Dick Spring
Ceist:9 Mr. Spring asked the Minister for Finance if the Government will establish a public inquiry into the collapse of Merchant Banking; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - Merchant Banking Collapse.
I do not propose to establish a public inquiry as suggested by the Deputy. My function in the matter relates to banking legislation, and I outlined to the House in March 1990 the changes which had been made in the Central Bank Act, 1989, to strengthen the powers of the Central Bank in relation to the supervision of banks and to improve the protection of depositors generally.
Is the Minister aware that Mr. Patrick Shorthall, the liquidator of Merchant Banking, recently stated that clear parallels existed between the charges brought in Belfast against Patrick Gallagher and matters which were in the liquidator's own report to the High Court, and that he also drew attention to possible breaches to the Larceny Acts and the Companies Act, and in the light of those clear statements by the liquidator, Mr. Shorthall, would the Minister not agree that the only way to get to the bottom of this whole unhappy issue would be to have a full, up-front and open public inquiry?
I am aware from reading the reports, and I happened to hear the interview with the liquidator, Patrick Shorthall, that the liquidator reported back to the courts, who in turn referred his report to the Director of Public Prosecutions who subsequently made his own decision in that regard. I freely admitted to this House when I answered this question the last time around that there were defects in the supervisory legislation of the Central Bank at the time. Those defects had been remedied in the 1989 Act and I also introduced the depositors protection scheme for small depositors in relation to it. Those defects in legislation were there at the time and from the seventies right up to 1982 when this liquidation was first instituted the Central Bank had brought to the attention of Merchant Banking Limited the whole question of what they saw as being out of place. They did not have at that time the authority to inspect books or anything, but the strengthening of their powers has been carried out in three different sections in the Central Bank Act, 1989.
(Limerick East): Am I to understand that the Minister is fully satisfied that the new supervisory powers in the Central Bank Act, 1989, are sufficient to deal with the issues that arise from the collapse of Merchant Banking in 1982 and that he has no intention of strengthening the supervisory powers of the Central Bank further? Could the Minister assure the House that the provisions of the Central Bank Act, 1989, are sufficient and that there will be no possibility of recurrence of such a collapse?
I am satisfied from all the advice available to me that the defects shown up in the supervisory powers and legislation underpinning those powers have been remedied in the Central Bank Act, 1989 and no additional adjustments are required to be made to the Act to take care of the kind of situation thrown up by Merchant Banking. The 1989 Act covers small depositors in this regard. The DPP's decision is a matter for himself. He has not given nor is he obliged to give any reason for not prosecuting. The question of further prosecutions is a matter for the Department of Justice. The Minister for Industry and Commerce has powers under the Companies Act to send in an inspection team if he feels it is necessary to do so. There is no lack of investigatory powers. I have set out clearly the position in relation to the Central Bank now and what it was then. Sections 38, 47 and 36 fill all the loopholes that were shown up.
Prior to the filling of the loopholes would the Minister comment on the allegation that the existing powers of the Central Bank were negligently applied in this case? Would he agree that the decision of the DPP not to prosecute having regard to the fact that convictions were successfully achieved in another jurisdiction seems incomprehensible to the public? Considering that many small depositors lost money in this collapse, does the Minister not agree that the least the Government could do to restore confidence and give some hope to those people is to set up an inquiry as sought in this question?
There were many inquiries. The question of prosecution is a matter for the Department of Justice and I suggest that the Deputy put down a question to the relevant Minister in that regard. It would be totally inappropriate for me to comment on the matter. As regards small depositors, I understand that the amount is something in excess of £1.2 million. The new scheme under the 1989 Act, which I understand is adequate to deal with whatever situation might arise, introduces a scheme to look after such matters. People were not unaware of what was happening. There have been many Governments since the mid-seventies when the problems of Merchant Banking were first identified. It is ludicrous to give the impression that these problems just occurred overnight. They did not. As regards depositors, the Central Bank stopped Merchant Banking from taking deposits in the seventies. In the circumstances, the question of compensation does not arise so far as I am concerned.
Question No. 10 withdrawn.