Central Bank Reform Bill 2010: Committee and Remaining Stages

Sections 1 to 3, inclusive, agreed to.
NEW SECTIONS

As amendments Nos. 1 and 6 are related, they may be discussed together.

I move amendment No. 1:

In page 10, before section 4, but in Part 1, to insert the following new section:

"4.—On the cessation date, the Freedom of Information Act 1997 is amended by inserting—

(a) in paragraph 1(2) of the First Schedule, “the Central Bank of Ireland,”, and

(b) in Part I of the Third Schedule at the end thereof—

(i) in column (2), "Central Bank Acts 1942 to 2010", and

(ii) in column (3), "any provision" opposite the mention in column (2) of the Consumer Protection Act 2007.".

I operate on the basis that the application of the Freedom of Information Act 1997 should be the default rule across public administration.

I do not exclude from that the operation of the Central Bank, especially in circumstances where such relatively radical changes are being brought about in the regulatory system and in the Central Bank, the decisions that are relevant and those we debated on Second Stage. I have made the point many times in debates on the application of the Freedom of Information Act that this ought to be the position. In other words, it should be incumbent on the Government to demonstrate why the Freedom of Information Act ought not to apply rather than it being necessary for us to argue it should. In those circumstances, we tabled the amendment to seek to persuade the Minister, even at this late hour in both the day and the passage of the Bill, that it would and should be appropriate for the Freedom of Information Act to apply to the Central Bank of Ireland in its new manifestation.

I am interested to hear what the Minister will say in response to this amendment, on the basis that the default position should be the application of the Act rather than its non-application.

Senator Alex White moved this amendment on his own behalf and that of Senators McCarthy, Ryan, Prendergast, Bacik and Hannigan. This issue was discussed in the other House. There are good reasons for the exclusion of the Central Bank from the freedom of information legislation. First, there is the sensitivity of the information it holds; second, the independent position of the bank under the European statutes and the very restrictive information constraints which are associated with that; and, third, the risks of an inadvertent disclosure of sensitive information. However, I am prepared to consider whether the level of information made available by the Central Bank could be improved within the legal and other constraints that apply. I will reflect further on this issue with a view to re-examining it as part of the second Bill on financial regulatory reform which will be published in the autumn. At this stage I do not propose to accept the amendment.

What the Minister says is useful and helpful, apart from the conclusion. It seems the first reason, namely, sensitivity of information and the third, the risk of an inadvertent revelation of sensitive information, are the same so that there are two rather than three reasons. The fact that there is sensitive information within the Central Bank which people might seek is not of itself a reason for excluding the application of the Act because there are many controls and savers in the freedom of information legislation. The Minister knows well this is for the protection of this or that information or this or that exclusion of the availability of information in particular circumstances. It is possible to circumscribe this. It is relatively easy to circumscribe and delimit the level, extent and sensitivity of information in regard to what is made available.

I am disappointed that a simple statement that some information may be sensitive of itself is a reason for rejecting the amendment. However, I am encouraged by what the Minister said in regard to his revisiting this issue which is important. The argument has been made many times and I will not hold up the House by revisiting and rehearsing it. The question of confidence in the system requires to a very considerable extent that information be available to the public, not only from the point of view of idle curiosity, as it were, but because where information is available and accessible to the public, whether through the efforts of journalists or well motivated individual citizens, there is a much better chance of the presence of a higher degree of confidence in these institutions, which have taken such a battering in recent years. On foot of what the Minister said, I will take his word that he will revisit this issue in the autumn legislation and will not forget the undertaking he has given. We can revisit the issue then and on that basis I will not press the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 2:

In page 10, before section 4, but in Part 2, to insert the following new section:

4.—The Governor of the Central Bank and the Head of Financial Regulation shall present to the Houses of the Oireachtas an appraisal of the Recommendations of the Statutory Commission of Investigation on the Banking system within 3 months of such Commission completing its work.".

We had much discussion in the House on the various banking reports taking place. The institution which is to be set up will play a very important role in ensuring that such difficulties will never again confront the country. The purpose of this amendment is to ensure that when the banking reports are completed the Central Bank commission and the organisation under it will produce a view on the recommendations of the reports, allowing Members of the Oireachtas to hear those views and understand what action will be taken to ensure we are never again plunged into this difficulty.

I am not sure whether this amendment arises from the Bill but that is not for me to say. The terms of reference for the statutory commission will be before the Seanad either this or the following week and at that stage Senators will have an opportunity to discuss the operation of the statutory commission. The Government proposal is that the terms of reference will relate to the management of the banks, their boards, regulators and supervisors, the accountants and any communications from the Department of Finance to the other Minister to the regulatory or supervisory system. Those are the terms of reference of the commission of investigation and there will be an opportunity to debate them in the other House this week and in this House next week — obviously that is a matter for this House.

The amendment before us looks at the recommendations of the statutory commission of investigation. I am not sure that is a matter that requires express recitation in this Bill. Clearly, the Governor will always make himself available to the committees of the Houses as will the head of financial regulation. I assume that is what will happen in regard to the statutory commission of investigation. It will not preside at the statutory commission and the Governor rather than the head of financial regulation has clearly done the preliminary scoping exercises on which the terms of reference are based. Messrs. Regling and Watson were the authors of the other report. The terms of reference are based on those scoping reports and when the final commission report is to hand early next year clearly there must be Oireachtas action on it. I do not take from that. It would seem to me the finance committee is the appropriate forum but if this House wished to take steps that is a matter for it to decide.

Amendment, by leave, withdrawn.
Section 4 agreed to.
Amendment No. 3 not moved.
Section 5 agreed to.
SECTION 6

I move amendment No. 4:

In page 12, between lines 1 and 2, to insert the following:

"(9) Within one year of the enactment of this Act, and each year thereafter, the Agency shall publish an assessment of the performance of the Commission in protecting consumer interests through its regulations, orders, codes of practice and other activities.".

I thank the Minister, Deputy Brian Lenihan, for his contribution and welcome the Minister for Defence, Deputy Killeen. It has been acknowledged in discussions we have had on the banking industry in recent years that there has been an omission in that the interests of consumers were not adequately represented against the strength of large banking organisations. This amendment seeks to compel the new commission to produce a report, where possible, on the work it will do to advocate for and represent the consumers of banks.

Under the Bill, responsibility for providing consumers with financial information and education will be transferred to the National Consumer Agency, along with the associated staff. The Government has decided the agency is best fitted to support consumers of financial services and products by providing information and education in line with the agency's overall responsibilities for consumers. The supervision and regulation of products, markets and institutions from a consumer perspective remains with the bank. It would be entirely inappropriate to assign the NCA, which is responsible for consumer information and education, the role of reporting on the Central Bank's performance of its statutory functions which are outside the remit of the NCA. However, the Bill makes separate provision for a consumer advisory group and amendments made on Committee Stage in Dáil Éireann have further developed the role of that group. There is also provision for the Central Bank to make available to the Oireachtas an annual statement of its regulatory performance and discuss that statement before an Oireachtas committee, if so requested.

I am not in a position to accept the amendment because it runs counter to the underlying philosophy of the Bill in that in circumstances where the National Consumer Agency is to take over the financial information and education element it would be inappropriate also to task it with responsibility for the statutory functions of the bank.

Amendment, by leave, withdrawn.
Section 6 agreed to.
Sections 7 to 13, inclusive, agreed to.
Amendment No. 5 not moved.
Section 14 agreed to.
Amendment No. 6 not moved.
Section 15 agreed to.
Sections 16 to 19, inclusive, agreed to.
SECTION 20

I move amendment No. 7:

In page 18, between lines 2 and 3, to insert the following:

"(6) Regulations under this section shall be laid before each House of the Oireachtas and shall come into force after 21 sitting days, during which time a motion may be tabled in either House to amend or annul the regulations.".

The amendment addresses a difficulty regarding organisations such as this. It seeks to ensure the Houses of the Oireachtas would be aware of the work in which the organisation is engaged through the laying of regulations before them. The amendment would require the new Central Bank organisation to provide a report for the Houses of the Oireachtas on the regulations being put in place to enable them to discuss them, if they so wish.

Members will remember that the Bill was amended on Report Stage in the Dáil by way of the acceptance of a Fine Gael amendment along these lines to provide that regulations made by the bank relating to fitness and probity would be laid before the Oireachtas. This was referred to in section 26(6). However, the Minister also advised on Committee Stage in the Dáil that it was important for the Central Bank to be in a position to act promptly in designating controlled functions to ensure the full rigour of the fitness and probity provisions could be applied. For that reason, he is not persuaded by the argument that there should be a 21-day delay which the amendment would cause. In addition, it is important that once the Central Bank is assigned this function, it is able to act independently and at arm's length from the political system. For that reason, it is not proposed to provide for amendment or annulment of the regulations by the Oireachtas.

Amendment, by leave, withdrawn.
Section 20 agreed to.
Section 21 agreed to.
SECTION 22
Question proposed: "That section 22 stand part of the Bill."

Why does the Minister believe it is necessary to specify in subsection (4) the offices held by persons covered by the pre-approved control provisions included in the legislation? If one specifies the offices that will be subject to the terms of legislation, there is a temptation — as happened in the past — for the organisation one is regulating to create another job that does not carry of the titles specified but which encompasses the same work. In transport legislation, with which I am more familiar, a provision is included to the effect that the Minister may deem another post or job to be the equivalent of the roles performed and as such falls within the parameters of the legislation. Why does the Minister believe it is necessary to specify the jobs of director, chief executive, secretary and so on in this respect? Will such a specification create an opportunity to have the same work done under a different title perhaps outside the scope of the Bill?

This is an element that has been debated previously. It is my understanding that the section prohibits regulated financial service providers from permitting a person to perform a controlled function, unless a financial service provider is satisfied that the person concerned complies with any published standards of fitness and probity and has agreed to abide by such standards. The Central Bank can publish a code of standards of fitness and probity with the powers given to it in section 50. The section also provides that the bank can take into account published standards when performing its functions and exercising its powers.

The list of offices for which the section provides is more indicative than exhaustive. It provides for a situation where someone is performing these roles perhaps under another title. It seems the concern of the Senator in that regard is covered by the prohibition provided for in the section dealing with the controlled functions to be performed by a person.

I am not sure it is covered. The section is clear. Subsection (4)(a) reads”... any of the following positions or offices ...”. It also reads: “(i) the office of director; (ii) the office of chief executive; (iii) the office of secretary; (iv) subject to ... [ an earlier] subsection ..., an office or position ...”. By being so specific about such offices, does this not create an opportunity for somebody to redefine the work done by a person under a different title and for it, therefore, to fall outside the scope of the section?

The bank may publish a code of standards of fitness and probity using the powers given to it in section 50. It is my understanding that it would be in a position to prevent such a circumvention of the provisions under section 50 andde facto under section 22. In reality, such a list could not be exhaustive in terms of including every possible function that might be performed by persons in the specified posts; in other words, I am referring to functions rather than posts.

Section 50 reads: "The Bank may issue a code setting out standards of fitness and probity for the purposes of this Part." My point stands. In other legislation regulating an organisation the Minister or the regulator has the ability to define any other post he or she deems fit as falling within the scope of the legislation. For example, if this provision were to cover a person involved in investment banking activity, some of those who discharge these functions do not carry any of the titles concerned; however, they do provide services that affect the health and overall performance of the organisation in question. I hear what the Minister is saying and understand his response, but my response is that section 50 is ambiguous in that it provides that the bank may issue a code setting out standards of fitness and probity.

To return to the point made on section 50, I had a quick look at the provision while the Senator was speaking and it seems to be open in encompassing anybody who might have a function about which the bank might have a concern in regard to his or her duties and responsibilities. Even section 22(4)(a) seems clear. It reads: “in the case of a regulated financial service provider that is a body corporate of a prescribed class, a person who holds or performs the duties of any of the following position or offices in a regulated financial provider shall be taken to exercise a significant influence on the conduct of the regulated financial service provider’s affairs”. That seems to encompass any person who is trying to circumvent the rules by designating a post with a particular title. The section encompasses responsibilities rather than titles, even where an attempt is made by a particular institution to circumvent the rules in the manner outlined by the Senator.

Question put and agreed to.
Amendment No. 8 not moved.
Section 23 agreed to.
Sections 24 to 49, inclusive, agreed to.
SECTION 50

I move amendment No. 9:

In page 38, between lines 8 and 9, to insert the following:

"(2) The code shall not come into force until it has been submitted to the Minister for Finance who shall submit it for consideration and approval by the Houses of the Oireachtas or a Committee of the Houses of the Oireachtas designated to deal with such matters.".

Given the discussion we had on the importance of section 50 in laying out the standards for probity and fitness upon which so much of the Bill will rest, the suggestion is simple, namely, that when the reformed Central Bank has put the code in place it allows the Houses of the Oireachtas to discuss the code. Given how evident was the lack of fitness of some people to perform the jobs with which they were entrusted, it is appropriate that public representatives have an opportunity to see this code, table any amendments to it and have their views heard.

In a sense this is a philosophical question on how one would view the role of the Central Bank and the regulator in these matters as opposed to the political system, with the Minister on the one hand or an Oireachtas committee on the other. If one were to take the view that one would charge the Central Bank and the regulator with particular responsibilities, among them setting out their code of practice, and also to take the view that it would be very undesirable that there would be interference in the pursuit of the functions of the two offices by the political system or the Minister, one would come to the view that even in the case of the code of practice, which perhaps Senator Donohoe would argue is fairly narrow and parallel to the operations of the regulator and the Central Bank rather than central to them, it would seem to be more desirable that the bank would come forward with its own code of practice and operate in accordance with it without having to refer to the political system. The general provisions of the Bill with regard to the accountability of the Central Bank for its regulatory performance to the Oireachtas and its committees seems to strike a reasonable balance between its operational independence and accountability, which is very necessary and is provided for in this Bill, and its capacity to order its own business in terms of its code.

I do not think the code is quite narrow. It allows very generous latitude to the banks to set out the standards in question. None the less, I understand the importance of the independence of the Central Bank and ensuring it is free from unnecessary political interference as opposed to direction.

Amendment, by leave, withdrawn.
Section 50 agreed to.
Sections 51 to 53, inclusive, agreed to.
SCHEDULE 1
Amendments Nos. 10 to 12, inclusive, not moved.

I move amendment No. 13:

In page 53, column 3, between lines 6 and 7, to insert the following:

"(n) credit union affairs.”.

We have had a lot of discussion on this in the House and many Members have raised concerns about the need to strike a balance between the needs of the credit union movement and the broader regulatory duties that the organisation will have. We understand the role the commission will play in running it. All this amendment suggests is that there should at least be an ordinary member of the commission who could have an understanding of the particular needs of the credit union movement and ensure it is represented in the commission.

I heard a good deal of the Second Stage debate and the points made by Members on the role and functions of credit unions, as was the case in the other House. As everyone is aware, credit unions fall within the definition of financial service providers which is set out in the Bill. The Minister for Finance believes that the issue is covered and that relevant knowledge of credit union affairs is already recognised among the many disciplines from which Central Bank commission members may be drawn. In other words, it is central to financial service provision by institutions.

Amendment, by leave, withdrawn.
Amendment No. 14 not moved.

I move amendment No. 15:

In page 53, column 3, between lines 42 and 43, to insert the following:

"(4) No person shall be appointed for more than two terms.".

It is important in an organisation such as this, when the financial world is so fast moving and the organisation which it seeks to regulate is so sophisticated, that there should be some mandatory turnover of people who are at the head of the organisation, that is, a term limit. That is what this amendment hopes to deliver, to ensure there is always a degree of freshness within the commission.

Amendment No. 15 is already covered by section 24B(4). It was accepted by the Minister for Finance in response to an amendment tabled by Fine Gael on Committee Stage.

Amendment, by leave, withdrawn.
Amendment No. 16 not moved.

Amendments Nos. 17 and 22 are related and will be discussed together.

I move amendment No. 17:

In page 56, column 3, between lines 22 and 23, to insert the following:

"(2) In publishing its proposed levies, it shall publish an impact assessment of the proposed levies including relevant comparisons of cost effectiveness of its operations with comparator countries.".

This amendment seeks to ensure that the new Central Bank, in the reports it will produce, makes adequate use of international benchmarks in these areas. It is proposed that in terms of levies we consider the degree of levies imposed in other countries to ensure the levies being put in place are appropriate. We tabled this amendment because we have seen examples in other regulatory bodies where easy decisions are made on the level of levy to fund and put in place large, well-funded regulatory bodies. We need a profitable banking system and for it to be well regulated. I want to ensure there is focus on making sure the levies imposed are adequate and ample to fund the organisations and are also proportionate. The way to check that is to examine what has been done in other jurisdictions.

In respect of amendments Nos. 17 and 22, the Minister for Finance has asked officials in his Department to undertake a process of consultation with the Central Bank, the Financial Services Regulatory Authority and representatives of the financial services industry with a view to examining how a move to 100% funding of the regulation of financial services by the industry might come about. In a statement to the industry in December 2009, the Governor of the bank signalled his expectation of an increasing degree of industry funding for financial regulation. Shoestring regulation will not work and the Minister is mindful of the points made in the recent banking reports on the past under resourcing of regulators.

The Bill makes provision for the Central Bank to seek value for money and it will be subject to audit by the Comptroller and Auditor General. The levy provisions set out an open regime whereby the Central Bank must make a transparent statement of its requirements and must seek to match revenue to expenditure on an ongoing basis, subject to certain provisions for flexibility. The Bill strikes a balance between resourcing the Central Bill on the one hand, while not giving it a blank cheque on the other. However, the resourcing of our regulatory system should not be subject to an industry impact analysis that fails to take account of the wider economic and societal costs of regulatory failure. It will take many years before the levies cover the cost of rescuing the banking system.

The Bill's provisions as they stand address the many considerations that must be borne in mind, including the issues outlined by Senator Donohoe. Accepting amendments Nos. 17 and 22 would distort the balance somewhat by making it more difficult to achieve our shared aims in respect of the functions of the Central Bank and the Financial Services Regulatory Authority.

Amendment, by leave, withdrawn.

Amendments Nos. 18 and 19 are related and may be discussed together.

I move amendment No. 18:

In page 60, column 3, between lines 20 and 21, to insert the following:

"(c) the benchmarks or domestic and/or international comparison against which its regulatory performance should be viewed,”.

There have been occasions in which the advice Ministers received was so overwhelming that they had no choice but to follow it. The amendments provide that any advice provided to a Minister in regard to the discharge of his or her duty is published and made available.

The issues raised by amendment No. 18 ought to be viewed together with the provisions of section 32B(3)(d), which requires the Central Bank to specify the targets and criteria for assessing its performance in strategic planning. This will, in turn, inform the regulatory performance plan and provide for the assessment of regulatory performance against relevant international benchmarks. The international peer review provided under section 32M will also feed into this process and help inform the development of appropriate international benchmarks over time. On that basis, the proposals in amendment No. 18 are already addressed by section 32B.

With regard to amendment No. 19, the purpose of section 32L is to allow for the assessment of the regulatory performance of the Central Bank. The amendment seeks to provide an automatic requirement to publish information that may be highly sensitive, even where doing so seriously compromises the commercial position of financial service providers or the Central Bank in its attempts to regulate the sector effectively and stabilise the overall system. Clearly, that is not Senator Donohoe's intention. The Minister has already shown a willingness to explore whether information could be made more readily available from the Central Bank but he believes the proposed amendment is too far reaching and takes insufficient account of the genuine public interest reasons for the protection of sensitive information in these instances.

Amendment, by leave, withdrawn.
Amendment Nos. 19 and 20 not moved.
Question proposed: "That Schedule 1 be Schedule 1 to the Bill."

This is a fine Bill in many ways but section 18CA of Schedule 1, which deals with the membership of the Central Bank commission, badly damages its credibility. We addressed this issue on Second Stage. The most important part of this Bill is the commission and the Central Bank will be judged by its performance and personnel. If a Government ever had an opportunity to act in a new way, this is it. Let us forget about the abuse of patronage in Bord na Móna, the Dublin Airport Authority, An Post or VHI. These commercial State-sponsored bodies are not quite as sensitive as the Central Bank, which will be the institution on which the credibility and credit rating of this State will stand or fall. It will regulate the banks but if the international markets lose faith in the sector or the institution, we will be in even more serious trouble than we are at present. I hate to anticipate the sort of doomsday scenario that threatens us as a result.

Whenever I make this argument, the response is always that it is very unfair to exclude political people just because they are members of Fianna Fáil. Ministers always say that because they always make appointments from the ranks of Fianna Fáil.

I agree Fine Gael does the same thing, as does the Labour Party. It just happens that Fianna Fáil does it more often because it has been in power longer. The entire State apparatus is in its hands as a result.

Ten out of ten for that.

Ten out of ten for performing in Fianna Fáil's own interest.

I agree that nobody should be excluded simply on the basis of membership of a political party but dozens of people who are qualified to sit on the Central Bank commission have no association with political parties. The suspicion that those who are closely associated with political parties can be relied on to do what their party demands rather than serve the interest of the State will be held over the Central Bank if these eight ministerial nominees are appointed in the sordid method this Government has used to make appointments to all the semi-State bodies under its control.

This issue is too serious to play politics. The future of the nation is in the hands of the Central Bank. The performance of the Government leaves an enormous amount to be desired in this area and not only with regard to Anglo Irish Bank. The Government's appointment of Mr. Honohan and Mr. Elderfield indicates it has some idea of the importance of independence but when it comes to the banks it capitulates and appoints the same people. It had an incredible opportunity with Bank of Ireland to appoint someone untainted with past associations but it appointed someone who had been chief executive of that bank for many years. It could have done the same in AIB but it let the deputy chairman slip in. Nothing changed. Nearly all the directors of AIB who were in place during the property frenzy remain. Even though the Government virtually controls that bank, it has done nothing to replace them. Colm Doherty, the arch insider who is chief executive of AIB, was appointed with the eventual consent of the Minister for Finance and the Taoiseach. While they resisted it for a while, they were eyeballed, gave in and lost. The same occurred when Richie Boucher was appointed chief executive of the Bank of Ireland. We have the same guys in charge, the same people at all levels and no change.

Why did the Minister not take the opportunity to introduce something along the lines of what is being done by the Committee on Communications, Energy and Natural Resources, on which Senator O'Toole sits? It is interviewing candidates for one of the State bodies and while I do not know how this is proceeding, the process is certainly taking place. Why was a body that is a little detached from us not established to make these appointments and ensure they have credibility? If the Minister returns next week with a list of eight appointees and I am able to argue that the loyalty of the individuals in question — at least seven of them at any rate given that the Green Party would insist on one appointment — is more to the Fianna Fáil Party than to the State, the Central Bank commission will be in danger of being discredited, despite havingex officio members. In such circumstances, the entire organisation would be discredited.

Why must the Secretary General of the Department of Finance sit on the commission when it will include as members the Governor of the Central Bank and head of regulation? One of the great problems under the old regime was that the Secretary General of the Department automatically became the Governor of the Central Bank. This has been changed in what was a welcome and great break with the past. However, while this appeared to be a culture change, the Minister has now made a provision to automatically make the Secretary General a member of the commission. As a result, the Department will continue to exert a strong influence.

I cannot emphasise how important these appointments are. If there is to be an acid test of independence, it should be that we can be confident that those who are appointed are strong enough to say "No" to the Minister and tell him they will not do what he wants. Many of the appointments the Minister has made to the banks, including the nationalised bank, do not pass that test. I will not name again the individuals to whom I refer but they are self-evident because they have pedigree in the Fianna Fáil Party and extraordinarily obvious loyalties to it.

I ask the Deputy to stick to the issue.

Having stuck rigidly to the issue, I plead with the Minister to think again on the Schedule and establish a system which separates the party in power from these appointments by at least one remove. I do not mind how he achieves this but the issue is of the utmost importance. I assume the appointments will be made in the next week or thereabouts. I ask the Minister to give some assurance they will not be riddled with the political complexion with which they have been riddled in the past.

I concur with Senator Ross on this point and made a similar point on Second Stage. I propose to respond to the Minister's argument that we are damaging the reputation of politics and proposing to undermine the independence of the Central Bank. I disagree completely because I do not for one moment suggest that politics is bad. I am proud and pleased to be a politician and any inference to the contrary is completely misplaced. I hope I will be able to continue in my current role for a while longer. I have a good appreciation of the worth and value of politics.

We are discussing the one institution whose independence is a matter of national interest. The Central Bank is of such importance that appointments to it must be made in a process that is independent of all forms of political influence. Our role is to provide political leadership, whereas central banks are meant to be independent. The Schedule creates potential for inappropriate political influence. For this reason, I support the view expressed by Senator Ross and ask the Minister, even at this late stage, to reconsider the provisions of the Schedule.

I fundamentally disagree with Senators Ross and Donohoe. The institutions of the State command and demand a certain level of respect. As I stated, in a small country it will be possible to trace some level of lineage or connection to a political party, even in the case of Senator Ross. We expect the Government of the day to take decisions on behalf of citizens. Governments must have confidence in their ability to exercise this function and be accountable to the electorate. People can adjudicate in this matter under the Constitution when a general election is held.

It is imperative that the Minister has decision-making powers. I am pleased he is in a position to make appointments to the Central Bank commission. How often are Senators frustrated by ministerial answers stating that a matter raised is the responsibility of this or that body? I am pleased the Minister can make the appointments in question as they arise and do not accept there is a political complexion to this issue.

What is the optimum selection process? Would appointments be made by the Trinity club? Does one have to be a graduate of Trinity College Dublin to be acceptable to the masses? Such a proposition would not be acceptable to the National University of Ireland. Must appointees be members of the Fine Gael or Fianna Fáil parties or a member of the teaching profession? What prescribed body would one choose other than a government that has been democratically elected to select the most appropriate people to do a job? What elitist group could one choose that would be best placed to decide what individuals are best qualified?

The Minister indicated that people must be qualified to do the job. Ministerial appointments must be made and no process is fairer or more accountable than democratically elected representatives taking decisions on behalf of their electors. If they do not perform to scratch, under the Constitution we have a good means of getting rid of them in due course.

This is not a matter of people failing to show respect to the institutions of the State. That does not drive the points Senator Ross and I have made. The Fianna Fáil Party has made appointments in a manner that does not show respect for State institutions.

That is the Senator's opinion. This is a democratically elected Government which has made determinations with which the Senator happens to disagree.

Please allow Senator Donohoe to continue, without interruption. We are discussing Schedule 1.

It is a fact, rather than an opinion, that appointments were made by the Fianna Fáil Party in the past ten years that did not show respect for State institutions.

This is a Committee Stage debate.

I am aware of that. I am responding to a point made by Senator MacSharry and I contend that this issue is relevant to the spirit of the debate. A range of mechanisms are available for making the appointments. In this country and elsewhere advertisements are placed in the media inviting people to put forward their name for positions and selection is made by a body on which politicians do not sit. There is ample scope for the Oireachtas to understand the work the Central Bank is doing and interrogate it through the committee structure. The successful operation of the Central Bank is a matter of national interest. For this reason, it must be devoid of political influence and be seen to be such. Making this point does not show a lack of respect to the institution but an understanding of its role.

I am staggered by what Senator MacSharry said. I do not know whether he ever heard of the Drumcondra mafia. It was not possible to be a member of the Drumcondra mafia without being a member of a State board. Perhaps it just happens that they were all incredibly qualified to sit on the boards to which they were appointed. However, it is fair enough to point out that this is an abuse that has existed for a very long time.

We are talking about the future of the Central Bank. I am not talking about the past.

We are on Schedule 1 to the Bill.

There was at least one member of that group on the board——

It must have been close to the bone. They seem to be getting very——

——of the Central Bank, so Senator MacSharry should be careful.

I have nothing to be careful about. I am talking about the future.

Senator Ross to continue, without interruption. I remind the Senator we are on Schedule 1.

Correct. I was making exactly that point. One only needs to look at the performance of the coterie that surrounded the last Taoiseach to know that every single one of them was slotted in to a position on one of the semi-State boards for which, in many cases, they were blatantly unsuited and under-qualified. It is absurd to maintain that that sort of thing was not going on. It was going on and it is still going on. The temperature of this debate has been raised because Senator MacSharry has made such an absurd defence. We are trying to say that we accept that it has happened and was unacceptable, but for God's sake, in an institution like the Central Bank let us not let it happen because too much is at stake. Let us not pretend that people who were not qualified were not appointed because they were. While it would be a pity to do so, I will name names if necessary. To go into denial about this is utterly crazy and unreal. That is what has happened, but please let it not happen in this case. We have the opportunity to plead with the Minister in the next week not to make that sort of appointment.

It is outrageous to suggest that because someone is a member of any political party, he or she would not do the best for the country.

No one is suggesting that.

That is an outrageous attack on the political system. When we look at what the banks did, we can see they were members of their own club. There were no members of the political system in the banking system. They destroyed their own organisations. To suggest now some connection between that and someone who was appointed to the board of the Central Bank on the basis of being a member of any political party is an outrageous attack on the political system. We can clearly see what happened in the health services. When we got rid of all the politicians from the health services, what happened? We cannot get one question answered. I do not subscribe to Senator Ross's proposal. I believe that we are committed people regardless of whether one's orientation is to Fine Gael, Labour, the Green Party or Fianna Fáil. We are Irish people committed to doing the best job we can. The one stipulation is that a person should have the qualifications, which is provided for in the Bill. It is important for us to stick to that. Having qualifications and the ability to do the job are what are most important.

I want to talk about the future and build on the good work already done with the other appointments. Do the appointments of David Begg, Matthew Elderfield or Alan Dukes to the board of Anglo Irish Bank represent cronyism? We cannot cherry pick. It is not about showing a lack of respect. In changing the regulatory regime with this Bill and two more Bills to follow, it shows the belief in this institution to do its work in the appropriate way without bowing to whether a person is a product of the Trinity regime, the Fianna Fáil scholarship programme or the Fine Gael training programme. It is the ability to take the appropriate judgment that these people have the qualifications and the independence we expect them to have and that they will ask questions.

There are other organisations. For example Messrs. Regling and Watson did not pre-write the report as determined by the Fianna Fáil members of the Oireachtas Joint Committee on Finance and the Public Service, nor did Gay Byrne pursue a line in the Road Safety Authority that was dictated to him by any Fianna Fáil entities or otherwise. I believe in this institution's ability to pick the six to eight members of the Central Bank commission in the appropriate fashion which will reflect that. I will not account for any past appointments that turned out to be bad — absolutely not. I am speaking about the here and now, based on the Government actions that have been adjudicated on by the international community to have been very good. We continue to lead the world in implementing the kinds of measure that need to be put in place. I say to Senator Donohoe that it is not about lack of respect.

That is what the Senator said. I have been misquoted.

Senator MacSharry to continue, without interruption.

I believe in this institution's ability to do that well and continue to do it in the way it has been undertaken. It has shown the world an example in recent times.

At approximately this time last year a report was published suggesting that there were approximately 850 State agencies, boards and groups of one kind or another. Three weeks ago Dr. Muiris MacCarthaigh of the IPA published a report stating that there are 240, of which 189 have boards, with memberships ranging from three to, I believe, 35, which is an average of approximately ten or 12. This means that several thousand people are board members. Anyone would accept that it would be a miracle — even Solomon would be challenged — to appoint all the members of such boards to a particular standard and for all of them to be fully engaged and doing the job well. The point Senator Ross makes now and has made previously is as much about members of boards who are somewhat disengaged or freewheeling along as about people who are seeking to subvert the integrity of the purpose of the board. In either case there are challenges. I accept that the points made by Senators on all sides of the House are made from a position of personal integrity based on the concerns they have. It is important to accept that as a starting point.

I do not suppose that either Senator Ross or Senator Donohoe were ever fortunate enough to attend a Fianna Fáil cumann meeting. However, if they did so frequently, they would hear, among other criticisms, that we seem to appoint many people to boards, who are very definitely tagged with memberships of or alignments with other political parties and traditions. Whenever that is said to me I have no difficulty in defending it if I believe that the person is suitable for the job. I believe it is probably true that all parties in government have appointed people from other political traditions when they have regarded them as suitable for particular jobs. In his Second Stage speech, Senator Ross referred to the quality of Matthew Elderfield and Professor Honohan and their suitability for the job. Given the record of the Minister, Deputy Brian Lenihan, in this regard, it is reasonable to expect and accept that he would be able to find and appoint people of that calibre. I know the Senator is making a slightly different point about being less than satisfied about the appointments to the boards of banks, which may not be germane to the current debate on the Central Bank and the regulator. However, it is a point he holds very strongly and can be argued one way or the other.

On Second Stage, Senator Donohoe raised a query about the Secretary General of the Department of Finance being on the commission. If we cast our minds back to some of the points made by Professor Honohan and Messrs. Regling and Watson, one of the concerns would be that the policies being followed by the Department of Finance would be informed by what was known at Central Bank level and at regulator level. There is a strong argument for including the Secretary General in those circumstances. In general terms the Minister has an established track record in finding people of particular quality, which is challenging because there is not an enormous pool of people who are completely divorced from the activities of recent years and the difficulties into which we have got ourselves. On balance in our type of democracy with an Executive that is answerable to the Parliament and the committees thereof in a very immediate way, it is reasonable to accept that the Minister will come up with good quality people and, as Senator Ross said, even if he did not, there would be an opportunity to make that point very strongly. On the basis of previous experience, I am confident he would be in a position to do so.

There are other points on, for example, the independence of the Governor on the budget of the institution. Given the many safeguards that are in place, I would be very confident that the new Central Bank and regulatory system will be capable of standing much more independently and clearly and will set out the terms of regulation much more strongly than has been the case in the past, which led to many difficulties.

Question put.
The Committee divided: Tá, 29; Níl, 15.

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • O’Toole, Joe.
  • Ormonde, Ann.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.

Níl

  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Healy Eames, Fidelma.
  • McFadden, Nicky.
  • Norris, David.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Ross, Shane.
  • White, Alex.
Tellers: Tá, Senators Niall Ó Brolcháin and Diarmuid Wilson; Níl, Senators Paschal Donohoe and Shane Ross.
Question declared carried.
SCHEDULE 2
Amendments Nos. 21 and 22 not moved.

I move amendment No. 23:

In page 83, between lines 21 and 22, to insert the following:

"This Part shall not come into effect until an order for its commencement is approved by both Houses of the Oireachtas. The Minister shall, at the same time making such an Order, publish a report on the impact of this Part on Credit Unions in Ireland generally.".

There has been discussion among many Members of the impact of the Bill on the credit union movement. The Minister made a helpful speech on Second Stage in which he clarified that some changes had been made in response to representations received from credit unions. That said, there is still concern about the effect the Bill will have on credit unions. Their great work has been acknowledged by many, as have the standards they have reached. While the amendment accepts completely the need for regulation across all financial services, including the credit union sector, it simply proposes that a report be prepared to enable us to understand the effect the Bill will have on the credit union sector and to obtain some facts in order that we will be better able to understand how it will work and determine whether it will have unnecessary and negative consequences.

And so say all of us.

I assume the Minister will not accept the amendment but between the passage of this legislation and the publication of the Central Bank Reform (No. 2) Bill perhaps the Department or the Minister might agree to liaise with the regulator and the Irish League of Credit Unions to assess the impact of the legislation on the day-to-day running of that organisation in continuing the very good work it has done in the past 40 years in serving communities.

On the face of it, there is nothing wrong with what Senator MacSharry has proposed, but the difficulty is that the machinery to be extend to the credit union movement will have been brought into operation. I support the amendment because once the measures are extended in an extensive, if not a draconian, way to the operations of the credit union movement, it will be nigh on impossible to change them. It may well be that there is a justification for what the Minister has proposed. No one doubts the necessity to extend rigorous regulation to the credit union movement and the operation of credit unions, which is important. I agree with my colleagues that credit unions have not conducted themselves in anything like the same way as the banks and other financial institutions. They have been almost completely free of criticism in the past decade and a half. However, it is important in an environment in which we are extending rigorous regulation that we do not leave the credit union movement out of the system. I do not believe there is a case to be made for the exclusion of exclude the movement completely.

The value of the amendment is that it would allow for an assessment and an evaluation to be made of the likely impact of the measures to be introduced. It would delay the commencement of this part of the Bill. The proposals would not be commenced until an order was made for that purpose. The amendment would allow the assessment and evaluation proposed to be made in the interim. The only net difference between the amendment and what Senator MacSharry said is that the operation of the new machinery would be delayed until that assessment and evaluation were made. For that reason, the amendment is worthy of support.

As Senator O'Reilly and others said, we have all made the point that the credit union movement has made an extraordinary contribution and been available to the ordinary everyday borrower borrowing to tide them over or for something perhaps a little more ambitious. Credit unions have operated in an extremely prudent and reliable way and proved themselves during the years. If for that reason alone there should be a breather to allow this issue to be assessed and evaluated and a further study to be made of how the Bill will impact on the credit union movement.

I support the views of Senator MacSharry. I have met the leaders of the credit union movement and I am very conscious of the tremendous work being done by credit unions. A minority in the movement have faced financial difficulties and I understand where the Minister is coming from to ensure everything will be straightforward. The banks and the credit unions have been linked together. It is important that the good work being done by credit unions is recognised. The vast majority are operating properly and in a prudent manner. It is very important, therefore, that we review what they are doing as opposed to linking them with the operations of the banks. I support what Senator MacSharry said in that regard.

It is important to bear in mind that the wording of section 35 differs dramatically from that in the Bill as published originally. I took the Bill on Report Stage in the Dáil when eight substantive changes were made by the Minister, many arising from points made by Opposition spokespersons and others, as well as those made by Senators Keaveney, Alex White, Donohoe and MacSharry. There is an acceptance of the importance of the credit union sector, particularly for people who for a variety of reasons, not least that they are the least wealthy, tend to have less access to banks.

It is also important to bear in mind that there are advantages for credit unions in running with the situation as is currently proposed. One of the effects of the amendment, if enacted, would be to make the commencement of the provisions amending section 35 of the Act of 1997 contingent on an order made by the Minister for Finance and approved by both Houses of the Oireachtas. Additionally, the amendment would oblige the Minister to undertake and publish a report on the impact of the provisions on credit unions generally. One of the impacts of that would be that there would be considerable delay. It is important that the provisions be enacted quickly to make it possible for credit unions to have the increased flexibility to reschedule loans, subject to appropriate liquidity provisioning and accounting requirements, and so that credit union members can benefit from this. If the amendment were accepted it would delay the introduction of the provisions and thus undermine the original rationale for their introduction. In addition, section 2 already provides for the commencement arrangements. Therefore, if the amendment were to be accepted it would be in conflict with another part of the Bill.

With regard to the impact of the provision on credit unions generally, the Registrar of Credit Unions indicated to the Joint Committee on Economic and Regulatory Affairs on 27 May, that the registry had carried out an impact analysis which examined the level of provisions held against rescheduled loans. It is not clear, therefore, that a further assessment in this regard is necessary. Also, the strategic review of the credit union sector will provide an early opportunity to review the operation of the measures relating to credit unions, including the amended section 35 provisions. That was the point made by Senator MacSharry. We expect that report will be ready in spring 2011.

As the Minister and other speakers said, the Bill is the first of a suite of three. Therefore, there will be opportunities to revisit issues of concern or that cause difficulty. At this point, the best balance is struck by the provisions as currently provided for.

I thank the Minister for his contribution. I understand the changes made to the Bill on Report Stage in the Dáil. They were helpfully detailed by the Minister for Finance earlier. That said, we believe the issues raised are legitimate and the amendment deserving of support.

Amendment put.
The Committee divided: Tá, 15; Níl, 29.

  • Bradford, Paul.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Cannon, Ciaran.
  • Coghlan, Paul.
  • Cummins, Maurice.
  • Donohoe, Paschal.
  • Fitzgerald, Frances.
  • Healy Eames, Fidelma.
  • McFadden, Nicky.
  • Norris, David.
  • O’Reilly, Joe.
  • Phelan, John Paul.
  • Ross, Shane.
  • White, Alex.

Níl

  • Boyle, Dan.
  • Brady, Martin.
  • Butler, Larry.
  • Carroll, James.
  • Carty, John.
  • Cassidy, Donie.
  • Corrigan, Maria.
  • Daly, Mark.
  • Dearey, Mark.
  • Ellis, John.
  • Feeney, Geraldine.
  • Glynn, Camillus.
  • Hanafin, John.
  • Keaveney, Cecilia.
  • Leyden, Terry.
  • MacSharry, Marc.
  • McDonald, Lisa.
  • Mooney, Paschal.
  • Ó Brolcháin, Niall.
  • Ó Domhnaill, Brian.
  • Ó Murchú, Labhrás.
  • O’Donovan, Denis.
  • O’Malley, Fiona.
  • O’Sullivan, Ned.
  • O’Toole, Joe.
  • Ormonde, Ann.
  • Walsh, Jim.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Maurice Cummins and Paschal Donohoe; Níl, Senators Niall Ó Brolcháin and Diarmuid Wilson.
Amendment declared lost.
Amendment No. 24 not moved.
Schedule 2 agreed to.
Schedule 3 agreed to.
Title agreed to.
Bill reported without amendment, received for final consideration and passed.

When is it proposed to sit again?

Ag 10.30 maidin amárach.