The Central Bank is part of the payment system, yet it makes and imposes the rules for membership within the system. It seems it is being the gamekeeper and the poacher. Could it construct a system in such a way that it would be biased against certain interests? Is there not a conflict of interest between its two roles? Are there any safeguards to ensure it cannot operate in this manner?
SECTION 15.
Question proposed: "That section 15 stand part of the Bill."
The Deputy raised an interesting point. A similar situation exists in the health insurance area, involving the Department of Health, the VHI and other players, where regulation is urgently required. The existing structures have agreed to reorganise the payment system generally by establishing an Irish payment system organisation — an IPSO — to replace the existing patchwork of bodies. I presume all parties will be part of the IPSO. I am not sure I can answer the Deputy's concerns without getting into a full debate on the role of the Central Bank vis-�-visall the others applying for membership.
There were many complaints about people being unable to operate in the system. Is it not dangerous to presume they will be able to operate in the new system? This legislation gives the Central Bank a role as a player and a regulator. Are people protected under this legislation?
The industry has requested that the Central Bank should continue in its role as a player and regulator. I do not know if it is because of the gravitas of the Central Bank or the openness of the system, but I am advised the industry is happy. I will discuss this matter again on Report Stage because I am not fully satisfied with my reply. We may be doing as the industry wishes, but I do not know enough to state if it should have its way on this issue. However, I am satisfied that if the industry is happy to allow the Central Bank to play two roles, something is being done right in this area. We are not satisfied with the health insurance area, which we must change. I am not saying I will do anything on Report Stage, but I would like to come back to allay the Deputy’s concerns.
It is important to come back on Report Stage. No matter what area the industry operates in, it is always happy until something goes wrong. That section should be considered on Report Stage.
The Competition Authority has also accepted this situation. Our thinking is changing in this area. People will only wonder if a dual role is compatible if a problem arises. It may be compatible in this case — I am not saying it is not — but I would like the opportunity to come back on Report Stage to allay the Deputy's fears.
I dislike the principle of a regulator also being a player. We are learning numerous lessons as the markets and our ways of operation change.
I accept there is new thinking in this area. I will return to it on Report Stage.
The Banker's Federation asked that the criteria to be imposed by the Central Bank in deciding the requirements for membership of a payment system as outlined in this section be set down more clearly. There is no amendment in the Minister's name but has some thought been given to this matter? Will the reasons be given for imposing conditions? When one gets a refusal from the planning appeals board or the local authority, a reason for the decision is given.
An amendment was not deemed necessary and I understand the IBF are satisfied with this section. It specifically states that:
"In approving the rules of a payment system or in imposing terms and conditions for the operation of a system, the Bank may, without prejudice to any other requirement it sees fit to impose in the interests of the proper and orderly regulation of the system, impose conditions in relation to all or any of the following:
(a) the requirements for membership and rules of operation of the system;
(b) the code of conduct to be followed by the members of the system;
(c) the apportionment of costs as between the members themselves or between the members and the system;
(d) the fees, contributions or any other financial requirement in relation to membership of a payment system whatsoever imposed or to be imposed on an existing member of the system or an applicant for membership of the system."
The IBF is satisfied and I am advised that no amendment is deemed necessary.
Question put and agreed to.
Section 16 agreed to.
NEW SECTION.
I move amendment No. 5:
In page 14, before section 17, to insert the following new section:
17.—The Bank may exempt a payment system or a class of payment system from some or all of the requirements of this Part on such terms and conditions as the Bank may decide, where it is of the opinion that the application of this Part to that system or class of system is not necessary in the interest of the proper and orderly regulation of financial transactions in the State".
In banking supervision legislation there exists a standard provision which allows the bank exempt from all or part of the terms of the supervisory regime certain entities or classes of entities in instances where the bank is satisfied that their regulation is not prudentially necessary. This provision is designed to avoid circumstances where the application of the supervisory regime would have unwanted consequences. An example of the type of instance envisaged is that many banks engaged in the provision of custodial services, sometimes acting on behalf of other financial or credit institutions would entail the handling of securities. It is clear these services should not be regarded as a security settlement system for the purposes of the Bill and this provision would allow the Central Bank to exempt such services from the regulatory ambit of the Bill.
Another example is where one bank undertakes credit card transaction processing facilities for another. Such a bilateral arrangement would not be subject to the terms of the Bill.
I am advised these are specific issues that the IBF raised in their communications with the Department.
They may have raised the issues but I do not fully understand the import of the amendment. The banking institutions may well be looking after themselves but where does the consumer figure? If I understand what the Minister of State is saying particularly in regard to credit card transactions, this arrangement may suit the IBF members. Why load down certain regulations to accommodate transactions which should have the full regulatory system applied to them? The Minister of State in effect is saying that for certain transactions it will be possible to set aside the regulations. I am not satisfied with the answer. That seems to be an avoidance of the system rather than a simplification of it.
It is really to exclude bilateral arrangements which I am advised will not effect the consumers' rights because their contract will be with the parent bank.
Take on the logic of it.
I am trying to understand how the customer could be disadvantaged.
I picked up on the point the Minister of State made about credit cards. Why would one want to set aside some of the regulatory provisions of the system for certain aspects of its operation? I do not see why that is necessary. Does that not create concern about the system if something goes wrong? If something goes wrong can somebody say the regulations did not apply under this section?
Apparently, there is no risk to the customer in terms of the exclusion we are talking about. If all of these bilateral arrangements were included, there would be extra costs which would be borne by the customer.
There is a risk to the customer if something goes wrong in the relationship with the bank and it is the bank that is being excluded from operating certain provisions under this Bill.
All banks, even those operating a bilateral arrangement, are already being regulated.
Why do we need this amendment, therefore?
Is the Deputy asking why it should be stated at all?
Yes. It is necessary to stand back from all the lobbying of vested interests. This may well be correct, but I want the explanation of it.
Without this amendment an extra layer of regulation would have to be applied to all of these arrangements. This amendment makes the point that this is not necessary. All the banks and institutions are regulated — there is no risk to the customer. Introducing another layer of regulation on bilateral arrangements would be unnecessary and would result in extra costs being passed on to the customer.
The Minister of State is saying derogations exist within the system as a matter of course?
Only for bilateral arrangements. Every institution is already regulated.
I accept that. We have seen many examples of regulated institutions going to the wall. I am asking for an explanation of the necessity for the derogation. If there is a set of rules, one should abide by them. Why is it necessary to derogate from certain aspects of the rules?
We are talking about payment systems, not specifically banks. The reason for this amendment is that on a strict reading of the Bill as it stands it could be interpreted as requiring another layer of regulation. It is unnecessary and there is no risk to the customer. Absence of derogation under these bilateral arrangements would involve extra cost.
This was not in the Bill when it was published so it was obviously considered unnecessary. The Minister said there was IBF lobbying for the insertion of this section. The effect of this amendment is to create a derogation for members of the IBF from certain regulations. Why?
The Deputy rightly says this was not originally in the Bill. An identical system for payment systems was included in the original heads of the Bill submitted to the parliamentary draftsman. On 14 August 1996 he stamped the provision and it was inadvertently overlooked in the subsequent processing of the Bill prior to publication. It is a tidying up measure that should have been in the original publication. This amendment will reintroduce the provision in accordance with the Government's original intention. I did not necessarily want to drag in a third party. It was a human error.
I was not trying to embarrass anybody.
It is obvious that if the Minister of State keeps going on like that, people will know what happens in the Department of Finance. This could bring down the country.
I thank the Deputy for the compliment.
Amendment agreed to.
Section 17 agreed to.