Is there anecdotal evidence of outflows of finance from financial institutions regulated in this country but that are not part of the guarantee to the six financial institutions in respect of the Bill going through? I am aware of the complications about this, but will the Tánaiste say whether the Government is aware of this from the Central Bank or the Financial Regulator. I recognise the complications about relevance to other jurisdictions and not having to take on activities there.
Leaders’ Questions.
As the Minister for Finance indicated last night at the end of the Second Stage discussion, through the legislation we will discuss later this morning and this afternoon, there will be facilitation in the event of any competitive distortions. The Financial Regulator is monitoring the balance of flows between institutions and his job is to maintain a stable banking environment. Any further decisions will be made on the basis of that information to the Minister for Finance.
Yesterday I made the point that this is about a stable banking system, not protection of management. A number of financial institutions licensed and incorporated in Ireland and whose liquidity, capital and solvency are regulated in Ireland are not part of the guarantee system. Has the Government considered a mechanism for ring-fencing the Irish activities of those financial institutions to keep a competitive playing pitch for financial activities? Is the Government in a position to do that on the basis of all those activities being regulated here but a number of those institutions not being part of the guarantee to the six financial institutions mentioned in the Bill? What does the Government propose to do about that?
All the institutions are included in the €100,000 guarantee. We are aware of concerns being expressed. On the basis of financial instability or if there was a difficulty with the balance of flow between institutions, the Financial Regulator will inform the Minister for Finance. The Minister has indicated in the broad parts of the legislation available to him that on the basis of that information there is an instrument available to him to allow him to deal with that. It would be appropriate for that to be teased out in the context of the discussions we will have here later this morning. There is enablement in the legislation in the event of those issues having to be addressed.
Many people, at some stage in their lives, have been approached by a family member, friend or business colleague who has asked them to be guarantor for a bank loan. Most people would be cautious and reluctant to do that and would want a certain amount of basic information before going to the bank and signing a guarantee for somebody, no matter how close they are to the person. People would want to know how much they were guaranteeing, the conditions attached to it and a little about how the person for whom they were going guarantor would behave financially afterwards. They would certainly read the small print of the guarantee very closely.
This country is being asked to go guarantor for the banks and in effect we are being asked put up the deeds of the country as security in doing so. Today on Committee Stage we will go through the small print of what that guarantee amounts to. Several issues regarding the Bill presented yesterday and the small print are of very serious concern to the Labour Party. I want to highlight some of those and perhaps the Tánaiste will answer them.
How much are we being asked to guarantee? Figures floating around have ranged from €300 billion to €500 billion. When I asked the Taoiseach about it yesterday he suggested to the House that this would never be called in, that no payment would ever be required from the taxpayer for this guarantee. Yet, the Bill explicitly provides for payment and there is a Financial Resolution before the House that requires for payment from the Exchequer. What exactly are we being asked to guarantee? In the Bill there seems to be no limit.
What charge will the banks pay for this comfort with which they are being provided? We are told there will be a charge, but no charge is specified in the Bill. The charge applies only if the guarantee is called in. It is like having an insurance policy where one has to pay the premium only on the day one makes a claim. What is this charge and how will it apply? What are the exact conditions? In the Bill, we are being asked to sign up to the guarantee of which we will be told the conditions later. The Minister for Finance will introduce a scheme before the House and it will apply provided we do not annul it within 21 days. We need to have the conditions of this guarantee upfront and known to us before the Bill is passed and before it comes into effect.
We know that the top executives of the banks have been paying themselves in millions. Will any limits, restrictions or constraints be put on the continuing arrangements for top executive reward in the banks? These are among the issues addressed in a series of amendments to the Bill by the Labour Party. How the Government responds to those amendments will determine whether the Labour Party will support this Bill.
I want clear answers. I want to know how much we are being asked to guarantee, what the banks will pay for the comfort, whether we will see the exact conditions before the guarantee is signed and whether the Government will allow top executives of the banks to keep their fists in the till.
It is appropriate to say that Members facilitated Second Stage late last night. We are all very anxious to bring the legislation to finality today if at all possible. We can discuss the timeframe for that in due course. It is also important to say why we are here. It is to give legislative back-up to a principled decision made by the Government yesterday. It is important to see that and bring it to finality as quickly as possible.
On the specific issues raised, as the Deputy is aware, this is broad enabling legislation. Regarding a fee, as the Minister for Finance indicated last night, that is a matter for discussion with the Central Bank, which will determine what the fee will be. It is important to reiterate that this facilitates banks in the case of an event happening. We are facilitating a guarantee that we hope will never have to be called in. That is the aspiration of all of us in the House.
I appreciate that the Labour Party put questions to me in the context of the amendments set down but it would be more appropriate to discuss them in the context of the debate on Committee Stage of the legislation, where we can tease out these issues and adhere to parliamentary democracy and where the Minister for Finance can answer them to the best of his ability. This is broad enabling legislation to provide a legislative framework to a principled decision made by the Government yesterday.
My questions go to the heart of the issue. What are we being asked to guarantee? No Member of the House or member of the public would walk into a bank and sign a guarantee for anybody, even a close member of the family, without knowing how much he or she is going to guarantee, and they would certainly not sign it in circumstances where it was open-ended, with no limit to the guarantee. Frankly, the Labour Party is not prepared to do with the taxpayers' money what it would not be prepared to do with personal money. We need to know exactly what we are signing up to. The Tánaiste tells us this is a broad enabling measure, which means a blank cheque. It is a blank cheque for the banks, a blank legislative cheque to grant the Government enabling provisions to look after the situation and, in the case of this Government, it is an inappropriate blank cheque to give a Government that thought, three years ago when the Taoiseach was Minister for Finance, that the country was so flush with money that it could abolish the bank levy. These are the people asking us to trust them in respect of their relationship with the banks.
There are simple questions we want answered on behalf of the taxpayer that any individual going to sign a guarantee in a bank would ask in analogous circumstances. How much will we guarantee? What will be paid for it? Will we see the conditions beforehand and will the Government do something about the excessive rewards that those seeking the guarantee pay themselves? These are simple questions and if the Tánaiste is not able to answer them perhaps the Minister for Finance will provide satisfactory answers during the course of the day. If those fundamental questions are not answered to our satisfaction, the Labour Party will not support this Bill this evening.
That would be most unfortunate but it is a matter for the Labour Party to decide. The assets of the banks exceed the guarantee.
What are the assets?
How do we know if we do not know the amount of the guarantee?
We would have found ourselves in a different set of circumstances if we had not brought in this legislation. We would have undermined the system of banking and it would have totally collapsed. As Members, we would be in a sorry situation if this legislation was not published. If we did not have this legislation, banks could not raise the capital necessary to keep this economy going. That is the fundamental reason that we are here, which is not to say that we cannot question or fine tune legislation in discussions of the House. That can be done in the context of the debate, which is open-ended, on Committee and Report Stages. The outcome of yesterday's decision has had a positive effect on our markets, which is what we want to see. We do not want to see the guarantee called in but we want to ensure that we have the capacity to obtain capital to keep this economy going. This is a short-term measure to deal with specific issues. The framework necessary to ensure this works will be outlined in the context of the debate later this morning.