Trustee Savings Banks Bill, 1989: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. Farrell

The last legislation governing the Trustee Savings Banks was in 1863 and we know how times have changed. At that time a pound was 240p and now it is only 100p. The whole situation has changed and we have to update our legislation.

I welcome the Bill because it is very forward looking and is a Bill that will bring us to the end of the 1990s and into the year 2000 and further. The Bill is very important. As things stood the Trustee Savings Banks were an extension of the credit unions and were for small investors. Now the Trustee Savings Banks are facing big competition and probably in a few years time will be facing even more competition from the Continent. As we know from what the Minister has told us banks on the Continent have been changed enormously over the years. They updated their legislation but we left our legislation as it was apart from a few amendments here and there. There is an old country saying that we put a bush in a gap now and then when there was need to but we never really sat down to look at the whole situation.

At the present time particularly it is important that the Trustee Savings Banks get into the big league because those in local authorities know how the cartels are operating and are charging local authorities for transacting their business anything from £30,000 to £100,000 a year despite the fact that they are making huge sums in interest on those local authorities. They had no opposition, they could agree among themselves and there was no regard for the small man. Even though the local authorities spend from £15 million up to £100 million, nevertheless they are treated now just as small fellows and are told to pay.

That is a challenge to industry. I believe when this legislation gets through and when they get into the big league the Trustee Savings Banks will be able to compete against some of our larger banks and they will be able to take on those accounts from local authorities. Up to now they could only deal with small depositors but when this Bill is enacted they will be able to deal with companies. We have a lot of small companies now who want finance and the large banks do not give them the attention and the care they should give them. I believe when the Trustee Savings Banks get into the bigger league, the vast experience they have gained over the years in dealing with small depositors and handling small accounts will help them to deal with their customers in a more humanitarian manner than some of the bigger outlets we have at the moment. It will be a great advantage because we must get more people into the money market and supply the service the people need.

We know the range of the Trustee Savings Banks are restricted at present to deposit taking and making loans which in the opinion of the Minister for Finance contribute to thrift. That word thrift is very important because it will encourage the smaller people who have been putting money into the savings deposit accounts to learn how they may invest their savings better. There will be finance advice available in those banks and they will be able to update their knowledge. That will encourage even more thrift among the ordinary people in the country who have only a week's wages and put a few pounds away. They will now be able to get better advice and they will be able to compete.

I am very enthusiastic about this Bill. One of my arguments has been the way the big banks are treating the local authorities. They have been getting dreadful bills and are not able to seek finance elsewhere. As chairman of my county council I would certainly approach the Trustee Savings Banks to see if they could come up with a better deal for local authorities. They are now opening offices in rural areas and in the main towns around the country. At one time they were only in Dublin. Then they opened in Limerick and Cork, but now they are in Sligo and in a number of provincial towns.

As they expand into the various towns there is no reason we could not ask them to quote for business which would save all the people quite a lot of money instead of having to pay those new banking charges which we are opposing, and which we will continue to oppose. If you impose charges on local authorities it is on the ordinary people you are imposing the charges. The local authorities are only doing the work for the ordinary people. We cannot continue taking it off the people working on jobs here and there around the country and giving it to those vast complexes that are making millions of pounds profit every year. It has to be stopped and I believe this Bill and the Trustee Savings Banks will assist us.

Another thing I like is that the Trustee Savings Banks can alter their rates as they see fit, subject to the condition that the rights of depositors are fully protected in relation to the deposit and interest thereon under any amending legislation in accordance with accepted practice. It is very important even though those banks are starting to expand, that the deposit is guaranteed because we know over the years there were incidents of deposits not being fully guaranteed. It is provided under this Bill that there will be no danger whatever of any depositor losing his investment.

It is also stated in the Bill that the competition may make it necessary for them to become associated with larger financial groupings and form a joint venture. It is good that is included in the Bill. Joint venture is being talked about a lot today and the private sector and the public sector can get together to provide services at a more competitive rate.

I am pleased that that option is there. I have no doubt if that was not implemented that bigger European banks could take over banks such as the Trustee Savings Banks after 1992. This Bill will give them the opportunity to get into enterprises and different businesses overseas. There seems to be a lot of banking activity going on between our banks and overseas banks. The Trustee Savings Banks will now be in the main league and they will be able to take their place, to keep the small depositor to the fore and give him a bigger and broader base. In that way we will see the Trustee Savings Banks as a bigger, a more positive, a more productive and a much better unit to serve their depositors and the people. I congratulate the Minister on bringing in this Bill. I welcome it and know it will be a great success.

I would like to join with the other speakers in welcoming the Bill. It is much needed. In the area of finance there is not enough competition between the lending agencies. This affects all types of business and possibly the individual also.

I agree with some aspects of the Bill in principle but the measure does not go far enough. At the moment, as indicated by the Minister, having allowed for working capital and operational costs, 80 per cent of moneys deposited must be made available to the Exchequer. We have two Trustee Savings Banks, two major units, the Cork and Limerick Savings Bank and the Dublin Trustee Savings Bank with a network of 64 branches throughout the country. There are restrictions on the banks which do not allow them to provide all the banking services that should be available.

As we are all aware, certain steps forward were taken recently. The Trustee Savings Banks now operate current accounts, they can give loans and engage in foreign exchange. There are positive restrictions in so far as they can take money on deposit from individuals but they cannot — and this is a great pity — take money from corporate bodies and large institutions. While the Minister indicated there are changes envisaged whereby this 80 per cent will be phased downwards, I urge that that phasing downwards be done sooner rather than later and that it be brought to a stage where there is much more money available from the Trustee Savings Banks for lending.

It is interesting to note that in the last financial year there was £760 million on deposit in the bank. That is a measure of the confidence that has built up in recent times in the Trustee Savings Banks. At the same time many people do not see them as an alternative to the other commercial banks and lending institutions.

I take the point about absolute security and Government-backed aspects which exist and which will continue to exist while there is a proportion of investment into the Exchequer from the Trustee Savings Banks. That proportion could be significantly less, perhaps half the present figure and one would still have the necessary security. There is no danger that banks with no Government backing, such as the commercial banks — in so far as one can say anything with a degree of certainty these days — are likely to get into financial difficulties. The banks during the last financial year lodged more than £500 million with the Exchequer. That is a lot of money and I suggest that a good portion of it should be available to individuals, companies and to others for productive investment. There seems to be a kind of an old traditional linkage between many of our existing banking and lending agencies and, hopefully, we can get away from that. Because a business or an individual may not have been successful in business with one lending agency there seems to be a barrier on further borrowing by that person. I know of this from experience of acting in an advisory and consultative capacity on behalf of persons in business with whom I am closely connected. The Bill presented to this House as I would interpret it, ultimately would put the banks in a position that they would eventually be completely competitive in all aspects with the other lending institutions. That is to be welcomed.

The present volume of business carried out by the Trustee Savings Banks is not large in a banking context. In fact it is quite small; but there is a wide network, there is machinery there to enable massive expansion without very much further expense. I have already referred to this question of phasing down, and perhaps phasing out eventually, the commitment from the banks to the Exchequer. Perhaps there is merit in having a certain amount payable to the Exchequer. I would not have a serious quibble with that but I believe the present figure certainly needs to be radically and quickly altered. In the context of the EC throughout which there are many Trustee Savings Banks, we must think in terms of competing with them, particularly when we will have a more open situation in 1992 and from there on.

I mentioned earlier the question of banking for an individual or a company. I do not think enough people appreciate and realise how important it is for persons with good ideas, good business notions, to have access to money. I am not advocating in any way that money should be freely available for non-productive purposes but at the moment I would honestly state there are persons who are unable to find sufficient finance for worthwhile ideas. The point should be made that we have Barclays Bank operating in branch offices throughout the country. There is a branch in Limerick and in Dublin and other places and they are doing fairly substantial business. There are also several other foreign banks from different parts of Europe and further afield. Should we not be able to fill much of the void ourselves? There is no doubt we can do that and in the context of the European scene it becomes doubly important.

There is no problem with regard to the present ownership of the banks. They have a board of trustees operating on a voluntary basis and I am quite certain that certain restrictions that now exist can be overcome easily by the Minister for this now voluntary board to become a more dynamic, vigorous, business like body.

I advocate the amalgamation of the Cork, Limerick and Dublin Trustee Savings Banks. I believe that as a unit they will be very formidable in the context of the Irish scene and more so, perhaps, in the context of Europe. In France in the past 12 months the 400 branches of Trustee Savings Banks were reduced by as many as 75 due to merging and greater linkage between banks. I honestly believe the amalgamation of the Dublin Trustee Savings Bank with the Limerick Cork Savings Bank which is at the moment operating as one unit would be a step forward.

I welcome this initiative by the Minister. It is deserving of our support. I urge the Minister very strongly to move forward at a greater pace in phasing out the contribution that is paid by the Trustee Savings Banks each year from this 80 per cent figure after operational and working costs and that he would put legislation in place to make the Trustee Savings Banks similar in kind to and competitive with the other banks and lending institutions in this country.

I welcome the Bill which I consider is very timely. I welcome it in the first place because there is generally a need to update and rationalise structures in this country and the proposal in the Bill to centralise all the banking agencies under the Central Bank is very positive and rational. The idea of having one controlling agency in the long term will allow us develop the banking system in a rational manner. As a co-op manager, I have often felt that this type of development which we see here in the banking sector could be carried across to the corporate sector where there is a question of the Registrar of Friendly Societies dealing with co-operatives that are now multinationals, and also the Companies Office. Any move in rationalising this type of anomaly is to be welcomed.

The Trustee Savings Banks perform a very important role in the community. They have led the way particularly on such issues as opening hours and it has been a constant source of regret to me that their branch structure has not spread throughout the country. The people in the provincial towns have not had the advantages of this competition that people in the cities have had. In this day and age the idea of bank opening hours from 10 a.m., closing for lunch and closing again at 3 p.m. four days a week, with one late opening in the evening is anomalous. I must congratulate the Trustee Savings Banks on not adhering to this archaic system; they are providing consumer-orientated services. I hope that under this new legislation we will see the day, and not too far off, when branches of the Trustee Savings Banks will be established in every small town in Ireland. It has often caused me to wonder, when I look at small towns where there are three branches of the same bank operating, providing essentially the same services at the same interest rate, as to why this duplication of costs, which at the end of the day the consumer carries, is needed. I welcome any move that would be made towards the provision of real competition.

I also welcome in this Bill the exclusion of the exclusion, in other words, allowing the Trustee Savings Banks to take deposits from and to make loans other than to individuals. It has been one of the very limiting factors that Trustee Savings Banks have been precluded from doing this. It is a great advance that this is not excluded in the new legislation.

It is also to be welcomed that the restriction regarding the depositing of 80 per cent of the funds in Government bonds has been withdrawn and that it will now be possible for the Trustee Savings Banks to recycle into the banking system a much higher percentage of the money they take on deposits. This together with the possibility of lending to business will ensure that more funds will be available for development in the future.

There has been a great deal of emphasis put by Opposition speakers on the remote possibility that the Trustee Savings Banks could be moved from their present format into private ownership. We will have to look at the nature of ownership and service. Unbridled competition without any regulation obviously is not acceptable. But, as somebody who has spent his full working life in the co-operative sector, working for the development of small rural communities, who has practical knowledge and experience of trying to bring about development, I often wonder about the armchair commentators who pontificate on the nature of private and public enterprise. We have to face one fact, that is, that we are often provided with bad services by the private sector and also at times are provided with bad services by the public sector. The lowest common denominator that will be found in this situation is that the common factor of bad service is where there is no competition, where some agency or group of agencies have a monopoly in the provision of certain services.

This is very obvious in the case of the associated banks. As I have pointed out, their opening and closing hours in a real world of competition would never have survived. Similarly, in other services we have seen that what has determined the level of the service has not been the nature or the ownership of the enterprise but whether there was a mechanism in place that stimulated enterprise and development. The measure I would use at any time as to the efficiency and the acceptability of the ownership of any enterprise is, at the end of the day, the service it provides to the community it purports to serve. If that became the yard-stick of how we measure performance in this country we would get out of what tends at times to be a rather sterile debate. Up until now, the debate has centred purely on the question of public and private. Again, in the Trustee Savings Banks you have something that is neither one nor the other. This is also the situation that I have worked with quite successfully as a co-op manager where you had a structure that did not have the full rigours of State ownership and on the other hand, was totally sensitive to the requirements of the community that it served. The Trustee Savings Banks in their way have come up to that particular specification. In many ways, they are analogous to co-operative societies.

The other point that I would make is that ownership is not everything in the question of control. We should look more and more to controlling monopolies, where necessary, by regulation. We should use the powers we have to ensure that certain basic services are provided at a reasonable cost to the consumer by regulation. I have many times commented to people who have asked me, "Who owns the co-op? or, "Who owns this" that at the end of the day all business now is subject to very strict regulation from any number of sources and that because one has legal ownership of a business does not give the right to do things at will. We have to decide in the future whether the State will control by regulation or control by ownership.

I would like to stress this: I am not advocating any change in the status of the Trustee Savings Banks which have served us well, but I am making a few general comments on the question of ownership and on the paranoia that exists to look at anything in the real world that we live in.

In conclusion, I would like to say that this Bill provides us with an updating of the legislation. It was very urgently needed and its provisions are to be welcomed. I look forward to a great deal of other legislation of this type — which is urgently needed to update activities in other spheres — coming before the Houses of the Oireachtas, so that in 1992 we will be in a position to compete and to offer our citizens services that will not be second rate but will be compatible with those available in any other country.

Will the Chair inform me how much time there is left?

Would I be preventing the Minister from getting in by using the time or will it be possible for the debate to be continued?

Acting Chairman

The debate will be resumed on another day. The ten minutes applies just for today.

Thank you. I listened with great interest to what Senator Ó Cuív had to say about the relationship between these institutions and the communities they are intended to serve. In particular, I was intrigued and pleased by the subtle distinction the Senator made between control by regulation and State ownership. I took it from that he was not in favour of the nationalisation of the banking institutions of this country, including the Trustee Savings Banks. I might not entirely agree with the Senator on that. I am not sure that it might not be a good idea to nationalise all these resources.

I find myself in a rather curious position having listened with great interest also last week to Senator Brendan Ryan who addressed a very wide-ranging subject matter under the heading of this Bill. He launched a considerable attack upon the banking system and the services that are provided by the banking system for the citizens. This places me in some difficulty because where Senator Ryan was very persuasive in his arguments — he was briefed by the Small Businesses Association, I understand; I also have received a briefing but it is from a slightly different source, the Consultative Committee of Accountancy Bodies in Ireland — and I may appear at times to be approaching this matter from a different point of view, although I will attempt to merge the two so that I can take a reasonably balanced viewpoint.

I would have to say with regard to what both Senator Ó Cuív and Senator Ryan said, there are problems for citizens in terms of the services that are currently available, including those of the banks. The opening hours of these services which are not only restricted to the direct banking services but also relate to the hours of opening at the offices which deal with the consumer as the possessor of a credit card, are extremely restrictive.

Although it may be rather wide, I would like to make the point that it is very shocking when one is considering the Trustee Savings Banks, with all this wonderful 19th Century ethic of thrift and so on, to look at the situation with regard to the banks and at the outrageous interest rates that are being charged to the ordinary decent citizen who is persuaded to have a credit card because of all the goodies that can be got. Anybody who has a credit card of any kind is now on some kind of circulation list so that we get deluged with all these very attractive things. Like the old stamps for petrol, one gets points every time one goes into debt. These points can be built up to a couple of hundred points when one gets a sports bag or eventually a microwave oven and so on.

Surely you get points for credit?

No, I do not think so. I think it is for the money spent. I have never been in credit and I seem to be getting an astronomical number of points. Unless there is a grave mistake somewhere in the system, I must be right that it relates to the money spent. In other words, the banks are deliberately encouraging and inciting people to spend money beyond their means. Many people are not aware that for this privilege banks, which basically include the Trustee Savings Banks, are shops. They sell only one commodity — money. There is no reason for people to be particularly grateful, grovelling or obsequious to them because they are actually in the business of selling something, in this case hard currency. The price people are paying on their credit cards is somewhere around 28 per cent.

The reason I say this is that the intention behind the Bill and the point that is being welcomed by the Consultative Committee of Accountancy Bodies, is the principle of the level playing field, that the Trustee Savings Banks wish to be placed on the same basis as the major banking institutions. I applaud that. I think it is necessary. The Trustee Savings Banks have played a valuable, if small, role in Irish society but I wish that this level playing field were not only level as between the various banking interests, but I wish the Minister could encourage those banking interests to provide a level playing field for the customer, and in particular to advise the customer as to the nature of charges that are being made in real terms to those who have accounts. I hope this will be provided for.

I would like also to make a few comments about banking generally before I go into some detailed observations on this Bill and on the welcome that has been given to it by the body that briefed me, principally on the basis that it does initiate the idea of a level playing field. It seems we are in a situation where, for example, with regard to bank charges, we get a very bad deal indeed. The charges continue to climb. They rise with a really unpleasant regularity and, at the same time, the service to the customer is less and less good. I will give one instance: we are now in a situation where charges are rising and the customer no longer appears to be entitled to a return of used cheques. This means that the ordinary individual in his or her domestic accounting is placed at a real disadvantage because they do not have what amounts to a receipt. If and when this legislation goes through, as I have no doubt it will, I would like some comment on whether the individual customer has absolutely no right whatever in this matter. I am occasionally asked by accountants for evidence of payment of bills and a receipted cheque is regarded as evidence of payment of bills. It is impossible to get these cheques out of the banks. We are getting a worse and worse service.

I do not think it is just individuals who are getting a poor service. I am quite astonished by the arrogance of banks at the moment in instituting for the first time charges on the accounts of county councils. I do not always speak in favour of either county councils or their members but they obviously perform an extremely necessary, valuable function in our society. The sudden arbitrary precipitate introduction of charges on county councils, which amount to many thousands of pounds, by the banking system is a most unfortunate, although legal, step for the banks to take particularly at this juncture where we have on the one hand the spectacle of the services provided by county councils being cut back all the time because they have no money, because the rating system has collapsed, because people refuse to pay water rates and because simultaneously with this, the Government are reluctant to provide funds from the Central Exchequer. They then get attacked by the banking system, which aggravates the problem by imposing charges for the first time.

I realise county councils and some people, particularly Thatcherite economists, would maintain that this will force them to live in the real world. The real world surely is what they have been living with already and this is the introduction of a new and rather dangerous element. I am a little bit worried by this and I hope I am not taking too broad a scope by introducing these concerns and hesitations——

Acting Chairman

I want to remind the Senator that we will finish the debate at 4.30 p.m. The Senator has two minutes.

Thank you very much. In the two minutes I would like to comment on the Minister's speech which I found very interesting, particularly his discussive historical introduction which brought us back to the 19th Century, pointing out that the main legislation governing this area goes back to 1863 and it has hardly been looked at in that period. The Minister also pointed out that the Trustee Savings Banks are subject to certain archaic restrictions which severely limit their capacity to operate on this level playing field I spoke about with regard to the other financial institutions. The Minister pointed out that the range of Trustee Savings Banks activities is legally restricted at present to deposit taking, making of secured loans and such activities as in the opinion of the Minister for Finance contribute to thrift. Like all the other citizens of the country, I am very impressed, very grateful and happy that the principal then on the mind of the Minister for Finance is thrift a good, Victorian virtue and one which this country clearly needs.

I have some reservations even about matters raised in the text of the Minister's speech. I noticed in Part III of the Bill dealing with trustees an age limit of 70 years is imposed. I regret this because very often people can mature. When one thinks, for example, of people like Winston Churchill, Chancellor Adenauer, and in the financial world Calouste Gulherkian, it is perfectly clear that financial intelligence does not automatically extinguish at age 70. I appeal to the Minister to ignore this ageism.

Acting Chairman

Will the Senator please move adjournment of the debate.

I move adjournment of the debate.

On a point of order, I thought we agreed to complete Second Stage.

No. It was hoped that we would have concluded Second Stage today, but it is intended that we conclude Second Stage and all Stages next week. That is why the amendments were issued on the Bill. It was agreed with the Whip of the Senator's group and his fellow Whips that next week we conclude all Stages, even though there are a few people who are offering on the Second Stage. There are two speakers who are offering.

There is a misunderstanding obviously, because there was a question of concluding all Stages today with which we were not in agreement. I thought the compromise was that we would conclude Second Stage. I have no wish to stifle debate but I would like assurances that if we continue Second Stage next week with a view to completing the Bill, that Committee and Report Stages will not be curtailed and that we will have a full discussion and debate on those Stages. That is my concern, that if we squash it all into what is left next week the debate will be guillotined after discussing amendments Nos. 1, 2 and 3.

I will accept what the Leader of the House said providing I get assurances that we will have full debates on Committee and Report Stages.

An absolute assurance.

Thank you.

The word "absolute" has been noted on this side of the House.

Debate adjourned.