National Asset Management Agency Bill 2009: Committee Stage (Resumed).

SECTION 19.

The purpose of the meeting is to consider the National Asset Management Agency Bill 2009. Proceedings will be suspended at 1 p.m. and reconvened at 2 p.m. I welcome the Minister for Finance, Deputy Brian Lenihan. I remind members that all mobile telephones must be switched off.

Amendments Nos. 54, 72, 82 and 88 are related to amendment No. 50 and will be discussed together.

I move amendment No. 50:

In page 30, subsection (3), line 27, to delete "representative" and substitute "member".

This is a technical amendment to change the word "representative" to ensure consistency. As for amendment No. 54, section 25(5) allows the Minister to nominate a person to fill a vacancy in the chair if it arises. There is a technically incorrect reference as a consequence of section 25(7) and it needs adaptation.

Amendment No. 74 is a minor technical amendment for clarification purposes. Section 38 provides for the removal of the CEO from office. Amendment No. 82 is also a minor technical amendment to section 41 for clarification purposes.

Although grouped with the others, amendment No. 88 is not a technical amendment and is designed to give certainty to NAMA and the taxpayer by specifying in the legislation the maximum amount of subordinated debt securities that can be issued by NAMA in consideration for the acquisition of bank assets. That maximum is to be 5% of the amount of the consideration paid for the bank assets. A balance must be struck between maximising the amount of risk shared and helping the economy by putting the financial system on track. Subordinated bonds are a method of sharing the risk associated with NAMA. They put the banks at risk if NAMA is to lose money, which is not our expectation, without giving them an upside on the gains. It is important that we clarify the amount of subordinated debt not just as a matter of public interest or knowledge, but as a matter of certainty in the markets. According to the accountancy advice available to the Government, there is an issue about going beyond 5%.

When people heard about the 50:50 sharing of risk stridently announced by the Green Party, they felt that the Government was having a rethink about setting a long-term economic value and paying in excess for the assets. People were dismayed to discover that, when the details emerged, the Minister was capping the amount of subordinated bonds at 5%. I do not understand the basis for the 5% figure. The Minister refers to mysterious advice. If risk is shared, as was implicit in the proposal that seemed to have Government support, one leaves some of the risk on the banks' balance sheets and the Government might find itself in a position where it must take an increased shareholding. The exchange is that the Government has more of the upside while the shareholders or bondholders holding the subordinated part have more risk in NAMA. That was my understanding of what the Green Party was advocating and the direction of Government thinking.

In effect, the 50:50 split was a way of not paying the €7 billion long-term economic value, cutting it down substantially while having to recapitalise and taking a bigger share of the banks. In return, there would be a fairer arrangement of risk sharing, with the taxpayer having a large shareholding in the cleansed bank and the shareholders in the bank having a greater stake in NAMA. If it did not go well, they would get nothing back on these subordinated bonds. This seemed a sensible development in Government thinking, but it came to an abrupt end when we saw the detail and found that subordinated bonds were capped at 5% of the €54 billion.

The advice about 5% must be exposed. Even if it was true that some group of accountants would ignore subordinated bonds of less than €2.7 billion but would have a canary if it was more than this figure, this was an attempt to share the risk more fairly. People would feel more comfortable with what the Green Party was advocating, a 50:50 share of the risk.

This would have gained more political support for the NAMA process. The Minister must be more explicit on why he feels a greater element of the subordinated bonds is not justified. Professor Honohan, who is now Governor of the Central Bank, was very clear in his advice to the Government before his appointment. He suggested the Government should pay a conservative price for the assets and, in return, it should take a more substantial shareholding in the banks and provide a substantial shareholding for the banks and their bondholders in NAMA. That would have had a number of advantages by making NAMA less of a public bureaucracy that must be overseen. It would be a joint venture with private interests having skin in the game. This would have helped NAMA in many ways. Asset recovery by bureaucracies or state-run entities have not been successful. Numerous cases illustrate that the political elements succeed in subverting the original intentions of the asset recovery entity and it becomes soft on asset recovery. This resulted in a state not recouping what had been hoped from the exercise. Numerous examples from the IMF report on the subject back this up.

The Minister must explain more thoroughly why he did not adopt either a greater amount of subordinated bonds in his model or the model proposed by the then professor of international financial economics in Trinity College and now Governor of the Central Bank. This had wide appeal and, for the first time, was bridging something of the difference between the solutions on either side of this House. Professor Honohan's model seemed to have the benefit of many people's thinking and I was disappointed to see the puny outcome of the consideration by the Government of this model.

We will have an opportunity to discuss valuation methodology later but we will take that specific issue at this point. Deputy Bruton has raised a number of questions that I wish to reply to. The Government accepted Professor Honohan's proposal, save in one respect. What we did not accept is giving shares in NAMA to the banks.

That is not what he proposed.

It is what he proposed, Deputy. We will not make progress in this debate if we keep denying this.

It was to the shareholders rather than the bank.

Yes, but it could have been done either way.

That is a major difference.

I accept that point but it was open to the other approach as well.

No, Professor Honohan's model was specific.

When he engages in discussions on these matters, Professor Honohan is considerably more sophisticated than in the approach in public debate. That must be recognised. His proposal was, as Deputy O'Donnell says, that shareholders in the banks could be given shares in NAMA, which means that if it made a profit they would share in the upswing of NAMA. That is not risk sharing; it is the State giving a benefit to a group of private shareholders out of legislation enacted for public purposes.

One way of strengthening the proposal is to give the shares to the banks. This would create an incentive to the banks' employees, as distinct from shareholders, to work out the loans in an efficient way and to recoup some of the profit from NAMA for the bank. I set my face against that aspect of his proposals because, with the sovereign having to intervene and take the steps we must take, if there is a profit from NAMA it should accrue to the taxpayer, not to bank shareholders or banks directly. That was the view I took on that aspect of Professor Honohan's proposal.

I examined the proposal with great care because anything Professor Honohan proposes must be considered. It would have made the spectrum of risk sharing look wider because, instead of the 5% at one end, we would have 5% at the other end. One could represent it as a 10% spectrum of risk sharing but the reality is that half of the proposal was to give an upswing to the banks or, in his proposal, their shareholders in the success of NAMA. I did not agree with that proposal and I do not believe we should agree with it. It was put forward in good faith and I considered it carefully but in my view if there is a profit——

The Minister is distorting it.

No, I am not distorting it.

Deal with the side of NAMA that——

I had the benefit of considerable——

Will the Minister yield?

——discussion with Professor Honohan——

I will allow Deputy Bruton to come in again later.

Will the Minister yield to allow me to make a point?

I will in a moment, I want to go through the proposal. I am only starting on this subject.

The moment will have gone.

Fair enough, what is the point Deputy Bruton wants to make?

I call Deputy Burton.

I have not replied yet.

The Minister is distorting the model offered by Professor Honohan, who very clearly saw that the Government would pay less for the assets it acquired from the banks. The Minister would save approximately €7 billion as although he would be putting that amount into the banks he would have additional shareholding in the banks. For the same amount of money, the Government would have an additional amount of shareholding in the banks. The Minister is totally disregarding that and pretending that——

I am not disregarding that.

——Professor Honohan's proposal——

I understand Deputy Bruton's point.

——was about giving profit opportunity to the banks. It was a fair exchange that would have made it much more equitable.

Professor Honohan never expressed a final opinion on valuation other than the opinion he expressed as governor, with the outgoing governor, that the particular formula adopted by the Government on the long-term economic value was not disproportionate. That is his stated opinion on the issue. I will not second guess him on valuations. I am simply drawing attention to the fact that inherent in the structure of what was proposed at that stage was the idea that a bank should share in the upswing in NAMA and I am simply stating that I decided not to follow that route.

Yes, that would have happened because the Minister would have had a bigger shareholding in the bank.

I did not interrupt Deputy Bruton and I am entitled to reply to the questions he raised this morning.

The Minister is missing the point.

No, I am not missing the point.

The Minister is missing the point.

Deputy O'Donnell is out of order.

Another aspect is the question of preferential debt and this is at the heart of most of the questions asked by Deputy Bruton this morning. The Government accepted Professor Honohan's proposal on subordinated debt and ensuring that some of the bonds issued would be subordinated debt. However, a number of important points have been entirely overlooked in the debate about this. The bonds issued to the banks for the banks' assets will carry 0.5% above the Euribor rate, which at present is 1.5%. If subordinated debt is issued it must carry a much higher rate of interest, or coupon, in the order of between 5% and 7% because that is the commercial nature of the transaction. As we all know from our extensive discussions during the year, subordinated debt is debt which is at risk. Nobody advances a principal sum without taking a substantial coupon for the risk inherent in the advance of the sum on a subordinated basis.

For the purposes of the argument, were the State to decide that half the bond issue should be in the form of subordinated debt, the consequence would follow that NAMA would be crippled with huge interest bills because the interest coupon which subordinated debt carries is way in excess of 0.5% above the Euribor rate. By definition, because it is at risk debt it must carry a large coupon. The subordinated debt that will issue under the 5% rubric will carry such a coupon in accordance with current market expectations. I am not fixing the exact amount here today but it will be in the order of 5% or 7%, give or take some percentiles, because that is the nature of subordinated debt.

The idea that subordinated debt is somehow intrinsically superior to the type of debt that we will issue on foot of these bonds is incorrect. In terms of the business plan and the performance of NAMA, the issue of a large quantity of subordinated debt would cripple NAMA with very extensive interest obligations in the event that the assets perform and would cause considerable difficulties for it. That is the reason in principle that one cannot have an excessive reliance on subordinated debt. Of course, one can have some reliance on it. It was an extremely good idea of Professor Honohan's and I was always open to it.

Last March, I explored and mentioned the possibility of share warrants as an option. In the end, we settled on subordinated debt because having issued subordinated debt NAMA can withhold payment of coupon if there is a depreciation in the asset value and can withhold the payment of the principal sum at the end of the term if there is a substantial depreciation in asset values. Equally, were NAMA to perform, subordinated debt would carry interest at a relatively high coupon. That is how subordinated debt works. It provides an incentive for the banks to perform and that is a very important issue in the context of the working-out of the loans. They have every incentive to work out the loans because by doing so they can earn more money from the coupon and ultimate principal sum that will be payable. That is how it is being structured.

There is an important technical issue, which Deputy Bruton touched on. The general rule when valuing equity investments, for example a straight-forward ordinary share, is to value it on a mark to market basis. It is valued as it is in the market because the share is traded in the market. With an ordinary share, market valuation takes place on whatever it is quoted in the Stock Exchange. However, in the case of the six-month treasury bills which are the nature of the bonds which we will issue as consideration for the assets, it is not mark to market and carries the full-face value as an asset of the bank. In accountancy practice, if subordinated debt is well in excess of 5% of the total consideration it is mark to market and treated as an ordinary share. Therefore, its hazardous character means it can be traded on the market and marked to a substantially reduced price. That would mean it would not amount to compensation for the banks and one would still have to pay the additional money depending on the appropriate level of compensation for the assets that one acquires. There are powerful technical reasons that one cannot exceed this 5% limit in the case of subordinated debt and that is the clear accountancy advice which the Government received on this matter.

One can get a senior counsel to argue any side of the coin because I recall——

I will take that as a compliment.

——the same Minister running into the House on the night of the guarantee and including in that guarantee these very risky subordinated debts for which he just told us very eloquently and in his inimitable way the bond holders get their return at higher rates because they are bearing the risk.

Not all subordinated debt.

I am not a senior counsel but I recognise——

The Deputy can read.

——different arguments.

Dated subordinated debt.

I hear the Minister's plea on behalf of subordinated debt. I am amazed that the same level of insight was not available to the Minister on the night of the guarantee. We have never received an explanation as to who were the holders of the tier 1 dated subordinated debt that was included in the guarantee. The Minister responded to me that with the markets it is impossible to know where, how and by whom they would be held. I find intriguing that when it comes to this side of the argument the Minister has one take on it but when it came to the guarantee he had apparently no knowledge that this subordinated debt was the highly risky stuff that was expected to fend for itself when the risk came home. Clearly, the Minister can have his cake and eat it when he has a NAMA cake mix, which is what we have.

Let us get real on this. Some 13 months ago the Minister told us that our banks uniquely had weathered this storm and that we were in a zone of financial stability in a very troubled world. Two weeks later he told us that we had the cheapest bailout in the world so far——

——and a week later he told us that it was not the function of the Government to fund or bail out the banks. More recently he told the Fianna Fáil Ard-Fheis, no doubt to cheers, that Ireland would be the first out of recession.

We are not discussing the Fianna Fáil Ard-Fheis. Will the Deputy please stick to the amendment?

It might be no harm.

I welcome Deputy McCormack. It is nice of him to attend.

The Minister has just given us a tour de force argument——

There must be a morning outing.

——on his take on subordinated debt and the 5%. Let us get real.

Professor Honohan has carried out studies on bank collapses around the world on which he has published extensively. That was one of the reasons I welcomed his appointment as Governor of the Central Bank of Ireland. However, he has pointed out that one of the cornerstones to recovery is transparency. The critical issue about transparency here is that the subordinated debt in this particular package is a fig leaf to hide the blushes of the Green Party on the renegotiation of a package and a programme for Government over which it had precious little input. Professor Honohan spoke about transparency being the hallmark. In effect, this proposal in regard to the subordinated debt, as the Minister suggested, must be seen in the context of the overall one.

The Minister proposes to take and value debt at way above its price, and I hope we will discuss this shortly. A leading expert on property in Ireland over the years, Mr. Fagan, wrote a column in this morning's edition of The Irish Times. The headline reads: “Capital values down 53% from peak”. That refers to prime property in the Dublin area not fields around Longford which were over-zoned. The Minister proposes to overpay for the distressed loans by a very considerable factor. As part of the fig leaf for that overpayment, he suggests that some of the bonds would be issued in the form in which they are being issued so as to suggest a notion of risk sharing. Risk sharing is an entirely different concept from the way he is approaching it. The Minister’s provision of a bad bank mechanism is a bailout mechanism for the banks and the property developers who have given collateral for the loans.

We want to test the quality of the bailout. Since the Minister is the onein situ, he is dramatically overpaying for the value of the distressed loans. He is doing so in the hope that it will raise bank share prices, which it is not doing at the moment because the bond markets and others who assess this, including the latest development yesterday on the SPV, see through the structure of the system. People in the financial markets spend a few minutes looking at Ireland and at this deal and they price it based on the level of information available.

As part of the overpayment structure, the Minister is including a percentage of this type of debt. Yesterday, the SPV was a flip in terms of the structure he previously described for NAMA. The 5% subordinated debt is another flip in the structure of the total which will be paid by Government, NAMA and now the SPV for the distressed assets. The Minister is suggesting that it therefore constitutes a form of risk sharing.

I agree with the previous speaker who said Professor Honohan's original comments on this suggested finding a mechanism for risk sharing which shifted the sharing of the risk very strongly into the court of the banks, the investors and the bond holders in order to encourage them, as far as possible, to put their own houses in order. The structure the Minister set up is designed to rescue them, take their bad debts at an overvalued market rate, give them Government bonds and let the Irish taxpayer take the €54 billion hit allied to Irish Government debt.

It is off the balance sheet as per the EU, which is fine. I accept that is what the Minister wanted and what Opposition parties would have wanted as well. That is a technical issue but it does not mean that the bond markets do not price that into their take on Irish Government debt and Irish banks.

The Minister has failed to convince me in any way that this subordinated debt provides any serious level of encouragement to the banks to work their backs off to work out these loans and get the maximum back for the Irish taxpayers who are ultimately taking the hit for the €54 billion debt being issued in their names.

This was a political deal worked out between the Minister's party and the Green Party. It gave the Green Party something to talk about at its conference. I have no doubt——

The Deputy should talk about the subject and not the political parties.

I am sorry. I should not mention party conferences. However, the origin of this amendment is in a party conference and subsequent discussions between the Government partners.

The Minister has not produced one argument in defence of this particular structure because the key thing it lacks is an incentivisation. What he needs to do is to incentivise the banks big time to clean up the mess they made. The nurse, the fireman and the doctor who face wage cuts, along with Members of the Oireachtas, did not, as they keep saying correctly, create the risky behaviour and so on in which the banks indulged. Instead of using a carrot and stick, the Minister's approach to the banks is all carrot and no stick. If he was at a fence feeding a carrot to a horse, the horse would have eaten right up to his elbow by this stage because he seems to have no sense of how to address the banks and try to force them to do the work out they should do.

I refer to the technical amendment the Minister has tabled. He should not expect us to believe this is some kind of risk sharing. Professor Honohan appeared before the committee and also wrote a number of articles in which he set out his concept of risk sharing which was drawn from his experience of crashes around the world and primarily based on incentivising the banks to work as hard as possible to clean up their balance sheets. That is not what we are doing. We are lifting toxic debt off their balance sheets. In return, we are giving them Government bonds. They can go to the ECB with the bulk of those bonds — 95% — and use them. The Minister has still not told us if he has a gentleman's agreement with them that they will not sell them all in one fell swoop. Some time later, as we approach the end of the ten year period, they will have their subordinated debt or perhaps by then, they will have sold it in the secondary markets. Will there be a restriction on them doing so or are they free to do so? Will they hold it on their balance sheets? What does the Minister anticipate they will do with the subordinated debt?

For instance, if a foreign bank buys a share in one of our banks — it has been mooted on several occasions that Canadian banks might take a significant interest in Allied Irish Banks or one of the other large Irish banks — what would a new owner or a significant new stakeholder do with subordinated debt on the balance sheet? Does the Minister have a view on that? Does he have a gentlemen's agreement with the banks about what might happen?

Will the Minister deal with the issue of the maximum subordinated debt of 5%, or €2.7 billion? He might give us a detailed explanation as to why, in terms of the accounting rules, it cannot be higher than 5%.

The Minister has missed the point about the Honohan model. Under the Minister's model, the taxpayer can gain only if NAMA makes a profit. Under the Honohan model, at least there was proper risk sharing in that if NAMA made a profit the taxpayer would gain, while if the banks did well the taxpayer would gain through his or her shareholding in the banks. Equally, under this model, if NAMA made a loss it would be shared with the shareholders and bond-holders in the banks. Thus, proper risk sharing would have taken place. In the Minister's proposal, there is no risk sharing with bond-holders or with the banks or their shareholders. The taxpayer is taking on toxic assets at €7 billion above their market value and, for that, we have €2.7 billion of subordinated debt. Can the Minister give us a valid explanation as to why he is putting the figure of 5% into the legislation?

I gave the explanation earlier.

The Minister did not.

Deputies

He did not.

There are two reasons.

The Minister spoke about the word——

The Deputy has asked the question and the Minister can answer it later.

I want to elaborate on the question as it is important. The Minister mentioned the accounting rules, on which I ask him to elaborate. These loans are being bought at €7 billion more than their market value, and €2.7 billion of that is subordinated. Will the ECB accept these subordinated bonds by way of security for putting money into the banks? Can the subordinated debt be traded on the open market? Does the Minister anticipate the subordinated debt will be repaid? Could we have a situation in which NAMA makes a loss and the subordinated debt will have to be repaid because of the way the markets operate? I would like the Minister to tell us this. There may be an understanding in markets worldwide that if this subordinated debt can be traded on the open market, the Government will repay regardless of the circumstances.

The Minister might elaborate on the reason he is specifying 5% and on the specific details for which I asked. He is misrepresenting the Honohan model as it was originally enunciated.

Like my colleague, Deputy O'Donnell, and most ordinary citizens, I was astounded when it was announced that the bond-holders would take only 5% of the risk in NAMA, although we had been led to believe the risk would be split 50:50 between the taxpayer and the bond-holders. There is a big difference between 5% risk and 50% risk. I do not think the Minister has satisfactorily answered the question of why he settled for 5%. Why could the bond-holders not have taken 10%, 15%, 20% or even 30% of the risk so that the taxpayer would not have to take an unjust 95%?

Everybody is being far too hard on the Minister. I congratulate him on a job exceptionally well done. I am not referring to his negotiations with the banks because that was a total walkover by the banks. It was 100-nil to the banks in that case.

There were no negotiations with the banks.

I congratulate the Minister on a job well done——

I am sorry, but there were no negotiations with the banks.

Of course the banks were negotiating with the Minister.

There were no negotiations.

I congratulate the Minister on his total walkover of the Green Party members, who proclaimed publicly they were supporting a 50:50 division of the risk, and got their day in the sun.

To which amendment is the Deputy referring?

This is completely relevant to these amendments. The Green Party members had their day in the sun, proclaiming the 50:50 division as a huge victory.

(Interruptions).

Yet within hours of that we know they settled for 5%.

I ask the Deputy to speak on the amendment.

It was akin to the programme for Government negotiations, whose outcome we have seen. The 5% maximum risk in terms of subordinated debt is nothing short of scandalous. Everything about this NAMA Bill is scandalous; the draft business plan with which we were presented is not worth the paper it is written on——

What is the Deputy's proposal?

There is a dangerous species over there.

——because the SPV will do the business.

What is the Deputy's proposal?

Is Deputy Cuffe happy with the 5%?

Our proposal is to deal directly with it — to nationalise the two main banks that really are of systemic importance.

That would get lending going again.

It is not to do what the Green Party has done, which was to nationalise Anglo Irish Bank. I thought it would have known better or had some principles, rather than carrying out an action such as that which has burdened the taxpayer. Shame on the Green Party for doing so.

After nationalisation, what would happen?

In that way we would ensure——

Deputy Morgan.

——that the situation is stabilised quickly and that SMEs get their funding stream.

How would Sinn Féin do that?

We would not do what the Green Party has done.

What magic wand would it use?

There is to be no discussion across the floor, please.

The Green Party members are alive and well.

I ask Deputy Morgan to speak on the amendment.

It is only fair that I should reply to the Deputy. He is clearly not following the debate if he does not know the Opposition's proposals.

Does the Deputy have a point to make for the Minister?

There are green shoots appearing over there.

They are very low green shoots. We have a long time to wait before some backbone comes into them.

It sounds like a magic wand from this side of the Chamber.

I agree with what Deputy Bruton said. The Minister is distorting the Honohan amendment, as it was called. It would be interesting, on Report Stage, to give him another opportunity to consider that amendment as it was proposed by Professor Honohan. I am giving notice that I will bring back that as a Report Stage amendment. Perhaps the Minister will accept it at that point.

As we are discussing amendment No. 88, I will move on to amendment No. 87. As there is much public interest in this debate on Committee Stage, it would be valuable if the Minister went through the chain of risk and benefit. I heard what he said yesterday and again this morning. It is difficult, given that NAMA probably will be passed, not to reach the conclusion that the quicker we get to equity the better, in the public interest.

I have listened to the contributions this morning and there is a reason we must have absolute clarity now. Reference has been made to Professor Honohan and others; their contribution — the part that is held in common by qualified independent commentators — is that the Minister should pay a prudent price for toxic assets, ensure maximum transparency and provide as much clarity as possible. They also mention, as a fourth point, that we should have a significant clean-out among the people who are taking administrative decisions. That is what is there in print.

I presume that when we come to amendment No. 87 the Deputy will not repeat what he is saying now.

Deputies

Never.

He never repeats himself.

Not at all. I will strive to be as original as the Minister.

The Deputy does not take his cue from the Minister at any other time so I do not think he should do so now.

I am sticking entirely to what I have just had presented to me. I can make it brief and clear.

It would be valuable if we had a reprise of where the risk and benefit arise for the different categories of participant. For example, the word "performance" is used; I have a difficulty with that. A subordinated debt that is covered by a guarantee is almost a contradiction in terms. How does one calculate the risk in subordinated debt that is covered by a guarantee?

It is not covered by any guarantee.

If there is a difficulty in defining this, how can the Minister then postulate what is the appropriate benefit? The Minister arrives at 5%——

At this stage I must point out that subordinated debt does not come into any of these amendments.

I am really replying to——

The Minister raised it.

This subordinated debt is not covered by any guarantee.

I am coming to the point. This is why the Minister should take the opportunity to clarify all of this. I am trying to deal with what the Minister has said.

We will deal with that under amendment No. 87.

Perhaps the Chairman has discovered a disciplinary tendency with regard to me that was not there with regard to the Minister. However, we will move on.

If I am to interpret what has been said thus far regarding risk sharing, the benefits for the public, such as they will be, begin at the point of termination. As we were discussing the amendment yesterday evening, qualifications began to arise. The SPV, for example, was to pay annual dividends as well a possible dividend on its termination. The putative benefit to the public became increasingly conditional as bits and pieces were split off to various parties. Perhaps it is simple minded of me to ask who is taking the risk.

We cannot have a Second Stage debate. People are not addressing the four amendments in the group.

Does the Chairman mean people in general or just the current speaker?

Amendment No. 87 deals with the matters raised by the Deputy.

To save time, I will make my remarks when we discuss the section.

We are not discussing the section.

I was only replying to what was said by others. Several speakers referred to Professor Honohan's views on valuation.

That does not mean they were correct to do so.

I am simply responding to the Minister. I am trying to be positive about this.

The Deputy will get an opportunity to speak on that subject when we reach amendment No. 87.

Why did the Chairman not say that to anyone else?

I would be delighted to co-operate with the Chairman. I will make my points when we discuss amendment No. 87.

The Chairman permitted the Minister to make a lengthy intervention.

He can look forward to my comments on amendment No. 87.

Thank you, Deputy.

I wish to address amendment No. 88, which pertains to subordinated debt.

It does not.

It does. It amends section 47.

If the Deputy reads the amendment he will see to what it pertains.

With all due respect, the Minister——

With all due respect, it does not.

——in his initial contribution noted that it relates to subordinated debt. Section 47 specifically deals with subordinated debt. Amendment No. 88 proposes to delete subsection (6), which refers to subsection (5).

Amendment No. 87 deals with the subject to which the Deputy refers.

Amendment No. 88 proposes to delete section 47(6).

It is about the order which the Minister will make on subordinated debt.

Subsection (6) relates to subsection (5), which states "The total amount of subordinated debt securities issued under this section shall not exceed a percentage of the aggregate total portfolio acquisition value specified by the Minister by order." I want to speak to amendment No. 88 and the issue of subordinated debt.

The Minister has stated that his intention is to create an incentive for the banks to clean up their balance sheets. I question the feasibility of that for several reasons. The redemption value of the subordinated debt——

We are not discussing that issue now. We will discuss it in the context of amendment No. 87.

I have explained why we are discussing it.

I have explained to the Deputy where we stand.

The Minister in his initial contribution——

We are speaking to the group.

We are not speaking to the group.

My contributions thus far have been brief.

We are speaking according to how Standing Orders apply to our business.

I will not continue for ages. Other Deputies have already addressed the issue of subordinated debt.

The Deputy is not speaking on the issue.

I will only require two minutes to make a couple of points.

The Deputy may make his intervention under amendment No. 87.

As I have explained——

He is not running the order of business for this committee.

On a point of order——

There is no point of order.

In his initial contribution, the Minister spoke about subordinated debt.

He should not have done so.

Perhaps he will assist us in clarifying the matter. Section 47, which amendment No. 88 proposes to amend——

Section 47 is not currently up for discussion.

It is, actually. Amendment No. 88 amends section 47.

Amendment No. 88 is a specific amendment.

To what section does it pertain?

Section 47.

What does section 47 deal with?

We will not discuss it now.

I ask the Chairman to read the section for me.

I am ruling that the Deputy is not dealing with the matter.

I am asking for a ruling.

I have made a ruling.

What does section 47 deal with?

The Deputy is dealing with amendment No. 88, which is a specific amendment.

It amends section 47.

What is the title of section 47?

It deals with subordinated debt.

The Deputy may not speak to the section.

I am not speaking to the section.

It proposes to delete the publication requirements regarding dated subordinated debt. It is about subordinated debt, therefore.

Subsections (5) and (6) are related.

The Minister said that at the outset.

It is not dated. It is subordinated debt.

It is about dated subordinated debt.

It is not dated.

Deputy Naughten may speak on the amendment.

On a point of order, the two amendments are clearly linked. Amendment No. 87 puts in 5%.

Amendment No. 87 is not being moved.

Amendment No. 88 provides that as the 5% has been put in, the Minister will not submit an order on subordinated debt.

Amendment No. 88 is a technical amendment.

It refers to amendment No. 87. They are linked.

They are not to be discussed together.

On a point of order, I propose that we amend the order to include amendments Nos. 87 and 88. That would provide for a logical debate on what the Minister has said and the contents of the amendments.

If we do that——

If members agree, amendment No. 88 can be taken out of the grouping.

I am not agreeing with the proposal because it appears to me these matters should be considered in the context of the valuation methodology. We have not yet completed our debate on the amendments pertaining to corporate governance. We are now skipping ahead to valuation, which I am aware Opposition Deputies are anxious to discuss.

That is the grouping.

Deputies will see the difficulty. We will return to valuation later.

Why were they grouped in that manner?

I strongly suggest that as we are in the middle of it——

Deputy Burton has proposed that we remove amendment No. 88 from this grouping and discuss it with amendment No. 87.

We have already discussed it at length.

Is that agreed? Agreed.

On the issue of the 5% limit——

That will be discussed under amendments Nos. 87 and 88.

There is one rule for some and another for others.

Some make the rules up as they go along.

The Deputy would know all about that.

We can discuss the matter when we come to the next amendment.

We have just had a lengthy conversation on it.

They have changed the rules.

The Minister made the critical comment that subordinated debt could not be increased above 5% because that would cripple NAMA.

We will discuss subordinated debt with amendments Nos. 87 and 88.

He wants to address the point.

He stated that the interest rate would be so high that it would cripple NAMA.

The Deputy can address that point when we discuss the amendments.

That is what he said.

Deputy Lee will get another opportunity to discuss the issue.

I wish to respond to a telling comment by the Minister.

I will not allow the Minister to reply to those questions at this point because we will return to them later.

He wants to reply.

We are discussing amendments Nos. 50, 54, 74 and 82.

It is a critical issue and the Minister has indicated that he is willing to hear what I have to say.

I am responding to the Minister's comments on the amendments in this group.

He is entitled to do so.

He stated it is critical that we do not have a high interest rate of more than 5% on the bonds issued by NAMA because anything higher than that would cripple it. My difficulty with his statement is that NAMA is based on borrowing the vast majority of its money at 0.5% above ECB rates.

Above Euribor rates. They are similar.

They will be reset every six months. We all know these interest rates will go up, in which case the vast majority of the loans will incur high rates.

They will. If the bonds——

Having discussed this matter, we will now dispose of it and move on.

I am responding to the Minister's comments. If 5% of the loans are at a high interest rate, it will cripple NAMA——

I ask the Minister to reply.

——and the economics of the matter are highly suspect——

I am surprised that the Deputy is causing such disorder.

——because the vast majority of the interest rate will increase. The difficulty is the Minister is making it up as he goes along.

We are dealing with four technical amendments. I ask the Minister to reply before I put the amendment to the House.

The difficulty with this is that in response to what the Minister stated——

I ask the Chairman to make a clear statement about what we are discussing. This ridiculous gabble has been going on for some 12 minutes.

As I have stated time and again, we are discussing four technical amendments, namely, amendments Nos. 50, 54, 72 and 82. I ask the Minister to reply.

Deputy Lee made a substantive comment on one of the technical amendments in reply to my point that subordinated debt would obviously carry a variable interest rate. Deputy Terence Flanagan indicated that half the debt should be issued in subordinated form and my point was that if one was to do that, NAMA would have very high interest payments to pay in respect of the subordinated debt for the future.

The Chairman did not prevent the Minister from referring to subordinated debt. Is he deaf in his left ear?

In the event of NAMA performing, the interest rates would be very high because subordinated debt, as Deputy Burton graciously acknowledged in starting the discussion on this topic, is subject to a much higher rate of interest.

I ask the Minister to speak only to the technical issues.

The principal bonds which are about to be issued will be issued at 0.5% above the Euribor rate. Deputy Lee pointed out that the underlying securities that NAMA is acquiring will be affected. Those interest rates will rise as well in line with the Euribor rate. As such, the amount that can be gathered in will rise in terms of what we will, for current purposes, term the 1.5% bonds. We are operating in a zone of substantial monetary stability with the European Central Bank. Over time, the historical trend in interest rates has been very low by international comparisons. I do not accept the Deputy's underlying argument that somehow future fluctuations in interest rates endanger NAMA. If the European Central Bank rates were to rise by another 1% or 2% over the next few years, the clear implication would be that the European economy had staged a substantial recovery.

It is outrageous to believe that increasing interest rates would not have a bearing on the economics of NAMA. I heard the Minister state on radio that six-month bonds would be issued. This means they will be reissued every six months at the latest interest rate. If interest rates increase, they affect everything in the economy. The idea NAMA will have more income if interest rates increase misses the point because higher interest rates will strangle the property market. The economics of this are bogus and the whole thing will unravel. The Minister's unwillingness to raise the subordinated debt above 5% puts his finger on the issue. His fear of high interest rates points to the fact that this is a very dodgy plan based on dubious economics and it will collapse. The Minister is making it up as he goes along.

Interest rates will increase in every country in the eurozone.

The European Central Bank has made clear there will be no immediate increases in interest rates.

The bonds are reissued every six months.

(Interruptions).
Amendment put and declared carried.
Section 19, as amended, agreed to.
Section 20 agreed to.
Amendment No. 51 not moved.
Section 21 agreed to.
SECTION 22.
Amendment No. 52 not moved.
Question proposed: "That section 22 stand part of the Bill."

I seek an explanation regarding the wording of paragraph (b). The section states:

22.—(1) An appointed member ceases to be such a member if he or she—

(a) is adjudicated bankrupt,

(b) makes a composition or arrangement with creditors.....

Many people have had a composition or arrangement with their creditors. Does the Minister propose to tighten this provision on Report Stage?

I apologise for interrupting my colleague. Under section 23(1), a person will also be disqualified from membership of a board on the grounds of bankruptcy and, in paragraph (c), of having made “a composition or arrangement with creditors”. What is the great offence in this regard?

I highlight again what has gone wrong with the legislation. We are dealing with the formation of and appointment to the board of the National Asset Management Agency. NAMA has been superseded by the master special purpose vehicle. The note supplied by the Minister yesterday states: "The Master SPV will be run with the objective of making a profit on the purchase and management of the assets it purchases. The profits earned by the SPV will be distributed to the shareholders...." Private investors will own 51% of ordinary equity in the SPV, with NAMA owning the remaining 49%. The SPV will have its own board with members appointed by NAMA and the private sector equity investors. All the relevant provisions refer only to the members appointed by NAMA. The legislation does not refer to the obligations on directors appointed by the private equity investors who own 51% of the company.

While the Deputy may have a point, the section deals with——

I will not permit the Chair to filibuster me. I am speaking to the section.

The section deals with how appointed members cease to hold office.

Yes and I want to know how members appointed to the SPV by the private equity investors can cease to be members of the SPV board.

That is a valid question.

That question is not answered in the section. The members appointed by private equity investors could be anybody, including bankrupts or gangsters. The Minister cannot get away with producing a Bill which hides the fact that he has transferred all responsibility to a company known as the master SPV. NAMA is only a front.

It is a name plate.

I ask the Green Party Deputy present to read the note supplied by the Minister because we have all been fooled. I say this with respect to Deputy Cuffe who was not present yesterday when the note was suddenly produced. The note changes entirely the meaning of that with which we are dealing. We are now dealing with a company known as the master SPV, which will be 51% owned by private investors and 49% owned by NAMA. We do not even know who will own the 51% share.

We are not discussing that matter.

The Minister informed us that this share may be held by pension funds.

The Deputy has asked a question on the section. He may not wander off and pick up what he wishes to——

I am entitled to speak to the section.

The Deputy raised a question but then departed from the issue.

The section does not deal with the directors appointed by the shareholders who own 51% of the special purpose vehicle. Given that the Bill does not include a section dealing with these shareholders, where else can I raise the matter if not during discussion of this section? I want the Minister to be honest with the House and members of the public by informing us that he has suddenly changed the ball game. We are dealing with a different animal altogether. It is a limited company in its own right with a board of directors, shareholders we do not know——

A majority of private shareholders.

——whom we do not know.

——and directors we do not know, and yet they will hold a majority shareholding. We are talking about €54 billion of taxpayers' money at risk. If this House is to do its job properly the Minister should be honest, come in here and say the only way we can deal with this is to set up a different structure from that which he told us about on Second Stage. That is a fact and somebody should stop trying to pull the wool over our eyes and con us. It is stated in black and white in the Minister's memo produced yesterday that it will be run with the objective of making profit on the purchase and management of the assets it purchases.

There is no basis for that.

It goes on to talk about the distribution of dividends. It mentions the dividends. It has no legal basis according to this Bill. It is a separate limited company with a shareholding of €100 million——

How would one earn a dividend?

—— and nobody can tell me what the €100 million will be used for because all of the purchases will be by way of bonds. What is the €100 million for?

How would one earn a dividend?

I have to operate under the orders.

I know the Chair has to.

I have given the Deputy quite a bit of latitude to speak outside this.

No, the Chair has not. We are now dealing with section 22. How can the directors appointed by the private equity investors be covered under this section, because there is no other section to deal with it? This section deals with one aspect of the board of directors.

It is a fair question and I am sure the Minister will reply to the Deputy.

How can we go on dealing with this charade——

That is something the Deputy will have to ask the Minister to reply to.

—— talking about NAMA which no longer exists?

I will ask the Minister to reply to that.

Can the Minister please put this issue to bed? I presume he will have to table an amendment on Report Stage that incorporates this provision in the Bill. Has he committed to doing that? It seems to me it is unconscionable that we should go on, having regard to yesterday's debate on this issue, when the only reasonable conclusion that one could come to is that the Minister will frame an appropriate amendment to incorporate this into the Bill on Report Stage. Is that the case?

Deputy Higgins raised the question of the definition in section 22 of a composition or arrangement with creditors. As I understand it, that is a technical term of art borrowed from the bankruptcy code. It does not mean any arrangement one may make with a creditor. It is a technical composition or arrangement under the bankruptcy code. I will ask the draftsmen to see whether greater precision can be put into that expression.

In proper legislation.

The Minster is not dealing with the question.

I will deal with the Deputy's question. I dealt with it at length yesterday evening.

The Minister did not deal with it.

Deputy, please allow the Minister to reply.

I will deal with it again.

We are not stupid.

One of the difficulties in this debate is that people keep asking the same questions and receiving the same answer.

The Minister is not dealing with it.

(Interruptions).

I explained the position last night and reconfirmed it overnight.

On point of order, I do not mean to be disrespectful to the Minister but he produced a document yesterday which states, in black bold print, that the master SPV will be a separate legal entity and will be jointly owned by private investors who will own 51% of the ordinary equity and by NAMA which will hold the remaining 49% ordinary equity. In black bold print the Minister is telling me this will be a separate legal entity which will be jointly owned——

We had that discussion yesterday.

——by 51% of private investors and there is no provision. The Minister should not try to fool me that——

We had that discussion in detail yesterday. Deputy Barrett has asked several questions of the Minister and I ask him to please allow the Minister to answer,

He told me yesterday that there will be no mention in the legislation of the obligations of the 51% shareholder directors. He did not answer it yesterday.

Deputy Barrett must allow the Minister to answer the questions he has asked.

First of all, I made it clear yesterday that such a vehicle can be created under the Act as it stands. In reply to Deputy Rabbitte, I rechecked the position with the Attorney General last night and he is quite satisfied that the Bill as it stands accommodates this investment vehicle and there is no requirement for any further amendment to the Bill to accommodate it. The Attorney General is quite satisfied on that point.

On Deputy Barrett's question, the crucial point is that a shareholders agreement will be concluded in regard to this investment vehicle. Under that shareholders agreement nothing can be decided upon which frustrates the statutory purpose of the Bill we are discussing.

It is a legal entity in its own right.

Allow the Minister to finish.

I have to take my law from the Attorney General. He tells me this framework is sufficient to accommodate this entity. This entity, as we know from our debate to date, involves the investment of €100 million, €49 million by NAMA and €51 million by a private investor. The figure of €51 million is less than 0.5 of 1% of the total assets with which NAMA is dealing.

It is a majority shareholding in the SPV.

As a result of attracting that majority shareholding in an SPV, which is subject to shareholder agreement and the statutory purposes of this Bill, the entirety of this operation is off balance sheet for Ireland in the Stability and Growth Pact. That is what this all means. Deputy Barrett may shake his head but there are important considerations of national advantage in that.

I am not disputing that. The point is that it is not provided for in this Bill.

Deputy Burton.

I have one follow-up question. Is this an unfair representation of the current status of the Bill? Is NAMA any more than a supervisory board, with the executive board actually the SPV?

Exactly. It is a separate legal entity.

In normal business parlance, is NAMA no more than a supervisory board and the board will actually carry out the executive operational purchase management and disposition of the resources?

That is an unfair characterisation.

I do not mean to be unfair. I am looking for clarity. I am not trying to be unfair. What is wrong with that description?

How is it inaccurate?

How is it inaccurate?

The point is that what is being established here is an investment vehicle and its purpose is to pay a defined profit, which is very carefully defined in the document the Deputy has examined regarding the investors who participate in it. The statutory purposes of NAMA remain inviolate and will be protected in any shareholder agreement in connection with this vehicle.

It is a separate legal entity which can earn dividends.

The Chair has called me.

I am moving the question on section 22 which deals with the appointment of members and how they are to cease to hold office.

On a point of order, the Chair acknowledged me and called me. The Minister went into a detailed discussion on the SPV. We raised this——

We are not having any further discussion on subject matter outside——

On section 22——

The Minister was replying to questions which were being put that I should not have allowed.

On section 22——

We are putting section 22——

——and section 23——

The question is that section 22 stand part of the Bill. Those in favour——

I want to speak on section 22.

The Deputy may speak on section 22.

The Minister has not responded to the announcement and three-page document he brought in after luncheon — as he described it quaintly — yesterday and presented to the Members. The first paragraph says NAMA will arrange and supervise the identification and valuation of property-backed loans on the books of qualifying financial institutions in Ireland, but will delegate the purchase and management of these loans to a separately created SPV. A very valid question has been asked of the Minister. I do not disagree with the Minister's legal advice that the powers the Minister has in the NAMA Bill are so wide-ranging and awesome that NAMA is absolutely entitled to be involved in the creation of vehicles and so on. This vehicle has a particularly important point.

Section 22 deals with——

It is fundamental——

——how appointed members cease to hold office.

Hold it a second.

This vehicle is not——

I am putting the question that section 22 stand part of the Bill.

Allow the Member to speak.

Those in favour say "Tá"——

The Chairman cannot act like a dictator.

——and those against say "Níl".

On a point of order——

You cannot act like a dictator.

We will move to section 23.

On a point of order, a member has been called to speak by the Chairman.

You called me.

She is not speaking to the section.

It is on the subject matter.

I am speaking to the section.

She is not speaking to the subject matter.

In the middle of this the Chairman has looked for a vote.

I am speaking to the section.

I have called several votes.

You are not entitled to do that.

You are not entitled to treat us like schoolchildren.

Is it agreed that section 22 stands part of the Bill?

In section——

Agreed.

The Chairman cannot do that.

The Chairman cannot do this.

This is too serious a matter. This company can be challenged in court. It is a legal entity.

We are moving to section 23.

This is not a dictatorship.

If it endeavours to purchase property, it can be challenged.

Question put and declared carried.
SECTION 23.
Question proposed: "That section 23 stand part of the Bill."

Does the section apply to the SPV?

Does it apply or not?

Those in favour?

This is not right.

Those against?

I will declare that section 23 stands part of the Bill.

I wish to speak to section 22 as well.

I wish to speak on section 22.

The Chairman will get a vote on every section with the way he is operating.

The Deputy is too late.

Question put.
The Committee divided: Tá, 7; Níl 5.

  • Ahern, Michael.
  • Ahern, Noel.
  • Andrews, Chris.
  • Devins, Jimmy.
  • Fahey, Frank.
  • Lenihan, Brian.
  • McGrath, Michael.

Níl

  • Barrett, Seán
  • Bruton, Richard.
  • Burton, Joan.
  • Flanagan, Terence.
  • O’Donnell, Kieran.
Question declared carried.
Sitting suspended at 1 p.m. and resumed at 2.05 p.m.

As we are now in public session, I request that all mobile telephones be switched off. I propose that we break at 4 p.m. for 15 minutes and at 6 p.m. for 30 minutes. Is that agreed? Agreed. We will adjourn at 9 p.m. Is that agreed? Agreed.

Section 24 agreed to.
SECTION 25.
Amendment No. 53 not moved.

I move amendment No. 54:

In page 33, subsection (7), line 35, to delete "undersubsection (5)“ and substitute ”pursuant to subsection (5)”.

Amendment agreed to.
Amendment No. 55 not moved.
Section 25, as amended, agreed to.
Section 26 agreed to.
SECTION 27.
Question proposed: "That section 27 stand part of the Bill."

I could ask whether this will apply to the SPVs board.

The Deputy could.

The grouped document covers it.

This section is on electronic meetings.

Question put and agreed to.
Sections 28 and 29 agreed to.
SECTION 30.
Question proposed: "That section 30 stand part of the Bill."

Do the obligations listed in section 30 fall on any subsidiary bodies associated with the board, for example, the SPV in any of its forms?

We will have to examine that question.

Subsection 30(2) gives the board the capacity to exercise discretion regarding the release in its biannual report of any such disclosures as have been made. How is this discretion to be established?

That is a normal procedure and there is nothing unusual in it.

On the suitability of the members of the SPV for holding office which is related to their disclosure of interests, I know there will be shareholders' agreements in the Minister's vision but will NAMA set suitability criteria for these investors or who will set those criteria? Is it appropriate that those criteria will be set without reference to the Oireachtas?

We can look at the issue of the directors before Report Stage. On the issue of the investors, it is clearly a commercial decision which will have to be made by NAMA.

I am thinking in particular of the directors. We are at pains to ensure the directors are suitable and appropriate and do not have conflicts of interest. We need to have some assurance. I refer to the point made by Deputy Rabbitte. A Report Stage amendment is needed to govern these SPVs in some shape or form, even accepting the Minister's case that they can be shoehorned to fit what is in the legislation. The Oireachtas would want to do more than shoehorn them. It must also be satisfied there is probity and that the actions of the SPV would be in accord with certain standards which would be broader requirements than simply relying on NAMA to interpret the purposes and apply them in some vicarious way to these other people.

I maintain and the Attorney General has advised me that the legislation has capacity to accommodate the SPV. I will examine Deputy Bruton's issue. My intention is to structure all those matters into the shareholder agreement so that there will be an extension of NAMA by analogy.

This section 30 will be very difficult. What we seek from the members of the board of NAMA is transparency and if conflicts of interest exist, they should be clearly stated and obviously avoided. The example that comes to mind is what happened in Anglo Irish Bank. Its relationship with other institutions such as the Dublin docklands authority, seems to have given rise to many inter-related connections, so to speak. There is a difficulty about the Minister's proposal of an SPV. He referred yesterday to a French precedent and to the proposal that the private investors will put up €51million. If each of the banks was to fund a group like the Anglo ten with €5 million or €10 million each this would be permissible within the definition of an SPV. In this situation such people would essentially act as proxies for the banks, particularly the banks involved in the guarantee. This was the kind of arrangement made in Anglo.

This will not be permissible.

It is a completely legitimate scenario——

It would not be permissible.

——of what might happen. There is no point in the Minister shaking his head because I know this can happen. It is a completely legitimate scenario. The issue therefore arises that although as I acknowledged before, the Act gives the Minister very broad powers with regard to any SPVs or subsidiary bodies, it does not put ——

We are talking about disclosure issues, not the SPVs.

——corresponding requirements on those.

I ask the Deputy to address the section.

Section 30 deals with the disclosure of members' interests and it deals with declarations of conflicts of interests and so on. The members of the board will have relatively stringent requirements about declaring conflicts of interest but with regard to the members who take part as private investors or the nominees of the private investors on the SPV board, this legislation will not apply to them unless the Minister brings in a Report Stage amendment which will transfer the obligations about directors' disclosures and so on which are stated in this section, into subsidiary entities or vehicles, whichever are established by the board. We ask for a Report Stage amendment and ask if the Minister is minded to produce such an amendment.

The Minister states that the Attorney General's advice is that the Bill accommodates provision for the SPVs. I am a little sceptical on this point but the Minister could allay my scepticism by pointing out where that accommodation exists in the Bill.

If the Attorney General has confirmed to the Minister that the Bill as it stands is sufficient to create this master SPV, then I accept this is the advice and is the view of the Attorney General. I am puzzled as to why the Minister would resist a simple amendment that would give a manifest statutory basis for this development. The disclosure of interests requirements for NAMA members in the Bill as it stands are very rigid and I do not take issue with them as they seem to be appropriate. However, we do not have any such code in respect of who will be the directors of the SPV. We know the Minister in his briefing note has posited that the members of the NAMA board, all nine of them, may be members of the SPV. I would think this unlikely or if it happens, there will be a very large board, but this is an incidental point.

In terms of the disclosure of interests requirements the action will be at the level of the SPV; the executive operational purchase and management and disposal of assets will be done by the SPV. In this small town I would have thought it would be very prudent to have laid out somewhere the requirements and impositions on directors. I understand the Minister to say he will provide for all of that in the shareholder agreement and he asks us to trust him to do a good job. That may well be the case but I am still puzzled as to why he resists incorporating in the legislation proper an open and transparent amendment, including one that would impose these same conditions on the directors of the SPV. Is it only a power of veto that NAMA will have in terms of the directors? I assume the owners of the private equity can nominate whomsoever they please.

The Minister is saying they will not nominate an estate agent with a manifest interest or a former banker who had to exit the scene in less than glorious circumstances and that they would do nothing so reckless. However, if they put up €51 million they are free to nominate whomsoever they please. The Minister is saying NAMA could veto Mr. X because his track record has either been somewhat deficient, because he may have a conflict of interest or might be perceived as an unsuitable person. Is the only assurance for the House that the Minister will be prescriptive about the matter in the shareholder agreement? What assurance do we have that there will not be people guiding the private vehicle in a manner that might give rise to a conflict of interest?

I echo the comments of other speakers on SPVs. I find the matter difficult to understand. In the handout given by the Minister yesterday he stated that the master SPV would be a separate legal entity to NAMA. Some €49 million of taxpayers' money——

Is the Deputy speaking to the section?

I refer to the disclosure of interests in section 30. The board of——

There is no reference to SPVs in that section.

The matter of disclosure of interest is very relevant for the membership of the board of the SPV. I am seriously concerned that not only the master SPV but the sub SPVs associated with AIB or Bank of Ireland could have nominee directors directly involved with the very same banking institutions. Not only will the banks receive the €54 billion but they will continue to have control over the acquisition, management and disposal of the assets. It is difficult to comprehend why no primary legislation is required for the establishment of the SPV. I expect the Minister will bring such a measure through on Report Stage following due consideration. If the Minister is relying on the existing body of legislation his powers are far too wide to be able to establish an SPV. Given the level of taxpayers' money involved and the implications of NAMA, SPVs should warrant specific reference in primary legislation. The Minister keeps directing us to section 12(2)(r) which refers to borrow, lend, or transfer debt securities, including equity and debt instruments.

The Deputy should keep to the section.

The reference is far too wide.

This discussion is far too wide.

A key worry with section 30 is that there will be not only a master SPV but also satellite or baby SPVs with separate boards nominated by the private shareholders. The Minister still has not answered the question of who these private investors will be. Deputy Rabbitte referred to the possibility of former CEOs with so-called expertise sitting on such boards and having two bites at the cherry. I call on the Minister to address this point.

The description of section 30 refers to disclosure of interests. I am simply thinking out loud but should this not refer to disclosure of interests in the case of an alleged conflict? There does not appear to be reference, in section 30 or anywhere else in the Bill, to a requirement for board members of NAMA to declare their interests. Everyone in the House has a statutory obligation to declare all interests above a certain level. It seems the people who would control €74 billion of Irish liability should have an obligation to disclose all their interests, preferably in public. However, if there was a reason it could not be in public, they should do so at a register available to the chairman and chief executive of NAMA. There should be an absolute obligation included in the legislation such that in the same way as Members of the Oireachtas must declare their assets and interests so should any board members. This would assist with transparency and it would increase public faith in the operations of the board of NAMA. I call on the Minister to consider such an amendment on Report Stage.

I will have Deputy Mulcahy's point examined. Deputy Rabbitte makes a fair point and I will revert to the Attorney General on the question of the corporate governance standards that apply to NAMA. One could analogise them and insert them by analogy into the shareholder agreement. However, it may be necessary to have something stronger and I will examine the matter in the context of this part as a whole, rather than any one part of it and, in particular, the application of it to the group entities envisaged in the definition clause.

Before the Chair proceeds will the Minister point to where specifically in the Bill there is reference to the capacity to deal with SPVs?

We went over this ground yesterday evening. There is the definition of a group entity.

I refer to the matter in a general sense, not specifically.

The matter is not specifically referred to in this section.

Sections 12(2)(r) refers to “borrow, lend or transfer debt securities” and 12(2)(n) refers to “form a NAMA group entity for the purpose of performing any of its functions”. These were the clauses relied upon.

Deputy O'Donnell referred to modules. The spacecraft has €100 million in it but the modules have no money in them. The €100 million is the ceiling. The Deputy referred to——

They would effectively be set up to manage the individual assets of individual institutions.

Not necessarily. They could be set up in another way. That was one suggestion in the document.

The legislation refers to "may create a number of subsidiaries".

We will not have any further discussion on that matter at this stage.

The Minister referred to it.

There will be no further discussion on it.

I am happy to allow the Minister to elaborate on it.

I thank the Deputy but we will move on to the question.

Question put and agreed to.
SECTION 31.
Amendments Nos. 56 and 57 not moved.
Question proposed: "That section 31 stand part of the Bill."

Is the reference to an audit committee the same committee as that to which the Minister suggested Deputies might be added?

I suggested as much but last night Deputy Burton indicated she was not favourably disposed to the amendment.

I envisage difficulties with the suggestion too but is it here?

Question put and agreed to.
SECTION 32.
Amendment No. 58 not moved.
Question proposed: "That section 32 stand part of the Bill."

Section 32 allows the board to establish other committees in which persons who are not members of the NAMA board may participate. Several such committees are referred to in the Bill. Will the Minister enlighten us in this regard? I refer to the valuation group. Will such a committee be a sub-committee of the board? What relationship will the evaluation panel as envisaged in the Bill have to the board structures? In particular, as members now have the statement on the SPV, what relationship will these board sub-committees have to the SPV? The Minister will be able to appoint persons to the sub-committees, presumably at his will or perhaps on the nomination of the chief executive or the board. Effectively, however, a great deal of the board's work could be parcelled out to sub-committees.

What are the Minister's intentions regarding the establishment of sub-committees in respect of the critical issues of the valuation process and the valuations? He already has referred to an audit committee, a credit committee and a risk management committee. The Minister should enlighten members regarding his thinking on these committees. The aforementioned three committees usually exist on most bank boards. Does the Minister intend, particularly in respect of the valuation process, that this would be done directly by the board or via a board sub-committee making recommendations to the board?

The valuations are not done by the board but by valuation experts——

—— who are separate from the board. They are subject to a review process which is separate in statutory terms from the board. The board's sub-committees will have no function in respect of valuation.

Perhaps the Deputy and I are at cross-purposes.

This proposal will involve parcels of literally thousands of valuations. Those who have worked in a company would know that in a bank or the kind of institution the Minister is establishing, a framework is required to deal with such a vast job. What will be the relationship of the valuation board, or whatever the Minister wishes to call it, to the board? The Minister listed a lengthy list of qualifications for the members of the board in respect of valuation and similar experience. What does the Minister propose in respect of the sub-committees? Who are the external people the Minister has in mind to appoint? He has mentioned three specific sub-committees. Does the Minister propose to appoint external people to the credit committee or the risk management committee? The Minister already suggested yesterday that he might appoint two Deputies to the audit committee and I stated I did not consider that to be appropriate.

While I stated I was open to that, I did not say that I was in favour.

When the Minister indicated his openness to it, I stated there are reasons to be concerned about it because were Members of the House on the audit committee, they might be in an invidious position unless perhaps they were retiring Members as I believe Deputy O'Donnell suggested.

I did not suggest that.

I apologise. Perhaps Deputy Barrett suggested it.

I like things to be attributed and that was not the case..

It was someone from the Fine Gael side.

If it was good it does not matter.

Is Deputy Burton certain? I thought the suggestion emanated from the benches behind her.

No one is volunteering.

It was behind her.

Can the Minister paint a picture as to the identity of the additional people who will be appointed to the various sub-committees and their relationship to the board? As such extensive provision has been made regarding sub-committees and the appointment of external people to them, the Minister must have something in mind.

To assist the Deputy on the valuation issue, I think I stated that NAMA was separate from the valuation process. However, I should have stated that the sub-committees are separate from the valuation process and have no involvement in it. Clearly, NAMA acts in the valuation process on the advice of the experts retained by it to conduct the valuations, subject to the law and to Part 5, which members will examine in due course. The Deputy then asked about the sub-committees themselves and whether I had any intentions with regard to whom will be placed on them. It is normal in any legislation of this kind to have an audit committee, a risk committee and a credit committee.

I know that. I told the Minister that.

I appreciate that. Clearly, were I to be minded to appoint anyone additional to those who already were on the board, they would have to be persons with particular competence in the spheres of risk management, audit or credit. As members are still dealing with section 32, I wish to speak on the section myself. Before doing so, I do not know whether I have dealt with the Deputy's query.

I have asked the Minister for an explanation. He has made extensive provision for other committees and for additional people to be appointed to the other committees who are not members of the board.

I see the point.

A valuation procedure has been proposed and members will come to it in detail later. However, is the evaluation procedure——

Those so engaged are not envisaged as being a sub-committee or connected to the board.

No. The board will be obliged to bear ultimate responsibility for the application of the evaluation methodology set out in the Act and this responsibility must rest with the board. There is no question, for example, of section 32 being used to establish a valuation committee, if this is what the Deputy was thinking. That does not arise because a sub-committee of such fundamental importance would have to be set out in the subsection itself with the audit, risk and credit sub-committees. Under the valuation methodology provisions, any functions that rest with the agency rest with the board subject to delegation to properly retained officers who have expertise in the particular areas. There is no question of a sub-committee being established to deal with valuation.

The Minister suggests that the entire board will deal fully at all times with all valuations and not any sub-committee thereof.

We can discuss that when we come to the valuation section.

In so far as there are corporate audit responsibilities in respect of the valuation process, which there are, then the entire board must exercise them. I do not of course rule out delegation because clearly——

—— the board will not collectively value individual property or retain someone to do that.

No, I am asking the Minister something different. The Minister is setting up a valuation procedure. Will the entire board deal fully with the consequences of the valuation procedure or will it be delegated to, for instance, a sub-committee including people who are external to the board to deal with the processing, monitoring or whatever of the valuations? Will the valuations be considered primarily and totally in summary by the full board meeting as a full board?

This pertains to Part 5.

The board must decide this collectively.

I know that but if one sits on a board, one can get a summary sheet and tick it off. However, that differs from a board dealing substantially and fully with the body of the valuations that come forward to it.

First, I was obliged to deal with the issue as to whether there will be a sub-committee of the board dealing with valuation issues. I have ruled this out and have stated it is clear that this is not the intention of the Bill. Valuation is so fundamental to this Bill that were there a sub-committee to deal with valuation, it would have to be expressly mentioned in the Bill. However, this is not the case and the intention is that the board will exercise collectively functions in respect of valuation.

At this point I have not prescribed within the legislation for the precise corporate structure that applies beyond that. In other words, I do not prescribe who does the valuations, what expert officer reports valuation to the board, how the board considers the question of valuations or how the board looks collectively at valuations.

I wish to make a small point in respect of the balance of sections 32(1)(a) and section 32(1)(b). The former explicitly refers to advisory committees while the latter refers to “such other committees and sub-committees as it considers necessary or expedient”. This is a rather bald and unconditional statement of capacity by the board itself and I seek clarification in this regard. The Minister has stated that where a sub-committee has been established by the board to handle a matter in respect of valuation, there would never be a question of such a sub-committee functioning in this area.

That is the position because valuation is so fundamental to this legislation.

I have not difficulty in understanding the point about the function of valuation. Section 32(1)(b) unconditionally states: “such other committees and sub-committees as it considers necessary or expedient”. It is a power given to the board. What the Minister is offering is a ministerial interpretation of how the board will restrain itself. That it is not how it reads.

Deputy Burton rightly asked about valuation in general. The board cannot delegate that function to the committee under the terms of the legislation because it is such a fundamental feature of the legislation that, if the Legislature were to have intended the board to do that, it would have to provide for such a committee in express terms. The next subsection refers to the formation of advisory committees and such other sub-committees as the board may deem expedient. Let us suppose there is a difficulty with a particular valuer, who was engaging in persistent misconduct, and the board found it necessary to engage in an inquiry in that regard. It would be open to the board to appoint a sub-committee to investigate the charges of misconduct in respect of the valuer, to follow the appropriate procedures as advised and to report to the board on what action should be taken. That is how I envisage the corporate governance structure.

I have received representations on the establishment of committees and I will convey my views to the board on that. I wish to speak to the section on this aspect although I do not intend to make legislative provision for the contingencies about which I have entertained representations. These were made by the First Minister of Northern Ireland, who is concerned about the volume of assets NAMA will have in Northern Ireland. He indicated his wish to see a Northern Ireland advisory committee established to advise on the operation of NAMA in Northern Ireland. This could be slotted into the framework of section 32.

Arising from Government discussions it is clear that NAMA has major implications for planning and development, as Deputy Burton pointed out earlier. There is no question of NAMA becoming a planning authority or usurping the functions of the planning authorities but, in respect of the matters in which NAMA has a function in development, it is important that it has a cohesive view on planning and development and it may require a planning and development committee. I do not intend to write that into legislation but I should disclose it to the House because it is something I will advise the board on. If it had a fundamental objection to this it would voice it to me and I would have to trust the judgment of the board members when they are appointed. They seem reasonable examples of additional committees that could be established.

In yesterday's document, the Minister stated that the master SPV will have its own board with members appointed by NAMA, maybe the whole NAMA board of nine members, and the private sector equity investors. The whole board of NAMA will amount to nine members and, if the private sector has 51%, it will have at least ten seats on the board.

Not necessarily.

The Minister drew attention to this. The phrase used by the document circulated by the Department is that it may be the whole NAMA board of nine. Suppose it is not the whole board of NAMA along with ten private investor representatives, amounting to 19——

I am trying to be helpful. What is not necessarily the case is that there will be ten private sector representatives in that position.

The Minister must prove comprehensively to EUROSTAT that this is a privately owned vehicle because it is on this basis that NAMA has been allowed to have off-balance sheet status. In that case, the Minister must take care with the direction and control of such an entity.

We must put the question that section 32 stand part of the Bill. Is that agreed?

If the Minister only appoints five members of the NAMA board to the SPV——

Those in favour say "Tá".

Chairman, this is really important.

Manners might be in order even if the Chairman is not going to abide by procedure.

I have a question about the sub-committee.

We have discussed SPVs on numerous occasions. The Minister has mentioned that this section deals with the appointment of other committees by the board——

I have never discussed this before, nor has anyone else.

The board is not setting up the SPVs.

If the board of NAMA appoints five people to the SPV board, is that a sub-committee of the board?

So they are randomly appointed and have no coherence in respect of their participation on the SPV board. That is bad governance policy from the Minister.

Deputy Burton is making presumptions and judgments about how the Government strategy will be pursued. It is understandable that she canvases various contingencies and it is very helpful. I will address them all.

On a point of order, the reason for the line of questioning from the Opposition is that the SPVs were introduced as a mechanism yesterday.

Deputy Sherlock has not been listening.

Our opportunity to debate this, if I may finish the point briefly——

Deputy Sherlock has not been listening to what has been happening here.

If the Minister is being a little disingenuous, I ask him to consider that the Opposition is entitled to ask any questions, no matter how spurious the Minister thinks they are.

I did not suggest it was spurious.

The demeanour of the Minister suggests otherwise, with all due respect.

The points raised by Deputy Sherlock have been discussed numerous times by the Minister.

I have read in the newspapers that the Northern Ireland Executive indicated to the Minister that it wanted representation on a special committee to protect Northern Ireland interests in the NAMA portfolio although this is the first time I have heard the Minister say this. Did the Minister refuse the establishment of the committee? Now that the proposal in this section transfers entitlement to establish any advisory committee to the board, so that the Minister has no further say in the matter, it may well be that the board will decide to take on board the representations made by the First Minister of Northern Ireland and establish an advisory board with the function to protect the interests of property portfolios containing properties in Northern Ireland.

I made my wishes known to the committee this afternoon. It would be possible under the legislation to give direction to the board to set up such a committee. I do not envisage that happening. I assume the board will reflect on the conversations that have taken place on this matter. I had constructive discussions with the First Minister, who was accompanied by a Minister of the Sinn Féin interest, Mr. Kelly. Mr. Kelly observed silence but I was struck by the warm and enthusiastic support for NAMA from both the SDLP and the Official Unionist Party. They were concerned by the volume of assets to be acquired that are located in Northern Ireland. They were anxious that local interests would have some point of liaison with the agency in regard to these assets.

Will the Minister publish all representations he has received in respect of the appointments to the board or sub-committees of the board? The Minister could easily appoint to the sub-committees persons related to various parties from Northern Ireland with the required specialist knowledge of property.

According to one of the papers published today, written representations on public interest directorships were made by the Minister's brother, the Minister of State, when the Minister advertised that he was appointing public interest directors. The Minister's brother wrote to him on several occasions apparently proposing named persons.

Were any of them appointed?

Last night, the Minister made a good proposal to advertise for members. Can we be assured that there will be an advertisement process for members of the board, of the SPV and of sub-committees? There should be some level of public information and scrutiny attaching to all of the appointments directly and indirectly.

I already made it clear that if I am minded to appoint any persons to this board I will share the names with the Opposition in advance so those in the Opposition can express opinions on them. It may come up through freedom of information requests — I am not sure of the precise rule — but Deputy Burton will appreciate that a vast number of people write to the Department seeking all types of positions in NAMA but I have no function in this regard. Many of the positions are filled by tender. I have made clear my position on the directors and I do not have a difficulty extending that principle to the three named sub-committees. I envisage that persons of the highest technical competence in those fields will be appointed to those sub-committees and that is generally the practice in extern appointments to sub-committees.

Question put and agreed to.
SECTION 33.

I move amendment No. 59:

In page 38, subsection (2), line 5, to delete "shall" and substitute "may".

The amendment deals with the issue of indemnification by NAMA of individual members. It uses the test that a person was acting in good faith. Is the protection of acting in good faith sufficiently defined? The Bill states that NAMA shall always indemnify someone acting in good faith even if incompetence is at the core of it. Is this a very generous acceptance that incompetence should be indemnified?

The section provides that certain specified persons, where the board is satisfied that these persons have discharged their functions in good faith, shall be indemnified against claims. It is important that anyone who works for NAMA is indemnified by a board; that is normal corporate practice. There is no provision to indemnify anyone who acts in bad faith. The section also provides that the indemnity can be revoked and, if necessary, payments recovered where someone has acted in bad faith. It is in the nature——

The question I raise is whether good faith is an appropriate hurdle.

The standard itself?

Yes. It is a very low hurdle.

I understand that it is the normal standard that applies where a company agrees to indemnify an employee. The employees of a company must have some measure of protection against personal liability through the board and good faith is the standard used. The amendment suggests that "shall" should be deleted and substituted with the word "may". That would remove entirely the scope of the indemnity. The phrase "without negligence" could also be inserted but that could be very broad. The classic example of negligence is the person emptying an oil tanker who has a smoke and throws the butt away and then there is a conflagration. That is negligence but it is still attributed to the employer.

The regulator.

Surely it is this type of blanket guarantee that has us where we are.

Members must abide by the rules of the Chair. If they wish to speak they must stand up.

This is a standard provision in corporate governance; let us not bring blanket guarantees into this. I will ask the Attorney General to examine this prior to Report Stage because issues arise and it is the standard format.

I thought we were living in a different era.

Amendment, by leave, withdrawn.
Section 33 agreed to.
SECTION 34.
Amendment No. 60 not moved.

I move amendment No. 61:

In page 38, subsection (1), between lines 18 and 19, to insert the following:

"(e) the manner in which NAMA is to take account of the commercial interests of credit institutions that are not participating institutions;”.

Section 34 provides that within three months of the establishment of NAMA codes of practice must be submitted for approval to the Minister for Finance. The proposed amendment is for the agency to prepare a code of conduct relating to how it takes account of the commercial interests of credit institutions that are not participating institutions. It is not the intention that the agency will put non-participating institutions at a disadvantage. The amendment will ensure that the agency will draw up guidelines which, subject to the approval of the Minister, will set out the code of conduct with non-participating institutions.

I am interested to know what the Minister envisages as a code of conduct for non-participating banks? We have seen in the courts a move by some non-participating banks to appoint receivers and liquidators. People could be forgiven for thinking that there may have been an element of ransom in such approaches as if one held a small but strategic element of a site, development or project one could seek to exact a higher price than that to which one was entitled because NAMA would be coming along to purchase assets at a price considerably above their market value, even though the courts valued those assets at 25% of their value, which was a 75% mark down. The issue remains of some concern in the context of NAMA as those who might have small interests in projects could demand more than a fair recompense because NAMA might have a certain view of how a project should be dealt with and they would be in a position to try to hold NAMA over a barrel. What codes of conduct are envisaged? I am sure the Minister has given some thought to it if he is tabling an amendment seeking to have these codes of conduct installed. Perhaps he will give us the benefit of his thinking on them so we can consider the issue.

As I am on my feet I will ask about another issue which perhaps needs a code of conduct. Bringing in good assets will bring in people who have projects that they hope to fulfil and bring to fruition. However, NAMA is not a bank with a lending capability and these people will not be able go to normal banks because the security of their projects will probably be compromised by NAMA's ownership. What will be the code of conduct on lending? Some people will have a legitimate expectation of getting banking services on normal terms but NAMA might have a different view on how it wants to deal with its rationed resources. Will codes of conduct be developed in this sphere? Do we need to make legislative provision for what is proposed generally on codes of conduct?

I wish to intervene to assist the debate. There is no need to make legislative provision of the type Deputy Bruton envisaged but the issue he raised in the conclusion of his contribution is very important. It is intended to draw up a code of conduct dealing with that issue and there is ample power in the legislation to do so. As the Deputy rightly said, if one has a performing loan in NAMA, that might not necessarily be NAMA's first priority in terms of advancing credit. NAMA's priority will be to sell at the maximum value for the taxpayer in regard to any development.

In regard to the earlier question about the express reference to the issue of the non-participating institutions, strong representations were made to us on behalf of these institutions to the effect that they would be prejudiced by the sheer size and scale of NAMA and that NAMA should not be in a position where it can lever an undue advantage out of its position as against the other participating banks. That is the circumstance being addressed in this amendment.

Does the Minister have the outlines of what the codes of conduct might contain?

I note that NAMA will prepare codes of practice within three months of its establishment day. Does the Minister anticipate these codes of practice will be in place before the first transfer of assets in December? It is extremely important that the codes of practice are in place before the transfer of €16 billion worth of assets. By January 2010, the Minister will have transferred €40 billion worth of assets which makes up a significant proportion of the €77 billion. The codes of practice should be in place before any transfer of assets to NAMA.

I wish to touch on a point Deputy Bruton made in regard to performing loans going into NAMA. Yesterday the Minister said NAMA is there to get the maximum return for the taxpayer. I refer to the bulk of the securities in terms of an asset being transferred to NAMA and to getting value for it if it is a greenfield site. There is a limit of €5 billion in terms of the amount NAMA can extend. Perhaps the Minister will elaborate on that. For what does he see that €5 billion being used? How will NAMA ensure that these loans continue to be performing loans and that value is got for the site? It is a critical issue in terms of return. The Minister might address that point.

He will if it is relevant.

Can we get an undertaking from the Minister that all the codes of conduct will be published in full because they are extremely significant in terms of how NAMA will operate? The draft NAMA business plan for the period November-December 2009 states that contractual agreements will be agreed and that firms will be appointed formally for positions, including legal services, property valuation services, loan and associated valuation services, etc. It also states that the ten to 15 largest borrower exposures will be dealt with by year end and that NAMA will meet the major borrowers as their loans transfer to it.

That means the die will be cast on how this will operate because if the board of NAMA operates in a particular way for the ten to 15 biggest borrower exposures — the €16 billion or so — and if, by the end of February, it has dealt with up to €38 billion, unless the codes of practice are published and made available before that process starts, it will be open to an aggrieved person to state that by being dealt with later, he or she is being dealt with in a less fair way.

Surely, the Minister must publish the codes of practice as NAMA begins its operation. The Bill states that it must do so within three months of the establishment day. Section 34(4) states that if that has not been done, the Minister can establish his own codes of practice.

The National Treasury Management Agency has codes of practice. However, there are examples of senior banking staff who are compromised in regard to loans they have taken out with the banks. I know informally how they will be dealt with, namely, that they are not to be involved in any of this. Surely those codes of practice should be clearly stated in writing on the establishment day. Does the Minister have a position on that?

I believe the Minister said the UK Treasury and the non-participating institutions are concerned that they will be dealt with fairly in regard to the codes of conduct. I believe he has committed that NAMA will not act to the "detriment" — I think that was the word he used — of other parties. Surely all of this means he is obliged to publish the codes of practice. If they are ready to be published, can we see them? Can they be laid before the House? It would also help to clarify in the public mind how NAMA will deal with experts, such as valuers, estate agents and so on in towns and village around Ireland, who will have an interest in the progress of this.

I welcome the Minister's comments on the other commercial institutions not covered by NAMA. As someone who represents the Border constituency of Cavan-Monaghan——

We are talking about codes of practice in section 34.

The amendment refers to the commercial interests of credit institutions that are not participating. Is that correct?

These institutions include Ulster Bank, National Irish Bank and ACC. Before I came into this meeting, I had representations from small businesses, specifically pig farmers, who are being put under tremendous pressure by these institutions. Some of them may want to leave the country, so it is important they get some crumb of comfort in whatever way they can. We do not want to find ourselves in a situation at the end of this NAMA process where there are only two banks left.

Ulster Bank and National Irish Bank, in particular, have given good service to the Border region. If one looks at a map, one will see they are situated in the main in counties Donegal, Cavan and Monaghan, although they have branches throughout the country. How their interests are addressed is extremely important and it will be vital to what happens to the smaller industries in my region because if they are put under pressure, it will affect the valuations of NAMA. Only last week, I saw a 2,400 sq. ft. house for sale at €165,000, the price of the site two years ago. That is as a result of pressure from some of the lending institutions. We need to be very careful about it.

Deputy Burton spoke about the ten biggest operators but we must remember that there is no sign of any finance going to small businesses to allow them to stay in business. If we do not keep people working and paying taxes, it will be very hard to pay for NAMA.

Deputy Crawford has raised an important issue. Some people are caught in a twilight zone in that they bank with Ulster Bank and National Irish Bank, in particular, which are not open for business. I know of one situation in which a call from a farmer who did not have enough money to feed his cattle was not returned for four weeks.

The reason I bring this up is that the farmer did go through one of the major banks associated with NAMA, where the bank officials sympathised with him but refused to deal with him or any client from Ulster Bank or National Irish Bank. This is the issue I raised yesterday. These banks are closed for business. It is a serious issue and I hope this legislation will deal with it.

Deputy Feighan has identified one of the crucial facets of the banking crisis, which is not often discussed in this House because of the anxiety to attribute blame — which can legitimately be attributed to many. The Irish banking sector divides into domestically and externally owned banks. Some, although not all, of the externally owned institutions are clearly deleveraging, which of itself creates a major credit gap in the Irish system. I do not want to go back to the Second Stage debate, but that is one of the reasons we must have a solution. We must put some of the banks in a position to bridge the gap in the credit supply. I do not want to decode all the statements that different bankers have made. I have heard many bankers say it is business as usual. It cannot be business as usual in the banking system if it has gone through such a cash shortage as it has since the earlier part of this year. That is why it is essential to have a structural solution, although we can argue about the details.

Deputy Burton mentioned codes of practice. We must remember that the codes of practice regulate how assets are managed by NAMA. We are not dealing with the valuation process. Three months is a reasonable deadline for the board and there is power for the Minister to intervene at the end of that period. The board must be selected and appointed and then come to grips with its enormous corporate responsibilities and draw up its code of practice, and I do not think a time limit of three months is unreasonable when one considers the time limits for the acquisition of the assets, which are of a similar scale. I appreciate that in the business plan the ambition is to start a sizeable amount of the work by Christmas, which is now less than two months away, but that time limit could easily slip into January at the rate we have been proceeding.

The Minister stated that €16 billion of assets are to be dealt with before Christmas, and he has committed in the legislation to codes of practice. Let us suppose one of the top ten or 15 developers is invited in to be dealt with by NAMA. One might argue that the SPV is managing the developers, according to the SPV statement, but according to the NAMA business plan NAMA is to manage them. How is the developer to be sure NAMA is dealing with him or her according to its codes of practice if there are not even draft guidelines? The codes of practice in this respect——

For clarification, is the Deputy suggesting that——

The codes of practice——

I just want to ask the Deputy a question. Is she suggesting to the Minister that he should publish a code of practice that NAMA could then——

Yes, and I will tell the committee why. The code of practice for a large company——

To give NAMA three months——

May I explain this to the Minister? If one works in the media one has a style book, and in a large company or bank one has the company operating manual. If one is an officer of a company, one has reference to a manual which can also be described as a code of practice. NAMA needs something like this, at least in draft form.

Let us say half of the ten or 15 top developers disagree vehemently with the manner in which NAMA approaches the management of their work-out. They are opinionated people and they think the people in NAMA know nothing and are not dealing with them properly. There is a reference in the business plan to codes of practice or an operating manual or whatever the Minister wants to call it. The diagram at the end envisages quite a structured process and he offered us a process auditor. He has not started to work on NAMA just now but has been working on it for seven or eight months. I do not understand why he feels it is adequate for a firm operating manual to become available only three months after establishment. Let us remember that many professionals who deal directly with clients have a manual that guides them on the various regulations for dealing with them, and must go through a step-by-step procedure in order to protect themselves and, more particularly, to work impartially and fairly with their clients.

I assume the interim CEO of NAMA is already establishing such a code of practice. I ask the Minister to elaborate on the method of dealing with performing loans, for which security has gone into NAMA, in terms of obtaining values for the sites involved. What does the Minister intend will be in the code of practicevis-à-vis the banks?

I do not think we will go into the details of what is in the code of practice.

The Minister said he would deal with the issue.

We will not go into the detail.

Subject to the authority of the board, interim operating guidelines can be drawn up to ensure consistency in the delivery of service, whether it is to performing, non-performing or half-performing lenders. A reasonable period of time must be given to the board of a new entity to draw up a code of practice which is being published and put into the public domain and in respect of which it can be held accountable. The existence of the codes of practice does not diminish the power of the board in the interim to take whatever steps are necessary to ensure consistency in service delivery through the adoption of interim working guidelines or similar.

Does the Minister envisage——

The important point about this project is that we proceed with it as quickly as possible. We have been told this by the European Commission and we know it ourselves.

Does the Minister envisage——

I am not prepared to hold up the project so a dream design can be drawn up.

Does the Minister anticipate the taking over of assets before a code of practice is in place? It is a simple question.

I am putting the question on amendment No. 61.

My question should be answered. Does the Minister anticipate——

So the Minister intends to take over assets without a code of practice?

There will be interim guidelines in operation. I have no doubt about that.

The Minister can make that decision. Will there or will there not be a code of practice in place? We are talking about €54 billion of taxpayers' money and €16 billion being taken over. It makes no sense. The Minister has had months to prepare a code of practice.

Amendment put and declared carried.
Amendments Nos. 62 to 64, inclusive, not moved.

I move amendment No. 65:

In page 38, subsection (4), line 35, after "may" to insert the following:

"with the approval of a committee nominated for the purpose by Dáil Éireann".

Amendment put and declared lost.
Amendment No. 66 not moved.
Section 34 agreed to.
NEW SECTION.

I move amendment No. 67:

In page 38, before section 35, but in Chapter 2, to insert the following new section:

35.—NAMA shall prepare, publish and submit to Dáil Éireann for consideration, a business plan including a Corporate Operational Plan on an annual basis, including an overview of the outlook for interest rates and evolution of yield curves.".

Amendment put and declared lost.
SECTION 35.

I move amendment No. 68:

In page 39, subsection (1), line 4, after "shall" to insert the following:

"with the approval of a committee nominated for the purpose by Dáil Éireann".

Amendment put and declared lost.
Amendments Nos. 69 and 70 not moved.
Question proposed: "That section 35 stand part of the Bill."

The section as drafted empowers the Minister, after consultation with the CEO of the NTMA and the chair of the agency, to appoint a chief executive. I undertook informally to consult the Opposition on an appointment but I am anxious that such agreement will only apply in the case of the first chief executive because any subsequent appointment should be made by the board. It clearly would be desirable to have the first appointment made by the board but I do not want to delay the commencement of the agency. My intention is to table an amendment to section 35 to require that subsequent appointments are made by the board.

Has the Minister advertised for the position?

How does he envisage the appointment procedure for the first CEO?

The procedure will be as set out in this section. After consulting with the CEO of the NTMA and the chair of the agency, I will appoint a person who in my opinion is suitably qualified for the position. I have also indicated my intention to consult Opposition Deputies.

Will the Minister advertise the position?

I think it unlikely because of the speed with which matters must be arranged. Again, however, I will have to hear what the CEO of the NTMA and the chairperson of the agency have to say.

Will the chief executive's salary be made public and will he or she be paid a bonus?

Will there be a commission?

Can the Minister outline the targets and objectives which the chief executive will be required to achieve?

Will he or she be paid a bonus?

Does the Minister have anyone in mind?

By virtue of the legislation I cannot say but I understand that, as an employee of the NTMA, his or her salary is not subject to disclosure.

Will somebody know eventually?

Will there be a bonus or a company car?

Deputy Terence Flanagan asked a valid question regarding whether bonuses will be paid but it has not been answered.

We will come to it.

If the Minister intends to limit the pool of candidates by not advertising——

I did not say I will not advertise.

He has just stated that given the speed at which he must proceed, it is unlikely that he will advertise.

I said that I would have to listen to the opinion of the CEO of the NTMA and the chair of the agency.

Is he not the boss?

It is unlikely that he will advertise. The appointment clearly will be made from a small pool of candidates. Once again we hear the notion that we are such a small country that very few people could do the job. We will not know his — the most certain thing about today's proceedings is that a man will be appointed — salary because he will come from this small pool. We cannot know his salary, whether he will get a bonus or the rules under which he will operate. We have to move so fast on the issue, after eight months on this road, that we will know nothing about this man other than his name and the job he is to perform. Are these not the reasons we are here in the first place? We should be operating under new rules and transparency, openness and accountability should be the order of the day. Who is the man? The Minister clearly has somebody in mind.

I cannot have a person in mind at this stage because I must follow certain statutory procedures.

The Minister probably will be asked similar questions by other Deputies.

Why should the job not be publicly advertised? Do not mind what the chair of NAMA or anyone else says.

It will be the Minister's call.

One speaker at a time, please.

Is the Minister not the boss? Will they start swinging him by the tail before he even starts?

They are doing that already.

I think it is a reasonable question and the public wants to know the answer. There will be another small bubble and nobody will know the first thing about it. Why has the Minister decided against a public advertisement?

What is the term of office for the CEO of NAMA?

It is top secret.

Section 35(3) states that it is to be determined in accordance with sections 7(2) and 8 of the National Treasury Management Agency Act 1990. It is important that we know the terms and conditions of the position because it is not often that €77 billion is spent in this Chamber.

Last night, the Minister stated that under the Government guarantee scheme, the CEOs of banks would no longer receive bonuses. There is a glaring inconsistency with this policy in his refusal to indicate whether the CEO of NAMA will be paid a bonus. He cannot have it both ways. The CEO of NAMA should be approved by a committee of the Oireachtas. This person will deal with assets worth €54 billion on behalf of the Irish taxpayer. It is not good enough that the Minister is avoiding the question of the salary and bonuses to be paid.

It will be determined by the board.

The buck stops with the Minister. Ultimately, he is the guardian of the public purse. He needs to state in this Chamber the exact position on salary and bonuses payments.

At the time of the emergency budget, the Minister indicated that he would order a review of the salaries of top officials in the public service. Although this is not a Civil Service position, it does involve an appointment by the board of a public body. Can the Minister indicate whether the appointee is likely to earn in excess of his own salary? His package is worth approximately——

We are not discussing the packages of Ministers or any other Members of this House.

I am asking a question. I understand the Minister's package is worth between €220,000 and €250,000 in salary terms. He also has a driver and pension package.

The Deputy wanted to ask a question about section 35.

I am asking a question.

Her contribution is closer to a Second Stage speech. She is wandering around the world like Moses.

I do not wander far from here. At the time of the budget, the Minister indicated that he was having a review carried out of the pay awarded to top public servants. The position in question will be at the top of the range, as it were, and the appointee will no doubt be covered by top person's pay. At budget time, I suggested that for the duration of the financial emergency no one should earn more than the value of the package of the Minister for Finance. Will the person appointed earn less, equal to or more than the package earned by the Minister? Will the Minister provide an indicative figure of the person's compensation package?

The Deputy should give the Minister an opportunity to answer. She asked the same question three times.

If the Minister tells us who he has in mind, we may agree to the appointment.

I cannot pre-empt the statutory process.

I am not certain we would agree if the Minister informed us who he had in mind. This is an example of ongoing inconsistencies. This legislation offered an opportunity for a new beginning in terms of openness and transparency in the salaries and bonuses of top public servants. Instead, we will not even be told if the person appointed receives a bonus. Where is the change? Why can a specific provision not be introduced to provide information on salaries and bonuses and allay public concern?

Everyone knows the profession of politician has been severely damaged by recent events. We will not help resolve the crisis of confidence in the political establishment by ignoring these issues. They are a vital aspect of establishing public confidence. We have made a poor beginning and I hope the Minister will reconsider the position he has adopted.

A variety of important issues has been canvassed and I will be pleased to deal with them.

The Minister must do so in the context of section 35.

On section 35, the chief executive of the National Treasury Management Agency and chairperson of the agency will be consulted before I can appoint a chief executive officer. For this reason, I cannot speculate about the identity of the officer at this stage. On appointment, the person——

Surely it is not speculation if the Minister knows who will be appointed.

I do not know who it will be because I do not yet have a chairman for the agency.

The Minister has not asked him.

Please allow the Minister to continue without interruption. He did not interrupt the Deputy.

No, we do not have a chairman. It is an issue about which I will ask the leaders of the Labour Party and Fine Gael and, if necessary, the leader of the other party. That is the position regarding the chair. We have a chief executive of the NTMA but I have not yet discussed the issue of the appointment because we have to wait until we have a chair for the agency.

Under the third subsection, when the person is appointed he or she will be appointed as a member of the staff of the NTMA, if he or she is not already such a member. The person may or may not be a member of the NTMA.

He probably will be.

In the event that the person is not a member of the NTMA, he or she must be made a member of the NTMA.

The Minister has not answered the question.

I am answering it. The Deputy should have a little patience.

He is taking the scenic route.

It is clear under the section that the person will be a member of the NTMA, irrespective of whether he or she was originally a member of the agency. We all know that the provisions on the payment and remuneration arrangements of the NTMA have not been subject to public disclosure for many years.

It is a secret society.

It is the old circle.

That is a wider issue on which we can have a debate on another day. I have not seen a deluge of Private Members' motions on the subject.

Will canvassing for the position disqualify?

I have received the report of the group on top level pay. It is an important report which is being examined.

I object to Deputy Burton's reference to "packages". I do not have a package and if I did have one, the Deputy would also have one. A substantial part of the package I have is my salary as a Deputy. I do not know what figure will be fixed upon by the board in relation to remuneration.

Should the person earn more than the Minister?

That is a matter for the board. I do not seek financial recompense for the position I am in. I understand a large number of persons, including the bulk of the secretaries general of Departments and persons in different statutory authorities, are paid well in excess of what I am paid or have packages, if one insists on using that term, that are more lucrative.

We are well aware of that.

The Minister is being rather flippant in suggesting this is a closed box and we should respect our betters by not looking under its lid.

The Deputy is free to open the lid.

One of the problems at the root of the banking system has been the system of bonuses which was related to short-term thinking about how to deal with risk. The same exposures arise with regard to a bonus package that may be arranged behind closed doors for a chief executive of an agency such as NAMA. It could, for example, emphasise short-term gain rather than the long-term work-out of the assets held by the agency. While NAMA may be a different type of operation from a bank in that it will be engaged in asset recovery rather than risk, rather than lending, the very same principles apply. We need to have confidence that a remuneration committee will set the figure and pursue policies based on learning lessons from recent problems in the banking sector. There must be some level of public scrutiny in this matter.

The notion that issues will continue to be kept secret is not in accord with what several Deputies have said. Recent problems have been closely related to a remuneration and bonus system that encouraged incorrect thinking about issues. Nothing requires long-term thinking more than the management of €54 billion of taxpayers' money in an asset recovery vehicle, about which there has been significant concern. The International Monetary Fund has written about the hazards of publicly managed asset recovery vehicles not securing best value. It is important, therefore, that the bonuses and incentives are properly set and open to scrutiny and are applied in a manner which maximises the interests of taxpayers.

The issue is not only the level of pay the person who will be appointed will receive or whether he or she will be awarded bonuses. I will not mind if a bonus is paid provided the appointee delivers the beef for the taxpayer. The issue should, however, be subject to public scrutiny. If the appointee is given a bonus, we should know the reason it was awarded and we must be assured that it was genuinely earned and based on a long-term perspective, rather than the short-term generation of cash flow to make a particular year look good.

No one present would begrudge anyone fair pay, bonuses that are merited or other extras provided for doing a good job. However, members of the public do not understand the reason the pay and remuneration of employees of the National Treasury Management Agency are not available for public scrutiny. It is a disgrace that this information is not available. It appears that in employing someone to try to get us out of the awful hole in which we find ourselves, we are reverting to the process that got us into the hole in the first place. Does the Minister not see the contradiction in what is being done? Does he not see that members of the public will no longer stand for packages and bonuses being awarded without information being provided on whether they are merited, warranted or deserved?

Surely we need a fresh start and a different approach. The Minister should be open to accepting an amendment that will ensure we know exactly what the appointee will receive and the reason he or she will receive it. If the appointee does his or her job properly, he or she will do the State a great service.

I hope the contract which will be drawn up for this person will not lead us into a position where, if it does not work out because the person does not do his or her job properly and is not up to the job, he or she will not get a golden parachute like we have seen in the past, which will infuriate people more. If a person cannot do the job he or she should be out the door and not rewarded for not doing the job properly. While the person is in the job the public should know how much the taxpayer is paying him or her.

I would like to reply to the debate so far.

There are only two more contributors.

In several of the contributions the National Treasury Management Agency has been equated with a bank despite the fact that there is no suggestion of impropriety, wrongdoing, improper behaviour or anything of that type regarding it.

Thank God there are sensible enough people who will see that.

No one has said that, Minister.

Let us be clear about that. An equation was drawn between the NTMA and the banks throughout this debate and the operation of bonuses in the institutions.

No. We mentioned other institutions.

This is a long-term matter.

The Minister is listening with the wrong ear.

Allow the Minister to speak.

There is nothing new in this subsection that is not the current position at the NTMA and has been the position there since the early part of the——

It is an entirely new body.

Order, please.

Several of the Deputies were members of a Government which never questioned that arrangement over a long number of years

If we want to revisit that arrangement this is not the occasion on which to do it.

Deputy Creed.

The reason the arrangement was put in place was to ensure the efficient management of the State debt and the efficient issue of State securities, and that has happened as a result.

It is totally different, Minister.

Deputy Creed.

I thank the Chair for the opportunity to say a few brief words on this. The Minster's logic appears to be that because it is happening under the NTMA and the soon-to-be-appointed chief executive officer will be an employee of it and for that reason the same culture of secrecy regarding salary remuneration should apply. There is now an opportunity for a fresh start. We are talking here about taxpayers' money. It will be regrettable, given the fact that this institution will be dealing with €50 billion, €60 billion or €70 billion of taxpayers' money, that the headlines will be about the expenditure on the salary of one individual. In terms of the vitally important aspect of public support for the principle of NAMA, one reason the Minister is losing that support is that people feel the same old show is in town.

This is an opportunity to shine some light where it has not shone before in respect of what is happening with public funds and remuneration for public officials. The NTMA is not a bank and NAMA is not a bank, but public money is involved. Therefore, the principles of openness and public access to information should prevail. The headlines will be about the Minister's refusal to have openness about the salary aspect, but it is only part of the requirement for transparency in its operations, which should be central to the operation of NAMA in the future. Simply because the chief executive is an employee of the NTMA is not a reason for cloaking the salary and remuneration package in secrecy and the Minister should use this opportunity to break new ground in that respect. It begs the question — perhaps not for this occasion — as to why the veil of secrecy should apply to NAMA or the NTMA.

I regret we are dealing with this issue. Section 35(3) states:

The term of office, remuneration, allowances and other terms and conditions (including the provision of superannuation benefits) of appointment of the Chief Executive Officer shall be determined in accordance with sections 7(2) and 8 of the National Treasury Management Agency Act 1990.

The chief executive officer is not a civil servant. If we want to have this debate, let us have it about the NTMA. If people want to have transparency about the agency, which is the outstanding agency in this country, let us have it but it is irrelevant in terms of this appointment and we should get on with the more important aspects of the debate.

I understand the Minister now has in his possession the findings of the review of the remuneration of the top people in the public service — I do not know if he has had it for a few days or weeks. My recollection is that the Minister drew our attention specifically to the fact that many top persons are paid a package of compensation in excess of his own. I accept that because, if I recall correctly, the chief executive of the ESB earns more than €400,000, as does the chief executive of RTE. Am I to assume that because this post will be filled by a top person it will be in the upper regions of a top person's pay? In other words, it is likely to be over €400,000 and possibly over €500,000.

There is a public interest element to this issue. The Minister is working on the L'Oréal principle that he is paying this amount because the man — we think it is a man — concerned is worth it. If this man is worth it——

No amount is mentioned.

——can the Minister tell us what he is worth in terms of his package? It is a fair question in a Parliament.

On Deputy Fahey's observations about the NTMA, most of us were not in this House when the NTMA legislation was passed. The differential between the lowest-paid person on a public sector wage and the highest-paid person on a public sector wage was nothing as wide then as it has now become where, with the top person's pay review, it can be ten times an average industrial wage. The Minister is coming into a budgetary period where he is making appeals to patriotism——

The Deputy is moving away from the amendment to a Second Stage speech.

——for people to restrain and take pay cuts. I come back to the principal point.

The Deputy is moving away from the amendment.

This is a legitimate matter of public interest to give us an indication of what the likely work-out of this package is to be. Is there an incentivisation process in the package? Is there a bonus element? What budgetary figure does the Minister have in mind for the rough cost? Is it below €300,000? The Governor of the Central Bank and the regulator——

The Deputy is repeating herself.

——are in that field. Is it above €400,000?

The Deputy is repeating herself.

That is what several chief executives of various public bodies in the public domain are earning. I understand the Taoiseach earns approximately €280,000. Can we know the rough equivalents?

The Deputy is moving way beyond the content of the section.

The Taoiseach told us 18 months ago that he was going to bring the primacy of politics back to the Chamber. That did not happen. If anything, it is worse. In fairness to the Minister's colleague, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, gave the committee the opportunity to make recommendations to him on appointments to the Broadcasting Authority of Ireland. Deputy O'Donnell made a suggestion about a Dáil committee. The Committee on Finance and the Public Service did not have the opportunity to examine the Minister's appointment.

It is important because every person in this Chamber wants the very best and brightest person to be the CEO of NAMA given that the person concerned will have an enormous job to do in the public interest. It is important that the members of the Committee on Finance and the Public Service are given the opportunity to run the rule over whomever this person is because he or she is likely to be the person — contrary to the Minister's opinion on NAMA making a profit — who, if it makes a loss, will be placing a levy on the banks. We all know the pressures the banks will bring to bear if a levy is imposed.

A levy should not be collected in ten or five years' time. Instead, there should be a buy-back clause in place of a levy for the most distressed assets, that is, the grassy fields around every town in every county in the country. A levy will not work. The Minister should scrap the levy and consider a buy-back clause whereby, if the banks scald us now via NAMA with the transfer of loans——

The Deputy is moving away from section 35.

I am addressing it.

The Deputy is moving away from section 35. He should speak to the section.

The CEO will deal with these very important matters.

The issue should be discussed in the right place.

If the banks scald NAMA on the prices paid on these lands now——

Section 35 deals with the appointment of a chief executive officer.

These are the most distressed assets to be transferred to NAMA. The buy-back laws will kick in and the banks in ten years, at the end of the lifespan, will have the opportunity to come in.

I thank the Deputy.

We deliver the money to the State.

The Deputy has moved away from section 35.

These are issues which the chief executive officer will have to implement.

One must be very careful not to move away from any section so I will try to address this section only.

I thank the Deputy.

I would like the Minister to go back to the points referred to in his replies. We all realise that a serious position prevails currently and we all realise the importance of a structure like NAMA and the responsibility that it proposes to take on. We also realise that it takes on great responsibility devolved to it from the Government and which the Government may have had to take upon itself otherwise. We realise that the chief executive and members must be remunerated.

Does the Minister agree that in these very straitened times, the general public is not as tolerant of what it sees as a further escape from the normal rigours of the restrictions which everyone must endure in the present climate? When the public sees something that appears at variance with its own position such as a bonus or extraordinary payment, people will raise questions given that they have increased burdens. Does the Minister accept that they have a valid case, as that is fundamental to the current discussion?

If the Minister does not agree that the public has a valid concern, this part of the debate is of no value whatever. If the Minister is in agreement, it falls naturally that he must determine what is reasonable. I recognise that one cannot govern by public acclamation; it is important for the time in which we live that we realise that governing in such a way does not work.

Will the Minister clarify if a balance must be struck? Along with the burdens of the mortgages and taxation which the taxpayers must bear, they will also have to worry about the burden of NAMA. It is a bridge over troubled waters or, conversely, a leaky aqueduct over their heads. It is not funny and is a serious issue.

It is like a bad dream.

Does the Minister agree that it might be no harm to reassure the House in view of the concerns expressed by members of the Opposition? There is no concern expressed by the Government backbenchers and they may have gone past their stage of concern. I know the Chairman wants me to wind up.

No, the Deputy may continue speaking all night to the section.

The Chairman develops a nervous allergic reaction as soon as I open my mouth. I do not want to continue to the detriment of his general good health. The point I make is serious and must be addressed. I ask the Minister to do so.

I call Deputy Flanagan and then Deputy Rabbitte.

I have been seeking to contribute.

You have not. I call Deputy Flanagan.

I signalled a long time ago.

I call Deputy Flanagan.

Deputy O'Donnell may go before me.

I call Deputy Flanagan.

The Chairman is wrong; fair is fair. I will not be bullied.

I wish to ask the Minister again about the chief executive officer's role and the strategic targets and objectives by which his or her performance will be measured. Why is the Minister not willing to consider outlining the salary and bonuses? There is a public appetite to know about that.

I do not know the salary or whether the CEO will be paid a bonus.

We are discussing an issue that is entirely hypothetical, which is why I cannot answer the Deputy.

The Minister can determine it.

I share Deputy Durkan's concerns.

The Minister can determine it.

Will the Minister lay the job description of the CEO before the House? That might be helpful.

I call Deputy O'Donnell.

Deputy Rabbitte may go before me.

The opportunities for the indignation decibels to rise in respect of this legislation are not always directly related to the importance of the issues under consideration. For those of us who remember the legislation which established the National Treasury Management Agency, one of the reasons for so doing was to take it from under the remit of Civil Service pay rates at the time. In so far as one is competent to judge it — with the little knowledge I have picked up over the years I am not — I believe the NTMA has done a particularly good job. I did not hear anybody on any side of the House denigrate it.

Is it possible for the chief executive of the NAMA operation to become the chief executive of the SPV?

Is it the Minister's intention that he or she may so become the chief executive of the SPV?

I do not want to anticipate SPV matters but, ideally, that would be the intention.

My point is very similar. In the handout given by the Minister, he indicated that one of the benefits of the master SPV structure is that it will permit the full recoupment by the NTMA of any staff or other costs incurred throughout the life of NAMA. Without the SPV structure, these costs would be charged and become expenses of the Central Fund like the NTMA's current administrative costs.

Deputy Rabbitte made reference to the fact that the CEO of NAMA could also be the CEO of the master SPV. Does such a person necessarily need to be a member of staff in the NTMA? Could such a person stand alone, which would allow the Minister to disclose the terms of remuneration, including bonuses, and bring about proper transparency? That leads from Deputy Rabbitte's point.

Does the Minister envisage that the new chief executive will be in a similar role with regard to remuneration as the head of the State Claims Agency or the National Development Finance Agency, which are closely linked to the NTMA? I am one of the people totally opposed to the course of action being taken by the Government but most people are reassured that the NTMA would have such a central role.

It should be remembered that at a meeting of the Committee of Public Accounts earlier this year, the NTMA was severely criticised for losses in the national portfolio pension fundvis-à-vis the performance of other sovereign funds. We also noted in this House that the recent performance has been much better and has even been pretty good. Does the Minister envisage the new chief executive having that kind of role?

The Minister will respond and after that I will put the question.

Yes. That is the reason the agency is being set up under the aegis of the NTMA. Deputy Rabbitte referred to the history of this matter and I am simply conforming with precedent in this regard. I have listened to what was said in the House and I will reflect on it. It is a position of considerable public importance but no person associated with the NTMA has been called into question in the past because of the performance of duties.

As Deputy Durkan reminded us some time ago, this question of bonuses is of great importance. I do not know if the chief executive will be paid a bonus or salary and it is clearly a matter for the board. Bonuses are undesirable in the current climate and I would have thought they would have to be very carefully structured if they are to be paid. I cannot predetermine the matter.

On the disclosure of salary, there is a freedom of information appeal pending on the matter at present and I would prefer to leave it where it lies for the time being.

Will the Minister publish the job description?

Question put and agreed to.
Sitting suspended at 4 p.m. and resumed at 4.20 p.m.
SECTION 36.
Question proposed: "That section 36 stand part of the Bill."

I must advise the House that, following consultation with the Comptroller and Auditor General, I will introduce a Report Stage technical amendment to subsection (5).

To section 36, but there is no amendment yet.

I was interested in subsection (5) because of the designation "accountable person", which is curious in terms of its relationship with the Committee of Public Accounts.

There will still be an accountable person under the revised amendment. Deputy Rabbitte will be able to discuss the matter still.

Why will this person not be the Accounting Officer in the normal way as opposed to an accountable person? I have a protocol with me agreed by the Treasury across the water where, in a body like NAMA, someone was designated the Accounting Officer. When I need the protocol, I cannot lay my hand on it. In the arrangement across the water, the person in question would be the Accounting Officer and be responsible and directly answerable to the Committee of Public Accounts.

I remind the Minister that it is not just in Her Majesty's realm that these arrangements apply. They also apply here. For example, we recently made the Garda Commissioner the Garda's Accounting Officer. Where the property agency, in which the Minister for Justice, Equality and Law Reform may or may not have been involved, is concerned, we specified that its chief executive be the Accounting Officer.

Given the functions of this chief executive and the sensible indication by the Minister that he or she will be the CEO of the special purpose vehicle, why should he or she not be called the Accounting Officer for the purposes of the Act and the normal relationship with the Committee of Public Accounts?

As I understand the position, an Accounting Officer must have a Vote. This officer will not have a vote. The same position arises with the chief executive of the National Treasury Management Agency.

I know the Minister has——

I can try to conduct research to shed further light on the matter for Report Stage. For example, the NTMA is charged on the Central Fund as an incidental to the funding of the national debt. Therefore, the person responsible is an accountable person rather than an Accounting Officer. The Garda Commissioner has a Vote from the Department of Justice, Equality and Law Reform by way of delegation from the Minister, so he is an Accounting Officer in respect of the Garda Síochána Vote or that part of it committed to him.

I appreciate that. It is the answer the Minister gave me the last night. The protocol from Her Majesty's Treasury that I cannot find sets down that, notwithstanding this consideration, the person may be designated as an Accounting Officer. I take the Minister's point about the Garda Commissioner having a Vote. What is the correct term for the property agency?

Is the Deputy referring to the management body or the registration authority?

In the case of the Property Registration Authority, the same situation does not arise. It does not seem desirable to have this at arm's length. Why should the Secretary General of the Department of Finance be its Accounting Officer? I did not ask the Minister whether this was the case, but who is the Accounting Officer?

Not for the NTMA. The chief executive is the accountable person.

The chief executive of the NTMA is——

The accountable person.

Yes. The NTMA's boss seems to be at a considerable remove from where the action is and whom is taking the decisions.

I will do further research on the question, as I am not sure. For example, the Oireachtas Commission is charged on the Central Fund, but its Clerk is an Accounting Officer.

Section 36(2) refers to NAMA's strategic targets and objectives. Would it be possible to put that information and the job description of the CEO on NAMA's website?

Yes, on the commencement of the legislation.

Given the Minister's presentation, the SPV is now a critical feature in the Bill's architecture. It seems that the chief executive officer might also be the CEO of the SPV. I am at a loss to understand why the relationship between the CEO and the SPV is not being spelled out. Since the SPV will be controlled by private interests, what if they want to appoint their own person as the designated executive? They will control a majority of the shares. There ought to be a specific reference in the Bill to special entities, SPVs or whatever else the Minister has in mind.

There might be a bolshie set of private investors in the SPV. After being pally with them for some time, the Minister might take a different view of how things——

No one is pally with me in this job.

——should play out, but they want their own person in an executive function. They will have 51%. The Minister has told EUROSTAT that the SPV is a real off-sheet vehicle. Were this the case, it would have real powers of its own. If it is simply an arrangement of convenience, surely the Minister ought to refer to the relationship between the chief executive and special entities, companies, SPVs and so on. He would be wise to do so. We all know that marriages are made in heaven and divorces are made in detail. If there were to be a row, God forbid, between the investors in the special purpose vehicle and the State, where would the Minister's protection or that of the chief executive officer of NAMA, lie? I do not mean they could decide to ignore the chief executive officer but they could decide that their position as the majority shareholders in the special purpose vehicle would give them an entitlement to nominate their person, their executive, additional persons, equal persons, equal executives, to the Minister's chief executive of NAMA.

All these issues can be addressed by way of shareholder agreement and this is the advice I have received. I will look at that specific issue with regard to the CEO, as I undertook to look at the position of the fiduciary position of the board at an earlier request from Deputy Rabbitte.

A Cabinet Office document and code of practice, entitled Public Bodies: A Guide for Departments deals with financial management and accountability. Chapter 6, sub-paragraph (2) makes plain:

2.2.1 The Chief Executive of the NDPB [non-departmental public body] is normally designated as its Accounting Officer. The designation is usually made by the Permanent Secretary of the sponsor department, the Principal Accounting Officer, although an Additional Accounting Officer within the sponsor department may do so if they have responsibility for the body in question.

The Minister has stated there can be a common chief executive officer between NAMA and the master SPV. This appears to contradict the provision that the SPV must have autonomy of decision in its day-to-day operations. How does the Minister reconcile his desire for the SPV to be seen as a stand-alone institution when the same chief executive officer is in NAMA which is fully controlled by the State and in an SPV which is 51% controlled by private investors? Will there be one CEO for NAMA and the master SPV and separate CEOs for the sub-SPVs if they go ahead? Will the Minister say if the sub-SPVs are going ahead? How will this be compatible with the rules as set down by EUROSTAT which states there must be decision-making autonomy?

I replied to the previous intervention on this subject by Deputy Burton. These matters can be regulated by shareholder agreement. There is an element of unreality being introduced into the debate about this subject. I have made it clear that the operation of the vehicle cannot impede the performance by NAMA of its statutory functions. We can continue with this debate about the vehicle for the next day or two. I understand there are legitimate questions to be asked about it. We can continue the debate but it has all the unreality of the debate Deputy O'Donnell's party conducted about external association for about 20 years and reference to dictionaries. This is the Bill that will regulate NAMA. Under this legislation NAMA has power to set up this investment vehicle and can enter a suitable arrangement to entirely protect the statutory purposes of NAMA. That is what this is about.

I cannot allow the Minister to get away with that.

I must put the question, that section 36 stand part of the Bill. I must put the question.

Chairman, please, in the interests of fairness——

I declare that——

The Minister——

We are moving on.

The SPVs are private investors and the Minister is not dealing with the issue. He gave us a memorandum of understanding which contradicts what he has just said. I expected the Minister would address the point because it is too serious.

The Deputy is now being disorderly and we have moved on to deal with section 37.

The Minister is amused.

It is too serious a matter.

I have replied on many occasions.

The Minister has not——

Deputy O'Donnell, you are being disorderly.

The Minister has not replied to it. He has been evasive on the issue.

Question put and agreed to.
SECTION 37.
Question proposed: "That section 37 stand part of the Bill."

I advise the Chairman not to get carried away. I wish to raise a question.

Section 37 deals with the resignation of the chief executive officer and section 38 deals with the removal of the chief executive officer. In view of what happened with regard to the chief executive of FÁS and questions arising regarding chief executive officers of various bodies in the public domain, I ask the Minister to clarify. Will the chief executive officer of NAMA be a contracted employee? I refer to the various arrangements set out in section 38 ——

We are discussing section 37. The Deputy can move on to section 38 after that.

I wish to refer to both sections. Where the chief executive officer decides to go — as in the case of the chief executive officer of FÁS or so we are led to believe — are guidelines available with regard to resignation packages? This is a reasonable question in the context of what has happened. We have reason to believe that this chief executive officer will be one of the highest paid public servants in the State. If after two or three years the chief executive officer decides to call it a day, will he or she have a specific package, golden boot, golden parachute?

I agree with Deputy Burton that this issue should be regulated in the contract which such a person enters into. Clearly since no such person has been appointed and since there is no contract under negotiation or agreed, the issue does not arise at this stage. However, I will draw Deputy Burton's concerns to the incoming board when it is appointed because it is an issue of importance. The position regarding resignation or retirement is spelt out with clarity in the contract of appointment.

Question put and agreed to.
SECTION 38.
Amendment No. 71 not moved.

I move amendment No. 72:

In page 40, subsection (4), line 27, to delete "undersubsection (3)“ and substitute ”pursuant to subsection (3)”.

Amendment agreed to.
Section 38, as amended, agreed to.
SECTION 39.

Amendments Nos. 73 to 75, inclusive, are out of order.

Amendments Nos. 73 to 75, inclusive, not moved.
Question proposed: "That section 39 stand part of the Bill."

Why was it decided to structure NAMA in this way whereby the NTMA would provide the services to NAMA rather than the traditional direct relationship? It seems a cumbersome arrangement. There are some skills in the NTMA on which the Minister has relied in advising him of the development of NAMA, although at one stage it seemed that the chief executive officer was outside the loop in that regard.

Notwithstanding that, it seems there is an indirect arrangement under which the NTMA assigns staff, rather than NAMA doing so directly. Having chosen this rather unusual approach the Minister then suggested the special purpose vehicle would get him out of the unusual approach set up in the first place, such that there would not be a charge on the central fund although NTMA activities otherwise become a charge on the central fund. I am keen to know the reasoning behind this relationship. Earlier sections have obscured the terms and conditions of the chief executive officer. When establishing a body such as NAMA, it would seem more straightforward to establish the controls fairly clearly with the various checks and balances appropriate for that body, rather than cycling them through NTMA. I wish to hear a little more about the thinking behind this.

To be clear on the substance of the amendment, I refer to section 9(3) which provides that, "Except where otherwise provided by this Act, NAMA is independent in the performance of its functions under this Act." There is no question mark about the legal merits of the amendment and this is provided for in the Bill. The wider question the Deputy wishes to explore is the relationship between the NTMA and the National Assets Management Agency. The Government has been clear in its intent that the agency should be set up under the aegis of the National Treasury Management Agency. First, this is important because several personnel from the NTMA have already worked on the project. Second, it is important because it allows the agency to benefit from the substantial international reputation of NTMA. I was very pleased to hear Deputy Rabbitte and other Deputies disavow any intention to impugn the capacities of the NTMA in this debate. For this reason the Bill provides clear roles for the NTMA on the board of the agency and in the provision of staff and other resources to the agency.

Question put and agreed to.
SECTION 40.
Amendments Nos. 76 to 81, inclusive, not moved.
Question proposed: "That section 40 stand part of the Bill."

I refer to the remarks of Deputy Rabbitte. As I understand it, the NTMA will be the Accounting Officer for NAMA. Will such an arrangement be the result of the legislation?

No. The chief executive will be the Accounting Officer.

However, the NTMA will assign resources on the recommendation of the chief executive of NAMA. It seems a strange arrangement that a body would assign resources to another body over which it has no control. The body assigning the resources will not be the Accounting Officer. It will be the body receiving them. Why cycle it all through the NTMA? I understand the reputation of the NTMA is good and that there might be some connection between them.

There is the advantage of common staff expertise, including for recruitment in this area.

However, their task is not the same. It is somewhat like suggesting the FÁS budget should be cycled through Enterprise Ireland because they might recruit similar people. We need clarity in respect of who is accountable for what. If a body procures resources it must be accountable for them and it must know how they are operated. It must be able to hold accountable the various executives dispensing those resources. Why create this camel where one tries to cycle the stuff through another hump to get it back out? I cannot intuit or understand it.

Section 40 envisages the recruitment of staff for NAMA via the NTMA which has a proven track record in recruiting quality staff for the State in financial operations.

However, they will be employees of the NTMA.

I refer to the requirements under section 40(2), including the necessity for good character, not previously disqualified, and especially having no material conflict, whether actual or potential. I strongly support this provision. I recognise that the chief executive of the NTMA and the acting director of NAMA have indicated this would be a requirement. This is a proper requirement and a very good section which sets a floor. The recruitment of people to NAMA involves a situation of great conflict, difference of opinion and difference of approach to valuation. We need persons whose probity is proven beyond any reasonable doubt. This must be a hallmark of any recruitment into this body. I welcome the section and I strongly welcome the position taken by the chief executive officer of the NTMA. It is somewhat unusual in the history of the Irish public service.

Section 40(3) states, "Before the NTMA assigns a member of its staff to NAMA undersubsection (1), the NTMA shall ensure that he or she provides a statement of his or her interests, assets and liabilities to the Chief Executive Officer of NAMA and the Chief Executive of the NTMA in a form that the NTMA specifies.” Perhaps all the people transferred in an acting capacity to NAMA, including senior people, have done this already or have been requested to do so by the chief executive officer of the NTMA. I believe it is a very good measure because there is a great concern about the operation of NAMA. I have raised this matter with the Minister previously. Persons may be compromised, especially in banks which are part of the NAMA process, by a very high level of personal lending, over and above the value of the family house. Several persons associated with Anglo Irish Bank have significantly large lendings and loans from that bank and are seriously compromised. This requirement should apply to members of the board as well. I do not intend to demean the qualifications of persons putting themselves forward to be members of the board. The vast majority of such persons will meet all the characteristics set out in the Bill. This is a new standard for a public appointments process. I understand the chairman of the NTMA and the managing director designate of NAMA were heavily involved in drawing up this code, which is to be commended. People may have observations related to how appropriate it is but I believe the section is a very good addition to the Bill and I welcome it.

Question put and agreed to.
SECTION 41.

Amendment No. 82 has already been discussed with amendment No. 50.

I move amendment No. 82:

In page 42, paragraph (e), line 1, to delete “removal” and substitute “suspension”.

Amendment agreed to.
Section 41, as amended, agreed to.
NEW SECTION.

I move amendment No. 83:

In page 42, before section 42, but in Chapter 4, to insert the following new section:

42.—For the avoidance of doubt, notwithstanding anything in this Chapter, NAMA shall be an independent entity from the NTMA, shall operate at arms length from the NTMA and shall not in any material respect, be connected to the NTMA save for the provision of resources and staffing under this Chapter.".

This amendment arose from an earlier discussion. We seek to have clarity in the relationship and the organisations should be at arm's length, other than for the matter of provisional resources. The Minister has probably offered assurances that this will be the case.

I wonder whether there are potential conflicts of interest between bodies that manage the cost of debt and those which are in the asset recovery business. There certainly is a view that the cost of debt is about keeping down the charges while asset recovery might have a different set of priorities. Asset recovery has a different function and tying it in so closely raises doubts because the NTMA does not have the same purpose While I have not thought through the potential conflicts, they certainly are different. I refer to the function of raising money as opposed to that of recovering assets. I ask the Minister to assure members that they will operate at arm's length. I am not overly concerned about this amendment.

They must operate at arm's length and, if necessary, a code of practice can be drawn up in that regard. However, I agree with Deputy Burton's earlier comments. It is important that the State must create confidence in its own institutions. I will also take on board the Deputy's point about whether the board itself could be subjected to a similar requirement. As for the Deputy's interesting comments about the bank of which the State owns 100%, its new chief executive is anxious and is conducting a comprehensive survey of the issues to which the Deputy referred.

Amendment, by leave, withdrawn.
SECTION 42.
Question proposed: "That section 42 stand part of the Bill."

I refer to the help to be given to NAMA by expert advisers and service providers. Does the Minister hope that NAMA will use the NTMA's existing expertise rather than employing external consultants? Will a set budget be put in place to ensure that consultants will not be employed willy-nilly and that costs will be kept low?

Obviously, the plan always has been to have a slim, lean and efficient NAMA and not to follow an examples such as that provided by the savings and loan rescue in the United States, where a large staff was employed to deal with matters. However, NAMA will need some external assistance and this is reflected in the business plan.

Will a budget be set in respect of consultants' fees?

Question put and agreed to.
SECTION 43.

Amendments Nos. 85 and 86 are related to amendment No. 84 and they may all be discussed together.

I move amendment No. 84:

In page 42, lines 32 to 34, to delete paragraph (c) and substitute the following:

"(c) makes all efforts to ensure that conflicts of interest do not arise while contracted to NAMA and for a period of 3 months after the cessation or completion of a contract for the provisions of services under this section, and to declare any such conflict (actual or potential) to NAMA,”.

This issue relates to the conflicts of interest of those who will provide professional advice. It seems there is a small circle of those who advise on legal and financial issues. One frequently sees the same companies cropping up on both sides of the argument and which provide advice simultaneously to both the Government and the banks. While one is led to believe that Chinese walls exist within such companies that assure adequate protection, why would one choose such large companies if one believed they were made up of Chinese walls and that a company's expertise and assembled experience were not completely available to those who engaged it? I believe an issue of potential conflicts arises in this regard when the State engages legal and other advice.

Something like a cooling-off period is needed. There must be a way to assure people that there is not such almost free movement. I refer to a scenario in which one could move from advising the State, having gained access to its information, to suddenly providing advice to someone who is on the other side of the counter, that is, acting as poacher as opposed to gamekeeper. I am unsure whether I have an answer to this problem. I have tabled an amendment to try to offer a cooling-off period as a way to manage conflicts of interest or to emphasise their importance. However, this is an issue about which there will be some concern because of the small number of people who turn up repeatedly on all sides of the argument. I seek the Minister's views on how one can best be assured that the State's advice is independent and of the best quality and that such advice is not being availed of by others who employ the same companies.

The difficulty with this section is the issue of insider knowledge, insider trading and insider advantage because someone is working on a NAMA project. The major accounting and legal firms in this State that consistently appear as providers of such services to organisations such as NAMA number less than ten in either case or perhaps even less than five. NAMA will be all about information regarding the management of the loans, land portfolios and so on. For example, investors who acquire information about the likely approaches to the pricing of underlying assets and so on will have highly valuable insider information. Normally, certainly in the United States, there are severe restrictions on the use of insider information. While I must ask the Minister how this would be done, section 43 contains a worthwhile exhortation to behave appropriately and properly. Do penalties exist and is it a criminal offence to use insider information in a way that is inappropriate?

Two considerations arise in respect of insider information. The first consideration is that the State itself would be cheated regarding the carrying out of the work. The second pertains to competition and the free market in that persons interested in acquiring assets would be advantaged to the disadvantage of other business people in a small town, area or village in which NAMA land was available. While one cannot legislate for everything, has the Minister thought about how these fundamentally ethical issues will be addressed? The Fine Gael amendment attempts to put some distance between the service providers and NAMA after they have left its service. Has the Minister a more general or robust approach in mind? The experience of several tribunals has done great damage to the notion of public ethical values in this country and has cost a lot of money.

I do not wish to restrict the Deputy but she has made her point.

This is important. I am sure the Minister has given consideration to this matter. At one point I suggested to him that because so much money was involved, the chairman of NAMA ought to be someone like a retired High Court judge in order that probity, as well as an economic approach, etc., would be a hallmark. All members have stated repeatedly that this is an extremely small country. It is likely that most of these advisers will have gone to 20 schools. The bulk of them will have attended——

Surely not that many.

I stand corrected by Deputy Rabbitte. They will be in the same yacht clubs, sports clubs and hurling clubs. The Minister envisages NAMA as a greater Dublin exercise but he referred to——

CBS boys are still rising to the top, Deputy Burton will be glad to hear.

——€240 million per year in expenses going into this. Some of this will go back to the banks and will be well received by them. From the Minister's answers yesterday, some €100 million to €140 million per year will be provided in fees to various service providers. It is a vast amount of money in a depressed market. If someone has inside information that can be used, it is an even greater amount of money. I would like to hear the Minister's thoughts on this issue.

Earlier, I praised the requirements in section 40. Could these requirements apply to service providers? The way Chinese walls operate in a big partnership is that some partners will do the NAMA work and not communicate with other partners about it, but Ireland is such a small country that we must strive for a situation where NAMA is robustly fair in its business dealings and not influenced by special positions. This is not an easy thing to do because we also want it to be economic and to proceed if it is the Government's chosen vehicle, although the Labour Party does not agree with it.

I have two concerns — the use of consultants and who are the consultants. The use of consultants is prevalent as one can see from the example of local authorities installing a pedestrian crossing or moving a speed limit by 100 m. The engineering section used to prepare the scheme but that no longer happens and it is now put out to consultants. Local authorities are one example I have cited but this also applies to the HSE, Departments and the NTMA. Why has expertise not been built up in the Department over the years when there was affluence and opportunity to bring it in?

We hear about the Chinese walls but in the real world people have suspicions and concerns. It always seems to be the same group that is employed and takes millions of taxpayers' money for its work. It causes great suspicion.

Some 90% of liquidations and receiverships seem to be handed to one group of accountants in the city. They are known as the big ten. I am advised by auditors outside the city that their prices are some 50% to 60% cheaper than the rate in the city but these people on the outer reaches are not being engaged. There is an issue of efficiency in this respect. Perhaps it is not the Minister's portfolio but it is a major issue. People in the provinces, as they are called by some individuals, are just as competent and able and, more importantly, are much hungrier for the work than some of the city operators.

The fears being raised are real. This is a real minefield and I am not sure what are the solutions. I am not sure the Fine Gael amendment meets this problem. It is an attempt to deal with one aspect of this, where someone has had a hand on the levers of knowledge and then leaves a company. The Fine Gael amendment provides for a period thereafter in which a person cannot use the knowledge to the advantage of new clients. That is a real problem. I am sceptical in any event about the effectiveness of Chinese walls in this town. Everything I have learned, from the beef tribunal to the present time, confirms my scepticism. The Minister has gone to extraordinary lengths, more than in any legislation I can recall, to deal with this question of standards in respect of other issues that have arisen, some of which we have discussed today. This is where a lot of the action resides. At a time when many solicitors and other professionals are out of work, the small number of big companies will regard NAMA as a cash cow. By God, what a cash cow it will be for them for a long time to come.

It is about the knowledge and information that these companies have. It is very difficult to guard against the conflict of interest issue raised in this amendment. Some projects will be intended to be completed, an assessment will be made and the view will be taken that it is better to finish the project or that the development land should be developed as quickly as possible while other land returns to agricultural use. This information is in the possession of the advisers. Fine Gael attempts to provide for a cooling off period and this is fine, but not a great deal will happen all that quickly. It will not happen within three months. At the same time, one cannot unreasonably trammel someone from doing other work. I do not suggest I have the solution but the potential in this area ranges from conflict of interest to straightforward corruption. I know companies in this town and if one were to believe all one is told about the Chinese walls, one would think we were on a different continent.

In the same vein of consultants, there is a provision of €2.6 billion for expenses and consultants. How much has the Minister spent on consultants to date? I watched the Minister across the Chamber day after day and I do not believe he has confidence in what he is purporting. He is acting like a defence lawyer on this, defending it without any great belief.

Mr. Peter Bacon came out front to deliver NAMA to the public. What will be his position in the organisation? If the Government had taken heed of Mr. Bacon's reports of 2000 and 2006, we would not have NAMA, but the Government did not pay heed to his reports.

Deputy Sheahan is moving off the section.

While I have the floor, I took another note that the principal to be repaid by borrowers will be €1 billion in 2010 and 2011, €2.5 billion in 2012 and €7.5 billion in 2013.

The figures are quite interesting but they do not deal with section 43.

In 2012 and 2013, when the Minister is on this side of the House, will he stand up and justify how he came to these calculations?

It is critical that the public has confidence in the process of NAMA. What we propose is common practice in business whereby people who are taken on in particular roles normally have to sign a contract to the effect that they will not engage in activities for a period of time after leaving the post. It is perfectly reasonable that people involved in contracts with NAMA would allow for a three-month period after the contract is completed.

Does the €240 million per annum being incurred by NAMA include the costs incurred by the National Treasury Management Agency for the work it is doing for NAMA? That is not quite clear. Reference is made to administrative costs with outsourcing of services, fees paid to banks on a cost recovery basis and fees paid to a master servicer acting on behalf of NAMA. Will the Minister clarify this point? How much will be incurred on an annual basis by the National Treasury Management Agency in dealing with its work on behalf of NAMA?

Is the Minister satisfied and confident that there are no conflicts of interest with consultants engaged on NAMA preparation work? It is critical to have public confidence in the project and for that to exist, the public must feel that there are no conflicts of interest and that what is being done is being done in the public interest. Will the Minister address the matters of conflict of interest, the current situation, our amendments and answer the question on whether the National Treasury Management Agency is included in the €240 million annual running costs for NAMA? How much will be incurred per annum by the National Treasury Management Agency for dealing with NAMA's affairs? How many employees of the National Treasury Management Agency will be engaged in work on behalf of NAMA?

That is a long list of questions. I will start with Deputies Bruton and Burton who raised a question and stated they were not sure how one would address it. One way it is addressed is in section 199 of the legislation which includes a strong criminal provision on confidential information. Confidential information is defined as meaning "information relating to the commercial or business interests of a participating institution or of a person who is or has been in a relationship with a participating institution". The definition also includes "information that is subject at law or in equity to a duty of confidentiality" and "information that, if it were contained in a document, would have the result that a person could not be compelled to disclose the document in evidence". It also includes other considerations. This offence applies to board members, officers and staff members of NAMA and persons otherwise performing duties on behalf on NAMA or the NTMA. This extends to a professional person retained.

It is essential to provide for a criminal offence in this area because of the sensitivity of the area. The question is how far beyond that we can go. To reassure Deputies somewhat, I believe Deputies contributing to this debate did so with a particular context in mind. This context was the banking crisis we have witnessed to date. The Minister, the Department and the NTMA have sought and obtained expert advice in the legal, accountancy, banking and investment areas. That advice has been given and in virtually all cases where it was possible to do so, it was tendered for. I must state that very competitive rates were obtained in those tenders because of the anxiety of various firms to advise a sovereign State. It is of attraction for a senior professional body to advise the Government of Ireland because it is a substantial professional cachet for them. Some of the fees on tender bear no relationship to the commercial rate those firms normally charge.

The context in the legislation is somewhat different to that context because the volume of professional advice required here is very substantial and somewhat more routine. When one is engaged in the valuation of a loan, a valuer can be of assistance, but no one valuer will be in a position to value all the loans. An accountant will also be of assistance in a valuation but no one accountant will be in a position to advise on all of these loans. In the investigation of the title to the collateral a lawyer, ideally a solicitor, will be of assistance — it would be rare that any such solicitor would have need to have recourse to counsel except occasionally, so I take it in general that it would be a solicitor. No one solicitor will be in a position to check the title and legal position of the collateral for all of these loans.

The professional services to be provided under the legislation are extensive, as Deputy Burton has been pointing out since the beginning of the debate and she is absolutely right. While they are extensive in scale, they are more routine in character than the type of professional advice the Government had to have recourse to since the banking crisis began. They are services for which it is easy to tender. It is important that the tendering is done in an entirely objective and impartial way, that the NTMA does that tendering and that those who wish to render services are given an opportunity to do so and that the prices are competitive. It is not as difficult to price these tenders because conveyancers have their price as do solicitors advising generally on banking securities, auctioneers conducting valuations, and accountants evaluating books and the solvency of individuals and their prospects. All of these matters are measurable for an appropriate fee in a market where there is a great hunger to render professional services. I do not dispute anything with the Opposition. I am making the point that this is the context in which all of this professional advice will be retained.

While I agree with Deputy Rabbitte and other contributors who made the point that Chinese walls are very difficult to sustain in a small jurisdiction, I do not think the area of professional malpractice here will relate to the Chinese walls as such because the decisions are not being taken at such high a level in professional terms that it is a danger. Rather, the danger is that of the general intimacy of Irish life and the possible coincidence of interest between a given professional person and a given person having his or her loan valued. The strongest precaution against that must be taken in the tendering procedures which the body itself must take and in the robustness of supervision arrangements for valuation. There is also the backup of a criminal offence for criminal wrongdoing.

That is by way of general introduction to the subject and I will go through the Fine Gael amendments in detail. I know everyone is trying to do their best on this. Fine Gael proposes a set of standards for advisers and service providers whereby NAMA would seek to ensure in its contractual relations that each of its advisers and service providers would avoid or manage conflicts of interest. That is correct but it is provided for in section 43, namely, the management of conflicts of interest. The proposed amendment goes further, as Deputy O'Donnell pointed out, and requires this cooling off period of three months after the cessation or completion of a contract for the provision of services under the section. That should not be in legislation but it is something at which the board could look in the context of its recruitment of advisers because it will have to structure it not only to include a provision like that but to include a number of other provisions.

Amendment No. 85 states that: "NAMA shall not enter into any contract for the provision of services by expert advisers or service providers where such advisers or service providers are likely to have a conflict of interest by reason of their providing, or having provided services to the participating institutions, or to customers or clients of the participating institutions relating to eligible bank assets which have been, or are to be, acquired by NAMA under this Act." That is very sweeping as a legal provision in a statute and, in effect, it might prevent many persons from advising NAMA who are perfectly reputable.

This amendment raises the following issue. There is a great difference between a professional firm, which has rendered advice on an occasional basis for a particular client who happens to be a person who is entering NAMA, and a business, which has systematically depended for the bulk of its business on its relationship with a particular client who is entering into NAMA. I am not criticising the Deputy because he wanted to raise the issue but the amendment does not address it. Again, the board will have to address that issue in looking at who it retains.

A percentage of fees.

The percentage of fee income and the dominant position of the firm in question is an entirely valid issue to raise.

Amendment No. 86 relates to advisers or service providers. There is a very long list of them and of the requirements in regard to their remuneration, invoices and fees. That imposes a huge administrative burden on those advisers and it is not clear what the purpose of this is. Obviously, the chief executive and the board will have to account for expenditure.

Deputy O'Donnell asked about the apportionment of costs between different headings.

I asked about the National Treasury Management Agency in terms of being included——

The NTMA is not included in the salary heading.

Does the €240 million include——

It does not include the NTMA in regard to salaries.

Therefore, the business plan does not include all expenses incurred in dealing with the NAMA assets. It is a very critical point.

The accounts will include it.

The business plan basically deals with €240 million.

That is correct. The business plan does not account for it but the accounts will do so once the staff have transferred to NAMA.

What figure will be incurred on an annual basis by the NTMA in terms of dealing with NAMA, because that will give a more accurate position? The Minister said the net cash flows in terms of the management of NAMA will be €5.48 million. Clearly, that is not an accurate figure because the NTMA is involved in much of the day-to-day running of NAMA. The salary of the chief executive officer is paid by the NTMA and not by NAMA. It is critical that this point is dealt with. The Minister produced a business plan stating that there will be €5.48 million net cash flows over the ten year period.

This year the estimated sum involved is €1.3 million. In the next year——

Is this for the NTMA?

This is the NTMA cost.

Some €1.3 million.

That is €1.3 million per year which is approximately €13 million over——

That is what we gave to Rody.

There is more than one individual involved here.

How many staff are involved?

We are discussing the Bill on Committee Stage——

It is €1.3 million per annum.

——and not a business plan.

It is critical in the context of the Minister's reference to the chief executive officer.

I thought we were discussing professional engagements.

We are discussing section 43.

We are discussing——

I thought we were discussing the amendments the Deputy tabled in connection with professional engagements.

I assume if the NTMA is doing work, it is a consultant on behalf of——

We are discussing professional standards and audits and not the business plan.

We are discussing section 43. I beg the Chairman's indulgence. Amendment No. 85 deals with the provision of services to NAMA. The NTMA provides services to NAMA. The Minister referred to the €1.3 million. We are entitled to know how many staff are involved in working with the NTMA on an annual basis.

We had a debate a few minutes ago on NAMA and the NTMA but the Deputy did not ask that question. I do not have the information to hand but I will arrange for it to be forwarded to the Deputy.

The Minister does not have the information to hand?

No. This cannot degenerate into a general question time with no reference to the section we are supposed to be discussing.

I raised the €1.3 million per annum.

The NTMA does not stand, in regard to NAMA, in the position as the professional advisers comprehended by the Deputy's amendments.

Will the Minister forward the information to me?

NAMA's functions will largely be to look at the future potential of land which it is in charge of and how to maximise its potential value. The Government has employed consultants in recent years and the point has been made by Paul Sweeney of ICTU that their ideological outlook is in the one direction, that they tend to be anti the public realm and that they have a particular view of economics.

Will the Minister ensure the service providers employed by NAMA involve a much broader outlook in terms of economics and the use of land? One could say the most profitable way to use land is for housing or commercial development in a rising property market but we do not necessarily want to go down that path again because we want sustainable development. We must deal with issues such as climate change, ensure enough food is produced, develop other niches and so on.

Will we bring in consultants with a different outlook and who will look at land from the perspective of food production, forestry and sustainable planning and who have a very positive view on the need for public space in terms of quality of life and well-being? Will we bring in people who are not the usual suspects in terms of economic consultants, lawyers and so on? Will the Minister explain how he will maintain control over the cost of consultants, in particular legal consultants?

The Deputy moved slightly off section 43.

I will deal with the points raised by Deputy Tuffy. The only economic consultant retained to date by the NTMA in connection with this, and as was mentioned opposite, was Dr. Peter Bacon who has had no connection with this project since the announcement in the budget earlier this year.

In regard to future economic advice, I will bear in mind what Deputy Tuffy said. I have agreed to an amendment in the name of her party which will include among the purposes of NAMA the social, economic and sustainable development of the country.

In regard to the question of ideological outlook, when one speaks about valuers, solicitors and accountants, I am not sure that ideological outlook will colour their valuation. The focus of this debate has been on other factors that might colour their valuations and their assessment of the value of the loans.

I agree with Deputy Tuffy that it is important we do not have an ideological assessment about where this is going because it would be most undesirable. The legislation has been drafted in such a way as to ensure we do not have a further property bubble. That is a matter to which we might return when we come to valuations.

Is the amendment being pressed?

I am no expert in the field of conflict of interest and I do not pretend to have cracked it in these amendments, but it was worth while raising it and I am somewhat reassured that the Minister has indicated it will be an issue for the board to examine. I presume internal auditors and advisers to the board will make sure there is a certain level of alertness.

I am pressing amendment No. 84 as it is sensible. Based on the Minister's argument in respect of the other two amendments, I accept they ought not to be moved.

Amendment put and declared lost.
Amendment No. 85 not moved.
Section 43 agreed to.
Amendment No. 86 not moved.
Section 44 agreed to.
SECTION 45.
Question proposed: "That section 45 stand part of the Bill."

I would like clarification on one aspect of this section. Does the section refer to ordinary debt securities or six-month bonds? The Bill provides that these debt securities may bear no interest if the Minister sees fit. Was that provision made for a particular reason? Was there an expectation that interest rates could fall very low and he would need that facility, or does it genuinely indicate some discretion on the part of the Minister to set terms that could be zero? The same provision is repeated in section 47 in respect of the subordinated bonds we discussed earlier, and the Minister was at pains to point out that these were high-yielding bonds, at 5% at least; yet he is giving himself the legal provision to set the interest at zero.

Yes. This is simply to give the Minister widespread power. It is true that in the case of standard bonds, if I can call them that, a study of what has happened in the last year will show it was conceivable at one stage that central banks would set negative interest rates, resulting in a zero bond. It is more unlikely in the case of the subordinated bond issue because that tends to carry a higher level of coupon. In both cases the purpose of the section is to ensure the Minister can specify that the bond carries no interest, where appropriate.

Question put and agreed to.
SECTION 46.
Question proposed: "That section 46 stand part of the Bill."

The provisions in this section give NAMA a wide power, but subsection (1), paragraphs (b) and (c) provide for the creation and issue of debt securities — not just interest-bearing securities, as has been previously discussed — “for such cash or non-cash consideration or deferred consideration as it thinks fit, and ... subject to such terms and conditions as to repayment ... as it thinks fit.” Does the Minister have an example of deferred consideration in mind? Non-cash consideration, broadly speaking, would presumably consist of land and so on. Could the Minister explain what he has in mind?

The considerations in general would be the bank assets that are being acquired.

Clearly they are a non-cash consideration. However, the option of paying cash, I presume, is left open. For example, in a case in which a loan has been realised but there is a fund standing to the account, the fund would simply be transferred to the agency.

What is meant by deferred consideration? Can the Minister give an example?

If a loan was on such terms that it only became repayable at a future date, for example, it would be a deferred consideration. It would not have immediate value. If we had a loan whose repayment was designated as being at a future and ascertained date but there is no immediate payment obligation on foot of the loan, one could argue that was a deferred consideration. However, I would prefer to check the matter further for the Deputy.

I would be interested to hear some examples of what the Minister has in mind, particularly in view of the fact that it is likely there will be all kinds of deals given that the powers of NAMA are wide in terms of deal structures. The use of a privately controlled SPV increases the scope for such deals. I would like to get some sense of this through examples. We know, for example, about the top ten developers and the fact that their loans will be dealt with immediately. I would like to hear examples of such deals.

I presume the Minister is saying that the prospect of interest rates falling to zero, which he said loomed large for a brief time, is less likely as far as we can foresee at the moment. The structure of what he is putting in place is to allow him the flexibility of an inducement in terms of the debt securities issued. The banks will be able to make a profit, presumably, on the bond, and that in turn should encourage them to lend it.

I presume that is the theory. Does the Minister intend to stick with the provision set out in subsection (1)(b), “bearing interest at such rate as it thinks fit, or no interest”? Is it the Minister’s view that the last saving grace should continue to be there, notwithstanding the fact that it does not seem realistic under the present conditions?

I am advised that is the correct statutory formula and I am satisfied with it. We are living in a world of unforeseen contingencies and it is as well to plan for them.

Although much of the public debate has been devoted to the nature of the bond which the banks will acquire as a result of this operation, it is worth noting that while it gives the bank an opportunity to make money with, as the Deputy pointed out, a low interest rate, as a form of compensation it is rather severe on the bank in the sense that there is a poor return on the money that is given in compensation.

To follow up on Deputy Rabbitte's point, given that the NAMA bonds will be at 1.5% and that €16 billion will go into the banks before Christmas and €38 billion by February, while the Minister — as he explained — cannot dictate to the banks what their interest rate policy will be, it is essential that the banks lend on that money at sustainable rates which, it is reasonable to assume, should be in the range of 1.5% to 3% above the cost of borrowing.

I have seen a document which shows that AIB wants to charge customers 4% above the cost of funds, which is unacceptable. While I appreciate that the Minister cannot dictate on this matter, it should be made clear through whatever controls can be used on the banks that such proposals will not be accepted.

Although not directly related to my previous comments, ACC Bank's current treatment of its customers is also unacceptable. I have learned of several recent cases in which the bank insisted on having interest and principal repaid from borrowers who are only in a position to pay interest. It is even insisting on principal and interest being paid on income producing assets held by other banks. The public should not be intimidated by ACC Bank. Customers should tell it to go to hell when it seeks interest and principal on mortgages and loans.

NAMA will have the power to issue debt carrying the guarantee of the Irish taxpayer. The Minister's adviser, Dr. Alan Ahearne, has frequently predicted that the debt will, in his own words, wash its face. However, he has acknowledged that his predictions are made in the context of interest rates which reflect the current period. While we do not expect rapid increases in interest rates from the ECB, if there is a European recovery over the next 15 months they can be expected to increase by 0.5% every six months. What will the Minister do when the pool of debt created in our name comes up for renegotiation after the first six months have passed? This conundrum has never been satisfactorily solved.

We know that the NTMA's money managers are currently selling sovereign debt on the market at the rate of €1.5 billion per month in order to meet deficit and other Government borrowing requirements. If the banks hold onto the debt they receive at the first rates, what guarantee do we have that they will not sell them on at discounted rates? We know they plan to use the debt on their balance sheets and at the ECB window. The Minister, in his usual manner, has described a scenario whereby a Canadian company or another investor takes a one third interest in a bank as a sign of strength.

It is a sign of strength.

He has not yet explained to us what would happen subsequently. God forbid, could they decide to off-load the entire €54 billion on the markets while the NTMA is trying to raise €1.5 billion per month?

The Deputy is making a Second Stage speech.

This pertains to the section because the agency can issue bonds bearing interest at such rates as it deems fit. The subsequent behaviour of those bonds in the market——

The Deputy has already asked that question.

It is a perfectly reasonable question.

I have no doubt that the Minister will reply to it.

I acknowledge that the Minister has undertaken to give me an explanation of "deferred consideration."

The Deputy has asked for an explanation and the Minister agreed to provide one.

Does it mean we will defer the taking of loans and land banks for a certain period?

He has already undertaken to provide an explanation.

I concur completely with Deputy Fahey regarding ACC Bank. However, I am more worried about his comments on AIB charging 4% above cost. Surely, if we are going to invest so much money to release AIB and Bank of Ireland from their bad debts, we must be able to guarantee credit at a reasonable rate to small business people because otherwise the country will go down the drain. The Minister cannot just say they are free to do what they like. There has to be some sort of control.

Section 46(1) states: "NAMA or a NAMA group entity may, whenever and so often as it thinks fit, create and issue debt securities", which in effect means it can borrow as much as it wants. We are proceeding on the basis of a mind boggling estimate of €54 billion. Deputy Burton referred to the difficulty that arises in regard to NAMA's ability to wash its face, which according to the Minister's economic adviser, means that the money it earns from performing loans will match its outgoings.

It is also set out in the business plan.

There is a mismatch between the duration of performing and non-performing loans. A performing loan will no longer be available to NAMA for washing its face once it has completed its term. However, if a loan is not performing, NAMA cannot use it to replace the performing loan because it is not generating income. How much are we willing to allow NAMA to borrow and under what circumstances?

The issue of interest rates is a separate and significant issue. The Minister noted this morning that NAMA could be crippled by an excess of bonds at high interest rates but we will have to deal with increasing interest rates alongside performing loans which have completed their terms. How does NAMA propose to find replacement income? Will any limit be imposed on the amount of money we will allow it to borrow on our behalf?

The Deputy should table an amendment.

In endorsing this section, we are writing a blank cheque for something that does not add up. Where will the limits be set?

People are facing continuing uncertainty from their banks in respect of performing loans on which they cannot make principal repayments. Pressure is being brought to bear to change the interest rate and enable them to pay interest only on their loans. This is the appropriate time for the Minister to take action and negotiate with the banks while he still has bargaining power. Once the bonds are issued, the banks will not show the same degree of enthusiasm for listening to the Minister.

I hope the Minister will take on board Deputy Fahey's comments on the need to protect ordinary consumers who are meeting their obligations but are coming under pressure to pay higher interest rates, etc. This is a significant problem given that the only possible outcome of taking such an approach is more property flooding the market as people are forced to sell their homes to meet repayments.

In response to the points raised by Deputy Fahey, the Minister is relying on moral suasion to achieve discipline from the banks. There is nothing in the text of the Bill that requires of the banks that they respond to the generosity of the State and increase the flow of credit.

My second point is explicitly related to section 46. Deputy Lee pointed out the difference between a performing loan, a non-performing loan and a non-performing loan where a person is seeking an accommodation under which only interest will be paid. Different developers have stated in television interviews that they do not propose to pay penal rates of interest. The Minister stressed on Second Stage that whatever is owed to any of the institutions covered in the guarantee will remain owed. The section states:

46.—(1) NAMA or a NAMA group entity may, whenever and so often as it thinks fit, create and issue debt securities—

(a) bearing interest at such rate as it thinks fit, or no interest,

(b) for such cash or non-cash consideration or deferred consideration as it thinks fit....

Does the term "non-cash consideration" include the changing of the form of guarantee for the original loan? Mr. Mark Duffy, who is establishing an asset recovery body, has suggested that negotiations on bundles of assets that are supported by a loan will include the option of changing the form of personal guarantee given for the original loan. Does the Minister envisage NAMA releasing people from the form of guarantee they gave for the original loan to be purchased through the taxpayers' agency, NAMA?

I find this Bill surreal in many ways. Not only are we giving NAMA a blank cheque, we are giving it a blank cheque book. At a time when Deputies are being lobbied about life saving operations for children at Our Lady's Children's Hospital in Crumlin, the Government does not have a problem finding whatever sums of money it considers necessary for NAMA.

We are discussing section 46.

While I do not intend to labour the point, that the Government does not have a problem finding money for NAMA says everything about its attitude to these matters.

Given the gravity of the situation, I will briefly elaborate on Deputy Fahey's comments. Having listened to most of today's debate, I am well-informed, even if finance is not my field. Small businesses are under pressure, as are individuals.

The issue the Deputy raises was addressed comprehensively yesterday when the Minister indicated he was in negotiations with the banks.

I impress upon the Minister that Deputies are coming under pressure in many of the areas we deal with——

The Deputy must speak to section 46. I call Deputy O'Donnell.

Deputy Neville should be allowed to contribute to the debate.

Does Deputy Neville wish to speak?

The Chairman will not allow it.

The Deputy is being gagged.

Are we discussing section 45 or 46?

I am glad Deputy O'Donnell is as confused as the rest of us are.

We are proceeding slowly.

Interest rates have increased since the discussion started.

In discussing the bonds issued to the banks the Minister indicated that interest rates will increase at a low rate. It is generally accepted that interest rates will rise. Will the guaranteed payments to the banks be used to encourage the banks to hold the bonds, receive the interest thereon and commence lending? There is a concern that in the event that an outsider investor takes a share in the banks, the bonds, which will be tradeable, will be sold.

Deputy Fahey stated that if interest rates increase, interest income to NAMA from the bonds will also increase. In that context, €16 billion will be paid out on €54 billion of NAMA debt and €12 billion in interest will be paid on debt with a book value of €77 billion. There will also be a €4 billion hole to be plugged and a default on €15 billion of assets, which is the magic 20% figure. No interest will be written off in terms of the bond holders being paid by NAMA. How much interest will be written off by NAMA in respect of the loans the agency acquires? Therein lies the answer.

Deputy O'Donnell has been gazing into a crystal ball. On Deputy Burton's question as to whether the banks could collectively flood the market with all the six-month treasury notes in one simultaneous operation, while anything is theoretically possible, it is difficult to believe that banks which are systemically involved in the economy would have any interest or incentive so to do.

The second issue raised by Deputy Burton was whether the phrase "deferred consideration" could be reconsidered and whether it covered some other conspiratorial move in relation to the Bill. That is not the case. This is a standard formula that has been used in legislation of this type. I will consider deleting it if Deputies wish it to be deleted but we are better sticking to hallowed formulae, even when on occasion they simply benefit from repetition.

Deputy Lee noted that interest rates are historically at a very low level and therefore some increase in interest rates is inevitable. What are the implications of this in terms of the six-month notes that are issued? The implication is that the notes are issued at the applicable rate from time to time. It is almost in the nature of a floating rate note that the State is issuing and it will vary depending on the applicable rate during the six-month period. That is how this is structured in the legislation. I draw the attention of Deputies Lee and O'Donnell to the fact that the bu