Will the Minister give some greater detail on what he means by a bank ombudsman? I have some idea but I would like the Minister to go into it in greater detail on this stage, as he indicated he would. Banks should certainly have some form of bank ombudsman. Banks just like other institutions make mistakes and the consumer has a right to be able to consult with an independent body with regard to his rights. The Minister referred to bad service, to unfair practices, in relation to the non-itemising of charges and so on. There are a number of areas in which a bank can frustrate the efforts of the consumer. The establishment of some form of bank ombudsman would be welcome and I would ask the Minister to comment in greater detail on it now.
Central Bank Bill, 1988: Committee and Final Stages.
Is it proposed that the ombudsman would have any authority with regard to the state of paper currency? Our paper currency does nothing for our tourist industry. One of the great complaints I have heard relates to the horrible state of the £1 and £5 notes. Nobody seems to have any powers in relation to this. I have complained about it to my own bank but nothing seems to be done about it. There has been some improvement but for the past 12 months or more these notes have been, to say the least, unhygienic. Can the Minister give the ombudsman some powers in that regard, or deal with it in some other way?
In relation to the type of complaints procedure that might be set up, I do not have a scheme ready and waiting in the wings to be put in place. I certainly see the complaints process here as involving consumer-type complaints which will be about a variety of bank activities, such as the availability of loans, financial services generally, credit cards, cash dispensing cards and so on. The complaints could be about a wide variety of sources of dissatisfaction, such as alleged over-charging, unfair practices, undue delay, bad service and so on.
What will happen under this section is that the Central Bank will invite the banks to propose the establishment of a scheme on a self-regulatory basis. The regulations to be made under this section will provide for the operation and procedures of the scheme, when we get a scheme in place, whether complaints must be in writing, or taken up with the bank concerned first, or whether oral hearings will be held. It is not possible at this stage to paint the entire picture.
The regulations provided for in subsection (2) of this section are a necessary framework for the administrative details of the scheme. I do not believe it is necessary to require that this House approve these regulations in draft form before they can come into effect. We are taking the power to regulate. The Central Bank will be the body who will set up this scheme and then we will make regulations to underpin it.
If a person applies for a loan from a commercial bank but is refused for whatever reason, is it envisaged that the reason for the refusal will be made known? At present many banks refuse loans but give no reason for doing so. Will the Ombudsman have a role to play?
Let me reply, first to a point made earlier by Senator McDonnell on the state of bank notes. The Ombudsman will not have a role in this area. Currency is a matter for the Central Bank and I know — indeed I have spoken to them about this matter — that they are endeavouring to ensure the currency is kept to a high standard. We are committed to the introduction of a one pound coin next year and this might help. In relation to the point made by Senator Fallon about loans, it is for the bank to make up their mind whether a person is a good risk.
Are they obliged to give the reason for the refusal?
We will look at it in the process, but we will reach the point where we cannot be the banker as well as everything else. Where there are serious consumer complaints, they will be dealt with under this type of operation.
I would like more information on section 46 from the Minister. The appointment and role of an auditor is very important. As I said, a similar provision is contained in the Insurance Bill — an amendment was introduced at the last minute. Clearly, that was one of the best things to happen during the passage of that legislation. Under that legislation, if an auditor finds an insurance company to be even remotely wrong in their accounts there is an obligation on him to immediately inform the Minister and the Department of Industry and Commerce. Under this legislation, if something is found to be wrong, then the Central Bank or the Minister for Finance has to be advised immediately. If such a provision had been in place in the past we would not have had the Irish Trust Bank or the other scandals. Therefore, I welcome this provision. Perhaps the Minister would like to comment further on the section.
The matter raised by Senator Fallon should be referred to the Central Bank and to the Minister for Finance.
My apologies.
Section 47 is probably the section the Senator is referring to. This section proposes to impose new duties on an auditor of a licenceholder, in particular a duty to report to the Central Bank in certain circumstances along the lines the Senator referred to. It is important that the Central Bank be able to object to a particular person being appointed auditor where it has reason to believe that that person would not adequately discharge these or other duties of an auditor. The Central Bank can also require a licence holder to notify it of the name of the person whom it is either proposed to be appointed or reappointed as an auditor of the licenceholder. The Central Bank must also be notified by the licenceholder when the directors propose to fill a casual vacancy in the position of auditor. Notification must be given at least 15 days in advance of the shareholders being informed of the name of the person who it is proposed to appoint or reappoint at the annual general meeting, or in the case of the filling of a casual vacancy by the directors at least 15 days in advance. Therefore, there is adequate protecton to cover the eventuality Senator Fallon has referred to.
The way the section is worded leaves some doubt in my mind. I welcome the provision but I wonder whether some discretion will be left to the Central Bank or the bank against which the report has been made to indicate in the annual report whether attention has been drawn by the auditors to the matter concerned. Will the discretion remain with the Central Bank or with the bank concerned?
Where the auditor finds something seriously wrong we would expect him to put a note in the accounts. Where an auditor believes that circumstances exist which materially affect the licenceholder's ability to fulfil his obligations to depositors or his financial obligations generally, such as the obligation to maintain particular ratios of capital or assets, he must report to the Central Bank. Where he has reason to believe there are defects in the financial or internal accounting systems of the licence-holder, where he believes there are omissions or inaccuracies in financial returns made to the Central Bank, where he proposes to qualify any certificate he is required to give under the Companies Act or the Central Bank Act, or as he must where he decides to resign and not to seek re-election as an auditor he also has to report to the Central Bank. These are all laid out in section 1 of the Bill.
May we take it that the auditors will qualify the accounts to that extent?
They are required to do so under the Companies Act.
That is the reason I was wondering it is highlighted here.
They are required under the Companies Act to attach a note.
On section 104, could the Minister comment on the amount of money the commercial banks spend annually on advertising? It seems they are spending a great deal of money. I know they are in competition with building societies and other institutions, life assurance companies and so forth. It would be a worth-while exercise if we could find out sometime the amount of money which commercial banks operating in this country spend annually on advertising. Are any figures available for that?
Surely, in view of the considerable expenditure on marketing and advertising of their services with a view to development we can trust them to control their money?
Fair comment.
I am curious.
Section 104 deals with restrictions on advertising in relation to exchanges. In general terms, banks are free to spend their money on advertising their products.
I accept that.
They are not entitled to provide any type of misleading advertising. Regulations were brought in here to ensure the control of the APR arrangements, so that people would know exactly the rates that they were being charged. In general terms, the Central Bank monitors the amount of money spent by individual banks with regard to that and other aspects, in relation to the overall administrative side.
But there is no specific figure?
There is no specific figure available. The Central Bank judges each bank individually.
I am sure many people are not aware that it is not lawful for anybody to do any following things: to cut, tear, or otherwise mutilate or interfere with any security device or a legal tender note or a consolidated banknote or to write or print on these notes. It does no harm to highlight the fact that these are unlawful acts. People are not generally aware of this. I am sure that the Minister would agree with me.
Does this mean that if I were at some social function and somebody decided to run a draw and you write your name on the document, this is totally illegal, or will a blind eye be turned to that?
I cannot turn a blind eye to anything which is technically incorrect.