Vol. 88 No. 7
I move amendment No. 12:—
In page 5, Section 7 (g), in line 56, to delete the words "and issued not less than one year" and substitute the words "which have been offered for public subscription or tender", and in line 57, after the word "bank" to insert the words "and are officially quoted on the Dublin Stock Exchange and the Cork Stock Exchange".
Could we have some explanation from the Minister in regard to this amendment, particularly as regards that part of the section which requires that stocks shall be quoted officially on the Dublin and Cork Stock Exchanges before they can be bought? My reason for proposing amendment No. 13 originally was in order to get rid of the reference to the Dublin and Cork Stock Exchanges. Then I realised that the word "buy" in paragraph (g) of Section 7 did not include "subscribed for". If the State is issuing a loan having "buy" here—even if there is no reference to a necessity for quoting on the Dublin and Cork Stock Exchanges—would not it allow the bank to subscribe for any of the issues put up by the Government? I wonder if the Minister would refresh our minds on his intention in making a reference to the Dublin and Cork Stock Exchange quotations in his amendment No. 12.
I think I explained very fully on the last day my reasons for including that condition. I think it is a wise condition. I went a long way to meet the views of Deputies, and that we should remove the limitation we had there. I also went a long way to make changes, in regard to the criticisms offered by Deputy Mulcahy and others on various stages of the Bill. The limitation of having these issues quoted on the stock exchanges at Dublin and Cork is a wise one, and a safeguard both in the general interest and in the interest of the Government.
I move amendment No. 13a:—
In page 5, before Section 7 (h), to insert a new paragraph as follows:—
Subscribe for, hold or sell securities of or guaranteed by the State which have been offered for public subscription or tender.
On various stages of the Bill and in various discussions that have taken place here, we have emphasised the impossibility of carrying on the general work of this country if, in the present and in the future, we have to pay as much for money as we have been paying in the past. As the Bill would stand, without the introduction of a clause like this into it, the Government, in issuing a loan to carry on necessary work, might find it impossible to get money at a reasonable rate. We have indicated that we are paying a substantially higher rate here than is paid in Great Britain. The work we contemplate doing with borrowed money at the present time ought to be as credit-worthy and as credit-sustaining as the work being done with very large sums of money borrowed in Great Britain.
It is accepted fairly generally now that an attempt must be made to provide full employment for all our people. While we accept the responsibility of maintenance for our people, we cannot indefinitely maintain them unless there is production by all our people. The only effective or proper way of getting the necessary distribution of money that will provide our people with the necessaries of life is by full employment, and we cannot hope to get full employment without the proper use of a monetary policy and without proper spending or investment of moneys by the State. This is, particularly, a time when, more than any other, State investment is required in order to maintain both our production and the capacity of our people to pass through present circumstances and to face a future in which the necessary investment will be done by the ordinary people. It is, therefore, a time when the Government, inevitably, will find that they will have to borrow, perhaps, substantial amounts of money. I see no means by which, systematically and without irritation and friction of one kind or another, the Government can control interest rates, at which they borrow money, and keep them at a suitable level unless they have the power to resist the withholding of money, by the people who have it, because they are not getting a high enough rate of interest.
If the Minister had to ask to-morrow for a loan of £8,000,000 and found that only something like £4,000,000 was subscribed, I think he should have it in his power to get the remaining money that he required from the central bank at a rate that he and the Government, with their grip on the situation and their view of the situation, would consider reasonable. During the previous discussions we pointed out what a very important lifting effect on interest rates here the deposit rate of 1 per cent., over such a very substantial amount of money as is held in the Irish banks on deposit, has had, and the Minister will find himself up against a very great difficulty, in bringing money rates down to a reasonable level, unless he has some such power as is indicated in the amendment which I bring forward here. Therefore, I think the House should face that matter fairly and squarely.
As paragraph (g) of the section stands, the bank can only buy Government securities that are actually in the hands of some other person. As I read it, if the Minister issues, say, £8,000,000, and if only £4,000,000 is taken up, he having fixed the rate of interest beforehand, the bank is not then in a position to subscribe the remaining £4,000,000 without going through some machinery other than subscribing directly for the loan as issued. For that reason, I think it is essential that such a clause as I suggest here should be inserted.
I may be wrong, but I understand that a loan cannot be quoted on the Dublin or Cork Stock Exchanges until the Minister for Finance has indicated that the loan has been subscribed in full, and therefore I think that what I say with regard to paragraph (g) is perfectly correct: that is, that if a loan of £8,000,000 is offered, and only £4,000,000 is taken up, it would not be possible to get a quotation from the stock exchange at that point, and therefore it would be impossible for the bank to take up from the Minister for Finance the remainder of the loan outstanding.
I understand that the present regulation made by the Stock Exchanges of Dublin and Cork is that they would quote a loan that had been subscribed as to two-thirds. Of course, they can change their rules at any time, but their present rule, which has been in existence for some time, is that once two-thirds have been subscribed, they are prepared to issue a quotation. In introducing his amendment and recommending it to us for adoption, Deputy Mulcahy urges that the Minister should be anxious to get money for public purposes at a cheaper rate. That has been the custom up to the present. It is very difficult for a Minister for Finance to resist such an amendment. I, as Minister for Finance, would be very happy to get money for public purposes at a cheap rate, the lowest rate possible. If we could get it at 2 per cent., as Deputy Mulcahy properly says, it would save us a lot of money and probably enable us to do, in normal circumstances, a lot of very useful public work which is, to a certain extent, ordinarily restricted when the cost of money is much higher than 2 per cent. I do not think that it would be wise for me, as Minister for Finance, to accept this amendment because, while it might help to secure money at a cheaper rate than at present, it also opens a door—a door that, probably, would not be used by this Government or by the next Government, but that might be used by some Government for purposes that, in the end, would not be advantageous to the State.
We heard some Deputies in the House here, when this same principle was under discussion on the Committee Stage of the Bill, describing in lurid language the printing machine that might be used to print red-hot currency by some Government at a future date. As the law stands, or as it is proposed in the Bill, and as it is proposed even with the amendments that have now been accepted by the House, the danger which those Deputies saw, that it might be used to the disadvantage of the State at some time or another, may exist to some extent, but an effort, certainly, has been made to control it, so that no loan would be issued by the Government of the day except in a bona fide way, and offered to, and accepted by, the public; and a guarantee that it was accepted by the public would be that these loans would be quoted on the stock exchanges. That is a guarantee to the public that loans have been issued in a bona fide way, and not because of the Government rushing to the central bank, in times of panic, emergency, or difficulty, and urging it to give moneys to the Government to carry on the normal affairs of the Government, which the central bank, in normal times, and except under pressure, might not wish to do. I think that, all things considered, in the powers we are proposing we have gone a long way on the road towards meeting those who are anxious to leave the approach to the central bank wider open and to make the effort to get cheaper money more easy. But to go to the extent that Deputy Mulcahy suggests would not, I think, be wise.
I think the condition that we had laid down, of having the issue quoted on the stock exchange, is a guarantee to the public, to the people who subscribe to these loans and to the taxpayers in general that the loan has been bona fide offered to, and subscribed by, the public: that the savings of the people have been used to float the loan successfully. That is a guarantee that, so far as I can see in present circumstances or in the immediate future, we ought not to forgo. It is a wise provision. It is one that Governments, even those that might be tempted in times of financial difficulties to go to the central bank and ask it to provide them with finances, would be glad to have as a safeguard for themselves not to expend money extravagantly. On the whole, I think that if the Deputy himself thinks over the matter he will see that even though this Government, or the next Government, or may be a Government or two after that again, might not use the power, still it is better not to tempt them and to have the safeguard there. Again, I say that I think the provision is a wise one and that it ought to remain.
If I understood the Minister correctly, I gathered that his opposition to the amendment was to some extent based on the fear of a possible abuse of the powers suggested in it by some future Government. I think the Minister said, not the next Government but some future Government. Some of the Minister's remarks seemed, at any rate, to hint that the power suggested in the amendment might be abused by a future Labour Government.
They never will get there.
The Minister did not mention any Party.
I am prepared to support any recommendation that will secure money at lower rates of interest than those quoted during the period of the emergency. I would urge on the Minister to set aside whatever stupid fears he may have with regard to what future Governments may do, and keep before his mind the fact that local authorities as well as the State have had to pay excessive rates of interest— in fact they might be described as usurious rates of interest—to enable them to carry out important housing schemes for the working classes. The Minister cannot but be aware that within the past year an important housing scheme, promoted by the Dublin Corporation, was held up because sanction was refused by the Department of Local Government on the grounds that the type of house proposed by the corporation—three or four-roomed flats—would cost more than £1,000. The cost in that particular case was due in no small measure to the excessively high rates of interest charged to the local authority.
This amendment would, I think, if passed make a most important and far-reaching contribution to the success of this Bill. It would enable the State to provide itself with money at lower rates of interest than the powers that control finance at the moment are prepared to accord, and in so doing would put at the disposal of the community money which could be extensively used for the development of the agricultural industry. I think the Minister has already admitted that he would like to be able to obtain money at a lower rate of interest than that which prevails at the moment. He also admitted that this money, if available, might be used to serve useful purposes for the community. He has suggested, however, that if such a power were in the hands of the Government it would offer to them a temptation which they might be unable to resist. Therefore, it has been decided to place, to a large extent, this power in the hands of people who are outside the control of the Government. One may ask, if we cannot rely on the honesty of the elected Government of the country, how can we rely on the people in whom the Minister reposes control in this Bill? There is no doubt whatever that if the financial interests here consider that a loan is being sought by the Government at too low a rate of interest for the development of agriculture, for industry, for housing or for turf production, they can prevent the Government from securing that loan by refusing to have it subscribed to the extent of two-thirds. By wielding that power they can hold the Government and the community of this State to ransom, and hold up all efforts for the country's development on sound economic lines.
Does the Deputy desire a decision on his amendment?
I think it is important that the House should formally take a decision on it.
Does the Deputy intend to move amendment No. 15?
Can we say a word on the section, as amended?
Not on the section.
Even as amended?
This is Report Stage.
I move amendment No. 14:—
In page 5, before section 7 (h), to insert a new paragraph as follows:—
(h) buy, hold, or sell securities of any public authority (whether of general or local jurisdiction) in the State which are authorised by law for the investment of trust funds and have been offered for public subscription or tender before being bought by the bank and are officially quoted on the Dublin Stock Exchange and on the Cork Stock Exchange;.
The object of the central bank in buying such securities will be to influence credit conditions. It is essential that it should have as wide a field as possible to operate in, and should be able to buy as many suitable types of securities as possible. This amendment proposes to add to the kind of securities which may be purchased by the bank, "securities of any public authority (whether of general or local jurisdiction)".
Will the Minister say whether there is any regulation by the stock exchange to quote the securities of public authorities in the same way as it quotes State loans after two-thirds of them have been taken up? Suppose the Dublin Corporation issues a loan and that only two-thirds of it are taken up, will the stock exchange give a quotation?
I believe so.
With regard to this amendment and the last one, will the Minister say whether, after a loan that had been issued and only two-thirds of it had been taken up and quoted by the stock exchange, it would then be within the power of the central bank to buy direct from the Minister the remaining one-third or whatever fraction of one-third was remaining over?
I take it they would go to the stock exchange. Once it was quoted on the stock exchange, the central bank, like any ordinary customer, would have to go and purchase through the stock exchange. It would be open to them and they would be free to purchase, once it was quoted, through the stock exchange.
Suppose the loan was for £6,000,000 and £4,000,000 was taken up, I take it that the remaining £2,000,000 would not be available for purchase through the stock exchange.
Could the central bank only purchase whatever part of the £4,000,000 was actually let loose on the stock exchange?
That is right.
We know where we are now.
I move amendment No. 18:—
In page 6, before Section 8, to insert a new section as follows:—
It shall be lawful for the bank to do all or any of the following things on such occasions and to such extent as the board shall think proper, that is to say:—
(a) make provision for the collection and study of data relating to monetary and credit problems and publish informative material in regard thereto;
(b) establish and maintain, either directly or indirectly, contact with the monetary authorities established in other countries;
(c) do all such things as may be ancillary or incidental to or consequential on the exercise of any of the powers or the performance of any of the duties conferred or imposed on the bank by this or any other section of this Act or from time to time conferred or imposed on the bank by law.
I think the amendment does what Deputy Cosgrave asked should be done. It does not do it in as wide a sense as Deputy Cosgrave wished to have it done, but I think it does the essential things that everybody, perhaps Deputy Cosgrave included, would like to have done. I do not know whether Deputy Cosgrave was anxious to have full research into all economic matters, but I think that so long as the central bank deals with all monetary and credit problems and collects statistics and data relating to these matters, not generally covering the very wide field of the whole economics of the country, the bank will be fulfilling its functions. If it were given power to set up any machinery it thought fit and proper to collect all that data and publish informative material, as stated in the amendment, relating to the monetary and credit problems, it would be doing all that we could really ask it to do.
With regard to the second item, I have, I think, accepted fully Deputy Cosgrave's suggestion about establishing and maintaining direct contact with monetary authorities established in other countries and, fearing anything should be overlooked, that it might not have power to do some things which might be useful and helpful in the monetary and credit spheres, I put in a general sub-section, sub-section (c). My anxiety, as I think it is the anxiety of Deputies opposite, is that the most useful kind of statistical matter should be collected and published by the board of the bank at convenient times. Whether it will be convenient to publish these statistics weekly or fortnightly or monthly will rest with themselves. But I certainly am anxious with regard to our financial affairs, the financial condition of the country, and monetary and credit problems that arise here, that all relevant figures and statistics and information that can be gathered by the bank should be published by them and given to the people to use in whatever way they think proper.
I move amendment No. 20:—
In page 7, line 35, Section 11 (3), to delete the words and figures "Part IV (except Sections 39 and 44 repealed by this Act)" and substitute the words and figures "Sections 42 and 43", and in lines 42 and 43 to delete the words and figures "Part IV (except as aforesaid)" and substitute the words and figures "Sections 42 and 43".
Amendments Nos. 20, 21, 22 and 23 are intended to meet and, in fact, go a little further than meeting all that Deputy Davin asked for. It means taking whole sections from the Currency Act of 1927 and adapting them to the new Bill and we have done that in amendments Nos. 20, 21, 22 and 23.
I move amendment No. 25:—
In page 9, Section 15 (1), to delete all from the word "but" in line 51 to the end of the sub-section in line 53.
This is to meet the wish of Deputy Cosgrave.
I move amendment No. 26:—
In page 10, line 23, Section 15 (4) (d), before the word "or" to insert the words and brackets "(whether in the State or in any other country)".
During the Committee Stage Deputy McGilligan stated that he recollected a judgment having been given at some time that a bankrupt means a bankrupt within the State only, and this is to provide that it should be taken as "whether in the State or in any other country".
I move amendment No. 27:—
In page 10, Section 15 (4) (d), after the word "creditors" in line 24 to insert the words "whether in the State or in any other country".
This was put down following on the principle embodied in the section generally that if a director or governor of the bank is adjudged bankrupt in another country he automatically has to retire from the board of the bank. This provides that a person who has to make a composition with his creditors in another country should also retire from the board of the bank. It is not a particularly high standard to set that, if the central bank has on its directorate a person who has interests in another country or business relations or dealings with another country, we should specify that we would regard his making a composition with his creditors there as a reason why he should retire from the directorate of the bank. The only objection there might lie to it would be that, on rare occasions, attempts have been made to ruin a man's credit and in a case of that sort subsequent consideration might tend to rehabilitate the man here, but, at the moment, if he fails to meet his creditors in full in another country, it appears to me that it would be scarcely right that he should occupy a seat on the board of the central bank of this country. I do not know what the practice is with regard to the directorate of banks, but I should say that if a director of a bank finds himself in that position, it is almost inevitable that he would have to retire, even if the failure were in respect of another country.
In principle I am with the Deputy. If there is bankruptcy, there is no question that he ought to be disqualified. But it might happen that the governor would be a shareholder in a bank or some institution of the kind that defaulted or went bankrupt or that had arranged with its creditors, and he might be disqualified because he was a shareholder in that institution—because the bank he had shares in defaulted or made a composition with its creditors. Under the amendment, it has been suggested to me, the governor would probably be disqualified and that would be going even further than what the Deputy has in mind. If there is any question of bankruptcy, there is no dispute; but if there is a question of the governor being a shareholder in some foreign company that defaulted or made a composition, he would be disqualified. It is probable he would be disqualified under the amendment that the Deputy has put down, and that would be going further, perhaps, than what the Deputy might like to suggest.
I do not understand the Minister's line of reasoning. If a bank director was a shareholder in a company in another country and that company went bankrupt or made an arrangement, he would not have carried the arrangement with his creditors; I take it that it would be in a corporate capacity. If it be a limited liability company, I take it that he would be a director of the company.
No, a shareholder.
Then the line of argument is even thinner. How could the shareholders of a company, except it was an unlimited liability company, which is almost unheard of these days, be so adjudged? If that company went bankrupt, surely all the shareholders would not be adjudged to have made an arrangement with their creditors?
The Minister means where there would be a call.
I think the situation is even more serious. Here we are talking about a person who is the governor of our central bank, who will have a very important and influential say in the investment of a lot of money in the hands of the bank. We are supposing the possibility that he is the kind of person who would have his own money in shares in a foreign bank that might go "bust." I could understand his having his shares in some industrial concern, but if the thought could come into our minds that it was possible to have a person like that who would have shares in a foreign bank that might go "bust," surely the last place we would have a person of that type would be as governor.
As regards the point Deputy Dockrell raised, I cannot see how, except it was in some queer country with queer laws, the shareholder of a bank or even a company could be adjudged bankrupt or could be regarded as having compounded with his creditors simply because the company got into difficulties and had to compound in any kind of way. When we consider the type of position and the type of man we expect in that position, I think it is a dangerous splitting of hairs to distinguish between a person being adjudged a bankrupt and compounding with his creditors. In a case of this kind we should hold that there was no difference between either one or the other.
I think the Minister must have misunderstood either the information given to him or the amendment. It is so long since we had this measure before us that it has passed from my recollection whether we were dealing with the director or the governor.
The governor.
As regards the governor, I think there should be no qualms of conscience with reference to conditions. They could not be made too difficult for him. I would not allow him to buy or sell shares. If he is going to do that, he should be confined to gilt-edged securities, so as to keep him after the manner and style of Caesar's wife. He should not be allowed to purchase shares in a bank anywhere at any time once he accepts the office of governor, and therefore no question arises as to any call that will be made upon him, and any composition or any complications with his creditors would not arise either. From what then might a difficulty arise? The only way is if an action were taken against him, if he were defendant in proceedings or if he were a plaintiff and lost and some unusual influences were at work to place him in that position. But, apart from those considerations, the question we have to decide is whether this man should not be compelled by the law as we lay it down to refrain from the exercise of any activities which would put him into a position in which he would have to make an arrangement with his creditors. It would be undesirable that publicity in the banking or the commercial world would be given to the fact that the governor of the central bank in Eire was making a composition with his creditors in Timbuctoo.
I do not expect the Minister at a moment's notice to decide on this amendment, but I think it would be highly undesirable that there should be any latitude given to a person occupying the position of governor of the bank, and he should lose his office, he should resign, if he had to make an arrangement with his creditors in any part of the world.
I quite agree that if the governor had to make an arrangement with his creditors he ought to go, but it has been represented to me that if he held partially paid-up shares in a foreign company——
Let him decide on either holding the shares or being governor, one or the other, but not the two. We are under no compliment to him.
He would find himself disqualified because he held shares in a foreign company, and foreign in this Bill might mean in the North of Ireland. But is it not pushing it rather far? A company may be making a composition and he may happen to hold shares that were not fully paid up and therefore he would be in the position of a shareholder.
If he has time to buy shares like that, he has no time to do his work.
Deputy Mulcahy talked about the idea of a man holding shares in an institution—he cannot hold shares in a bank—but in some other institution that might go bankrupt. I know and I know Deputy Cosgrave knows, and I think Deputy Mulcahy knows, people who were looked up to and regarded by us who knew them as men of substance, men of the highest integrity and standing in finance in the United States of America and in the collapse they were caught out. Some of them went bankrupt; some of them went to jail, not through their own fault, in the awful collapse that took place after 1929 in the United States of America. There were some people whom we did not know personally but who were of world-wide repute in financial circles in America who were caught out in the same way—people who could sign their names for millions of dollars. When the collapse came, they were caught out. I do not think anything of the kind is likely to happen here. I would entirely accept Deputy Cosgrave's statement that the governor of the central bank should be sans peur et sans reproche, financially, at any rate, but we might be tying him up too tightly. After all, if a man is of a saving nature he must put his money somewhere, and if he happened to get caught out in a financial tornado such as occurred in the United States of America, where something like 4,000 banks went out of business in a period of two or three years, it would not be the governor's fault. It may be that there is foundation for what is suggested to me here, that we are pulling the ropes too tightly and that the amendment of Deputy Cosgrave would exclude the governor from putting his money even in what we would all regard as safe, gilt-edged investments, over which he would have no control.
Are we allowed to speak only once on this occasion?
Once. The Deputy has spoken twice.
And the Minister likewise.
Hence I am not prepared to hear Minister or Deputy further on this amendment.
I would like to conclude.
It may not be done.
Surely on an amendment?
Surely not.
I would like to tell the Minister, through you, that I do not accept one quarter of what he has said.
Maybe the quarter the Deputy does accept would cover this case.
Is the Deputy withdrawing the amendment?
Certainly not; it is a lovely one
I move amendment No. 28:—
In page 10, Section 16 (5), to delete all from the word "means" in line 48 to the word "State" in line 51, and substitute the words "includes a bank incorporated outside the State as well as a bank incorporated in the State."
We have already accepted the principle of this amendment. The governor shall not be a shareholder in a bank incorporated outside the State or in a bank incorporated in the State.
I move amendment No. 29:—
In page 11, line 41, Section 19 (6) after the words "Seanad Eireann" to add the words "or as Uachtarán".
This is a similar amendment to No. 28, moved by Deputy Mulcahy.
I thought when Deputy Mulcahy put down this amendment that some respect would be shown to the dignity of the holder of this office and that his name would take precedence of rather than follow after the Seanad and the Dáil. I do not know whether it is meant as a compliment to the Dáil and Seanad or that it is an oversight, but it appears to me to be disrespectful when the person who, according to the Constitution, takes precedence over everybody within the State, is kept trotting in at the end.
I move amendment No. 30:—
In page 12, before Section 20 (4) to insert a new sub-section as follows:—
(4) Every director (other than a banking director or a service director) who, after the appointment of the first directors, is appointed for a purpose other than filling a vacancy amongst the directors (other than as aforesaid) shall hold office for five years from the day as on and from which he is appointed.
This amendment is intended to fill up a kind of lacuna. The number of non-banking directors to be appointed is left to the discretion of the Minister, subject to a maximum of five. The Minister may, for instance, appoint only four non-banking directors in the first instance and may wish after a year or two to appoint a fifth. At present there is no provision under Section 20 or elsewhere in the Bill setting out the duration of the term of office of any director who may be appointed after the first directors and this is to provide that the term of office shall be five years.
I move amendment No. 31:—
In page 12, line 27, Section 21 (b), after the word "bankrupt" to insert the words and brackets "(whether in the State or in any other country)".
This amendment deals with the bankrupt issue also, bankrupt to mean bankrupt both within and outside the State.
The following amendment appears in my name:—
32. In page 12, line 28, Section 21 (b), after the word "creditors" to insert the words and brackets "(whether in the State or in any other country)".
This is similar to 27?
Yes. I am sure I did not put that down except for some reason.
It is a sequel to 27.
Amendments Nos. 33 to 37 set out two alternative schemes. It will be possible to allow for decisions on Nos. 33, 34 and 35.
We will see whether we will be able to delete it first.
Amendment No. 33.
I move amendment No. 33, standing in the name of Deputy McGilligan:—
In page 12 to delete lines 36 to 58 and in page 13 to delete lines 1 to 10 (Section 22) and substitute a new section as follows:—
(1) The first banking directors shall be appointed from among the persons elected or nominated to a panel to be formed according to the further provisions of this section.
(2) Not more than 30 nor less than ten days before the appointed day the Minister shall appoint a time and place (in this section referred to as the appointed time and place) for the meeting of representatives of the associated banks for the election of three persons to the panel.
(3) The Minister shall cause every associated bank to be informed in writing of the appointed time and place.
(4) Every associated bank may cause one and only one representative nominated by it in that behalf to attend at the appointed time and place and shall then or within three days thereafter elect in accordance with the Rules contained in the Second Schedule to this Act three persons eligible and willing to act as banking directors, each experienced in practical banking and possessing sufficient knowledge of currency and credit to enable him to give the board expert advice in matters relating thereto, and shall forthwith communicate to the Minister in accordance with the said Rules the names of the three persons so elected.
(5) Not more than 30 days nor less than ten days before the appointed day the Minister shall appoint a date (in this section referred to as the appointed date) on or before which the executive committee of the Irish Bank Officials' Association may nominate and communicate to the Minister the names of three persons being officials of associated banks who are eligible and willing to act as banking directors each experienced in practical banking and possessing sufficient knowledge of currency and credit to enable him to give the board expert advice in matters relating thereto.
(6) The Minister shall cause the executive committee to be informed in writing of the appointed date.
(7) If the said representatives of the associated banks who attend at the appointed time and place fail to elect in accordance with this section three persons for the panel or if no representatives of the associated banks attend at the appointed time and place it shall be lawful for the Minister to appoint such three eligible persons as he shall think proper to the panel but subject to the restriction that if and so far as eligible and suitable persons willing to act can be found amongst the directors of the several associated banks no person who is not a director of an associated bank shall be appointed to the panel by the Minister under this sub-section and in any event no person who is in the permanent service of the State shall be appointed.
(8) If on or before the appointed date the executive committee of the Irish Bank Officials' Association fail to nominate and communicate to the Minister the names of three persons in accordance with this section it shall be lawful for the Minister to appoint to the panel such three eligible persons as he shall think proper but subject to the restriction that if and so far as eligible and suitable persons willing to act can be found amongst the officials of the several associated banks no person who is not an official of an associated bank shall be appointed to the panel by the Minister and in any event no person who is in the permanent service of the State shall be so appointed.
The proposal in this amendment is to delete Section 22 and to insert the new section that is on the paper in its place. Section 22 proposes that the representatives of the associated banks on the board, that is, the three members referred to in Section 5 (3) (b) would be appointed from a panel of six submitted to the Minister by the representatives of the associated banks, that is, that the associated banks, through the banking directors of these banks, would submit a panel of six and that the Minister would select three of them. I submit that you want as banking directors persons who have first-class and long experience of banking and that you do not want the type of person who becomes a banking director through the amount of money that he holds, or as it were, through inheritance.
We depend for the development of our life and security and the improvement of our national situation on technicians of various kinds—on our engineers, on our doctors and even on our statesmen. From where do we get our first class engineers? From long training in the schools and long experience outside, where the person of the engineer is developed, by long practice at every aspect of the work and long contact with other men in handling that work. We get our doctors from long training in the schools and direct personal plodding through all the various aspects of the doctors' work, and the same applies to the architect, and even to the statesman. Unless he is in close contact with people and their problems, and has had that close contact for a considerable time, and unless there is embodied in his person a complete grasp of the human factors he is dealing with, you will not have any successful work. Here we are appointing a body which will have a very great deal of control over the most important matters—matters which, if simply dealt with in a theoretical kind of way, without an understanding of the complex machinery involved and without an understanding of the humanity and sense of organism of the machine being dealt with, may lead us very far astray with very great reactions of an unfortunate kind on the people.
In his amendment, Deputy McGilligan suggests that the panel of six which will go to the Minister will consist of three names selected by the directors of the associated banks and three selected by the executive committee of the Irish Bank Officials' Association—an association which includes officials of all ranks in the banks throughout the country, from the very highest down. The Minister would then have placed before him, as a panel from which to select three, the selections of people who are directors and the selections of people who are steeped in the details of the practical carrying out of the banks' work. I move the amendment because I feel that the Minister should have the opportunity of having drawn to his attention by the people who are engaged in the practical work the type of people who are available, as they consider, for work of this kind. Without machinery or a process of this kind, the Minister has no chance of having brought to his notice perhaps the most important class of people whom you want to have represented on the board.
The Minister will have all kinds of claims as to the type and number of people to be appointed as the other directors. Two of these will no doubt be service directors, and he will then have three others, and there is no doubt that these three will be selected with a view to either academic qualifications or industrial qualifications. Both classes of persons will no doubt be necessary on the board, but, as the proposal stands at present, there is no provision at all for the appointment of men with practical banking experience, of men who have grown up in the banking world in the same way as the engineer grows up from his schooling and experience of the actual work, or as the doctor, the architect, or any of these other highly technical people grow up. The Minister not only has no opportunity of getting that type of person on the board, but he has no opportunity of seeing where that type of person is, or of having the persons of that type who are available drawn to his attention by the people most qualified to draw them to his attention.
I do not think the Deputy is correctly informed if he says that the Minister will have no opportunity of getting for the board of the central bank, through the machinery proposed in the Bill, the help of people of wide and lengthy experience in banking, or that I, as Minister, will give no opportunity to the bankers to elect such people on to the board, through the panel of six, unless I adopt the series of amendments set down by Deputy McGilligan and moved by Deputy Mulcahy. I auggest to the Deputy that that is not correct. We have had on the Currency Commission at least two directors of banks who, so to speak, rose from the ranks, who had a life-long experience of banking and who, towards the close of their long years of experience, were elected bank directors.
I have met fairly frequently deputations from the Banks' Standing Committee. We had discussions on certain aspects of this Bill, and, before the Bill was under discussion, I met deputations from the Banks' Standing Committee. I do not think I ever met a deputation on which there were not directors of banks who had risen from the ranks, who were formerly officials. We have had the most distinguished bankers and the most experienced bankers in the country on these deputations—some of them always—men who had formerly been officials and who had occupied the highest official posts in a number of these banks. Speaking from recollection, from my knowledge of the bankers, in Dublin, at any rate, there are on the boards of six of the eight associated banks directors who are technicians, who have spent their lives in banking and who have all the knowledge and experience, all the technical qualifications which Deputy Mulcahy regards, and which I regard, as desirable to have at the disposal of the central bank. It is not necessary, therefore, that the amendments should be adopted to secure the technical fitness which the Deputy thinks so desirable.
There are other reasons. It is the directors of the banks, and not the officials, who are the custodians, the representatives of the shareholders and the depositors. Those who confide their money to the banks for safe keeping have confidence in the directors. I do not say that they have not confidence in the officials—I am sure they have—but it is not on the officials, but on the directors that the responsibility rests for the safeguarding of the money of the depositors, the shareholders and the customers of the banks, and it is important that that confidence should be recognised by the State in the way in which we propose to recognise it.
It is also advisable that the harmonious relations that have existed so long between the Currency Commission and the shareholding banks, as they were called—the associated banks as they will be called when the central bank is set up—should continue. I should not like to say that there would be a break in these harmonious relations if we were to adopt the amendments, but I should not like to take the risk. I think we have full opportunities of getting all the technical ability, the knowledge and skill that one associates with people who have given a lifetime to the service of any profession—engineering, medical or banking. The knowledge that comes from a lifetime of service will be at our disposal from amongst the directors of the associated banks at present in existence, all of whom may be eligible for election on the panel. We are not excluding any of these officials. A number of them are men whose names are well known in the financial and banking world and they would certainly bring a great and valuable store of knowledge and experience to the board of the central bank if they were put on it, as some of them have already done in the case of the Currency Commission. However, I do not think it necessary to accept the amendments suggested by Deputy Mulcahy for the reasons I have given.
Amendment put and negatived.
I move amendment No. 34:—
In page 12, line 49, Section 22 (3), to delete the word "eligible" and substitute therefor the words "each experienced in practical banking and possessing sufficient knowledge of currency and credit to enable him to give the board expert advice in matters relating thereto.
Sub-section (3) of Section 22 provides that the associated banks shall select a panel of six persons eligible and willing to act as banking directors and submit it to the Minister—"a panel of six persons eligible and willing to act." There is no provision in the Bill in which eligibility is defined in any way. The purpose of the amendment is to provide a definition of "eligible." Lines 49 and 50, if amended in accordance with the amendment, would read:—
"a panel of six persons each experienced in practical banking and possessing sufficient knowledge of currency and credit to enable him to give the board expert advice in matters relating thereto, and willing to act as banking directors".
I think it is necessary that eligibility as regards the banking directors should be indicated in some way and it should be made clear that they are experienced in practical banking and that they possess a knowledge of currency and credit. I should also like to ask the Minister, arising out of his remarks on the last amendment, whether in order to be nominated on a panel put up by the associated banks under Section 22, as it stands now, it is necessary for a person to be a director of a bank. Would an official of a bank or a person who was not either an official or a director be eligible for submission on the panel set up by the banking directors?
My interpretation is that such persons would be eligible. There is no restriction on the class of persons. I think it unlikely myself but it is open to the directors to elect an official on the panel if they so desire.
An outside person?
I think so.
What does "eligible" mean then? I think it should be defined in some way.
It would not mean unmarried by any chance?
I do not think so. I do not know how the Deputy would define the qualifications he suggests in the amendment or who is to decide these qualifications. Are we to hold an examination? I should not like to be given the job.
"Each experienced in practical banking and possessing sufficient knowledge of currency and credit to enable him to give the board expert advice in matters relating thereto."
How are we going to define that, or who is going to decide whether the persons selected have a sufficient knowledge of currency and credit? I think that question alone, the difficulty of deciding that issue, rules out the amendment.
If the section is to be left as it is, I think "eligible" should be changed into "not eligible."
Amendment put and declared negatived.
Amendment No. 35 falls by the decision already come to.
I move amendment No. 38:—
In page 14, to add at the end of Section 24 two new sub-sections as follows:—
(5) Whenever a director to whom this section applies ceases by any means to hold office as such director and the Minister determines to reduce the number of such directors and for that purpose not to fill the vacancy occasioned by such cesser, such cesser shall for the purposes of this Act (except this section) be deemed not to have occasioned a vacancy in the membership of the board.
(6) Whenever the Minister, for the purpose of reducing the number of directors to whom this section applies, determines not to fill a vacancy which has occurred amongst those directors, he shall cause the board to be informed of such determination.
This is similar to an amendment moved already. Whenever a vacancy occurs amongst the directors to whom Section 24 applies, the Minister may decide not to fill such vacancy. The amendment is designed to meet such a situation. It is a consequential amendment.
I move amendment No. 39:—
In page 14, Section 25 (6), to delete all from the word "means" in line 29 to the word "State" in line 32, and substitute the words "includes a bank incorporated outside the State as well as a bank incorporated in the State."
This also relates to the question of non-banking directors holding shares in a bank. It is a consequential amendment.
I move amendment No. 40:—
In page 14, before Section 26, to insert a new section as follows:—
(1) No disqualification of the governor or a director under any provision of this Act shall operate to remove him from his office until a resolution has been passed by the board declaring him to be disqualified on a stated ground from holding his said office.
(2) No member of the board shall vote on a resolution under this section in relation to his own disqualification.
During the Committee Stage it was asked whether a director who acts on the board after becoming disqualified under Sections 21 and 25 invalidates the acts of the board by so doing, especially if he is one of the four members constituting a quorum at one or more of the meetings of the board. It was suggested that it might be desirable to introduce a provision to the effect that, notwithstanding such a disqualified director acting, the acts of the board would be valid. This amendment is to meet that situation.
I move amendment No. 41:—
In page 15, Section 27 (3), to delete all from the word "Save" in line 5 to the word "Act" where it secondly occurs in line 6.
This amendment and amendment No. 42 arose out of some discussions on the Committee Stage in relation to adding two new sub-sections to Section 24. On closer examination it has been found that the words proposed to be deleted are really unnecessary. On the Committee Stage it was asked whether the governor has a vote on ordinary occasions as well as a casting vote in the event of an equality of votes. To remove doubt and uncertainty in the matter, the present amendment No. 42 proposes to insert the words: "second or" before the words "casting vote".
I move amendment No. 43:—
In page 15, lines 12 to 47, to delete Section 28.
This amendment should have been put in on the Committee Stage. Its object is to delete the provision of compensation or superannuation or other pension for members of the Currency Commission, and to ensure that the new board which is now being set up will not be composed of any pensionable members so far as that board is concerned. It is an innovation to provide for those compensations and pensions. In any event, to my mind, it is not necessary, and, as far as we know, is unasked for. It was not recommended, as far as my recollection goes, by the Banking Commission. Even if it were, I should not be disposed to consider or accept such a recommendation. The work of this body, as I have said before, is not to my mind either as onerous or as important as that which is undertaken by the board of a fairly extensive associated bank, or a shareholding bank as it is now called. It is possible that the work may, on occasion, be more important work, but it is routine. It has none of the characteristics and gives rise to none of the immense troubles and worries occasioned by the other work, nor does it call for the exercise of a business mind such as is asked for or expected on the boards of one of the other banks.
As far as I know, no case was made in respect of this provision either in the Second Reading speech of the Minister or on the Committee Stage. It adds to the expenses, and to my mind it detracts somewhat from the dignity of the persons appointed. I know of no bank in this country—some of them have been here for 150 years and others of them for 100 years— which provides a pension for a chairman or member of the board of directors, no matter how long they have been appointed. I heard quite recently of a member of a board retiring after 40 or 50 years' service— almost an octogenarian or a septuagenarian at any rate-and no pension was paid in his case. This is a time when costs are rising and there should be very keen consideration of any addition to our national expenses. Those things must be paid by somebody. Consequently, I think we should take this opportunity to strike out that provision, and stop those unnecessary expenses.
I do not think Deputy Cosgrave is correct in saying that this is a unique proposition, and that there is no precedent for it. There is a precedent under Deputy Cosgrave's own Government, and there is a precedent in the previous history of this country. Under the Railways Act, 1924, the directors were provided with compensation for loss of office, and under the Insurance Act of this Government certain directors were provided with compensation for loss of office. There are certainly two precedents; there may be others. I think it is correct to say that directors who are not whole-time officers of a banking board would not be pensioned. The Deputy was probably correct in saying that men who had been on the boards of banks for 30 or 40 or more years would not be pensioned, but certainly if they were whole-time officers—as some of them were—they would be pensioned and have been pensioned. I think all whole-time officials of banks, whether directors or not, have been pensioned.
Not the directors, as far as I am aware.
I know one or two who were managing directors of banks —Deputy Cosgrave knows them too—and who were pensioned.
No.
They were managing directors.
They were pensioned as officials?
I think, in some cases, they were promoted to chairman of the board, and were pensioned.
As officials?
Probably their period of office as managing director and as director was taken into account, I do not know. Certainly, I think a case has been made, and a just case, for pensioning a whole-time official of the Currency Commission.
A whole-time official?
A whole-time chairman or governor.
None whatever.
If he is a whole-time official I think it is just that he should be pensioned for his years of service or compensated for loss of office. I did not think that was a proposition to which anyone in the House would object. A whole-time official, no matter what his salary is, when he loses office by reason of abolition or anything else, should be compensated or pensioned. I think that is a proposition which we have always stood over in this House. Certainly there is a precedent for it in the case of the two Acts to which I have referred, the Railways Act, 1924, and the Insurance (Amendment) Act, 1938. The directors in those cases were compensated for loss of office, and I think it is not an unreasonable proposition that the directors in this case should be compensated for loss of office also. More recently still-I think the Final Stage was only reached to-day-under the Electricity Supply Board (Superannuation) Bill, the House has accepted the principle of compensation to directors for loss of office. The principle was discussed at length in this House and in the other House, and we agreed to give compensation for loss of office to directors, whole-time and part-time, of the Electricity Supply Board. That is another case where the principle was accepted in the House here, and I thought it unlikely that there would be any opposition to accepting the principle in the case of the directors of the Currency Commission.
There is no relationship whatever between the railways and the position here. In the case of the railways the board of directors was abolished. Here we are simply changing the name of an institution. There are five directors at present and we are going to call this institution instead of the Currency Commission a bank. You must distinguish between directors and officials. If these are officials are they to be paid as such? They are not. Everybody knows that. If it is intended that the Chairman of the Currency Commission is to be an official that is another matter. I never heard of it before. So far as insurance companies and railways are concerned they were simply wiped out and replaced by one body. It is not the same here. There is no bank director or ex-director on the pension roll of any bank.
What about managing directors?
Managing directors, if they have pensions, would have them as officials.
Are they not pensioned as managing directors?
I never heard of it.
I rather thought they were.
They may be ex-officio when on the board of directors. As directors there is no such case. To my mind we are making this a super-branch of the Civil Service, and I very strongly object to that.
The Minister for Finance will have to approve of the scheme, and whoever he is he will see that it is reasonable.
That is another matter. Power is now being taken to pension off directors who got £300 a year. It is certainly a new principle.
It is not new. We have it in the Electricity Supply Board.
The Electricity Supply Board is a new body, and from the beginning it was intended to give pensions. They are whole-time and part-time officials, and it was intended that they would get pensions. That was the arrangement.
I cannot accept the amendment.
I move amendment No. 44:—
In page 17, line 43, Section 32 (1) (a) (ii), after the word "of" to insert the words "not more than."
On the Committee Stage I sought to reduce from 2½ per cent. to not more than 1½ per cent. per annum the charge for consolidated bank notes. Deputy McGilligan explained in my absence that I sought to reduce the amount of commission originally put on the notes. Later on that amount was increased from 30/- per £100 to £3 and then reduced to 2½ per cent. the figure at which the fee now stands. In view of the fact that the banks were able to carry on, and that the scheme was able to pay for itself at 1½ per cent. the additional 1 per cent. added is nothing but taxation. If we let the section go as it is now it will read:—
(ii) for the portion of such half-year which is subsequent to the date of the passing of this Act, a sum calculated at the rate of 2½ per cent. per annum on the amount of consolidated bank notes outstanding ...
shall be paid. We are practically adding 1 per cent. per annum to the taxation involved. I do not agree with that. I want to leave it open to the Minister, when the scheme has settled down, to charge less, if, on reconsideration, he changes his mind as, I think, he should. The State is going to receive money in a number of ways from the central bank. The situation should be tidied up and in relation to consolidated bank notes there ought not to be any charge more than the cost. The State is going to receive a considerable portion of the 2½ per cent. The capital I think is 40,000 and the State is going to receive the surplus. We ought to know what the State does get. The overheads of the banks should be reduced. I submit that the present overhead charges on the banks involved by the increase should not continue indefinitely. If the section passes in its present form there will be statutory requirement to charge the banks 2½ per cent. for consolidated bank notes. The second reason for the amendment is that there ought to be a tidying up of accounts in the relationship between the banks and the Government, and we should know in a unified way how much money the Government was getting.
I think it has been a very profitable business for the banks, that they are getting this service for 2½ per cent. It is a small enough charge for the privilege they get. After all, the Minister for Finance must get money somewhere, and if he taxes banks-if the Deputy calls it a tax-I think he is saving the taxpayers in another direction.
He is raising the rate of interest on people who will have to pay interest.
Not necessarily. It does not follow that if the charge were reduced to 1½ per cent. We would get money or loans any cheaper. Take the position in the North of Ireland. The old rate of 7/- is still in operation there and the bank charges have never been less than they have here. It does not follow that if the Minister for Finance loses revenue here he is going to gain in other ways. If I had any guarantee of that I might accept the amendment.
Does the Minister seriously doubt that it will not follow if he reduces the rate payable for money?
I am not satisfied that that follows. If I were satisfied I would not hesitate to accept the amendment. Has the Deputy any reason to think that it would influence the cost of money?
If we are to reduce the price of money it is a very bad headline, whatever the effects, to have the Minister charging the banks 2½ per cent.
A modest 2½ per cent. for a great privilege.
In this case the Minister ought to consider that what is sauce for the goose is sauce for the gander. Last night the Taoiseach when resisting an application from the Labour Party to increase the wages of turf workers, pointed out that the wages of these workers could not be increased without ultimately increasing the price of turf in Dublin. I suggest to the Minister that there is no difference between that inexorable logic and the position of the banks, except that they do not sell turf. They are selling money. If you increase the costs to the banker, he must get it off somebody somewhere. He must either pay smaller dividends to his shareholders or charge his customers who get accommodation, including the Government themselves, more. I suggest to the Minister that that logic is inexorable.
Is not the Deputy happy when the Minister for Finance gets in all the revenue possible without taxing the people? This provision enables him to refrain from additional taxation. The money, too, is easily collected. I have grave doubts whether any advantage will accrue to those seeking loans, whether the Minister for Finance or the public, by adopting Deputy Mulcahy's amendment. I am prepared to risk it, however, and I accept amendments Nos. 44, 45, and 46.
I am not pressing the Minister. All I want him to do is not to tie himself down by the rigid letter of the statute.
I move amendment No.49:—
In page 19, line 24, Section 35 (5), after the word "notes" to add the following words: "but the same proportion of any sums expended by an associated bank in the discharge of such liability as the agreed proportion mentioned in sub-section (2) of this section shall be repaid by the bank to the associated bank."
I could repeat on this amendment my remark about sauce for the goose being sauce for the gander. The Minister was to consider whether or not he could offer relief in this case. In my opinion, for what it is worth, it is manifestly fair that if any claimants turn up for money which has been written off, the Government should stand their share in the proportion that they have shared in the "swag". That is my proposition in plain language and I suggest to the Minister that it is only justice.
The section, as drafted, will, I think, meet any contingency of the type Deputy Dockrell has in mind. It is contemplated that the writing-off will be effected in more than one operation, one writing-off taking place in 1943, and the second one five years subsequently. The section provides for a further writing-off if any dead notes be presented later. The interest of the banks will be well safeguarded and the initiative will lie with them. They will be dealt with fairly and justly.
Do I understand the Minister to say that he is accepting the principle of my amendment and that it is covered in the Bill?
I think that what the Deputy seeks to achieve is provided for.
If that be so, I am perfectly satisfied.
I understood that the Minister was to consider two points in connection with this matter. One was the precipitancy of the Currency Commission in coming to a decision on a particular date which would bind all subsequent dates, no matter what movements took place in the dead notes in the meantime from one part of the country to another. I understood that the Minister appreciated that weakness in the Bill. What is decided on the 1st June, 1928, will not apply without alteration in July, 1929, or in July, of 1930, 1940 or 1942. Over that period, there must have been some alteration in the proportion of these notes in either part of the country. It was a great mistake on the part of Currency Commission to take a decision which would bind all subsequent dates in relation to these notes. Sooner or later, there will have to be an agreement between two Governments or, possibly, three Governments on this matter. The two Governments are not going to be concerned regarding a decision the Bank of England may take. We would not be bound by that decision, if we did not accept it.
If the Currency Commission takes a decision, it is obvious that the other Governments are not going to accept it unless they are in agreement with it. The second point is: having agreed as to the proportion of these notes outstanding, and as to the percentage the Minister should get, some of those notes are subsequently presented. The case we put up on the last occasion was that the charge in respect of those notes, which were regarded as dead, and in respect of which the Minister was paid, should not be the liability of the banks. They have paid. Why should they be asked to pay a second time? We argued on the last occasion that the banks had paid a considerable amount of interest on this money. For five years they paid 1½ per cent., for the next five years 3 per cent., and for the past five years 2½ per cent. That is 35 per cent. in all.
There are two Governments involved. One Government lays down in this section what it will get, what it expects to get and what it is determined to get. Is the other Government, looking on, likely to seek a better bargain? It appears to me to be likely that they will. I can imagine the position of a bank, looking at these two collections of gentlemen, bent upon getting the last ounce of money's worth out of the institution. It is our loss, as those banks have their major holdings, interest and liabilities in this country. It is all loss, and to that extent I thought the Minister would reconsider the whole section.
I considered this matter again very fully, with all the expert advice I could get. Having done so, I found no necessity to change it, as we have covered all the situations likely to arise. In this case, the initiative rests with the banks. As Deputy Cosgrave properly says, there must be agreement between all the people concerned before this matter is settled finally. Efforts have been made before to obtain agreement, and they have failed. Certain understandings, which might form the basis of agreement at a later date, were arrived at between the Governments concerned; but I do not know how they will work out eventually. If the proportions we would like to see adopted are accepted, the State will get something out of it and the banks' interests will be safeguarded also. The Government maintain that we have a certain interest in the matter-that all the interest in the dead notes does not lie with the banks. The British Government, the Northern Ireland Government as a subsidiary, and this Government, maintain that they have a certain equity in the matter, and that a certain proportion of the assets of these dead notes, when they are finally written off, must accrue to the Government. Under the tentative agreements that were discussed-but not adopted-the interests of all parties, including the banks, would be safeguarded. The banks would not get all they asked for, but neither would the Government.
Before any conclusion is come to or any final agreement arrived at, there will have to be—as there has been already-further prolonged debates and discussions. It is not the intention of the Government to deprive the banks of their just due, but there will be differences of opinion as to what "just due" may mean. The banks are entitled to a certain proportion, in the belief of the Government. I do not know how long it will be before final agreement is reached-it may be 20 years, when most of us are under the sod-but the Government spokesman of that time will, I hope, see to it that the Government gets a fair share of the assets of these dead notes, while at the same time not being unjust to the banks. If I were in a position to arrive at a decision in this matter, I would not be unjust to the banks; and I am sure that, if Deputies on the opposite benches have to deal with this, they will try to be just and fair also.
After all, the State has provided all the opportunities for the profits derived out of this note issue, and the State should get a certain proportion of the assets of the dead notes. This matter has given a great deal of trouble in the past, and will give a certain amount more in the future, but I think that, on the whole, the sections proposed in this Central Bank Bill are not unjust to anyone. They will provide a basis, on the initiative of the banks, for coming to an agreed settlement as to how the assets of this fund should be disposed of finally.
I move amendment No. 50:—
In page 19, before Section 36 but in Part IV, to insert a new section as follows:—
Legal tender notes to the proportion of not less than 1 in 3 on the backing of liquid sound advances shall be issued to each associated bank. The bank shall accept the certificate of the responsible officer of each associated bank countersigned by the auditor and the chairman of the board of directors.
On the Committee Stage I had down a different amendment from this, effecting much the same purpose. As the law will stand as soon as this Bill is passed, without this amendment, any currency to be issued in the future will be currency deriving its sole backing from external assets-from credits that we have elsewhere. The integrity of our currency depends upon this country possessing external assets at least to the extent of whatever currency is issued. Under the Currency (Amendment) Act-even as amended by this Bill—the central bank may decide, with or without the concurrence of the Minister, as the case may be, to utilise other backing for the issue of its notes. Very little reflection is needed to realise that any or all of our securities here-say national loan, land bonds issued on our own responsibility exclusively, any stock issued by a local authority here entitled so to issue, and so on-have no real market on our stock exchanges. It would be impossible to sell £1,000,000 worth of those securities inside many months. It is quite true that, on occasion, a national loan is taken up to the extent of £6,000,000 or £7,000,000; but our securities, as such, have no market. People who buy them do so to keep them, and the sales are insignificant-as was shown by the Banking Commission. Therefore, any change that would take place on the part of the central bank —in respect of the utilising of these securities—would mean simply buying securities that would be unmarketable, except over a long period of time. We are faced with the problem of finding something which is marketable, which is security, and which is easily realisable.
The suggestion made here is not a new one. It was recommended in the case of the first Banking Commission. In regard to the original consolidated note issue, arrangements were made to have it backed by liquid sound advances. I have explained already that the Currency Commission was not satisfied with the arrangements which the banks were prepared to make, nor were the banks perfectly satisfied with the arrangements which the Currency Commission wishes to make in that connection. The banks, after all, have a certain confidence reposed in them. In this country, they have maintained that confidence over a very long period, and have not sacrificed it even in this particular case, and they solved the question of the backing of the consolidated note issue by pledging these notes with the Currency Commission. That was not the intention, either when the Act was passing through this House, or when the matter was under consideration, I think, by the original Banking Commission.
Now, the principal contention that I make in recommending this amendment is that, although we boast of our independence and claim to be a sovereign State, we do not back that claim with our own money. It is a derogation, to my mind, of status, and there is no earthly reason for it. The banks, in this country of ours, have survived over 100 years. Not a single depositor in 100 years has been disappointed in getting his money whenever he wanted it, and it is an extraordinary thing that we should set up a commission—a commission of yesterday—which will not accept that standing and that status. Why, every single penny that there is in the Currency Commission at the present moment, every penny that there will be in the central bank that they will have control over, came from those banks here in this country, and the Irish banks, in their turn, got it from our own people. There is every national reason why we should have an issue of currency backed by our own assets. The assets of our own people are as good as there are in any part of the world. What is the meaning of liquid sound advances? It means advances to customers in which there is collateral, and collateral which is as negotiable and as good as any of the sterling assets on the other side. It is all nonsense for us to be talking about our sovereignty, our independence, and all the rest of it, if we are not prepared to accept the value of our own 6d. or our own £ as being as good for the backing of the note issue of this country as the sterling assets.
I am not asking for anything unreasonable in respect of this, because I realise at once the ease with which one can cash in on the London Stock Exchange any sterling securities that one might have, or how easy it is to get a cheque on the Bank of England cashed, and so on. I realise that this is a conservative country, with a conservative banking system, and I am not asking for the whole of the backing of our currency here; I am only asking that it should be in the proportion of one in three, and it is not an unreasonable thing to ask for. It is one in regard to which the circumstances of the case warrant us in having confidence in our own people. For that reason, this proposed central bank has none of the characteristics of a central bank. Have we not the courage to back at least a portion of the issue of our notes with our own assets?
I accept fully, in principle, that it would be wise for us to have portion of our currency backed by domestic assets. I accept fully what Deputy Cosgrave says about the soundness of our own assets and our own banking system and bankers. I realise that we have a reliable banking system here and reliable bankers, who have not failed the people of this country in safeguarding the deposits committed to their charge. That is true. There is no country in the world where there is sounder security than here. The question between us, then, is, how is that to be arranged? How is it to be arranged that we should have domestic backing for a portion of our currency? I am quite willing, if it were practicable, to adopt Deputy Cosgrave's suggestion—quite willing—but since we discussed this matter before, I went into the whole subject again with my advisers, and I also sought other advice. I sought the best banking advice that is available to the Government-experienced men-and I put Deputy Cosgrave's amendment to them and asked their opinion on it, and their answer was that it is impracticable and that it cannot be adopted. I asked, why, and a variety of reasons were given. The advice of these bankers, men with as long experience of banking as any bankers in the country, was that the liquid sound advances, as a basis of backing for even portion of our currency, could not be adopted by the banking system.
As I say, I am quite willing to accept, in principle—taking into account our financial history, taking into account national sentiment, if you like, but, more important still, our financial soundness—that we should have no hesitation in taking the risk of having a proportion of our currency backed by domestic assets. That is not an unreasonable proposition, and, if it could be done in the way Deputy Cosgrave suggests, I would not hesitate to adopt it, but having gone to those who know more about it than I do, and who would have the job of putting the system into operation-that would be their responsibility-I am told that it cannot be done. I am told, not alone by the Currency Commission— they told us that before, as I already informed the House-but by the Banking Commission, that it is not practicable. I also went to bankers of long standing, and with experience and knowledge of the subject, and their advice to me was that it is not practicable. The only way out, that I see, is along the line of the amendments I have down later in regard to the Currency Commission (Amendment) Act of 1930. I think there is a way there of securing, to some extent at any rate, what Deputy Cosgrave desires, what I would desire, what I think the Government would desire, and that, probably, the whole House would desire. But having examined the matter, having gone everywhere that I could to get technical and reliable advice on it— not alone, as I say, to the members of the Currency Commission, to whom the matter did not come as a new subject, or the Currency Commission officials, but to those who are independent of the Currency Commission and are experienced bankers-and being advised by them all that Deputy Cosgrave's amendment is not practicable, I have to bow to superior knowledge and experience and I cannot, therefore, accept Deputy Cosgrave's amendment. I think, however, that a way of meeting, to an extent at any rate, the principle that he advocates and the principle that I myself should like to see adopted, is offered in later amendments that are down here for consideration. I refer to the amendments to the Currency Commission Act of 1930.
The Minister indicated that he had banking advice on this. Would he say if the banking people, whom he consulted about this, could explain why it is that this is done by Irish banks in the North of Ireland and cannot be done by Irish banks in Eire?
What is in this amendment is not true of the banks in the North of Ireland.
My information is that it is.
It is not in operation in the North of Ireland.
I move amendment No. 51:—
In page 20, lines 32 and 33, Section 37 (6), to delete the words "punishable accordingly on conviction thereof" and substitute the words "liable on conviction thereof to the penalty mentioned in the next preceding sub-section."
On the Committee Stage it was suggested by Deputy Esmonde that the words "punishable accordingly on conviction thereof" were not sufficiently specific. He urged that it would be desirable to specify the penalties for the offences in question. I have adopted his suggestion, and I am specifying the penalties as set out in amendments Nos. 51 and 52.
Amendment No. 54 is out of order, and the Deputy who put it down has been so informed.
I move amendment No. 56:—
In page 25, before Section 46 but in Part VI to insert a new section as follows:—
(1) If at any time it should appear to the board, with the concurrence of the Minister, that it is expedient so to do, it shall be lawful for the board to make, with the consent of the Minister, regulations requiring every licensed banker to settle all or a particular class or particular classes (defined in the regulations) of his clearances by cheques drawn either (as shall be specified in the regulations) on the bank or on an agent appointed for the purpose by the bank and requiring every licensed banker, for the purposes of so settling such clearances, to make and maintain with the bank such deposits as shall be prescribed by the board by or under the regulations.
(2) If at any time it should appear to the board, with the concurrence of the Minister, that it is expedient so to do, it shall be lawful for the board to make, with the consent of the Minister, regulations requiring every licensed banker to lodge with the bank for clearance all such cheques, bills, notes, or other negotiable instruments (payable outside the State and lodged for clearance at an office in the State of such banker) as shall be prescribed in that behalf by the board by or under the regulations.
(3) If and whenever regulations made by the board under either of the foregoing sub-sections of this section are in force, it shall be the duty of every licensed banker to comply with those regulations and, if any licensed banker fails (whether by act or omission) so to do, he shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding £100 for every day during which such failure is continued.
Central banks generally perform the function of clearing payments between the commercial banks in their respective countries. As the commercial banks generally keep balances with central banks, the settlement of payments can be conveniently effected by means of debits and credits between the accounts in the books of the central banks. Paragraph (j) of the original Section 7 of the Bill empowered the central bank "to keep the accounts of any bankers clearing." Many central banks carry out clearing arrangements and settlement of balances as a natural development of central banking functions. I think there are few, if any, central banks that do not, in fact, carry out the function of clearances. That is so in the case of the Bank of England and of the Federal Reserve Banks of the United States of America. They certainly do, and some others. In some of these cases it is provided by law that the central bank should carry out clearing arrangements for their respective commercial banks. The Irish banks, of course, have already their own clearing arrangements, and it is not proposed to disturb these arrangements, but it is considered desirable to empower the central bank to perform this function if the need should ever arise in the future, and if circumstances would make it desirable that the commercial banks should be required to effect their clearances through the central bank.
Clearances through the central bank, apart from being a matter of great convenience to the commercial banks, are of some significance in economising the use of cash in banking operations, and thus tend to strengthen the banking system at times when big demands are made by the public for more cash. It has been pointed out that the settlement of internal clearances through the central bank makes for economy in the amount of cash required to be held by the various commercial banks, and that a similar economy can be effected in the amount of foreign exchange required for the purpose of effecting external clearances if these are all centralised and effected through the central bank. This is an important consideration where payments have to be made to countries from which we import more than we export, and in which we have no substantial assets and investments such as we have, for instance, in Great Britain. I think the suggested arrangement, if put into operation, will be found advantageous from the point of view of the State as well as of the commercial banks, and may probably be a source of economy to the banks as well as to their customers. However, the section does not at present seek to impose a system of clearances, but empowers the board of the central bank, with the concurrence of the Minister, if it thinks it expedient to do so, to make regulations requiring the licensed bankers to adopt the central bank as the medium for clearances for internal and external operations.
I would like to know whether the Chair has any advice to give me in regard to my amendment. Will I have an opportunity of replying to the Minister?
The Minister's amendment and the Deputy's amendment are mutually exclusive.
I will move my amendment, then, after Deputy Cosgrave has spoken.
When I first saw this amendment, and the provision in Section 7, it struck me that this was going to be another imposition on the banking system without any corresponding advantage. The present clearing system has been in operation for a very considerable time. I must say that I have never heard any criticism or complaint about it. It had this advantage, that it was kept within what one might describe as the banking system as such, and within whatever confidences there are in that connection. There was this confidence in it, that when a person drew a cheque he knew that the confidence of the bank could be relied upon not to have any talk about it. The first thing that strikes me about this amendment is that all cheques drawn, on whatever bank, must be lodged in this new institution. You will have, possibly, the six persons on this central bank and its officials in contact with that extra information. The point is a small one, but it is one which, I expect, banking interests would be concerned about. The principal thing I am concerned about is this: Is this going to mean a delay in the clearing of cheques? I have not given much attention to the matter for some time, but, speaking from recollection, cheques are, or used to be, cleared in two days. Assume that the period was two days, is this going to mean an extra day? This is new work for a new body that has not had previous experience of it. If there is going to be no extra delay then the objection on that score falls. Another objection is that a deposit must be kept, presumably free of interest, by the commercial banks with the central bank for the purpose. They have their credit at present in the Bank of England. Does it mean having an extra bank added to their list of expenses? If it does, it means that they have to keep a credit in London and a credit here. That appears to me to mean further expense without any corresponding advantage. I should like to see where the advantage lies, if there be one.
I hope the new central bank will not be a sort of Nosey-Parker. But there is a general apprehension on the part of persons outside whenever they see Governmental interference in these matters, that there is something of that sort afoot. I should say off-hand that that is not so. But to explain that to people outside is quite a different matter. The real issues here are: does this mean a further lodgment of money on the part of each bank on which it will get no interest because, on its face, it appears that that would be so? Secondly, does it mean that there will be extra delay in the clearance of cheques? That would be a matter of some importance. There is a further objection. Regulations are to be made by a board which, in effect, is not responsible to anybody. It is not responsible to this House. This board gets statutory authority to make regulations. I object to that. It is bad enough to have Ministerial power to make regulations. Is is true that they usually arrange that they can be annulled? It is not a form of legislation that is particularly attractive to anybody except Ministers, and I suppose the Civil Service generally. It is not a good system. But to have regulations made by a body not responsible to this House, a nominated body, is something which is unusual. They can exercise very considerable powers under these regulations. In these circumstances, the proposal seems to me to be capable of adding to the expense of business; to be capable of adding to the delays that are occasioned in business, and to be capable of spreading information which is of a highly confidential character. It adds nothing whatever in efficiency; it adds nothing to the status of the institution, nor does it add in any other respect to commercial progress or activity in the country.
I move amendment No. 57:
In page 25, before Section 46, but in part VI, to insert a new section as follows:—
(1) If and whenever the board shall recommend to the Minister that it is expedient to require every licensed banker to make and maintain with the bank, such deposits as shall be prescribed, and to settle all or a particular class or particular classes of clearances by cheques, drawn either on the bank, or on any agent appointed for the purpose by the bank, the Minister may make an Order declaring in accordance with such request the particular deposits to be made and maintained with the bank, and the particular class or classes of clearances to be cleared by cheques drawn on the bank or on an agent, appointed for the purpose by the bank.
(2) If and whenever the board shall recommend to the Minister, that it is expedient to require every licensed banker to deposit with the bank all cheques, bills, notes or other negotiable instruments payable outside the State and lodged for clearance at an office in the State, the Minister may, in accordance with such request, make an Order accordingly.
(3) The Minister may, at any time, upon the request of the board, by order, rescind, vary or amend in accordance with such request an Order made by him under this section.
(4) No Order made under this section, upon a request of the board, which is not unanimous shall be of any force or effect unless or until it has been laid before each House of the Oireachtas, and has been approved by resolution of each such House.
(5) Every Order made under this section on a unanimous request of the board shall be laid before each House of the Oireachtas as soon as may be after it is made, and if a resolution annulling such Order is passed by either such House within the next subsequent 21 days on which such House has sat after such Order is laid before it, such Order shall be annulled accordingly, but without prejudice to the validity of anything previously done under such Order.
(6) It shall be the duty of every licensed banker to comply with any Order made under this section and if any licensed banker fails (whether by act or omission) so to do, he shall be guilty of an offence under this section and shall be liable on summary conviction thereof to a fine not exceeding £100 for every day during which such failure is continued.
(7) If and whenever the deposits made by a licensed banker with the bank under this section, exceed the amount it is necessary for the bank to maintain in order to settle the clearances of such licensed banker, the bank shall pay to the licensed banker on such proportion of such deposits as are equivalent to this excess interest at a rate or rates equal to the rate or rates the bank receives for its corresponding investments.
The purpose of the amendment is somewhat exploratory, but if it were adopted, the deposits would cover any deposits required for international clearances or domestic clearances, or safeguard certain assets that are held in respect of banks' liabilities within the State. Under the Minister's amendment No. 56, any deposits that would be required would be for the purpose of settling clearances. Under sub-section (1) of my amendment, these deposits would not be restricted by the necessity for using them for mere clearances. But, in considering this amendment and some other matters in connection with it, certain phenomena came to my notice that I think require a certain amount of attention and a certain amount of safeguarding. If we look at the statistical returns issued by the Currency Commission for April last, we find the domestic liabilities of the banks on the 31st March, 1942, were £165,790,000. These were the liabilities within the State. As against that, they held assets within the State that only amounted to £77,854,000. So that there was a difference of £87,936,000 between the assets and the liabilities of the banks within the State. But assets were held outside the State. That was the position at the end of March, 1942.
If we look at the position from that point of view at the end of March, 1939, we find that as against £34,726,000 of liabilities within the State, the banks held £71,234,000 of assets within the State, and held outside the State, in respect of liabilities within the State, a sum of £63,492,000. We have the position, therefore, that between March, 1939, and March, 1942, while the liabilities of Irish banks within the State rose by £31,064,000, the assets they held within the State as against these liabilities rose only by £6,619,000. So that there is a sum of £24,445,000, or about £24,500,000, in liabilities within the State covered only by assets held outside the State. That is a very considerable increase in the holding of assets outside the State against domestic liabilities, and I suggest that there is a possible serious danger in that. Of that £87,936,000 held outside the State against liabilities inside the State, a fairly large amount is no doubt held by four banks that are not institutions belonging to this State; that is, they are institutions that are regarded from the point of view of taxation and everything else in Great Britain as being British institutions. In the situation that has developed and is continuing to develop there, we do not know what type of special taxation or capital levy might be introduced in Great Britain that might operate in some way or another against those assets as long as they are held in Great Britain by non-Eire institutions.
In the first part of my amendment I say:—
If and whenever the board shall recommend to the Minister that it is expedient to require every licensed banker to make and maintain with the bank, such deposits as shall be prescribed...
When, in the development of the amendment, I free that from any condition that these deposits will be made in respect of clearances, I mean it to cover a situation in which the board might consider that, in order to preserve to a greater extent assets that our banks had lying outside the country in respect of liabilities within the country, the banks might be required to transfer these assets to the central bank and, even though they were held in Great Britain, that they would be held for the banks by the central bank as an Irish institution and therefore would be free from running any of the risks that they might run in the present extraordinary circumstances by being held by institutions not belonging to this country.
A very large amount of money is held abroad by Irish banks in cash or at short call. I should like to know why it is necessary to hold so much cash abroad. I take it that cash is held abroad for the purpose of keeping one-tenth against liabilities that are liabilities to the banks abroad and may be held also in connection with our trade balance and whatever clearances may be required in connection with them. It appears to me that there is some connection between the amount of money that is held in cash or on short call outside the country and our trade balances. If we look at the balances of trade from 1933 to 1937, we find that there was what we call an adverse trade balance in 1933 of £16,768,000, in 1934 £21,927,000 and, over the years 1933 to 1937 inclusive, there was an average adverse trade balance of £18,539,000. If we take the cash held abroad during that time, there was an average total of £19,433,000 held by the Irish banks in cash and at short call. Some of that money was required, to the extent of one-tenth, to cover liabilities abroad.
Let us take 1933 as an example. The adverse trade balance in that year was £16,768,000. The total amount of cash held abroad was £20,641,000. The external liabilities were £49,200,000. Taking it that £4,920,000 of that cash was held against external liabilities, we had, in some kind of relation to our trade balances, cash held abroad to the extent of £15,520,000. In the same way, on an average against an adverse trade balance of £19,503,000 for the six years, there was cash held abroad, when allowance was made for the one-tenth, to the extent of £14,686,000. Where your adverse trade balance was £18,500,000 you had £14,500,000 held by the banks in cash.
During the last two years a very considerable change has taken place. In 1940, when the adverse trade balance was £13,816,000, the excess in cash and money at short call over what was required to cover external liabilities was £22,230,000. During 1941, when we ceased to have an adverse trade balance, and when we exported £2,298,000 worth more than we imported, the cash held abroad, again making allowance to cover external liabilities by one-tenth, was £28,425,000. While the trade balance has changed from an adverse of £16,522,000 in 1939 to a favourable trade balance of £2,500,000 in 1941, the amount of money held abroad over what was required to cover liabilities rose from £16,000,000 to £28,000,000, or by £12,000,000.
It seems to me that an examination of that position would show that there was a very considerable amount of money lying abroad earning nothing. It could be utilised, on the credit of the central bank, by deposits being made with the central bank, to earn money. When we see a situation like that developing, it does seem to require some review here in order to ascertain why such a large amount of money would be lying abroad, perhaps lying dangerously abroad, and earning no money, while we were here paying very high rates for any money we required.
Under the first part of the amendment, it does seem an examination is required as to why deposits of that kind should not be made, in the first place, to safeguard those assets that are being held abroad against liabilities that are entirely domestic, and, in the second place, we should like to know why our financial resources are wasted by the holding of such huge amounts in the shape of cash and money at short call abroad, earning nothing, particularly when our trading position, which might be expected to require money abroad for clearance purposes, has been so radically changed, when we compare it with what it was before the emergency started.
I should like to know whether any estimate has been made of the amount of money that would be saved by bringing domestic clearances from London here; and, again, what might be saved by bringing the international clearances from London here. Deputy Cosgrave has asked whether this is going to cost the banks anything more. I should like to know that, too, and how the central bank is going to pay itself for the amount of work it will do in that connection. The amendment provides that where decisions along these important lines are taken, by a unanimous decision of the board, they may be put into operation by an Order of the Minister, but they may be challenged by a vote here. Where the Minister considers it advisable to take decisions on these lines, and where he has not the unanimous recommendation of the board, they would have to come before the Dáil for positive approval.
Under this amendment, if it is put into operation, where deposits are made with the bank over and above what is required for clearance purposes, the banks making the deposits would get, on the amount of money they have deposited, interest at the same rates or some equivalent rates as the bank was earning on these deposits —they would earn money on the proportion of the amount of their deposits that was not required for clearance purposes. Again, I say the idea is in the first place to safeguard money that is held abroad as against liabilities that are internal ones; in the second place, to get some kind of machinery going that would show how much money was being unnecessarily held abroad as cash and would see that it was put to use by the banks or would require deposits to be made so that it could be made productive through the operations of the central bank.
I would like to add to the protests about statutory powers being extended to this body. It is quite bad enough to have a number of Government Departments practically making statutory orders but now we are going to have an outside body making statutory orders with the concurrence of the Minister. The Minister will probably say that this clause is only permissive but, of course, having parted with it as a permissive clause, it may become operative the day after. We must look at it in that light and consider the advantages and the disadvantages. As far as I know, it is proposed to use only the central bank for collecting English and foreign cheques. In other words, they are to be centralised here and sent across. It was suggested that that would mean perhaps one day's delay. I would suggest that it means more like three or four days' delay because, remember, the ordinary banks, when dealing with the central bank, will have to carry out the same procedure that they carry out at present, namely, they will have to collect, record and take particulars of all the cheques that they send on to the central bank, the central bank will again have to do that and, therefore, I would suggest that there will be three or four days' delay. If the Irish banks are going to get that service performed for nothing, I would like to suggest that it is something new, because it will entail substantial staff who will have a substantial amount of business to perform.
There is another matter that I would like to suggest to the Minister. While the banks at present adopt the procedure of collecting these cheques and sending them away through certain well-defined channels, in certain cases there are cheques which, by reason of some doubt or something else, may be called upon for special clearances and those are taken in a class by themselves and can be dealt with quite separately from the ordinary machinery. Is the Minister going to provide for that or is he going to say that a system which has grown up and which has been founded on years of practice, must, in the interests of centralisation or something else, be done away with?
On the other side of the account, apparently, the banks are going to have to keep their present channels for Irish cheques coming back here. I do not see how the Minister could suggest that there is any saving there or that there will not be very substantial expense, first of all in cheques being delayed three or four days going back to the other side and the banks not being credited with those balances. The next thing is that, apparently, there is going to be one channel for cheques going one way and another channel for cheques going the other way. That is a type of—I suppose you might call it—Heath Robinson machinery which I am afraid we are becoming only too familiar with in this country. Somebody will have to pay the cost of that.
I would like to suggest to the Minister that, when he is replying, he should deal very fully with those points because, while he might say that this expenditure is not very great, it is all heaping costs on to the back of industry which industry must bear in the last resort. The Irish banks and the central bank will all have to be paid a profit over and above the services they perform and that is all going to come back to the ordinary trader in increased cost of running his business.
It was decided to take No. 1 at 6 o'clock.
Will we finish this amendment?
Is there any objection to disposing of this amendment?
Very good, Sir.
Have I permission to speak again?
The Minister has asked whether he has permission to speak again. Technically he has not.
I thought I raised that on a point of order, and I think I induced the Leas-Cheann Comhairle to agree that if amendments Nos. 56 and 57 were moved together, the Minister having opened on his own amendment-amendment No. 56-would be able to reply to what was said on amendment No. 57.
Amendment No. 57 falls if amendment No. 56 is carried.
I am satisfied with whatever decision is taken.
I feel sure that the House will agree to the Minister being allowed to speak twice.
We will allow him to speak three times if it is helpful to the House, I am sure. We will even allow the Taoiseach to speak as well.
As Deputy Mulcahy has said, we would be back in Committee at once if I spoke.
The main argument against the amendment I propose, as I understand it, is that there would be delay. I do not know that it is a fact that there need be any greater delay than there is at present. I do not see why the central bank should not be as expeditious in dealing with the matter of clearances as the office which at present performs that function for the Irish banks in Dublin, or any places in Great Britain where clearances are carried out for Irish banks.
At present the office is connected with the Bank of Ireland. As a matter of convenience, the practice of clearances being carried out by that office has grown up. That office clears cheques for the Irish banks and if the office had to move across the street in Dame Street or College Green, I do not think there need be one hour's extra delay by reason of the fact that a new office, situated somewhere in the centre of the city, might be doing this work in future rather than the office which at present performs the function. It might happen that there would be delay in connection with what might technically be called foreign cheques, but I do not think it necessarily follows that there should be delay of one day more much less the three days Deputy Dockrell suggests.
Deputy Cosgrave earlier to-day complained that this new bank would not have any of the attributes of the ordinary central banks as we know their constitution and their practice in any other part of the world. Here is one function which the great majority of them perform for the banks in their respective countries. These central banks in most cases—I cannot say what the percentage is, but it is very high-perform clearing operations for their respective banks and we propose to give that function to the new central bank which is to be set up here.
Deputy Cosgrave ought not to complain if we give it that function because it is one of the attributes of the majority of central banks the world over. It is true that, to some extent, there may be a loss of interest, but it will only be very small because the amount of interest paid on the deposits held by the clearance banks, if we may so refer to them, for the commercial banks here at present is, admittedly, in most cases, very small. Something may be earned on these deposits, but, if anything is earned, it is a very small amount. The cost to the banks should not be any more than what the cost of clearance to them is to-day. I do not see how it need be any greater.
Will the work not have to be duplicated?
I do not think so.
The central bank will have to record, photograph and so on.
Is that not done at present by the body responsible for clearance?
Yes, but they will have to continue to do that.
No; there need not be two clearing offices in Dublin.
They must take particulars.
The banks make their own records and the clearance office which operates at present, perhaps, makes records. If it does not, the new central bank will have to make records and keep account of all the cheques sent to it for clearance, but I imagine that the office which does clearances at present keeps its records, and, if so, the necessity for doing that will, I take it, disappear and the work will in future be carried on by the central bank, so I do not see the point in regard to duplication.
Regulations may be made by the bank. It is true that this is a permissive section, but it is not true, I suggest to Deputy Dockrell, that the Order will be made the day after power is given, because I realise, and I am sure the board of the central bank will be bound to realise, that this matter of clearances is not something which can be arranged in a day. It is a highly technical business which will have to be studied and a knowledge of all its various operations will have to be acquired by the officials of the central bank; but I am satisfied that the central bank will not jump into this work the first day, the first week or the first month it is set up. It will take its time, and examine the whole situation, and see whether the setting up of a clearance system to be controlled by the central bank will be advantageous to the commercial community, to the banks and to the State as a whole. I believe it will be advantageous and helpful, and that eventually it will be an economy.
I did not see exactly the appositeness of a good deal Deputy Mulcahy said in proposing his amendment about the large amounts of cash held outside the country and the necessity for reducing those large cash assets abroad and repatriating them, in connection with this section.
Getting them to earn money.
Does the Deputy say they are not earning money?
Yes. There was a sum of £28,000,000 abroad on 31st March, 1942, earning no money, and, on 31st March, 1939, there was a sum of only £16,000,000.
I am not satisfied that that sum of £28,000,000 was not earning money.
How much is it earning?
Not very much, but it is not just left there by the bankers.
I should have said that there was a sum of £34,000,000 abroad. The figure I gave of £23,000,000 was the amount reduced by one-tenth as against liabilities abroad.
Are we not paying 4 per cent. on the £80,000 we raised for turf production here?
All I say is that I do not see that it came properly under this section or under the amendment the Deputy was proposing.
It comes under my amendment all right.
I take it that what the Deputy said in relation to Section 57 related to deposits. Deposits will be made with the central bank here for the purpose of clearance. If it is for the purpose of clearance, the amount of deposit required would be very small and would not affect the assets held abroad to any appreciable extent. The amount kept at present in the banks which do the clearances for the Irish banks is, comparatively speaking, very small——
That was why I put down my amendment.
——and it does not earn interest.
I see that. I pointed out that the Minister's amendment only required deposits for the purpose of making clearances. I framed my amendment so that the deposits could be made without any suggestion that they were to be made only for the purpose of clearances. I indicated some of the reasons why these powers should be operated in order to require licensed bankers to bring assets abroad under a national institution for taxation here and to earn money here instead of having them lying idle.
I suggest that if there is a question of giving power to the central bank to require compulsory deposits from the commercial banks that that should be dealt with separately and distinctly from the matter of clearances. That is an important power which has often been suggested as a proper power to be given to central banks—to require deposits by statute.
Under the rules of order, the only way I could bring this in was as an amendment, in the same way as the Minister brought in his new and advanced amendment.
I have no right to object to the Deputy's amendment on a point of order, but I do suggest that this is a principle in itself and that it should get separate consideration entirely apart from the question of clearances.
I fully appreciate that point.
It is one that could have been very usefully discussed on various Stages of the Bill, but I suggest that it should not be brought in as a kind of side-wind because it is a very important power to give to the central bank. It would not be wise to bring it in in a manner which would suggest that we were trying to slip in something that was not fully adverted to by everybody in this House.
Like the Minister's amendment, it is never too late to bring it in, particularly when you have the advantage of the Seanad coming afterwards.
Perhaps that is an invitation to somebody to have that principle discussed later on in another place, but I do suggest that it is not the right way to bring it in. Therefore, I am not following the Deputy with regard to the cash securities held by the banks outside the country.
The Minister appreciates that there is a position there to be investigated?
I certainly do, but I think to some extent that has been met by Section 45. I cannot tell what amount of money will be saved by transferring clearances to the central bank. That will have to be fully investigated by the board of the central bank before they will make any recommendation to the Minister and the Minister will have to be satisfied that it will be a useful service to the banks and to the commercial community of the State as a whole, before he gives his consent or sanctions any regulations that might be proposed to be made by the central bank under this section.
