Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Wednesday, 9 Apr 2014

Vol. 837 No. 2

Central Bank Bill 2014: Second Stage

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

I thank the House for agreeing to discuss the Central Bank Bill 2014 today. I apologise on behalf of the Minister for Finance, Deputy Michael Noonan, who has a major commitment this afternoon.

The legislation has two purposes, the first of which is to extend the current Central Bank legislation which allows for the transfer of assets and liabilities between holders of banking licences so as to permit the transfer of assets and liabilities from a building society to the holder of a banking licence. ICS is the only building society in Ireland. This will facilitate both the State and Bank of Ireland in fulfilling their respective commitments to the European Commission as part of the bank's amended restructuring plan. The second purpose is to make provision for certain payments from the Central Fund to the account established by the European Stability Mechanism, ESM, as agent on behalf of the euro area member states, to receive payments for the purpose of providing financial assistance for the Hellenic Republic, namely, Greece.

The Bill has three sections and a Long Title. Section 1 provides for the amendment of the Central Bank Act 1971. Section 2 provides for certain payments from the Central Fund to be transferred for the ultimate benefit of Greece, subject to certain conditions. Section 3 contains the Short Title of the Bill.

In July 2013 Bank of Ireland agreed to an amendment to its restructuring plan which had previously been agreed with the European Commission in respect of state aid received by the bank. This allowed the bank to retain its life assurance subsidiary, New Ireland Assurance Company. As part of this amendment, the bank committed to certain substitution measures, including the sale of the ICS distribution platform, together with, at the option of a purchaser, up to €1 billion of mortgages and up to €1 billion of matching deposits. The purpose of the ICS substitution measure is to support new entities in entering the Irish market and thereby increase competition to ultimately benefit the consumer.

For the avoidance of doubt, Bank of Ireland is not required, under the substitution measures agreed to, to sell ICS, rather to offer for sale the distribution platform, together with, at the option of the purchaser, certain assets and liabilities of ICS. The ICS distribution platform includes the ICS brand, the IT system and the broker network. As matters stand, Part III of the Central Bank Act 1971 can be used by banks to transfer between each other their assets and liabilities under a scheme of transfer under Part III of the Act. The effect of the amendments contained in the Bill is to extend the scope of Part III of the 1971 Act to enable building societies to transfer assets and liabilities under that legislation, as well as banks. ICS is the sole remaining building society in Ireland. Part III transfer schemes have been used successfully many times and after these amendments, ICS will be enabled to transfer its assets and liabilities in accordance with that framework. Any transfer of assets and liabilities pursuant to the 1971 Act is subject to the approval of the Minister for Finance after consultation with the Central Bank. If the Bill is enacted, it is anticipated that ICS will apply, pursuant to Part III of the 1971 Act, to transfer the bulk of its assets and liabilities to Bank of Ireland. It is anticipated that an onward transfer of some of these assets and liabilities to a third party would subsequently be effected. This onward transfer could include up to €1 billion of the €6 billion mortgage book held by ICS. The restructuring plan which has been agreed to between Bank of Ireland and the Euorpean Commission requires the Commission to approve the purchaser of the ICS platform. The primary purpose of this condition in the restructuring plan is to encourage competition in the mortgage intermediaries market.

It is important to note that in respect of ICS, economic ownership of the building society has, by virtue of its membership rights in ICS, transferred to Bank of Ireland and that the members do not retain any right to any distribution of the assets of ICS. Bank of Ireland and ICS employ exactly the same procedures under the mortgage arrears resolution process, MARP, and both organisations comply with the Central Bank code of conduct on mortgage arrears, CCMA. Mortgage holders with ICS are not treated any differently from mortgage holders with Bank of Ireland. The ICS mortgage book value is approximately €6 billion, with approximately 40,000 account holders.

The purpose of the proposed legislative change is to allow for a new entrant into the market, thereby increasing competition to the benefit of the consumer. This can best be achieved by a sale to a regulated entity and the broad thrust of the text included in the restructuring plan is consistent with this. The Commission, however, has the final say in regard to the ultimate purchaser and that decision is outside our control.

There is also the broader issue of CCMA protection for residential mortgage borrowers who have had their loans sold by banks to an unregulated entity.

The House should note that the sale of loan books to unregulated third parties Bill, listed in the Government’s legislative programme, is intended to address concerns surrounding the continued applicability of the code after the sale of loan books to unregulated entities. The Government is committed to bringing forward legislation to protect mortgage holders and will work with other interested parties to achieve the best solution for consumers. Officials in the Department of Finance are actively examining this with the Central Bank and the Attorney General's office with a view to bringing forward legislation to address the issue. It is intended this legislation will apply to all loans which were issued by a regulated financial service provider and subsequently transferred to an unregulated purchaser.

Section 2 provides for certain payments from the Central Fund. Specifically, it is to provide a legislative basis for Ireland to make transfers to an intermediate account operated by the ESM, European Stability Mechanism, on behalf of the euro area member states. These transfers are to be in an amount equivalent to the income that accrues to the Central Bank of Ireland from the securities market programme, SMP, portfolio of Greek Government debt. The Bill provides that these transfers may take place up to 2026. However, as the amount in 2026 will be quite small, it is proposed that this will be paid in 2025.

In November 2012, as part of the package of measures designed to help Greece, it was agreed by the euro area member states that the securities market programme related income of member states would be transferred to Greece under certain conditions. Euro member states agreed in January 2013 that the ESM would be the agent for making such payments. It has, accordingly, established an intermediate account into which the euro area member states can place an amount equivalent to the income on the SMP portfolios accruing to their national central banks as and from budget year 2013. Member states under a full financial assistance programme are not required to participate in the scheme while in a programme. As Ireland exited its EU-IMF programme of financial assistance in December 2013, the measure now applies to it. The next transfer date for this measure is 1 July 2014, the earliest date by which Ireland could be required to make its payment of €31 million for 2014 and the necessary legislation will need to be in place by that time.

As is widely known, Greece is benefiting from its second programme of financial assistance, arising from the serious budgetary and economic problems it has experienced and its resulting inability to secure international funding at sustainable rates. On 27 November 2012, the most recent in a series of packages to assist Greece was agreed to by euro area Finance Ministers. It is designed to provide further assistance for Greece in putting its economy on a path to sustainable growth and its domestic finances on a sound footing. It was agreed in the context of the statement by euro area Heads of State and Government on 21 July 2011, reiterated in October 2011, that the Greek situation was different from that of other countries, therefore requiring an exceptional response.

One of the measures agreed to in November 2012 was the SMP measure, the subject of section 2. As Ireland has successfully exited its programme, we are now liable to make payments under this process, beginning in 2014. Legislative provision needs to be made to permit these payments to be made. The full package of measures agreed to in November 2012 includes a debt buy-back of bonds held by private investors; a reduction of 100 basis points in the interest rate margin on the Greek loan facility, bringing it to 50 basis points; the cancellation of the guarantee commitment fee on EFSF, European Financial Stability Facility, loans; the extension of maximum maturities of the loan to Greece by 15 years to 30; deferral of the interest payments on Greece's EFSF loans for ten years; and that member states will pass on to Greece's segregated account an amount equivalent to the income on the SMP portfolio accruing to their national central banks as and from budget year 2013. Again, member states, under a full financial assistance programme, are not required to participate in this scheme for the period in which they receive financial assistance.

The Euro Area Loan Facility (Amendment) Act 2013 provided for the interest rate reduction and the maximum maturity extension. The debt buy-back, successfully completed in December 2012, and the cancellation of the guarantee commitment fee did not require either the amendment of existing legislation or the introduction of new legislation here. It is also important to note that, as before, these concessions to Greece are to accrue in a phased manner and conditional on a strong implementation of the agreed reform measures in the programme period, as well as in the post-programme surveillance period. The current SMP measure, with the deferral of interest rates previously agreed to, provides an additional level of financial conditionality both during the existing programme and also in the period of post-programme surveillance which will apply when Greece emerges from its programme.

In Ireland, on the other hand, we have exited our programme. We are, therefore, subject to both the normal fiscal and economic policy co-ordination and oversight which applies to all EU and euro member states. We are also subject to post-programme surveillance but without the added potential financial sanctions which can apply to Greece as part of these measures. Both Greece and the other euro area member states agree that it is only through the full and strict implementation of the fiscal consolidation and structural reform measures included in their programme that Greece will regain competitiveness and be able to fund itself through the international markets.

Some ask why Ireland is not seeking or being offered the Greek package or one similar to it. It is important to differentiate between Ireland and Greece in this case. Ireland's situation differs in fundamental aspects of fiscal and economic performance from that of Greece. The approach to these issues is, accordingly, fundamentally different. Greece's public debt prospects are of a different order of magnitude to Ireland's. Notwithstanding significant private sector involvement in March 2012 in its autumn forecast later that year, the European Commission forecast that the Greek debt-to-GDP ratio would worsen, reaching over 188% in 2013. This outlook, with a worse than expected economic and fiscal performance up to that point, was what prompted a reconsideration of Greece's debt sustainability in November 2012. Even after the series of measures agreed to and taking account of the impact of structural reforms in raising both growth and revenue in the coming years, Greek public sector debt could amount to around 124% of GDP by 2020. The corresponding Department of Finance assessment of Ireland's public debt, published in the budget last October, is that the debt-to-GDP ratio peaked at 124% in 2013 and will decline thereafter.

The Greek economy has suffered a recession that was more severe than anticipated, with GDP declining by 23.5% from 2008 to 2013. Notwithstanding its difficult path, some welcome signs of recovery are emerging. On the fiscal side, Greece will record a primary surplus for 2013 which it expects to be larger than originally envisaged. Recent data support expectations that Greece should return to growth in 2014. Confidence indicators continue to improve, while hard data releases suggest the first signs of recovery. Structural reforms undertaken in labour and product markets have underpinned improved competitiveness leading to expectations for strengthened exports and investment. In addition, Greece's bond yields have also dropped sharply recently.

There is, nevertheless, some distance to go towards recovery. A critical difference between the two economies in this regard relates to the importance of international trade. In Greece exports amount to the equivalent of about 25% of GDP, resulting in export growth not being in a position to provide much by way of offset to the contractional effect of fiscal austerity. In Ireland, by contrast, exports amount to the equivalent of over 100% of GDP, meaning that the growth in exports can provide a powerful offset to the impact of fiscal consolidation on economic activity.

Our overall economic performance is also very different. The Department of Finance's budget 2014 forecast envisages growth of 2% this year and an average of 2.5% in 2015 and 2016. Employment is increasing and unemployment is falling. In Ireland's case therefore, economic growth is helping to ensure debt sustainability. In Greece, despite the recent welcome signs of recovery, the economy has nevertheless contracted sharply, which compounds the problem of its very heavy debt burden. It therefore follows that what is appropriate for Greece is not necessarily appropriate for Ireland.
Ireland's route back to economic stability and financial sovereignty is different, shorter and less severe than that of Greece. That is not to downplay the pain being experienced by many in this country, but this is not a case of one size fits all. Each programme is tailored to the economic factors at play in the relevant member state. In this context, in terms of the economic challenges facing Ireland and Greece and the best way to deal with them, Ireland's needs, as a country which has exited a programme, are very different to those of Greece.
I look forward to a constructive debate on this Bill. It is essential that all euro area countries answer the calls made on them to help the currency zone achieve renewed and sustainable financial stability fully and promptly. Section 2 of this Bill represents Ireland's latest contribution to this unquestionably desirable cause and we must play our full part. Therefore, I urge Deputies to agree the legislative measures required to assist Greece. I commend the Bill to the House.

I am pleased to have the opportunity to contribute to the Second Stage debate on the Central Bank Bill 2014. While this debate is about the Central Bank Bill, I would like to point out that I have just come from the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, which has been meeting with the various banks this week, primarily in regard to the issue of mortgage arrears. Yesterday, the committee met officials from Ulster Bank, this afternoon it met officials from Permanent TSB and AIB and tomorrow it will meet officials from Bank of Ireland.

A clear picture is emerging from these meetings and I would like the Minister of State to take a message back to the Minister for Finance, Deputy Noonan, in this regard. The Fianna Fáil leader, Deputy Martin, raised this same issue with him on Leaders' Questions. Looking at the information that has been provided by the banks so far, in excess of 30,000 individual mortgage arrears cases are now undergoing legal proceedings or the mortgagees have received a letter from the bank advising them legal proceedings are about to commence. Therefore, we are witnessing a serious ramping up of enforcement activity by the banks in respect of mortgage arrears cases. I do not claim that all of these cases will result in the loss of the home in question. Hopefully, deals can be reached and solutions arrived at to protect the family home in the majority of cases, but inevitably many of the families involved will lose their homes. This seems certain now and is happening already. With over 30,000 cases in the system, this is an inevitable consequence.

The Government's response, in terms of providing a safety net for families in this situation, is the mortgage to rent scheme. It is clear from the evidence being presented by the banks that this scheme is not working. In the case of the three banks that have come before the committee so far, only one mortgage to rent transaction has been completed. While there are a few hundred more in the pipelines, the banks are all saying the same thing, that these are exceptionally difficult transactions to conclude as they are complicated and bureaucratic. I urge the Minister of State to take the message to the Minister that he needs to provide a safety net or backstop for individual families who now face the prospect of losing their family homes. The mortgage to rent scheme is not working and needs to be reviewed so people can be given support.

The Central Bank Bill 2014 is a short, essentially technical Bill. I support the provisions relating to Greece and I intend to bring forward some amendments on Committee Stage relating to the potential sale of ICS mortgages. It is noteworthy that as the two main provisions of the Bill are not by their nature linked, the Bill could be regarded as some sort of miscellaneous provisions Bill. This raises the question as to why other matters pertaining to the work of the Central Bank, for which there is a clear need to introduce legislation, are not being dealt with at this time.

In regard to the Bank of Ireland-ICS Building Society issue, in July 2013 Bank of Ireland agreed an amendment to the restructuring plan it had in place with the European Commission. The essence of this was to allow it to retain its life assurance business, New Ireland, while requiring it to substitute alternative measures for this, including the sale of the ICS distribution platform, together with up to €1 billion of mortgages and up to €1 billion of matching deposits.

As an aside, I might mention that the Commission was far more efficient in concluding an agreement for the restructuring of Bank of Ireland than it has been with Permanent TSB or AIB, whose restructuring plans remain not concluded. In a reply to me in respect of Permanent TSB this week, the Minister said the plan is still under negotiation, nearly two years after the plan was first submitted to the Commission. This is creating considerable uncertainty over the future of Permanent TSB, a subject I will return to at an appropriate time in the future.

The underlying reason for the legislation is to facilitate the transfer of the ICS Building Society loan book to its parent company, Bank of Ireland, and the subsequent sale of its distribution network and possibly part of its mortgage book. I can see merit in allowing Bank of Ireland hold on to its New Ireland division. It is a stable business requiring relatively little capital and generating solid fee income on an annual basis. It makes Bank of Ireland an overall more attractive proposition to investors. However, I have serious concerns about the potential sale of ICS mortgages if the issue is handled in a manner similar to that of the former Irish Nationwide customers of IBRC in special liquidation. I would be grateful if in his reply to this debate, the Minister could provide us with some more detail on the current state of the ICS mortgage book. In regard to IBRC, it was a drawn out process to try to ascertain details of how many mortgages were in existence and the level of arrears. We have been given a figure in respect of ICS, the total value of the book and the number of customers. However, if we are to make a proper assessment of any sale of ICS mortgages, this information should be made available up front.

The idea of generating more competition in the Irish banking sector is laudable. The decision by Danske Bank to join ACC in withdrawing from personal banking in the Irish market was another blow to hopes of real competition in the financial services sector. Fewer banks means higher borrowing rates, increased charges and reduced rates for deposits for both business and personal customers. The requirement to allow Bank of Ireland give KBC the opportunity to market its current account services to Bank of Ireland customers was a novel way of encouraging a more competitive market. We need more of these types of initiatives.

When taking action to increase competition, it is crucial that the Central Bank balances its role as the regulator of banks that are struggling to become profitable again with its responsibility to protect the interests of bank customers. In essence we need a twin-track approach, effective regulation and competition. While the legislation may help competition somewhat by facilitating the sale of the ICS distribution network, I am concerned about the prospect of the sale of up to €1 billion of ICS mortgages. If the average balance on the mortgages sold is €150,000, this could involve over 6,000 mortgages being sold. When we debated the issue in committee, the possibility of these mortgages being sold to an unregulated third party was raised. This issue was addressed in the Minister of State's opening remarks.

I am grateful for the briefing we received from Department officials, although I have concerns over their contention that as the purpose of this exercise is to generate greater competition in the market place, the European Commission would be unlikely to approve any sale to an unregulated entity. I am not so convinced on this point. It is quite conceivable that Bank of Ireland could look to de-risk its portfolio by selling off those ICS mortgages that are most in distress. This is something that should concern all of us. It would amount to an effective outsourcing of repossession actions. Can we be sure the Commission would block such a proposal if Bank of Ireland claimed to have a ready buyer for these assets? As we saw in the recent IBRC sale, there is most certainly a speculative market for distressed Irish property assets. Will the Minister confirm whether his approval will be needed for any proposed sale or will he simply defer to the wishes of the Commission?

I am also concerned by the price that Bank of Ireland will get for the ICS assets being sold. The State is still a 14% shareholder in Bank of Ireland.

While ultimately we will make a profit on our investment in Bank of Ireland, the sale of part of the State's equity stake in 2011 as well as the contingent convertible notes, CoCos, and preference shares was done at prices below their long-term value.

I ask the Minister to use Committee Stage of this Bill to bring forward amendments to deal with sale of mortgages to unregulated third parties. The issue cannot wait until next year when the Government intends to publish its legislation. Although the Minister accepted a Bill I introduced on the subject in March and has promised to deal with the issue, the sale of IBRC has come and gone without action being taken. ICS Building Society customers are potentially in the firing line. How much longer can we afford to wait before action is taken?

I also ask the Minister seriously to examine the recent ESRI report on competition in the banking sector and produce proposals as to how mortgage lending to couples and individuals can be improved. Yesterday in this House he said he would like to see house prices rise further. That is a one-dimensional view of the property market. We need a stabilisation of the market whereby a potential buyer with a good income and clear capacity to repay can get a mortgage at an affordable rate. We are a long way from that. Today's legislation may help if it generates more competition but there are risks attached to it and we need a wider range of actions to give us a functioning mortgage market.

The second item in the legislation is a provision to allow the profits from the holdings of Greek Government bonds purchased through the ECB's securities markets programme, SMP, to be repatriated to that country. In its own right I welcome this. It was a concession to Greece as part of the various support programmes of bailouts and debt write downs the country went through. Today is a good day for Greece as it is re-entering the long-term debt markets. Its long-term bond yields are at or below 6%. Many thought we would not see this day for a very long time. However, it does not mean the European approach to Greece has been a success. It has been an unmitigated disaster.

The Greek people have been put through a tortuous process of cuts and tax increases since the crisis began to unfold in 2008. The concession on profits on the securities markets programme is small in this context. The concession on profits on Greek bonds has implications for Ireland. It raises the issue of what will happen to profits made by the ECB on Irish Government bonds. While we are in the dark as to the extent of these profits, given the rally in Irish Government bonds and yields below 3% it is likely that they are considerable. Figures of between €3 billion and €5 billion have been mentioned. It would be an act of solidarity by our eurozone colleagues and a recognition of the huge debt burden Ireland still carries if a process were put in place for these profits to be paid back to Ireland. The Minister has been unusually silent on it to date and I urge him to pursue it vigorously.

While I am on the subject of debt sustainability, I also urge the Minister to take action on the provision that if Ireland repays some of its IMF loans before maturity we must also pay off a proportionate amount of European Financial Stability Facility, EFSF, and European Financial Stabilisation Mechanism, EFSM loans. Our IMF loans are costing us 4.15% annually and have an average seven years to maturity. Our five-year bond yields have a yield of less than 2.5%. There is, therefore, an opportunity for Ireland to make a saving on our annual interest bill if we were allowed repay our IMF loans without a corresponding requirement to repay EFSF and EFSM loans. Given that the EU authorities were happy to extend these loans and reduce the rates, this is a concession we should actively pursue with them.

Finally, the major unresolved question of retroactive recapitalisation of the banks will not go away. The Government has made various attempts to long finger the issue by saying it cannot be dealt with until the single supervisory mechanism is in place. By the time this happens nearly three years will have passed since the commitment to break the link between sovereign and bank debt. We need a clear commitment that this issue will be pursued vigorously and that the Government will not accept any going back on the deal that was entered into in respect of the promissory notes by accepting an accelerated timetable for the disposal of the Government bonds held by the Central Bank.

As I mentioned at the outset, the two main provisions of the Bill cannot be regarded as related matters. During the pre-legislative stage we heard that while the ICS provisions are urgent given the deadline for the completion of actions under the Bank of Ireland restructuring plan, the item relating to Greece was essentially an add-on as it was convenient to deal with the matter in this Bill rather than introduce a separate one at a later stage. In this context I suggest two matters that we might consider could equally be dealt with under this Bill. The first relates to the Statute of Limitations for mis-selling of payment protection insurance and other claims before the Financial Services Ombudsman. The issue was back in the news recently and is one I have sought to deal with previously. As the law stands, the Ombudsman cannot deal with claims for mis-selling which date back over six years. This is patently unfair as many people may not become aware that they were the victim of mis-selling until after the six years has passed. A relatively simple amendment to give people three years from the date they become aware of the mis-selling would be an effective remedy to potentially thousands of customers.

I will bring forward certain amendments on Committee Stage, which may be taken as early as next week. Overall we are supportive of the Bill and look forward to a constructive debate on it.

The Central Bank Bill 2014 does two distinct things. The Bill may be rough around the edges. It would be tempting to say it is a purely technical Bill, but that is not the case. The two substantive articles in this Bill touch on very important issues. The first relates to the potential sale of up to €1 billion of mortgages from ICS Building Society, which is part of Bank of Ireland. It is a reflection of the times and the state the country is in that there is only one building society in the State.

We fear the Bill could become the vehicle for the sale of a loan book to a vulture capital company, as we have seen with Bank of Scotland and IBRC. I accept the assertion of the Minister and his Department that this is unlikely to happen as this book, if sold, will most likely be sold to a new competitor in the market, which will be a regulated company. While we hope this is the case, it is not guaranteed. Legislation is the only way to ensure all mortgage holders are afforded the protection of the code of conduct and other protections. The legislation is with the Government and is also in a Private Members' Bill which has passed Second Stage. There is an opportunity to advance that Bill through the House. The Government should prioritise it and bring it before the Dáil as soon as possible, where it will get the support of both sides of the House.

If it is to be a step to allow a new competitor into the market, that is welcome. The banking sector in Ireland is still very much a sick man. A new injection of competition is much needed. Perhaps the Minister or somebody from the Labour Party can update us on the Government's commitment to establish a State bank. Although the Labour Party made a commitment to do that, we have seen no moves in that direction. We eagerly await it. This manoeuvre relates to the restructuring plan at Bank of Ireland regarding the ICS business. This week the finance committee will hear that Bank of Ireland has reached its target under the mortgage arrears resolution scheme only through the use of legal action against those who are struggling to pay mortgages and householders who are in financial difficulty. Almost 3,500 households are under threat of legal action by Bank of Ireland, which is 14% owned by the State.

In a couple of weeks the Minister will have the opportunity to make his position clear regarding the €843,000 remuneration package for its CEO. We urge the Minister to use the opportunity of his attendance at the AGM to deal with this. He should use his vote to oppose such an obscene pay packet. On this morning's Order of Business he said he would be reluctant to do so because it might send out the wrong signal. I am not sure to whom that would send the wrong signal. I do not know of many constituents who would consider it the wrong signal to find that the CEO of Bank of Ireland was going to have his remuneration package sliced a little. I know few citizens who would lie awake tonight worrying about that.

The Minister told us this morning during Leaders' Questions he would let us know about the issue, and I hope that will happen before the Bank of Ireland annual general meeting and the message will be correct. He must use his vote effectively and send the correct signal to the citizens of this State, who have suffered much hardship.

The second part of the Bill allows for the repayment to Greece of the interest on its loans, and we have no objection to that move. It was cruel in the first place, as despite all the talk of solidarity within the EU, the institution's loans led to a case where profits could be made by lenders on the back of the difficult position of the Greek people. The Greeks have struggled with austerity for many years, creating terrible social consequences for people and particularly those who are less well off in Greek society. Unfortunately, it has aided the creation of far-right organisations which have targeted some of the most vulnerable people in Greek society, including immigrants. That is a shocking development, so it is only right that the accrued interest is returned to the Greek people.

When the heads of the Bill were before the finance committee, departmental officials were questioned as to whether Ireland had ever asked for a similar arrangement as that enjoyed by Greece. We were told the Government had not sought such an arrangement. In the Minister of State's opening address he differentiated between Greece and Ireland, which are two different countries experiencing different circumstances. Nevertheless, the Government did not seek to have interest payments on loans repaid to the Irish people, which is unsurprising. The Government's attempts to reduce the sovereign debt burden have amounted to tinkering at the edges and kicking the debt down the road.

There are two chunks of debt hovering over the State and the Irish people, weighing on our potential to grow our way out of economic stagnation. We learned this week that the so-called deal on the first chunk, the IBRC debt encompassing the private debts of the former Anglo Irish Bank and Irish Nationwide, could be unravelling. The European Central Bank, ECB, has indicated it wants the Irish Central Bank to dispose of the bonds exchanged for the promissory note at an accelerated rate, which is very worrying for a couple of reasons. It could mean the circular nature of the interest on the bonds would be broken and the interest would not be returned to the State via the Central Bank, which is a real concern. Additionally, the scheduled timing and planning of rates would be blown apart.

When the Dáil sat through the night last summer to pass this sleight-of-hand, we opposed the measure not just for the sake of it but because of good reason; we did so because it wound down the bank but did not wind down the debt. Even worse than that, it turned the debt into a sovereign bond, and we have now heard the ECB is not happy with the arrangement and it is now under pressure. This should not be a sovereign debt and it should be lifted from the shoulders of the Irish people. A better deal should have been done on that promissory note.

The second chunk of debt is the sovereign debt linked to bailing out the so-called pillar banks. We were told in June 2012 that the same European Stability Mechanism, ESM, being discussed today would ride to the rescue in this regard because of a seismic shift in policy. The term "game changer" was used. We argued at the time that the Government was overplaying the importance of the June 2012 statement, as there were contradictory signals from EU leaders. We have since seen the prospects of Irish banking debt being recouped by the State being rowed back. The ESM chief, the German Finance Minister and the European Parliament - led by the main grouping, which is associated with Fine Gael - pour cold water on this issue.

The Government now has two battles on its hands and should not be afraid, even at this late stage, to stand up for the interests of Ireland. It must stand up to the ECB and the EU and play to the relative advantages we have. Sinn Féin is content to support this Bill on Second Stage in the hope the issues we have raised can be addressed. We appeal to the Minister and the Government to do so.

Deputy Richard Boyd Barrett is sharing time with Deputies Catherine Murphy and Joe Higgins.

This Bill deals with two important issues and I am very concerned about both. There are changes to the Central Bank Act with regard to building societies, particularly allowing building societies to transfer assets, infrastructure and so on to banks, which is precluded in the 1971 Act. It was reported to us on the finance committee that this is being done because the European Commission is requiring this of Bank of Ireland because of state aid rules. If I am correct, this would allow the ICS platform, which may be attached to a mortgage book, up for sale. That is very worrying, given what we have seen happen in the Irish Bank Resolution Corporation, IBRC, mortgage book. That book, containing debt from the former Anglo Irish Bank, is being put up for sale and vulture funds are seeking to get hold of and profit from it. As a result, there is great concern among mortgage holders about changes in circumstances and the fact that somebody else will hold the mortgage. These funds are not regulated so they do not necessarily have to comply with any codes of conduct or regulations that mortgage holders would want.

We debated this at the finance committee and departmental officials suggested that the logic was conditional, as it was as possible that the book would be sold to regulated financial entities as it would not. Given what is happening now, it is highly likely that regulated entities will not buy the book, and we seem to be witnessing vulture funds from the US and elsewhere making the purchase. They were probably prompted and encouraged by the words of the Taoiseach when he was in New York on St. Patrick's Day, telling American investors that Dublin was the place to go in order to make a killing on the property market. Those were highly irresponsible comments from a Taoiseach in encouraging speculation in Irish property, mortgages and so on. These vulture funds and financial institutions seem to be moving in here at a rapid rate, and the Government seems very keen to facilitate them. This case involves state aid rules from the European Commission, which are obnoxious anyway. The Commission is very selective in its application of state aid rules, which are largely a pressure on states to privatise certain institutions, and in this case it involves the selling of assets to what are potentially unregulated bodies.

I asked the very simple question at the committee of whether the ICS customers even know this is happening, and that their mortgages could be transferred to another financial institution or unregulated vulture fund. Has anybody bothered to contact them to indicate legislation is going through the Oireachtas facilitating this process? It is something with potentially profound implications.

There will be no conditions put into the legislation to protect those people. The Joint Committee on Finance, Public Expenditure and Reform discussed this but, as I understand it, no changes have been made. That is typical of the very shoddy way the Government treats the innocent victims of a financial crisis created by the activities of bodies such as the European Union, the banks and property speculators who speculated on mortgages and so on. The same people are once again a party to moving things in their own interests, regardless of the potential consequences for innocent customers of ICS. That is pretty rotten. I strongly suspect many of these people do not even know this is happening and will not know till after the event, when it is too late. For that reason I oppose this Bill. It should not go any further.

The distinction between building societies and banks no longer exists because there are no longer building societies in the proper sense. A distinction was drawn between the two in the Central Bank Act 1971 because there was an awareness that building societies operated on different principles from commercially oriented profit-driven banks and should therefore be treated differently. That has changed; building societies no longer have that ethos and are in effect banks. It is worth remarking on that fact because there was somehow an understanding that one might be better off with a building society or that some people might prefer to be with a credit union because of banks’ profit-driven agenda. People wanted to be treated differently, more humanely. That distinction between building societies and banks is gone, and while I do not know enough about ICS to say, it may have had a different style or relationship with its customers which could dramatically change after the handover to Bank of Ireland, but even more so after the handover to some other entity to which these things could be sold. This will suddenly be inflicted on the people concerned. It is rotten, and may produce another crisis for those people similar to the one that occurred with regard to the Irish Nationwide mortgage book. I will oppose the Bill for that reason.

In respect of the Greek bailout, as I understand it, we will forgo the profits we might otherwise make on Greek bonds and give Greece cheaper loans to get it out of its difficulties. Why the hell did we not ask for the same facility? I would not want to deny that facility to the Greek people. When we ask why we did not ask for the same facility, the answer is that a lot of conditions were imposed on Greece, the implication being that those conditions were so harsh and so awful that we were better off not asking for it. I do not accept that, because conditions were imposed on us for the deal we did with the troika which were absolutely brutal and have savaged people in this country and done extreme damage to our economy and society. I do not understand why the Government did not ask, apart from the fact that its whole policy has been to be the best little boys in Europe and do exactly what the troika says in the hope of reward, but that reward is not forthcoming for the majority of citizens in this country. I am concerned about it because it is tied up with a so-called bailout which imposed brutal conditions of austerity on people. We should not sign up to it.

I understand this legislation arises out of the restructuring plan agreed between Bank of Ireland and the European Commission. Under the plan, Bank of Ireland is required to offer certain assets of its ICS Building Society for sale. ICS must first transfer those assets to Bank of Ireland, which will then sell them. This Bill will permit the transfer to take place lawfully.

We are told it is a technical Bill. In fact, however, there is a much bigger issue at play here that others have alluded to, namely, the philosophy of the European Union, the Commission and the European Central Bank. Jürgen Habermas put it well last year when he said:

The actual course of the crisis management [The crisis may not be at its peak, but it is still there] is pushed and implemented in the first place by the large camp of pragmatic politicians who pursue an incrementalist agenda but lack a comprehensive perspective. They are oriented towards “More Europe” because they want to avoid the far more dramatic and presumably costly alternative of abandoning the euro.

That would be really problematic, but there is validity in what he says.

What bothers me about this is that the Commission is acting for the markets. In the recent reorganisation of the European Union there was a possibility that we would not have a voice. Where is our voice? What is it saying on behalf of the citizens of this country? We are seeing the impact of the liquidation of the IBRC on those who had mortgages from Irish Nationwide. They had no control over what happened to their mortgages. They were sold off in four different funds. Outside investors were most interested in those that were in trouble. They did not want the performing mortgages because it would cost them money to administer those mortgages. They wanted the ones they could get at a huge discount and that they could sell off.

The Minister for Finance, Deputy Noonan, said this morning that nobody is speaking for the taxpayer and that he is trying to make sure the taxpayer is protected. I do not see how the taxpayer is protected when people’s homes are repossessed and the taxpayer must, rightly, step in to make sure people have shelter, whether through rent assistance, local authority houses or other types of support. The taxpayer must pay a price that could, in some cases, have been avoided by doing some things differently, but we were told yesterday that was not even written into the terms of reference.

What worries me is that we are repeating the mistakes made in the winding down of the IBRC and its impact on those mortgage holders. We have no guarantee that €1 billion worth of Irish mortgages will not be sold to an unregulated institution. It is important that the Minister of State tell us how many mortgages are involved when he wraps up this debate. Deputy Boyd Barrett made a good point about the ICS mortgage holders knowing about it, because the Irish Nationwide mortgage holders did not know anything until they got the letter in August or September of last year.

Then they realised the impact it would have on them and how their mortgages were packaged and sold. The Commission has indicated that it would prefer not to endorse a sale to an unregulated institution, but there is no legal protection in this regard. Given that the Commission is to the forefront in generating the legislation and directives with which we comply, why does it not do something about the matter? Surely it has a role to play when it considers any potential sale, as provided for in the Bill, in terms of prohibiting assets from being sold to unregulated institutions. Can we safely assume Bank of Ireland will take the opportunity to offload some of the more troublesome mortgages in the ICS loan book? In doing this, it is extremely likely that the purchaser will not be found in Ireland. When I raised this issue in the context of the Irish Nationwide Building Society loan book, the Minister of State at the Department of Finance, Deputy Brian Hayes, advised me that I should not prejudge who was going to buy the mortgages because it was possible that the purchaser would be an Irish institution. That did not turn out to be the case.

It would be wrong to argue that others should not profit from our debts if we do not acknowledge that it is equally wrong for others to profit from Greece's debts. I support that side of the legislation, but I have serious concerns about the domestic side. I wonder whether these two matters have been grouped together in the Bill as a means of getting people to agree to it.

I do not understand how the Commission can agree matters with Bank of Ireland without setting out conditions. The issue of the excessive salaries paid to people at the top of that bank was raised this morning. It appears that it is all one way traffic when it comes to protections. The banks and those at the upper echelons are protected, but citizens are much further down the pecking order. When one considers the bailout of Bank of Ireland and the significant debt discounts it received when its loans transferred to NAMA, our interest goes way beyond the Minister's 14% shareholding. As we approach the European elections, we must ask ourselves what kind of Europe we want. The European Commission is heavily involved in this arrangement. It will not be possible to create a Europe with a social conscience or that works for its citizens if the Commission acts first and foremost on behalf of the money markets. It is understandable people become eurosceptics when they see how measures can be arranged to the detriment of individuals who are not even considered in the terms of reference, as was the case in respect of Irish Nationwide Building Society mortgage holders.

There is an absence of a big vision to solve this crisis, in the way that there was a vision in the aftermath of the Second World War. The London debt agreement of 1953 was one of the greatest acts of solidarity among nations, including Britain and France. We put a few bob into the debt fund, as did Greece. The biggest beneficiary of the debt agreement was Germany, the debts of which were either written off or rescheduled over such a long period that the last repayments were only made in recent years. That type of vision should be articulated by the European institutions. It is not enough that we concentrate on the technical working out of issues. We need a vision for the Europe we desire and the European Commission must be at the centre of it. These limited technical agreements are only prolonging the process and adding to the agony for some individuals.

I am totally opposed to the Central Bank Bill 2014 which proposes to compel the sale of €1 billion in mortgages and €1 billion in matching mortgages of ICS Building Society. The Minister of State said the Bill would support new entities in entering the Irish market and increase competition to ultimately benefit the consumer. That is palpably a false premise on which to base the substantial banking measure proposed in the Bill.

The boot prints of the European Commission and the European Central Bank are all over this proposal. They are dictating it to the Government which has fallen to its knees in front of these European agencies, as usual. The Commission and the ECB are the very agencies which insisted that the private bad gambling debts of the speculators, the developers, the bankers and the bond holders in the Irish property bubble be paid for by bleeding the people dry in the six year austerity programme through which we have come. Why should we believe or accept anything these agencies say, given their record of compelling the people to take on their shoulders the debts of the sharks in the European financial markets who recklessly gambled in the Irish property bubble as they chased super profits? The people had nothing to do with these actions. The Commission and the ECB protect, first and foremost, the interests of the sharks in the financial markets, the major financial institutions and the bond holders, not the interests of the Irish people, the Greek people or working class people anywhere in Europe.

What did so-called competition between banks and mortgage providers do for the people between 2000 and 2008? They piled in here to blow even bigger the property bubble that was developing and outdid each other, not in the interests of consumers or ordinary people but in gouging as much as they could from unfortunate young working people in the main who needed to put a roof over their heads and were made by these gougers, with the developers and other speculators, to pay exorbitant amounts of money for the basic human right to a home and condemned to unsustainable mortgages. Unlike their parents who had repaid their mortgages over 20 years, they took out mortgages of 40 years' duration.

That is the record of the entities the Government now seeks to bring here in the interests of the consumer. Who is it fooling? These entities blew the bubble sky high until it shattered, with disastrous consequences for the people. The sharks then got the European Union and the ECB to force two Governments - Fianna Fáil and the Green Party in the first and Fine Gael and the Labour Party in the second - to fall flat on their faces in front of the laws of the financial markets to defend the sharks' interests and bail them out from the crashed casino of the Irish property market.

Therefore, I am totally opposed to this proposal and to the sale of one sixth of the mortgage book of ICS. These unfortunate mortgage holders, perhaps 6,000, 7,000 or 8,000, could end up in the hands of vulture capitalists from anywhere in the world, exactly as has happened to the unfortunate mortgage holders with Irish Nationwide, who found themselves parcelled and sold off a few weeks ago by the IBRC to American vulture capitalists. The latter are now in the hands of international speculators. They stood outside the Dáil to beg the Government to give them an opportunity to buy back their mortgages at the discounted rate that was being offered to the speculators, but the Government refused, because that was also in the interests of the sharks in the financial markets.

The capitalist financial system is a diseased system from start to finish, run in the interests of super profits and of tiny elites in the financial markets who are unelected, unaccountable and invisible to ordinary people. Now we are told that a further inoculation of the bacteria causing that disease will somehow cure it. What incredible logic. I stand instead for complete public ownership of the financial system in this country and in Europe under the democratic control and management of ordinary people so that these institutions are utilised entirely for the benefit of society to build the homes that our people so desperately need at present, to give investment to small enterprises and the self-employed, to create the jobs and reboot the economy destroyed by austerity, and, in general, to work for the benefit of society. That is what would be in the interests of our people.

The second part of this Bill deals with provisions pertaining to the European Stability Mechanism with regard to loans to Greece. No Irish socialist could support anything that supports the architecture of the bank bailout and, in particular, the bailout that was forced on the Greek people and has enslaved them for the past five years. The Minister of State had the audacity to state, "Greece and the other euro area member states agree that it is only through the full and strict implementation of the fiscal consolidation" - that is, austerity - that Greece will be able to recover. The Minister of State went on to make further statements with regard to how matters are going well in Greece.

I will bring an air of reality to the Dáil. The EU and the ECB, with the complicity of the Irish Government, have condemned the Greek people to a never-ending Gethsemane of suffering through the economic policies that have been forced on them. The Greek people have been forced for five years to sweat their lifeblood in order to satisfy the sharks in the financial markets and, like the Irish people, forced to salvage the big players in those markets. The catastrophic austerity agenda of savage cuts in Greek public services, wages and incomes has ground the Greek economy into the dust. There is a humanitarian crisis of horrific proportions. Workers have lost 50% of their purchasing power since 2009. Unemployment is at 28%. Youth unemployment is at 61%. A full 50% of hospital beds have been closed down under the austerity programme. Children are coming to school malnourished. That is the reality of EU policy in Greece. This horror has created conditions in which even the fascist right are garnering a foothold.

As in Ireland, these are not solutions. As in Ireland, the only solution is a socialist transformation of the economy of Greece in the interests of the Greek people. I urge the Greek working people, who, joined with the Irish, the Italians, the Portuguese and the Spanish, all are victims of this system, to overthrow this rotten system and put in its place a system that is run in the interests of society and of humanity. That is the alternative to the Government's Bill.

I call Deputy Seán Kyne who is sharing time with Deputies Dara Murphy and John Paul Phelan.

One of the features of the financial instability and turmoil that the country faced some five years ago was that of institutions acting outside their areas of traditional competency. Building societies exemplify this. Institutions that previously had been concerned solely with providing financial assistance to people to purchase homes expanded into commercial and property sectors. The results, as the House will be aware, were primarily disastrous. The shortcomings of the legislative framework became apparent and conspired with the failings in regulation and oversight to create a situation which has characterised government across many countries ever since.

In this context, the introduction of this legislation is welcome. The Central Bank Bill will extend the application of Part of 3 of the Central Bank Act 1971 to building societies. Incidentally, the legislation is also necessary to permit the continued restructuring of the pillar banks, including Bank of Ireland, which is seeking to complete the sale of specific assets and liabilities of ICS Building Society. The sale could not take place without the passing of this Bill.

It is vital and necessary for us to have a comprehensive and effective legislative framework in place which oversees and regulates our financial sector. We must learn from the grave and foolish mistakes of the first decade of this century, mistakes that have had such catastrophic consequences. Aside from this, we must also ensure a degree of flexibility so that we can return to normal healthy levels of financial activity. This includes borrowing and lending as well as saving.

On Monday last, the Minister of State, Deputy Perry, and I met representatives of St. Columba's Credit Union in Galway and the Ballybane Enterprise Centre in the city. Many Members from the west will be aware of those organisations on account of the successful SCCUL Enterprise Awards, which celebrate, reward and promote entrepreneurship and enterprise in Galway and the west. The main concerns raised at the meeting on Monday, as the Minister of State will be aware - they promised to send both of us a submission - centred on the restrictions currently in place on credit union lending. Notwithstanding some problems that arose with a number of them, credit unions are a hugely positive feature of Irish society and they play a considerable role in promoting financial inclusion and providing financial services to a wide number of people who might otherwise be excluded. The voluntary and community themes run to the core of the credit union movement.

SCCUL is a registered charity but it is separate from St. Columba's Credit Union in Galway. Established in 2002, its vision is to make a contribution to help prevent and alleviate poverty in the Galway city area, to develop leadership skills, to prevent socioeconomic isolation and to support the least privileged groups, and, as the Minister of State will be aware, it does wonderful work. It runs an exceptional credit union to a very high standard and with high reserves. It is as a result of prudent and careful management that it has these sizeable reserves. These reserves could be used to assist small to medium-sized local businesses that require finance for expansion. Such lending, in turn, would have a considerable positive impact on job creation.

With this legislation before the House, it is clear that the Government is open to introducing legislative changes and reforms which help businesses expand and create jobs while maintaining a high level of oversight and responsibility which are so essential in a sustainable economic system. I encourage the Ministers to examine legislation and amendments that would help credit unions to help local businesses to the benefit of communities across the country. As I stated, we are awaiting a submission from the group, but it has considerable reserves that it wishes to be able to promote in its area, either in terms of lending to businesses or for some of the capital infrastructure that is needed in its community in the Galway city area.

The latter part of the Bill concerns implementing a mechanism to facilitate the assistance which our country promised to provide to another of our European colleagues in difficulty. In Ireland, we have a proud history of helping those in need or those less fortunate even when we were not exactly in the best position. Through the determination and work of the Irish people, and the assistance from the EU and the IMF, we have exited the bailout programme and regained our economic sovereignty. It has not been easy and it has required sacrifices and difficult decisions but we have regained our economic sovereignty. Portugal will soon do likewise. Other European nations, however, most notably Greece, are still grappling with serious economic challenges. Just as Ireland assists less developed countries whose peoples continue to struggle with poverty, we have a duty to assist Greece, to which part of this Bill refers.

I begin my contribution with a sense of confusion, having listened to the second last speaker saying he wanted to bring an air of reality to the debate and then suggesting we adopt a North Korean banking model. There is no doubt the banks in this country let us down very badly but we need more competition.

Who called for a North Korean banking model?

Deputy Joe Higgins had his say.

I am just curious. Who called for a North Korean banking model?

It was similar to a North Korean banking model.

The first part of the legislation brings about the possibility and encouragement of more possibility and more competition within the Irish banking system and that is to be welcomed. The second part concerns the European Stability Mechanism, ESM. There was commentary earlier about the European Central Bank, ECB, report issued this week and the concern that the promissory note deal of one year ago was to be renegotiated, as another Member suggested. We must be clear what was said in the ECB report. Last year, the ECB noted Ireland's promissory note deal and expressed some concern. Why is the ECB expressing concern? It is linked to the great fear the ECB has about monetary financing, which is quantitative easing. It seemed to suggest any slippage towards monetary financing will dilute the powers of the ECB. It says that the fact that we are making payments over the next 25 to 40 years mitigates their concerns. One of the flaws is that it does not accept a timeframe and, by accepting there is a timeframe for the issuance of bonds, it is tacitly accepting that we are not breaking any rules. It is a complete misnomer to suggest the best deal done by this Government, the promissory note, is unravelling. That is nonsense. The Ceann Comhairle would have been inundated with requests to discuss why we are paying up €3.1 million in March if we had to do so last year and this year. It would be the topic of the day had it not been for the renegotiation of the promissory note deal, which was an enormous success. Members of the Opposition, having not been able to have a debate about the €3.1 billion, are running around trying to find other fears to prey on.

One valid query is the difference between the ECB and the Federal Reserve in the United States. The reason the ECB is terrified of monetary financing or quantitative easing is because it is terrified of inflation. The only direct rule the ECB must concern itself with is inflation. In contrast, the Federal Reserve in the United States also has a mandate to look at inflation but must also consider unemployment levels. If unemployment levels go above 6% or 7% – I am not sure which – the Federal Reserve can step in and print more money to create vibrancy and growth in the economy. The ECB does not have that function. Looking at the stagnant levels of growth across the Continent over the past number of years, it is time the leaders of finance in Europe look at this difference between the two central banks. There are deep and technical arguments and some suggest there is a culture of fear of inflation, given our history. In light of the fact that, through the promissory note deal, we reduced the amount of money we would take out of the Exchequer and, consequently, we are one of the few countries experiencing growth, over the coming years the ECB should copy what is happening in Ireland rather than noting concern about it in a report. Ireland, in contrast to Europe, has had the growth all of us on the Continent need.

I will take up where Deputy Dara Murphy finished. I was shocked at some of the media commentary over the past 24 hours, particularly that concerning the finance spokesperson of the main Opposition party. He tried to cast all sorts of doubt on the negotiated agreement of Deputy Noonan, which saw the end of the promissory note. This was a positive step for the country financially. Last year, we ensured that we would not pay in excess of €3 billion at the end of March every year for the coming ten years. That arrangement had been negotiated by the previous Government, in which that finance spokesman was a Deputy. He was in this House on the Government benches but he now tries to cast aspersions on the validity of the agreement, which has lifted a huge weight off the shoulders of the Irish taxpayer. People have short memories but they need to be reminded of what they landed the country in a couple of years ago.

I have no difficulty in supporting the legislation. I should hold my hands up and say that I have €300 in an ICS Building Society account. It will not be affected in any way by the legislation. I used it as a savings account to gather funds to make a down payment when I bought my house. When I was in secondary school, which is not all that long ago, there were several building societies operating in the Irish financial sector. Now, we are down to one building society, which is a subsidiary or an arm of one of the pillar banks. The legislation seeks to allow an agreement between that pillar bank and the European Commission, which was made in the middle of last year, to come into practice.

The second aspect of the Bill concerns the establishment of a transfer facility with the ESM to deal with the difficulties in Greece. I agree with some of the points made by Deputy Joe Higgins to the effect that Greece is in a very difficult position. Legislation that allows for its difficulties to be eased somewhat should be welcomed.

I must get across the importance, for the future of the country, of avoiding what we witnessed in the five or six years before the economic crash. In essence, this involves avoiding another property bubble. In certain parts of this city and in isolated other parts of the country and particular segments of the market, we can see significant shortages and dramatically rising property prices. Economically and politically, I can see the benefits and the necessity for property prices to increase somewhat to help people in significant negative equity.

The overriding responsibility of the Oireachtas must be to ensure that we never again experience a property bubble such as we had prior to the economic collapse a few years ago. We should look around at different parts of Europe. Germany, in particular, is an obvious example of a country that has studiously avoided boom and bust cycles in the property market over the course of its economic history since the Second World War. Germany has achieved that by means of a number of measures. The previous speaker, Deputy Dara Murphy, correctly hinted at the reluctance of the European Central Bank to get involved in quantitative easing and the dangers associated with it from an historical perspective in Europe such as inflation and hyper-inflation, in particular from a German point of view, as it led to a political situation in that country that had serious and devastating repercussions across the Continent and further afield. At this juncture perhaps the European Central Bank might look at the way the Federal Reserve in the United States operates in order that some of the best parts of its approach could be introduced into the operations of the European Central Bank. There is more than just Germany in the eurozone but that point does not often come across as well as it should.

In certain parts of this city there is a shortage of larger homes and apartments which is leading to an increase in prices. We only have to look at the property supplements of newspapers. For some years such supplements virtually disappeared or were only printed every now and again but they are now back and are nearly as big as they ever were. The latest research shows that property prices, in particular for larger homes in the south Dublin area, are starting to increase significantly. There is a need for stimulating activity in the construction sector in that segment of the market and in the apartment rental sector. I could bring Members to a few apartment complexes in Carlow and Kilkenny in my constituency where nobody would ever live in an apartment but we do not have apartments in places where we need them. For those reasons there is a strong argument to be made for stimulating the property sector to ensure a supply of apartments in parts of Dublin city in particular.

Economic activity in Dublin has increased at a pace which is far quicker than most of the rest of the country in recent years. I do not wish to cause difficulty by making that point. Everybody outside of Dublin is pleased that certain parts of Dublin are improving but people would like to see more improvement in their own part of the world. The Minister of State, Deputy Jan O’Sullivan, who has responsibility for social housing is more familiar than I am with the significant shortages in the supply of social housing in Dublin but also right across the country, including in my area.

We should never lose sight of the fact that a political decision was made in the early part of the millennium to remove the regulatory role of the Central Bank for financial institutions and to establish the Financial Regulator. It is an understatement to say that did not work. I was not a Member at the time but the committee responsible was chaired by the former Minister for Justice, Equality and Law Reform, Mr. McDowell, which came up initially with the homework for the legislation which resulted in the establishment of the Financial Regulator and the removal of the function from the Central Bank. In future, we must be cognisant in all of our utterances, actions and legislation so as to ensure the property bubble which has crippled so many people in this country and that will leave a lasting legacy for individuals, families and the State cannot be repeated. I am not convinced enough is being done to avoid the emergence of a property bubble again. In certain parts of the city in particular we are already seeing surging prices which are not a positive indicator in terms of avoiding that horrific scenario in future.

Thank you, Cheann Comhairle, for the opportunity to speak on this new piece of legislation, the Central Bank Bill 2014. Before I go into the details of the legislation I wish to say that there is no point discussing the Bill unless we face up to and deal with other core issues as well such as unemployment, low pay, financial services, housing, banking and the SME sector. There is a strong link between the Bill and the broader issues. We must focus on those urgent matters and come up with sensible and workable solutions as people are suffering following difficult years. We must be radical and creative in dealing with the financial and banking crisis. People have taken enough. They need a break and they need it now.

The Bill has two main purposes, the first of which is to extend Part 3 of the Central Bank Act 1971 so that it will apply to building societies as well as to banks. Specifically, the Bill will make provision for the effective transfer of the business and other assets and liabilities of building societies and for those and other purposes to amend the Central Bank Act 1971. The second purpose of the Bill is to make provision for certain payments out of the Central Fund to the account established by the ESM as agent on behalf of the euro area member states to receive payments for the purpose of providing financial assistance to the Hellenic Republic and for related matters. They are the two main reasons for the legislation and are at the heart of it.

We must consider ideas and work relating to the banking sector. I urge the Minister to have an open mind on public banking, as it could be very important. I commend Mr. Gerry Duddy and the Public Banking Forum of Ireland on putting forward ideas that would help the economy. I would welcome the introduction of public savings banks in this country – public banks that are mandated to support SMEs. Such banks would lend only their customer savings and their aim would be sustainable lending rather than maximising profits. They would return all interests and profits to the public banking community and they would be banned from financial speculation. A total of 64% of banks in Germany are public banks. They increased their lending to the SME sector by 17% between 2008 and 2011. Public banks are important and they were a strong factor in Germany’s survival of the recession. They are also a success story.

Greece is getting EU assistance to set up 40 public banks, two of which are to be set up immediately to support SMEs, while Ireland is borrowing from a German public bank for our SMEs. The Minister for Finance, Deputy Noonan, has already invited private European banks to compete in the Irish market – more banks that will not lend to our SMEs. Small and medium enterprise provides two thirds of all jobs in this country. We should never forget the massive contribution of the SME sector to the creation of jobs in this country. The logic of such actions beggars belief.

We must ask such questions so as to make a contribution to the broader debate on the Central Bank but also on the financial problems facing this country. I wish to ask the Minister for Finance a number of questions. The first is why we are borrowing for SMEs from the German public bank, KfW, when we should set up our own bank as Greece is doing with EU assistance.

We are basically funding SMEs by using €6.4 billion of our National Pensions Reserve Fund with €2 billion from KfW but the profits will go to the foreign bank. What logic is there in inviting into the Irish market more private banks that will not lend to our SMEs when we consider that Germany's success is mainly due to its public saving banks supporting its SMEs? That is a fundamental question for the Minister. I would like to see a proposal from the Dáil - from an all-party committee - to investigate the potential benefits to the Irish economy of a comprehensive public banking system in Ireland similar to what they have in Germany. The Opposition is criticised regularly for not coming up with ideas but that is an idea. I am not saying I have all the solutions but that is an idea that should be seriously examined.

The public savings banks operate on commercial principles with the aim of maximising sustainable lending, not of maximising profits. They operate on the principle of local deposits and local loans, keeping capital in their own area. They only lend money they have, that is, there is no fractional reserve lending. Surpluses remain with the bank and within the region. Profits are used to increase equity and for non-profit purposes - the public benefit principle. They are banned from engaging in financial speculation and only allowed to lend to local people and businesses in their county or city area. They are controlled by stakeholders from the local community and are independent of political influence and control. These are all the positives of the public savings banks.

The joint liability scheme provides protection for all savings bank branches. They are mandated to finance all businesses and SMEs within their designated area. They can retain cash in Irish society - the aim is to have a cashless society by 2017 under the current system - and the public savings banks can provide cheap or free credit card services for businesses that bank with them. Those are some ideas relating to the broader issues that the Minister or the Committee on Finance and the Public Service should not be afraid to examine.

We also have to face up to the reality of the tax issue. I note it has come up lately in regard to our public service and also in regard to the urgent need for a universal health service, which I strongly support. I know some of my Opposition colleagues are jumping up and down about the costs, but if we want to have a public health service, we will have to pay for it. That is the reality. Most sensible people will accept that point and will make their contribution. Of course, they want information about the figures and the background to it but they will pay for it. They are prepared to pay a little extra in tax for a quality health service where there is equity in the system. That is the problem with the current system. We need to face up to the reality that if we want a proper health service, we will have to make some sort of a contribution towards it. It is not good enough to jump up and down and say that we want a public health service but we are not prepared to pay extra taxes. We have to examine that and take the hit if we are to be genuine and honest with people. At the time of the last election when we canvassing at the doors, most people said to us to get in there and try and do something, try to fix the economy, get on with the job and stop messing them around. That was a regular comment we heard on the doorsteps.

We seem to be running away from the tax issue. Why are we running away from adopting the financial transaction tax? The EU will discuss it on 6 May. The details of a financial transaction tax indicate it would apply to trading in bonds, shares and would raise a net of between €300 million and €500 million for public finances in Ireland. It would reduce the harmful economic activity by acting as a curb on speculation and risk taking by increasing the cost of transactions and can increase growth and reduce poverty by making resources available to invest in public services, addressing climate change and supporting development in the State. It would raise between €300 million to €500 million but we are all worried that London or some other country will get the gig. I propose that it should apply across the European Union and in that way no member state could hijack the gig. Around the world people are campaigning for this financial transaction tax, believing that the banks, the hedge funds and the rest of the financial sector should pay their fair share in respect of the global financial crisis. That is the just side of it. Those guys caused the problem and they should make a contribution. We are not trying to close down the financial services in this country. That is an argument I hear regularly in debates on this issue in this House. We are trying to bring equity into the tax system. We could raise between €300 million and €500 million from the application of this tax and I believe they are conservative figures and that there is the potential to raise more from it, but it must be done across the European Union.

In the European Union 11 countries are currently preparing to introduce a financial transaction Act under a special enhanced co-operation procedure. This is a legislative measure and can be adopted by a minimum of nine countries if a policy does not enjoy sufficient support for adoption across the European Union. Our Government, in this opportunity presented, did not opt to introduce a financial transaction tax, while countries like Germany, France, Greece, Spain are planning to announce their agreement on the tax on 6 May at the meeting of the finance Ministers. We have run away from adopting that tax, but we must do so if we are serious about addressing our problems because there is a lack of money in the country to provide the urgently needed services. I was in Darndale on Monday morning and saw an excellent service being provided in my constituency. It employs 100 people and provides a service to 260 preschool children, many of whom come from disadvantaged families. That service is short €100,000. When we consider that such a tax could raise between €300 million and €500 million, we need to wise up, cop on and start supporting services, and these are services that will prevent young children at risk, and child who come from dysfunctional families, ending up in Mountjoy in 15 or 20 years' time. Sometimes the financial people only look at the statistics, they do not take account of the broader picture. That is something they have run away from and they need to accept their responsibility.

I heard some colleagues speak about the housing crisis and the Minister of State, Deputy Jan O'Sullivan, is present and participating in this debate. We all know there is a huge housing crisis here and we are all worried about the boom and bust scenario and all the problems associated with that. We have families who cannot afford a house and people are finding it very difficult to get a home. I know that from my clinics in my area and from talking to the wider community. We need to address this issue as well, but we also need to address the issue of discrimination against poorer families and people in the rental sector who do not have any rights. A Cheann Comhairle, am I okay for time?

The Deputy is okay for time but not for content. We are dealing with the Central Bank Bill.

I was mentioning that issue to bring in the boom and bust scenario.

I raised that issue because it is linked into the economic debate.

To return to the Bill, section 1 extends the application of Part III of the Central Bank Act 1971 to building societies as well as banks. At present there is only one remaining building society in the State, ICS Building Society. This section will enable the transfer of assets and liabilities pursuant to Part III of the 1971 Act from building societies to banks. Section 2 enables payment to be made out of the Central Fund to an account established by the ESM as the agent on behalf of the euro area member states to receive payments for the purpose of providing financial assistance to Greece. These payments are to be made in an amount equivalent to the income that accrues to the Central Bank of Ireland from the securities market programme portfolio of the Greek government debt. These are the two main sections in the Bill.

I welcome the debate on this issue. We need to be sensible. We need to put forward solutions as well as being critical. We also need to be strongly critical of some of the mad decisions that were made in the past and we need to ensure that such decisions will not be repeated. I hope the Government listens to some of the ideas I put forward in the debate on this Bill.

On behalf of the Minister for Finance, I would like to thank the House for agreeing to discuss the Central Bank Bill 2014 at such short notice. As the Members know, the enactment of this Bill is needed urgently for two reasons. The first is the need to extend Part III of the Central Bank Act 1971 in order that it will apply to building societies as well as to banks.

Specifically, this will make provision for the effective and expeditious transfer of the business and other assets and liabilities of building societies. For these and other purposes, the Bill will amend the Central Bank Act 1971. This legislation must be in place by the end of this month to allow the Bank of Ireland to meet its 30 June 2014 deadline under its revised restructuring plan for the disposal of certain assets of the ICS Building Society. There is also a need for legislative provision for Ireland's contribution to the securities market programme, SMP, income measure for Greece before our first payment is due to be made on 1 July 2014.

I thank Deputies on all sides of the House for their constructive and considered contributions to this discussion. All Deputies who contributed have the best interests of Europe, the euro area, Ireland and Greece at heart. There has been a healthy and constructive discussion on the Bill, as well as on the draft heads of the Bill, which were discussed at the Joint Committee on Finance, Public Expenditure and Reform on 26 March under the Government's new pre-legislative scrutiny process.

Concern was expressed today that mortgages with ICS Building Society are likely to be sold to an unregulated financial services provider. It is important that such concerns are not overdone and that we avoid generating unnecessary concern on the part of mortgage holders. The core of what is required to be sold under the amended restructuring plan agreed between Bank of Ireland and the European Commission is the ICS platform. The purchaser has the option to acquire up to €1 billion par value of mortgages out of the €6 billion mortgage book held by ICS Building Society. It is not clear yet whether any of the mortgages will be sold, still less whether any of the mortgages will be sold to a purchaser that is not a regulated financial service provider.

It is also important to remember what the legislation that we are debating will permit. The Bill, if enacted, will permit the transfer of assets and liabilities from ICS Building Society to a bank. All banks are regulated financial service providers and all banks are required to comply with the Central Bank's code of conduct on mortgage arrears. It is clear that for most people who hold mortgages with ICS Building Society, nothing significant will change. They will transfer from ICS Building Society to Bank of Ireland. The Department of Finance has confirmed that mortgagors in Bank of Ireland are treated in the same way as mortgagors in ICS Building Society, so mortgagors will not be treated any differently as a consequence of the transfer.

The sale of the ICS platform will enhance competition in the mortgage market and will facilitate either a new entrant to the market or the expansion of the presence of an existing market participant. This will benefit consumers and borrowers throughout the market as a whole. Competition is necessary to ensure lenders do not have a free hand when dealing with their customers, and they must be conscious that alternative lenders are available to consumers in their dealings with them. Along with an appropriate regulatory framework, competition is also therefore an important element of proper consumer protection. It is important that the provision of mortgage credit be facilitated and that robust competition be encouraged in this sector for the benefit of consumers generally.

As has been outlined, it is anticipated that an application will be made to the Minister for Finance to transfer the bulk of the assets of ICS Building Society to Bank of Ireland. It is further anticipated, though not certain, that an onward sale of some mortgage assets might subsequently occur. Such an onward sale would likely take place under the normal contractual rules rather than any statutory mechanism. However, the legislation itself will facilitate a transfer of the mortgages only to a bank; in this case, it is expected to be Bank of Ireland. Even if there were a subsequent transfer of mortgages to an unregulated financial service provider, the House is aware that the sale of loan books to unregulated third parties Bill, which is listed in the Government's legislative programme, is intended to address concerns surrounding the continued applicability of the code after the sale of loan books to unregulated entities. As has already been indicated, the Government is committed to bringing forward legislation to protect mortgage holders and will work with other interested parties to achieve the best solution for consumers. Officials in the Department of Finance are actively examining this in consultation with the Central Bank and the Office of the Attorney General with a view to bringing forward legislation to address this issue. It is intended this legislation will apply to all loans which were issued by a regulated financial service provider and subsequently transferred to a unregulated purchaser.

The SMP measure arises as a result of our successful exit at the end of last year from our programme. It is, in any event, appropriate and important that we should participate in this measure. It is designed to offer further assistance to Greece, a country in far greater need than ourselves. As has been outlined, the SMP income measure forms part of a larger package of measures designed to put Greece back on track to financial stability.

I note that some Deputies raised the issue of whether Ireland should also seek this concession. In this context I will repeat what has been stated before. This SMP measure formed part of a series of measures designed specifically for Greece. The measures were in the context of statements by the euro area Heads of State and Government that Greece's problems were of a scale which required special attention. This was agreed in November 2012, and our need at that time was different from that of Greece. We were preparing for our exit. We have exited our programme successfully and we are firmly back in the markets. While we still face big challenges, our needs are different from those of Greece, and we should remember this. Although there are some signs of recovery in Greece, it is important to remember that Ireland is not Greece.

Over the period 2014 to 2025, under this measure, Ireland is expected to provide just under €126 million by way of the intermediate account for the benefit of Greece. The amounts will be provided to Greece subject to satisfaction of programme conditionality and the continuation of reforms under post-programme surveillance. Overall, the euro area member states will provide just over €10 billion to the account. In 2013, when Ireland was not required to participate in this process, just over €2 billion was provided under this measure. I emphasise that our participation in the SMP measure is a consequence of our success - that is to say, our exit from our programme last year. As the House is aware, there is an urgency to both measures in the Bill. I thank the House for its time and Members for their contributions, and I commend the Bill to the House.

Question put:
The Dáil divided: Tá, 94; Níl, 17.

  • Adams, Gerry.
  • Bannon, James.
  • Bruton, Richard.
  • Burton, Joan.
  • Butler, Ray.
  • Buttimer, Jerry.
  • Byrne, Eric.
  • Carey, Joe.
  • Coffey, Paudie.
  • Collins, Niall.
  • Colreavy, Michael.
  • Conaghan, Michael.
  • Conlan, Seán.
  • Connaughton, Paul J.
  • Conway, Ciara.
  • Coonan, Noel.
  • Corcoran Kennedy, Marcella.
  • Costello, Joe.
  • Cowen, Barry.
  • Creed, Michael.
  • Crowe, Seán.
  • Daly, Jim.
  • Deenihan, Jimmy.
  • Deering, Pat.
  • Doherty, Pearse.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Dooley, Timmy.
  • Dowds, Robert.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Ellis, Dessie.
  • Farrell, Alan.
  • Ferris, Martin.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Flanagan, Terence.
  • Fleming, Sean.
  • Griffin, Brendan.
  • Hannigan, Dominic.
  • Harrington, Noel.
  • Harris, Simon.
  • Hayes, Tom.
  • Heydon, Martin.
  • Hogan, Phil.
  • Howlin, Brendan.
  • Humphreys, Kevin.
  • Keaveney, Colm.
  • Kehoe, Paul.
  • Kelleher, Billy.
  • Kenny, Seán.
  • Kirk, Seamus.
  • Kitt, Michael P.
  • Kyne, Seán.
  • Lawlor, Anthony.
  • Lynch, Kathleen.
  • Lyons, John.
  • Mac Lochlainn, Pádraig.
  • McCarthy, Michael.
  • McConalogue, Charlie.
  • McEntee, Helen.
  • McGinley, Dinny.
  • McGrath, Michael.
  • McLellan, Sandra.
  • Maloney, Eamonn.
  • Mulherin, Michelle.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Nash, Gerald.
  • Neville, Dan.
  • Ó Caoláin, Caoimhghín.
  • Ó Fearghaíl, Seán.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Donnell, Kieran.
  • O'Donovan, Patrick.
  • O'Mahony, John.
  • O'Sullivan, Jan.
  • Perry, John.
  • Phelan, Ann.
  • Phelan, John Paul.
  • Rabbitte, Pat.
  • Reilly, James.
  • Ring, Michael.
  • Ryan, Brendan.
  • Smith, Brendan.
  • Stagg, Emmet.
  • Stanley, Brian.
  • Stanton, David.
  • Tóibín, Peadar.
  • Troy, Robert.
  • Tuffy, Joanna.
  • Varadkar, Leo.
  • White, Alex.


  • Boyd Barrett, Richard.
  • Broughan, Thomas P.
  • Daly, Clare.
  • Donnelly, Stephen S.
  • Fleming, Tom.
  • Grealish, Noel.
  • Halligan, John.
  • Healy, Seamus.
  • Healy-Rae, Michael.
  • Higgins, Joe.
  • McGrath, Finian.
  • McGrath, Mattie.
  • Murphy, Catherine.
  • Pringle, Thomas.
  • Ross, Shane.
  • Shortall, Róisín.
  • Wallace, Mick.
Tellers: Tá, Deputies Paul Kehoe and Emmet Stagg; Níl, Deputies Catherine Murphy and Finian McGrath.
Question declared carried.