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Seanad Éireann debate -
Thursday, 30 Nov 2000

Vol. 164 No. 16

ICC Bank Bill, 2000: Second Stage.

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

The purpose of the Bill is to provide an increase in the authorised share capital of ICC Bank and to put in place the enabling provisions required to facilitate the future sale of ICC Bank subject to the approval of the Dáil at the appropriate time.

As Senators may be aware, the Government decided in mid-1998, following fundamental changes in the banking sector and the economy generally, to dispose of the State's interest in ICC Bank. Following this, a sale process was initiated which was unfortunately suspended temporarily in December last year following the withdrawal of the final bidder, namely, Bank of Ireland.

At that time, the Minister asked the board to review all the options for the future and he reiterated his view that the status quo was not an option. The board, following its review, recommended that the bank should pursue the option of seeking a strategic partner or an outright sale because it would benefit from access to capital, broader expertise and, possibly, international opportunities. The staff of the bank fully supported this view and the Minister sanctioned the board's exploring the options in relation to this course of action. He also authorised the board to oversee the negotiation of a new employee share ownership plan which was provided for in the ICC Bank Act, 1999. The negotiations have been completed and the ESOP has been agreed. The employees accepted it by ballot on 9 October. The share ownership plan, which is being put in place in the context of a sale, consists of a 14.9% stake in ICC of which 5% is in return for change in the bank and 9.9% is being purchased.

On a point of order, can copies of the Minister's speech be made available?

The copies are on their way.

One of the main purposes of this Bill is to provide for an increase in the authorised share capital of the bank because the current authorised share capital of £40 million has been mostly subscribed. The bank is continuing to grow strongly and as long as it remains in public ownership the shareholder has to provide the necessary share capital. It is the Minister's intention to subscribe for the shares available to him in a £15 million rights issue which the bank intends to carry out following the enactment of this legislation.

The other objective of the Bill is to put in place the enabling provisions to facilitate a change in ownership. Senators will be aware of recent newspaper reports about a possible sale of the bank. The chief executive of the bank is quoted as saying that none of the discussions has yet translated into a formal proposal. As I have already stated, the bank has been mandated by the Minister to explore the options for the future and the Minister will consider any proposals formally recommended to him by the board. The Minister has not received any proposals from the board. In the circumstances, it would be wholly irresponsible for the Minister to make any comments on these newspaper reports.

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 bank has grown through retained profits, deposits and loans to a stage where its balance sheet now amounts to over £2.8 billion. In 1998 the bank made pre-tax operating profits of £23 million. ICC's interim results, announced in April, showed pre-tax profits were up by 64% to £18.3 million and the cost:income ratio reduced to 35.8% from 47.1% for the same period in the previous financial year.

No assessment of the contribution of the ICC Bank is complete without a reference to its strong performance in the venture capital field. It has had a pioneering role in the provision of such funding in Ireland and the bank 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 Irish SMEs.

The performance of the bank during the past 12 months demonstrates that it is in a strong position and confirms its strengths in its specialist market segments. I have every confidence in the bank going forward. However, the long-term future of the bank is best served by a change in ownership and the Minister would like to see this happen sooner rather than later. The skills and expertise in the ICC will be best used under the umbrella of a bigger commercial operation. The board, management and staff of the bank are all agreed on this.

I now turn to the main provisions of the Bill. Section 1 is the definitions section and is self explanatory. Section 2 is a standard provision in relation to the expenses of the Minister.

Section 3 provides for an increase in the auth orised share capital of the bank from its current limit of £40 million to £80 million. It is the Minister's intention, as he has already indicated in public, to make sure that the bank remains adequately capitalised as long as it remains in State ownership. Almost £37 million of the current limit has been subscribed. He proposes, following the enactment of this legislation, to subscribe a further £15 million which will meet the present needs of the bank.

Section 4 provides for the disposal of shares by the Minister for Finance. It also provides that a motion for approval by Dáil Éireann is required for any disposal of shares other than the employee share ownership plan.

Section 5 provides for the continuation of existing guarantees given by the Minister. No guarantees will be given in the future and the amount which is subject to guarantee will continue to be reduced as existing facilities expire.

Section 6 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 the Bill.

Section 7 and the accompanying schedule to the Bill will only come into play if and when the bank is sold. This section provides for the repeal of the ICC Bank Acts, 1933 to 1997, and the deletion of references to ICC in other legislation. The purpose of these repeals and deletions is to ensure that ICC Bank, once sold, will operate on the same basis as any other private commercial bank. They will be given effect by ministerial order under section 8(2) of the Bill. The relevant order will not be made until ICC Bank plc is formally granted a licence by the Central Bank. Section 8 gives the short title and commencement provisions.

I commend this Bill to Seanad Éireann and I look forward to Members' statements.

I welcome the Minister of State to the House. As he has stated in his opening words, the purpose of this legislation is to provide for an increase in the share capital of ICC and to put in place provisions to facilitate its future sale, subject to a resolution being passed by both Houses of the Oireachtas.

The ICC was set up by the State in the early 1930s. At that time the country had a very low industrial base and our few manufacturing industries had no sources for long-term credit. Private funds which should have been supporting Irish industry were being invested in the London stock exchange. The ICC Bank corrected this imbalance by investing in and underwriting domestic industry. A wide variety of Irish businesses were floated on the Stock Exchange and many have now become established names, nationally or internationally, such as CRH, Newbridge Cutlery and Irish Sugar. The scale and sophistication of Irish business has changed substantially in the intervening years but ICC's focus has remained on the promotion of Irish business by providing it with appropriate financial services.

By the 1970s and 1980s ICC Bank operated as Ireland's development bank for business and provided small and medium sized businesses with longer term finance than was available in the marketplace. ICC Bank was in a position to raise funds from international agencies such as the World Bank and the European Investment Bank, which had access to the more attractive interest rates available on world capital markets. It would then pass them on to Irish businesses, allowing them to operate more competitively than if funds had been secured directly from the domestic market. This was a great assistance to indigenous industries at a time when domestic interest rates were very high.

If Irish business has grown in sophistication over the years, so too has its financial requirements. The ICC's initial role was to support the growth of indigenous business here but now they offer a wide range of financial services to all the business sectors of the economy. These range from manufacturing to tourism, transport, distribution services, construction, property and other businesses.

When Mr. Michael Quinn, general manager of ICC, recently addressed the Oireachtas Joint Committee on Finance and the Public Service he informed us that the bank had now built a particular niche for itself in software investment with two special software investment funds. He further stated that the bank's venture capital investments showed a strong performance in the first six months of this year. He also said that as a follow on from their previous software fund earlier in the year they were now launching Software 2000 Fund which is targeted to raise another £100 million from domestic and international sources for software and information technology growth industry businesses.

ICC Bank caters for almost 4,000 business customers who have loan, asset finance, international trade facilities or venture capital investments, while over 6,000 customers have savings and investments with the bank. It has a proud record of profits since its establishment and recent pre-tax profits rose by 64% to £18.3 million in the bank's latest accounting period – the six months ending April 2000. This reflects a strong performance by the bank's core lending and venture capital business.

ICC Bank is a very progressive bank and its current management is doing an excellent job. Loan advances to business stood at £2 billion at the end of April, an increase of 24% for the same period last year, which reflects the ongoing vibrancy of the economy and its willingness to invest in the future. These figures reflect a strong performance across all aspects of the bank's activities.

The ICC management is very bullish in its forecast for the future of the bank. It hopes to double shareholding values over the period 2000-2002 by delivering excellent results on shareholders' funds. Pre-tax profit is projected to almost double by 2002. The bank plans to achieve this by providing added value and high quality, efficient services to its customers, with professional and motivated staff operating at a high level of productivity.

Speaking of staff, I am delighted to see that the bank has introduced an employees' share ownership scheme to allow staff to invest directly in the bank's future. I understand that in return for an agreed programme for change, staff will be allocated a 5% block of shares. A further 9.9% of shares will be acquired by the staff, which will be part funded by a change in pension fund arrangements and a loan. There is little or no market in ICC shares due to the fact that the Minister for Finance controls 98% of the shares in the bank. This issue was raised with Mr. Quinn when he met with the Committee on Finance and the Public Service. A member of that committee requested that a list of their private shareholders be issued to members, which was duly done. It showed that, with the exception of the Minister, the amount of shares individuals held was minuscule. I would like to know what mechanism will be put in place to allow staff who so desire to dispose of their shares in such a narrow market. Perhaps the Minister will refer to this matter in his reply.

Around this time last year it was the intention of the Government to sell the ICC Bank but, as Members will be aware, the plan was withdrawn at the last moment. That has never been fully explained, but I am sure it was connected with the downturn in financial shares at that time. Certainly, it was no reflection on the performance of ICC Bank.

ICC Bank is currently allowed to double its amount of authorised share capital and the injection of funds which will result from the passing of this legislation will allow it to lend up to £80 million. The Minister has also signalled his intention to subscribe up to £15 million for shares available to him in a rights issue which the bank intends to carry out following the enactment of this legislation.

I am happy to support this legislation and I hope that, whatever future direction the bank takes, it will continue to support – and even expand upon its support for – Irish industry in the years to come.

I wish to apologise to my colleagues as I understand that bringing a Bill through all Stages in one sitting is not the best manner in which to deal with legislation. I hope, however, that having had the division on the Order of Business, they can accept the fact that, in this particular instance, it is the only way in which we can proceed today.

In relation to the bank itself, may I say that—

Senator Ross will have an opportunity to make his contribution in due course.

It will be a very short one.

Senator Cox without interruption, please.

Over the years, ICC Bank has made a significant contribution to the development of indigenous industry. Indeed, on many occasions, if it had not been for this bank, many Irish companies would not have been in a position to raise the necessary venture capital. Perhaps ICC Bank can serve to set an example for some of the other banks and the ongoing financial practices in the banking sector.

I wish to refer specifically to some of the issues that have arisen concerning the big banks and how they currently operate in the marketplace. Rural bank branches are being closed down in the interests of making greater profits. If that example had been followed in the past, many people would not have been in a position to run their companies or transact business in centres outside the larger towns and cities. The banks should examine this area. They are certainly making enough profits and their overall profitability will not be affected by keeping a number of rural offices open where they contribute to community involvement. We should follow the example set by ICC Bank in being willing to take chances and put the customer first.

Bearing in mind what ICC Bank has done over the years, I would like to discuss the responsibilities that banks have to their clients. ICC made some strong and important decisions to support various types of companies, and Senator Doyle referred to a number of very successful companies in this regard. The standard banks are often inclined to be free with money, tending to lend it for projects that may or may not have a chance of succeeding. However, they do this on the basis that the borrower assigns their private house, which is the only asset of major value to them. I would like to see banks moving away from this practice.

In the past, businesswomen who sought loans from banks were asked, "What does your husband do, and is he going to co-sign the loan agree ment?" We have moved away from that. There was also a time when, if someone sought to establish a company and had a good business plan, they were told, "That's wonderful and we will certainly forward you the required venture capital, but you must mortgage your house as an asset against this loan." Sadly, such pre-conditions often precluded people from entering the business market. The banks moved away from this practice for a period, but it came to light again during the taxi dispute when it transpired that a number of people had mortgaged their houses to pay for taxi plates. They now have an asset that is of no value and the only person who loses out is the individual taxi plate owner, not the bank which holds the mortgage deed on the borrower's house.

I would like to see more responsibility being exercised in lending money. Many banks send out unsolicited letters to young people, encouraging them to borrow money. They are told that if they earn over £15,000, have been in their job for more than one year and can produce three pay-slips, they should fill in a pre-printed form, sign it at the bottom, and they will be given £5,000 to buy a car, go on holidays or do whatever they want. The banks are encouraging a spending culture and there is no encouragement to save money, particularly for young people. If that is the way the country is going, with inflation rising all the time, in a couple of years many people will not be able to understand the importance of saving if they want to do something without having recourse to borrowing.

ICC Bank has set a good example of how to do business by developing a thriving niche market, without using the sad marketing techniques we see being used daily by other parts of the banking industry. We have discussed the issue of credit cards on many occasions. Letters are now being sent to people, increasing their credit limits all the time. The small print is never big enough to identify the fact that if one has an outstanding credit card balance one must pay interest on the whole balance. It does not matter whether or not one makes a minimum payment. These practices take away from the integrity of the banking system which, as a whole, should re-examine them.

I am delighted to see the creation of a share option scheme in ICC Bank. This is one of the key retention tools which many companies in Ireland, particularly those involved in the software industry as well as dotcom companies, can use in retaining key staff. Being able to purchase shares in one's own company at a proper price and sell them after a period of five or six years at a tax rate that is encouraging is one of the important aspects in trying to attract and retain workers. If it is intended that Ireland should become the e-commerce and software capital of the world, there is a need to ensure we have a tax regime which favours share ownership schemes and encourages employees to invest in their own companies as an expression of their loyalty. This is a real live issue, which should be taken into consideration.

I compliment the management of ICC Bank. It has done a great job in creating a niche market for the bank. This is something of which it should be proud. In recent years many companies have been happy to raise venture capital with the bank, which has always taken a sympathetic view. In this I hope it has set an example for the rest of the banking community.

I regret that the Minister for Finance is not present. I am not making a debating point, but the heading on the script as circulated reads:

Seanad Éireann

Statement by the Minister for Finance

Introducing the Second Stage of the

"ICC Bank Bill, 2000".

That is an untruth, innaccurate and misleading. This is not the first time this has happened. At such a critical period for ICC Bank – I mean within hours and days – it is a pity that the Minister is not present. I am aware that he is not to blame personally, but it is obvious that the timing is very unfortunate. It was a speech prepared for him, but it was obvious that it would not be delivered by him. He was not present yesterday either for the debate on an appropriate Bill. I do not blame him for not being present because he has pressing business elsewhere, but I do not see why we should have to rush legislation through when he is not here. Like the rest of the House, in the case of legislation dealt with yesterday, I would have been quite happy to wait until the appropriate Minister was present and, in the case of the legislation being dealt with today, I would be quite happy to wait until the appropriate Minister is able to be present.

I would be more than happy to do so for a different reason.

Can we vote for that?

As if that was not bad enough, the legislation dealt with yesterday was taken by a Minister of State who had nothing to do with the responsible Department, but he got the Bill through courageously and with a great deal of energy. He is a Minister of State with great abilities in his own Department and sphere. Today, the Minister of State present in the House is not attached to the relevant Department. It is insulting to the House not to send a Minister of State from the Department concerned. The Minister of State present is capable and as able as any member of his party, but to send him to deal with a Bill for which he is not the appropriate Minister of State is insulting to the House. What this means is that he is not authorised to accept amendments. That is the unwritten rule of the House. We will not get an amendment through. We are going through the motions and wasting time.

I raised the timing of the Bill on the Order of Business because it is my understanding that there is an extraordinary general meeting of ICC Bank tomorrow. I have to admit that I do not know what is on the agenda, but I will know within minutes. I presume that a motion will be put through to increase the authorised capital. If I am wrong, the Minister of State can correct me, even though he is not from the appropriate Department. The reason I do not know is that I cannot get a reply from the bank. If that is the case, it is wrong that the Seanad should be treated in this way. We should not be here at the diktat of any semi-State or outside organisation.

Let us be honest – this is a shambles. The Minister of State present is not attached to the appropriate Department; we have a Bill which should wait; an EGM is scheduled for tomorrow; Committee and Remaining Stages have to be taken today because nobody is going to take a blind bit of notice of what we say, and we have a bank which is for sale, which has a lot to do with the timing of the Bill. It seems a bit odd. It passed through the Dáil the day before yesterday and is being rushed through all Stages here today, and we are not being told why. In the normal course of events, it could wait until Christmas. There is no crisis about authorised capital, which currently stands at £40 million, and there will not be a crisis in the next few days or weeks.

It is quite obvious that ICC Bank is for sale. I note the Minister of State's reference to press reports, on which he cannot comment – I can as I contributed to one of them – that the bank will be sold within the next week, probably to Bank of Scotland, and that there are others involved and interested. It is very likely that it will be sold to Bank of Scotland very shortly. In the Delphic words of civil servants, the Minister of State said that nothing has yet been produced to the Minister, which means that he has not seen a formal document. In the code that we are used to in takeover talk, I read this as meaning that talks are concluded and it is only a matter of dotting the i's and crossing the t's. I will not be one bit surprised if there is an announcement very shortly that Bank of Scotland has bought ICC Bank. That is the reason the Bill is being dealt with so quickly.

This is not the way we ought to do our business and it is a shame that we do it that way. Let us be realistic; let us not waste our time talking about the Bill for too long because nobody is going to take any notice of what we say and there will be no amendments, although the Minister of State may surprise me. Perhaps he has a raft of amendments in his file or will accept them as they are produced, but I bet him and every other Member of the House £10 to 1p that that will not happen. It may be an expensive bet, but a reasonable one.

If it is true that Bank of Scotland is about to buy ICC Bank, it would be a welcome development. If the Bill is facilitating this, it should, in principle, on Second Stage be welcomed because what Bank of Scotland did for the mortgage retail market in Ireland was way overdue and something we should all welcome. It introduced competition into the cartel. There is no doubt that Irish banks, particularly in the mortgage market but also in the savings deposits and lending markets, were running an absolutely scandalous cartel and it took the entry of a foreign bank, operating purely by telephone, to break it. When it did so, it had a very dramatic effect on mortgages. It may not have been dramatic enough, but it undercut everybody else and all the other dinosaurs had to cut their rates. That was a very welcome development. If Bank of Scotland or any other external bank from any country is intending to buy a much more imposing presence in this country, we should welcome it.

If this Bill, in effect, facilitates competition in the banking market, whether it be in venture capital, BESs or small businesses, that is good. The awful vista before us this time last year was that the Bank of Ireland would buy the ICC. The Minister, correctly, told the bank to jump in a lake because it was only bidding £200 million and was the only bidder.

The temptation must have been great for the Minister because I am aware of his instincts with regard to State banks – get rid of them. He believes the State has no business in banking. There was only one bidder but he decided against selling the ICC. He was not going to be held over a barrel by the Bank of Ireland. Instead he waited until another bidder appeared.

It would have been a disaster. Bank of Ireland has an extraordinarily dominant position in banking in this country. It owns the biggest stockbrokers, the second biggest insurers and the biggest fund managers and is the biggest retail bank. If it had also bought ICC, it would have put itself in an extremely strong position in what is already a cartel. It would also have shut out any initiative from the Bank of Scotland or any other foreign bank. That is presumably why it wished to buy the ICC so cheaply.

If this Bill prefaces the introduction of a foreign bank, indeed preferably a foreign bank, let us agree that this will be a good thing. What we need more than anything else in banking is competition. It is particularly needed in the savings sector. There are plenty of areas where the banks still operate sharp practice. It is not good enough for them to issue, as they did this week, an absurd document about ethics in banking. It is laughable because it is largely aspirational and contains no sanctions for those who breach these so-called ethics.

This Bill will be extremely welcome if it helps to improve banking from the consumer's point of view. I hope that whoever takes over the ICC will break the cartel on savings. Bank of Scotland did it in the mortgage sector. Most people, because they are passive savers and display what is called the inertia factor, put their money, if they have any, into one of the major banks at an interest rate of 1% or less. It is scandalous and appalling that people are allowed to do that. The result is that the major banks, AIB and Bank of Ireland in particular, exploit people to the extent that they allow them to put their money on deposit at 1% or less and lend that money at a rate of 8%.

There are exceptions to that but not among the well known banks. One of the exceptions is the TSB and Superquinn, the Tusa exception. It gives between 4.5% and 4.75% on savings. People should be pouring money into it. It is the most commendable of the local breakers of the cartel. Another exception is from outside this country and offers a higher rate than Tusa. It is Northern Rock. Again, an outsider was required to offer reasonable deposit rates and breach the cartel. I have no declaration of interest to make with regard to Northern Rock except that I deposited money with it. It offers 5.75% for as little as £1,000 on call. In other words, the money is available immediately. At the same time Bank of Ireland and AIB are paying 1%. They will offer a little more if one deposits a substantial amount of money but they will not give more for £1,000.

There is a fund in the Bank of Ireland yielding 4.5%.

Not for £1,000 on call.

Senator Ross, without interruption.

It is a great lecture on how to invest our money, if we had it to invest.

I hope this Bill will mean the ICC is taken over by a bank that will offer competition to the consumer. That is the best reason for supporting it.

I accept the overall thesis that ICC on its own would find life difficult. The niche market of small business and venture capital, in which it has made a great dent, is one in which it would be difficult for a small bank with small capitalisation to survive over a long period. In the past I might have been over-critical of the ICC in certain areas. I might have been unfair. The bank has proved wrong some of the statements I made in the Seanad about its activities and its chances of success.

However, despite being a State bank, it refused to be transparent about its BES charges. That was disgraceful. It was disgraceful that the State did not apply the right pressure and make it do so. It did not reveal the charges which were being paid by the companies raising the money, in other words, people who were putting money in did not know how much was being taken away in charges to those companies. ICC, as a leader in that sector, was not transparent and should have answered that charge.

I wish to comment briefly on the ESOP. These employee schemes, generally giving employees 14.9%, are now common, fashionable and accepted as politically correct. They were part of the Eircom deal and will be part of the Aer Lingus deal. They are part of every sale of a State asset, whether it is a straight sale such as this or conducted through privatisation. I am not certain that they are what they are cooked up to be. In this case the employees are to get a certain amount of the shares. I consider profit-sharing schemes to be good in principle.

However, what will the employees give in return? This is always extremely vague. In the case of Eircom, Aer Lingus and ICC, we hear about changes in work practices. I am not sure about these changes in work practices because I have never heard exactly what they are. I doubt that there are many real changes in work practices. It is probably an inverted commas job.

What are the terms of the loans the employees are being given to purchase these shares? Are they soft loans where the employees are getting them for half nothing? Second, are they getting any shares free of charge? Third, what changes are being made in the pension fund arrangements to facilitate employees in the purchase of these shares?

Given the disgraceful circumstances surrounding the introduction of this Bill and the way it is being put through the House, we have a right to protest. However, I would welcome it if it were being introduced in other circumstances, such as the likelihood of the Bank of Scotland or another bank taking over ICC and benefiting the Irish consumer.

It is a shame there is a time limit on this debate as I and other Senators could listen to Senator Ross for much longer. The Senator has his finger on the pulse in many areas.

I welcome the Minister of State and the Bill. Christmas must be coming if the Minister of State is in the House seeking to pass legislation on the ICC in a hurry. I hope he succeeds in selling ICC and that we are not faced with another failed attempt to dispose of it. I wish to declare an interest in this issue in that my company has a joint interest in a retail banking venture with the TSB.

I look forward to the day when the State no longer owns ICC or ACC and has no further relationship with the TSB. As long as these banks continue to hang around the State's neck we will be in danger of playing with them, almost as if they were toys. This has happened in the past. Senators such as Senator Ross who have good memories will remember the folly of what we called the third banking force. It was not so long ago that we held this ill-conceived idea which consisted of rolling the ICC, the ACC and the TSB together.

It was in the family.

I accept that but minds differ on occasions. This concept of a third banking force was based on the belief that we could create an effective competitor for AIB and Bank of Ireland in the retail banking sector.

An equally misconceived idea was the more recent scheme of merging the ACC and the TSB and floating them on the stock market. The sooner the State is rid of these relationships the better for the State, its citizens and the taxpayer. We would have been well shut of these banks before now if greed – I hasten to use the word – had not entered the picture. The result of this greed was that totally unrealistic selling prices were dreamed up for the ACC and the ICC. The truth is that both companies are having difficulty finding a secure place for themselves in the banking sector. Were it not for the opportunity they present to foreign banks as a way into the Irish market, they would probably be completely unsaleable. However, I welcome the fact that these banks probably can be sold, otherwise they would continue to be a millstone around our necks, particularly that of the State.

I look forward to the day when the State's only role in banking is as a regulator. We saw from the DIRT inquiry that this is a very difficult task and the State will be put to the pin of its collar to perform it well. At the same time it would be wrong to let go of the ICC without recognising the worthwhile job it did when established, and continued to do for a long time after. The bank was set up in the 1930s to fill a gap in the market whereby it provided capital for new industry at a time when commercial banks did not want to touch any such proposition. The 1930s was the only era which provided justification for the State getting involved in banking. ICC Bank filled a gap which needed to be filled and which would otherwise have not been filled to the detriment of the country as a whole. The bank filled the gap so well that commercial banks were eventually attracted to the market ICC occupied. As a result, ICC moved from a position of being the only lender in that sector to one in which it was just another competitor. At that point, the justification for the State's continued ownership and sponsorship of ICC ceased to exist.

The concept behind the establishment of the ICC Bank was correct in the 1930s because there was a gap which needed to be filled. However, once that gap was filled, the State should have withdrawn from the sector. We all recognise that, even though the justification for its existence as a State bank disappeared overnight, it is very diffi cult for the State to withdraw from something in which it is involved.

ICC Bank was set up a long time ago and it should have been sold off or closed down once it was no longer the only company operating in that sector of the market. However, that is difficult to do because it is easy to start things in this country but difficult to stop them and close them down. We are very good at starting things but very slow to say to ourselves, "That organisation did a great job when it was established but now it's finished so let's close it down and move on". That is what we should have done in the late 1960s and early 1970s when the service provided by ICC was no longer needed.

The thinking seems to be that empires are built and have to be defended at all costs. That is what happened in this country over the years. This is particularly the case regarding a company like ACC. In the case of ACC, the DIRT inquiry not only revealed that the so-called State bank set about breaking the law, but it effectively escaped from the control of its own board and, therefore, from public control. I am happy ICC did not go down that route, yet its continued existence as a State bank has been an embarrassment to the State. The bank fulfilled no great national purpose. ICC Bank needed increasing amounts of capital investment which the Government had no business injecting into a commercial operation whose rightful place was in the private sector.

The ideological barrier was another reason which delayed our coming to terms with State banks. Senator Costello will correct me but I believe this was the case. There are probably still some who believe that, almost as a matter of principle, all banks should be State owned. This used to be the belief. However, if one believes this, one is not going to be very keen to give away any bank owned by the State. I am firmly against State ownership of banks but not for ideological reasons. If there is a gap to be filled, as there was in the 1930s, by all means let it be filled by a State bank. However, evidence from all over the world shows that if there is one thing the State is not good at – the State is not good at a few things – it is running banks.

Banks in France are regularly nationalised and then denationalised. I am of the belief that banks will always behave like banks, regardless of whether they are owned by the State. That is why it is a mistake for the State to get involved in banking, other than the exceptions to which I referred. The State should be constantly honing its skills to ensure it controls the activities of banks. However, it cannot properly perform that role if it also owns banks. The State's job is to regulate banks but that is a difficult task. If we wish to see the public's interest looked after, the State's efforts must be concentrated on regulating banks and ensuring competition. The current debate on banking is very weak in that it is con centrating on whether the Central Bank should regulate the financial services industry when the important issue is the future of the country and its banking institutions. It is essential we learn how to regulate banks. We have not done a good job over the years, but that is our objective.

When talking of France I am reminded of the way a French friend once explained to me the distinction in banking. He said that in seeking to own banks, the State wants to become the madame in a brothel. Alas, the true role of the State is a far less glamorous one. It is that of chief of police. I trust that next year when the Minister of State makes his pre-Christmas visit to this House he will be wearing the policeman's hat. I welcome the Bill and the opportunity to make sure it is passed.

I listened with interest to the contributions of Members. Everybody except myself appears to be in favour of the sale of the bank. The Minister of State, in his introductory speech, has probably given us the best reason the bank should not be sold since he has said it is continuing to grow strongly. He then used the following flowery blurb to describe the bank:

ICC Bank has expanded steadily and has enjoyed consistent profitability. While the State has made equity investments totalling £36.9 million over the years, [that is not enormous considering the state of our economy] the bank has grown through retained profits, deposits and loans to a stage where its balance sheet now amounts to over £2.8 billion. In 1998 the bank made pre-tax operating profits of £23 million. ICC's interim results, announced in April, showed pre-tax profits were up by 64% . . .

Senator Quinn must be green with envy at the thought of the private sector not being able to match anything like that performance. When was the last time the supermarket business had a 64% increase on the previous year's profits? I imagine it has been a long time.

The Minister of State went on to say:

. . . the cost:income ratio reduced to 35.8% from 47.1 % [this is wonderful, it is far better than any competitive private sector operation] for the same period in the previous financial year. No assessment of the contribution of ICC Bank is complete without a reference to its strong performance in the venture capital field. It has had a pioneering role in the provision of such funding in Ireland and the bank 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 Irish SMEs.

This is exciting stuff. I would love to get my hands on an operation of this nature. If the Bank of Ireland—

That is the purpose of this Bill. ICC Bank is to be sold.

Bank of Ireland was trying to buy ICC bank for £200 million, yet it has assets of £2.8 billion with a 64% increase on last year's profitability. It would have been a giveaway for £200 million, but thankfully that deal fell apart and Bank of Ireland did not get it.

I will finish on another point in the Minister of State's speech.

Does the Senator intend to read all the Minister of State's speech?

I do not want to cite all his speech. It is great stuff. I would be in the market if I had the money to buy such a fine operation.

I thought the Senator was a socialist.

I said "if", but I am not – this is a hypothetical situation.

The Minister of State continued:

The performance of the bank during the past 12 months demonstrates that it is in a strong position and confirms its strengths in its specialist market segments. I have every confidence in the bank going forward, however [imagine this coming out of the blue] the long-term future of the bank is best served by a change in ownership. The skills and expertise in the ICC will be best used under the umbrella of a bigger commercial operation.

I do not disagree with the last sentence. Why is the ICC best served by a change of ownership, given that it is doing wonderfully under its current ownership? Why can it not be best served under the umbrella of a bigger commercial operation in a joint venture? Why does there have to be a change of ownership?

It beats me why all the profitable operations have to be sold off. I am not an ideologue regarding State ownership of the banks. This speech is what one would put into an auctioneer's office and one would say this is a wonderful business and anybody with the money who does not jump at the opportunity to buy it is missing a golden opportunity. This is the Minister of State's blurb for the sale of the ICC. Fair play to him. I hope it is going well. I presume the details presented here are accurate and I have no doubt a bank will come into the market. It seems the Bank of Scotland is about to do so.

I am not sure if Senator Quinn was here for the Order of Business, but I, like Senators Ross and Doyle, am deeply annoyed that all Stages of this Bill are being taken in one sitting. We have consistently opposed, in principle and practice, the taking of all Stages – First Stage, Second Stage, Committee Stage, Report Stage and Fifth Stage – of any Bill in one sitting. We had a row in the House yesterday on the taking of Committee and Report Stages of the National Pensions Reserve Fund Bill in one sitting, even though Second Stage of that Bill was taken the previous week, but now we are going the whole hog with the taking of all Stages of this Bill in the one sitting. That is not good enough. It is not the proper way to treat parliamentarians. We need the presentation of the Second Stage of a Bill, the response to it by the Minister concerned, then Senators and perhaps the Minister, having heard what was said on Second Stage, should have an opportunity to table amendments to the Bill on Committee Stage. There should be a break before the taking of Report Stage to provide for further reflection on Committee Stage and consideration of suggestions that may be put forward. The manner in which we are dealing with this Bill is unacceptable. It is highly unsatisfactory, the ultimate in a guillotine measure. By taking all Stages of this Bill today, it is clear that the Minister of State does not intend to accept any amendments proposed.

I was elected to this House to represent the people of Ireland. That is my function here. I do not want to rubber-stamp legislation, but this is what I have been asked to do here. I have been asked to deal with all Stages of this Bill, but the Minister of State will stonewall any amendment I may table to the Bill, and I am sure he has already agreed to do that. The Minister for Finance has not come into the House to take this Bill, but I am sure the Minister of State was given riding instructions on how to deal with it. His instructions were to get this Bill through this House today since it will not be brought back to the Dáil. I am sure he was told not to accept any amendments to it as, if he did, the Bill would have to brought back to the other House.

That is not acceptable, particularly because, as Senator Ross said, an EGM of ICC Bank is being held tomorrow, 1 December. Why is that extraordinary general meeting taking place? The Minister of State did not refer to it in his speech. Why should this body decide to have its EGM the day after we have to rush this Bill through the House? It seems extraordinary. It seems we are dancing to the tune of an external body rather than making our decisions, having had the opportunity to give our full attention to all the provisions of the Bill.

This Bill must be passed in this House so that the ICC can tell its shareholders at its EGM that the Bill has reached a certain stage in the Dáil and Seanad and it can set out the options. Perhaps a proposal will be put forward regarding increased authorised capital or the sale of the bank, as those are the two items for which this legislation makes provision, but we do not know that. This legislation must be passed through this House for something like that to be done, there fore a decision has been taken prior to our even discussing it. That is unacceptable. It is disgraceful, outrageous and an insult to this House. I hope we never go through this charade again. The Minister of State should listen to me as my opinion is different from those of previous speakers but I know it is falling on deaf ears and that no action will be taken.

ICC has obviously provided a good service since it was set up in 1933. None of us can remember that time but it was a period in which the land annuities were refused by the then Taoiseach, Eamon de Valera, after he came to power in 1932. There was a virtual commercial war between this country and Britain and there was no Irish capital available. Irish goods were not being bought by Britain, particularly our livestock, and we had a rather weak ban on British goods. All capital, such as it was, was leaving the country and that was the context in which the ICC was established to provide some capital funding for small to medium sized business.

ICC has functioned successfully in that regard. It was a pioneer and is now the market leader in providing venture capital for the small to medium business sector. That is a wonderful role as that sector is the heart of the nation. The commercial world depends on small to medium sized industry, as that is what keeps things ticking over. The large private banks will provide as much money as is wanted by big business but small to medium sized industry is at the heart of the nation and it is important that it continues. Some of the bigger players are coming into that niche market but ICC is still the foremost operator in the field.

What is the future for ICC and banking in general? This morning the House gave me permission to publish the Central Bank (Amendment) Bill, which proposes that the Central Bank fulfil a wider role in regulation than that referred to by Senator Quinn. It has a role in regulating and supervising the banks, though it has not exercised that role very well, as we know from the DIRT inquiry. It took a hands-off role and let matters go without paying too much attention. I want to extend its powers of regulation to a wider dimension. Section 9 of the Central Bank Act, 1971, provides for the proper and orderly regulation of banking and I want to extend that to ensure that the banks maintain a sufficient number of branches and other offices and, where appropriate throughout the State, meet the reasonable requirements of their customers.

Nobody apart from Senator Cox has referred at any length to the customers of the banks. Other speakers probably mentioned them but not in any great detail, dwelling instead on the operation of the bank. However, the customer is crucial. If one does not have a loyal and satisfied customer it is bad business. The banks operate as if they are no longer customer-oriented. Their literature is about how customer friendly they are, but they are not, they are customer unfriendly, the exact opposite of what they should be.

Imagine Senator Quinn putting together a customer service plan for a new supermarket not to suit the customer but to suit himself. That is what the banks are doing. They are telling people to use Internet banking, the telephone and the hole in the wall. The banks are saying they will not provide a regional bank structure for accessible service. People will have to come into the centre of Dublin if they want to use banks. Suburban bank branches are being closed down. That is the practice, to get rid of customer service. The banks want the customer's money but do not want to provide a service and do not want to see the customer. They just want to see the money and to get the business of the big operators. The ordinary Seán or Sheila in the street is to be kept out altogether, otherwise extra overheads, staff and hassle are involved. There is no great money made from cashing cheques or paying bills or old age pensions. That is disgraceful. Customer service is disappearing fast without a word from the Central Bank or the Government.

The Senator should come back to the Bill. He is straying into banking itself.

The Senator's contribution is very interesting.

I thank Senator Cox. She referred to this issue in similar terms.

What is the value of a streamlined service in the private or State sector that makes enormous profits? Irish banks are the most profitable in Europe and there is no other bank to touch them. There are all sorts of hidden charges but there is no customer service. It is a scandal and the Central Bank is not regulating it. I am trying to remedy that situation and I am sure I will have the support of all sides of the House in doing so. It is the central issue in relation to any bank.

Should we sell the bank? I am not so sure. If £200 million was all that was on offer last year for the bank from the Bank of Ireland, obviously it is a buyer's market. I do not know if the Minister has an idea that there is more money available now than before, but it is questionable whether we should consider selling a bank that is so profitable, with assets of £2.8 billion accumulated over the year. We can ensure that the bank expands and continues to operate in the role it has made its own, providing a service to the thousands of small to medium sized businesses in the country, if it operates on a joint venture basis. I would be delighted to see it expand and believe it should. It has a huge segment of the market and should build on that. Privatising it will not improve its efficiency as it is quite efficient at present. What are we going to get? What will be the return?

The State is not a hands-on owner at present though it owns 98% of the shares. The State does not tell the bank what to do, as it operates on its own. I do not worry, as Senator Quinn does, about State interference in how the bank does its business. There is no interference by the State and the bank is allowed to conduct its business as it sees fit according to commercial concerns of the market, though I am concerned by that.

I am concerned by the employee share options. Senator Ross is concerned for a different reason, as he does not feel the employees earned them, but I am concerned that we are giving 40.9% of the shares in the bank to current employees, with no reference to past employees who built up the bank over the past 70 years or to future employees. In that sense I see this as a form of bribery to get the bank employees on board and I am unhappy with it.

I am opposed to this. It needs far more discussion and it should not be rushed through in one day. This is being done by forces outside this House rather than this House organising its own business in a proper fashion.

I welcome the Minister of State to the House. I agree with the sentiments expressed by other Senators in relation to the Order of Business this morning and the taking of all Stages of the Bill.

I have long sought a debate on the sale of State assets, ICC, ACC, the TSB, Aer Lingus, Aer Rianta and so forth, because that issue warrants a much broader discussion. Rushing this Bill through the House this evening leaves a lot to be desired and it would lead one to believe that it is being done because the Government has taken the decision, along ICC Bank, to sell the bank although, as Senator Ross said, it could well be sold. There is no doubt that is the reason the Bill is being rushed through in such a fashion. There is no great urgency in getting it passed by the House. It could wait until after Christmas.

Section 2 states that the expenses incurred by the Minister in the administration of this Act shall be paid out of moneys provided by the Oireachtas. That seems to be the norm in relation to many Bills that are passed by this House but in his contribution the Minister of State said:

The other objective of the Bill is to put in place the enabling provisions to facilitate a change in ownership. Senators will be aware of recent newspaper reports about a possible sale of the bank. The chief executive of the bank is quoted as saying that none of the discussions have yet translated into a formal proposal. As I have already stated, the board has been mandated by the Minister to explore the options for the future and the Minister will consider any proposals formally recommended to him by the board.

That would suggest that the bank is about to be or has been sold.

Major costs will be involved in implementing the Bill but the funding and the provisions the Minister has allowed under section 2 should be ring-fenced from profits made by the bank. Why should the taxpayer have to pay? I ask the Minister to re-examine section 2 in that regard.

In the sale of Telecom Éireann provision was made to give 15% ownership to the employees. That should be the case if ICC Bank is sold. In any discussions or newspaper articles on the sale of ICC Bank, no provisions have been made for the customers of the bank. Those are the people who have been screwed with high interest rates on their borrowings and low interest on their investments over many years. It is only in the past few years that interest rates have come down. If this bank is to be sold, some provision should be made to compensate those people who have paid huge sums in interest over the years because they are the people who were loyal to the bank and who helped it to grow. I ask the Minister of State to examine that aspect.

Senators have said that this House is being used to rubber stamp the Bill and I agree with them. It is unfortunate that we have to take all Stages today and in the fashion it is being brought before the House.

While I favour the sale of some State assets, I would be sad in one respect to see ICC Bank sold. ICC Bank has been a venture capital company for small businesses throughout the country and it will be sadly missed by many of those business people when it is sold. I hope it will present new challenges for the other banks but ICC Bank provided an excellent banking facility for this section of our business community, and in that sense I would be sad to see it sold. I hope that the eventual buyer will continue to provide the same facilities to those people throughout the country.

I thank Senators for their contributions. I want to assure Senator Ross and Senator Costello, in particular, that I have listened very carefully to what has been said, much of which was worth saying. I will return to that shortly. I also assure Senator Ross that I am fully briefed on the Bill. I have a fairly detailed knowledge of the contents of the Bill and I am ready and able to deal with any technical issues that might arise.

Senator Joe Doyle raised the issue of employees being able to get value for shares appropriated through the share ownership fund. Shares must be held in this fund for a minimum period of three years for reasons of tax efficiency. The expectation is that a sale will take place well before the three years are up and that following a sale, the fund will swop its ICC shares for shares in the purchaser. If, however, no sale of the bank takes place in the three years after the establishment of the share ownership fund, and shares are appropriated to employees, any employee wanting to realise value for them could sell them on the open market. The most likely purchasers of shares would be the share fund itself. That matter is currently the subject of ongoing discussion between the bank and the staff; it is not yet finalised.

Senator Cox referred to the importance of banks keeping rural offices open. I subscribe fully to that view and to what Senator Costello said about the banks providing a service for their customers. Senator Cox also referred to the banks' invitations to people, particularly young people, to borrow money. I could not agree more with that. I recently encountered a case in my own constituency where a young lady had great difficulty paying off an Access card bill. I believe the amount was about £4,000. After various threats and constant communications from the bank in question, her mother went in to the bank and paid off the amount outstanding. A fortnight after it had been paid, another Access card, totally unsolicited, arrived which was directed to the person who had run up the bad debt. That is totally unacceptable and I have written to the chairman of the relevant banking group for his comments on the matter.

Senator Cox also referred to the importance of encouraging share ownership schemes through tax relief, particularly in the software area. I spoke at length about that in the debate on last year's Finance Bill and I have had discussions with the Minister for Finance on the matter. He has already made a start in this area. We need to do much more but I expect, from my discussions with the Minister, to see further progress in that area in the budget next week.

Senator Ross referred to the circumstances surrounding the sale of the bank and the failure of the sale to go through last year. Last December, the Minister temporarily withdrew ICC Bank from sale. At that time he stressed that the current status quo was not an option and he asked the board to explore all the options for the future of the bank, including a change of ownership. In the interim, ICC Bank submitted a strategy document for the bank which is currently being implemented.

The board of ICC Bank is reviewing all its options for the future and the Minister is awaiting its proposals. Any such proposals will be given detailed consideration and if it is accepted the Minister will bring it to Government for approval. On 28 November the board of the ICC confirmed that a number of parties have expressed an interest in acquiring the ICC and these may or may not lead to an offer for the company. It also confirmed that no proposal has been received to date that is capable of being put to ICC shareholders, but should any of the interest develop into an acceptable proposal it will be put to the shareholders. To date the Minister has not received proposals or recommendations from the board. In the circumstances it would be totally inappropriate for me or the Minister to make further comment on this matter.

Senator Ross was correct in saying that an EGM has been called for tomorrow. The ICC Bank Bill, 2000, is due to be enacted today and an EGM is required to alter the memorandum and articles in order to be consistent with the ICC Bank Act, 2000, when enacted. The meeting is also being called to facilitate the issue of new share capital which will be required in the coming months to ensure the bank is adequately funded once the Bill is enacted.

Senator Ross referred to the loan and employee share ownership fund. There is an urgency to increase the authorised share capital. While there is a small amount of unsubscribed share capital, it is insufficient to restore the capital adequacy ratio to 10%. The Minister will transfer 5% of his interest in the ICC to staff who qualify for the employee participation fund in return for staff agreeing to a transformation agreement, the main elements of which are as follows: staff will work an extended working week on the principle of outsourcing services on the understanding that final implementation arrangements will be agreed; open-ended option to reduce staff numbers where considered appropriate on a voluntary basis and on terms no less favourable than those previously offered; transfers within the bank subject to normal procedures; a closer linking of performance and reward; continuation of good relations between staff and the company; not to submit for a period of three years any cost increasing claims or any claims which deviate from the salary and benefit structures already agreed by the board – normal salary increases will, of course, apply, as will the continuation of staff flexibility; the initial funding will be made up of a lump sum contribution by the company of £6.4 million in respect of the employee pension contributions; a lump sum contribution of £2.85 million by the company in return for the staff agreeing to work additional hours above those in the transformation agreement to bring working hours up to 36.25 hours per week and a loan of an aggregate amount of £11 million.

The staff must purchase the 9.9%. The terms of the loan required by staff to fund the 9.9% are a matter for the staff and the bank providing the loan. My understanding is that a loan is being negotiated with an independent bank, that is, not ICC Bank or any bank connected therewith, and that the negotiations with the bank and staff are still ongoing.

The actuarial value of the pension was calculated based on the benefit to the company of an increased contribution of 5% by the staff towards their pension. Under the terms of the employee share option scheme, the company will pay 5% less towards pensions. This figure is being capitalised over an actuarial period.

Senator Burke referred to section 2. The cost of the Minister's advisers in any failed process should fall on the Minister. This is necessary to ensure that the advice the Minister receives is independent. The board will have its own advisers and while the interests of the board and shareholder coincide in most cases, there are occasions when they do not. While it is possible to envisage a situation where the company would directly bear the costs of the Minister's advisers, this is felt to be undesirable as it opens up the prospect of divided loyalties for the adviser placed in such a difficult conflict of interest situation.

In the commercial world the proceeds of share sales are normally passed to the vendor on a net basis. The practice in the public sector is different but equally stringent, and transparency and accountability, including political accountability, rules apply. Under the public financial procedures the Minister provides for expenditure through the Estimate for his Department and pays such expenses as are required out of money provided by the Oireachtas. This system ensures full transparency for the cost borne by the taxpayer in the sale of the bank. Because the fees of the advisers are paid up front the proceeds from the sale come into the Exchequer on a gross basis.

I hope I have dealt adequately with the main points raised. I commend the Bill to the House.

Question, "That the Bill be now read a Second Time", put and declared carried.
Question put: "That Committee Stage be taken now."

Bohan, Eddie.Callanan, Peter.Cassidy, Donie.Cox, Margaret.Cregan, JohnDardis, John.Farrell, Willie.Fitzgerald, Liam.Gibbons, Jim.Glennon, Jim.

Kett, Tony.Kiely, Daniel.Kiely, Rory.Leonard, Ann.Mooney, Paschal.Moylan, Pat.O'Donovan, Denis.Ó Murchú, Labhrás.Ormonde, Ann.

Níl

Burke, Paddy.Coghlan, Paul.Costello, Joe.Doyle, Joe.Henry, Mary.Jackman, Mary.McDonagh, Jarlath.

Norris, David.O'Dowd, Fergus.O'Toole, Joe.Quinn, Feargal.Ross, Shane.Taylor-Quinn, Madeleine.

Tellers: Tá, Senators Farrell and Gibbons; Níl, Senators Costello and Quinn.
Question declared carried.
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