Tar éis a thuruis fhada dhuamhair tríd an Dáil tá an Bille seo á leagadh fé bhráid an tSeanaid anois chun go n-aontóidh siad leis. Ar an mbealach dó tríd an tigh eile rinneas athruithe maithe móra ar an mbun-Bhille. Admhuím go fonnmhar go bhfuaras congnamh mór chun feabhas do chur air mar a bhí sé ar dtúis. Cé gur rí-fhada is gur géar an díospóireacht do rinneadh air, ba léir gur mhian le gach uile dhuine teacht ar an réiteach ab fhearr ar na fadhbanna líonmhara do nochtadh.
Ba mhaith liom anois trácht beag gairid a dhéanamh ar an gcuma inar fhás an bhancaereacht cheannais san aimsir seo agus ar chuid de na cúiseanna ba bhun leis an bhfás san. Leis na blianta fada anuas, o am éigin i bhfad roimh an gcogadh atá anois ann, tá ag síor-mhéadú ar an gcuristeach a dhéanann rialtaisí ar fuaid an domhain ar chúrsaí eacnamaíochta. Tá daoine ann adéarfadh gurb ionann an Bille seo agus an cur-isteach san do dhéanamh ar chúrsaí airgid chó maith. Ní bheadh, ámh, dearcadh dá shórt ceart ar fad. Deireadh rialtoirí agus rialtaisí riamh is i gcomhnaí gur chuid dá réimhcheart píosaí monaidh agus scruith a dtíortha féin fé seach do thabhairt amach.
De bharr córais bhancaereachta nuaaimseardha d'fhás ní bhíonn ina phíosaí monaidh ach beagán beag den airgead iomlán a bhíonn i gcúrsaíocht. D'fhéadfaí airgead bainc a thabhairt ar fhurmhór an airgid sin. Diaidh ar ndiaidh iseadh chuaidh an nóta bainc i dtreise agus is iomdha bliain d'imigh thart sarar fhéad sé cúrsú chó héascaidh saoráideach le píosaí monaidh agus muinín do mhúscailt ag na daoine ann. Nuair a tháinig san b'éigean don Stát cur isteach ar an gcúrsa agus slánchoimeád dlíthiúil áirithe do chur i bhfeidhm maidir le nótaí bainc do thabhairt amach agus do chaomhnadh. Tháinig as fás breise na bancaereachta go bhféachtar ar thaiscí bainc mar shórt áirithe airgid díreach mar a féachtar ar nótaí bainc. An méadú tháinig ar uimhir na dtaiscí agus ar uimhir na seiceanna a húsáidtear chun íocaíochtaí ilghnéitheacha dhéanamh, is mó go mór fada é ná an méadú ar líon na nótaí bainc, na bpíosaí airgid agus na nótaí dlí-thairgthe a thugann Stáit amach. Má thagann as athruithe ar mhéid an airgid bhanc-dhéanta go méadóidh no go laghdóidh soláthar an uile shaghas airgid, déanann san deifir do réimhcheart an Stáit maidir le píosaí monaidh agus nótaí dlí-thairgthe do thabhairt amach. Mar sin de, de bharr na bhforbairtí i mbancaereacht na haimsire seo níorbh fholáir don Stát ina lán cásanna comhachta nua do ghlacadh chuige féin chun oibriú agus rialáil do dhéanamh ar mhéid an chreidiúnais bhainc i gcoitinne. Dá bhrí sin is féidir a rá, i dtaobh Bancanna Ceannais agus údaráis monaíochta eile do bhunú chun bancanna tráchtála do mhaoirseacht agus do rialáil, go dtáinig sé go do-sheachanta as na forbairtí agus na hathruithe ilghnéitheacha thárla i gcúrsaí bancaereachta agus monaíochta.
Fás diaidh ar ndiaidh fás na bancaereachta ceannais agus ní hiontuigthe go riachtanach gur fhás sí san aon tslí amháin sna tíortha úd is túisce ina raibh Bancanna Ceannais. Ní raibh sna Bancanna Ceannais is sine ar dtúis ach bancanna tráchtála ach thárla go ndearna Bancanna Ceannais díobh ar ball de bhuadh a dtábhachta agus a mórcháile.
I gceann an naoú aois déag is beag tír san Eoraip ná raibh banc inti agus ceart aige chun nótaí do thabhairt amach chó maith le príbhléidí agus feidhmeanna speisialta. Tar éis cogadh na mblian 1914-18 bhí córais mhonaíochta agus airgeadais a lán de Stáit na hEorpa á suathadh go mór. Le linn bheith ag iarraidh an tréchéile go léir a tháinig do shocrú ba ró-léir an gá bhí le córas bancaereachta ceannais. Mhol Códháil Airgeadais Eadarnáisiúnta i mBruiséal i 1920 do gach tír ná raibh Banc Ceannais cheana aici ceann do bhunú chun córais mhonaíochta do dhéanamh agus do choimeád daingean do-chorraithe agus fós ar mhaithe le comhar eadarnáisiúnta. An Chódháil Airgeadais a comóradh i nGenoa i 1922, mholadar san freisin go mbunófaí Bancanna Ceannais ag tíortha ar mhian leo nóteisiúint fhónta aon-chineálach do bheith acu agus urlámhas do choimeád ar a gcúrsaí airgeadais féin. Luigheadh air sin arís ag Códháil Eacnamaíochta an Domhain i 1933. Is fiú a thabhairt dar n-aire gur bunuíodh trí bancanna ceannais ar fhichid i dtrí stáit fhichid idir 1921 agus 1936. Fágann san go bhfuil banc ceannais dá chuid féin le fáil i nach mór gach aon tír ar fuaid an domhain mhóir a bhfuil tábhacht ag baint léi o thaobh na heacnamaíochta.
An Coimisiún Airgid Reatha so againne atá ag cólíonadh roinnt d'fheidhmeanna bainc cheannais cheana féin is amhlaidh a bunuíodh é tar éis do Choimisiún Bancaereachta na bliana 1926 san do mholadh. Thuig an Coimisiún san nárbh fhéidir féachaint ar na conclúidí shroiseadar i dtaobh puintí tábhachtacha áirithe mar chonclúidí do-athruithe agus go gcaithfí iad d'athscrúdú uair éigin de bharr an athruithe ar na coinníollacha eacnamaíochta ar a rabhadar bunuithe agus, i dTuarasgabháil Mhionlaigh ón gCoimisiún, moladh coimisiún fiosrúcháin eile do bhunú i gceann cúig mblian. An Coimisiún Bancaereachta cuireadh ar bun i mí na Samhna, 1934, ghlacadar as láimh a leithéid sin d'athscrúdú do dhéanamh. Mholadar comhachta breise thabhairt do Choimisiún an Airgid Reatha agus banc ceannais ceart do dhéanamh de, rud atáim a thairgsint a dhéanamh anois.
I feel I am right in assuming that Senators are sufficiently conversant with the main contents of the Bill to enable me to dispense with a detailed analysis. I shall confine myself to the circumstances and events which led up to the preparation of the Bill.
The Currency Commission, which already performs some central banking functions, such as the issue of legal tender notes, was set up following the recommendation to that effect by the 1926 Banking Commission. This commission appreciated that its conclusions on a number of important points could not be regarded as final and that they would require reexamination in the course of time as a consequence of the change in the economic conditions on which they were based, and the establishment of a further commission of inquiry after an interval of five years was recommended in a minority report submitted by the commission. Such a review was undertaken by the commission set up in November, 1934, which reported in March, 1938 and recommended that the Currency Commission should be given additional powers and transformed into a central bank proper.
The main additional powers which the 1938 Banking Commission recommended should be given to the new banking institution may be mentioned briefly:—
(1) to rediscount bills of exchange and to make advances against the collateral of Government securities to commercial banks and other credit institutions;
(2) to fix minimum rates for these transactions and to publish them from time to time;
(3) to buy and sell fixed-interest-bearing securities of a gilt-edged character, subject to the condition that any Irish Government securities so bought should have been outstanding for at least two years;
(4) to receive non-interest-bearing deposits from public authorities, banks and other credit institutions.
Under existing provisions our commercial banks are able to obtain legal tender notes from the Currency Commission against the surrender of sterling assets. As all Irish banks possess large sterling holdings, they can readily obtain whatever amounts of Irish currency they may require. That is the reason why the absence of other methods of obtaining funds from the Currency Commission has not created any difficulties for the banks.
It is desirable, however, that in addition to being able thus to secure legal tender notes from the central bank commercial banks should also be able to secure accommodation not necessarily in the form of notes but by way of credit in the books of the central bank through the rediscounting by the bank of commercial and agricultural bills and through the granting by the bank of advances against specified securities. This form of credit accommodation is often more convenient than the receiving of legal tender notes to the same amount.
In no country in the world does the banking system normally possess enough cash to meet all its potential liabilities. If all the depositors wanted to withdraw their deposits at the same time in the form of cash the banks could not provide the cash. But normally all depositors do not want to do this at the one time. At certain times of the year, e.g., at the end of the month when cash is drawn for salary payments or at the end of the half-year when various dividend or tax payments have to be made, or during the holiday, harvesting or marketing seasons there is a heavy drain on the cash reserves of the commercial banks. Moreover, in times of intense business activity or when the balance of current payments moves against a country and thus reduces the basis of bank credit, the strain caused by the regularly recurring factors just mentioned is aggravated and may sometimes cause a crisis. In the absence of a central bank each of the commercial banks would have to carry an excessive and unremunerative amount of cash reserves to meet periods of financial strain or other emergency; whereas with the central bank to fall back on at such times a substantially smaller cash reserve is sufficient.
In the case of an emergency, whether arising externally or internally, it would be most advantageous that the central bank should have the necessary powers to meet any currency requirements by an extension of credit against assets other than those normally eligible to be exchanged for legal tender notes. For example, in the event of an international crisis that caused a freezing-up of gilt-edged securities in the London Stock Exchange coinciding with a crisis affecting one or more banks in this country, it is desirable that the Irish central bank should, in such circumstances, be able to act as lender of last resort. Banking crises have fortunately been spared to this country, but it is essential to provide for all contingencies. A central bank, therefore, performs the essential duty of providing the necessary cash and credit against acceptable securities at all times, but especially in times of necessity.
Power to rediscount first-class commercial bills and bills drawn or issued for agricultural purposes or based on live stock as well as other bills is accordingly proposed for the monetary authority in this country.
The quantity of commercial bills available of a type which would be eligible for rediscounting is small, the reason being that business here, as indeed in a great number of other countries, is to an increasing extent being financed by bank overdrafts and not by bills that are repaid at maturity. A number of such bills is, however, available and it is proposed that the central bank should be empowered to rediscount them. To widen the field of eligibility, the period of maturity of bills which may be accepted has been lengthened to one year for agricultural bills, and six months for other bills. A provision has also been added to enable the central bank to rediscount Exchequer bills and bills of local authorities. Provision for the rediscount of these two types of bills was not recommended by the Banking Commission. The Government and Dáil Eireann, however, felt that their inclusion was desirable in order to extend, as far as possible, the types and volume of bills to be rediscounted. Exchequer bills, or Treasury bills, as they are generally called elsewhere, are eligible for rediscount by most central banks. Bills of municipal authorities are also eligible for rediscount by a number of central banks.
In addition to rediscounting of bills, it is proposed that the monetary authority be empowered to make advances against the collateral of Government securities, large amounts of which are held by our Irish banks. The exercise of the power of rediscounting bills and making advances against specified securities will not necessarily be reserved for contingencies such as I mentioned earlier. The central bank will publish its interest and discount rates and specify the conditions on which it is prepared to grant accommodation, and it will then be for the commercial banks to approach the central bank if they require such accommodation.
Even when no extensive business is done by a central bank in rediscounting bills or making advances, the fixing and publishing of a discount rate is still a fact of special significance. When the commercial banks are approached by persons who have agricultural bills or commercial bills of exchange to discount, and when the central bank has published its rediscount rates for such types of bills, the commercial banks concerned will, of necessity, have regard to the periods and rates of rediscount quoted by the central bank.
When bills are rediscounted and advances against Government securities granted to other credit institutions, the initiative is taken by those who wish to obtain facilities from the monetary authority. When the latter intervenes on its own initiative to purchase or sell bills or Government securities such interventions are known as open market operations. Action of this kind has for its purpose the influencing of general credit conditions. It may be prompted by several different reasons, and the actual object of any particular operation will depend on the conditions obtaining at the time.
There are times—such as a period of depression—when the monetary authority deems it necessary deliberately to expand the cash basis of the whole banking system. It does so by buying securities in the stock exchanges, thus transferring cash to somebody else. If the seller is a bank, then that bank's cash reserve is increased, while its liabilities are unchanged, and it is, therefore, in a position to lend more freely. Even if the seller is not a commercial bank, the cash received by him is eventually deposited with his particular bank, and thus increases the cash reserve of that bank. The net effect will be that deposits and cash reserves will expand, and the commercial bank or banks concerned will thereby be in a position to lend more freely and to set the wheels of trade and industry in motion again.
These operations may be used by the central bank to provoke expansion or contraction in loans granted by commercial banks, or changes in the interest rates charged, or for both these purposes.
As I mentioned already, the 1938 Banking Commission recommended that any Irish Government securities should be outstanding for two years before being bought by the central bank. The purpose of this was to prevent any possible inflationary financing through too easy access by the Government to the central bank. Objection was raised in Dáil Eireann to this restriction, and amendments to have it removed entirely were moved by some Deputies. The Government gave full consideration to the proposed amendments, and decided to meet the unofficial amendments proposed as far as possible. Accordingly, Ministerial amendments were moved, deleting the requirement that Irish Government securities must be outstanding for two years, and providing instead that the central bank may buy Irish Government securities or any securities of public authorities which have trustee status and have been offered for public subscription or tender before being bought by the central bank, and which are officially quoted on the Dublin and Cork Stock Exchanges. Before any security is quoted on the stock exchange, one of the factors considered under the present rules is whether two-thirds of it have been subscribed by the public. This is to ensure that the reactions of the investing public to the new security are fairly well tested before it is officially quoted. Ample savings exist in this country to facilitate borrowings by the Government, by local authorities, and any others desiring to raise loans. While such savings exist, there is no need for the Government to borrow directly from the proposed central bank. When the latter buys or sells Government securities, it does so for the purpose of influencing general credit conditions rather than to facilitate the Government. At the same time, there is no broad or active market in this country for Irish Government securities, and it is desirable that the central bank should not be unduly hampered by restrictions on the types of Government security in which it may deal. In the circumstances, it is felt that the present wording of the relevant paragraphs in Section 7 of the Bill is sufficiently wide and at the same time provides certain necessary safeguards.
When the commercial banks obtain credits from the central bank directly through the rediscounting of bills or granting of advances, or indirectly through the open market purchase of securities by the central bank, they may request the central bank to give them legal tender notes out of such credits in the central bank's general fund. Thus the central bank may be required to furnish legal tender notes against domestic assets, and not against those sterling assets normally accepted by the Legal Tender Note Fund. Moreover, under Section 3 of the Currency (Amendment) Act, 1930, the central bank will also have power to accept securities other than sterling for the purpose of the Legal Tender Note Fund.
A number of Deputies proposed that the provisions of this section of the 1930 Act should be amended to enable the central bank more easily to issue legal tender notes against domestic assets. As Senators are, no doubt, aware, that section provides that the Currency Commission must be unanimous in requesting the Minister for Finance to make an Order adding any new form of assets to those in which the Legal Tender Note Fund may be held. The Minister for Finance may then make the necessary Order which, in turn, has to be specifically ratified by both Houses of the Oireachtas. Various opinions were voiced regarding these rather restrictive provisions. Some Deputies wished to remove the requirement of a unanimous vote; others wished to remove the requirement of ratification by both Houses of the Oireachtas. After full consideration of the various viewpoints and of the issues involved, the Government decided that two alternative ways of proceeding might be permitted. This was accepted by the Dáil and the following are the alternative courses now available—(1) on a unanimous request by the central bank board, the Minister for Finance may make the necessary Order which will not require to be specifically ratified by both Houses of the Oireachtas before becoming operative. It will be necessary, however, to lay any such Order before both Houses; (2) if a majority of the Currency Commission or the central bank board request the Minister for Finance to make an Order and if the Minister agrees to do so, that Order must be specifically ratified by both Houses of the Oireachtas.
For reasons of convenience, safety and economy, it has become the custom for commercial banks to maintain deposits and cash reserves with their appropriate central banks. Among various other advantages for commercial banks, this practice facilitates the settling of inter-bank payments by appropriate transfers in the books of the central bank. The Bill as originally introduced provided, and still provides under paragraph (1) of Section 7, that the bank may "keep the accounts of any bankers' clearing".
Irish banks have already their own arrangements for settling claims and payments between themselves. This Bill does not disturb these arrangements, but it has been considered necessary to empower the central bank to perform this function if, in the opinion of the board, after due consideration, circumstances make it expedient that the commercial banks should effect their clearances through the central bank. The necessary powers are now conferred in Section 50 of the Bill.
During the debates in Dáil Eireann, a number of Deputies stressed the desirability of providing explicitly that the central bank should have power to conduct research into monetary and credit problems, to publish results of such research work from time to time and, for this and other purposes, to establish and maintain contact with other central banks. Section 8, which was introduced on Report Stage, makes the necessary provision for these various purposes.
Different, and sometimes rather contrary, views were put forward in Dáil Eireann regarding the relationship between the central bank, the Government and the Legislature. On the one side, it was held that there should be a provision similar to that in Section 10 of the Reserve Bank of New Zealand (Amendment) Act, 1936, which says that
"it shall be the general function of the Reserve Bank, within the limits of its powers, to give effect, so far as may be, to the monetary policy of the Government as communicated to it from time to time by the Minister for Finance".
On the other side, the suggestion was made, and unofficial amendments were put forward in support thereof, that the central bank board should advise the Minister for Finance from time to time regarding the effects of State policy on monetary, credit and economic affairs. I myself felt that a provision similar to that in the New Zealand Act referred to would be detrimental to the independence of the central bank and that the second suggestion mentioned went rather too far in the other direction. It is desirable and, indeed, it is expected that there will be the closest co-operation between the Government and the central bank, and any advice or suggestions tendered by the central bank will, certainly, be given the serious consideration which they will merit, coming from so responsible a body. The Oireachtas is the ultimate source of the central bank's power and authority, but, as there is no direct contact between the Oireachtas and the bank, it is considered essential to have some link such as that provided in Section 6 (2) between the Minister for Finance and the board.
This Bill has, as I have stated, been the subject of very detailed examination and discussion in Dáil Eireann. Moreover, copies of it have now been available for over seven months and the reports in the Press of the discussions in the Dáil will have conveyed to Senators a good deal of information about the more important provisions included in it. I have, therefore, confined myself to giving a short resume of some of the main provisions of the Bill as introduced in Dáil Eireann and to giving in some detail an explanation of the changes which were made as a result of the discussion on the Committee and Report Stages.
Some critics of the Bill in the other House considered certain provisions detrimental to the interests of the commercial banks and a number thought other provisions too novel. The contrary criticism was advanced against the Bill by other Deputies who complained that the central bank will not have the more extensive powers of controlling credit and monetary affairs possessed by some central banks elsewhere. The first answer to this criticism is that there is no standard pattern for a central bank. Great differences are found as regards both the organisation of central banks and the functions given to them in different countries. Just as the systems of commercial banking vary from country to country, so do those of central banking. It must also be borne in mind that certain operations permitted under the statutes of an individual central bank abroad may rarely or, perhaps, never be undertaken in practice. The particular functions of a central bank in one country may not necessarily suit in another country where different circumstances obtain. For instance, a number of States whose central banks have rather extensive powers are debtor States, as compared with this country which is in the position of a creditor State. Powers have to be given in debtor States to enable the respective central banks effectively to conserve supplies of foreign exchange or prevent undue credit-expansion by commercial banks. In this country, the general plea is for more extension of credit to various kinds of borrowers and the provisions of Section 49 of the Bill have, as one aim, the encouraging, where appropriate, of more loans by our commercial banks within the State.
The huge amount of liquid sterling assets held in our commercial banks places them in a peculiar position in regard to central banking control, but as, happily, it is universally acknowledged that their management of their business has been generally wise and prudent, it is not necessary to compel them by law to keep minimum cash reserves with our central bank in a manner similar to that which obtains in some other States.
In times of war and emergency, trade and industry become very much affected by the disturbed conditions and these effects are, in due course, transmitted to monetary and banking spheres. Warring countries tend to decrease their exports and to look for increased imports. These disturbances produce drastic changes in the foreign trade of all countries and upset the balance of payments. The amount of foreign exchange available for trading with certain countries is not always sufficient to cover the cost of the imports required from such countries. Rates of exchange with foreign currencies suffer severe jolts, and it generally becomes necessary to establish a system of exchange-control in almost every country, whether belligerent or neutral. The need, accordingly, arises to ration the amount of available exchange—allocating it to essential imports. A further object of the exchange control system is to prevent depreciation of the external value of the currency of the country imposing the control.
The most serious financial danger always encountered in times of war and emergency is that of inflation. Prices of imported materials and commodities first increase, resulting, in time, in increases in the price of internally-produced materials and commodities. Incomes and receipts of certain classes of the community rise; there is additional Government expenditure on armies and armaments and the monetary circulation, in general, increases.
Any one of these disturbing changes is liable to produce repercussions on a country's monetary system and may demand that immediate action be taken by the responsible monetary authority. The cumulative effect of a combination of such changes may have far-reaching results unless strong counter measures are taken. Some of these measures usually fall to be performed by a central bank, and, without such a bank, we in this country are not effectively equipped to meet the contingencies which I have described. I may add as an example that when it became necessary, at the start of the present emergency, to establish a system of exchange control, the administration of the system had to be undertaken by the Department of Finance—a function which would, probably, have been assigned to a central bank if one were in existence here.
I stated earlier that, in order to provide for the event of an international crisis causing a freezing up of the external assets of commercial banks and coinciding with a domestic crisis affecting one or more of these banks, it was considered desirable, even before the present emergency, that an Irish central bank should be available to act as lender of last resort. The possibility of such an international crisis occurring is ever so much greater in war time than in peace. As the establishment of a central bank was considered desirable and necessary in normal times, it is doubly so now, and it is only prudent that we should try to be prepared for every possible contingency in the present critical times.