Insurance (Miscellaneous Provisions) Bill, 1985: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time".

Deputy Coveney was in possession, but he is not here. Deputy Seamus Brennan has 30 minutes.

The Ides of March have dealt a heavy blow to this country. I am not a member of the crazy Right as opposed to the crazy Left but I support the State's decision. It was correct to isolate the Allied Irish Bank as quickly as possible from the difficulties it faced. We have to stop the double thinking in regard to whether or not Allied Irish Banks should be protected. The Allied Irish Banks were correct to announce a maintained dividend. Perhaps they did it too aggressively but it was financially essential that they announced that a dividend would be maintained. If they did not, the share price would have tumbled. It has already tumbled considerably, but it would have tumbled to a nominal figure. Who wants to hold shares that do not have a dividend? It would have left the bank open to a run on the deposits and there were interesting signs that other banks were interested in a takeover bid if the share price tumbled to a very low level. That would have been a take-over from EC based banks because non-EC based banks would not have been permitted to make such a bid.

I understand that the AIB set up a crisis room monitoring the withdrawal of deposits for the couple of days after 15 March. That room is still in existence. They are still monitoring and there is tremendous uncertainty about the level of deposits. Some people would ask "Why worry"? Some Disneyland financial analysts would say "Why worry if we lose a bank? Is that not what private enterprise is about?" The answer cannot be dodged. The banks are interlocked. For example, the Bank of Ireland shares plummeted nearly as much as Allied Irish Bank's shares when the exchange was opened after the event. Secondly, banks are essential mechanisms for efficient State borrowing. Had there been any difficulty with the AIB it would have led to difficulty with other banks and the efficient arranging of our borrowing requirements would have been under severe threat.

Let us stop the nonsense suggesting that somehow we could have done without the AIB or any other major financial institution. Our party supported the Government's decision. Let us be quite blunt as to who the AIB are. They have 27,000 shareholders, 87 per cent of whom are Irish. Two out of every three shareholders in the AIB have shares worth less than £2,500. The pension funds have about 60 per cent of the shares. This is the pension money of Irish workers. The people on the left should not behave like the cat that got the cream in jumping on this own goal of the private sector because many of the shareholders are in the category of less than £2,000 and the pension funds is the money of Irish workers. It is not just a conglomeration of fat cats. That is a simplistic view of the merits of State ownership versus private ownership. The average holding in the AIB is £2,000 and the average dividend is £200, subject to tax. Obviously it is the ordinary person who owns the shares in this bank. Let us be clear about that.

Banks in every country are notoriously worried about a major run occurring and they have to move quickly, and sometimes aggressively, to re-assure depositors that their money is safe. That is what AIB had to do last week. The consequences of not moving in and saying that the depositors' money was safe, that the shares would hold, that at least some of the dividend could be maintained, were horrific. To pretend otherwise is to be dishonest. All one has to do is to observe the bank in Ohio where recently the State had to move in and close down the bank for a whole week to prevent people taking their money out. Do we want to get to that situation?

Let us be crystal clear. The bank had to be protected and cut free from the difficulties of the Insurance Corporation of Ireland. For the State and for this party it was a question of to which red light one would respond. There were priorities everywhere, red lights everywhere — the taxpayer had to be protected, the ICI and the Allied Irish Banks had to be protected. The Government, with the support of this party, dealt with the greatest priority, the need to ensure that that bank was protected so that when the dust settled the bank would still be there and so that today we would not be debating an even greater catastrophe. We support the stabilisation of the bank.

The cost to the bank of getting out of the ICI has not been light and I am sure that the bank will and should be called on to do more. If we accept the argument that the bank should be maintained, we must be very careful as to how hard we push from now on. There was £86 million written off and there was a £50 million soft loan. That soft loan should be turned into a grant, because effectively it will be a grant. Can anyone see Allied Irish Banks sueing the State for a return of its £50 million soft loan with little or no interest? Even they are not that crazy. The soft loan is so soft that it is in effect a grant and should be turned formally into a grant at this stage. The £20 million guarantee money is in the Bill as being the liability of the State.

I understand that the AIB have lodged £20 million in the Central Bank to meet that. Yesterday Deputy Haughey made the point that it was not in the Bill that that £20 million was the liability of the AIB and asked that it be put into the Bill. If the £20 million is in the Bill as being the liability of the State and it is already in the Central Bank, it should be mentioned in the Bill so that that £20 million is clearly legally available to the State. If we accept these proposals we have taken from Allied Irish Banks a total of £156 million in capital. That is well over a quarter of the value of the bank. Should we take another quarter off the value of the bank? If we do that, let us do it clearly and in the full knowledge of the danger into which we are putting the bank. Can we take more than £156 million? It is important to put that on the table because there is double thinking in this whole area as to whether or not we should demand enormous extra sums from the bank at this stage. Maybe over the years we can ask the bank to repay the ICI. I will deal with that at a later stage.

It is worth noting that the interest on £156 million would be between £15 million to £20 million per year. A figure of £20 million out of profits of £70 million per year is one hell of a fine for making a hell of a mistake. They deserve that fine because they made a hell of a mistake but can we, as legislators, push harder? If we push harder I wonder will we bring down the house of cards? That is the question I want to pose and we have to answer it in a non-ideological fashion, whether it is State owned or privately owned. Do we want it brought down or do we want it maintained? My answer is, I want it maintained. A lot of the capital has gone and let us be reasonable and sensible about how hard we push that bank in the foreseeable future until it regains some self-confidence.

I am totally opposed to the creation of a semi-State company around the Insurance Corporation of Ireland. I am totally opposed to that step being taken now, as is proposed in the Bill. I ask the Government to take the Bill out of the House because it represents a blank cheque, a black hole. We do not know how much it is going to cost. We do not have any idea. The Bill asks the representatives of the Irish people to vote into law a new semi-State company, liabilities unknown, depth of black hole unknown and size of black hole unknown. We are asked to vote it into the law today with our eyes closed. It is a ridiculous request and it should be withdrawn. It is an insult to the House to ask us to pass the legislation to establish this company and say, "we will get back to you in a couple of weeks when we know the Bill you voted for; here is the invoice, pay it today in Dáil Eireann and we will come back to you later with the accurate figures." That is a lunatic way for a State to behave. We blame the bank for behaving in a non-commercial way and quite rightly because they made a mess of it but we are now proceeding to compound the situation by behaving in a non-commercial fashion. How more non-commercial can one behave? We are being asked to agree to pay a bill that is not known, irrespective of its size. It is a lunatic situation and the Bill should be taken out of the House today.

If necessary the Bill can be reintroduced when we see the depth of the black hole, when we see how much money we are in for but it should be taken out of the House until such time as we know the extent of the liability. At that stage, if necessary, the Bill can be reintroduced. Until that day I am totally opposed to the creation of a new semi-State company around this problem. I should like to put that into perspective. There are 28 commercial semi-State companies and I am involved in a committee dealing with them. Those companies have a total turnover of £3 billion and employ 54,000 people. In general they give an excellent service to the State. There are some bad eggs and we are trying to weed them out. Between them, according to the last available figures, they lose about £200 million spread over all the companies but today we are setting up a new semi-State company which on its own might lose that amount. The company we are setting up might on its own totally outshine the losses of all the other 28 semi-State companies put together. That is why I think it is a ludicrous position and why I wonder if any thought was given to it. It is a millstone around the necks of the public. I implore the Minister to take the Bill out of the House until we know what we are getting into. One Bill passed after three days could be the single biggest difficulty in those 28 companies.

It is worth recording that we have been making some progress with the 28 companies, reducing the losses, getting them into shape and getting them more commercially minded. They are coming round but we are now putting in one that by itself could sink the whole sector. The acid test of the company is whether or not it can survive as a private company. The answer seems to be that it cannot. If it could have survived as a private limited company the bank certainly would have kept it. It is clear that, although the bank did not do their sums right on day one they have certainly done them since, and that the company concerned cannot be maintained as a private limited company.

The size of the loss depends on the re-insurance treaties. The story is around that a lot of the re-insurance is now getting wobbly. That is happening because it is dealing with a State body and not because it is dealing with some other type of animal. The story is around, and I think some credence can be given to it, that the re-insurers are now looking at the small print, at the treaties, and saying that there was not full disclosure to them as re-insurers and because of that they will not meet the liability. I am positive that the figure of £65 million given by the Minister in the House is a gross underestimation. It may be accurate today on the basis of what the re-insurance companies are saying but wait until their lawyers get at it, wait until they know that they are dealing with a State company instead of a receiver or liquidator. The day they know they will say, "it is a State company; it is Ireland Limited, the suckers will pay; let us find some legal loopholes and we will get out of this re-insurance because after all we were not told the full facts". They will contend they they did not get full disclosure and will ask why they should be caught for re-insurance. That will make the Bill ten times what it is supposed to be. I can assure the House that that worries the heart out of me.

The Insurance Corporation of Ireland should be wound down and the good business that is there and the employees should be placed with other companies. A temporary fund should be established for the more sensitive parts of the business. If that is not done we will be giving a blank cheque to the private sector, to every financial institution for ever more, and we will pick up the tab. How do we know what bum business the Bank of Ireland have bought or the Ulster Bank, or the Northern Bank? We do not have any idea and if we take this step in a panic measure we will be asked to do the same in the House month after month from now on. Would the other banks not be crazy if they did not look at their subsidiaries now and say, "Maybe we can unload this one." I am sure that is the atmosphere in the board rooms of the major banks today.

If I do not want a semi-State company what do I want? I will answer that by saying that apart from winding down the ICI, placing the employees and the business elsewhere with a temporary fund to deal with the sensitive business, I believe that the State should consider putting in a receiver into the Insurance Corporation of Ireland. I make that suggestion to protect the employees and the taxpayers. If an administrator is installed and then the Bill is introduced to turn the whole thing into a semi-State company we are inviting claims from all over the world to double and treble, and go on doubling and trebling. People with claims will not settle lightly. Would anybody settle a claim lightly against the State? One would not. One would send in one's lawyers and get the best shilling possible because one would bear in mind that one was dealing with a State organisation. If the State put in a receiver it would be an entirely different kettle of fish because a receiver cannot be pushed too hard. If the receiver is pushed too hard he will pull the plug. If people were aware of that they would adopt a more reasonable approach to the future management of the Insurance Corporation of Ireland. The Minister should consider whether it would be advisable to take out the administrator and put in a receiver to wind down the company over a couple of years, replace the staff and the business and do the normal thing that occurs in the private sector, let the company wind down over a period in an organised way.

I have read an advertisement placed all over the world under the heading "Insurance Corporation of Ireland PLC, Statement From the Administrator, William McCann, FCA". In the course of that statement Mr. McCann states that his function is to take over the management of the company's business which will be carried on as a going concern with a view to placing it on a sound commercial and financial footing. That last part of that sentence is the crunch point.

Who told the administrator that it was his job to put this company on a sound commercial and financial footing? Who told him that his job was not to wind down the company and place the business elsewhere? If the AIB could not place it on a sound commercial footing, how can the administrator do so? How did he know that it would not be the decision of this House that the ICI would be wound down with replacement of employees? He jumped the gun by placing that advertisement and exceeded his authority. That advertisement should be withdrawn from circulation because it gives the impression that he has already arranged the money from the State and that it will soon be on a sound commercial footing. That is pre-empting the decision of the Dáil and that is why I particularly object to the advertisement. A receiver would have been far safer from the point of view of the State because we have not yet decided whether we will keep the company going and shower it with money which would involve introducing a Bill every year to give Sealúchais Árachais Teoranta £80 million or £90 million or whatever they need. In years to come SAT will be regarded as essential, like CIE. I see no reason why the motor insurance business in the Insurance Corporation of Ireland cannot be put into the PMPA. After all, the PMPA are a State-administered company. Do we need a second State company dealing with motor insurance? It is a crazy duplication which is totally unnecessary. It could be done quite easily and could form part of the winding down of the ICI and the placing of business and staff elsewhere in an orderly fashion rather than setting up this sitting duck for every creditor worldwide to have a pot shot at the Irish State for the next couple of years.

We have not yet decided whether we are keeping the company going or winding it down over a period, which is the view I take, and yet the administrator announced that he will get it going on a financial footing. It seems he has had assurances in this regard and I wonder what they are.

I must also criticise the Members of the House who made irresponsible statements over the last couple of days to get publicity. We are all in the political business and we need to communicate with the public but do we need to be on the airwaves to the extend that, three mornings in a row, speakers on RTE advocated screwing the AIB? Is that what the public want or is it just a cheap political approach to a very serious problem? I deprecate the points made by a number of Deputies over the last few days.

The regulatory system in the Department of Industry, Trade, Commerce and Tourism has failed and should be rewritten in full. Having regard to what happened in the PMPA, we should have known that the system should be rewritten and why did we not do it then? The UK authorities who checked out the accounts obviously did not put any great work into it either and they should also rewrite their system as they also missed it. The Government had the 1983 accounts of the ICI in June 1984 and they saw that the ICI wrote £11 million of the business in 1982 and £32 million in 1983; it more than doubled in an 18 month period but the provisions for those claims did not rise accordingly. This information was available in June 1984. The reserve ratio, that between claims and premiums, was down from 120 per cent in 1982 to 70 per cent in 1983. In 1981 it was 144 per cent. The accounts were available in the Department but nobody seems to have noticed. That is gross negligence on the part of the regulatory authorities and an alternative approach will have to be taken. Unless the Department can sort out the regulatory mechanism to an even finer degree, they should hand over that authority to the Central Bank who have the job of getting information on a monthly basis from each bank in the country and there is no reason why they could not take on the insurance companies in the same way.

We did not turn the PMPA into a semi-State company but left it to an administrator. Why not leave this to the administrator also? Why bring in a Bill which will turn it into a semi-State company? Until that question is answered satisfactorily, the Bill should be taken out of circulation. If it was not needed for the PMPA it certainly is not needed for ICI. We will now own two insurance companies and we will all bow to SAT because it is as Gaeilge. We will not be as interested in the PMPA because it is not one of our sacred cows; it is something which the administrator can deal with at arm's length from the State. This company should also be at arm's length from the State. For these reasons, this is a ridiculous Bill.

As I understand it, the mechanism they use in the Department for general and life business is to seek the same type of report although, for general insurance, you need a report more often as life insurance is not a risk and is actuarially sound. This other area is wide open and extremely dangerous and it needs a different reporting system. Are the life and general systems used in the same way in that there are quarterly reports?

The AIB said they could not investigate the company before they bought it so why did they not do so afterwards? When there was a minority holding between Irish Shipping and Ocean Bank, why did they not investigate the safety of the minority holding at that time? At one time, AIB had a minority holding through Ocean Bank of which 40 per cent was held by ICI. Why did they wait until they had a majority holding to investigate it? Why did the Continental Corporation of New York in 1983 sell 75 per cent of ICI and why, one year later, did AIB have to inject £30 million into it? Did they not ask the Continental Corporation of New York why they were selling 75 per cent of an Irish company? Surely that would have raised an interesting question.

I do not think the worst is over in regard to ICI which is why I think this legislation is crazy. If the worst was over — I know enough about financial institutions to say this — the bank would stay in. They would not take all the losses and then dump it. They would do the opposite, they would take all the blows, have it cleaned out and, when it was down to a reasonable figure, they would get back in, build it up and sell it. I warn the Minister against using the figure of £65 million as a device to get the Bill passed because if only £65 million was involved the AIB or any other bank would stomach it and get on with it. But it could be up to ten times that amount. The Minister is trying to give the impression to the Members of the House that we can pass this Bill because, after all, it is only £65 million, we can breathe a sigh of relief, we can handle that. We cannot handle £650 million if that is what it turns out to be and I fear it might be.

I call for a full investigation by the administrator into what went on with these joyriders in London in the office of the ICI. They were known as a soft touch. They were on an incentive scheme to sell on commission and they issued a money market report to the London underwriters in which they said: "The company is now soundly backed by the AIB and all is well." That was issued officially by the London underwriters a few months before the collapse of the ICI. The report went around London that the company was basically sound. I have a long list of questions about what those joyriders in London were up to. Unfortunately I cannot go into them now but perhaps I will do so on another occasion. I also have a list of questions about what Irish Shipping and AIB were up to in a company called Ocean Bank Developments and why AIB and Ocean Bank got into bed together in the first place, which led to their future investment in ICI. Ocean Bank Developments should be examined because that company is the seeds of the trouble between AIB and the ICI.

The taxpayer must not bear the brunt of this. We were right to rescue AIB. Do not compound the mistake by bringing in this Bill. Let us not have a semi-State company. Let us wind down the ICI, spread the risk over the remaining financial institutions and put in a receiver if necessary. We have made a major mistake. Do not compound that major mistake by passing this Bill.

Many issues arise in the consideration of this debacle and I would like to address three of them. The first is the nature of the State involvement in shoring up the financial difficulties of AIB/ICI, including the timing and the extent of the commitment involved. The second is the price being asked from those who are responsible for that fiasco. The third is the price which the State can reasonably expect from the financial and economic institutions in that sector of the marketplace generally and the possibility of bringing about a change as part of a price for ensuring that we do not allow AIB and the ICI in effect to crash.

With due respect to Deputy Brennan hindsight is a very exact science. If we were starting again with a clean sheet the State might well have other options available to it, but the State had to act and most reasonable people would believe that it had no other option but to commit itself fully in the belief that, unless prompt and comprehensive action was taken, major repercussions to economic stability would ensue. It remains to be seen whether that is the case; but a very strong body of opinion was that, unless strong, decisive, urgent action occurred, the consequences would have been even more catastrophic than they are. There is not much point in delaying the House in debate on that issue. The State has acted and to some extent this debate is redundant because the action, and perhaps even some of he legal obligations arising from that action, are complete and in place and, I presume, cannot be revoked.

The second area of my concern is consideration of the price which is appropriate to be paid by those who are reasonably deemed responsible for this mess. The Minister dealt with that in his speech. Whenever this kind of issue arises there is immediate recourse to the national interest, national economic stability and the need to protect our financial institutions as an excuse for in some cases very massive payments — by the taxpayer, ultimately — of public funds. The national interest in some cases could be defined as some type of action which is expected to be outside the interests of the ordinary consumer or member of the public except in so far as they are expected to pay to preserve this indefinable national interest.

I argue that the national interest includes the interest of the taxpayer and it would not be at all in the national interest for the State in any way to be perceived to be engaged in any kind of covert, secretive, furtive negotiations or discussions which ultimately would lead to a deal being done with AIB or ICI, the taxpayer footing the Bill and the full implications and analysis of the deal not being made available publicly. We have to trust our Government and Governments generally and those whom we elect, but they have a responsibility to come clean with the public. In due course I expect, therefore, that, having had a full investigation and analysis of what went wrong here and what the State is letting itself in for, the public and this House will be told. Therefore we should get away as quickly as we can from concepts of open-ended commitments, blank cheques and so on which strain credulity and the resources of the State and ask too much from the people ultimately. That should not be necessary, although I defend the right of the Government to act in an emergency, as this Government had to act in the last few days.

The Minister detailed the AIB price in his speech to the House. It will be very difficult to form any conclusion other than that there is a great degree of inadequacy about the extent to which AIB and ICI are being asked to foot the bill for a mess which they jointly have created. According to the Minister, the contribution is as follows. Writing off the total acquisition cost of ICI resulted in a loss of £86 million. I do not believe that that can reasonably be said to be part of the price which AIB are paying. Putting it as charitably as I can, that is the price of simply wrongheaded speculation, if not downright mismanagement. That is not part of the price which can be put on the credit side when it comes to totting up what AIB are contributing in this case. Deputy Brennan mentioned loans being in effect grants. That would imply that somehow the State are involved in calling a spade by some other name. I assume that if the State say it is accepting a loan it has every intention of repaying it. A loan is not a grant and cannot be construed to be a grant. Perhaps it should be a grant, but that is another day's work.

It is a soft loan.

I accept that it is a soft loan. It is like tipping the chap who throws you the lifebelt. I am not too grateful for soft loans when the purpose of the loan is effectively to steer one into shallow water, if I may use the analogy. The second part of the price is a major share of any damages arising out of legal proceedings against the formar auditors of ICI to go to the State. As my colleague, Deputy McGahon, would say, I would not like to bet too much on the amount of money that would accrue from that legal action if it ever comes up. I am willing to put a small wager that we will not hear a great deal further about it despite public posturings in that respect.

The next item is interest subsidies of £6 million on a £50 million loan over three years and an additional interest free loan of £20 million worth almost £3 million per year at current interest rates. I do not believe that a soft interest rate on a loan to get an institution out of trouble can be seen ultimately as a major constituent in terms of people paying a price. It is an indication of what I might call a conciliatory approach. What else would we expect? It is a very small net price. The third item is the purchase price of £2.5 million paid for Credit Finance Bank which they had sold with ICI for £5. If you buy an institution you buy it warts and all — and the "and all" is what that is about. It is unreasonable to expect the State simply to take up the rotten elements of the deal and not expect also that the State should not get the benefit of any silver lining in the dark cloud. Therefore, I question the legitimacy of including that as part of the price. The sale of a 20 per cent shareholding in the profitable and healthy Insurance Corporation of Ireland (Life), also for £5, also belongs to ICI and comes with the deal. It is not unreasonable to overstress the degree to which that makes a contribution. There is also the biggest share in any bank levy that may be imposed. At this moment no bank levy arises from this mess.

It is clear from the Minister's speech and other speeches that much thought is being given to the possibility of a bank levy. Leaving aside the lack of justice inherent in taxing people who minded their houses to pay the bill for people who have not, the reality is that there is not now any levy involved in that respect. The price in total seems to be extraordinarily generous. I believe the price from AIB and ICI should be the maximum possible consistent only with sustaining the viability of that banking institution. I am not convinced that that bottom line has been reached nor that any serious attempt has been made to bring that about.

I am a little heartened by a comment the Minister made in his speech which might give one a reason for believing he has something like that in mind. In the last paragraph he said:

Finally, I know Deputies will be concerned that AIB should continue to help in the longer term. In this regard the position will be reviewed in the light of the audit and of the claims experienced as they emerge over time. We will have to assess the situation again not later than 31 December 1985.

That and some of his other remarks gave me reason to believe that this list, which in my view is not a convincing list, may not be the final tally which AIB will have to cough up for the price of the State bailing them out of very deep water. That is reasonable.

What kind of plight could one be talking about if one pursued that line of argument? There are a number of options. One is that AIB repay over a period any money the State lends or gives them. If the State gives the loan and if the sum is in the region of £60 million to £120 million, AIB should be obliged — in my view morally obliged — to repay whatever sum is necessary over an appropriate period of time, that period to be sufficiently long to ensure that it does not jeopardise the viability of AIB. The period can be negotiated. It does not matter how long it takes. I would be willing to go so far as to say that we should be willing to accept that AIB could say they would repay the money in their own reasonable time. Another option — and, in my view, a better option — is that the State should not pay any money to anybody unless it is in pursuit of public policy. A third option would be that the State should purchase equity in proportion to what they pay for involvement in AIB. I am not aware if AIB would be unresponsive, and I doubt they would be, but that would ensure that the bank was stable and there would be no cash transfer strain on the bank. Yet the State would have a growing asset, assuming the continued success and growth of AIB. This would mean that we were not giving money without a clear purpose or reason other than a general notion that it was in the national interest that this corporate banking structure had to be preserved intact. That essentially is what we should be doing.

I should be grateful if the Minister would answer the specific question why any of these options has not been pursued. The State could purchase shares in direct proportion to the amount of money being spent. They could buy these shares by coming to an agreed price, whether it be £1.10, £1.20 or £1.30. The State would become a shareholder and would reap a dividend in the same way as the fortunate AIB shareholders will do this year while the rest of us will be paying for it.

The price outlined by the Minister appears to be one which takes great account of what the Central Bank says. The Central Bank said that the price outlined in the Minister's speech is the maximum which AIB could pay at this time. The Minister said:

The Central Bank, whose job it is to assure the soundness of our banking system, was involved in the discussions leading to the decision to rescue ICI. Their strong view, as a regulator of the banking industry was that the contribution by the bank that I have already outlined was the limit of what AIB could prudently be expected to make at this time.

That is fair and reasonable, but I am not asking them to pay anything at this time. I am talking about entering into a long term commitment to ensure that the degree of State involvement and State financial rescue support is minimal. That could arguably be said to be in line with what the Central Bank said to the Government.

I do not think it would be any harm if the Central Bank made some public observations about this matter. If they are engaged in a central role with a regulatory, supervisory or consultative function in this respect, it would not be too much to expect them to make some general observations about the stability of the institutions involved or about how they perceive the situation. In my view their voice has been conspicuously absent. I do not know the reasons for that silence but I am arguing strongly and stating as a fact that the public are not convinced that AIB have been asked to pay a price now or over the next number of years, or if necessary two decades, consistent with the degree of support which the State has given in this case.

Those who pay the piper should be able to call the tune, and that is not happening now. Ultimately the question of price is a matter of judgment and it is very hard to judge a case, particularly when one is not in possession of all the facts. Apparently the Minister does not have all the facts and, extraordinarily, nobody will have all the facts for a number of years until we see what the claims liability is likely to be.

I find it very hard, as did the Minister, to understand how allegedly professional organisations like AIB and ICI could not come up with reasonable "guestimates" quickly. Obviously their data information systems are antiquated or outdated, or else there are other problems; and I hope there are not, because we all want to see the rescue being carried out as efficiently, inexpensively and successfully as possible. That is a fundamental issue. Most people are not yet convinced that AIB have been asked to pay adequately for the price of this rescue.

We have to ask ourselves how this debacle happened. I am not going to spend a long time dealing with the history of this case, but I am struck by a number of things. People in this area of activity knew from commonplace talk of the difficulties of ICI, not just over the last number of months but over the last number of years. I spoke to a senior banking official who was able to tell me that it was known four years ago that ICI had problems, that it was known widely that there was an underprovision problem and that this would be visible in the famous blue book. He said that 18 months ago it was known that there was a major problem, particularly relating to London, and that six months ago everybody in the field was saying that the problem was — to use the word this gentleman used —"horrific."

Obviously the Department got wind of this and moved to act, particularly in relation to the Irish end of the business. If one looks at what the Minister said it is clear that he and the Department acted very quickly, efficiently and persistently, despite initial assurances, to ensure that the Irish end of the business was in good order and that the underprovision was compensated for. However, fairly bland assurances were apparently accepted about the London end. If I was in the position of a person asking those questions I would not be consoled if I knew that the obvious domino effect of a collapse in London, which handled 70 per cent in gross terms of the business of this corporate arrangement, was still subject to major query and that the people who gave assurances about there being no underprovision in London were the same as those one had to persistently pursue in order to get them to do their job in relation to the Irish end of the business. The regulatory end by the Department needs to be further examined. I gather the Minister intends to do that.

In an article by Des Crowley in The Sunday Tribune of 24 March 1985 he stated that the repeated publicity about the ICI difficulties were for long dismissed by AIB and that as recently as 14 November the new chief executive assured the press that £23 million was the limit of the write-offs the banks would suffer because of ICI's difficulties. That very day, however, the ICI management was holding a meeting with staff to convince them that they should end the strike called by their union, the ASTMS. At that staff meeting the company's accounting policies were challenged by a junior accountant in the group and he was supported by a more senior accountant, Ernie Phillips. They said that the claims provision in the 1983 company accounts had been cut by the top executive management in certain key areas. The claims provision supplied by the accountants in the important public liability, employers liability and motor sectors had been cut by 42.5 per cent at the behest of management.

If that is the case very serious issues arise. I would expect that, in due course, in order to ensure continuing public confidence in the stability and integrity of ICI and AIB, adequate inquiries and investigations would ensure and appropriate remedial measures follow. I do not believe that the public will be assured of the satisfactory ordering of affairs within companies which have fathered this debacle, the essential systems and personnel of which remain untouched. That would be no more than paying the bill for wantonness, wilful or otherwise, without any guarantee that a similar bill would not be presented in due course. What I am saying is that someone in those organisations will have to answer for what the Minister referred to, in somewhat oblique language, as being inaccurate information and for what I am saying is simple mismanagement and gross irresponsibility. If that does not happen, the national interest will not be served. It is a matter for the AIB and the ICI to take care of that matter and I expect they will do so.

The Minister spoke about the problem and how it had been handled and said:

However, I have already referred to the lack of adequate information systems and of management control, particularly in relation to the London branch of the company. It appears that the information supplied by the London branch to its supervisory authority and to its head office in Dublin did not reflect the true position of the business being transacted in the branch.

That can only be construed in one way and the consequences should flow from it.

The State should not be seen to be involved in private, behind closed doors discussions with major financial institutions nor should a general pact be declared that the less said the better. That is not in the national interest. What is in the national interest is to have a calm, rational analysis of the debacle and that appropriate action be taken. That should be done and I look forward to hearing about it in due course.

Part of the price which the State can now expect, if it interprets this not so much as a tragedy but as an opportunity, is to put in place the systems that would ensure that this kind of mess would never again occur. No financial institution should be allowed to be in a position where it jeopardises our national stability. That could be done without major interference in the institutions, by proper corporate structures, rebonding, ensuring there are certain upper limits of growth, and by regulatory control of one kind or another. The function of Government is usurped if we accept that in a country of one million taxpayers, where GNP is small, major financial institutions will be in a position to hijack the national finances if and when they choose to go into speculative areas of venture or simply when they are mismanaged. The State cannot continue to accept that. Part of the price of the rescue operation should be to begin a systematic re-evaluation of all aspects of the banking system and industry which could cause that kind of problem. There should be changes in the corporate structure of the financial market to ensure that no financial institution can ever again put a gun to the head of the country as has happened on this occasion. Other aspects of these institutions should be looked at and this opportunity should be taken to do that. The State should insist that this is part of the price of the rescue package. The whiff of cartel about the banking institutions should be examined.

There is no reason why the State should not be able to regulate that certain types of risks, if they are to have a consequential domino detrimental effect on the State, should not be offset or rebonded in some other way. In short I do not care how it is done but it should be done. We must ensure that we are never again in a position where a Government, over a weekend, have to turn the national finances upside down in order to bail out mismanagement or bad speculation.

Over the past two and a half years the Government have had to make very difficult decisions to get the national finances in order. I remember the extraordinary controversy that arose about the withdrawing of food subsidies. The figure involved was £17½ million. How puny it all seems now. Essentially we are now in the business of writing blank cheques and hoping there will not be too many noughts at the end. I believe the Minister knows what he is talking about when he says the figure is somewhere between £60 million and £120 million. It is irresponsible for anyone to speculate that it is more.

The Minister spoke about redefining the statutory responsibilities of directors and auditors. That is appropriate and should be part of the price. The State is not interested in picking up lame ducks but must insist that there are no more lame ducks. The Minister spoke about the quality of information required from insurers and the technical capacity of his Department to assess such information. Radical reform is necessary there. Either the Department or the Central Bank should be in a position to give meaningful consideration to the data presented to them. There is not much point in the present procedure which appears to be little more than taking an overview of what is presented and hoping that people are telling the truth.

As regards jury awards, I do not believe that is the problem in this case although I agree there are areas that need to be examined. It does not mean that we should rush into a commitment to abolish the system in the mistaken belief that somehow it is the fundamental problem in this case. The essential difficulty here was under-provision in the London area and the fact that management did not do anything about it. It was a management problem. We must try to ensure that we put the systems in place so that we cannot be threatened again in this way.

Secondly, a proper and thorough evaluation and analysis should be made of precisely what happened in this case. Having assured the stability of the banking institutions, in due course that evaluation should be made publicly available because the public are paying the piper. Thirdly, the corporate structure changes and the legislation and regulatory changes which need to be made should be introduced to ensure that this cannot recur.

There are issues which the management of AIB and ICI should address. I do not believe that the sum total of such addressing should be that one man gets extended holiday leave. To me that would be further negligence. A thorough re-examination in those two corporate bodies is important and I hope they will undertake it. They are the steps which should be taken at the very least to ensure that we do not have a repetition.

The House is responding very well to this difficulty. The Government had to act to shore up what could have been a catastrophic situation if they did not act. There is a degree of blind faith in their commitment but there was no other option available to them. Any humming and hawing would have meant that there would probably have been a run on that bank with its own concomitant domino consequences which would be catastrophic for everybody involved. The Government have acted properly and appropriately. They have done their best to ensure the stability of the market place. It may be reasonably deduced — and I hope I am not misintepreting what the Minister said — that the Minister may not yet be satisfied that the AIB have been asked to pay their full price. I do not believe they have. That price should be the maximum consistent only with the continuing viability and stability of the AIB-ICI. Otherwise they would be paying too little. The taxpayer is entitled to a better deal than that.

In some ways I regret having to rise to speak on this Bill. There could have been a very serious problem for the nation if one of our major prestigious financial institutions had collapsed because of the ICI problem. Over the past number of years our banking institutions have taken quite a bashing about high interest rates and profits. We cannot put all the blame on the financial institutions for high interest rates. No matter what the rate of interest is, all the bank gets is its own margin.

I should like to look briefly at the history and the development of AIB. The Munster and Leinster Bank were a well known Cork bank for a long number of years and they gave a magnificent service to the community. We now have Allied Irish Banks providing employment for 9,000 people. That is a very large number of people in decent, gainful employment. In the service sector there are quite a substantial number of jobs. In my own county AIB have approximately 40 branches. They have 100 in the Munster region. They have about 27,000 shareholders, some with very small shareholdings. Any company is built around shareholdings.

On page 27 of the directors' annual report there is a breakdown of the shareholdings. Two thirds of the shareholders hold shares to the value of about £2,500. There has been a good deal of criticism about the statements coming from AIB that they will continue to pay dividends. It is only right that they should pay dividends. People who invested their money are entitled to a return. It is a small return. It is somewhere in the region of 8 per cent gross. Many of the people I speak about will get a dividend of less than £200 gross. They are decent, honest Irish people who invested money in AIB. It is important for the bank to be in a position to pay a dividend. Confidence is important. If we do not have confidence in a bank which is one of our major financial institutions the community will suffer.

Some of the moneys involved are pension funds. I was surprised to read that Irish Life have approximately a 10 per cent to 12 per cent equity holding in AIB and a very large life assurance company known as Standard Life have a 5 per cent equity holding in AIB. If the worst had come to the worst and the bank had to be liquidated, the sufferers would have been those who benefit from pension funds and they are mainly Irish workers. The funds would have been depleted and we would have had a crisis. We have to recognise that the bank did not hide anything from the Government. They put all their cards on the table. That is to the credit of AIB.

It has been explained that the loss to AIB will be in the region of £90 million. That is a staggering figure. This cash input will reduce AIB's profits by a further £17 million per annum. That is made up of a loan a few years ago of £6 million to ICI and recently the soft loan of £50 million. A further shortfall will arise in AIB's profits because under the Central Bank guidelines for capital adequacy they will have to cut back on their lending which will cost them in the region of £3 million. In turn the Government have got ICI life which is worth £20 million. The Credit Finance Bank has been bought back from the Government for £2.4 million at 50 per cent above the market value.

Where did the problem arise? It has not been said, but I believe that what prompted the take-over of ICI by AIB was that the borrowings were going out of control and AIB believed that they could do a better job. We have heard that Ernst and Whinney are to be sued by Allied Irish Banks and one wonders was a proper, free acquisition carried out. In recent years we have seen much of this type of problem in take-overs — acquisitions are not properly carried out. There must be a strengthening of company law with regard to auditors and company directors. There is a rat race at present to become auditors and company directors in the State and private sectors. We have too many armchair type directors who are not prepared to ask questions. People who sit on boards of directors tell me that one is the odd man out if one asks questions and particularly one must not ask awkward questions. Some legislation must be introduced to bring about a tightening up in this whole area.

I have been disappointed at the many State appointments made by the present Government of civil servants to boards of semi-State companies. This is not in the best interests of any company. Civil servants, by and large, do not like to be ruffled and it is doubtful if they will play a satisfactory role in the area of asking questions. Practical people are needed as company directors, people who understand business. There is at present no great commitment. I am openly critical of the two directors of AIB who sat on the board of ICI. Too many excuses have been made for them and it is very obvious that they did not ask the necessary questions. If they had continued to seek information they would have had to get it and AIB would not find themselves in their present sorry state.

Auditors also have a major role to play. They do not go into sufficient detail in their business. They depend on the shareholders and on the influence of the directors to be re-appointed. This whole area must be examined and there must be a tightening up by legislation.

AIB have played a significant role in the development of this country. They are the major lenders to Irish agriculture, the agribusiness sector, the co-operatives and farmers. It is right to say that during the recent financial crisis within the farming community, from the experience of many of my constituents and myself, Allied Irish Banks have given a very sympathetic ear. They have financed and developed our co-operative movement to the tune, I would say, of 65 to 70 per cent of lendings. That is proof of their great commitment to agricultural development here. They have suffered from time to time in that area because many of our co-operatives have not been as successful as we would have liked.

I would go so far as to say that, looking at their shareholding, their customers, their whole business, they would be classed more as a community based bank than anything else. One must examine the service that they give throughout the country. All our small towns have a branch of the Allied Irish Banks. They give cheque cashing facility, deposit facility, money changing and many of these transactions have no pay back. It is quite disappointing to see the attacks that have been made on AIB and on all banking institutions. Since the founding of the State they have contributed significantly to our economy. In the industrial area, when any new project is put forward by Governments of any persuasion, the banks have always come up front and have been helpful in the area of venture capital and in the development of any type of new industry. They have never questioned the risks but have been forthcoming and helpful.

One must look at the profitability of Allied Irish Banks and at its breakdown. They made a profit of £50 million in 1983. After payment of a dividend the remainder was ploughed back to make more funding available for industrial and agricultural development here in the private and public sectors. Further, one must examine the shareholders' funds, which were in the region of £420 million in the previous year, and the losses that have been taken there. What are shareholders' funds? They are an accumulation of profits and assets and if there were a collapse they would not be worth the paper on which they are written. Who would want the branches of the bank around the country? They would be practically worthless. Ninety million pounds has been wiped from the value of their equity on the foreign stock exchanges and £176 million shares which were worth £264 million on 14 March are now reduced to in the region of £180 million to £190 million. It is very obvious that the sufferers here have been the small investor and shareholder. Their depositors, by and large, are small people. Somebody tried to put an estimate on it that in the region of two-thirds of their depositors have accounts of under £500. That speaks for itself.

I am glad to see Deputy Cluskey in the House. In the Cork Examiner of 19 November 1983, under the heading “Insurers urged to go abroad” there was a quotation:

Irish insurers were urged to compete abroad and promote external development by the Minister for Trade, Commerce and Tourism, Mr. Frank Cluskey yesterday when he addressed a Dublin seminar on insurance in this country organised by the ASTMS.

He said the focus was on the challenges and not the opportunities which the EC presented to us. We complained of new competition in our market and blamed the EC directives for this, but he reminded insurers that directives applied in all member states.

It is correct that ICI have been major insurers here in the area of employers' liability. We have a total liability in this country of 500 manufacturing firms and they have 25 per cent of this high risk business. I am also aware that their rates were extremely keen, which was a help to our manufacturing industry in recessionary times. Another risk area was that of car insurance and they had 5 per cent of that business. They also provided a very important facility for builders, a bonding cover. Had the company gone into liquidation many of our builders — who are becoming fewer with the recession, as a result of Government policy and so on — would have gone out of business also. We must remember the contribution they made to manufacturing industry in the area of employers' liability where they were definitely undercutting. Therefore one must examine the case on its merits.

Our jury system is responsible for many of the problems being encountered in our insurance industry. The Government have come up front there and some changes must be effected in that area. It is correct to say that possibly many of the people who sit on juries have a chip on their shoulder vis-à-vis insurance companies which may be the reason there are such high awards given.

It is alarming that 50 years after the establishment of this company by the late Seán Lemass — set up so that we would have an Irish based industrial insurance company to take us out of the clutches of foreign companies — this difficulty should have arisen. The ICI experienced an industrial dispute which lasted eight weeks. I should like to ask the Minister what delay that occasioned in having the necessary information come to the fore.

It alarms me to learn that one of our State financial institutions, the ICC, were financial advisers to the ICI. Certainly they would not receive full marks on their competence because I would contend they were incompetent in their assessment of the company through their subsidiary, Mergers Limited. While there has been much vocal bashing of the private sector, we have nothing of which to be proud in the State or semi-State sector. Indeed it is time the Minister for Finance examined that institution. I would question their ability to assess a company because, had they possessed the expertise they should have, they would have come up with the relevant information sooner.

It is correct to say that individuals and companies here have been exploited since the establishment of shell companies by people for financial gain. Indeed a leader in that field was Tony O'Reilly. There has been asset stripping and the making of huge profits which has done our country untold harm. Indeed it is since that time that the real rot set in here on the financial scene. That is another area that must be scrutinised.

There was an article entitled "London's colourful ICI men" in Business and Finance of 21 March 1985 which, if read, will be seen to be self-explanatory. I believe the information contained therein was well known before 21 March when this glossy magazine became aware of it. It must have been known through gossip and, whether we like it or not, we must take heed of gossip. I know we politicians are usually very sensitive to it. It is in this area that I would be critical of AIB, that there must have been a feed of information into their headquarters because, with each month that passed, there was something about ICI with the big problem being in their London office. If what one reads is true it appears that the re-insurance in which they were engaging was of the worst type. Indeed it appears that they were re-insuring through another subsidiary of theirs.

It is a tragedy that this occurrence should have taken place at this time. I should say I have the greatest confidence in our banking institutions. I believe they will ride the storm succesfully and will continue to make the contribution to our economy they have to date. Until now it must be said that they constituted the only sector of our economy that did not receive State aid; they stood alone and did the job successfully.

I read the following statement recently:

It is unbelievable that auditors, consultants, Department officials and the like took so long to report on such a matter of vital importance and urgency. In this age of high technology in computerisation and micro chips it is very hard to understand such a lapse of time took place before the financial haemorrhage was diagnosed and the question is how much is the loss now and into the future? We will need that figure before we ask the Irish taxpayer for a financial transfusion. That is elementary business procedure, just, fair and reasonable.

I thank you for having allowed me make a contribution to what I believe will be seen to be one of the most important debates in this House in this session. Had this action not been taken the likely outcome would have been of incalculable importance to the nation as a whole because our country would have become insolvent. I must commend our leader on his responsible approach in supporting the Government in this case in the interests of the country and our people generally.

Deputy Cluskey has 30 minutes.

After listening to public comment both inside and outside the House, and this morning listening to Deputy Brennan criticising some of us who made public comment that was critical of AIB and the Government's handling of this affair, saying that we were being somewhat irresponsible, I should like to make one thing clear. I have not heard one person suggest that the Government could just walk away from this situation, and to imply that our criticism was on that basis is to misrepresent what we have been saying.

I have been saying that I believe AIB panicked the Government at the beginning of this whole affair into making tentative arrangements with them that should not have been made. We have been told about financial stability and how fragile is this whole area. If a person is critical about what has happened or, more importantly, seeks to find out what should have happened, it is said he is being irresponsible. The sacred cow, the financial sector and its fragility, must be protected at all costs.

I am not suggesting for a moment that one should be irresponsible with regard to the question of financial stability and its importance to the State but, in my opinion, in this instance it is being used in the way national security is being used in other countries, to try to obscure and hide gross mismanagement or at times an abuse of the democratic system. We have to strike a balance between our responsibility to the taxpayers and our sense of responsibility to the financial institutions of the State and to have regard to how vulnerable they might be to what I believe would be a little healthy exposure. It would not undermine them; at the end of the day it might do them and the State quite a bit of good.

I believe that when AIB walked into the Government with these doomsday predictions they had their own position and their priorities very well thought out. They were accepted without proper examination by the Government and without assessing the matter properly. If the Government had done that, I do not think they would have reached the tentative agreement they reached with the AIB.

As far as I can see the management of AIB took a different view. They said: "Right. We have made a gigantic mess in a speculative venture. How is the hatchet going to fall on us? Is it by the Government or by the people in Leinster House? No, they can rant and rave for a few days and they can go to the press but at the end of the day we stay here if our shareholders are happy. We are protected once they are satisfied we have got them a good deal." AIB are not answerable to the taxpayers but are answerable to their shareholders and that is where their priority lay, not necessarily for the exclusive benefit of the shareholders, because whether they come or go depends on the shareholders.

We must accept what we have been told in this House by the Minister. I am not suggesting nor would I suggest that the Minister is not telling us what he believes to be the factual situation. Let us examine it on that basis. We have been told that the sums involved are between £50 million and £120 million. The Minister stated that is the upper limit as he knows it to be and we accept that. Here we have AIB going to the Government and telling them they are going to put into liquidation a subsidiary wholly owned by them and that the effect of putting that subsidiary into liquidation would bring down AIB itself. We are told all of this is for a sum of £120 million at the upper limit. What rational person would accept that?

Let us look at the profits of AIB, a major bank. In 1983 their profits were £68.9 million, in 1984 they were £85.4 million and they have stated themselves that this year their profits will be in excess of £80 million. If they were to take two years profits and pay £120 million — and nobody has suggested they would have to or would do that — they would still have one-third of their profits left. These were the people who were going to put a company in liquidation which would undermine their own position. I do not believe I would have accepted that argument from AIB.

As the Minister has quite rightly told this House, that sum of £120 million is what is known now and it is not the definitive figure. It is what AIB and their auditors who have been in ICI for some time have made as their initial assessment. One can only come to one of two conclusions. If the figure of £120 million, the upper limit, is true, does anyone really believe that AIB after shooting themselves in the foot by their operations in the insurance game were going to turn around and shoot themselves in the head by liquidating a company for that kind of money which in their exalted sphere is not really big money? One can only come to one of two conclusions: either they sold the Government a pup, bluffed them and got away with it or that the sum that they reckon will be due at the end of the day will be very considerably more. It can only be one or the other.

In some statements this has been linked with the situation that pertained in PMPA. There is very little similarity between this and PMPA. There was considerable disquiet for a long time about the operations of PMPA. At least three of my predecessors in the Department had sat there wondering if a bomb would explode while they were there. The bomb explode while I was there, but it had been known for a long time. We would never have got to the root of that problem except that a previous Minister, Deputy Des O'Malley, had sent auditors to PMPA as his agents to try to ascertain the situation.

The Minister said that he hopes to have a more realistic assessment of the financial commitments of ICI in about five or six weeks. When Cooper and Lybrand were sent into PMPA it was anticipated that it would be for a reasonably long period. Over 12 months elapsed before they could get a realistic picture and, even then, it has emerged since that that was not the full picture. While the Minister might get some indication, he is being over optimistic in thinking that he will know the full picture in five or six weeks time.

Another major difference between the two situations is that PMPA was the parent company. The parent company went to the wall. In this instance the parent company remains one of the most successful profitable private financial institutions of this State while a subsidiary has brought about this panic. We are not talking about the same thing. The people responsible for the management of PMPA are not still sitting around the boardroom, although I am not convinced that they paid the price for their operations in PMPA. I do not suggest that the same type of activity went on in AIB or ICI but I am making the difference between the two situations quite clear.

What most people are concerned about is that the legislation here is not perfectly clear. When the legislation to deal with the PMPA came before the House it was clearly stated who would pay and how the cost would be paid. We do not know that in this Bill. All we know is that AIB are walking away fairly lightly, if the present proposals are adhered to. After the delay which has taken place in this House and in exploring other avenues, I do not believe that any sensible Government would go along these lines. The Government would be wise, to say the least, to ensure that AIB carry the can for their mistakes.

Another difference between the two situations is that PMPA are being financed out of the fund financed by a 2 per cent levy which was unanimously agreed by the House and which was accepted willingly and with a high degree of relief by the insurance industry. Can the same be said about either the unanimity of this House or the perception of what is happening in the rest of the financial world in regard to this situation? I do not think so. Every penny that will be used from the fund for the purpose of putting PMPA back on a proper footing must be paid back to the fund by the administrator of the PMPA. It will be paid to the fund by the disposal of PMPA as a going concern when it has been put in a healthy situation by the administrator. I do not see the ICI or Allied Irish Banks being put in the same situation. I do not see the similarity between PMPA and what we are being asked to do here.

What people have been justifiably concerned about is how this sort of thing can go undetected by the Department of Industry, Trade, Commerce and Tourism who have a statutory obligation to supervise these matters. I have definite views about how it can go on. My views were so definite about practices in the commercial world, about directors opening companies, closing companies, putting companies into bankruptcy and opening up next door to carry on the same practices, that I had a very serious look at the role of auditors particularly in the necessary policing, in the public interest, of companies engaged in commerce. I accept that the Minister is doing the right thing in strengthening that section of the Department. The Minister has mentioned that he will be bringing in more qualified people. However, it is not possible for that Department or any other Department, including the Central Bank, to police that operation unless they can accept certified accounts by auditors as being an accurate reflection of what is happening in a company. There is no other way; and the whole system must break down unless there is professional integrity, and, indeed, unless criminal activity by certain auditors is put at an end very quickly and sharply.

One of the real criticisms I have of the Minister who has been landed with this mess is that he did not proceed with the proposed company law legislation which had been finalised by way of memorandum more than 18 months ago. It would have gone some way towards rectifying this matter. I see that the Minister, again with a touch of panic, is considering proceeding with certain sections of that legislation. In my opinion there is no need to proceed with certain sections but there is a great need for a sense of urgency and priority about all of that proposed Bill. It should be put through the House to bring some order to this matter of auditors.

Talk of financial stability has got a great airing. We are all told how nervous international financiers are. We have been told that if there is any question of the State stepping into this area it will frighten them all away. Are we children? It is like telling a child, wrongfully, as it is wrong in this case, that if he or she does not go to bed, be good and go to sleep there is a great big bogey man outside. Let us look at the bogey man and whom he deals with. International financiers lend money to China, Russia, Zaire or anybody if they see an opportunity of making a profit. Whatever about this House, there are no political ideological hangups in the international financial world and that has been clearly demonstrated if any Member wishes to have a look at it.

If we are to get so concerned about financial stability, about AIB being rocked to some extent, I should like to ask whom would the people who lend money have more confidence in. Would they have more confidence in Allied Irish Banks or the Irish State? One of the first things they look for and one of their main criteria when lending money to any country or organisation is political stability. They do not care how it is obtained. It may be the greatest tyrant of the Right or the Left, but that does not count. The only thing that counts with them is if the State is stable. Their only concern is if the State can pay the money back, not necessarily the capital because its repayment can be rescheduled. Their concern is if a State can pay the interest. Those financiers want their money working for them and their interest coming in. Let us have a sense of responsibility about financial stability but let us not be fools. Let us look at this objectively and let it not be a cloak for operations which are contrary to the best interests of our people. Let us look at this in a cool and objective manner and without ideological hangups of the Left or the Right.

One thing that should emerge from this is that there should be a proper objective look at the role of the banking system and the financial institutions. Let us assess calmly and objectively whether all their operations are in the national interests or contrary to them.

Having been in the same position that Minister Bruton is in now, I realise the difficulty of coping with a matter like this. I do not envy him his task in the future discussions which will be necessary with the financial institutions. People are speculating about the approach of members of the Labour Party to this legislation. I have listened to Fianna Fáil speakers, from Deputy Haughey to the last contributor, Deputy O'Keeffe, and I must admire their consistency. They have a consistency about political schizophrenia that is unrivalled here. The way they can simultaneously hop from the right foot to the left foot and so far, apparently, not lose balance is incredible. In the Labour Party we were concerned about the Bill and the approach of the Government in solving the problem. We had long discussions on the matter. We have been told in the House, and received assurances elsewhere, that the passage of the Bill does not mean the end of the matter. What concerned me was would the passage of the Bill mean that AIB would walk down the road on to future glories leaving the Irish taxpayer to pick up the pieces? I have been assured that that is not the case and that discussions will now commence with AIB, and the other banks and insurance companies, on a package. The Minister has told the House that only as a last resort — they are his words — will the Exchequer be called upon.

I am not convinced that that last resort has to be resorted to. Members on all sides have made that known also. My colleagues and I have been assured that before this matter is finalised the package will be brought before the House for discussion. We have been assured that it will be finalised in the House one way or another.

Members are awere that I have faced a similar situation in principle with the Dublin Gas Company being handed £126 million plus of taxpayers' money without any accountability. Are Members aware of what has happened to the taxpayers' money that was given to Dublin Gas? Will the Minister tell us? If one puts down a question to the Minister to inquire about that money and what has been done with it, one will be told that the question is out of order because it is a matter for the Dublin Gas Company. One will be told that it is not a matter for the House because we only provided the money.

That did not come before the House but, on the definite assurance which we have been given that any final package which comes before the House will be voted on, I will vote in favour of the Bill. Allied Irish Banks, financial institutions and the Government would be very foolish not to listen to Deputies on all sides of the House expressing their determination that the taxpayer is not going to pick up the tab for the speculative ventures of AIB or any other part of the private sector. If they want to do that, they should acquire equity in the company.

On 16 December 1981 there was a debate in this House on an Insurance Bill before it. At the time Deputy Kelly was Minister for Trade, Commerce and Tourism and I was Opposition spokesman. The proposal in the short Bill before the House at that time was to enable the Irish Life Assurance Company to take over a majority holding in the Church and General Insurance Company. The proposal was drafted in such a way that it enabled Irish Life, in effect, to take over any company in the country at any time. Although none of us mentioned the PMPA by name, I had, of course, that organisation in mind when I suggested very strongly to the Minister that the proposals in the Bill should be amended to ensure that Irish Life would not have power to take over any general or non-life insurance company other than the Church and General. The reason was that I had a horrible feeling, which I had had for some time, that it was only a question of time until the PMPA went and I did not want to see a sort of semi-State body being saddled with 45 per cent of the motor insurance business. Because it was a semi-State body, it would be expected to take this insurance and would be put under pressure by the Government, Members of this House and other public representatives to take anyone and everyone who sought insurance.

In fairness to Deputy Kelly, he accepted the validity of that point. We had only one hour to debate it because it was shortly before the Christmas recess. Between the two of us we cobbled together an amendment, I do not know in whose name it was, perhaps it was in both. In any event, the amendment met the point and was accepted. There was general agreement in the House at the time regarding the desirability of having a semi-State body for non-life insurance because of the pressures to which it would be subjected. Now, a little over three years later, we are proposing to set up such a body and that is a very ominous step.

I have been concerned with various aspects of insurance for some time. I wish to briefly quote an extract from this speech which I delivered in Limerick on 11 March, only four days before this problem came to light.

Indeed the fundamental significance of insurance in our economy is further underlined by the fact that when an insurance company here goes under due to incompetence or over-ambitious empire building, the State compels the prudent insurance companies and their prudent clients, to pay up and bail it out to prevent a national catastrophe.... According to the administrator, the PMPA may reach self sufficiency by 1994 but even this seems optimistic given the generally depressed state of the insurance industry so, for at least ten years to come, insurance premiums will go on bearing the unwelcome burden of a 2 per cent levy... I consider this preferable to the State and thereby the taxpayer becoming the dominant and ultimate insurer but it is a bit rough, to say the least of it, when the wise have to pay for the excesses of the cowboys. If the State were God, the saints would suffer for the misdeeds of sinners.

Having re-read that speech, in the light of what has happened in the past fortnight, it is chillingly apposite. In this Bill we are doing all the things that, two weeks ago, nearly everybody would have agreed we should not be doing.

I fully realise the appalling sensitivity of this; it is not really an insurance problem any more, it is a banking problem and because it affects the number one bank in the country it affects the entire financial structure and the economy in the most profound way. Therefore, one has to deal with it as sensitively as possible and try to ensure a solution is brought about in some way which will minimise the damage. I am not simply talking about policyholders of the ICI or any other limited group like that but about potential damage to the entire financial credibility of the country, particularly in foreign eyes, which is profoundly worrying. Therefore, I do not want to say anything today that would make the situation worse and one should not be apportioning blame to particular people who must be going through the most dreadful agonies, not just for themselves and their companies, but for the country. For that reason one does not wish to exacerbate those agonies.

I am not happy about the way the problem is being approached for, among others, the reasons I have given in relation to the unsuitability of the State becoming involved, in effect, as an ultimate insurer which will end up with all the dross. However, I will come back to that later and to certain alternative approaches which I have in mind.

I wish to say a few words in relation to some of the matters which Deputy Cluskey mentioned. While I do not agree with all he said, I know that he understands many aspects of this matter because, like myself, he had to live through it and even though he lived through a more intensive period of having to cope with these problems because he had to do it in public while I was trying to stave it off in private over a period of years. I was not happy with Departmental supervision. Obviously, from what he said, Deputy Cluskey was not happy with it either. I do not want to blame anyone in particular but we should now consider the suitability of the general administrator in the Irish public service to monitor matters of enormous complexity where they are dealing with professionals every hour of every day. The Irish public service has, as its cornerstone, a general administrator. There are very few professionals within the public service and I suggest that, through no fault of the conscientious people involved, they may well not be able to cope with the kind of situations which arise from time to time. I am not criticising them as individuals because I know the degree of conscientiousness, but I wonder whether, not just in this field but in many other fields, we can afford to continue to rely on people who are basically general administrators and who may be dealing with insurance today and are just as likely to be dealing with exports, industry, industrial development, energy or whatever else next month or next year and perhaps were dealing with such matters a couple of years ago.

Apart from the difficulty of trying to identify these problems, one difficulty facing the Department which I found in my time there is, even when you identify the problem, what can be done about it? I recall having an argument with the chairman or managing director or whatever he was of a then large Irish motor insurance company when he banged the table many times and said to me, "All right, what are you going to do about it? Take my licence off me? I defy you to do it and you will have 50 per cent of motorists without insurance." Of course, my bluff was called and I could not do it, but was it right that a company got themselves such a large share of the market that they could call the bluff of the Minister who could not afford to stop them writing new business or to take that company's licence away, even though I knew in my heart of hearts that I should if at all possible take the licence from the company concerned or at the very least stop them writing new business? I suggest that as part of departmental supervision no company should be allowed to acquire more than 15 per cent of the non-life business of any class in this country. That would prevent such a situation arising in the future, or if it did not prevent it arising it would enable the Minister of the day and the Department to deal more effectively with it than has been my experience or, it would appear, the experience of those who have succeeded me in that Department. That is well worth examining.

I want to come to the other supervisory body involved in this matter and to comment briefly on their part in it. I am referring, of course, to the Central Bank who supervise all the banks here and who are very much a law unto themselves and who tend to take their own approach to things. They are independent or quasi-independent of the Government and there are valid reasons in many respects why they should be, but at the same time successive Governments have often been mystified by actions taken by the Central Bank from time to time.

One action that mystified me, because I can find no precendent for it in the western world, is the sanction by the Central Bank of the purchase by AIB of 100 per cent of a general non-life insurance company in this country. I made inquiries as far as I could as to whether in any other comparable country such a situation exists and I could not find any. I am not saying that it does not exist; perhaps it does somewhere. The practice in Britain, the US and elsewhere is that banks are not allowed by their regulatory authorities to own more than 5 or perhaps at the very most 10 per cent of a general insurance company. Here quite a big company, I think the second biggest in the country on the general non-life side, is owned 100 per cent by a bank and the risks involved are considerable.

Of course, the worst has happened and we are entitled to ask the Central Bank why that was allowed to come about. I do not think that the Central Bank can wash their hands behind a facade of anonymity in regard to it. Obviously, the bank concerned were pressing them to be allowed to do this. Maybe they were a little greedy, maybe they thought they were on to a good thing, but the Central Bank is there precisely to stop exhibitions of greed that might not be for the benefit of either the bank concerned or the economy generally in the longer term. Another bank in Ireland owns 20 per cent of another general insurance company, and the Central Bank now might give some thought to whether it would be appropriate to reduce that bank's holding in that other insurance company down to a level more in line with what is found to be prudent in other jurisdictions.

One of the small bits of silver lining that has come out of this whole affair was the Minister's reference to the decision of the Government to, as he put it, modify the right of recourse of a plaintiff to a jury to assess damages. I noticed that the Minister used the word "modify". I would have been happier if he had used the work "abolish". I read in a newspaper today that the Minister for Justice sees that he has three options which he will consider and put before the Government in a month or two. One is to retain the jury but give the judge power to give advice to the jury on what figure they should award. I do not think that is any good because it is not very different from what is there at the moment and the jury would be entitled to disregard the advice. The second option is to have a judge simply sitting on his own, as is the case in Britain and other countries, assessing the damages. That is a great improvement. The third is one which I have suggested, that was to have an administrative tribunal in these matters where no significant point of law arises. I made that suggestion in an article in The Irish Independent last Friday. I think that is very much the best of the three options that the Minister for Justice is considering and I urge it on him because after this problem is solved in whatever way it will be solved, difficulties will continue for many companies.

The publication of the blue book the other day showed an extraordinarily low degree of profitability in all classes of non-life insurance, and that properly gives rise to concern. The system we have had here for many years which I have railed about for some time now is quite indefensible and must be brought to an end. The best interest involved in trying to preserve it was not good enough. It is unfortunate that an appalling disaster of the kind we are debating now seems to be necessary to bring people to their senses. If this had been foreseen some years ago perhaps many of today's problems would not have occurred and we might not even be having the kind of debate we are having today.

The purpose of this Bill is primarily to set up a holding company called Sealúchais Árachais Teoranta which I will call SAT for short from here on in. SAT are not the ICI. They are a holding company, I understand, although that is not clear from the Minister's speech or from the Bill. That company will hold the shares of ICI which were transferred by AIB to the Minister a week or two ago. The Insurance Corporation of Ireland will continue as it is, a public limited company subject to administration and under the control of an administrator appointed under the 1983 Act.

May I draw the Minister's and the House's attention to the provisions of section 4(4)(a) of the 1983 Act? It says that body "shall be deemed for the purposes of this Act to be connected with an insurer if (a) it is the holding company of the insurer within the meaning of section 155 of the Companies Act, 1963". That has consequences that may not have been seen, because it was found necessary in the 1983 legislation to give the administrator jurisdiction over what was described as bodies concerned with the insurer concerned.

The reason for that was that the PMPA set-up was appalling. There were literally dozens of companies, industrial and provident societies, friendly societies, tontine societies, building societies and just about every other kind of society, all interlocking in a huge and virtually indecipherable way that practically nobody understood but the presiding guru. It was necessary in the 1983 Act to give the administrator jurisdiction over all these concerns, but that Act has not been amended in this Bill except for two words which were left out. The 1983 Bill went through this House in a day and few, if any, of us had time to read it or assimilate it all, and it was understandable that a grammatical error was made.

We now have a situation in which the administrator can claim powers over the holding company. It struck me that perhaps one of the reasons why AIB wanted to get rid of this situation was that they were the holding company and they did not want the administrator dictating to them or acting, as section 4 of the 1983 legislation says, "as receiver and manager" which he might have been entitled to do if he wished to exercise those powers and made an ex parte application to the court. That is a matter which will have to be taken into account.

Consequential and similar types of amendments to the 1983 Act may have to be made because, as Deputy Cluskey rightly pointed out, the PMPA situation is very different from the present situation. The PMPA shareholders were more or less cast aside, but the shareholding of the Insurance Corporation of Ireland has been transferred from the bank to the State holding company, SAT, established by this Bill. For that and for many other reasons which Deputy Cluskey mentioned, the appropriateness of the 1983 Act is not obvious to me in any case and amendments may have to be made.

Unfortunately, I can deal with this only very briefly because, if I were going to deal with it fully it would take a long time. But one of the dangers of dealing with this briefly is that I might give the wrong impression. The last thing I want to do is to rock any boat where any bank is concerned, and particularly where the number one Irish bank is concerned. However, it is necessary to say this. The commercial atmosphere that will obtain in this country is laid down primarily by the parts of the financial sector who have the greatest power and significance within the economy. Those parts are the banks, particularly the associated or clearing banks, and the insurance companies. The standards which they establish are the standards of commercial dealings and integrity in this country, because what is done at the top pervades to the bottom; but what is sometimes done at or near the bottom should not be the standards of those at the top. As I see it, one of the requirements of those who by virtue of their position must have total integrity, even if it causes loss to themselves, is that they must be able to say without having resort to law or anything else, whether it is in banking or in insurance, "My word is my bond".

The reason the City of London has remained supreme in the financial world of banking and insurance while the rest of a once Great Britain crumbles around it, is that the City of London preserved that tenet, "My word is my bond". I seriously say to the Government and to the Allied Irish Banks, whose expertise and enormous contribution to this country I readily acknowledge and admire, that the number one Irish bank should be able to say "My word is my bond". It should not have to say, as it will in these circumstances if they are not changed in some way, "My word is the bond of the Irish taxpayer". That is not good enough and in the bank's own interest it should be, and I believe can be, avoided.

I do not want to be quoting British examples but this is one area — and let us be fair about it — where they do things well. There are many banks in Britain which have encountered difficulties in the last ten years and each time the Bank of England put out what was called a life boat. I am not going into the technicalities of it, but all those banks survived. The banking community rallied around and the strength of the financial muscle of the City of London was preserved and the honour and integrity of British finance were preserved.

I would like to think that Irish finance is no less honourable and no less fully imbued with integrity. The Government and the bank should consider an alternative approach to this. In my view, the support should not be given to the insurance subsidiary but to the bank itself. That can be done without any major difficulty by the Central Bank, whose duty it is to do it and who may be open to criticism anyway for not having exercised their supervisory powers with sufficient diligence in allowing the purchase of this subsidiary in 1983. I do not believe the administrator should be taken out because that is a guarantee to the Central Bank and to the public. It is the Central Bank, the banking community and Allied Irish Banks between them who should solve this problem rather than having recourse to other areas, not simply because it is unfair to the Exchequer, and thereby the taxpayer, but because it is wrong in principle and will do enormous damage to the standard of honour and integrity in commercial dealings in this country if a major bank has to say "My word is the bond of the Irish taxpayer".

The figures that have been mentioned are not so enormous as to be incapable of resolution. What worries the bank, and I fully sympathise with them on this, is that because efforts will be made to resolve this — inevitably because of the nature of the problem it will take several years to do it — it will put the bank in some jeopardy because what counts for that bank as for any other is the confidence which lenders have, particularly those outside the country. If it was made clear that the Central Bank could stand behind it and hold it completely liquid in conjunction with the others, then I have no doubt that any crisis of confidence that might otherwise arise can be obviated.

I cannot be certain that the proposal before us in this Bill will do anything to resolve the crisis of confidence in the bank. It would be to the benefit of us all, to the economy and our commercial integrity if that was done. I hope that some thought can be given to an approach in that fashion.

For a number of reasons, including the fact that I am likely to lose my voice because of flu, I will keep my comments as brief as possible. In a debate like this there is the danger that there will be a lot of repetition. Some of the points I wish to make I suspect may have been made already.

We need to bear in mind the enormity of what has happened and the extraordinary good fortune we had as a country that the Ministers responsible responded the way they did and that the Central Bank and other banks responded as they did. It is easy for people to offer great wisdom with hindsight as to how the problem should have been approached. In this debate I have heard people offer views which are unrealistic. Some people have said, for example, that the State should acquire equity in the bank as a result of the contribution it is making. They ignored the fact that, if that happened, there would have to be an extraordinary general meeting of the shareholders of AIB to approve of such a deal. Had that occurred there would have been a delay of a few days and the one sure thing that would have happened would have been a run on deposits in AIB, the credibility of the bank abroad would have collapsed and the economic order would have collapsed with it.

Those who make such propositions should think carefully about what they are saying, because it is nonsense. I was astonished to see some senior reputable financial journalists make this point day after day in newspaper articles. Some of the suggestions which were offered might well have worked; but, as I say, it is easy to offer advice with the benefit of hindsight. We should be very glad that the enormous catastrophe which might have occurred, and which would have dragged the country into total economic chaos, was avoided. For that I compliment all the people concerned with this. It must have been a nightmare for the Ministers and bank officials involved.

I join with Deputy O'Malley and other Deputies who praised AIB in respect of their reputation and what they have done for the country. I know that people complain that the banks will give one an umbrella on a dry day and take it back on a wet day; but the fact is that AIB and the Bank of Ireland have been outstanding contributors to the development of the country over the past number of decades and their contribution to our future is of critical importance. They have carried the name of this country well with their branch operations in Japan, New York and all over the world. We should be proud of that.

Everyone makes mistakes. I hope that in the coming months we will learn a great deal more of the detail of what happened, but it seems as if the bank made an indefensible error of judgment in the matter in which they acquired ICI. Perhaps there are explanations which we have not heard but the explanations I have heard in the media from Mr. Gerry Scanlon, their chief executive, have not been convincing at all. The view in the financial world is that AIB did not do themselves any credit by the manner in which they acquired ICI. However, all of that is beside the point.

What we have to remember is that we, as a country, through our system of Government, our Departments and the Central Bank, actually regulate the insurance and banking industries. Whether we like it or not the regulatory agencies failed us on this occasion. There may be very good reasons for that, but the fact is that an insurance company almost brought down a bank which could have brought down the economic order of the country. That is an unavoidable fact. We can talk about who was doing what in AIB or ICI, but at the end of the day the fact is that by a whisper we missed collapsing into economic chaos in an area where in terms of insurance it is regulated and watched by the Department of Trade, Commerce and Tourism and in terms of banking it is watched and regulated by the Central Bank.

The Minister said that we must look carefully at the way the regulatory agencies, particularly his own Department, operate. I hope the Central Bank will also take a close look at the way they observe the conduct of banks. For example, is there anything to stop the Bank of Ireland buying a company which could threaten to bring it down at some stage in the future? Will we learn any lesson from this debacle? At the end of the day the only lesson to be learned is that we must not rely on a private company like AIB to ensure that its affairs will never threaten the State but rather that the State, through its own resources, must ensure that something like this never happens again.

I regret to say we had some warning that this kind of thing could happen when the PMPA collapsed. Many Members of the House held the view that the management of PMPA was appallingly bad and that it could never happen in another company. Unfortunately, we now have another example of what appears to be, through sheer bad management, an insurance company collapse. It is clear that the controls we maintain over insurance companies and banks will have to be fundamentally reviewed. I do not know if the legislation is strong enough or if when the Department note that there is something wrong with an insurance company they have the power they need to get that insurance company to correct whatever is wrong. The Minister and the Department have the right to withdraw licences but obviously some tiers of control or powers should be there. Perhaps the Minister will give us some indication of what changes he regards as being necessary in the powers his Department have in controlling insurance companies generally.

We have to examine whether or not we want the banks to engage in other types of business. In world terms, we live in a very small economy. Even though AIB and the Bank of Ireland are very big companies in Ireland, when they get into world level business in the States or in the UK, the disaster which can befall them, if an error of judgment is made, or if some mistake occurs, is such that it could cause the collapse, as it almost did on this occasion, of our whole economy. We need to consider that very carefully for that reason.

I do not want to see any witchhunt in the Insurance Corporation of Ireland but, if it will cost the banks, or the insurance industry, or the taxpayers a great deal of money, certain questions have to be answered. I do not know whether the under-provision for claims the ICI allowed to continue for the past several years was justifiable in any circumstances. It was evident to other insurance companies and to some people in the financial world that the under-provision was significant and should not have occurred. The ICI might be able to indicate that they were able to justify the provision they made for claims. I am sorry they have not done this. I am sorry AIB have not offered some explanation over the past week as to why this was the case. Perhaps there is no justification. If there is not, AIB should explain to us how, on something that should have been perfectly obvious to them, they did not see the trouble arising a long time before they actually did.

The other question which arises and which has been flaunted in the newspapers regularly over the past week is the re-insurance business in London. There have been claims that some of these transactions were reckless in the extreme and that there was an air of lunacy generating the type of activity that was going on in the London office of ICI. We are entitled to some explanation as to whether or not there was this lunatic-type business and whether there was any sense in doing what they did and particularly the way they invested heavily in certain types of insurance. I do not know whether they could be justified at all. There is a difference between making errors of judgment in business and being reckless or acting dangerously merely to generate a cash flow for reasons unassociated with getting in insurance business. I do not know whether or not that was the case. The Irish taxpayer and other Irish banks are entitled to know why they engaged in that sort of activity and whether there was any justification for it.

The question of liability arises in this context. The Minister said the liability will range somewhere between £50 million and £120 million. I understand that that is in respect of dealing with ordinary insurance claims over the next few years. I assume the figures the Minister is giving are accurate and based on some analysis that has been carried out of outstanding claims and I accept that. I gathered from the Minister's speech that that only includes claims and does not include the costs involved in the re-insurance contracts if some of these contracts are repudiated.

Many Members of the House will have seen Mr. John Moore of the Financial Times on a “Today-Tonight” programme the other night making the point that it was possible that these re-insurance contracts could be repudiated. Mr. Moore who, I understand, is a reputable journalist said that the liability involved then could be nearer £500 million than £50 million. That is what the man said. If that is the case, we will have to review our position. The Government made the correct decision to bail out the ICI and the AIB. They had no choice. They have no choice but to face up to the insurance contracts which are there and continue to provide cover for all those people who hold policies with ICI.

I wonder whether I would be happy if the Irish banking system, or the Irish insurance industry through levies, and so on, or the Irish taxpayer should have to pay one red cent to some of the go-boys who are involved in the re-insurance industry in London. I gather it is an upmarket form of bookmaking and a pretty rough business to say the least of it. There is a view abroad in London that here we have a company backed by the Irish State and all bills can be paid easily. I gather that many of the people involved in that re-insurance business will now use every means, honourable and otherwise, in the book to avoid their own liability and may repudiate contracts here and there in the hope and knowledge that somebody else will pick up the tab. If that is facing us, and if we are in any way prevented from dealing with it as it should be dealt with, we should review our position and should not be willing to pick up tabs for the type of re-insurance contracts other people entered into.

I want to refer to something Deputy O'Malley said about the jury award system. Over the past couple of years it has been very popular for attacks to be made on the jury award system. Our whole legal system needs to be reviewed fundamentally. No credit is due to any of the past several Governments for doing very little about this issue. I believe they are mostly compromised by the senior Bar. They would not admit to that, but that is the case. The senior Bar are a super lobby. We should face up to that and be willing to take them on. I have no doubt that most of the reform necessary within the legal system could come from the Bar themselves if they were prepared to face up to it. They have not been prepared to face up to it. The Government should take steps in this regard. Reform is long overdue.

Over the past two years the level of damages granted by juries has dropped significantly and primarily because of the publicity which has been generated by insurance interests to try to convince the Irish public that the reason their premiums for motor insurance and employer liability are so high is high jury awards. That is too clever by far on the part of the insurance companies. There are many reasons why the costs of our insurance premiums are the way they are. In the employer liability field and in the field of motor cover, we have a far higher incidence of accidents occurring than they have in other countries. The rate of road traffic accidents is far higher here than it is elsewhere in Europe. That is also the case in the employer liability field.

It is a bit unfair to exploit the victims of motor traffic accidents or employer liability accidents and say they are not entitled to get their money. People should bear in mind the fact that awards are made in serious type cases to satisfy people for their lives. I will give a couple of examples which I can quote from my own first hand experience. About seven years ago I was involved in a case on behalf of a girl who as a result of a car crash was paralysed from the neck down. At that time we got an award for her — the case was settled at the door of the court — of £220,000. By the time she provided herself with the facilities she needed in her own home, and the changes which had to be made in her own home, by the time she paid off the hospital bills — which went into tens of thousands of pounds — and medical expenses and by the time she acquired the rotating bed she needs to avoid bed sores and paid for an electric wheelchair and the nursing care for which she must pay, she does not have much money left to look after herself for the rest of her life. In other words, she has no other source of income. What seemed a large packet of money in 1977 or 1978, for her for the rest of her life is a pittance and simply will not do.

In another fatal car accident case, a breadwinner with a family of six children died. His widow was left to look after the family and educate them and the amount of money she got in 1976 or 1977 was £40,000. That simply did not pay the bills that family have had to pay over the past seven or eight years. These were figures which looked very fancy and large at the time. We must face up to the fact that people are going to be killed and badly injured on our roads in traffic accidents and there is entitlement to proper awards. I do not approve of jury awards that are completely outlandish, any more than I would approve of awards of judges that are too small. However, we must be extremely careful in the matter of compensating people when damage is done to them. The person who is quadriplegic as a result of a road traffic accident should not have to take one penny less than he or she is entitled to, merely because we complain about the cost of car insurance to us.

Let us not forget that it was not the cost of motor insurance premiums that caused the collapse of the PMPA or of the Insurance Corporation of Ireland. Seventy per cent of the business activity of the Insurance Corporation of Ireland was generated in the London office, and there is no jury award in the UK, so the only common denominator we know of between PMPA and the Insurance Corporation of Ireland was plain, down to earth bad management. That is what we need to guard against, mostly. We must seriously tackle the insurance cost problem which we very definitely have here. Let us look at the road system, the drunken driving and the level of uninsured driving, which latter is now of the order of 20 per cent of all drivers. Let us tackle those problems and stop complaining about those who are the victims of these accidents and suffer most of all from them.

In regard to what is to happen the ICI under the new company SAT — I give it the abbreviation given by Deputy O'Malley — I agree with other speakers who have made the point that the State should not stay involved in the insurance industry. The earliest opportunity should be taken to withdraw from it. We have no business in that field. It is of no benefit to this country at all that we remain in it. The only reason for the State going into the business is the appalling situation that confronted the country a couple of weeks ago when the problem emerged. Whether we can get other insurance companies to take on cover of the policies that exist in ICI, I do not know. An attempt should be made as early as possible to spread the work out among other companies and avoid the State having to remain in this area. The problem with PMPA at administration level was more complex because it covered so much more work. One must consider that only 30 per cent of the insurance corporation's business was actually conducted in this country. It should not be so difficult to dispose of it to other companies.

I noticed with interest that the managers involved in the insurance corporation life insurance business side are very interested in buying out that aspect of the business. I caution against that. The managers of that company should not be given the right to buy it. If possible, some deal with some other insurance company should take place spread over the whole lot. There is a real danger involved here that the State will end up carrying the worst possible cover within all the activities of the Insurance Corporation of Ireland and its associated companies. That should be avoided.

I want to join with Deputy O'Malley who made the point about honour amongst the banking community. I accept that the Government had very little option but to conclude the type of agreement they did conclude with Allied Irish Banks in order to ensure that confidence should continue to be reposed in our financial system and banking system. It was vitally important that the liability of Allied Irish Banks be absolutely clear and certain for that purpose. However, the moral obligation of AIB is far greater than they have been willing to admit to. They are going to have to find a means of discharging that obligation. I see difficulties for them in rushing in with millions of pounds more, if any financial institution would do any such thing to assist the Government. Obviously, they have shareholders to deal with. In fairness, there must be recognition of the other financial institutions who may have to pay additional levies because of this occurrence, and of the Irish taxpayer, if he or she is going to have to pay anything.

In order to rehabilitate themselves from the mess in which they find themselves, AIB must be prepared to make extra concessions. I do not know if the Government have the choice of avoiding any liability falling on the taxpayer. I should like to join with others who have said that it should be the banking system and the insurance industry that should pick up the tab. Even if they do, we will all have to contribute something towards it, but at least in so far as emphasis is concerned, and this is of importance, that is where we should start.

I regret having to rise to speak on this situation. What we are discussing is management accountability and responsibility. At present, we have not received from the Government as much information as we should be getting. It is all right talking about a figure between £50 million and £120 million. As a previous speaker said, that was less then two years profits of AIB. Is there any concern in the country, let it be in business, farming or anything else, that would not forego two years of its profits — if there were profits — to ensure not being held up to ridicule or that confidence would not be eroded in their regard? The word "confidence" is the important word in this issue, confidence in the system, in the Government.

There has been a long litany of debacles as far as high finance was concerned. Since the present Government came into power there have been this £500 million black hole and the milk output return, which amounts to millions also. We have had the PMPA debacle and recently the question of massive funds in the Department of Social Welfare.

The workers who are carrying the can and paying tax are entitled to more than they are getting at Government and departmental level. I take issue with the Government who make great play of their ability to handle national finances. According to himself, the Taoiseach nearly has a monopoly of ability to handle these finances. Still, we have had disaster after disaster in the last number of years.

I am seriously understating the reaction of the public with regard to the AIB matter when I say that a vastly different performance was expected from that bank. As one of our major financial institutions, which along with other financial institutions has reaped substantial profits from the Irish people, AIB have lectured, as other financial institutions have, various Governments on how things should be done. It is a great pity that they can run away without any accountability at all. When this type of occurrence takes place we are told, with regard to top management, that perhaps this lack of accountability has been occasioned by ill health — in other cases the situation is met through golden handshakes and payoffs — but all of them leave with substantial pensions and remuneration for the work they have done.

Now that the Minister of State is present I might raise the jury system with him, something that has been raised by many speakers.

Debate adjourned.