I thank the Members for the opportunity to discuss the Central Bank (Amendment) Bill 2014 today. The Government is bringing forward this Bill at the request of the Joint Committee of Inquiry into the Banking Crisis.
The Bill includes two main provisions. First, it amends section 33AK of the Central Bank Act 1942 to allow the Central Bank to disclose confidential information to the joint committee of inquiry under certain circumstances. As things stand, Central Bank officials are subject to professional secrecy requirements and could face criminal sanctions for sharing confidential information in this way. Second, the Bill provides for the Houses of the Oireachtas to make Standing Orders setting out the sanctions to apply to Members of the Houses for any failure to comply with these professional secrecy requirements.
On 14 May 2014, the Joint Committee of Inquiry into the Banking Crisis, chaired by Deputy Ciarán Lynch, was established by orders of both Houses of the Oireachtas. The committee was tasked with the development of a relevant proposal for an inquiry into certain aspects of the banking crisis. The purpose of the inquiry is to seek to establish the reasons Ireland experienced a systemic banking crisis. The joint committee met on seven occasions between 19 June and the 24 September 2014 to draft the relevant proposal and was assisted in its work by a support group with relevant knowledge and expertise. On 26 September 2014, the committee submitted its relevant proposal to the Committees on Procedure and Privileges of Dáil Éireann and Seanad Éireann for the conduct of an inquiry in accordance with the Houses of the Oireachtas (Inquiries, Privileges and Procedures) Act 2013 into certain aspects of Ireland's banking crisis. On 26 November 2014 the committee was formally empowered to conduct an inquiry under Part 2 of the 2013 Act. The Committee of Inquiry into the Banking Crisis is the first inquiry to be carried out under this legislation.
The scope of the inquiry as outlined in its terms of reference is broad and enabling. It is broken down into two phases, the context phase and the nexus phase. The context phase is for the purpose of information gathering. As Senators are aware, the joint committee of inquiry has already begun this work. This will inform the nexus phase, which will focus on three broad elements: banking systems and practices; regulatory and supervisory systems and practices; and crisis management systems and policy responses.
I want to say something about the interaction between the Department of Finance and the banking inquiry. The Department of Finance is fully committed to supporting the work of the Joint Committee of Inquiry into the Banking Crisis. This has been stated clearly in a number of letters from the Secretary General to the committee Chairman. The Department is in the process of sourcing, examining and formatting the substantial number of records requested by the inquiry. To this effect, a full-time central co-ordination unit has been established in the Department consisting of seven full-time staff. Eleven staff from other areas within the Department have been reassigned to process the records in the format required by the committee. In addition, ten temporary clerical officers have been recruited to assist in the processing of records for the inquiry, which gives a total of 28 staff working full-time and exclusively on the banking inquiry matters. Furthermore, a significant number of Department staff are actively sourcing and examining records relevant to the inquiry's direction in addition to their normal duties. Moreover, the Department's Secretary General has communicated directly with the inquiry's Chairman to ensure its direction to the Department is being met effectively. The Department is therefore clearly doing everything in its power to assist the banking inquiry in its work.
I will now explain the origin of the Bill being debated today. In its relevant proposal, the joint committee stated that section 33AK of the Central Bank Act 1942 prohibits listed categories of persons within the Central Bank from disclosing certain confidential information. The joint committee felt that this provision may therefore prove problematic for the banking inquiry when it seeks this information, which may in many cases be vital to the progression of the inquiry. Having taken legal advice on this point, the committee was of the view that it is necessary to amend section 33AK to overcome this issue. The joint committee further stated that ancillary amendments to the Standing Orders of Dáil Éireann and Seanad Éireann will also be required to put in place a process for how the Houses of the Oireachtas deal with confidential information and providing sanctions for Members who disclose such information without authorisation. In its consideration of the relevant proposal, the Committees on Procedure and Privileges considered that the preparation of the necessary amendments to the Act should be expedited by the Government. Therefore, in response to the recommendations of the Joint Committee of Inquiry and the Committees on Procedure and Privileges, the Government published the Central Bank (Amendment) Bill 2014 on 3 December 2014.
As Members are aware, the banking inquiry will inquire into the reasons Ireland experienced a systemic banking crisis. It will look at the political, economic, social, cultural, financial and behavioural factors and policies which impacted on or contributed to the crisis. In doing so, the joint committee may inquire into the findings and recommendations of previous reports into the crisis. Previous reports include the Honohan report, the Regling and Watson report and the Nyberg report. These reports identified that poor supervision, poor assessment of risks and a lack of following through on enforcement all played a part in the financial crisis.
Acting on the recommendations contained in these reports, a number of significant reforms have been introduced to build a strengthened regulatory framework as follows: the creation of a single fully integrated Central Bank of Ireland with a unitary board, the Central Bank commission; a regime to ensure the fitness and probity of key officeholders within financial service providers; a resolution mechanism to enable the Central Bank to intervene where a credit institution gets into serious difficulty and is in danger of becoming destabilised or otherwise failing; and strengthening powers for the Central Bank to impose and supervise compliance with regulatory requirements, and to undertake timely prudential interventions.
A comprehensive overhaul of the regulatory framework in the financial sector has also been pursued at EU level since the financial crisis. Through the introduction of various initiatives, the stability and resilience of the financial sector has been strengthened. Ireland has played a key role in driving these reforms at European level, including the single supervisory mechanism and the bank recovery and resolution directive. The wide-ranging and comprehensive reform in the financial services sector at both domestic and EU level in recent years is to be welcomed. We must never return to the failed policies which led to the banking crisis. Lessons must be learned. In that regard, this banking inquiry is essential.
I now turn to the provisions of the Bill. Section 33AK of the Central Bank Act 1942 contains an express prohibition under the Treaty of Rome, the European System of Central Banks statute and the supervisory EU legal Acts on disclosure of confidential information. All current and former employees of the Central Bank, including the Governor and members of the Central Bank commission, are affected by this prohibition.
The legislation has two purposes. The first is to amend section 33AK of the Central Bank Act 1942 to provide a gateway for the disclosure of confidential information by the Central Bank to the Joint Committee of Inquiry into the Banking Crisis. The information will be disclosed on condition that it remains confidential. The second is to provide for the Standing Orders of the Houses to set out the sanction for any Members who fail to comply with the provisions of professional secrecy as set out in the EU instruments. That sanction will be articulated in Standing Orders of the Houses which will seek to ensure that information provided in confidence to Members of the committee is not subsequently disclosed.
The sharing of information by the Central Bank with the Joint Committee of Inquiry into the Banking Crisis will not be possible until the changes to Standing Orders have been made. The reason for Standing Orders to be amended is to accommodate the constitutional position of the privilege of Members of the Oireachtas which restricts the extent to which criminal sanctions can be applied. This is not the case for any other persons who would disclose confidential information. For example, current and former personnel of the Central Bank would be liable to criminal sanction were they to disclose confidential information in breach of the professional secrecy requirements. Any other person who would receive confidential information pursuant to the gateway is subject to the statutory obligation contained in section of 33AK(6).
If such a person were to breach that obligation in circumstances where absolute privilege does not apply, an action for damages could potentially be brought by any party who suffered damage as a consequence of that breach.
Under the EU treaties, Ireland is required to consult formally with the European Central Bank, ECB, on any new legislative provisions relating to the Central Bank.
The opinion which I have received from the President of the ECB is largely positive but the ECB has made the point that the scope of section 33AK(6) of the Central Bank Act 1942 should be broadened to comply with Article 37.2 of the Statute of the European System of Central Banks, or ESCB. There is a duty of secrecy under the ESCB statute and that is why I propose to bring forward an amendment on Committee Stage in this House to broaden the scope of section 33AK(6) to provide for such obligations of professional secrecy. This would have the effect of removing any ambiguity over the scope of professional secrecy requirements pertaining to persons who would receive information disclosed by the Central Bank.
The ECB opinion further notes that under the capital requirements directive, specific conditions, rather than prohibitions, also apply when disclosing confidential information relating to the prudential supervision of institutions to parliamentary inquiry committees. The ECB identifies these conditions as follows: (a) the parliamentary inquiry committee must have a "precise mandate" under national law; (b) the information must be "strictly necessary" for fulfilling that mandate; (c) persons with access to the information are subject to professional secrecy requirements under national law at least equivalent to those referred to in the capital requirements directive; (d) where the information originates in another member state, that it is not disclosed without the express agreement of the competent authorities which have disclosed it, and solely for the purposes for which those authorities gave their agreement; and (e) to the extent that the disclosure of information relating to prudential supervision involves processing of personal data, any processing by the parliamentary inquiry committee must comply with relevant national transposing law.
The banking inquiry will be reflecting on some of the darkest days for the Irish economy. Thankfully, we are starting to emerge from those difficult times. The macro-economic and fiscal outlook is much more favourable than it has been for a number of years. Exports are growing and consumer spending and investment are on an upward trajectory. The number of people at work has increased by over 100,000 since the low point.
However, the Irish people have sacrificed a lot and the crisis has impacted heavily on their lives. They are entitled to understand the origins of the crisis and, importantly, to ensure the same mistakes do not happen again. The amendment to section 33AK of the Central Bank Act is an important part of that process.
The Bill addresses a key concern of the Joint Committee of Inquiry into the Banking Crisis and ensures there are no barriers to the Central Bank cooperating fully with the banking inquiry. The Government is initiating this Bill on the floor of this House today to facilitate the work of the joint committee. I look forward to a constructive debate on the Bill. I hope the House will support the passage of the Bill and assist in securing its early enactment.
I understand that the Cathaoirleach has been notified of an administrative error in the Bill as initiated, which consists of an additional bracket at the very end of line 23. I therefore ask the Cathaoirleach to request the Clerk to correct the misprint. I commend the Bill to the House.