Seanad Éireann debate -
Thursday, 9 Dec 1999

Vol. 161 No. 14

ICC Bank Bill, 1999: Second Stage.

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

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

As Senators may be aware, the Government decided on 27 July 1998 to make arrangements to dispose of the State's interest in ICC Bank plc. The motivation for this decision was that there is no significant strategic or policy need for continuing direct State involvement in the banking sector. The market has certainly moved on, industry has developed rapidly and State guarantees are not appropriate in a modern environment, as our national economy continues to grow and move forward.

ICC Bank was established in 1933 by Fianna Fáil, at a time when economic circumstances were seriously different to those obtaining today. At that stage, the aim was to encourage the financing of the development of an industrial base in a young, undeveloped nation. Since then, the ICC Bank has been a strong supporter of the Irish SME sector. In focusing on the financial needs of indigenous SMEs, the ICC Bank has played no small part in the development of indigenous industry, a development which has accelerated greatly in recent years.

ICC Bank has expanded steadily and has enjoyed consistent profitability. While the State has made equity investments totalling £36.9 million over the years, the ICC Bank has grown through its own efforts to a stage where its balance sheet now amounts to over £2 billion. The ICC Bank has paid regular and increasing dividends to the Exchequer over the past two decades. In the past five years alone, such dividend payments amounted to £14 million, while corporation tax payments in the same period came to £10 million. In 1998, the ICC Bank made pre-tax operating profits of £21 million.

In any assessment of the contribution of the ICC Bank, its performance in the venture capital field deserves special mention. It has had a pioneering role in the provision of such funding in Ireland and it continues to hold a market leader role in the venture capital area, an area which is vital to ensure the continuance of the accelerating development of SMEs.

In relation to the sale process, the Minister for Finance, Deputy McCreevy, appointed ABN-AMRO and McCann FitzGerald last February to advise him in relation to the corporate finance and legal aspects of the sale of the State's interest in the ICC Bank. During the following months, officials of the Department of Finance and the Minister's advisers worked with the board, management and staff of ICC Bank to prepare the necessary documentation in relation to the sale, to negotiate an employee share ownership trust and to agree the procedures for the sale process.

Following public advertisement, up to ten banks expressed an initial interest in acquiring the ICC Bank, but only three firm indications of interest were received on the closing date of 23 August last. Having reviewed these tenders, it was decided that all three should enter into stage two of the sale process, where they would be permitted to carry out due diligence on the ICC Bank.

One of these banks, National Australia Bank, withdrew from the process shortly thereafter. The two remaining banks undertook a preliminary due diligence exercise on ICC and also availed of the opportunity to meet with key management and union officials. One of these parties, Irish Intercontinental Bank, then withdrew at a late stage and a single final bid from Bank of Ireland was received by the deadline of 19 October last. Its bid was substantially less than the top range of the earlier indicative bids.

Following consultations with the board of ICC Bank, the receipt of advice from his financial advisers and a discussion with senior representatives of the Bank of Ireland, the Minister for Finance issued a press release confirming that bank as the preferred bidder. This decision was taken in recognition of the fact that a final offer would not be made until Bank of Ireland had completed the final due diligence process itself. The Minister for Finance informed Bank of Ireland at that stage that he was not happy with the price which they put on the table and that he wanted this increased. Furthermore, the Minister for Finance was conscious that a decision to withdraw ICC Bank from the market without exploring all of the possibilities would, at that stage, not be desirable.

Bank of Ireland only made it known to the Minister for Finance on Monday last, 6 December, that they no longer wished to proceed with this proposed acquisition. They acknowledged fully the strengths of ICC Bank in its specialist market segments, but they also felt that acquiring ICC Bank was not the best way to develop their SME lending business. In the light of this turn of events the Minister for Finance immediately withdrew ICC Bank from the market.

The Minister for Finance, his Government colleagues and, no doubt, the Members of Seanad Éireann, have the utmost confidence in ICC Bank plc. This has also been expressed by all parties in Dáil Éireann. The Minister is indicating his complete faith in the ICC Bank by now providing for the extension of its borrowing requirements in the ICC Bank Bill, 1999. Going forward, it is his intention to ensure that the ICC Bank remains adequately capitalised while it is under State ownership.

The board, management and staff of ICC Bank have co-operated with the change process over the past months. The Minister appreciates the positive role which they have played in this process. At all times their focus has been on building the quality and profitability of the ICC Bank. While all parties share the disappointment of a deal not being finalised at this juncture, the commitment of the stakeholders of the ICC Bank remains undiluted.

The Minister for Finance will now be asking the ICC board, management and staff to consider all of the options for the future of the ICC Bank in the light of current developments. He will consider these options for a way forward on receipt of the views of all of these parties.

In the light of the decision of Bank of Ireland not to pursue the finalisation of the acquisition of ICC Bank, the Minister for Finance decided to make changes in this Bill and recommit it to Committee Stage in the DáiI, where it unanimously passed all Stages yesterday. The urgency attached to this legislation at this point centres on the need to increase the borrowing limit of the ICC Bank.

I now turn to the main provisions of this Bill. Section 1 is the definitions section and is self-explanatory. Section 2 provides for the transfer of relevant shares to an employee share ownership trust, in line with the Government decision and for related matters. The employee share ownership plan, which was proposed in the context of a sale to Bank of Ireland, envisaged 5 per cent of the issued ordinary shares in the company being provided to the employees, in return for change in the ICC Bank and a further 9.9 per cent stake being available for purchase by staff. This section will allow for the reactivation of such a scheme if circumstances make such a course of action desirable in the future.

Section 3 is essentially an enabling provision to allow the Minister for Finance to dispose of his interest in Fóir Teoranta. Under the Fóir Teoranta (Dissolution) Act, 1990, the assets and liabilities of Fóir Teoranta were transferred to the ICC Bank plc, then the Industrial Credit Corporation. Since then, ICC Bank managed the portfolio on behalf of the Exchequer, with the Minister for Finance paying a management fee for the service. It is proposed to sell the residual Fóir Teoranta portfolio to ICC Bank for its estimated realisable value, less a consideration in relation to releasing ICC's management contract therefor.

Section 4 provides that the borrowing limit of ICC Bank plc be increased from £2.3 billion to £3.5 billion. Section 5 is a standard provision requiring ICC Bank plc to take relevant action to alter its memorandum and articles of association, in the context of the Companies Acts, to make them consistent with the terms of this Bill. Section 6 provides that the borrowing limit of ACC Bank plc be increased from £2.4 billion to £3 billion.

Section 7 provides for the repeal of certain provisions of the Fóir Teoranta (Dissolution) Act, 1990, to facilitate the scenario applying with the disposal by the Minister for Finance, of his interest in Fóir Teoranta, as provided for in section 3. Section 8 is a standard provision in relation to the expenses of the Minister for Finance. Section 9 gives the Short Title and construction. I commend this Bill to Seanad Éireann and I look forward to Members' statements.

Mr. J. Doyle

I welcome the Minister of State to the House for this Bill. The ICC Bank Bill, 1999, is radically different from the original Bill as amended by the Oireachtas Select Committee on Finance and the Public Service. Following the decision taken by the Minister for Finance last Monday to withdraw ICC Bank plc from sale, the sections of the Bill relating to that sale have been deleted. It is regrettable that the Minister had to withdraw the bank from sale. It is a serious and embarrassing setback for the Department of Finance. Unfortunately, the whole process has been embarrassing as potential bidders withdrew during the course of the year. The Minister of State has referred to the number of banks that were interested – ten institutions were interested in bidding for the bank.

Bank of Ireland was left as the sole contender for the bank. As the Minister of State said, the Minister was not happy with the price offered by Bank of Ireland. He wanted the bid increased. The sale at that time looked like realising £350 million for the Exchequer. However, there is a view that Bank of Ireland tried to negotiate the price downwards, having previously proposed an indicative offer of £350 million.

We are conscious of the battle that is taking place among the financial institutions in England for the soul of the National Westminster Bank – the Royal Bank of Scotland and the Bank of Scotland are trying to take it over. The National Westminster Bank, in trying to fight that bid, has indicated that it is prepared to sell Ulster Bank, which is a popular bank in Ireland. There is a view abroad that the Bank of Ireland may have lost interest in buying ICC Bank because Ulster Bank came on the market. This was referred to in the Minister for Finance's statement last Monday when he said that Bank of Ireland came to the view that acquiring ICC Bank is not in its best interest for the development of its SME lending business. The Minister of State may wish to cast some light on this when he replies. If there is only one purchaser it makes it more difficult to obtain the best price. The Minister for Finance had an obligation on behalf of the Exchequer and the taxpayers to obtain the best price for the bank.

I agree with the Minister of State – I also have the utmost confidence in ICC Bank, its board of management and its staff. It has played a tremendous role in helping Irish society over many years. It is the friendly bank of the small borrower and that position has been difficult over the past number of years. It might be in our best interest for the State to retain ICC Bank. I have full confidence in its management and staff. I am happy to co-operate with the passing of this legislation which provides additional borrowing capacity for ICC Bank. The limit of the bank has to be increased with immediate effect as indicated by the Minister of State in his speech. For that reason I am happy to see all Stages of the Bill taken today.

Mr. Bonner

I welcome the Minister of State to the House. Regardless of the events in the Lower House and, again, this morning in this House, we are delighted to have him here. We know he is well qualified to deal with this Bill having been a former Minister of State at the Department of Finance.

The purpose of this Bill is to facilitate and oversee the sale of ICC Bank. I agree with the Government's decision of 27 July last which gave the go-ahead for the sale of the bank. The Irish economy is going from strength to strength. We are actively participating and surviving in a climate of free market economics, both within Europe and within the world. This marketplace is changing and evolving all the time. We live in the European Union where the free movement of people, services, goods and capital operates across the territory of 15 member states, encompassing a population of over 340 million people. This is the new internal market where protectionism is a thing of the past. However, protectionism was a philosophy which served a very important purpose for the Irish nation when it was first founded in 1922. The State intervened in nearly all the key economic and social industries in the country. One such important economic sector which benefited from the tide of State involvement included the banking sector and in 1933 the ICC Bank was founded. The ICC Bank was established at a time when economic circum stances were very different from current circumstances. It was founded in a climate that encouraged the financing of the development of an industrial base in Ireland. Since then the ICC Bank has become a very strong supporter of small and medium sized industries which have formed and continue to form the bedrock of society.

The ICC should be commended on the key and active role it has played in promoting more economic activity in the SME, small and medium enterprise sector, over the past 66 years. The Minister for Finance, Deputy McCreevy, was correct when he stated in the House on 23 November last that the ICC Bank has played a major part in the development of indigenous industry.

Of course, times move on and economic conditions change, as do the priorities of the Government. This Government had to evaluate whether it was correct and proper actively to participate in the banking sector. The Government was correct in deciding that there is no strategic or policy justification for continuing State involvement on the margins of the banking sector. The marketplace has developed and State guarantees are not appropriate for moving forward. The ICC Bank would benefit from greater access to capital and broader expertise and I have no doubt that in the future it will benefit from international opportunities.

Before discussing specific provisions included in this Bill in greater detail, I will comment on the financial health of the ICC Bank at this time. The bank has expanded steadily and has enjoyed consistent profitability. While the State has made equity investments totalling £37 million over the years, the bank has grown through its own efforts to a stage where its balance sheet now amounts to over £2 billion. ICC has paid regular and increasing dividends to the Exchequer over the past two decades. In the past five years alone, such dividends amounted to £14 million, while corporation tax payments during the same period totalled £10 million.

In 1998, the bank made pre-tax profits of £21 million. Operating income rose by 22 per cent to £25.9 million in the six months ended April, with profits before tax increased by a corresponding 25 per cent to £11.3 million over the corresponding first half of the year. Advances to the bank's small and medium sized business customers went up by 28 per cent during the same period.

In any assessment of the contribution of the ICC Bank, its performance in the venture capital market deserves special mention. The bank has had a pioneering role in the provision of such funding and it continues to hold a market leader role in the venture capital area, an area which is vital to ensure the continued and accelerated development of SMEs. While the key provision in this Bill relates to the sale of the ICC Bank, it is important to note that the Government has actively encouraged and ensured that an employee share ownership trust, ESOT, has been put in place.

Section 2 of this Bill specifically deals with this matter. This section provides for the transfer of relevant shares to the employee share ownership trust and for related matters. An employee share ownership is envisaged to be made up of 5 per cent of the State's shareholding, providing in turn for change in the bank and a further 9.9 per cent stake to be available for purchase by the staff. This is a very sensible provision. All good leading companies ensure that their employees share in the prosperity of a successful company.

This provision in the Bill is a reflection of the broader and more important economic and social policy of rewarding staff, as companies grow from success to success. The staff union met all potential purchasers and none regarded the share scheme as out of the ordinary. Staff at the ICC Bank have already voted to accept the offer in a ballot which took place in July of this year. Some 92 per cent of the 358 workforce balloted accepted the final offer from the Government.

Section 3 of the original Bill has now been deleted owing to the sale not taking place. The new section 3 is essentially an enabling provision which allows the Minister to dispose of his or her interest in Fóir Teoranta under the Fóir Teoranta (Dissolution) Act, 1990. The assets and liabilities of Fóir Teoranta were transferred to the ICC Bank plc, which, of course, was the Industrial Credit Corporation. The Minister proposes to dispose of his residual interest in the assets and liabilities of the former Fóir Teoranta by selling the residual portfolio to the bank for its estimated realisable value, as determined by his advisers and as agreed with the bank, less a consideration relating to releasing the management contract.

The new section 4 of the Bill provides that the borrowing limit for the ICC Bank be now increased to £3.5 billion. Section 5 is a standard provision which requires the ICC Bank to take such steps as are necessary under the Companies Acts, 1963 to 1999, to alter its memorandum and articles of association to make them consistent with the terms of the Bill. This is normal in many companies. Section 6 provides that the borrowing limit of the ACC Bank plc will be increased to £3 billion.

The Government was very thorough and very fair in the manner in which it approached the sale of the ICC Bank shares. As the Minister said, in February the Government appointed ABN-AMRO and McCann FitzGerald to advise on the corporate finance and legal aspects of the sale of the Government's interest in the bank. During the following months, officials from the Department of Finance worked very closely with the board, management and staff of the ICC Bank to prepare the necessary documentation on the sale, to negotiate an employee share ownership trust and to agree procedures for the sale process.

Expressions of interest in acquiring the State's remaining shareholding were sought by advertisement on 12 July 1999. Up to ten banks had expressed an initial interest in acquiring the bank but only three firm indications of interest were received by the closing date of 23 August. Having reviewed the tenders, it was decided that all three firms should enter the second stage of the sale process where they would be permitted to carry out due diligence study of the ICC. One of these, National Australia Bank, withdrew from the process shortly thereafter. The two remaining banks undertook a preliminary due diligence exercise on the ICC and so availed of the opportunity to meet key management and union officials. One of these parties, Irish Intercontinental Bank, withdrew at a later stage.

By 19 October, the Bank of Ireland was the only bidder left in the ring. There have clearly been many negotiations since then between the Bank of Ireland and the Government on various aspects of the operations at ICC. The Minister for Finance informed the Bank of Ireland that he was not happy with the price offered and that he wanted this increased. The Minister was conscious that a decision to withdraw ICC Bank from the market without exploring all the possibilities would at that stage not be desirable. Bank of Ireland made it known to the Minister on Monday that it no longer wished to proceed with the acquisition. It fully acknowledged the strengths of ICC Bank in its specialist market segments but felt that acquiring ICC Bank was not the best way to develop its SME lending business.

One view in the marketplace is that Bank of Ireland tried to negotiate the price down having previously posted a higher indicative offer of around £350 million. As the only player left in the game, it held the upper hand. It also became clear as the sale process went on that Bank of Ireland had a viable option to satisfy its strategic needs through the acquisition of part of Ulster Bank. Bank analysts believe it was unfortunate that Ulster Bank effectively came on the market during the sale process for ICC Bank. This effectively meant the State bank was competing with Ulster Bank for a suitor and, given Ulster Bank's spread of interests, it was always likely to be the more attractive option. When this truth dawned, it became clear that the £350 million indicative bid Bank of Ireland had tabled at the outset was too high a price to pay. With no other bidder in the ring, it became clear to all parties that the final offer was going to be nowhere near this figure.

Despite the present difficulties the Government has the utmost confidence in the ICC Bank. The Minister is indicating his faith in the bank by providing for improved borrowing requirements in the ICC Bank Bill, 1999. The Government intends to ensure that the bank remains adequately capitalised while it is in State ownership.

ICC Bank was established by the Fianna Fáil-led Government in 1933. We are now in a global banking situation and are experiencing huge growth in our economy in which ICC has played a major role. As a leading venture capital bank it has made a huge contribution to the development of the industrial sector. The Government based its decision to withdraw the sale offer on devel opments in the banking sector since the tender process was initiated.

I wish to refer to the Minister's recent contribution in the Dáil on the proposed sale of ICC Bank. He stated that the bank has been on the market in one form or another since the early 1990s and that it was time to end this uncertainty. I agree with this proposition. It is important for the board, the employees, the Government and prospective purchasers that any future sale of the bank takes place in a structured and streamlined manner, and that a fair and equitable price is secured. We must ensure that any disposal of the bank takes place in the right environment and under the right conditions and, naturally, at the right price. The sale of ICC Bank fell through because Bank of Ireland did not make the required offer.

Mr. Ross

I will have to begin my contribution by expressing a little disappointment and protest at the way this Bill is being treated. The Minister of State is extremely competent in his own field but he is not a Minister in the relevant Department. That is a pity. The Minister for Finance is in Helsinki but there are other Ministers who, if they were not available today, could have come into the House at a different time when this Bill, which is not that urgent, could have been taken.

The Seanad is being insulted by being asked to take this Bill which has been filleted in the past few days for reasons which are not our fault, but because of the Government's incompetence. I also wish to make a general point. I do not wish to sound too purist, but there is a habit developing in this House, particularly on the Government side, of Members reading speeches. This is a great pity because it means there is a lack of spontaneity. Future generations who read the speeches made by Government speakers will believe that they are spontaneous. Members know that many of the speeches are written in the press offices of political parties and that it is against the rules of this House.

Mr. J. Doyle

The Senator can exclude the Fine Gael press office from that statement.

Mr. Bonner

He can also exclude the Fianna Fáil press office.

Mr. Ross

I intend to object in the future if this abuse continues. I do not like doing so but it is insulting to the House when speeches on the Government side reflect and bear an uncanny likeness to the Minister's speech. That is an insult to the House on important Bills such as this because, in some cases, it shows that the person reading the speech does not know or understand what they are talking about. This is not so in Senator Bonner's case as he is an extremely articulate and well-informed person on these matters.

The issues concerning the sale of ICC Bank have been inadequately addressed by the Minister of State as the House has been given no information. We got the story of what happened – a history lesson about what a wonderful bank ICC has been. The Minister of State told us what we already know and that the sale is not going ahead, but we do not know why. That is the first thing he should have told us. The reason is that this whole episode is a complete shambles and Government and Opposition Members are not living in the real world if they fail to recognise this fact.

In reality, ICC Bank was put up for sale around 1992 and was formally put up for sale last year. It must be the only bank in the world which has not had a bidder. This is a period of consolidation in international banking. Banks are gobbling each other up yet, according to the Minister of State, when ICC Bank was put up for sale last July it attracted only three indications of interest. This is extraordinary. The Minister of State never asked why there was such an incredibly lame response. However, the sale process continued but two of the banks withdrew, leaving only one bidder. Behaving like complete fools, as it has throughout this procedure, the Government issued a statement saying that Bank of Ireland was the preferred bidder. Wonderful, but this is nonsense. The Government was stuck because it could not sell the bank to anyone else.

A few weeks ago, after he had issued that statement, I said to the Minister in this House that ICC Bank should have been withdrawn from sale because it is obvious that if there is only one bidder, that bidder has one over a barrel. However, instead of withdrawing the sale offer, the Minister stuck his head in the sand and said, "We're going ahead with this". He knew something which we do not know for sure. The Minister of State has told us nothing so far but will he confirm that Bank of Ireland made an indicative bid last July? I do not know whether the offer was £350 million but I would like the Minister of State to tell me if that is so. I would also like him to clarify whether Bank of Ireland changed its mind having seen that there was no other bidder. I am sure that is exactly what happened, as could have been foreseen by anyone. However, the Government was so committed to selling this bank to the private sector that it took the decision to sell it to the only bank which was interested.

We do not need a prepared script, a history lesson on ICC Bank or praise for what the Government calls its great support for SMEs. We need to know where this process went wrong, because it was very difficult not to sell a bank in the last year. We need to know why Bank of Ireland withdrew, why there was so little interest and why other banks withdrew having taken a good look. I will make a few suggestions as to why these events occurred, which I expect the Minister of State to deny. I think the other banks which looked at ICC did not like the strings attached. This was not a normal commercial sale. The strings attached were made public – we knew about them, as did the other banks. They involved guarantees to the workforce in exchange for an end to certain work practices. Will the Minister of State specifically outline the nature of these work practices? What was going to come back from the workforce in exchange for the concessions being made to them?

Worse still, this was privatisation à la Telecom Éireann, Aer Lingus and Aer Rianta. It was privatisation Irish style. This worked in the case of Eircom which was a massive public privatisation. However, that sale was successful because it was a retail privatisation. One can sell a company giving 15 per cent of the shares to the workforce. This is the real problem but no one will say so because they are afraid of the voters. One can give 15 per cent of the shares to the workforce in a retail sale if one sells it properly because, as the Minister of State and everyone else knows, the public does not realise the implications. However, a hard-nosed bank which purely wants to make money will not like the figure of 15 per cent. It will not like the fact that it does not have a free hand with redundancies and work practices. That is the reality and that is why so few banks were interested. The ICC had baggage. It may be right or wrong, but that is the reason. If this is not admitted, the sale of TSB and ACC next year will be in serious trouble. The same pattern will be followed. A precedent has been established – the sale of a State asset has collapsed.

Bank of Ireland was not quite so concerned because it is used to these practices and it is an Irish bank – foreign banks, as a whole, withdrew. I want the Minister to tell me why Bank of Ireland withdrew. We have heard a lot of rhubarb which means absolutely nothing. Was there a breakdown on price? Reading last week's anaesthetic press release did no good. It stated that Bank of Ireland had decided that the development of the SME market was no longer in its interest. How could it no longer be in its interest? The one area in which Bank of Ireland does not have a strong market niche is small and medium enterprises. This was an ideal opportunity and would have been its last chance to acquire in the Irish banking market. Yet, it somehow withdrew. The Minister took the only option and withdrew ICC from the market. I do not believe any of that and neither does anybody else.

I do not believe the story being spun, which was aired by Senator Bonner, about Bank of Ireland deciding Ulster Bank was more important. There is no question of Bank of Ireland taking over Ulster Bank in the Republic. We should kill this rumour before it is spun as truth in the public arena. If Bank of Ireland takes over Ulster Bank, it will do so in Ulster. How can this affect the bank's SME interests in the Republic? It is known that Bank of Ireland has entered a joint venture with Irish Life and Permanent to take over Ulster Bank, in the event of it being sold. There is no guarantee this will happen – Ulster Bank is not for sale. It will depend on who, if anyone, takes over NatWest. Bank of Ireland will not abandon a small bank with no retail interests, which is only interested in small business and operates in the Republic, in favour of buying a retail bank in Northern Ireland, which is not even for sale. It is nonsense and a smokescreen. We want to know the truth.

The Minister of State does not have responsibility for this matter. I presume the Minister for Finance and his Ministers of State could answer my question if any of them were here. What was the Minister told by IIB and National Australian Bank? Why did they withdraw? What has happened is extraordinary. I am not suggesting there is something untoward or dishonest going on – I am suggesting we are not being told anything about it because it was such a total and utter shambles from start to finish.

What are the plans for ICC? The morale of its staff and directors must be at rock bottom because of the mess made of this by the shareholders. What plans does the Minister have? We know he wants to increase its borrowing – for what? Will it continue to operate as before? We know the plans for ACC but I want to know the plans for ICC. There are probably none. We never had an alternative course of action. We assumed someone would buy the bank. What was the final bid from Bank of Ireland? We are entitled to know that. It is not a secret – the negotiations are over and we want to know why they collapsed. If I do not receive a satisfactory reply from the Minister of State, I will request the information under the Freedom of Information Act. That reply should be given in this House. We should know exactly what happened and who bid what – there is no secret about it anymore. We should hear the entire saga.

I wish to ask the Minister of State about the role of the State in the banking sector. I know there is an ideological commitment and I share the Minister of State's belief, stated in his contribution, that the State should have no direct strategic role in the banking sector – by which I mean they should not have ownership.

Mr. Ryan

Rubbish.

Mr. Ross

I will come to Senator Ryan's point. However, the Minister should take note of the recent appalling controversies in the banking sector which would provoke one to believe the State must have a role, if not a shareholding. The banks are irresponsible, subversive and dishonest.

Mr. Ryan

Hear, hear.

Mr. Ross

They have acted against the interests of this State for many years. The Minister of State knows that – it is well-documented and unarguable. They have encouraged people not to pay DIRT and taken other actions which are patently not in the State's interest. The State has a role and has conspicuously failed in it. I agree with the Minister of State about shareholding. However, there is a case for the State to look long and hard at creating competition in the banking sector in a way which ends the domination of the big banks. There is no sign of that happening.

I repeat what I said yesterday – the State has been indirectly taking its orders from the banks through IBEC. The biggest paymasters of IBEC – to whom the State constantly listens – are not small, medium or big businesses but the large banks and the semi-State sector. They pull the strings and the State takes heed of what they say. It should play a role and challenge these banks to reduce their power, not to increase it. The State should consider this more carefully and less blandly than is suggested by the Minister of State's speech. Shareholding is another matter and there is no role for the Government in that. However, the Minister of State knows there are many other ways of exercising powerful institutions other than holding shares in them.

I would like to comment on the detail of the Bill, of which there is not much given the way it has been emasculated. I would like the Minister of State to tell us why there needs to be an increase of £1.2 billion – which is about 50 per cent – in the borrowing requirement. Does this indicate that ICC Bank has a future as an independent bank? How long before we are expected to renew this? This is an indication of Government thinking for the future in relation to the role of the bank.

I understand the affection of the Minister of State, Senator Bonner and others for the bank. When they say they supported SMEs in the past, what they mean is that they made non-commercial loans which they did not close. It is no secret that the ACC and ICC Banks were extremely lenient in bad times to those businesses which were in difficulties. Perhaps this was State policy. However, I do not think this will continue. While the banks' history may have been less than commercial, they were to a certain extent providing a social service. I am not making a judgment but this cannot continue in the future and it certainly cannot continue when the bank is floated. It is not a relevant factor any longer.

In the past I raised an issue which worried me with several Ministers and with which Minister of State might be in a position to help me. This relates specifically to the ICC. The ICC has been very successful in small and medium enterprises. It has been very successful in venture capital. It has been immensely successful in the profits it has made from its business expansion schemes. However, it has been the least transparent in revealing its charges. Over the years I have had several battles with Ministers on this issue. I am speaking from memory in this regard, but under the BES, the promoting bank buries somewhere in the small print what its charges are. Its charges might be 3 per cent to the purchaser of the shares in the relevant scheme. This is pretty high and would amount to a charge of £240,000 on £8 million for very little work. Despite being a State bank, the ICC does not reveal the amount it charges the business receiving the funds. This is a relevant factor. If you put £1 million into a business and you take £90,000 or, in some cases, £100,000 in commission to the business and £30,000 from the punters, you are making much more money than you are revealing out of the business you are pretending to help. Of course, banks must make money. They must be secure and solid because they are the foundation of the economy. However, the ICC Bank is the worst offender in terms of transparency. It resists revealing figures which are relevant.

The BES is supposed to help small companies in difficulty – this is the ICC's speciality. A very clever mechanism was devised for doing this but, in fact, this has resulted in the receiving company not getting as much money as the promoter pretends. The promoters of the BES schemes are making a fortune. They are also putting the money on deposit for up to a year for their own benefit, not for the benefit of the investors. This is not apparent. It is important that the State bank, which historically had made a large amount of money from these schemes, should be seen not to be secretive in this matter. I would like to hear the Minister of State's views on the issue.

The debate on this Bill gives us an opportunity to consider the privatisation programme. Today this programme is in ruins. Senator Ryan has a different view but I believe the privatisation programme was a magnificent opportunity for releasing the right companies into the private enterprise sector. This would remove State interference and control. As a result of what has happened here, confidence in Irish privatisations has collapsed. I no longer believe that the flotation of TSB/ACC will go ahead and Aer Lingus and Aer Rianta are both in danger. The reasons for this are not being revealed. This is being presented as a once-off bit of bad luck; it is not. Some time ago when this subject came up for discussion, I suggested to the Minister that if any bank was unsuitable for taking over the ICC, it was the Bank of Ireland. I said it was the worst possible choice even though I did not know at the time that there was no tender out. It was known that the ICC would be sold at some stage and that the Bank of Ireland would possibly be interested in taking it over. Many other names were in the hat at the time, including Anglo Irish Bank and the Ulster Bank, but they did not even make a bid. This is a case in point where the State should intervene in the banking industry.

The reason I thought the Bank of Ireland was unsuitable was that it is too damn powerful already. This is the biggest retail bank in Ireland. It is the biggest fund manager through Bank of Ireland Asset Management in Ireland. The Bank of Ireland has the biggest corporate finance department in Ireland. It owns Davy Stockbrokers, the biggest brokers in Ireland. It bought New Ireland Assurance, the second biggest assurance company in Ireland. The Bank of Ireland buys anything it wants and this results in totally disproportionate power. Its only gap was in this area. If the Bank of Ireland wishes to begin in this area, let it begin like everyone else from the bottom. It should not spend shareholders' money to increase its own empire because this would result in cross-selling. It would not matter if the Bank of Ireland did not use this position in its other enterprises. However, within the SME scheme, it might provide a loan on the basis that the company used the bank's insurance company. The bank might insist that a customer dealing in the stockmarket should use Davy Stockbrokers and a customer opening a bank account should use the Bank of Ireland. This does not just give the bank leverage in this area, it gives it dominance in certain areas. It is not in the interest of the consumer that any bank should have so much power. The State should be in a position to sell the bank, but it should not sell it to one of the biggest blocs. It should be Government policy to have a thriving, competitive banking sector. It should not be Government policy to pool every sector because it is the small businessman and consumer who will suffer.

I ask the Minister if he is taking note of some of my specific questions such as price. Let us hear the real story. What happened between July and last Monday? Let us not listen to this PR nonsense from the Bank of Ireland. Let us hear the details. Why did this bank get out? Why did the other banks get out? What did they not like about this bank which is thriving and making money? This is what I wish to hear and not the sort of plámás we have been getting today.

Mr. Quinn

I am quite upset about the arrival of this Bill which, in my opinion, represents bad law. "Quickie" legislation is always bad law but what is particularly objectionable in this instance is the fact that the Bill was reconstituted yesterday on Report Stage in the Dáil when even the Title was changed. That is bad practice and we should never rush legislation through the Houses unless there is a need for total urgency. There may have been such a need until Monday last but, at that point, it appears the Bank of Ireland stated that it was no longer interested in purchasing ICC Bank. In my opinion the Government should have withdrawn the Bill and returned with a proper, calm, well thought out strategy which indicates the action it intends to take in respect of ICC Bank. Senator Ross raised a number of relevant points in that regard.

ICC Bank is a fine institution with a proud history and it has been quite successful since its launch in 1933 by the then Fianna Fáil Government. However, we live in a different era and a different strategy is required. The last thing this fine institution needs is the rushing through of legislation governing its operations without sufficient consideration being given the bank's future strategy. It should not just be a case of those in power at the bank saying "We need a lot of money and we need it urgently.". It is amazing that this short, snappy Bill which only appeared yesterday proposes to increase the limit on the bank's borrowings from £2.3 billion to £3.5 billion and make available an additional £600 million in loans for ACC Bank. I do not understand how ACC Bank can be included under the terms of the Bill.

Senator Ross referred to this matter as a "shambles" and he is correct. We have not been given any information and we did not learn anything from the Minister of State's contribution. What we want is a new Bill but we have not been presented with one today. We owe it to the State and its citizens to pay attention to the provisions in the Bill. I propose that we adopt the sort of strategy we proposed in respect of the telecommunications industry. In that regard, we argued strongly that the State should end its involvement in the telecommunications business. A worthy proposal was made to the effect that instead of having an independent regulator for the telecommunications industry, the State should undertake to be the regulator. I seldom argue that the State should become involved in such matters. However, in regulating the banking and telecommunications sectors it would have a different objective. If the State was not involved in these sectors, it could pursue not only the objective of seeking fairness but it could also help to generate competition. One cannot generate competition if one is the owner or part owner of a company involved in a particular industry.

In my opinion the State should hold no position in the banking or telecommunications sectors. If it is to hold such a position, the Department of Finance should assume responsibility for generating increased competition. We have seen the effect of competition in recent weeks with the arrival of the Bank of Scotland in the banking sector. I must declare an interest here because I am involved with Tusa Bank. From that point of view, I suggest that the State should adopt a strategy of promoting increased competition.

The Government owes us an explanation why the Bill is being rushed through. We are also owed an explanation in respect of ICC Bank's need for an increase in its borrowing limit on such short notice. The Minister of State outlined the success enjoyed by this fine bank. If that is the case, why are we suddenly increasing the borrowing requirements of ICC and ACC on such short notice? There are many questions to be answered and there is a need to reflect calmly on the bank's future strategy. There is no need to rush through legislation as we are doing today.

Mr. Ryan

I hope I will not use my full allocation of time, but I suspect I might. It is becoming increasingly evident that we are in the hands of a profoundly incompetent Government. At a time when the country is enjoying the most favourable economic conditions in its history, everything the Government does goes wrong. The sale of Eircom was far from an unmitigated success and the departure of one or both of that company's strategic partners is yet another indi cation that the Government does not seem to understand the marketplace.

I have reached the conclusion that I, as a socialist, have a better understanding of market economics and the workings of the market than the ideologues who drive Government policy. These people have an ideological view of how the world should be organised and they are determined to make it behave in the way their ideology says it should. The reality is that the world does not work that way because, to everyone's great benefit, it is dependent on human beings not automatons who respond in a particular way to economic stimuli. Sooner or later, Governments in this country will discover – as Margaret Thatcher discovered to her cost after 16 years – that people are not automatons who provide a predictable response when subjected to an economic stimulus.

It is these ideologues, either in the Government or in the Departments which influence it, who have caused the Government to fall flat on its face in respect of a succession of issues. The Government sold Eircom and we have seen the subsequent near disaster which has befallen that company. Last week's budget is the most unmitigated disaster since Deputy John Bruton, at the height of an economic crisis, tried to place a tax on shoes. The Minister of State has no idea what the people, including those who benefited from the budget, think of the Government.

Acting Chairman (Mr. J. Doyle)

The debate on the budget took place last night, Senator Ryan, and we cannot go down that road again now.

Mr. Ryan

I thank the Acting Chairman for his guidance. He is probably correct.

We have now arrived at this particular disaster. I do not agree with Senator Ross about many things. However, I agree with him in one respect, namely, if you are going to take the route of promoting use of the market it ought to be a real market. The worst possible alternative is an in-between situation in which those involved in the market are protected from its negative aspects and allowed to benefit from its positive aspects. That is precisely the position which obtains in respect of the banking system.

The Government has encountered difficulties in respect of all of its privatisation initiatives because it cannot decide whose side to take. On the one hand, there are the ideologues of the Progressive Democrats who want to privatise everything while, on the other, there is Fianna Fáil which does not know for what it stands, thought privatisation would be a handy number and jumped on the bandwagon only to get egg on its face, first in respect of Eircom and now with ICC.

The Government's privatisation policy is a mess. There are a number of reasons for this, all of which relate to the fact that the Government cannot decide for what it stands because it stands for nothing. It does not understand the nature of our society or our economic success and it is floundering around in the face of unprecedented affluence, not knowing what to do with it. The Government is seeking boltholes in which to place money because it cannot think of anything better to do with it.

At a time of unprecedented affluence, the Government could spend its time considering the operation of the banking system. There is nothing I could say about that system which has not already been said on many occasions by Senator Ross. One does not have to be the chief economist of one or other of our major stockbrokers – in fact, that would probably be the worst position to hold – to recognise how bad are the banks, how indifferent they are to their customers, how profoundly uncompetitive they are, how arrogant they are and, in some cases, how primitive they are.

Last week I went to lodge a cheque in Bank of Ireland. This is something I rarely do because my various bits of income enter the banking system through various means.

Mr. J. Doyle

I would not say they are that small.

Mr. Ryan

Much to my surprise, the second largest bank in the State still expects me to complete a form in order to lodge a cheque in my account. It has not even managed to put in place the rudimentary information technology which would allow me to use a plastic card, as I could in virtually every other civilised bank in the country, to do so. That is the bank to which the Government was considering selling ICC Bank, an institution which is approximately five years behind the times in terms of even rudimentary information technology.

The banks manifestly ripped off mortgage holders on interest rates. The Government sat back and, after a small foreign bank demonstrated the scale of the rip-off, the Minister for Finance finally got around to reprimanding them about their uncompetitive practices. He would have waited forever if Bank of Scotland had not entered the market because it was nice, cosy and made the banks look good. They made huge profits and some of their employees swanned around as if they were, in Tom Wolfe's words, "Masters of the Universe" when they were just second rate leaders of banks which were protected by cosy relations between themselves and so-called regulators who allowed them to rip off consumers.

If one allows duopolies or effective monopolies to deal with consumers, they make a fortune because the consumer has no choice and is ripped off. That is the way the market works. Senator Ross approves it but I do not like it because it involves a huge inhuman cost. The Government does not seem to understand how the market works. It likes to talk about the market but every one of its buddies – taxi drivers, bankers or, indeed, publicans – is protected from the full force of the market. The instinct of the Fianna Fáil Party is to look after its buddies in every area and it wants them to make money through quasi-monopolies rather than be subjected to the full rigours of the market. It is widespread because the party is hopping around and is not sure what is stands for anymore.

Mr. Treacy

Totally wrong.

Mr. Ryan

The banking system needs competition because there is none. It also needs flexibility which responds to the requirements of various sectors of the economy. That does not exist as anybody involved in the small business sector will tell the Minister of State. In spite of the wonderful public relations exercises upon which banks spend a fortune, they are not good at supporting anything new, innovative or risky. They will back away from anything they do not know about and that is the experience of everybody I know. If they take a risk, they want to tie themselves in. Small businesses with good, new ideas are only given the funding they need to start up if the banks are provided with copperfastened guarantees against risk and are ensured that they will almost have a majority shareholding in the new enterprises if they are successful. Such a banking system is not wanted and it would not exist if there was genuine competition.

However, if a Government which preaches the market does not understand how it works, one ends up the mess that we are in. Banks do not believe in market economics because they know it would not make them as rich. They like the cosy arrangement because they have an effective monopoly where they can charge 10 per cent or 12 per cent on an overdraft for which they pay 0.5per cent interest on the money they lend. Such a rate would not be feasible if competition really existed in the marketplace and that is the profit margin of an effective monopoly.

Banks also do not believe in price competition or that the market should determine executive remuneration. They are keen on it determining the salaries of their often lowly paid staff but they have created a wonderful cartel between themselves and institutional shareholders whereby nobody quibbles with the obscene salaries awarded to top banking officials for doing a far from competent job in a non-competitive economy. Banks know that the institutional shareholders want the same and, therefore, there will be no challenge to it. What is the chief executive of ICC paid? It is a small bank in a niche market which is extremely successful and profitable and regarded highly by its customers – small and medium enterprises. He or she is paid perhaps 10 per cent of that which the "Masters of the Universe" at Bank of Ireland or Allied Irish Banks are paid or perhaps 50 per cent of that which the "Master of Universe" at that dynamic bank, known as Irish Life and Permanent, is paid. The Minister will say the reason for that is that the market determines it. The chief executive of ICC Bank is paid so little in comparison to others because he is under scrutiny from his shareholder, the State, but the shareholders of a major bank are so outnumbered by institutions that they do not have a chance to scrutinise anything like this.

The Minister for Enterprise, Trade and Employment, in one of her moments of enlightenment about how the market works, has at least decided that institutions which are public limited companies must disclose to shareholders – who are the owners – how much they are taking out for themselves. Is that not an extraordinarily radical action by someone who believes in market economics? The directors, who are the servants of the shareholders, must tell them how much of their money they are giving to themselves. This is regarded as radical innovation. It is the most rudimentary element of any market.

ICC Bank fills a niche in the market successfully, making a reasonable amount of money for a bank of its size. The Government came close to selling it to a bank which does not do the job nearly as well. No small business people that I know have much of an opinion of the two big banks. Most try to deal with the smaller banks because they receive a more human, focused and flexible response. Ideology tells the Government to sell ICC Bank and it goes ahead. It does not do so because of commercial reality because the bank is making a great deal of money. Within its own niche, it is regarded as a competitive bank doing things than no other bank will do, which is needed. It recorded £21 million in pre-tax profits in its last full year of trading. Presumably, ten years of such profits would equate to the price the Government hoped to get for the bank.

The Minister said that there was no significant strategic or policy need for continuing direct State involvement in the banking sector. I have no particular ideological desire to have banks remain in State ownership but I am not aware of any other way in this society to force Irish banking into accepting the competitive realities of a market economy other than having a sector which is not under the control of the cartel made up of Irish banks and their shareholders. If one examines the institutions which hold shares in the banks and the names of the people involved, one will find a list which equates to one-tenth of the membership of one or two golf clubs. The number is so small that all of them know each other by first names. They probably socialise together and look after each other because they do not compete when it comes to how much they are to be paid by their unknowing shareholders who are not even allowed to ask them an awkward question. That is why selling a State bank to one of those parasites is a disaster for the country. They feed off the livings of other people and provide no great service in return.

I am glad for two reasons that the proposed sale fell through. First, the principle for selling was ideological and there was no reason for it and, second, the ideology of the marketplace ignored its function, about which there is a great irony. It is easy to get a good lecture about how one must be careful about the marketplace. One should read Adam Smith and what he says about joint stock companies and the suspect nature of the way they do business. He had a sceptical view of the market. He knew how it should work but also that if one did not watch it carefully it would operate in a directly opposite manner to that in which is was supposed to. He believed that when people involved in any area of the market got together, they did not think about the consumer but immediately talked about how to fix prices. One did not have to pick up one's telephone and talk to a buddy in the nearest bank. One makes clear decisions that one will not compete too hard. It is obvious what they did. That is why it was ideological nonsense to sell this bank to Bank of Ireland. It would make a bad situation worse, although not overwhelmingly, for small businesses.

Perhaps the Government believes in the myth about private sector efficiency. If the Minister of State wants a list of examples of private sector efficiency, I can start with the multi-channel service in Cork which is dominated by Senator Ross's long-term employer and which abuses consumers on a scale beyond compare. The worst possible monopoly is a private sector monopoly.

I agree with Senator Ross, although for different reasons, about the position now. We are back again to why it did not sell, but the Minister will not tell us anything. The Government believes it is entitled to make deals behind closed doors about enterprises which are owned by the State. It will not tell us why the deal broke down – this is at a time of accountability and transparency. It has fudged the issue. Why is a price issue? Was it the unacceptability of Bank of Ireland or did it dawn on the Government last Monday that the banking system is in need of a fundamental shake up? What was the reason? We will be left waiting for the answer. I do not know whether this is related to the banks' control of IBEC and I suspect Senator Ross has more than a degree of correctness in that regard.

I have noticed things about the people who call themselves the driving force of the market economy in Ireland. They do not like anybody having rights and they get shirty if consumers are given more rights. They get shirty if their staff are given more rights and when we decide that their right to destroy the environment should be restricted in some way. However, they expect us as legislators to protect all their rights to make the maximum profit with the minimum inconvenience to themselves. What happened was that the State correctly decided to introduce an employee share option scheme in ICC Bank. This is a good idea in State companies and it is interesting in terms of partnership and giving staff a real sense of ownership in the companies in which they work. However, our brothers and sisters in the marketplace, who do not believe employees should have rights, do not agree.

Civilised countries do these things differently, as instanced by the degree of employee stockholding and supervision in Germany and Scandinavia. They work well and are successful. They have a concept of partnership which is real and inconvenient for both sides, unlike the Irish type of partnership which is only inconvenient for members of trade unions. This is the problem.

This Bill has nothing to do with what it was supposed to be about originally. Nevertheless, it contains extraordinary provisions and I wish to ask the Minister of State about them. Senator Ross also dealt with this area. Is the ESOP conditional on somebody else buying the bank? If so, when will it come into force? Why does ICC Bank need more money? The most ludicrous aspect relates to the legislation's Short Title, the ICC Bank Bill. Any normal person would assume that the Bill is about the ICC Bank. This is the type of logic ordinary people operate, but the Bill contains a provision which states that the borrowing powers of ACC Bank shall not exceed £3 billion, which I understand from the Minister's speech is an increase of £600 million.

This is included without explanation or reason. It relates to a bank of which most people do not have a high opinion for reasons outlined in recent weeks. This provision has been slipped into a Bill which deals with something entirely different and will allow the ACC Bank to increase its borrowings by £600 million. This is an unimaginable scale of borrowing to ordinary people. Even in modern Ireland, £600 million is a large amount of money. It represents approximately 1.2 per cent of Ireland's gross domestic product. A provision is being included in the middle of a Bill, which is not referred to in the Short Title, which will allow a bank that, as we now know from the cursory evidence at the DIRT inquiry, is or has been dubiously managed to borrow more money.

This move is not even included in a separate Bill so that people will be aware of it. Why has it been included in this Bill? It is a dangerous and unpleasant precedent which also arose yesterday where a Bill related to one area contained matters entirely unrelated to it for the convenience of Government Departments and Ministers. It is a profoundly disturbing trend.

I advise the Government to forget entirely about the privatisation approach and instead to put in train a programme which will ensure that the management of State companies is of a quality, with the remuneration packages which go with that, to run good companies. They should forget about this nonsense of private sector efficiency. There is not a scrap of evidence to support it and the British Government is still pursuing this nonsensical route on some issues. Some international consultants will say it is not true. It is a question of the type of management that is in place, the remuneration packages which are offered and the freedom and instructions given to them, not of who owns it. If anybody wanted an example that private ownership in itself makes nothing more efficient, the best one is the sector we are considering at present, the banking system which is manifestly inefficient.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

I detect a slight nervousness in the House, particularly on the Left side, but the Government is strong, solid, sound and sustained. There is no need to panic or worry. There will not be a general election for two and a half years. When it is held, the weather will be good and it will be nice to be outside. If anybody thinks there is a disaster or a crisis on the way, they are wrong.

Mr. Ryan

That is what Fianna Fáil always says during a crisis.

Mr. Treacy

There is nothing of the sort. I listened with great interest to the points made during the debate and I thank all the Senators for their excellent contributions. However, it is incorrect to suggest that I did not give information to the House on this matter. I refer Members to my speech in which I clearly stated that the Minister for Finance, Deputy McCreevy, informed Bank of Ireland at that stage that he was not happy with the price which it had put on the table and he wanted it increased. It could not be clearer.

I thank Senator Doyle for his positive remarks. He asked why the bank withdrew. Senator Ross and Senator Ryan raised many questions but Senator Bonner put it all into perspective. The market has spoken on this matter. We are in changing times in banking and it is an era of globalisation involving bigger banks. We cannot stand against the market and tell it that it cannot do various things. The market will regulate itself. Senator Ross is well established in the financial field and he knows the situation better than most. I thank the Senator for his contribution and his advice. I am sure the Minister for Finance would be delighted to receive a submission from him and other Members of the House about what we might do in the future.

We do not know the precise reason, but another bank came into the market and many considerations must have been taken into account before Bank of Ireland withdrew. There is no problem with ICC Bank as all the other banks categorically stated. Bank of Ireland obviously felt it was not as good a fit with it as it had hoped. We cannot say whether it had an interest in Ulster Bank. Given that Ulster Bank came into the market that was another consideration for the directors and management team in Bank of Ireland.

We had not finalised the price because we were not satisfied with it. We have no intention, and never had as a party in Government, of handing over the jewels in the crown of State assets. We would never dispose of assets for the sake of it, only if we got a proper return on the investment that has been made over decades on behalf of the taxpayers.

Senator Ross asked why there was only one bidder. At the outset there were ten indicative interests but at the end of the day that number fell to three. When it was decided to proceed one dropped out very quickly, another subsequently and we were left with one. Was it not better to proceed to finalise the process? Was it not better to know the real situation? Obviously Bank of Ireland was in a strong position as the only one remaining out of ten and finally the only one remaining out of three. That is the result of market forces, competition and opportunity. We could not predict that. Who could? The Minister was prepared to fight it out and he has proved in Opposition and in Government to have been correct in all his financial performances, predictions and decisions at all times.

Mr. Ryan

He is very provocative.

Mr. Treacy

He is a provocative man. He stimulates thought, economic growth—

Mr. J. Doyle

He stimulates debate.

Mr. Treacy

—and debate and he is innovative on taxation matters and will be proved correct again, as sure as night follows day. We could not decide to sell, at the end of the day, because we did not get the figures we wanted—

Mr. Ross

What figures?

Mr. Treacy

We will talk about those later. The important point is that we were not satisfied with what was available. The Government authorised the Minister for Finance to enter into negotiations on this matter. The Government also authorised the Minister for Finance to enter into negotiations with the staff on an employee share ownership plan, the ESOP, of up to 14.9per cent of the State's shareholding, 5per cent in return for change in the bank and 9.9per cent through purchase. Details of such a scheme had been worked out and would have been implemented on the sale of the bank. The dispersal of benefits to employees would be managed in an agreed way which would be tax efficient from the perspective of employees.

This would acknowledge employees' co-operation with the necessary changes at the bank and facilitate their buying into the new operation in a way that would prove mutually beneficial for owners, employees and the country at large. It would also be an acknowledgment of their huge personal contribution as key stakeholders in the positive development of the bank over the years. There is nothing wrong with that in my book. If people are dedicated to and do a good job and the State disposes of an asset there is nothing wrong with acknowledging their contribution. That is what is happening.

Senator Ross raised many questions as did Senator Ryan. The Fianna Fáil Party has been blamed, when it was possible to blame it, but it never gets credit for its innovation, despite having stimulated economic growth. Senator Ryan referred to how we look after our friends and the way we take decisions. We have never looked after our friends – we look after the people of Ireland.

Mr. J. Doyle

That is a nice one.

Mr. Treacy

I ask the House to reflect for moment on the 1983-87 Fine Gael-Labour Government.

Mr. Ryan

That is going a long way back.

Mr. Treacy

It is fact. The Senator talked about Fianna Fáil creating monopolies.

Mr. Ryan

Was that in 1937?

Mr. Treacy

The year 1937 was an historic year during which the people of Ireland accepted the Constitution from the great man, Éamon de Valera and the country has never looked back. Since then we have operated within the parameters of the Constitution and this has given us the legislative framework in which we have an environment of equality for our people. We are the envy of many other countries throughout the world.

In 1987 the Irish Civil Service Building Society was on the market under a Fine Gael-Labour Government. A proposal which came before the Cabinet for decision was turned down. Following a request from Bank of Ireland the leaders of the two parties got together, went back to the Government and changed the decision, thus allowing Bank of Ireland to take control of the Irish Civil Service Building Society. For the first time in the history of the State a bank got control of a building society. This created the first and most serious distortion in Irish financial services in this or the past century. Fianna Fáil was not in Government at that time and has never taken such a decision. The result of that decision is that a total power grip has been given to one institution in the financial services in Ireland.

The Government is led by the Taoiseach, Deputy Bertie Ahern. We, as citizens, are elected by the people and are privileged to serve. We have had our problems with the banking industry and acted immediately by putting in authorised officers, inspectors and taking the necessary action. We are carrying out the necessary reviews to ensure transparency, equity and fairness for all citizens in all financial institutions. We have plans to bring forward positive legislation to change the environment. Our record is one of performance, positive action and responding to the needs of this country at any given time and it is unfair to level at us the charge looking after monopolies and creating further monopolies. We have never done that and never will.

The Minister for Finance, Deputy McCreevy, has taken on the banks. He has met with the most powerful group and outlined the policy he wishes to pursue, the rules regarding implementation and has announced a major review of banking in Ireland. He will look at competition, globalisation, customer service, Irish banking in a new European context and any other matters that need to be looked at. As Minister of State at the Department of Enterprise, Trade and Employment, I have certain responsibilities for the banking industry in reporting to our excellent Tánaiste. In that Department we have brought forward innovative legislation and will bring forward more legislation. We set up the company law review group and will retain it in a permanent capacity to look after the regulation of the financial services. We propose to create a single regulatory authority. The company law review group will take note of what Senators and Members of Dáil Éireann say, take complaints from consumers and will take the necessary remedial action by legislation, primary or secondary, and other methods, to ensure equity in the system. We may also consider further measures.

On the question of changes to business by ICC in the market, businesses have been asked if they appreciate ICC and that has been confirmed positively. The ICC would not be used if it was not a competitive bank. Over the years it has proven to be a major stimulant organ in creating economic opportunity for new companies, assisting companies which needed further capital and support and has been a major success in the venture capital market. We acknowledge that ICC Bank was the leading venture capital player in Ireland and that it has played a significant role in the development of the sector. However, there has been a huge increase in activity in the venture capital market since the early 1990s. Under the seed venture capital measure of the European Union's industrial development programme 1994-99, £30 million of public money was placed with 15 funds which raised £60 million for investment. This measure helped to transform the Irish capital market and to greatly reduce the relative importance of single players.

In addition to the main Irish players, ICC Bank, Hibernia, ACT, Delta and Trinity among others, foreign groups, such as Agincourt, are taking a strong interest in venture capital initiatives in Ireland, all of which have made a huge contribution to the modern economy. The venture capital scene has been transformed in recent years with the amount being invested increasing continuously. ICC Bank and ACT have recently established new funds and others have initiatives in the pipeline. I expect ICC Bank will continue to be a major player in the Irish venture capital market into the future. However, the need for priming or direct involvement by the State is not as strong as heretofore. Many Irish firms are appreciative of the support given to them by ICC Bank. This fact, presumably, is part of the attraction of the bank to any bidder. In such circum stances, it should be in the interests of all parties to continue the SME focus which has been so successful in the past. I hope that ICC Bank, under new ownership, would continue to fulfil and to expand its role in the development of Irish industry.

If Bank of Ireland wished to purchase ICC Bank the final sealed offer, when received, would be sent for Government ratification, the Minister would report to Cabinet and it would take the final decision to proceed. The bank would then need clearance from the Competition Authority and the Central Bank, any of whom could decide it was a non-runner.

ICC Bank is very successful and has a liquidity rate greater than £500 million, giving it a ratio of about 30 per cent. It has provision of about £5 million for bad debts. It has traded successfully to the end of December 1998. The figures for 1999 are not yet available.

Senator Quinn spoke of the need for change and to have another look at this sector. I refer him to the banking review announced by the Minister for Finance and to which I referred earlier. He can rest assured that competition, which is hotting up already, will play a major part in this. European banking and the banking environment in general has been transformed by the IT industry which has changed the methods, systems and opportunities in banking. Consumers have adapted to those changes. The world is a much smaller place than heretofore and global banking is the way of the future. Huge changes have already taken place in Irish banking. Irish Permanent and Irish Life have amalgamated and Ulster Bank is currently on the market – an excellent bank which I hope when taken over will retain its culture and focus.

Senator Quinn said we were rushing through this legislation. We are not rushing through legislation. This legislation is a response to legislation already published to dispose of ICC Bank. It was brought forward immediately when the final bidder withdrew last Monday. We acted responsibly to ensure there would be no doubt, vacuum or indecision pertaining to the future of the bank. The legislation underpins the confidence the Government has in the bank, its future, its management, its staff and its directors, as confirmed yesterday in the Dáil. Its operations are very positive and innovative and have a huge contribution to make to the future economic growth of this country. We are not rushing through legislation. This legislation was published in response to a situation which evolved as a result of the proposals not coming to fruition. We must now close the door on the initial legislation as the bidders have withdrawn.

Senator Ryan spoke about ACC. We are using this financial legislation as an enabling device to ensure ACC is not hamstrung in its ability to respond to market forces prevailing at this time. There is huge opportunity for ACC to grow and respond to that market. We want to ensure there are no impediments in its way and consequently we are increasing its borrowing power. That is good, positive legislation which makes commercial and financial sense. We are using this opportunity to introduce it rather than waste the time of the Department of Finance, the parliamentary draftsman, the Attorney General, the Government and the Oireachtas by having to draft a new Bill. The Bill needs only a simple amendment which we are seeking to do here. Senator Ryan also said ICC Bank was in a mess as a result of this process. That is not true; it is a solid, sound bank.

Mr. Ryan

I said the Government was in a mess.

Mr. Treacy

The Government is not in a mess – it is strong, solid, sound and sustained. Senators have no need to worry. They have a permanent position for the next two and a half years at least when the sun will shine, opportunity will prevail and the people of Ireland will be very happy with the performance of this Government.

Mr. Ryan

This is repetitious, I think I heard this before.

Mr. Treacy

As far as the Government is concerned ICC Bank has a strong future. All future options pertaining to it will, of course, be considered by this Government.

Mr. Ross

What are the plans?

Mr. Treacy

The plans are contained in the legislation.

Mr. Ross

No, there are no plans in the legislation except those relating to borrowing.

Mr. Treacy

As of today, the plans are contained in the legislation—

Mr. Ross

There are no plans.

Mr. Treacy

—allowing ICC Bank to proceed. We are extending its borrowing limit; we are giving it full support. Negotiations will commence with the directors, management and staff on the future of the bank. All options will be considered and, if necessary, we will be back in this House discussing those options in the future.

Mr. Ross

There are no plans at all.

Mr. Treacy

I am not aware of the matter about the chief executive officer's salary. It would not be appropriate for me to discuss the salary of any individual.

Mr. Ross

It is public knowledge, it is contained in the annual report.

Mr. Treacy

That may be so, but I do not have that information.

Mr. Ross

It would be appropriate to discuss the matter because it is contained in the annual report.

An Cathaoirleach

We must hear the Minister of State's reply without interruption, please.

Mr. Treacy

The question of privatisation was raised. The Government will look at all cases on their merits and circumstances. We have no blanket ideology – we look at every semi-State organisation on its merits, abilities, historic record, assets, resources, human resources, contribution to the State, also on its relevance at the time and on the opportunities in the national, European and global environment in which we operate and we take clear, positive and focused decisions on them. After that the market rules.

I would like to pay a special tribute to the management and staff of ICC Bank who have done an outstanding job. We are very proud of them. They have given us their full co-operation. They have great expertise and are one of the bank's main assets. I have no doubt about the future of the bank or its staff. The bottom line is that ICC Bank is a sound, solid bank. Of course we are disappointed that this situation arose. We must accept that.

Mr. Ryan

I am not disappointed.

Mr. Treacy

Perhaps not. However, confusion may arise and we need to clarify the matter. We are introducing this legislation to ensure there is no confusion.

The Minister will receive reports and any other necessary documentation from the board. He will have an input from the management and staff and will then assess the future of the bank. He will take advice and, if necessary, go to Government and move forward. All options will be considered. The future is bright. We are positively optimistic about the future of ICC Bank and its key role and contribution to this country. There is no doubt about that. Shareholders will be disappointed but they will bounce bank and will be determined to move forward successfully.

The Government, the Minister for Finance and I have full confidence – expressed here yesterday by all parties – in ICC Bank and its future. While it is disappointing that there was not a positive conclusion to this matter there are always advantages in everything. This is an opportunity for the bank to refocus and to undertake a detailed appraisal of its operations. It must look to the future as we enter a new millennium with the utmost confidence. The Government is committed to an all-Ireland economy at this historic time when peace prevails in Northern Ireland.

We have had one of the most imaginative budgets in history.

Mr. Ryan

It was very imaginative, too much imagination.

Mr. Treacy

The economy has been stimulated and will continue to grow. The Government believes we have reached about one-third of our capacity to grow our economy. We are very confident about the future. In that confidence, we are absolutely certain that ICC Bank will play a noble role in continuing to make a real contribution to economic growth into the future.

Question put and agreed to.

An Cathaoirleach

When is it proposed to take Committee Stage?

Mr. Bonner

At 1 p.m.

An Cathaoirleach

Is that agreed?

Mr. Ross

May we take it a little later? May we have a longer break?

An Cathaoirleach

There is only one amendment and it will be ready for circulation before 1 p.m.

Mr. Ross

Committee Stage does not consist of amendments only. It is not just amendments which we will be discussing.

An Cathaoirleach

No. We will be discussing the sections also. We are allowing ten minutes so that the amendment can be circulated. There was no provision for a sos in the Order of Business, as agreed by the House.

Mr. Ross

I know that. We are breaking the rules already. Why not break them and provide for half an hour rather than ten minutes?

An Cathaoirleach

I call Senator Tom Fitzgerald, the Acting Leader of the House.

Mr. T. Fitzgerald

There is sufficient time in the few minutes before 1 p.m.

Mr. Ross

I dispute that, a Chathaoirligh, and I will tell you why and I am not being difficult. This Bill was bounced on us. We have not had much time to consider it. If we got half an hour, we would be able to go through it in a little more detail. I did not even have time to read it this morning and I would like half an hour to read it.

Mr. T. Fitzgerald

It is hard to explain this, a Chathaoirligh, but it would inconvenience the House. I would be grateful if Senator Ross could agree to the ten minutes' break on this occasion. I ask him to agree to it, seeing as the Minister of State and the officials are happy enough with that.

Mr. Ross

All right.

Mr. Treacy

I thank the Senator.

Mr. Ross

I assume the same generosity of spirit will be accorded to me in a similar situation.

An Cathaoirleach

Is it agreed that we take Committee Stage at 1 p.m.? Agreed.

Committee Stage ordered for 1 p.m.

Sitting suspended at 12.50 p.m. and resumed at 1 p.m.