retrieve his money. Someone in National Irish Bank must be held accountable for this fraud.

It is indicated that at least four branches are involved. The activities of the internal auditors and their reports to their superiors must be queried. If they reported correctly, why was no action taken? External auditors merely investigate the internal auditors' reports because it is impossible for an external auditor to check everything.

I am convinced that all banks are involved. There is such a variety of bank charges and interest charges that there is room for this sort of activity. I have always been dealt with very fairly by the officials of National Irish Bank. Many fine people work there and I do not believe that officials at branch level are to blame. Some years ago a branch of NIB was investigated in connection with a major fraud in the fishing industry. I wonder how the present problem did not come to light at that stage.

I congratulate RTÉ but I wonder if this is an example of investigative journalism or merely of disgruntled employees giving information. Many questions remain to be answered.

Mr. Costello

I welcome the Tánaiste and Minister for Enterprise, Trade and Employment to the House and thank her for her promise to return for the debate on the report of the National Minimum Wage Commission. The report will be available in the next few days so it will not be long before we welcome her again.

I congratulate RTÉ not merely on a fine piece of investigative journalism but also for standing up to intimidation — and legal intimidation at that. Pressure was put on RTÉ by the National Irish Bank to drop the investigation. We are faced with a case of theft. It is the lowest of the low to find a bank with its hand in the till, stealing from small investors. This is GUBU land. It is almost the worst scandal imaginable to have a bank robbery taking place from within. We will have to look at our definition of bank robbery if these institutions abuse the confidence placed in them by the public. We will certainly become a laughing stock abroad and this blow to our credibility will not help foreign investment in Ireland.

This outright larceny has been admitted by the bank because it had no choice. There has been a deliberate cover up and no attempt made to rectify the matter. The money was kept and no redress was made. The Government should seek to change the name of this bank. The name "National Irish Bank" gives the impression of State bank status and thus that a State bank is responsible for this crime. National Irish Bank is a subsidiary of the National Australian Bank and is largely the old Northern Bank. To give it the incorrect status of a national bank must be questioned. Its attitude towards trade union recognition for its staff must also be questioned, as must the fact that it was one of the front runners for the purchase of the ICC and TSB.

We should also examine the regulatory system. Should this bank retain its licence? If a bank admits blatant corruption in its confidential dealings with its clients it should not be entitled to retain its licence and, if it does, severe strictures and conditions should apply. What is the Central Bank's role? Has it monitored this area carefully enough? The Central Bank has instituted its own investigation, which is one of many inquiries which have now begun, but it may have been at fault in not being aware of what was happening given its regulatory function regarding banking activities.

There are several inquiries into this matter being conducted by the National Australian Bank, the Revenue Commissioners and the Minister's authorised officer. I am disappointed that the authorised officer has only begun to work in the last week while other inquiries have been afoot for some time. The Minister is also to appoint an inspector, which is disappointing given that the bank has come out with its hands up and admitted wrongdoing. Surely there was evidence enough to go to the High Court earlier without waiting for the present fait accompli. It must now be a matter of form to go to the High Court, because it cannot refuse the application to appoint an inspector when there is an admission from the bank. Are the terms of reference of the investigator to extend beyond the present admission to the alleged CNMI offshore scam? Will the Garda investigation extend to that area?

Senators have mentioned regulation of the banking area. We must ensure that the banking system is above reproach, but it will be a long time before small savers feel comfortable about putting their earnings into banks. We must reassure people, and the best way to do that is to institute an inquiry and develop reliable regulatory mechanisms.

Mr. Chambers

Without detracting from the seriousness of the discussion, I thank the Minister for her great work in the provision of jobs in the west; it is great to see that interest in the west.

Mrs. A. Doyle

They are not saying that in Wexford.

Mr. Chambers

Debates on tribunals, inquiries and payments to politicians have struck me as showing how hard it is to see where the perception of politics and finance in the State is going. I remember when the National Australian Bank bought the Northern Bank. It was seen as a welcome development that would bring in competition. I also remember when Allied Irish Bank and the Insurance Corporation of Ireland had to be bailed out by the State.

All financial institutions should be called in by the Government and the interests of the people should be put before them and the accountancy firms that work for them. These institutions should give an undertaking to cover the cost to the State of setting up an inspectorate to put their houses in order. They are very profitable organisations and are responsible for this problem with the financial credibility of the State. I welcome the Minister's interest in dealing with this quickly.

I believe there is a need to look at the regulation of financial institutions because the public is not happy with them, and with good reason. It is very easy to structure one's profits in a certain way with computerisation but protection must be in place. I am concerned that the Director of Consumer Affairs may not have the necessary resources to carry out this investigation. This is a vast area and profits are calculated daily. Existing structures mean substantial attention must be paid to bringing in proper regulation, and I hope the inspection will be thorough.

I wish the Minister well. It is necessary to deal with this matter in the best interests of our banking and financial services.

Dr. Henry

I congratulate the Minister on her action. This is an interesting case. When the prisoners in Mountjoy Jail are surveyed, great play is made of the districts they come from — deprived areas in the inner city, etc. I often say I know where the prisoners come from but I am not so sure where the criminals come from. The criminals seem to hold very interesting positions and I hope some of those involved in the most appalling wrongdoing are prosecuted and brought before the courts. We have a funny attitude towards white collar crime. I visit Mountjoy jail frequently where I have never seen anyone, apart from one woman, imprisoned for white collar crime. This debacle should allow us to look seriously at that.

The Minister should suggest to everyone with a bank account that they look at their last statement, as I did. The first item on mine was a direct debit of 19p. I do not have any direct debits as I do not like them. I went into the bank where they looked it up on their computer and said I was right. I asked whether money had been taken from my account and they said they could not tell me because it is automated. I asked them to find out and whether it would cost me money to do so, which is important to ask. The next interesting charge was £4.80 for lodging £1,000 in notes. I was pleased about this even though I have never lodged £1,000 in notes in my life. That was also a mistake. I transferred £1,000 from my current account to my savings account where I am saving to pay for my £7,000 medical insurance by July. The £4.80 was then taken off. There was then a 29p charge for cash withdrawals, even though I cannot use the hole-in-the-wall machines, as I explained to them before. I do not even have a PIN number. By this stage, the very nice girl who was dealing with me had taken me away from the counter to a side area. I asked her would she mind getting a statement of my entire service charges for the past year so we could go through them all — privately, if necessary.

In view of the fact that I could find that many errors in those few lines detailing a miserable current account, it might be a good idea if everyone looked through their statements. I know someone who saved £54 in the last quarter and who expects to save £28 this quarter. It seems to be more widespread than we think.

Mr. Bohan

I will be unpopular for defending banks. However, I have dealt with Allied Irish Banks for about 40 years and I have never had any problems with them. It is unfair to paint all banks into a corner because there were a couple of rogue bank managers in Carrick-on-Shannon, Carndonagh and other places. I do not condemn the National Irish Bank either, because from what I heard in the past couple of days there are many decent managers there who have not indulged in this practice.

This matter is being hyped by the media. It is grossly unfair to condemn Allied Irish Banks, the Bank of Ireland, the Ulster Bank and others. Unfortunately, there is a great deal of pressure on bank managers in small branches around the country to produce good results. They are inclined to do things they should not without the consent of headquarters.

We should be realistic about this. I have dealt with banks for a number of years and I have never come across this type of incident before. I am not saying it did not happen in certain areas. However, the incidents are isolated. We should not condemn the banking system as a whole because of what happened in a few branches.

Mrs. A. Doyle

I wish to address the point raised by Senator Bohan. No one is condemning the entire banking system. However, confidence in it has taken a battering, not only because of the revelations of the past 24 hours but because of a series of problems in recent months. We have seen the saga of non-residential offshore accounts and the allegations about certain Ansbacher accounts. There were also queries about the irregularities concerning the clerical and medical insurance offshore system operated by National Irish Bank. They have now been caught with their fingers in the till literally pilfering from their customers' accounts, in limited areas and only in certain banks. However, the entire banking system is taking a battering because of the lack of confidence projected because of allegation heaped on allegation in recent months.

This is a serious matter because the security of our banking system is a major tenet of any democracy. When I first heard the latest revelations yesterday, I thought it smacked of a banana republic. One wonders what on earth is going on. As we sit at the top table in Europe with the 11 countries who will be part of EMU next January, I wonder about the international reputation of Irish financial services and the security of the smallest customer's account in the smallest rural branch of any of the four clearing banks. Many questions need to be answered.

We know there is no major problem with the security of our banking system. However, the confidence of the individual who has a small account will be battered. It is not so long ago that money was kept in shoe boxes under the bed. It took a great deal of persuasion, particularly of the elderly, for people not to keep money in their house and to trust the banking system because of the personal security risks. As Senator Manning said, we must be balanced and responsible in our approach to this.

I thank the Minister for coming to the House as I am sure she had a busy day and there is a heap of work on her desk to which she must attend. Does she have any evidence of similar practices in other banks? Will her inspector or inspectorate — whichever it will be under the relevant section of the Companies Act — have the power to look at banks other than the National Irish Bank to see how widespread this practice of arbitrary increasing of interest rates on customer accounts is?

Unfortunately, I have reason to believe this practice is more widespread than in the National Irish Bank. I do not wish to give personal examples. I wish I could say to Senator Bohan and those who believe we are being too hard on the banks that I agree with them. I do not. I have general confidence in our banking system. We should not overdramatise. However, we should not minimise the importance of the problem we are facing. For a long time many people felt there was an abuse of power in their relationship with banks. This is a breach of trust between the small customer who does not have an accountant to check the books and the bank manager.

What are the implications for the credibility of our banking system because of these latest revelations? They are compounded by other unsavoury revelations in recent months about practices in our financial institutions. Will there be repercussions for our reputation internationally, particularly with the approach of EMU? What about the response of the EMI as our Central Bank negotiate the move to a single currency? Will the Minister ensure the National Irish Bank will pay for any charges incurred in the investigation?

Mr. Walsh

It is important that this discussion is balanced and we do not indulge any prejudices. We should be restrained and I am happy to await the outcome of the investigation which the Minister has initiated. This will allow us to debate the facts. I have no doubt that if people are culpable they will be brought to account for any wrongdoing.

I would like the Minister to investigate the issue of dormant accounts. Many elderly people die without having close relatives and there is a suspicion that large sums of money have been retained by the banks simply because the next of kin or other beneficiaries were never identified. It would be a major scandal if no effort was made by the banks to contact them. There should be an onus on the banks to disclose that information to some public body. In the event of efforts having been made to contact next of kin or other beneficiaries, that money should certainly not remain with the banks.

Mr. Bonner

Charity.

Mr. Walsh

It should be transferred to some sort of charitable institution for the public good. I would like to see the matter included, if possible, in this investigation. If not, it should be done separately. I compliment the Minister on her quick response in dealing with this. It is important to restore public confidence in our banking system, which by and large has assisted the development of the economy over a long period. If there are abuses, now is the time to tackle them and eradicate them quickly.

An Cathaoirleach

As it has been agreed that the Minister will take questions at 5.15 p.m., and it is now 5.11 p.m., perhaps Senator O'Meara will include any questions she may have for the Minister in her contribution.

Ms O'Meara

I thank the Minister for coming to the House today to listen to the concerns expressed and to take questions. She is to be commended for the speed of her response and that of her Government colleagues. However, I hope her speed will be matched by effectiveness in terms of what she plans to do.

Previous speakers referred to the need for balanced debate but it is time to call a spade a spade. I switched on the news at 6 o'clock yesterday and heard that a bank had admitted to theft, but had only done so when evidence was presented by journalists. When caught with its hand in the cookie jar, the bank's arrogant attitude was breathtaking. Not only has the bank shown a disregard for its customers but it has also shown a disregard for the law of the land.

A number of years ago a senior official in one of our major clearing banks discovered this was happening, yet did nothing about it. The internal audit reports of the National Irish Bank discovered that certain branches around the country were engaging in a deliberately structured and well thought out policy of taking money from customers' accounts. When senior officials of the bank were presented with this evidence they did nothing about it. There also appears to be certain evidence that the bank engaged in a cover up. Now that this has emerged, the bank has not even apologised. It said it would give the money back, but that is not good enough. As far as I know, not a single head has rolled within the bank. In fact, there is evidence that some people were actually promoted because of the fine performance of the branches involved.

This disregard for the law of the land is absolutely breathtaking, as is the arrogance displayed by the bank. As Senator Henry said, people have been jailed for failing to pay a TV licence, yet we now know that a bank has engaged in deliberate law breaking. That amounts to corruption, but we do not know how widespread it is. We would like to think that only the evidence which has emerged so far is the extent of the fraud, but we have no way of knowing if that is the case. There is much public fear and concern that this may be only the tip of the iceberg.

I have had similar experiences to Senator Henry in dealing with bank charges but I always put them down to inefficiency or ineffectiveness. Now, however, I am beginning to wonder if sleight-of-hand was involved. I am sure every bank customer in the country, particularly those in the National Irish Bank, are wondering the same. Public concern must be met soon.

The Minister mentioned the appointment of a High Court inspector but at this point we have no way of knowing if she will be successful in her attempt to have such an inspector appointed. As the Minister pointed out, however, inspectors appointed in the past have produced reports but no prosecutions have taken place. If the Minister does not succeed in getting an inspector appointed, what does she plan to do? There must be an independent inquiry. What exactly is the role of the Central Bank in relation to acting as a consumer watchdog? Who is protecting the interests of the ordinary customers and consumers?

I heard the Director of Consumer Affairs speaking about this matter but it seems he does not have extensive powers in this regard. I always thought the Central Bank was the regulatory body, but did it receive the internal audit reports? If so, the Central Bank certainly did not act upon them. That, in itself, raises a serious question, particularly considering the bank's former inaction on Ansbacher.

An Cathaoirleach

Senator Farrell indicated that he wished to contribute but, unfortunately, time does not allow for that. However, does the Senator wish to ask the Minister a question?

Mr. Farrell

If any Minister can get to the bottom of this matter, this Minister will. She may be small in stature but she will not fade away against any opposition.

Miss Harney

I wish I could fade away.

Mrs. A. Doyle

She is bigger than Deputy O'Dea.

Mr. Farrell

She will take it head on and she can be assured of our full confidence. I would not like to think, however, that in this trawl we would victimise staff who were innocent pawns in this game. The trouble starts at the top. It started the day that profit targets came into being, when the manager was taken out of the picture and replaced by a computer.

In 1985, when this House discussed a report on small businesses, one Senator referred to banks as legalised robbers. He pointed out much of what we are investigating today. Public representatives have raised many points over the years that were not acted upon by Ministers, yet when the media digs these facts up years later, we are all on our feet. This could have been prevented. It was not for the lack of Members of this House making the facts known at the time.

Mr. Manning

Most of the attention today was on the recent revelations. At this stage, from what the Minister knows, does she think there is a prima facie case against NIB arising from the other allegations made against the bank? What has she done about the matter and where does it stand at present?

An Cathaoirleach

I will now call upon the Minister to reply because many questions have been asked. If there is further time when the Minister has replied, we can have another question or two.

Tánaiste and Minister for Enterprise, Trade and Employment (Miss Harney)

Certainly. I thank Senators for their comments and for the constructive manner in which everyone has approached the debate. I compliment Senator Farrell, in particular, for being of the view that I am not fading away. I have spent 20 years trying to fade away without any great success.

When the allegations in relation to the management of NIB's insurance operation came to public attention we wrote to National Irish Bank in the first instance, which we were obliged to do by our lawyers in the interests of natural justice, and asked a number of questions. NIB responded a few days later. After that response we sought advice from the Attorney General, who in turn sought advice from an independent senior counsel. That advice became available on 10 March. It was to the effect that we could seek further information from National Irish Bank, that there was not enough information to recommend a particular course of action and certainly not to recommend an authorised officer or an inspector under the Companies Act. Two courses of action were open to us. The first is to write to the bank again to seek further information. However, if we did and further information was forthcoming, one cannot self-incriminate and any information which might come through that vehicle could not be subsequently used in any prosecution against National Irish Bank. Therefore, we decided not to take that route.

The other advice was to appoint an authorised officer under the Insurance Acts and that is what we did last Monday. The delay between 10 March and last Monday was because I was in the US and Minister Treacy, who was handling this matter, has not yet had the power to sign warrants devolved in relation to the Insurance Acts.

There is an uncertainty in relation to the legal advice. It is not certain whether the promoters of these products or the people who availed of the products promoted are guilty of an offence. Legal opinion is divided on that matter. That being the case and section 8 of the Companies Act being a provision of last resort, a strong view was put forward that unless we had information, as the Act states, suggesting that there are circumstances in being that a company was either defrauding its creditors or the creditors of another person or acting unlawfully or involved in fraud, then one could not successfully apply to the court to have an inspector appointed. That is why it has taken until National Irish Bank confirmed the substance of the RTÉ allegations of last night before we could move along that route. The lawyers are currently preparing the case and we hope to go to the court in a matter of hours.

With regard to another question which was raised, it is our intention to apply for the costs to be reimbursed. I do not believe the taxpayers should have to foot the bill for these investigations as they had to do on so many other occasions.

Mrs. A. Doyle

Good.

Miss Harney

We may or may not be successful. I want to answer Senators' points rather than have them raised again. The report will not be my report. When the inspectors make a report they make it to the court. By virtue of being a court report, it will be a public document in any event. Thereafter, it is for the court to make certain recommendations on foot of that report. Once the inspectorate or inspector is appointed, the Minister has no further involvement.

If, as Senator O'Meara said, we fail to get an inspector appointed, I must admit I do not know what we will do. In terms of the existing law, I do not believe there is anything we can do under the Companies Acts because that is the strongest position. We probably could have a section 19 authorised officer appointed but that would be a private report. I am working on the assumption and the strong legal advice that, given the admission by National Irish Bank, our petition will be successful.

An Cathaoirleach

Are there any other questions?

Mrs. A. Doyle

I had asked whether there were any implications for Ireland's progress towards EMU, and whether the European Monetary Institute has commented or is watching. In other words, what are the international implications for Ireland's financial services generally in relation to this latest scandal?

Miss Harney

Hopefully, there are none. Ireland's international reputation is impeccable in this area. It has taken a long number of years to build that good reputation and, as I said earlier, the International Financial Services Centre is very successful for that among other reasons, one of which is tax reasons. I have confidence in our banking system.

I hope this is an isolated case and it is right that we take it in perspective. We have no evidence that this has happened in any other bank. Until we have such evidence, we could not extend the scope of the inspectorate to any other institution. One must have circumstances which suggest, as I said, that there was fraud, wrongdoing or unlawful acts. If those circumstances do not exist, one cannot act on a hunch. I know we all have strong views about our bank from time to time — I was taken with Senator Henry's inquiries, and I might engage in some of them also.

It is important that we have confidence in our banking institution. It is the foundation on which our economy is built. Economies in which financial institutions do not command public and international confidence are not very successful.

I join with Senator Manning and others who signalled out the staff at National Irish Banks. I have no doubt the vast majority of the staff who work for National Irish Bank are as embarrassed and ashamed of what happened as the rest of the public. It is important to bear that in mind.

Mr. Connor

As much doubt has been raised in the contributions here, is the Minister satisfied with consumer protection for customers of financial institutions like banks? Clearly, banks take an attitude towards their customers which is unlike any that exists for other services in the commercial market.

Is she satisfied that there is a true open competitive market in banking in Ireland? What of the attitude of the banks in the sense that, as Senator Ross stated, they form a cartel rigging charges? Often there is criticism that interest rates are far too high and much of it has nothing to do with the directions of the Central Bank but with what is fixed by the banks acting in consort with each other. In that way a true competitive market does not exist in what is a free market.

Ms O'Meara

Does the Minister intend to ask the Central Bank authorities if they have received any of the reports referred to in media reports about this particular incident? If they received any of those auditors' reports, why did they not act? If not, is there a need to look at whether they or somebody else — for instance, the Director of Consumer Affairs — should be getting those reports?

Miss Harney

In response to Senator Connor, the new powers which the Director of Consumer Affairs received in the Consumer Credit Act, 1996, are quite extensive. We are currently examining the law to see whether or not the Director can carry out Inquiries retrospectively beyond the time he received those powers. Section 4 of that Act gives the Director wide powers to carry out an investigation into anything of public interest. However, a different section of the Act states that the Director's powers relate only to bank charges. There seems to be a conflict and we are trying to resolve that to see can the Director look into the loading of interest, etc. .

My predecessor amended substantially the Competition Act to establish a directorate of competition and to give that person enforcement powers. Indeed, on some occasions Members of both Houses of the Oireachtas have complained to me that that enforcement power is being used too aggressively. I do not know if they have ever looked at the banks, but they certainly have enormous independent powers to ensure there is competition in the domestic market in banking and all other areas of activity. Perhaps there is a case for the enforcement authority, which is the Competition Authority, and the person who has responsibility for enforcing the law to take action in this regard, but that is an independent function of the authority.

It is the case that the Central Bank would be made aware of any internal audits. However, the Central Bank is completely independent in the way in which it carries out its functions. It is precluded by virtue of that independence from bringing any information which comes into its possession to any other authority except breaches of exchange control regulations, which it brings to the attention of the Minister for Finance. I understand that in relation to its monitoring, regulatory and licensing roles it must not be interfered with and cannot bring to the attention of the Government, the Minister for Finance or any other Minister any information it receives in that capacity. That was confirmed to me last night when I spoke to the Governor of the Central Bank.

As the Minister for Finance stated in the other House this afternoon, when the Director of Consumer Affairs concludes his inquiry into bank charges in general it may be necessary to amend the current monitoring régime. If that is the case, we should be prepared to do that because it is important that we have an effective regime. I do not believe ordinary citizens are able to enforce the law against a major institution and they require the State to enforce it on their behalf. If internal audits had drawn the attention of the Central Bank to these matters a number of years ago, I believe the onus would have been on the Central Bank to ensure that the customers were told and the money was paid back. If its powers are lacking in that regard, we need to examine that.

An Cathaoirleach

As we have less than a minute remaining, I will allow Senator Farrell a brief question.

Mr. Farrell

Will this investigation include all banks? I think NIB was probably unlucky to get caught because there were disgruntled ex-employees. That is the opinion I formed from last night's programme. Will the Minister institute a check on all banks because I believe they should all be examined?

Miss Harney

The inspectorate cannot apply to all banks unless the Minister making the petition knows of circumstances which suggest that this was happening in other banks. A hunch, telephone calls or reports from journalists are not enough. I must have in my possession sufficient information to convince the court that there was fraudulent activity or circumstances suggesting fraudulent activity or unlawful acts. As I do not have such information, the investigation must be restricted to National Irish Bank. I hope the petition will be successful and that the inspectors can proceed with their work as soon as possible. We will then be able to reassure the public and re-establish confidence in our financial institutions.

The NIB is one of four clearing banks. These allegations are unprecedented and are being taken seriously. Things will be all the better for this inquiry. During the deliberations of the beef tribunal, some people took the view that it was damaging to the beef industry to have an inquiry into alleged wrongdoing. People also take that view in respect of the banking institutions but I take the opposite view. Those sectors and industries and the country will be damaged further if the Government and the authorities are not seen to act to ensure that the law is properly and fairly enforced.

Mr. Manning

On behalf of the Opposition, I thank the Minister for the open and flexible way she dealt with this matter and for taking questions on it. Everyone wishes her well in her attempts to get to the bottom of this.

An Cathaoirleach

When is proposed to sit again?

Mr. Finneran

At 10.30 a.m. tomorrow.