Wednesday, 17 April 2019

Questions (40)

Michael McGrath


40. Deputy Michael McGrath asked the Minister for Finance when he plans to introduce the central bank (amendment) Bill to address the recommendations of the Central Bank on banking culture and accountability; and if he will make a statement on the matter. [17999/19]

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Oral answers (6 contributions) (Question to Finance)

This question concerns the Central Bank's report on behaviour and culture within the main retail banks. One of the key recommendations in the report was that a senior individual accountability regime would be introduced in Ireland for senior executives within the banking system. There already is such a regime in the UK. This recommendation was contained in the report issued by the Central Bank in July of last year. It requires legislation, which I believe will be supported in this House. Can the Minister update the House on this issue? When does he expect to bring this legislation forward?

As the Deputy will be aware, I am committed to introducing a Central Bank (amendment) Bill that will increase individual accountability in the financial sector. As I have stated previously, the need to rebuild trust in the banking sector is a priority for this Government. Indeed, international evidence illustrates that improvements in banking culture, through increased individual accountability, lead to better consumer protection and financial stability outcomes.

In 2017, I asked the Central Bank to prepare a report on the current cultures, behaviours and the associated risks in the retail banks and the actions that may be taken to ensure that banks prioritise customer issues in the future.  Following my request, in July of last year the Central Bank published the report, Behaviour and Culture of the Irish Retail Banks.

My officials have been working on the details of a Central Bank (amendment) Bill, which will address the recommendations made in the report and a number of other policy matters, including statutory changes following on from the banking Inquiry, potential changes related to Private Member’s Bills and other matters.

The main proposals by the Central Bank in the report to enhance individual accountability include conduct standards, a senior executive accountability regime and enhancements to the Central Bank's current fitness and probity regime and the enforcement regime.

In preparing its report the Central Bank cooperated extensively with the Dutch Central Bank as it is one of the leaders in the field of financial services culture sphere. Separately, my Department has focused on the implementation and lessons from the UK’s senior managers’ regime and conduct standards given the close relationship between the two financial sectors.  This is particularly valid given the similar common law legal system so we can learn from the experiences of the UK.

The ongoing work between the Central Bank and my officials has focused on developing possible wording for legislative amendments and considering this wording in the context of constitutional protections and existing legal provisions.

I have previously stated in this House that I intended to seek Government approval to draft the heads of a Bill by the end of quarter one this year.  Notwithstanding that Brexit-related issues have caused this timeline to be adjusted, my intention is to progress this matter expeditiously so that I can seek approval to draft the heads of the Bill before the summer recess.

That reply is deeply disappointing. The reality is that the Central Bank has asked for these powers to hold senior executives in our banking system accountable, and the Minister is talking about going to the Government to seek approval to draft the heads of a Bill. He has not done that yet and is hoping to do that in the coming months. That does not sound to me like it is a Government priority or that we are likely to see this senior executive accountability regime introduced any time soon. The Minister knows well what the catalyst for all of this was. It was, of course, the tracker mortgage scandal, which continues to this day. The single largest outstanding issue in that tracker scandal relates to AIB. There are 6,000 customers in what is known as the prevailing rate group. I am sure the Minister is familiar with it and I encourage him to read over the transcript of our questioning of AIB's executives at the committee last week. That issue is going to go the full distance. The Minister should look at it and if he has a view on it - I hope he does - he should express that view. The measure of culture change is whether or not the banks, when decisions can go either way, make decisions in favour of the consumer.

My message to the House is very clear. I am going to bring in this legislation as soon as possible. There are many delicate constitutional matters that we have to deal with and I am determined that we will deal with them. I refer in particular to Articles 37 and 38 of the Constitution, which concern the limits to which judicial powers can be exercised other than by the courts and the right of an individual to earn a living and related property rights. There are other elements of our Constitution which are equally important, for example the common good. There is also a need to learn from the grave difficulties we have had in recent years in the operation of our banking system.

The commitment I had given to date was that I would bring the heads of the Bill to the Government before the end of the first quarter. I am now indicating to the House that it is going to take a little bit longer to do. The only reason for that delay is that all of my officials who have been involved in this area have also been involved in all of the issues which arose in the context of our Brexit omnibus Bill. That matter is now dealt with and I am going to move this matter forward as quickly as I can.

People want to know when this Bill will be introduced, not when the Minister is going to seek approval to draft the heads of a Bill. People want to know when it will be the law of the land that senior executives who are making critical decisions about the future of their consumers can be held to account in the manner recommended by the Central Bank. I would like to hear when the Minister expects that this regime will actually be put in place. Of course it is the case that the regime has to be constitutional, but the question of the constitutional rights of the 40,000 tracker mortgage customers who had their money taken from them also arises. Many of those people are still waiting to get that money back. There are 6,000 customers in AIB who, in my view, are still being wronged. That issue, as I said, is going to go the full distance. The Minister needs personally to examine that issue and convey a view, if he has one. Otherwise it will end up in the High Court and could be very embarrassing indeed for AIB, which is a bank in which the State continues to hold a majority share.

I will reaffirm again my determination that this Bill be implemented as soon as possible. The Deputy mentioned what citizens want to hear about the ability of such legislation to be effectively implemented. This has to be done in a way that is fully consistent with our Constitution. When the legislation is used, it must be capable of withstanding legal challenge. That is what we are going to do. I have explained why it has taken a little bit longer to do than I had previously indicated, but I am determined that we will move this legislation through.

On the implementation of this legislation, if I get co-operation from the House on this matter, which I am sure I will given the interest people have in it, and get agreement to the heads of the Bill well in advance of the summer recess, we can publish it, move to drafting and have the legislation available to go to the House after the summer. Thereafter I hope we can pass it as soon as possible.

On the Deputy's final point about the group of citizens affected by AIB, I wish to assure the Deputy that I am well aware of the issue.

I am equally aware that the investigation of this matter is being carried out by the Central Bank and I have to recognise its right to do that work.