Dáil Éireann díospóireacht -
Wednesday, 4 May 1994

Vol. 442 No. 3

Adjournment Debate. - Development of Trustee Savings Bank.

Mr. Yates:

I thank you for allowing this matter to be debated twice in one week by way of Adjournment Debate. On the last occasion this matter was raised, the Minister of State at the Department of Finance, Deputy Fitzgerald, said they were not aware of any proposal even though it was currently being referred to in the media. On Friday last we were told that the National Irish Bank and the Trustee Savings Bank reached provisional agreement on a merger which was seeking Government approval.

In the short time available I ask the Minister to respond to a number of my points. It is not conceivable that the Minister or anyone in his Department would not know these discussions were taking place; if he did not know, he should have known. Let us look at it from Trustee Savings Bank's point of view. If they were doing this deal and if it had to be ratified by the Minister surely it would be prudent to alert the Minister. A tacit green light was given to this project and now the Government are in a state of confusion. Can the Minister clarify when he first knew of this proposal, why the Government was not up to date and was taken by surprise by the whole measure? Will the future of the Trustee Savings Bank be reduced to a political football that amounts to a political virility test for the Labour Party because they are not getting their message through with the media? If that is the approach it is no way to run a State financial organisation. We must have a coherent policy, the Government must speak with one voice and must give a clear sense of direction as to the future of the Trustee Savings Bank both for their staff and the banking sector generally.

I have said repeatedly that I consider the proposal in the Programme for a partnership Government for a State bank, merging the three banks, to be daft. I have spoken with the management of the three banks and they all said they wanted equity to expand. If you put together three banks which are starved of equity who will put in the equity? The Minister is aware that in the case of Aer Lingus the taxpayer is starved of cash. We must achieve certain criteria in the public interest. First, the sale must be conducted in an open and fair manner, anyone who wishes to bid must be free to do so, as happened with the Dublin Trustee Savings Bank in 1991 when Woodchester, Irish Life, Ulster Bank and the top bidder, National Irish Bank, tendered.

Why should any interested party be refused the opportunity to bid for the Trustee Savings Bank? The first objective is that the taxpayer should get the maximum price. The second objective is that we must have the maximum level of competition. There is serious disquiet about a hidden cartel in the banking sector that charges become negotiable among top customers and that they have equivalent rates of lending margins, some of which have been increased recently. What we need is aggressive competition. State ownership does not guarantee that, it can only happen through dynamic and vibrant competition for additional market share. In my view that will not be achieved without the involvement of a major building society. That is the key, if we want real competition on a nationwide basis.

The third objective is to secure in so far as possible the security of tenure of the 1,100 staff in the Trustee Savings Bank.

Will the Minister come clean and tell us when he knew, and who else in Government knew? It is not credible that this could have gone on for eight months and no one in the Department of Finance knew about it. If that is true, it shows a breathtaking contempt for Government by the Trustee Savings Bank. I do not believe that to be the case. There are rumours to the effect that the Government is insisting that if the deal goes through they must take ICC as well, leaving the Government free to sell off ACC to Crédit Agricole. I would like to see those questions answered. Will the Minister set out clearly the Government's objectives and a unified policy so that our ideological baggage does not hinder us in dealing with this matter in an orderly way?

Minister for Finance (Mr. B. Ahern):

The board of trustees of Trustee Savings Bank has asked me to authorise and effect the reorganisation of Trustee Savings Bank into an independent company pursuant to section 57 of the Trustee Savings Bank Act, 1989. In summary, the trustees have recommended to me that the assets, liabilities and business of Trustee Savings Bank be transferred into National Irish Bank Limited which is a subsidiary of National Australia Bank Limited. Under the provisions of section 57 (6) (b) of the Trustee Savings Bank Act, 1989, the proceeds of any sale or other disposal of the assets of Trustee Savings Bank accrue to the Exchequer. Having exercised due diligence, National Australia Bank has made a firm offer for Trustee Savings Bank. However, I am sure that the House will accept that commercial considerations dictate that the offer has to remain confidential for the moment. Also under section 57 of the Trustee Savings Bank Act, 1989, any proposal to reorganise the Trustee Savings Bank would have to be the subject of a ministerial order, a draft of which must be approved by both Houses of the Oireachtas.

The recommendation by the board of trustees was made to me following detailed discussions between Trustee Savings Bank and National Australia Bank. I was not involved in these discussions.

Let me answer Deputy Yates's question. I believe I was the first member of Government to be made aware of this matter in a telephone call from Mr. Don Argus of National Australia Bank and Dr. Dermot Whelan of Trustee Savings Bank on Wednesday last. Both requested that they see me in due course. Mr. Whelan contacted me on Thursday night to present some of the documents and he presented more on Friday. That was the first contact with Government. The recommendation of the Board of Trustees was made following these discussions. The proposal we have received puts a very high priority on employment and I have been assured that staff interests are being consulted. Together, National Irish Bank and Trustee Savings Bank would have total assets of £2,300 million and approximately 2,000 employees. On the basis of the detailed discussions that Trustee Savings Bank have had with National Australia Bank, the trustees have assured me that they are confident that together the two banks will provide enhanced employment opportunities for their staff. In recent years both Trustee Savings Bank and NIB have each demonstrated considerable ability to compete effectively in the personal banking sector and the trustees are confident that from this base the proposed merged bank would be well positioned to play a significant part in fostering the development of small and medium sized business in Ireland.

Trustee savings banks were initially established in Ireland during the 19th century as societies to encourage thrift and to provide a secure means of saving within local communities. A process of consolidation by merger over many years culminated in the amalgamation of Cork and Limerick Savings Bank and Trustee Savings Bank Dublin to form TSB Bank in 1992.

As the House will be aware TSB Bank has no shareholders and therefore does not pay a dividend to the Exchequer or to anyone else. The Government does not appoint the trustees and the trustees have the function of managing TSB Bank on a day-to-day basis. Arising from this they also have a crucial role to play in the future development of their bank. As trustees they have a particular duty to their depositors and staff. In summary, TSB Bank is not a State bank in the same way that ICC and ACC are State banks. In the circumstances the trustees were within their legal rights to investigate the options available to them with a view to making proposals to Government on the future development of their bank. They have done nothing wrong in that regard. I have no problem with that approach, but I now have the task of ensuring that in my examination of these proposals the wider national interest is fully taken into account. I can assure the House that this will be done.

At today's meeting of the Government the recommendation of the trustees was given preliminary consideration. It was decided that as this is a very complex issue the Minister for Finance should consider the recommendation from the trustees in the context of Government policy on the banking and financial sectors and also in the context of emerging developments in the financial markets generally. When I have completed this examination I will report back to Government. The Government, having considered my report, and taking into account the options available, will then decide on the most appropriate response to the recommendation from the board of TSB Bank.

At this point my main consideration is that any development that we approve should be consistent with the needs of the financial sector generally and with the development needs of the economy. In particular, I believe that any development we approve must give rise to a genuine increase in competition. We need a competitive banking system to encourage investment and job creation because like every other cost, banking costs have to compare favourably with what is available in competitor countries. We also need a banking system which is responsive to the needs of small and medium sized enterprises because it is only by encouraging these that we can hope to create the jobs that we so badly need.

In the context of employment, I fully understand the concerns of the trustees regarding the future job security of the employees of TSB Bank and indeed I share these concerns. However, I also have to be concerned about employment in the overall banking and financial sector. In that context it is essential that our banking system becomes competitive enough to cope effectively with competition from banks located outside Ireland. Increasing competition within Europe means that Irish banks and financial institutions have to be at least as competitive as their European counterparts if jobs in Ireland are to be protected. If they are not competitive business will be lost to banks located abroad and employment will be less than it would otherwise be. I intend to take whatever steps are available to me in the review to ensure that we have a competitive banking system.

There has been much speculation about how the assets, liabilities and business of Trustee Savings Bank should be disposed of. I would say to the House that such speculation is premature. When I have examined the recommendation from the trustees of Trustee Savings Bank and the Government has had an opportunity to consider my report on it and the other options available, then I will be in a position to say what actions we need to take on foot of the Government's decisions. In the meantime speculation about what the Government might or might not decide serves no useful purpose.

Let me assure Deputy Yates that my discussions with Trustee Savings Bank last week were joint discussions attended by members of the National Australia Bank who were able to answer the financial questions but not the general questions I put to them. Members who could answer strategic questions were not present. I hope to meet shortly with senior personnel from the National Australia Bank. I hope to be able to report back fully to Government on the matter.

Mr. Yates:

Will anyone else get a look in?

Mr. B. Ahern:

The position regarding a competitive tender will be dealt with at that stage. I hope not to delay in carrying out this examination.