Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Thursday, 2 Nov 1989

Vol. 392 No. 5

Trustee Savings Banks Bill, 1989: Second Stage.

I move: "That the Bill be now read a Second Time."

This Bill provides for a comprehensive revision of the legislation governing the status and operations of the Trustee Savings Banks. The basic legislation dates back to the year 1863 and, while there have been a number of amending provisions down through the years, the essential requirements have remained largely unchanged. This legislation served its purposes well when the Trustee Savings Banks were simply savings institutions. In modern conditions, and particularly with the advances in banking in more recent times, the legislation is no longer adequate and severely restricts the ability of the Trustee Savings Banks to realise their proper potential and to compete as effectively as they should.

Over many years, the Trustee Savings Banks have provided a most useful service for the community. The trustee movement was founded in the early years of the last century to provide safe repositories for small savings. It developed a banking service which became identified with the smaller depositor and the smaller borrower and which had a special local character. The pressures of the financial world have necessitated amalgamation in more recent times. Local units could not survive and prosper independently and now they are grouped into two banks, the Cork and Limerick Savings Bank and the Trustee Savings Bank, Dublin. Between them these two banks have a total of 64 branches serving many local communities throughout the country and further extensions of the branch network are planned.

I am sorry to interrupt the Minister but the conversation in the Lobby is intruding into the Business of the House, let us have silence and order, please.

At the end of the last financial year the total of balances due to depositors was in excess of £760 million and the number of employees was 800.

The Trustee Savings Banks, therefore, are a substantial retail banking operation. There is undoubtedly room for considerable expansion but it is necessary in the first instance to remove existing restrictions on their activities and to give them the scope to provide a full retail banking service. While they now provide many of the services of a commercial bank, including current accounts, loans and foreign exchange, a full service cannot be provided under the existing legislation. The range of their activities is legally confined at present to deposit taking, making of secured loans and such activities as, in the opinion of the Minister for Finance, contribute to thrift. As matters stand the Trustee Savings Banks are confined to taking deposits from and making loans to individuals only and not companies and, in the modern world, this is a very severe handicap as it does not allow them to respond adequately to business opportunities. In addition to the restrictions relating to deposits and loans they cannot invest in new areas of financial activity, such as fund management and corporate finance. The scale of activities is also influenced by the proportion of depositors' funds which the Minister for Finance allows the Trustee Savings Banks to retain. Under present arrangements it is required that after allowing for working balances some 80 per cent of deposit funds must be lodged with the Exchequer. The Trustee Savings Banks are paid a margin over the cost to them of these funds to meet their overheads. The balance of 20 per cent is available for lending to individuals. At the end of the last financial year the total amount on deposit with the Exchequer was in excess of £600 million.

The main purpose of this Bill is to facilitate the Trustee Savings Banks in providing a competitive banking service in equal competition with other banking institutions. While they are not big in banking terms, they have developed a wide retail network over the years and they have a track record of reliability and good service which should enable them to grow significantly once they are given the freedom to do so. This Bill will allow for an extension of their activities and will allow them to respond more flexibly to the requirements of the market. The orderly and prudent development of their business will require an agreed and gradual reduction in the proportion of their funds invested with the Exchequer. The provision in this Bill transferring the supervision of the Trustee Savings Banks from the Department of Finance to the Central Bank, the appropriate supervisory authority for a banking operation, will facilitate those changes.

The basic trends seen in the development of savings banks in other EC member states are reflected in the current Bill. The types of structural changes that the savings banks have been undergoing in the member states relate to amalgamation, technical innovation and changing to company status.

The amalgamation process in the savings bank sector has been most strongly in evidence in France and Denmark. The savings banks in France now have a completely new structure and during 1985 and 1986 their number dropped by 70 to 395 institutions as a result of mergers. Savings banks are significantly up-to-date with regard to the level of new technology they are utilising in their day-to-day banking and have, in fact, pioneered innovative areas such as card technology and data banks. German savings banks have been particularly active in the technical field with increased computerisation and automation to increase co-operation throughout the savings bank organisation.

Another direction in which European savings banks are heading is towards changing their system of organisation to that of company status. Denmark has legislation underway which would allow individual savings banks to become joint stock companies. In the Netherlands two of the large savings banks are about to set up a limited holding company thus enabling them to raise funds on the capital market directly. In Britain the Trustee Savings Banks Act, 1985 enacted the framework for restructuring the Trustee Savings Banks and transferring them into private ownership.

Before I deal with individual sections of the Bill, there is one issue in particular which I would like to clarify and this is the question of ownership. The Trustee Savings Banks have been founded and run under trusteeships and, because of the voluntary role of the trustees and the community service aspect of the banks' activities, ownership has never been an issue. The broad assumption has been that they are voluntary bodies providing a community service. The question of ownership must be considered however, if the Trustee Savings Banks are to provide a much wider banking service and if there is a likelihood that they may be reconstituted as companies. The legal advice to me is that the Oireachtas has the power to dispose of the assets of the Trustee Savings Banks or to alter their status as it sees fit. This power is of course subject to the condition that the rights of depositors are fully protected in relation to their deposits and interest thereon under amending legislation, in accordance with accepted practice.

I will not go through the sections of the Bill item by item as much of it is self-explanatory and is simply consolidating and updating the existing legislation. I propose therefore to focus on the more significant items which will affect the status of the Trustee Savings Banks.

Part 1 of the Bill, which brings us up to section 8, deals with standard procedures including the laying of regulations before the Oireachtas. I would like to make special mention of sections 5 and 6 at this stage.

Section 5 deals with regulations to remove difficulties. I know that a similar provision in the recent building societies legislation gave rise to some adverse reaction in its passage through the House. For that reason I would like Deputies to be quite clear on the purpose and intention of this section.

The section provides that if any difficulty arises in bringing any provision of this Act into effect then the Minister is empowered to remove that difficulty by way of regulations which may also modify the legislation to such an extent as may be necessary to facilitate its enforcement. The existing Trustee Savings Bank legislation is both antiquated and labyrinthine and the present Bill is the first root and branch reform of that legislation in this State. There is a strong possibility of unforeseen technical difficulties arising in giving effect to the provisions of the present Bill and this provision is to enable the Minister to deal with them. This power can effectively be exercised only within the context and intentions of the present Bill. There is no possibility of the provision being used to subvent the intention of the legislation and there are precedents for it. I would draw the attention of the House to the time limit of three years on this section, and to the fact that, as provided in section 4 of this Bill, any regulation made under this section would be placed before both Houses of the Oireachtas who would have the power to annul the regulation within 21 days if they so wished.

Section 6 empowers the Minister to modify provisions of this Bill by regulation to take account of relevant changes in company, banking and building society legislation. This provision is necessary because many of the provisions contained in this Bill have originated in company, banking or building society legislation and Trustee Savings Bank legislation will almost inevitably require amendment in order to keep up with any changes in these areas. Instead of having to return to the House to amend the present legislation, this provision allows the Minister to make such amendments by regulation. This in no way undermines the authority of the Oireachtas as it will only apply to legislation which has already been adopted by both Houses. It will not involve making any new legislation. These regulations will also be subject to section 4 where they will be placed before both Houses of the Oireachtas which have the power to annul any regulation within 21 days after it has been placed before them.

Part II deals with the establishment and licensing of Trustee Savings Banks. While the establishment of new Trustee Savings Banks is highly unlikely, in view of recent trends in the financial sector, we cannot rule out this possibility in the longer term.

The requirements for establishment are specified in section 9. The fundamental condition here is the supervisory role of the trustees. This section also removes the anachronistic limits on the activities of the Trustee Savings Banks. In effect, they will now be empowered to carry on, in addition to their existing activities, any other financial service which the Central Bank considers prudent. This should open the way for the Trustee Savings Banks to provide a truly modern banking service and encourage them to exploit other market opportunities. The safeguard here for the Trustee Savings Banks, and the banking and financial sector generally, is the requirement for Central Bank approval.

Another key change in regard to the Trustee Savings Banks is contained in section 10. Up to now they have been supervised by the Department of Finance. This is unsatisfactory because the appropriate supervisory authority for a banking operation is, as I have already said, the Central Bank. Accordingly, the supervisory function is now being transferred to the bank. This will be a much more satisfactory situation where a range of financial institutions, including banks and building societies, will come under the one supervisory authority. It will facilitate a consistent approach to supervision and is vital at a time when competition in this sector is increasing.

Part III of the Bill deals with the trustees themselves. The most significant point here is in sections 17 and 18 which both limit the numbers of trustees and impose an age limit. A maximum of ten trustees and an age limit of 70 years are proposed. These provisions are considered desirable to enable the Trustee Savings Banks to function as effectively as possible in the current dynamic marketplace. I would like to avail of this opportunity to acknowledge the contribution made by trustees over so many years in promoting the Trustee Savings Banks as a community service.

Part IV of the Bill deals with supervision. Most of the sections in this part are based on the Central Bank Acts of 1971 and 1989. Perhaps the most significant provision under this heading is the power of the Central Bank to intervene and protect the depositors where it has reason to conclude that a Trustee Savings Bank will not fulfil its obligations.

Part V of the Bill deals with the management and administration of the Trustee Savings Banks and draws heavily on the current building societies and Central Bank Acts. It provides for the keeping of proper accounts and for the development of superannuation schemes subject to the approval of the Central Bank.

Part VI of the Bill is concerned with the amalgamation of the Trustee Savings Banks and the procedures to be followed. In earlier years the local Trustee Savings Banks were generally independent units but mergers became inevitable as greater efficiency of operation and greater economies of scale were required. The new provisions relax the existing requirements for amalgamation. Previously amalgamation took place by special resolution passed by three-fourths of the trustees. This has now been changed to three-fifths, i.e. 60 per cent of trustees as opposed to 75 per cent originally.

As I mentioned earlier, there are now just two banks. While they co-operate and indeed share some common facilities, there are no proposals for amalgamation at this time. The pressures for amalgamation into one unit should continue to grow as competition intensifies and there are some obvious advantages in a pooling of resources in this manner. Amalgamation will require the prior approval of the Minister for Finance and the Central Bank. Indeed, the passage of this Bill should itself prompt the two remaining Trustee Savings Banks to look afresh at the question of amalgamation. I would certainly not stand in the way of amalgamation if both banks were satisfied that this was in their best interests.

The most significant feature of Part VII of the Bill is section 58 which provides for the re-organisation of the Trustee Savings Banks into companies. There are no plans at present for any such reorganisation and the intention is to continue with the trusteeship arrangement. As the Trustee Savings Banks extend their activities, however, it may be necessary to introduce a company structure to allow them greater flexibility in trading and in raising capital and to open the way for more direct links with other financial organisations. While the trading and investment advantages would be welcome they would have to be weighed against possible disadvantages in the areas of taxation and the remuneration of the new capital. However, in an increasingly competitive environment, we must recognise the possibility that the Trustee Savings Banks may find it necessary to become associated with larger financial groupings and some level of joint venture or even close relationship may be desirable in due course. In this kind of situation it would in all probability be necessary in the first instance to change the trustee status.

Section 58 empowers the Minister for Finance to do this by ministerial order. However, this order will have to be approved by the Oireachtas before it can take effect. In the event, therefore, of proposals for a fundamental change in the structure of the Trustee Savings Banks at a future date, the Oireachtas will have the opportunity in advance to debate this change and the reasons for it.

I have already indicated that much of this Bill is based on the legislation now applying to banks and other financial institutions. In fact, much of this other legislation was in the course of updating while the present Trustee Savings Bank Bill was being drafted. As a result of this, and of comments received and of further consideration of aspects of the Bill, I will be introducing a number of amendments on Committee Stage. In general these amendments will involve further alignment of Trustee Savings Bank legislation with current arrangements for the banks, companies and building societies.

The present legislation served its purposes well as long as the Trustee Savings Banks simply fulfilled the role of savings institutions. This is no longer an adequate role for survival and development in the modern financial system. By comparison with the major banking institutions operating in this country the Trustee Savings Banks are small. As the internal market of the European Community evolves and free movement of capital becomes the norm, there will be increasing competition for market space and the Trustee Savings Banks cannot afford to be handicapped by restrictive legislation.

The Trustee Savings Banks have a great tradition. Even with the limiting conditions imposed on them, they have made great strides in modernising their activities and extending their range of services to the community. The present legislation opens up new frontiers for them and gives them the facility to compete on equal terms for the future. It is now time for them to move into the mainstream of banking in an orderly and prudent manner while maintaining their distinctive characteristic of special service for the smaller depositor. They will now be in a position to provide a full range of banking services and to expand their facilities in the confidence that they can be fully competitive.

I commend this Bill to the House.

(Limerick East): I would like to recognise the part played by the Trustee Savings Banks in the banking system in this country. They have given an admirable service to, by and large, the small depositors who use their facilities. In recent years as they expanded their activities into the area of house loans for example they have provided a very effective and efficient service. I admire their trustees and staff, who do a very good job indeed. I make those remarks by way of introduction because I do not want anything I say now to be taken as a criticism either of the Trustee Savings Banks as institutions or the excellent people who give their time as trustees or the excellent people who staff those banks.

This is the most disgraceful legislation that has ever been put before this House. It is an attempt by the Minister to take functions which are proper to this House and to transfer to the Central Bank functions that are also proper to this House. This Bill, while purporting to extend certain banking facilities to the Trustee Savings Banks fails to address the principal issues which the Bill should address and allows the Minister to proceed by way of regulation to deal with primary statutory issues which are the function of this House.

We do not know what the scope of this Bill will be because the Minister in one of the early sections, section 5, seeks to change the scope and range of the Bill at any time in any direction he likes over the next three years. None of the fundamental issues are being addressed here. It is a disgrace that any Department or any Minister should bring such ill-prepared legislation before the House. For quite a long time, probably for nine years, legislation to update the Acts which govern the activities of the Trustee Savings Banks has been considered. The legislation was held up for quite a long time because it was impossible for the Department of Finance and the Central Bank to reach agreement on fundamental issues. The outstanding issues when I was in Government, were: (1) the accountability of the trustees of the Trustee Savings Banks to the Central Bank and the Minister for Finance; (2) the determination of interest rates paid and charged by the Trustee Savings Banks to customers; (3) interest rates and management expenses on funds placed by them with the Minister and, (4) the related question of investment of the Trustee Savings Banks' funds. Only the first of these issues has been addressed in the Bill. Everything else is left to be decided by the Central Bank on its own, the Minister on his own, or by consultation between the Minister and the Central Bank. Any House of Parliament that would accept this Bill as presented, regardless of the merits of the Trustee Savings Banks as a banking system is not doing its job. I will refer to section 4 and use the Explanatory Memorandum to illustrate my point. Section 4 deals with the making of regulations to give full effect to the Act, the laying of such regulations before the Houses of the Oireachtas and the giving of directions by the Central Bank to the Trustee Savings Banks. That is a normal provision which we can accept in any Bill. However, section 5 provides that the Minister may, if any difficulty arises in bringing any provision of this Bill into force, modify by regulation the relevant provision to such extent as may be necessary to bring the provision into effect. This power will lapse after three years. If we turn to the Bill we see that the provisions of the section are even more dramatic than one would expect from a cursory reading of the Explanatory Memorandum. Section 5 states:

If, in any respect, any difficulty arises in bringing any provision of this Act into operation or in relation to the operation of any such provision, the Minister may by regulations do anything which appears to him to be necessary or expedient for removing that difficulty, for bringing that provision into operation, or for securing or facilitating its operation, and any such regulations may modify any provision of this Act so far as may be necessary or expedient for carrying such provision into effect for the purposes aforesaid but no regulations shall be made under this section in relation to any provision of this Act after the expiration of three years commencing on the day on which the relevant provision of this Act came into operation.

It also provides that no regulation can be made after three years. Would any House of Parliament in the western world accept that provision? If the Minister is not sure of the effect of what he is putting before us then he should pass what he is sure of and bring amending legislation back into the House if he needs to amend the Bill. The provision whereby the Minister can change anything and everything in this Bill for a period of three years by way of regulation is a ludicrous way in which to treat the Houses of the Oireachtas. The Minister knows this and he tried to draw some of the teeth of the attack which he expected from the Opposition by referring to the fact that the regulations would be put before the House and the House could annul them within 21 days.

At least Fine Gael have the opportunity to do that, which is more than we do.

(Limerick East): This is all right if it is a net issue but we all know that ministerial regulations are quite detailed and the kind of set piece debate where one gets up and says “As a matter of principle I have to vote against all these regulations” is not the way to deal with matters of detail. The kind of debate necessary to examine regulations is a Committee Stage type of debate. They cannot be dealt with by simply saying “Tá” or “Níl”. I have never seen such an outrageous provision in any Bill presented to the House by this Minister. In seeking to take the power which properly rests in these Houses, aggregating it to himself, exercising it as he sees fit and making any change which he thinks is necessary in the provisions of the Bill which is now before us three years, the Minister is trying to take away from Parliament the powers which are rightly vested in Parliament.

Section 6, according to the Explanatory Memorandum, "allows the application by regulation of relevant changes in company and banking and building society law to the Trustee Savings Banks as many of the provisions of this Bill have drawn on existing and proposed legislation in these areas". If something goes through in the Central Bank Bill or in the Companies Bill, which is still working its way through the House, the Minister may, with not so much as by your leave, by regulation, load the particular train which is leaving the station today with any provision he likes provided it comes from legislation which is associated with this area. It is quite clear what has happened here. This Bill was not ready for publication. It was rushed out before the last election and the issues which should have been dealt with within the Department of Finance and between the Department of Finance and the Central Bank were not dealt with because there was difficulty in getting agreement.

I should like to refer to section 12 which deals with the supervisory role of the Central Bank. As the Minister said, at present the Department of Finance exercise a supervisory role over the Trustee Savings Banks but this is being transferred to the Central Bank, and rightly so, in the light of the Central Bank legislation. The conditions which attach to licences issued by the Central Bank are not provided for in the Bill. The Central Bank are to be empowered to license Trustee Savings Banks. It may be unlikely that new banks will be founded but we do not know under what conditions these licences will be issued; they are not stated in the Bill. The Central Bank, under the power vested in them in this section, will be able to attach conditions to licences and this Parliament will not be in a position to examine them. If this Bill goes through the House and any of us put down a question to the Minister for Finance which asks him about the conditions the Central Bank are applying to a licence, we will get a polite letter from the Ceann Comhairle saying that the Minister cannot answer the question because the Central Bank are independent in their legislative function. It is rather like the present position where if I put a question down to the Minister about interest rates he will tell me that it is out of order because interest rates are a matter for the Central Bank.

This will be the difficulty if we buy a pig in a poke here and transmit powers to the Central Bank which are not spelt out in the Bill. We do not know what we are empowering the Central Bank to do and in future these Houses will not be able to examine what the Central Bank do because they will be independent and will not be subject to the Minister for Finance. Consequently, the Minister for Finance cannot be held accountable for anything the Central Bank may do under section 15. Section 16 deals with a further provision in this regard, the rules of a Trustee Savings Bank. The Explanatory Memorandum states:

Provision is made for drawing up and altering the rules subject to the approval of the Central Bank. As a minimum the rules must deal with the matters set out in the Second Schedule to the Bill...

At least this section is not as wide as the previous sections I have referred to.

Section 31 gives authority to the Central Bank to determine the ratio which shall be maintained between assets and liabilities. That is a power proper to the Central Bank but there should be an indication in the Bill of what the ratio will be.

Section 32 provides "that the trustees shall pay into a special account in the name of the Minister for Finance or invest in the purchase of Government securities such proportion of their deposits as may be determined by the Central Bank after consulting with the Minister". It is worth looking at the existing arrangements to see what I find objectionable in this regard. As I understand it, at present the Trustee Savings Banks are required to invest their depositors' funds with the Minister, who puts them towards financing the Exchequer borrowing requirement. Under the 1965 and 1969 Acts the Minister has permitted the banks to undertake the business of loans under personal bridging and mortgages and has allowed them to retain 20 per cent of their depositors' funds for this purpose. The criteria governing the loans portfolio require that all loans must be fully secured. I know that the Trustee Savings Banks would like this restraint to be removed, and I do not object to changes in arrangements being made, but the changes in the arrangements should be written into the Bill and we should have an opportunity to examine them in this House. It is a further example in the Bill where the intention of the Minister is unclear and the House is being asked to allow the Minister and the Central Bank to change the arrangements about the use of depositors' funds in the Trustee Savings Banks and we do not know what the end result will be.

The Minister is shaking his head and smiling in an amused fashion. That would be great if we were in Panama and dealing with Noriega who could rule by directive. However, we happen to be in a parliamentary democracy where we do not rule by directive and fundamental changes in the law have to be dealt with in this House. It may be inconvenient for Ministers but that is the way things are done. By taking regulatory powers for himself and giving regulatory powers to the Central Bank the Minister is putting a package before us, the full effect of which we do not know. Furthermore we will have very limited opportunities in this House, once the Bill goes through, to examine the regulations made by the Minister and we will have no power at all to examine the conditions laid down by the Central Bank because they will be independent in the exercise of their function.

As I said section 32 provides that the trustees shall pay into a special account in the name of the Minister for Finance or invest in the purchase of Government securities such proportion of their deposits as may be determined between the Central Bank and the Minister. It is very clear at the moment what the arrangement will be — 80 per cent is to be given to the Minister and 20 per cent can be used by the bank. I am not saying that that percentage should not be 60/40, 50/50, 40/60 the other way or even 20/80 the other way. I am happy with any reasonable arrangement which stands up and can be examined, but I am not happy where the Minister is saying we are moving away from the existing arrangement of 80/20 and the Minister and the Central Bank will make an arrangement about what the new situation will be. We are being asked to hand over the power to the Minister and the Central Bank to do that. I do not believe that is the way to legislate.

I move to section 58. The Minister says that at some future time it may be appropriate to set up the Trustee Savings Banks as companies and to arrange for the transfer of all assets and liabilities to the new companies. The Minister, in the section, seeks the power to do this by putting a draft order before the House. Now he says that the movement towards companies would be in line with what is happening internationally, and he refers to Denmark which has legislation under way which would allow individual savings banks to become joint stock companies. In the Netherlands, two of the large savings banks are about to set up a limited holding company thus enabling them to raise funds on the capital market directly. In Britain, the Trustee Savings Banks Act, 1985, enacted a framework for restructuring the Trustee Savings Banks and transferring them into private ownership. That is fair enough. We know they were out of line with international practice; but in the three examples given by the Minister, it was the Parliaments of those countries that made the arrangements by primary legislation. The Minister is not coming into this House and providing us with a framework to enable the Trustee Savings Banks to set up as companies. He is asking that he would be allowed, by draft order, to change the legal status of the Trustee Savings Banks to enable them to incorporate.

I repeat it lest anybody has any doubt about the matter, I have only admiration for the Trustee Savings Banks, but they deserve a better Bill which could be examined fully and in detail by the Houses of the Oireachtas in a manner which would enable everybody to know what exactly we are doing. In most of the key areas of this Bill we do not know what we are doing. We are being asked to give power to the Minister to make fundamental changes and we do not know the detail of those changes. In other sections we are being asked to give power to the Central Bank to make fundamental changes and we do not know the nature of those changes.

I would like if the Minister would, at the end of Second Stage, refer in particular to section 59. According to the Explanatory Memorandum this requires that the Trustee Savings Banks may not be designated or described in any manner which implies that the Government or the Central Bank are liable to depositors for money placed with the banks. I was under the impression that one of the attractions of the Trustee Savings Banks at the moment was that everything on deposit by the smallest saver was under-written by the Government. I remember a particular incident when the rumour factory which can be so damaging caused a situation where there were large scale withdrawals one morning from the Trustee Savings Bank. The Minister's predecessor, the present leader of Fine Gael, Deputy Alan Dukes, as Minister for Finance, went on the 1.30 p.m. news on radio and said that depositors need have no fear because the Trustee Savings Banks are fully under-written by the Government and if there was any problem with the Trustee Savings Banks the Government were fully under-writing, down to the last penny, any money that was on deposit. Now the Minister is writing into a Bill, without explanation either here or in his speech, that in future the Trustee Savings Banks may not be designated or described in any manner which implies that the Government or the Central Bank are liable to depositors for money placed with the banks. If the Minister was presenting a corpus of legislation which spelled out in detail what the new arrangements would be, if we were clear what the conditions of the licence were, if we were clear on the scope of the Bill, if we knew how interest rates would be arrived at, if we knew how depositors' investments would be invested, if we knew all that we could truly say that there would be very little risk to the deposits of any investor in the Trustee Savings Banks because they would be following the same rules as the Associated Banks which have a marvellous record with only two cases in the history of the State where there has been any default.

Sticking like a rock out of smooth water, we have section 59 where the Minister is saying in future the Trustee Savings Banks cannot describe themselves in any fashion which would suggest that depositors' savings are under-written by the Central Bank or by the Government. In the context of this poorly framed legislation, that is an outrage because it leaves depositors without the plank they had under them, with the safety net removed, and it is going to be a matter for the Minister for Finance and the Central Bank, by regulation, to put another plank in place, and the people who are entrusted to make these arrangements in this House are not being given the information necessary to ascertain whether this is in the depositors' interests.

I would like now to move to the question of how interest rates will be arrived at. As I understand it, the Trustee Savings Banks are at present authorised to operate ordinary and investment deposit accounts. They pay a single rate of interest on both accounts. This was the position when I was in Government. If things have changed since then, perhaps the Minister would inform me. This rate is linked to the rates payable by the Minister to the banks for moneys invested with him under each account. In addition, the Minister pays 1.65 per cent of moneys deposited with him in order to cover the Trustee Savings Banks' management expenses. That was clear. Everybody, the trustees, the depositors, the management and the Minister, knew where they stood. The arrangement was transparent. That is now to go; but what is to be the new situation? The Central Bank will decide at some future date what mechanism will be put in place to decide interest rates. The Bill does not say that this will be the same mechanism as the Central Bank applies to the Associated Banks at the moment. If that were the case then we would say the Minister is merely bringing us into line with every other bank. The Minister is not saying that; he is saying that the Central Bank will be empowered, at some future date, to make arrangements for the striking of interest rates, he is also saying that the present arrangements will no longer exist. I do not think that is satisfactory. I do not believe fundamental changes should be made in matters like this without the House being informed what those arrangements are. This Bill is far too vague in all the areas I have referred to. I know it has been difficult to get agreement between the Department of Finance and the Central Bank. I know there was fundamental disagreement on the whole area of supervision — to a large extent, the section which deals with supervision has been worked out and at least 80 per cent of what is agreed is on the face of the Bill — but there are other areas where the disagreements between the Department of Finance and the Central Bank are still outstanding. Rather than sitting down and working out these disagreements the Minister has decided to put sections into the Bill which have the effect of allowing him and the Central Bank to work out the difficulties which are still unresolved subsequent to the passing of this Bill. That is not the way to legislate.

I understand why the Minister has done this. He has announced on a number of occasions that he wants to get through the House a corpus of legislation dealing with the financial institutions. He wants the Bills running if not in tandem at least in parallel. The Central Bank Bill has gone through as has the Companies Bill and now we have the Trustees Saving Banks Bill. I agree with the Minister's intent but in rushing to fulfil a commitment when the ground work has not been completed, the Minister has done a disservice to himself and to the House.

I have no objection whatever to the Trustee Savings Banks being put on the same level playing field as the Associated Banks and the building societies or to allowing the Trustee Savings Banks to trade and engage in those activities which are proper to banks. That would allow them be competitive, to act in the best interests of their depositors, to act in the best interests of their customers and to allow them, to act, ultimately, in the best interest of the country. I have the utmost admiration for the Trustee Savings Banks but the Bill does them a singular disservice. It is a disgrace to the Department which produced it, to the Minister who put it before the Government and to the Government that waved it through. It would be a disgrace to the House if we passed it as drafted. My party will be opposing the Bill on Second Stage.

The essential problem with the Bill, as the Labour Party see it and as highlighted by the Minister in his speech, is that it raises the crucial question regarding the ownership of the Trustee Savings Banks. That question is raised in the Bill and it was raised by the Minister in his speech but we did not get an answer. The important factor of the ownership of the Trustee Savings Bank was shied away from, ignored and pushed to one side. There may be a sinister reason that was done and I will refer to it at a later stage.

The position of the Trustee Savings Banks, as I understand it, is that for practical purposes there are no beneficial owners. It is called a trusteeship, and the word "trust" and "trustee" appear frequently in the Bill. What is a trustee? A trustee is a person who holds property on behalf of a person or a number of people. For whom do the trustees of the Trustees Savings Banks hold the assets of the banks? The Minister raised that question in the course of his speech when he said that the question of ownership must be considered. I agree with that comment but the Minister did not say anything further about that matter. The Minister went on to say that the legal advice given to him was that the Oireachtas has power to dispose of the assets of the Trustees Savings Banks or to alter their status as it sees fit. I should like to say, with all humility, that I totally agree with the legal advice given to the Minister on this issue. I agree that the Oireachtas has full power to dispose of the assets of the Trustees Savings Banks.

The Labour Party say that now is the time, when we are processing this Bill, to deal with the question of ownership. I will tell the House, succinctly, what we say should be done about the ownership of the Trustees Savings Banks. The ownership of the Trustees Savings Banks should be taken into the public domain on a permanent basis and the Minister should use the Bill to do that. The Trustees Savings Banks should be owned by the people who in a vague, theoretical way, own them, if one is to accept the legal advice given to the Minister. That advice is that the assets are at the disposal of the Oireachtas.

The Trustees Savings Banks ought to be taken right away into formal 100 per cent public ownership, given full powers to deal with all financial matters that banks and their subsidiaries deal with, given power to compete at least on equal terms with the cartel banks, given power to have building society type subsidiaries, given power to have merchant bank type subsidiaries, given power to have insurance association, stockbroking subsidiaries and to engage in other financial activities conducted by the cartel banks. That would be a wonderful advancement for financial services here. It would be wonderful to have a State bank, owned by the people, in a position to compete on a level pitch with the cartel, the members of which do not compete with one another. They have the financial setup closely carved out for themselves without any real competition. What wonderful opportunities would be presented to the people of Ireland if they had their own State bank that could compete here and abroad after 1992. It would be wonderful if we had a State owned bank that had the full support of the State and could operate in Britain and in Europe after 1992. This is a golden opportunity but it has not been taken up by the Minister.

What does the Minister intend doing in regard to ownership? It is all very strange and there is a sinister element about his intentions. In the Bill the Minister gives himself power to authorise the formation of the Trustees Savings Banks into a company of which either the Minister can be the sole owner, as I suggest he should be, or, alternatively, he can offer it to the private sector. It appears that the Minister has left both options open to himself. That is the nub of what the Government, and the Minister, are about on this issue.

Deputy Noonan said it was difficult to know what was being done about the Bill but I can enlighten him, I can give him the information he seeks. In my opinion we are laying the groundwork for the privatisation of the Trustees Savings Banks. The Minister is gearing himself up and preparing the powers for himself to do a Thatcher operation on the Trustees Savings Banks. He has looked across the Irish Sea with some approval as have his Coalition partners, the Progressive Democrats. In fact, they would, if possible, give greater approval for such a move. The intention in the medium term is to privatise this national asset and sell off this magnificent potential for the Irish people to their friends, their backers and supporters in the private sector. That is what this is all about. I see no commitment to the contrary from the Minister in his opening speech on this Bill. I await with interest, when he replies to the debate, a commitment to this House that in no way will the Trustees Savings Banks be privatised, that the Minister recognises they are a valuable public asset with immense potential for the people and that he intends to preserve that for the people in the interests of the people. I look forward to an assurance that not 5 per cent, not 10 per cent, nor even 1 per cent of these banks will be allowed fall into the hands of the private sector creditors who, with the usual greed the private sector has, have their eye on any worthwhile public institution in any field that has tremendous potential, in this case in the financial sector. That is where this House has to be watchful and mindful of the intent here and of what the clear pointers and indicators are. Otherwise, why this vagary? Why not meet the challenge of the Trustees Savings Banks? Why say in a speech that the question of ownership has to be considered, then signally fail to consider it? That is why Deputy Noonan is puzzled and wonders what we are about on this Bill. There is good reason for his puzzlement and that is why the veil of uncertainty has been thrown over the powers the Minister is arrogating to himself as far as the Trustees Savings Banks are concerned.

The message of the Labour Party to the Minister on this issue can be given loud and clear here and now and will be repeated on many occasions. So far as the private sector, the Minister's and the Government's and the PDs' friends in the private sector and their banking creditors are concerned, I say, hands off the Trustee Savings Banks. They are public property and must remain in the public domain.

Deputy Noonan raised questions, and I support him, about some details in the Bill dealing with the powers the Minister is taking and the question of regulations. Everything he said is true. It is outrageous that one should be presented with a Bill which purports to give any Minister power to modify an Act of the Oireachtas. When one stops and thinks about that for a moment the enormity of the concept proposed there is quite frightening, that the Minister by regulation takes upon himself the power to modify an Act of the Oireachtas. That is not the purpose of ministerial regulations, I say with respect. Ministerial regulations indeed have a very important role in our constitutional system. It is quite in order for a Bill and an Act to say the Minister may have power through regulation to put into effect certain matters of detail that are needed on a particular subject. There is nothing wrong with that, but it is breaking new and highly dangerous ground to say the Minister has power to modify an Act of this Parliament. As I remember reading many years ago when I was studying constitutional law, that kind of concept was known as the Henry VIII clause. It is dictatorial. Why bother bringing in a Bill with 46 pages at all? Why not just bring in a three line Bill saying the Minister may have power by regulation to do whatever he wants to do so far as the Trustee Savings Banks are concerned and let him do the whole thing by regulation?

(Limerick East): That is what he has done in the Bill.

It is quite outrageous. I hope sincerely that the House will not buy that and I appeal to the Minister to think about it again.

The statement the Minister makes, that there are protective purposes involved with the 21 days, the resolution of the House and so on, is a pretty poor apology for this pair of sections. The Fine Gael Party at least have an opportunity to put down a motion to revoke regulations and so on. The Labour Party to a very small extent only have the opportunity to do that, The Workers' Party to an even smaller extent and other Members of the House not at all. Certainly the smaller parties in the House have no opportunity to put down motions to revoke regulations the Minister is there proposing.

I agree that the Trustee Savings Banks have done a fine job under the structures they have had up to now when they have been subject to the supervision of the Minister for Finance. I was a little surprised at the reference in the Minister's speech to the effect that until now they have been authorised to deal only with private individuals and not with companies. Probably they have been ignoring that, perhaps to some appreciable extent, because I am personally aware of one case where quite substantial loans were made to a building and development company who got themselves into difficulties. The Trustee Savings Bank may have some difficulty in getting their money back in that case. If it was done in one case probably it was done in hundreds if not thousands of others. It raises the question of the degree and type of supervision the Minister has been in effect imposing on the Trustee Savings Banks if they are breaking the rules so frequently in that regard. One wonders what kind of supervision it is. However, I am perfectly happy—indeed delighted — to see the Trustee Savings Banks will be given a free hand in the financial business they can do.

On the question of the supervision of these banks, and indeed other banks and other financial institutions, whether it be the Minister who supervises them or whether it be the Central Bank that supervises them, it is a fair proposition that when an institution such as the Central Bank has or is given the power and responsibility to supervise an institution — they should have that power — they should be obliged to do that job properly and effectively. If they do not and if any member of the public or a depositor loses as a result of the failure of the Central Bank or the Minister to do their supervision job in a proper manner, they ought to be responsible and legally liable to compensate such a person. Everybody else in society is responsible if he fails to carry out his duties in a proper manner. Why then should the Minister write into the Bill powers for the Central Bank to supervise and yet allow an evasion of their responsibility if anything goes wrong and they have not done their job in a proper manner?

Likewise in so far as the trustees of the Trustee Savings Banks are concerned, the Minister is giving them an out in respect of responsibility. If the Minister is purporting to upgrade their status, to provide that they be paid salaries now — which I understand they were not paid before — they should be responsible and liable to carry out their task in a proper manner and be personally responsible if they fail to do so. I do not think that unreasonable.

Talking about the trustees brings me back to the ownership question. The Minister is going to soldier on, it would appear, with this system of having the banks run by these trustees. Was ever a more undemocratic institution conceived of with the degree of power these trustees have? No mention has been made here this morning yet as to how these trustees are appointed. Where do they come from? Who are these people, these trustees of the savings banks? How do they get there? Who put them there and under what circumstances? How do new ones get appointed? As I understand it they are self-perpetuating bodies. When a vacancy occurs in the number of trustees as a result of the death or retirement of a member, the bank themselves bring in the new person, some friend, buddy or whatever. Who knows what experience they have? Who knows whether they are suitable people? Where is the democratic answerability to anybody in the community? Where is the democratic control to be exercised over this body of trustees? I am sure they are a fine body of men and women. I do not know who they are, I do not know any of them, but when one is controlling £750 million worth of deposits — as appears to be the situation here — there must be democratic accountability to someone and the Minister makes no provision for that anywhere in the Bill. He is soldiering on with the same totally unacceptable, unsatisfactory system. Certainly he is providing that the amount of the emoluments and salaries that will now be payable to the trustees have to be put up on their accounts and put on show in the bank's premises thanks very much, I am sure that is a tremendous help — but it might conceivably be a help if we had somebody monitoring that situation. There is nobody to do that because the Minister is providing no proper forum of ownership. He has evaded the whole ownership position and that is totally unacceptable.

In one sense I am complaining about the wideness of the power the Minister is taking upon himself in sections 5 and 6 to be able to amend the Bill, but in another sense I am complaining that he is not taking sufficient power to himself to cope with ownership in a direct and positive manner. I am puzzled about one aspect of section 58 — the key section — which deals with the power to change the Trustee Savings Banks into companies. It seems to me — and I will be interested to hear the Minister's comment — that there is a discrepancy or a variation, unusually, between the text of the Bill and the format of the Explanatory Memorandum. I do not know whether one was changed at a later stage or what the reason for it is, but it seems that the wording of section 58 gives power to the Minister to authorise the reorganisation of one or more of the Trustee Savings Banks. The implication there is that the reorganisation would have to originate from the Trustee Savings Bank itself and if it did, then the Minister could authorise it whereas the thrust of the Explanatory Memorandum would suggest that the Minister is being given power, as stated on page 5, to reorganise the Trustee Savings Bank into companies and so on. There is a very important difference there: whether the Minister may take the lead to carry out the reorganisation or only authorise it when it comes from the Trustee Savings Bank. I would prefer the wording in the Explanatory Memorandum to that in the Bill and I would be interested to hear what the Minister has to say in that regard.

This is part of the general banking sector and references have been made to other legislation that will go through, the control and role of the Central Bank and so on. There are certain unsatisfactory situations in the banking system at present which ought to be dealt with in this Bill so far as the Trustee Savings Banks are concerned and, perhaps, in other legislation as well dealing with the other banking systems.

I should like to refer to one point which causes me and many other people considerable difficulty. It involves the Central Bank which has a key role to play in the Trustee Savings Banks. It concerns the activities and roles of many of the merchant banks that operate in Ireland at present. For some reason that escapes me, any bank that is registered as a bank with the Central Bank is exempt from complying with the provisions of the Moneylenders Acts. That is entirely wrong particularly where the merchant banks are concerned. The merchant banks, hire purchase companies and so on, are registered as banks with the Central Bank and consequently are exempt from tbe provisions, requirements and protective measures to consumers that are given under the Moneylenders Acts. One aspect of that, in particular, concerns me and that is the requirement that lending institutions be it a Trustee Savings Bank, one of the cartel banks or a merchant bank are obligated to make clear on their loan agreements the true rate of interest. I would like to see measures introduced in this Bill to cover that issue so far as the Trustee Savings Banks and the other lending institutions are concerned. Moneylenders under the Moneylenders Act are obligated to do that and any loan agreement that does not comply is void. Merchant banks in their present loan agreements and hire purchase type transactions are not doing that. They are putting down the interest at 2.3 per cent a month and many unfortunate people get trapped into thinking that that is a low rate of interest whereas, in fact, it is something like 33, 34 or 35 per cent. It comes as a pretty rude shock when they find that out. That is a disgrace and an outrage and if that is the kind of activity that the Central Bank allows to continue here, then I am fearful for the role being given to them to control the activites of the Trustee Savings Banks. That is something the Minister ought to look into very carefully. I will be looking into possible amendments on that issue along those lines.

However, to conclude on my principal initial point, the Labour Party will be tabling very substantial amendments to this Bill if it passes Second Stage. The thrust of our amendments will be to ensure that the Trustee Savings Banks will be taken in a proper, final and formal manner into public ownership, that they will be given full power to compete with the cartel banks, that they will remain in public ownership for the benefit of the people, that they will be empowered to expand their activities here and outside this country and that the profits and benefits which they will achieve — freed from the restrictions which they have experienced — will be, to a major extent, for the benefit of the Irish people.

The Workers' Party have very serious reservations about this Bill. It is being presented as a simple measure to provide for an extension of the Trustee Savings Banks range of activities but actually appears to be a back door device to facilitate the privatisation or, at least, the partial privatisation of these banks.

Section 5 is a particularly ominous inclusion given that it seeks to give the Minister power to alter the legislation in order to facilitate whatever the purpose — either transparent or hidden — in this Bill. It seeks to give him the power to do anything—

...which appears to him to be necessary or expedient for removing that difficulty, for bringing the provision into operation, or for securing or facilitating its operation, and any such regulations may modify any provision of this Act so far as may be necessary or expedient for carrying such provision into effect for the purposes aforesaid....

What is odd about this regulation and the Minister was serious about not giving this House the right to refuse him particular powers to change the Bill — is that he could have, at least, introduced a provision under the regulations where positive regulations would have to be made. In other words, a regulation would have to be placed before the House and approved, before it would be implemented. Instead the Minister is seeking to have this power and the usual negative regulation where unless it is rescinded by the House within 21 days of having been made, it then becomes law. I have argued on many occasions in this House against that type of regulation. It is all right in relation to a number of minor matters of detail, but in a situation like this where the Minister is seeking to change the legislation, not simply to implement it, it is not appropriate that that should be done. It is not appropriate in any event that it should be done by way of the 21 day negative type regulation.

Since I came to this House in 1982 no such annulling motion has ever been taken by this House despite the fact that I have tried to move a number of them on social welfare matters. The reality is that unless an Opposition party put down a motion in Private Members' time, then such a motion cannot be taken.

As Deputy Noonan has already pointed out, even that procedure is inadequate because it is a set piece debate which does not permit the kind of teasing out of regulations which would be possible if there was a committee type debate on the regulations. Indeed, if the Minister wants to change any legislation he should be obliged to come back to this House with a new Bill to have such changes debated and teased out as we will this Bill over the next few weeks. The whole intention of the Bill is suspect because section 5 will effectively give a free hand to the Minister to do what he chooses in regard to how this Bill will be implemented and how it may be altered during the course of its implementation over at least the first three years of its life. We will be vigorously opposing that section if the Bill passes Second Stage.

Any legislative measure affecting a bank requires the most careful possible consideration by the Oireachtas. Banks play a crucial role in the economy and decisions made by them have a direct impact — not just on their own customers but also often on hundreds of thousands of workers in firms whose lives and employment prospects can be directly affected by decisions made on interest rates and credit policy. Real control of an economy requires effective public control of banks, and that is true whether we are talking of the Irish economy or the wider European economy. Indeed, it will be a matter of debate in the not too distant future in relation to how monetary union will be implemented, what control the Central Bank will have and how they will be made answerable to national governments or the European Community generally.

In this country there is little public control of the banks with the result that there is only limited public control over the economy. The most striking example of this is the way in which Government Ministers can disclaim all responsibility for interest and mortgage rates, although these matters can directly impact on the living standards of hundreds of thousands of householders and the job security and employment prospects of many workers. What we want to see is more public control of the banks, but the purpose of this Bill seems designed to reduce public control over the one limited area where there is at present some element of accountability.

We should not make the mistake of thinking that in this Bill we are dealing with some minor or insignificant part of the banking system. The Trustee Savings Banks are big business. If the two existing Trustee Savings Banks were merged they would form the fourth biggest bank in the State. Between them they have 63 branches around the country with total assets of some £800 million, employing more than 700 staff.

Over the years the Trustee Savings Banks have successfully expanded and developed their business. There is much public goodwill towards the Trustee Savings Banks. Many people, who need the services of a bank but who do not wish to contribute even further to the obscene profits of the commercial banks, place their accounts with the Trustee Savings Banks because of their non-profit taking status. The Trustee Savings Banks have been imaginative and innovative. They were, I believe, the first banks to be computerised. Unlike the other banks they open at hours which seem to be designed to suit the customer rather than the banks. A recent Consumers' Association of Ireland survey showed that on a whole range of charges for bank services the Trustee Savings Banks compared very favourably with the other banks.

Having said that, it must also be said that there is an extraordinary aura of secrecy surrounding the operation of the Trustee Savings Banks. Their legislative origins go back to the 1860s. Very little information is available about the ownership and control of the Trustee Savings Banks and the whole question of the role of the trustees — how they operate and how they are appointed — seems shrouded in mystery. No information of this nature is given to account holders and their annual reports are similarly unhelpful, giving only a list of the names of the trustees but no details of their background or role. There is virtually no information in the reports of the Central Bank on the role of the Trustee Savings Banks, and up to yesterday there was not even a copy of an annual report of either of the Trustee Savings Banks available in the Oireachtas Library.

The question of the present ownership of the Trustee Savings Banks is crucial. Who owns them? Is it the depositors, the trustees or the Government? When legislation similar to this was going through the House of Commons a few years back in relation to the British Trustee Savings Banks, the same issue arose. Who owned them? There the question eventually went to the Law Lords who ruled that the Government owned them, much to the annoyance and embarrassment of the Thatcher Government, which then promptly privatised them.

It would seem that we are heading in the same direction here. That is the only reasonable interpretation that can be put on section 58 of this Bill. Let me quote from the Explanatory Memorandum.

Section 58 gives authority to the Minister for Finance to reorganise the Trustee Savings Banks into companies and to arrange for transfer of all assets and liabilities to the new companies. The Minister may make a draft order to give effect to any such reorganisation and the order shall not have effect until a resolution approving of the draft has been passed by the Houses of the Oireachtas. The new companies may be under the control of the Minister or some other person.

What is the purpose of this section if it is not to facilitate privatisation?

There are other serious implications of the Bill also. Under section 30 of the Finance Act, 1940, a major portion of the money deposited with the Trustee Savings Banks, amounting I understand to about 80 per cent of the total, is lodged to a special account in the name of the Minister for Finance. Put simply, the money is "on-lent" to the Exchequer, and at a very favourable rate of interest. Indeed, just this week the Minister for Finance made an order specifying the rate of interest to be charged on this account at a very attractive 6.9 per cent. Having this money available has saved the Government having to borrow it at normal interest rates. In the case of the Dublin Trustee Savings Bank the money "on-lent" in this way in 1988 amounted to more than £300 million.

However, under section 32 of this Bill the amount to be deposited in the Minister's account, or invested in Government securities, is to be determined by the Central Bank, after consultation with the Minister. This would appear to suggest that the portion of the Trustee Savings Bank deposits which will be made available to the Exchequer will drop below the current level. If this is so, then the Exchequer will have to seek that cash elsewhere, paying normal rates of interest. Despite the statement in the Explanatory Memorandum that there will be no additional cost to the Exchequer arising from this Bill, this move could result in a significant additional cost or loss to the public purse.

Another area on which we have grave reservations is the question of transferring responsibility for supervising the Trustee Savings Banks from the Department of Finance to the Central Bank. In theory giving the Central Bank supervisory powers over all the banks as well as the building societies should be a good idea, but in practice it has not been effective at all. The Central Bank have failed totally to exercise any real control over the commercial banks. They have failed to live up to the obligations placed on them by the 1942 Central Bank Act to ensure that in matters of credit policy, the interests of the community as a whole should predominate. Given the predominance on the board of the Central Bank of representatives of private profit in general, and the commercial banks in particular, it has not been clear if the Central Bank are controlling the commercial banks or the commercial banks controlling the Central Bank. The claim made by the American economist, Milton Friedman, that regulatory bodies are generally captured by those they seek to regulate has certainly been true of the relationship between the commercial banks and the Central Bank.

Last year responsibility for supervising the building societies was transferred to the Central Bank, but they failed at the very first test only this week, when they shamelessly failed to take any action to prevent the building societies from increasing their mortgage rates in excess of the 1 per cent general increase in interest rates for which the bank had signalled their approval. Handing responsibility over to the Central Bank also removes any element of accountability to the people through the Dáil. Ministers are able to disclaim any responsibility for decisions which can have a major bearing on economic policy and Dáil questions on matters of legitimate public interest ruled out of order.

I referred earlier to the mystery surrounding the manner of appointment of the trustees at present. This Bill is not much more forthcoming in this regard. Section 17 tells us that there is to be not more than ten and not fewer than five trustees for each Trustee Savings Bank. Section 18 tells us that they cannot be aged over 70, and section 19 tells us that bankrupts and convicted crooks are ruled out. But nowhere is there any guidance given as to what qualifications, background, or experience the trustees should have. Neither are there any details in the Bill as to the manner of their selection. This is to be provided for in the rules of the Trustee Savings Banks, which will have to be approved by the Central Bank. One significant change is that while the payment of fees to trustees has, up to this, been prohibited, they will now be paid what are delicately referred to as "honoraria".

Deputy Taylor in making a point in relation to the trustees referred to the men and women of the Trustee Savings Banks doing a good job. I have no doubt that the trustees in general do a good job, but looking through the 1988 annual report of the Dublin Trustee Savings Bank I note that there are 23 trustees who are all men. There are two vice chairpersons who are men, one chairperson who is a man and a chief executive and a general manager, both men. I do not know the proportions in relation to the rest of staff but certainly there are no women among those running the Trustee Savings Bank in Dublin. Perhaps that is something to which we should address ourselves when dealing with this Bill to ensure that fair and equal treatment is given to all sections of our community.

I am sure, as Deputy Mervyn Taylor said, that the people who have been acting as trustees up to this have been fine people, acting in the best interests of their customers and the public in general. What I am concerned about is that in the absence of specific provisions in the legislation regarding the manner of their selection, together with the changes in the status of the Trustee Savings Banks and the introduction of fees for trustees, we will have the development of a self-perpetuating, controlling clique, similar to those who run the building societies, drawing huge fees and expenses, and who will not be responsible nor answerable to anyone.

Among those who will be most directly affected by this Bill are the Trustee Savings Bank employees. What consultation has there been with them? Who speaks for the Trustee Savings Bank workers, most of whom I understand are not even in a trade union? Have they no rights in regard to those proposed changes? I would ask the Minister, when replying to this debate, to say what consultation, if any, there has been with Trustee Savings Bank workers.

Finally, I want to repeat that The Workers' Party are not hostile to the Trustee Savings Banks. On the contrary, we admire the work they have done in trying to give the public a banking service without extracting obscene profits from their customers, and want to see them expanded and developed. But why can this not be done without changing their non-profit taking status and opening up the way for their eventual privatisation?

We will oppose this Bill on Second Stage. If it gets through as I am sure it will, with the support of the Progressive Democrats, we will introduce some major significant amendments on Committee Stage to try to ensure that the Trustee Savings Banks do not change their nature.

I welcome the Bill, as it proposes to unfetter the Trustee Savings Banks and allow them to trade freely in the banking business and provide a fully comprehensive service but the welcome is conditional because the Minister also proposes to retain certain arbitrary powers which go beyond what he should expect this House to give him in terms of regulations he can make in order to virtually change the operation of the Bill entirely.

The Trustee Savings Banks have given a tremendous, fairly competitive service over the years. It is important that they provided a banking system which was accessible during working hours and afterwards and which provided an alternative so that small investors could readily invest. Small investors and first time house purchasers could do business on a one to one basis with somebody who was prepared to give them full consideration whereas other institutions of a similar nature were not prepared to deal in that way. We should welcome any proposal to improve the scope of the services the bank are providing now or are likely to provide in future.

The approach of 1992 with computerisation, competition and so on means that financial services will continue to be affected and the Trustee Savings Banks will not be untouched. We must expect changes in legislation. An essential role already established by the Trustee Savings Banks is that they were able to compete and provide an alternative service not entirely under the umbrella of the other larger financial institutions. They had to work within certain guidelines and were strongly controlled by the Minister for Finance in relation to the amount of depositors' funds they could retain and so on but nevertheless they appeared to the small investor to be independent and in some way more accessible and more prepared to listen to problems. With the necessary change in legislation due to the approach of 1992 I hope we do not see a demise of that kind of competition and of that sort of attitude. That would be very undesirable from the point of view of the country, our economy and the people, particularly small investors, the sort of people who for instance are purchasing a house for the first time. In recent times it has not been at all unusual for people to go to four, five or six financial institutions without success but if they were lucky enough to have a Trustee Savings Bank branch in their area where they were making regular deposits, they could have their problems solved by them. The competitive element and the independent air should remain. This legislation should not result in the Trustee Savings Banks being rolled into the huge amorphous mass that is the financial services in Europe.

I will not dwell too much on the track record of the Trustee Savings Banks but it needs to be stated in order to consider what our attitude to the proposed changes should be in the future. Deputy De Rossa referred to privatisation. I would have no difficulty with privatisation provided competition remained. That is the kernel from the point of view of the investor or the customer. It is only when competition disappears that problems arise. For that reason it is immaterial whether an institution is controlled by the State through the Central Bank or directly by the Minister or by private trustees as long as the customer at the end of the day gets a fair service and the Trustee Savings Banks are not rolled into a mass where a huge impersonal organisation can emit whatever they wish at whatever time. That would be totally unacceptable but unfortunately it is a characteristic of financial services at the present time and it will obviously become more so in future.

In comparison with other track records the Trustee Savings Banks have not been as avaricious as have other banking institutions with regard to service charges. That is a facet of their operations I should like to see maintained so that people could go to a particular banking institution expecting a somewhat better deal when making a small investment or whatever. The public are entitled to that facility. Indeed I would contend that to some extent the growth of the Trustees Savings Banks over the past 20 years has been consequent on the maintenance of that type of service.

Deputy Taylor raised the matter of the various interest rates applicable at present, referring to various quotations from financial institutions appearing to offer very attractive lending rates. One discovers, at the end of the day, that the actual rate charged very often is vastly different from that projected in the various glossy brochures emanating from these financial institutions. With interest rates rising at present this aspect comes into focus. As has often been said in this House before, in difficult times when high interest rates obtain, any banking customer, whether a private individual or one owning a company, running a business or whatever, who gets into any difficulty and moves on the wrong side of the banking institutions, when tripped for a number of repayments or whatever, will then find himself with a serious problem on hand. This means the prevailing interest rates overtake him, he finds himself on the downhill and cannot extricate himself. It is as if a mechanism were tripped which begins with the inevitable ticking of a clock. In turn this means one can set a time limit on the demise of a company from the date they are unable to meet three or four repayments at a crucial stage of their operations, when interest rates take over and pre-determine the outcome. I make that comment as an aside from the general provisions of this Bill. Nonetheless it is no harm to remember that possibly unfair advertising legislation is being transgressed on account of the fact that very attractive interest rates appear to be offered by financial institutions with regard to loans. One discovers that, probing somewhat deeper, reading the small print — particularly by those people well used to dealing with these institutions — leads to a quick determination that those interest rates are not at all as indicated but rather lead to gross repayments over a number of years that are vastly in excess of those indicated in glossy brochures.

I want to refer also to the amalgamation and rationalisation of banking institutions, referred to in the course of the Minister's remarks. I suppose this process is inevitable. It affects the Trustee Savings Banks and, already, there have been indications of amalgamations in that area both here and throughout Europe. I suppose we cannot reverse that process. Here I must revert to my original fear with regard to elimination of competition. If all of the similar services throughout Europe are amalgamated one then has to deal with the one institution only whereas, previously, one might have had redress to five, six or even more. Approximately 20 or 30 years ago there were here approximately six to eight independent banking institutions. This meant that if a customer was not satisfied with one he or she could go to another. It was not true that a customer always played one off against another and always won. All of us in this House and outside it are well aware that very seldom does the customer win in such circumstances. Nonetheless there was then a variety of services available to the customer. After amalgamation and rationalisation we ended up with three banking groups. More recently there was a slight fragmentation when another banking group appeared on the horizon and appear to be nudging somewhat into the competitive area, an attractive and necessary prospect.

Reverting to the whole question of amalgamation and rationalisation in banking terms, resulting from this much needed development of allowing the Trustee Savings Banks additional scope, I hope we would not see them overtaken by another set of rules, principles or machinery, rolled into the system, so that they became distanced from their present clientele. While the provisions of the Bill are necessary and desirable we need to be careful in that one area. The provisions of the Bill allow greater scope to the Trustee Savings Banks. I hope that will be the outcome.

I come now to the anomalous sections, sections 5 and 6, but particularly section 6 to which the Minister referred at some length in the course of his introductory remarks. If the Bill is as important as we are led to believe and is worthy of discussion in this House them major changes likely to take place at a later stage equally should be worthy of similar discussion or mandate from this House. I do not accept the Minister's contention that time will be of the essence, that it would be unnecessary and undesirable to have to come back to the House to change regulations in order to meet circumstances as they arise. That applies to all legislation and particularly to the provisions of this Bill. I see no reason the Minister should not be expected to revert to this House, seeking an additional mandate if he proposes to travel down that road. The powers of regulation always have been contentious. They may be acceptable in some instances in which no major debate may arise from a ministerial decision at any given time. In other words, if the degree of change the Minister wishes to impose is not such as to put an entirely different complexion on any given operation — whether it be within the financial services are or any other — then for administrative reasons it is useful that the Minister can make a change. But these circumstances are totally different. There could be wideranging implications for businesses, industry and others in the banking field if a Minister took onto himself the role proposed under the provisions of section 6. In that case I would have strong objection to it.

With regard to computerisation and the general introduction of technology in banking services I remember some years ago — though I am sure our friends in the banking service will deny this — when one received one's statement at the end of a month or whenever, if one had lodged, say, £1,000 in a current account and simultaneously had written cheques for approximately the same amount, generally speaking one's overdraft was reduced by the £1,000 when lodged. That is not the case nowadays. The banking system is so highly computerised that the various clocks tick over, emitting a signal showing debits and credits, when all one is left with is the balance. That may appear to be a small matter to many people. Nonetheless very often small businesses, operating on a tight margin, find that practice very annoying. It may well evolve that, at the end of the banking year, their bank manager may well say to them, "You were in overdraft for the entire year; that is not a good operation", whereas, by putting a totally different interpretation on the way the figures were computed over the entire year, equally the bank manager could say that the customer had almost been in credit for the entire year.

It is interesting what modern technology has managed to do. While giving answers up front that much more quickly the bad news is also given that much more quickly. I have often promised myself to spend some time looking at the system but I have a sneaking suspicion that at this stage the customer does not have the advantage of the luxury of a couple of days' credit. His or her overdraft is somewhat less ominous than would appear to be the case under the new system. That is by way of general criticism of developments in the technological area and how they affect the consumer.

The consumer's needs are all important. It is on the basis of the needs and demands of the consumer that all services rest and are developed. If there was no consumer in the first place then there would be no need for these services. It should not be forgotten that, regardless of what changes are taking place, what amalgamation is required or what needs have to be met in the financial world, the needs of the ordinary, humble, domestic consumer are of paramount importance. While in every other business it is automatically assumed that the customer is always right, the customer does not always feel that he or she is right when dealing with financial services. For that reason the Minister, in respect of sections 5 and 6, should have regard to the views expressed by Members of this House already this morning. He should, when and if necessary, come back to the House with amending legislation in order that this House would stand over the changes being made as opposed to the present system whereby the House appears to give a free hand to the Minister to change the regulations at any given time to such an extent as to make the Bill before us almost totally irrelevant.

Again, I would like to congratulate the Trustee Savings Banks for their performance to date. I wish them every success in the future and hope they will continue to give that service. I hope the competitive angle they present in banking terms remains and is sharpened, that that leading edge comes more to the fore and that the benefits accrue to the customer. I know a number of other speakers wish to contribute and I do not want to delay the proceedings of the House other than to say that there are pros and cons in this legislation in particular and it is most important that the Minister recognises this. If he wishes to amend, by regulation, the legislation he should come back to the House for its approval.

I would like to make a very brief contribution to this legislation. Although it is a technical Bill and there is not a great deal of interest in the House in it, it is nonetheless a very important one. I would like to have been able to welcome the Bill because it is long overdue — it has been in incubation for about ten years. I know the people in the Trustee Savings Banks throughout the country have been watching for its appearance.

In the Minister's speech he said the existing Trustee Savings Bank legislation is both antiquated and labyrinthine and that the present Bill is the first root and branch reform of that legislation in the State. Why, then, did the Minister approach the legislation in the manner in which he did? We have seen some extraordinary approaches to legislation by Fianna Fáil in this House in recent days. Yesterday in the debate on the Child Care Bill the Minister in question was unable to give any indication of commencement dates. In this Bill the Minister for Finance approaches the matter in an unprecedented way. If he wanted to ensure that the Bill would go through smoothly and quickly, and that should be our objective, I question why he used the kind of approaches he has used in sections 5 and 6.

To quote again from the Minister's speech, he said that section 6 empowers the Minister to modify provisions of this Bill by regulation to take account of relevant changes in company banking and building society legislation. This is totally unacceptable and my colleague, Deputy Michael Noonan, has made a very good case as to the reason. First, it is unacceptable that a Minister should take that power onto himself. If he does so, the only redress this House has is to put down a motion to be debated which would nullify or negative that regulation but this never works. It is a most frustrating aspect of parliamentary procedure, as Deputy De Rossa pointed out, and it is unacceptable. I can understand why it has raised such hackles on this side.

The Minister stated in his speech that time would be of the essence and that is why he was using this procedure when it came to changes and developments in the operation of the Trustee Savings Banks. I would ask the Minister why, since it took ten years to prepare this Bill, there is such a rush now to change procedures. I would suggest that the views expressed on this side of the House are aimed at ensuring that this Bill will stand the test of time, that it will ensure accountability and security and above all that it will protect the rights of the consumer. I hope that, given the apparent disagreement between your side of the House and our side on this Bill, there can be a consensus, that we can discuss the issues on which we differ and that the Bill will come through as one with which we can all agree and one that serves the need.

I would like to use my time in this debate to do what other speakers have done, that is to express appreciation for the work of the Trustee Savings Banks down through the years. They are old established banks and have given a comprehensive service to customers. There are about 64 branches throughout the country with a workforce of 800 and combined assets totalling £700 million. They give a full personal banking service. They are non-profit making organisations and surpluses are put back into the business for development.

As somebody who banks with the Trustee Savings Bank and has a great deal of admiration for them, I would like to comment on their role. They have a sound, no nonsense approach to banking. Many other banking groups could take a lesson from them. They recognise and accept the real needs of their customers by staying open at lunch time, which is invaluable to workers, and have a late night opening the same night as the main shops are open. Generally they provide the public with a service comparable to public needs, and this highlights the inadequacies and shortcomings of many of the other banks. Too many of them are still living in the past when banking was a service used by the wealthy or at least by the better off, the kind of people who are free to do their business when all other people are at work.

Today banking is not a luxury but an essential service. It is and has to be used by people on a day-to-day basis. Most workers now have their salaries paid by way of bank transfers. This is a good idea, for security reasons, but it puts great pressure and places great demands on banks to meet the needs of those who go to work each day. However, they are not doing so. Anyone who looks at the long queues which form at the wall dispensers at banks, particularly on a Thursday, will know that the banks are not meeting their needs. The long suffering public deserve better treatment and a better service, at least as good as that which has been provided during the years by branches of the Trustee Savings Bank.

As I said, we need an essential service in the general banks. The associated banks have enormous resources and adopt aggressive marketing policies to garner in more and more customers. Unfortunately, they place a very low priority on customer needs. I feel very strongly about the role the Trustee Savings Banks play. They have been too modest in their advertising and marketing policies. If they undertook a real campaign and made a real effort they could wipe the eye of many of the other banks because of the genuine community service they provide. The debate on the services provided by banks is perhaps for another day. We have to get the agreement of the House for the Bill before us and make sure that it meets the needs of the public and the real fears which have been expressed on this side of the House.

I wish to join other speakers in acknowledging the contribution this financial group have made to the well being of so many people and the facilities they have provided to smaller communities throughout the country. At a time when financial institutions — I am thinking in particular of the Agricultural Credit Corporation, the building societies and even the banks — are rapidly expanding into other sectors of the financial services market, such as insurance and conveyancing, it is only natural that this legislation should allow the Trustee Savings Banks to compete on a equal footing with all other financial institutions in the financial services market.

As the House is aware, there is now enormous competition in the banking sector. In my opinion there are two tiers of competition. On the one hand, the Trustee Savings Banks, An Post and credit unions compete in the personal loan market and try to attract small depositors and on the other hand there has been a rapid expansion in the home loan market, particularly in the endowment mortgage sector. Many financial institutions have now entered into that market and the recent spate of advertising and the rates which they offer are an indication of the profit which financial institutions believe can be made in that sector of the market in the coming years. I expect that the Trustee Savings Banks will seek to ehance their role in that sector of the market and an expansion into the insurance sector will allow them to develop further that endowment mortgage side of their activities, unless of course the Minister for Finance in future budgets sees to it that the taking out of endownment mortgages will be less attractive by reducing tax relief on such mortgages. That remains to be seen but I am sure that the provision of home loans will continue to form a large part of the activity of financial institutions in coming years.

The over-dependence of the Trustee Savings Banks on the personal loan market has placed them in a vulnerable position. There is a great danger in this. If losses accrue and there are high interest rates, this will place pressure on individual borrowers who are trying to meet repayments on their loans. For that reason it is only natural that every financial institution should seek to expand over as wide an area as possible. By allowing the Trustee Savings Banks to offer loans to companies this Bill is seeking to protect the institutions themselves and for that reason it is welcome.

The Minister mentioned in the course of his speech that there are too many banks in the country today and envisages amalgamations, rationalisation and takeovers in the financial services sector. Indeed, in Part VI of the Bill, the Minister encourages more efficiency and acknowledges that there are too many small institutions and a need for rationalisation and amalgamations. In the context of 1992 and the need for greater efficiency in the marketplace, so that institutions will be able to compete effectively in the European Community, I have no doubt that we will see rationalisation and takeovers in the financial services sector. In a recent development the Irish Nationwide Building Society agreed to a takeover bid with the Irish Mutual Building Society. I have no doubt that financial institutions outside of Ireland will seek to take over financial institutions, in particular building societies, in the years ahead. I would also suggest that if the Trustee Savings Banks do not improve their efficiency to the level that will be demanded of them from 1992 onwards they will be ripe for a takeover bid by either an Irish institution or an institution in the European Community.

I am not satisfied with the provisions contained in Part V of the Bill or with the level of accountability of financial institutions. Some years ago the Minister of the day in building society legislation sought extra powers over the building societies. However, that legislation did not meet the requirement to get as much information as possible as a cosy club atmosphere has developed very rapidly in the financial services sector in recent years. We should seek to address this appalling problem and not allow the problems which arose with regard to the building society legislation to arise with regard to this legislation. I hope the Minister will make the necessary amendments to Part V of the Bill on Committee Stage to allay the fears of the financial institutions and seek to obtain as much information as possible for the Oireachtas, the general public and in particular, for the account holders of financial institutions so that they will feel much happier about the financial institutions with which they have invested their money.

In this legislation, the Minister is probably seeking to put the Trustee Savings Banks on an equal footing with all other financial institutions to ease their way, in the event of a takover, an amalgamation or a merger. Our experience of allowing banks to diversify into other sectors of the financial market is not good and we should seek in this legislation to ensure that past mistakes are not repeated. I am referring in particular to what happened when the Bank of Ireland diversified into the life assurance market. During the course of the debate on the Insurance Bill in another House I brought to the attention of the Minister for Industry and Commerce, now the Minister for Finance, the difficulties that were arising for the consumer. I regret to say the matter was not taken too seriously at the time but subsequently the Department of Industry and Commerce received numerous representations from the general public on the exploitation that was taking place vis-à-vis life assurance and Bank of Ireland account holders. I am glad to see that some improvement has taken place since then. I hope the consumer will be protected from exploitation and that what happened in the past will not be allowed to happen under this legislation.

There is an impression abroad that if a Minister had sufficient powers of regulation that he could do many things under the Bill. In fact, the Minister for the Environment sought to take certain powers of regulation to himself under the building society legislation. However, we see how that has failed over the years to ensure that the consumers are protected and not exploited by repayments or inbuilt management charges which are extraordinarily high. The financial institutions have failed to justify to the ordinary policy holder the amount of money that is being paid in management charges to various people. The Minister for the Environment has the power to call in the building societies to discuss an interest rate increase, but in the recent increase in the mortgage rate, which is above the Central Bank interest rate, it appeared he had little or no option but to allow them to continue on their own merry way and increase the interest rate at will. This is a development in the financial sector which requires redress. The Government have failed miserably to ensure that there is fair play for the mortgage holder.

Why is the Minister seeking more powers of regulation when experience suggests he would not be prepared to use those powers effectively for the benefit of the consumer? In recent times, particularly over the past 18 months, there has been a large increase in interest rates which is a very worrying trend for those who have taken out personal or other loans. I am particularly concerned as the Trustee Savings Banks are heavily dependent on the personal loan market and this may have an adverse effect on the viability of the banks. For that reason the improvements suggested in broadening their portfolio should help them. We should note that what can happen when there is a high interest rate and a liberal money supply is that the price of property can escalate enormously.

The rise in business activity in the Dublin area and throughout the country, together with the general relaxation and greater access by consumers to loan facilities — largely on account of competition — is responsible for the boom in the property market in Dublin in particular. There is such competition for a share in the property finance market that the financial institutions are prepared to be more flexible in lending money than they were a few years ago. We had a similar situation in 1978-79 when the price of agricultural land went through the roof. This was because the banks generally decided on a relaxation of the rules and a more flexible approach to loan facilities. We saw what happened then. With the escalation of interest rates, people were in difficulties and the Oireachtas had to devise a financial package to rescue those who had found themselves in the impossible position of not being able to pay the interest on the interest that had accrued from those loans. The financial institutions and the Central Bank must learn from past experience and ensure that the associated banks do not develop a liberal policy to the extent of mismanagement of the loan facilities.

Under Part VII, the Minister is seeking power to organise the Trustee Savings Banks into companies. Has he any plans to do this? How will the matter be dealt with? I would like the Minister to expand on that point.

Generally, I welcome the legislation. I hope that the fears that have been expressed and the comments I have made will be taken into consideration. There is a general welcome for the Bill in broadening the activities of a financial institution which will allow them to compete in a very competitive financial market.

I welcome this legislation. It is not one minute before time; in fact, it is long overdue. I have reservations about certain parts of the Bill, which have been spelled out by our spokesman on Finance. I hope the Minister has taken cognisance of the facts he has outlined.

The Trustee Savings Banks have given a very valuable service since their inception. The basic legislation under which they operate is completely outdated. It goes back to 1863. It is now high time that proper legislation was enacted in this House to ensure that the Trustee Savings Banks will continue unhindered to provide services to the general public. It is also of paramount importance that they be given every opportunity and that there should be no inhibitions on their progress in the financial world. I have no doubt that the Trustee Savings Banks incorporating the Cork and Limerick Savings Banks have given outstanding service to the general community. They have shown to the public that they are a caring financial institution. They will listen to what is being said by the general public whom they treat as equal citizens. They are not like the huge commercial banks which may close down a branch in an outlying area and leave their customers with a service once a month only. If the Minister is not going to copperfasten provisions in this Bill that will safeguard the general public, the Bill will not be a success.

I have no doubt the aim of the Trustee Savings Banks is to continue the service which they are giving their customers at present. They have proved to the general public that they can be trusted. They have the longest opening hours of any banking concern. The Trustee Savings Banks are open to the general public for approximately 32 hours per week while the other major banking concerns are open to the public for approximately 21 hours per week. Surely this is nonsensical in this day and age. It is unwarranted and unfair that any financial group who have a monopoly, such as the banking world have, should treat the general public in that fashion.

The Trustee Savings Banks' loan rates are the lowest available. They have shown their concern for their customers by deferring the present increase in house mortgages until 1 January 1990. That shows they are a caring financial concern. They have given their customers who have taken out loans an opportunity to enjoy the festive season and have not imposed on them the severe hardship which has been imposed by other financial institutions on their customers as late as yesterday and the day before.

The Trustee Savings Banks must be congratulated for the manner in which they handle the financial affairs of their customers. I do not have enough words with which to praise the Cork Savings Bank, the Limerick Savings Bank and the Trustee Savings Bank in Dublin, praise which they very much deserve. This goes to show that if there is no opposition in any walk of life there will be a complete walk over. It is for this reason we must welcome this legislation, provided it copperfastens the anomalies which were spelt out by our leader and spokesman on Finance, Deputy Michael Noonan——

You have a new leader?

Our spokesman on finance. I hope the Minister will recognise what he said because if he does not, he will rue the day. I do not want Mickey Mouse legislation being introduced in this House which does not give the Trustee Savings Banks the necessary mandate they require to carry on their good work. Inhibitions of any description should not be placed on the Trustee Savings Banks. They are a very imaginative and competitive outfit and I have no doubt they have the interests of their customers at heart.

While the major commercial banks are inclined to forget about their customers who live in the outlying areas of the country I believe those are the people who should be looked after. We cannot all live inside the Pale or on the outskirts of Dublin, Cork, Limerick, Waterford and Galway. If there is to be a future for this country our population in the under developed areas must be maintained. What do tourists do when they visit areas where the major banks operate a service only once a month? Surely everybody knows that people who are on holidays need to have access to a bank every day of the week. They need a proper service and not one which is run on a skeleton basis. Those very concerns boast of the countless millions of pounds they make in profits every year. Yet they are pruning the services which are so badly needed in rural Ireland today. I should like to ask the Minister if he is going to take any steps to stop the major banking concerns from pruning their branches throughout the country, closing them down and giving no service of any description. How can we attract industry and tourism to this country and maintain a proper agricultural community in rural Ireland if we do not have a proper banking system?

It is for this reason I stand in this Chamber today to praise the activities of the Cork and Limerick Trustee Savings Banks and the Trustee Savings Banks generally. If it were not for them I shudder to think what our banking policy would be. The Minister should remember that all citizens deserve equal rights. I hate to see the people who live in rural Ireland being treated as second class citizens. We must ensure that the Trustee Savings Banks will be given the opportunity to expand where they want to expand. If the legislation is properly introduced I believe it will be of paramount importance to each and every individual who is living in rural Ireland today.

At the outset I said that this legislation was not being introduced one day too soon and I hope the Minister in his reply will give an assurance to the people who have spoken on this Bill that proper treatment will be given to the Trustee Savings Banks, that no further commitments, other than those placed on the other banking systems, will be placed on them and that they will be given an equal share of the cake so far as the Central Bank is concerned. If the Minister proceeds along those lines the banking fraternity should have a very bright future in the years ahead. We want to see the Trustee Savings Banks going from strength to strength. The Cork Savings Bank have branches in Bandon, Clonakilty and Skibbereen and let us hope that in the not too distant future they will have branches in other towns in south-west Cork.

What about Schull?

The time is right for them to expand into the banking world. I wish them well and I hope they will rise to the occasion.

I should like to thank all the Deputies for their contributions to this debate. I concur with them in paying compliments to the Trustee Savings Banks for the fine customer service they have given throughout their many long years in operation, and especially for the service they have given in rural Ireland, as Deputy Sheehan said. I cannot say whether they have any intentions of opening a branch in Schull but I have no doubt that if there is enough business there they will.

While the Trustee Savings Banks are small in terms of the overall financial industry, they provide a very important service for the small depositor in particular. They are hampered by archaic regulations which have no place in today's financial environment so changes are long overdue. In fact, this Bill has been about nine years in gestation. A number of Ministers for Finance have passed through during that period. It was time to bring the Bill to the Floor of the House. It was time for them to be brought on to the level playing field and given the opportunity to provide a wider range of financial services. In future they will be under the authority of the Central Bank which is the proper supervisory authority for banking services. With the removal of outdated restrictions, the Trustee Savings Banks will be better equipped to grow and cope with intense competition. There are already plans in train for new branch offices. For the first time they will be able to do business with companies as well as individuals, and they will have much greater flexibility in terms of use of depositors' funds.

The updating of rules and structures which is being provided for in this Bill is in line with the changes already in operation or now being put into place in respect of savings banks' operations in other European countries. The whole financial sector has been going through a period of dramatic change in recent years. New financial instruments, the increased use of technology and the implementation of European Community Directives are having a very big impact and traditional lines of demarcation between the various finance houses are fading away. Earlier this year the Oireachtas enacted legislation on the Central Bank and on building societies to provide for these new realities. The present Bill is doing likewise for the Trustee Savings Banks.

Deputy Noonan was highly critical of the provision in section 5 about the making of regulations. First let me point out that there are many precedents for this. In the most recent Building Societies Act there is a clear precedent. There are several other precedents and the Deputy has been making a song and dance about a matter of really little importance. That is not to say that I do not agree with him in many areas. This House should always hold on to the powers it has and never delegate them; but in this case the Deputy will appreciate——

(Limerick East): Quote the precedents for modifying legislation by regulation.

We will get it for the Deputy.

(Limerick East): The Building Societies Bill has not gone through yet.

We will have all this discussion on Committee Stage and I will be only too happy to quote whatever the Deputy wants.

(Limerick East): The Minister said there were precedents. Now he is saying he does not have them.

Of course I have them. They are in the Building Societies Act.

(Limerick East): That has not gone through yet, Minister.

The Building Societies Act has gone through. The Companies Bill is only half way through.

As I stated in opening, the provision is merely intended to allow the Minister to deal with any unforeseen technical difficulties and nothing more. The Deputy also implied that there is some disagreement between the Department of Finance and the Central Bank on the question of supervision of the Trustee Savings Banks. I want to say categorically here and now that there is absolutely no basis whatsoever for such an assertion.

There has been some criticism of the intention to provide that the Trustee Savings Banks should be constituted as companies at a future stage. The Bill provides that the change to company status will be effected by ministerial order. The important point to note here, however, is that the Oireachtas will have the opportunity to debate such an order and the reasons for it.

Deputy Noonan is critical of section 59 which requires that the Trustee Savings Banks may not imply that the Government of the day or the Central Bank are liable to depositors for money placed with the banks. There is nothing new in this. It is simply a restatement of the legal position as it has been up to now.

Deputy Noonan was incensed because the legislation does not spell out what conditions the Central Bank will impose on granting licences to the Trustee Savings Banks. I think it is quite unrealistic to propose that we should include in legislation the details of any Central Bank licence. The logic of this is that all Central Bank licences should be subject to the same conditions. The whole thrust of the legislation is that Trustee Savings Banks are to be treated on the same footing as all other banks. The Central Bank has authority under the law to regulate the operations of banking institutions and they will exercise this function in relation to the Trustee Savings Banks in the same way as they exercise it in respect of the other banks.

Deputy Noonan queried the intention with regard to the determination of interest rates. The Bill states that Trustee Savings Bank interest rates paid to depositors and charged to borrowers will be fixed in a manner to be determined by the Central Bank. The rate the Minister pays on funds with him will be determined by the Minister after consulting with the Central Bank. It is the intention that the existing system where the Minister pays the cost of funds plus a margin for management expenses will broadly continue.

Deputy Mervyn Taylor spoke at some length about the question of ownership. His preference was that the Trustee Savings Banks should be taken into public ownership. The first priority for all of us here is to ensure the survival of the Trustee Savings Banks in today's highly competitive market place. The question of ownership really only arises when there is a proposal to change the trustee status. There is no such proposal at this time. The immediate priority is to encourage and enable the Trustee Savings Banks to provide a wider range of services to a wider public. I cannot say what directions the Trustee Savings Banks may take in the longer term. My concern is that they should grow and prosper. The Bill provides that whatever directions may be taken the Minister for Finance of the day will have the power to protect the public interest.

Deputy De Rossa raised the question of consultation with the Trustee Savings Banks in the course of the preparation of this Bill. I can confirm that there has been full consultation in all aspects of the legislation and the Trustee Savings Banks are very satisfied with developments. In relation to comments raised by others about areas to be teased out on Committee Stage, I will be only too happy to discuss them and if there are reasoned amendments we will certainly take a good look at them and have decent consultation about them.

In relation to the other questions raised by other Deputies about interest rates and building society mortgage rates, as we know from the Bills which were passed through the House, supervision of building societies has now gone to the Central Bank who are to be the central supervisory authority, and they have the legislative authority and power to oversee and regulate the interest rates.

Question put.
The Dáil divided: Tá, 62; Níl, 57.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Andrews, David.
  • Aylward, Liam.
  • Barrett, Michael.
  • Brady, Gerard.
  • Brady, Vincent.
  • Brennan, Mattie.
  • Browne, John (Wexford).
  • Burke, Raphael P.
  • Calleary, Seán.
  • Callely, Ivor.
  • Clohessy, Peadar.
  • Connolly, Ger.
  • Coughlan, Mary Theresa.
  • Cowen, Brian.
  • Cullimore, Séamus.
  • Daly, Brendan.
  • Davern, Noel.
  • Dempsey, Noel.
  • Dennehy, John.
  • Fitzgerald, Liam Joseph.
  • Fitzpatrick, Dermot.
  • Flood, Chris.
  • Gallagher, Pat the Cope.
  • Harney, Mary.
  • Haughey, Charles J.
  • Hilliard, Colm.
  • Hyland, Liam.
  • Jacob, Joe.
  • Kelly, Laurence.
  • Kenneally, Brendan.
  • Kirk, Séamus.
  • Kitt, Michael P.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Lyons, Denis.
  • Martin, Micheál.
  • McDaid, Jim.
  • McEllistrim, Tom.
  • Molloy, Robert.
  • Morley, P.J.
  • Noonan, Michael J. (Limerick West).
  • O'Connell, John.
  • O'Donoghue, John.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Rourke, Mary.
  • O'Toole, Martin Joe.
  • Power, Seán.
  • Quill, Máirín.
  • Reynolds, Albert.
  • Roche, Dick.
  • Stafford, John.
  • Treacy, Noel.
  • Tunney, Jim.
  • Wallace, Dan.
  • Wallace, Mary.
  • Walsh, Joe.
  • Wyse, Pearse.


  • Ahearn, Theresa.
  • Barnes, Monica.
  • Barrett, Seán.
  • Barry, Peter.
  • Bell, Michael.
  • Belton, Louis J.
  • Bradford, Paul.
  • Browne, John (Carlow-Kilkenny).
  • Bruton, Richard.
  • Byrne, Eric.
  • Carey, Donal.
  • Cosgrave, Michael Joe.
  • Currie, Austin.
  • D'Arcy, Michael.
  • Deenihan, Jimmy.
  • De Rossa, Proinsias.
  • Doyle, Joe.
  • Durkan, Bernard.
  • Enright, Thomas W.
  • Farrelly, John V.
  • Fennell, Nuala.
  • Ferris, Michael.
  • Finnucane, Michael.
  • Flaherty, Mary.
  • Flanagan, Charles.
  • Gilmore, Eamon.
  • Gregory, Tony.
  • Higgins, Jim.
  • Higgins, Michael D.
  • Hogan, Philip.
  • Howlin, Brendan.
  • Kavanagh, Liam.
  • Kemmy, Jim.
  • Kenny, Enda.
  • Lowry, Michael.
  • McCartan, Pat.
  • McCormack, Pádraic.
  • McGahon, Brendan.
  • Mac Giolla, Tomás.
  • McGrath, Paul.
  • Mitchell, Gay.
  • Moynihan, Michael.
  • Noonan, Michael. (Limerick East).
  • O'Shea, Brian.
  • O'Sullivan, Gerry.
  • O'Sullivan, Toddy.
  • Owen, Nora.
  • Pattison, Séamus.
  • Rabbitte, Pat.
  • Reynolds, Gerry.
  • Ryan, Seán.
  • Sheehan, Patrick J.
  • Spring, Dick.
  • Stagg, Emmet.
  • Taylor, Mervyn.
  • Timmins, Godfrey.
  • Yates, Ivan.
Tellers: Tá, Deputies V. Brady and Clohessy; Níl, Deputies J. Higgins and McCormack.
Question declared carried.

When it is proposed to take Committee Stage?

Tuesday next, subject to agreement between the Whips.

Committee Stage ordered for Tuesday, 7 November 1989.