Richard Bruton
Ceist:40 Deputy Richard Bruton asked the Minister for Finance the cumulative cuts in the public investment programme made to date; and if further cuts in investment in 2011 represents a sound basis for economic recovery. [11991/10]
Priority Questions.
Fiscal Policy.
The economic downturn from the middle of 2008 meant that the Government has had to take urgent and decisive action to stabilise our public finances. This has inevitably required a series of reductions across all areas of public expenditure, including capital expenditure. The NDP, when launched in early 2007, envisaged that Exchequer capital investment would be €76 billion over the period 2007-13 when growth of 4%-4.5% per annum was expected. It is now envisaged that Exchequer capital investment for the same period will be more than €47 billion, a considerable investment even though economic growth is now far lower.
The economic developments since the launch of the NDP have implications for the affordability of investment plans and the demand for infrastructure in the economy. The capital programme for the future remains substantial. The 2010 Exchequer capital allocation is €6.43 billion, which is nearly 5% of GNP. I also announced on the day of the budget a further €5.5 billion Exchequer capital allocation for each year from 2011-16. The cumulative Exchequer capital investment programme from 2010-16 will amount to more than €39 billion. Lower construction and tendering prices will also allow us to get greater outputs, even within nominally reduced levels of investment.
This is a significant investment programme which will build on the high level of public sector investment which has taken place in the past decade. Government capital investment will continue to support those projects which will help economic recovery, the development of a productive and internationally competitive economy, the development of the smart green economy, support sustainable long-term employment and provide modern social infrastructure.
The PPP model of procurement will also play an important role in delivering investment in Ireland's economic and social infrastructure. The Exchequer programme outlined above will be supplemented by a substantial pipeline of PPP projects. The PPP programme is projected to deliver in excess of €5.5 billion in private capital investment across the transport, education and wider social infrastructure sectors in the medium term. I am confident this well-targeted investment will help support jobs in the construction sector, will provide us with the requisite economic and social infrastructure and make a substantial contribution to our economic recovery.
I thank the Minister for his reply. If the Minister proceeds with a cut in spending of €1 billion next year, over the years 2009-11 he will have taken almost €9 billion out of capital spending. It will reduce spending by almost one third compared to what was projected in the capital budget. We know from the ERSI that the impact of that would be the equivalent of 90,000 jobs in the construction sector. When everyone in the country is saving to try to reduce their excessive debts, is it not a mistake for the State to slash its investment programme? Should we be using this opportunity to invest in assets with sound returns? I do not want to market Fine Gael's new era project. Does the Minister agree that vital arteries, such as the electricity and broadband systems, need to be brought up to 21st century standards? How can we have a strategy for economic recovery which is solely built on retrenchment in capital budgets when we need investment to begin?
Almost 5% of GDP is quite a high level of capital investment compared to many other member states in the eurozone. That said, it is justifiably high given our infrastructural needs. The Government's commitment to peg the figure at a definite sum for the next five years is welcome and ensures there is stability and certainty about the continuance of that level of public investment.
Deputy Bruton referred to other forms of investment apart from the public capital programme, such as the investments which can be made through devices such as investments made by the ESB or Bord Gáis in different projects, something which those commercial enterprises are free to do. As Deputy Bruton is aware, the dividends which the State might have obtained from these bodies in recent years have been foregone in order that enterprises have cheaper energy prices. That is a vital economic need in the current stressed economic conditions.
The Deputy referred to his party's document on these matters — I do not want to be contentious about it so I will not discuss it today — but the figures do not allow for the fact that it is necessary at this point in time to give support to energy companies and energy prices for business. That is what the Government is doing.
In the past 18 months, some 200,000 people have become unemployed, more than 80% of whom are under the age of 30. Are we at risk of pursuing a very limited policy of retrenchment when we need a combination of investment, reform and restructuring? The Minister's narrow track risks a correction in the economy which will be ground out by mass unemployment rather than examining where we can create opportunities to invest at a time when, to use the phrase "The paradox of thrift", everyone is saving furiously. The economy will continue to sink into a vicious cycle. The State has to take a leadership role. If the Minister does not like Fine Gael's new era document, I submit to him that he needs to develop another strong investment vehicle which can drive forward the economy instead of grinding it down.
On a stimulus package, every country in the world has been faced with similar problems to ours and all have had recourse to some form of stimulus through the injection of moneys by central banks in the countries concerned. We have seen this in the United Kingdom and in the United States. Ireland is in a free trade area and we have provided a substantial stimulus. Members of the House must recognise that the extent of the borrowing in which we are currently engaged is a substantial stimulus to the economy. It is at a percentage which cannot be trespassed, as far as any Irish Government is concerned. It provides a substantial stimulus to the economy. If we did not have that element of borrowing in the equation, far greater retrenchment would be required. A balance must be struck in these matters.
I agree with the Deputy on the wider question he raised. The Government has to move on from the stabilisation it has effected in the economy. The Government now has to move on to the essential measures which will support economic growth and recovery in the months and years ahead.
Bank Recapitalisation.
Joan Burton
Ceist:41 Deputy Joan Burton asked the Minister for Finance if he plans to further recapitalise Anglo Irish Bank in 2010; the impact he expects bank recapitalisation to have on the Exchequer and the general Government balance in 2010 and in 2011; the impact he expects bank recapitalisation to have on the National Pensions Reserve Fund in 2010 and in 2011; and if he will make a statement on the matter. [11995/10]
As I stated in my Second Stage speech on the NAMA Bill on 16 September last, it is likely that some institutions will require additional capital in order to absorb the losses arising from the transfer of their impaired assets to NAMA and in order to maintain appropriate levels of capital. I made clear in the speech, to the extent that sufficient capital cannot be raised independently or generated internally, that the Government remains committed to providing such banks and building societies with an appropriate level of capital to continue to meet their requirements in a manner consistent with EU state aid rules and the credit needs of the Irish economy.
In the case of Anglo Irish Bank, based on the information provided by me in mid-September to this House, the scale of its NAMA-eligible loans are such that they will give rise to a further capital requirement for the State. I am currently assessing the scale of any further capital support for Anglo Irish Bank in light of the emerging accounting and end of year financial position of the bank, and the likely impact of the NAMA transfers over the course of 2010.
In general terms, the impact of any future bank recapitalisation on the Exchequer, the National Pensions Reserve Fund and the general Government balance will depend on the scale and source of the recapitalisation funds and the basis on which the capital is provided and, therefore, cannot be specified at this point. The recapitalisation of Anglo Irish Bank in 2009 was funded by Exchequer borrowing in 2009. Following consultation with EUROSTAT, the injection was classified as a financial transaction and, therefore, did not affect the general Government balance. As a general rule of thumb, each €1 billion extra borrowed is estimated to cost the Exchequer about €50 million per year in interest costs.
The recapitalisations of both AIB and Bank of Ireland were made by the National Pensions Reserve Fund from its existing assets and, as such, had no impact on Exchequer borrowing requirements. As these injections were also classified as financial transactions, there was no impact upon the general Government balance, and the National Pensions Reserve Fund used its existing assets to make the injection. As the nature of any future recapitalisation is as yet unknown, it is not yet possible to assess exactly the effect on the Exchequer balance and the general Government balance. I can assure the Deputy that the regulator is in constant discussion with the National Treasury Management Agency about these matters.
I thank the Minister for his reply. It is now two and a half months since the Anglo Irish Bank year end. It is a State-owned bank. Speculation has appeared in the newspapers, uncontested by the Department of Finance, that the losses at Anglo Irish Bank are likely to be in the region of €10 billion to €12 billion, and I have seen mention of €14 billion. Is the Minister aware the bank is expecting to post very significant losses in the order of €10 billion and upwards when its year-end accounts are published? Does the Minister know when they will be published?
Second, as a consequence, does the Minister intend to recapitalise Anglo Irish Bank and to do so in stages? Again, there has been frequent comment in the media that an initial recapitalisation of €6 billion may be required but this may be insufficient and there may be further recapitalisation.
Does the Minister understand how upset many ordinary people are at the notion that the State will absorb perhaps €12 billion of losses in Anglo Irish Bank and, furthermore, that the State will then be required to pump a further €6 billion and upwards, either in a single interval or in stages, into the bank? Does the Minister have a position on the adequacy of the capital ratio given that the Financial Regulator is indicating a minimum of 8%?
Based on the information provided by me in mid-September to this House, the scale of Anglo Irish Bank's NAMA-eligible loans is such that they will give rise to some additional capital requirement for the State — there is no question about that. I am currently assessing the scale of any further capital support for Anglo Irish Bank in light of the emerging accounting end-year financial position of the bank and the likely impact of the NAMA transfers over the course of 2010.
Anglo Irish Bank is currently preparing its accounts for the 15-month period to 31 March 2010. These accounts have not been finalised and it would, therefore, not be appropriate for me to comment on those——
The accounts are to 31 December.
No, the accounting period was changed so it is preparing the accounts to 31 March 2010. These accounts have not been finalised and it would therefore not be appropriate for me to comment on these in view of the commercial sensitivities involved. That is the official position in regard to the accounts at Anglo Irish Bank. The accounting period will end on 31 March of this year, making it a 15-month accounting period.
While I do not want to take issue with the Minister, and he may wish to correct his papers, my understanding was that Anglo Irish Bank's year end was September. The Minister will recall the guarantee was issued on the night before Anglo Irish Bank's year end of 30 September. The 15-month accounting period goes from September 2008 to December 2009. The Minister might check his papers later, although it is a minor point.
I will communicate with the Deputy on it because the information at my disposal is that it is preparing its accounts for the 15-month period to 31 March this year.
While I do not want to take issue, that is not what I or the markets understand. We understand that the accounts to 31 December are in preparation at present and should be ready for issuance very soon.
I understood from recent statements by the Taoiseach that he is anticipating the Government will make a major announcement on recapitalisation of the banks after the St. Patrick's Day travels and the Cabinet reshuffle. I understand the recapitalisation statement may come sometime around the end of March or the beginning of April. Is a broad framework date set for the recapitalisation? If the required minimum capital level being indicated is 8%, although many observers talk about 10% capital levels and above, does the Minister know when the European Commission will publish its decision on the viability of Anglo Irish Bank and its business plan? Does the Minister believe Anglo Irish Bank has a future as a business bank or as an SME? At present, it is a zombie bank which is not doing any lending. It seems the level of the State investment required is extraordinary for no outcome.
The Deputy asks a number of very pertinent questions. On the question of an announcement about the capitalisation, as I indicated already to the House, the first round of the NAMA valuations is approaching completion. At that stage, once the first round of NAMA valuations is announced, there will then be an actual estimated position in regard to each institution. Deputies will recall that last September I gave an estimated figure of the potential NAMA liability or cost of acquiring the assets. That was, of course, an estimate, as I have pointed out on many occasions, and was subject to the necessary bottom-up valuations required in the legislation. The first round of those bottom-up valuations will be ready at a later stage this month. At that stage, the position will be far more institutionally specific than it was in the context of the announcement in February 2009, when there was an industry-wide announcement. It will be necessary to consider capital questions in regard to all institutions at that stage. In regard to capital, the regulator has a vital role in prescribing what the appropriate level of regulatory capital is for each institution.
Deputy Burton asked wider questions about Anglo Irish Bank. Its structural plan is with the European Commission. By virtue of restrictions that are already in operation at European level, there is a considerable amount of restriction on the amount of lending which the bank can do as a State-aided bank. Those structural discussions are still taking place with the European authorities.
It is important to bear in mind in regard to Anglo Irish Bank that it was essential and in the interests of the national economy that this bank be stabilised. The impact of the NAMA legislation will be a substantial downsizing in the loan book of Anglo Irish Bank and, at that stage, we will be in a position to take a view on its future.
Kieran O'Donnell
Ceist:42 Deputy Kieran O’Donnell asked the Minister for Finance the credit conditions which he expects to secure from the National Asset Management Agency and recapitalisation of the banks. [11992/10]
Deputy O'Donnell will be aware that under the NAMA legislation I will issue guidelines to ensure that small and medium-sized enterprises, sole traders and farm enterprises will have recourse to an independent, external review of decisions of credit refusal by the NAMA-participating banks. I hope banks not participating in NAMA or covered by the Government guarantee will also decide to join the system. My aim is to have a simple, effective review process, run by persons with experience and credibility. The banks must comply with the recommendations of the review process, or explain their reason for not doing so.
In addition to dealing with individual cases, the credit review system will examine the credit policies and practices of the banks in respect of SMEs. This will help me to decide what further action might be necessary to secure the flow of credit. I intend to publish the analysis from the review process so that the performance of the banks participating in NAMA will be clear to all.
Work has been ongoing since December on the logistical aspects of the review system and it is envisaged that reviews will commence shortly. While it is preferable that the banks raise capital themselves, without State involvement, I am on record as saying that if further capital injections from the State into the banking sector are required, the Government is willing to act. In the case of AIB or Bank of Ireland these capital injections would be in the form of equity capital, which would have the effect of increasing State ownership and control.
I ask the Deputy to recall that the recapitalisation of AIB and Bank of Ireland imposed a range of requirements on the two banks, including important commitments to support business lending. As part of the recapitalisation package announced in February 2009, both AIB and Bank of Ireland confirmed their commitment to increase lending capacity to small and medium enterprises by 10% and to provide an additional 30% capacity for lending to first-time buyers in 2009. If the mortgage lending was not taken up, then the extra capacity would be made available to SMEs. AIB and Bank of Ireland also committed to public campaigns to actively promote small business lending at competitive rates with increased transparency on the criteria to be met. Compliance with this commitment is monitored by the Financial Regulator and quarterly reports are submitted by both banks.
My question is about the expected credit conditions. It appears NAMA will provide orders for a mechanism for appeals regarding loans or overdrafts not granted. Will the Minister specify to the banks the level of credit they must provide? Will the Minister confirm that all the development and property loans of the institutions will be taken over by NAMA? I refer to the recently published accounts from AIB. A total of €23 billion of development loans will be taken over by NAMA but there remains €27 billion of property and construction sector loans on the AIB balance sheet. Will the Minister confirm this point? If property and construction sector loans remain on the books of the banks such loans will further deteriorate and the banks will not be freed up.
Will the Minister comment on the announcements by the banks that interest rates will be raised for the mortgage and small and medium-sized enterprise sectors? NAMA will provide liquidity to the banks but that might be accompanied by lower deposit interest rates because they may not need to access deposits. There appears to be nothing in what the Minister is providing. Will he consider putting in place a bank guarantee scheme to ensure that credit flows to small business, along the lines of the national recovery bank?
The Deputy has asked many questions. With regard to the nature of the regulations, the Deputy's subsequent questions are more interesting, if I may say so, because I will be repeating myself. I indicated to Deputy Burton that there are two elements to the regulations, one deals with the actual appeal mechanism and side by side with that is a sectoral analysis of each bank's performance. We cannot rest easy on the idea of an appeal mechanism where lenders may believe they are discouraged from making an example of their financial institution. We have to continue with detailed sectoral analysis of the position in each bank as it affects different sectors of industry and so that I can take further measures, if such measures are required.
The Deputy will recall that I made that point to him on Committee Stage, that it was important we did not just have one shot at this subject but rather two and three shots if required.
On the second point regarding loan guarantee schemes, there is an examination under way of the proposal to introduce a loan guarantee scheme at the Department of Enterprise, Trade and Employment. Any scheme developed has to assist business while at the same time assisting the interests of the taxpayer. One cannot introduce a loan guarantee scheme which in effect permits financial institutions to dump bad loans on the taxpayer.
On the wider proposal referred to by the Deputy, the national recovery bank, I have been quango-shooting this bank since last October and there is constant reference to this French comparison. What France has in existence is no different from what we already have in existence. The French equivalent of the National Treasury Management Agency raises funds directly for the French banking system. Were we to copy that system in this jurisdiction, it would have to be done on a non-discriminatory basis and not just for a particular financial institution one's party might wish to establish. The NTMA would then have to raise the funds for the entire banking system.
A brief supplementary question from Deputy O'Donnell.
We have let the treasury departments of the banks do that but clearly there is a degree of co-ordination with the NTMA in the sequencing of bond issues.
I call Deputy O'Donnell for a brief supplementary question. I will call the Minister again.
I will then deal with the Deputy's two other questions.
How will NAMA and the recapitalisation of the banks ensure that credit will flow to small and medium-sized enterprises? They are currently on their knees. The Minister appears to be making up policy on the hoof. A total of 55% of small and medium-sized enterprises have been unable to access credit in the past three months.
The Minister referred to the taxpayer. The Minister could put a total of €25 billion into the banks but credit might not flow as a result. How will he ensure that credit will flow?
If we do not set up an assets relief agency, which is an established feature of the banking rescue landscape in virtually every country in the world, we will not be in a position to provide credit. The whole purpose of NAMA, as I have pointed out many times, is to accelerate bank losses so that we can ensure that the banks are in a position to lend——
Will all the development loans be taken over?
If we decide to leave all these assets on the banks' balance sheets, we will not have any credit. That has been the experience of the past 18 months. The Deputy referred to interest rates and interest rate difficulties——
What is the Minister's view on interest rates?
Interest rates reflect the cost of money. If the position is that deposit rates are high in Ireland, correspondingly, interest rates will be high in Ireland because banks have to pay interest on foot of the deposit. We need to have a real discussion about the banking problems here and let us move away from the sloganising that has unfortunately taken the place of real debate in many cases.
Will all development loans be taken over by NAMA?
I call Question No. 43.
I think that is an important question.
It is but I am afraid we are well over time on this question.
With due respect, that is an important question and the Minister is willing to reply.
It is very good. Unfortunately, I am obliged to obey the rules of the House which say six minutes are allowed——
I ask for some latitude.
Six minutes are allocated and we have spent nine minutes on this question. It means other Deputies are squeezed out. The Deputy might want to prioritise but I have to be fair to all Deputies. I call Deputy Joan Burton.
I will get a chance on this one, anyway.
Joan Burton
Ceist:43 Deputy Joan Burton asked the Minister for Finance the State’s exit strategy from the blanket bank guarantee, issued on 30 September 2008; the credit institutions that have issued debt or other liabilities under the extended eligible liabilities guarantee; the amount of liabilities that have been raised to date under the eligible liabilities guarantee; the institutions, and the maturities; the proposals that he has to deal with dated subordinated debt covered by the blanket bank guarantee; and if he will make a statement on the matter. [11996/10]
As the Deputy will be aware, the Credit Institutions (Financial Support) Scheme 2008 will expire on 29 September 2010. This scheme was introduced following the collapse of Lehmann Brothers and the following liquidity crisis of September 2008. However, the funding of Irish banks has improved dramatically in the intervening period and the blanket guarantee will no longer be necessary into the future. A key feature of the new scheme introduced in December 2009 is access to longer-term funding, which is in line with the mainstream approach in the EU and is expected to contribute significantly to supporting the sustainable funding needs of the banks and to securing their continued stability. The structure of the scheme allows participating institutions to issue guaranteed and unguaranteed liabilities, which will help reduce their reliance on State guarantee support over time as financial market conditions continue to improve.
AIB, Anglo Irish Bank, Bank of Ireland, EBS, Irish Life & Permanent and the Irish Nationwide Building Society and named subsidiaries, are the participating institutions in the ELG scheme. Deposits covered by the ELG scheme at the end of February stood at €108 billion, while debt covered by ELG was €37 billion. The NTMA provides a comprehensive list on its website of securities which are guaranteed under ELG.
With regard to dated subordinated debt, this is not a covered liability under the ELG scheme. The EU Commission's banking communication of 13 October 2008 states that guarantees should not include subordinated debt. The new scheme reflects that policy under EU state-aid rules. In addition the funding positions of the covered institutions have improved significantly since the original guarantee and there is no need to have these liabilities covered. It must be stressed, however, that these dated liabilities will remain covered under the CIFS scheme until the expiry of that scheme.
Can the Minister confirm that senior debt issued by the covered institutions before the commencement date of the new extended liabilities guarantee scheme, 9 December, will continue to be guaranteed on 29 September, the anniversary of the guarantee, when it is meant to expire, but will then cease to be guaranteed under either guarantee scheme? Alternatively, is it the Minister's intention to exercise his prerogative under the primary bank guarantee legislation to extend beyond 29 September the guarantee for the senior debt issued by the covered institutions before the commencement date of the new ELG scheme?
What level of senior debt issued by the covered institutions before the commencement date will mature on or before 29 September? Will this debt be refinanced under the ELG scheme? To what extent are institutions engaging in maturity swapping under the full guarantee to the ELG, rolling over the guarantee in tranches?
In the absence of the ELG, many of the banks found it difficult to finance themselves beyond 30 September. An amount of senior debt would lapse on that date anyway. It is precisely to avoid that danger arising for the banks that the ELG legislation provided for the option of the bank refinancing beyond that date under guarantee so senior debt could be rolled out in an orderly manner for the institutions. There were some figures in the reply but they were not comprehensive. If the Deputy wishes for further information, it can be provided to her for the amounts involved.
On the separate question of other guaranteed securities arising in addition to the ELG, I made it clear in my answer that there is no question of any dated subordinated debt being extended under any circumstances. It would, however, be a brave man who would predict what would happen in the banking landscape in the next six months in Europe. Clearly any such change would require European approval and the ELG is what we have agreed with Brussels.
Do I hear a note of doubt entering the Minister's voice? Is he not closing off the possibility that the guarantee will, perhaps in piecemeal fashion, be extended after 29 September? The Minister appeared to confirm that all dated subordinated debt, the really risky stuff that we do not know why Fianna Fáil included it in the guarantee, is definitely out after 29 September. I hear doubt in the Minister's voice that would indicate he is thinking of extending the guarantee for the senior debt, even where it might not be part of the eligible liabilities scheme. In a way that scheme was the Minister's device to allow for the swapping of the senior debt into a new form of more limited, time structured guarantee. Is he thinking in that way?
Is the guarantee going to finish then on 29 September? Is the subordinated doubt definitely out?
The Deputy was wrong to detect a note of doubt. Subordinated debt is out. Fianna Fáil did not introduce it, the Government and this House did and the Government did on it advice from the Central Bank, the regulator and the other authorities.
Fianna Fáil is the senior Government party so I see more of the Minister than I do of our absent Green Party friends.
What has been put in place for senior debt is our envisaged response to the issue and there is no room for any doubt about that. Where I expressed a doubt related to wider European developments; what has been done on senior debt has been agreed with the Commission. That is our position. The issue I raised was if developments through the European area might dictate a change. I could not predict that.
Banking Sector Regulation.
Richard Bruton
Ceist:44 Deputy Richard Bruton asked the Minister for Finance if he is satisfied with the effectiveness of the powers of enforcement when regulatory failures or failures of corporate governance occur in the banking sector. [11993/10]
As the Deputy will be aware a detailed and comprehensive legal and regulatory framework is in place in Ireland for the regulation and supervision of the financial services sector. This framework is underpinned by an extensive series of EU directives governing the conduct of financial services activities on a cross-border basis within the EU Single Market.
Clearly, an effective system of enforcement is central to the effectiveness of any system of financial supervision. Under the statutory framework which established the Central Bank and Financial Services Authority of Ireland, the Financial Regulator was conferred with significant powers to impose sanctions for prescribed contraventions of legislation or regulatory rules.
The Financial Regulator has wide-ranging powers to conduct an examination where it suspects that a regulated financial service provider and/or person concerned in the management of a regulated financial service provider has committed a "prescribed contravention". If the examination concludes that there are reasonable grounds to suspect that there is or has been a prescribed contravention, the Financial Regulator can establish a inquiry. The inquiry shall decide if the prescribed contravention has occurred and determine the appropriate sanctions.
The legislation provides that, at any time up to the conclusion of an inquiry, the Financial Regulator may enter into a binding settlement agreement with a regulated financial service provider and/or a person concerned in its management to resolve the matter. Where a financial services firm or individual enters into such an agreement early in the pursuit of a sanctions case, the terms of the settlement will reflect the savings in time, resources and money that would result. Administrative sanctions procedure decisions can be appealed to the Irish Financial Services Appeals Tribunal.
My Department has been advised that the Financial Regulator has concluded 26 enforcement actions since it received the legislative powers to do so. Seven people have been disqualified from being involved in the management of regulated financial services providers for various periods of time and one person stepped down as a director. Seven of the firms sought the voluntary revocations of their authorisations.
In addition to the powers available to the Financial Regulator under the administrative sanctions regime, specific criminal offences are provided for under various national and EU legal instruments where a breach of regulatory requirements might arise. For instance, certain offences under the markets in financial instruments directive are punishable in Ireland by up fines up to €10 million and/or up to ten years imprisonment. The same punishments also apply in the case of other EU legislation.
Clearly, in restoring the reputation of the regulatory system through the reform of our regulatory structures, it will be a priority for the Government to ensure that any measures required to strengthen the powers of enforcement available to the new Central Bank of Ireland to ensure that a credible and robust enforcement regime is in place for the future. In that regard, my Department is in discussions with the Financial Regulator, now headed by Mr. Matthew Elderfield, and the Central Bank and Financial Services Authority of Ireland, to which Dr. Patrick Honohan has recently been appointed as Governor, to assess possible areas of improvement to its enforcement powers and supervisory resources with a view to including appropriate provisions in forthcoming legislation on the restructuring of the Central Bank.
There will be three Bills by the end of the year related to the reform of the Central Bank.
Does the Minister share the dismay of the public that, 18 months into the financial crisis, no one has been held to account? In the US there are 42 bankers in jail and the banks are paying money back to the state for the assistance they got. Are inquiries or sanctions being pursued against the financial institutions that are at the core of the failure? Does a vagueness in the definition of the offences prevent the criminal or civil arms of enforcement from taking action? It certainly appears to the public that serious misdemeanours took place.
Are changes being introduced in respect of boards of directors which failed their shareholders so that board members have suitable qualifications, know their business and act effectively?
The Deputy has gone beyond the remit of the question but I am happy to deal with the additional matters raised. In regard to boards of directors, there has been substantial change in personnel and this process will continue. The entire board of Anglo Irish Bank changed when the bank was nationalised, with one exception who had been appointed a few weeks earlier. We have also seen substantial change in the other institutions in respect of chairs and chief executive officers. As part of recapitalisation, we have insisted on a rotation scheme in both Bank of Ireland and Allied Irish Bank.
The investigations into particular matters, which are warranted by what has been established, have moved beyond the regulatory stage and I understand they are now at a criminal stage of investigation. This investigation has to take priority over the regulator and is being conducted on a parallel basis by the Garda Síochána and the Office of the Director of Corporate Enforcement.
The fraud squad has been involved for the past 12 months and the Office of the Director of Corporate Enforcement stated at least ten months ago that prima facia evidence existed of a criminal offence ten months ago but nothing has happened. We have not even seen the legal changes that would clarify the offences and the type of probity and fitness required to serve on a board. Nothing has happened that would give the public new confidence. We have seen neither tough enforcement nor new standards. For the sake of public confidence, these measures have to be implemented.
The first element of public confidence was established by the appointment of the new regulator, who has certainly inspired confidence in all his actions to date. As I indicated to the House yesterday, I intend to ensure any legislation introduced enhances his independence and freedom of action and ensures that a credible statement is made both at home and abroad about the proper regulation of our banking system.
We will have to deal with three items of legislation pertaining to the Central Bank and while I accept the third will be a consolidation measure——
The Minister's colleagues told us months ago that charges were imminent.
Responsibility for these matters rests not with the Government but with the bodies entrusted with instituting charges. It would be a criminal offence for me to contact the Director of Public Prosecutions on this matter. Legislation to this effect was enacted by a national coalition Government in 1974. I have limited scope for initiative in this area.
The other bodies mentioned jealously guard their independence, as they must, in the context of prosecutorial discretion and the preparation of cases. Just a few weeks ago, a Minister of State resigned because he wrote a letter pertaining to a summons. I do not understand how I am supposed to correspond with the authorities on these matters. Naturally I share the public unease about the delays that have already arisen because it is important these matters are brought to justice as quickly as possible. I agree with Deputy Burton's earlier comments in that regard.