ICC Bank Bill, 1992: Second and Subsequent Stages.

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

Minister for Finance (Mr. B. Ahern)

The main purpose of this Bill is to provide for the continued development of the Industrial Credit Corporation plc. It allows for an increase in the amount of borrowings which the corporation may undertake. The Bill also provides for a change in the name of the Industrial Credit Corporation to ICC Bank plc., for the supervision of the company by the Central Bank, for revised principal objects of the company, for the company to amend their memorandum and articles of association to accord with the changes in the Bill and for some technical matters.

The ICC's current borrowing limit of £1,000 million, which is also the amount which may be guaranteed by the Minister, has almost been reached. This limit was introduced under the terms of the Industrial Credit (Amendment) Act, 1990. I should point out that borrowing includes deposits with the company along with borrowing in the normal sense. The Bill provides for an increase in the borrowing limit to £1,300 million but leaves the guarantee limit unchanged at £1,000 million.

This Bill marks a departure therefore in that the increased amount of £300 million in ICC's borrowing powers will not be guaranteed by the State. It reflects the policy which has been in operation for some years of reducing the Exchequer's exposure through guarantees to commercial State bodies in so far as that can be achieved. Steps will be taken by ICC to ensure that the two types of borrowing will be clearly segregated and identified by lenders and depositors. I wish to make it clear that there is no change in relation to existing lenders and depositors with the ICC; their funds continue to be fully covered by the State guarantee already in place.

Before dealing with the detailed provisions of the Bill, I should like to give the House an indication of developments in relation to the corporation since 1990, when a Bill to increase ICC's borrowing limits was last before this House.

ICC are a merchant bank of some standing, particularly in the small and medium sized business sector, where they have most of their customer base. ICC have been developing along satisfactory lines. They have enjoyed a consistent run of profitability since their incorporation and have paid dividends to the Exchequer over many years. After tax profits in 1991 were £5.86 million and dividend payments increased from £1.4 million to £1.8 million. These assets amounted to over £1 billion at the year end. ICC recently published their half year figures, which showed a steady performance in profits after tax of £3.27 million and a continuation of their interim dividend, yielding over £700,000 to the Exchequer. The chairman stated at the release of these figures that he expected a satisfactory outcome for the year, in the absence of unforeseen circumstances.

ICC recently withdrew from activities which were not providing an adequate return, such as hire purchase, leasing and fund management. They are now concentrating on their core activities — term lending and trade finance to small and medium size business, treasury including foreign exchange and venture capital. In addition, they will continue their involvement as an adviser in corporate finance activities. The ICC are adopting a prudent approach to the growth of their assets rather than a push for growth; they are concentrating largely on working their existing assets to maximum effect. I am confident that the trend towards full commerciality of the ICC, which has been ongoing for some time, will continue under the direction of the new chairman, whom I recently appointed. The provisions of this Bill will help the corporation to maintain their present steady progress and enable them to meet the challenges of the post-1992 situation in the financial services area.

My predecessor announced in May 1990 that he was inviting firms to tender for a consultancy assignment on the future options available in relation to the ICC. Subsequently the consultants report that ICC would require additional capital in the years ahead which would not necessarily be available from the Exchequer and without which the future development of the company could be restricted. They found that there was no compelling strategic reason for the continued retention of the shares in ICC in State ownership. They therefore recommended that the Minister should sell his entire shareholding in ICC. The Government accepted that the option of a sale of the State's shareholding in ICC should be explored further and the consultants were employed — on a no sale no fee basis — to assess the prospects for a sale. However, no suitable purchaser of the State's shares in ICC has emerged so far. I am keeping the matter under review.

There have, of course, been some significant developments in the State banking sector since legislation relating to the ICC was last before this House. The trustee savings banks have now amalgamated. Legislation extending, inter alia, the areas of business that ACC can engage in was passed earlier this year. It will be obvious that the main sections of this Bill follow closely the lines of the ACC Bank Act, 1992. It is important to recognise, however, that there is still a substantial difference between the ICC and the ACC Bank in that the former is a merchant bank concentrating on the business sector with few retail outlets, whereas the ACC Bank is now largely a retail bank with a traditional concentration on the agricultural sector.

There has been suggestions that the State's banking activities should be amalgamated, and perhaps sold to the private sector. A simple merger of the ACC and the ICC has also been suggested. I am keeping the various options available to me under review. All I can say at this stage is that I am not ruling out any particular course of action, including a sale of ICC, should a suitable purchaser emerge.

As regards developments in the banking industry generally in recent years, we had a very interesting and thorough debate here on 11 June last. As I indicated then, legislation for the building societies, the Trustee Savings Banks, the ACC and now ICC has been introduced by the Government over the past few years. The EC Second Banking Directive will open up the Irish market to further EC competition. Steps have been taken — such as lowering primary and secondary liquidity requirements, the adjustments to the DIRT tax and new arrangements for the bank levy — aimed at improving the competitiveness of Irish banking in the new environment. The more stable economic and monetary conditions that will result from full Economic and Monetary Union will help Irish business, including the banks. The completion of the internal market and greater economic and monetary integration in the Community will create opportunities as well as challenges. The more competitive that Irish banks are in their domestic market, the more likely it is that they will be competitive in the broader European market. The financial institutions — not least the ICC — seem to me to be keenly aware of the need to increase their competitiveness in the light of the challenges ahead. Size is not necessarily the major impediment, depending on the segment of the banking market being sought by our domestic institutions, including ICC, ACC and the TSB. Indeed, some of our financial institutions, despite their relatively small size, have made good progress in markets abroad.

The Central Bank and my Department are working to ensure that we have a healthy and competitive banking sector which will be capable of meeting the challenges ahead. The availability of capital — including working capital and venture capital — from the banks, particularly for small and medium sized firms, is an issue frequently raised in recent months, not least in the debate here on 11 June. As I indicated to Senators during that debate, the Central Bank have investigated this matter at my Department's request and have assured me that there is no evidence that the banks are operating a credit squeeze. Bank lending is not constrained by capital requirements or liquidity conditions. However, both borrowers and lenders have become more cautious. It is my belief that while there are ample funds available for sound viable projects, it can be difficult to obtain finance for the more high risk type venture.

While the provision of working capital and equity finance for small and medium sized enterprises is a commercial matter for the individual banks concerned, I have exhorted the banks to act in a positive way to assist Irish business. I will be keen to monitor the banks ongoing response in this area. I am glad to note the recent initiative by the Small Firms Association in securing a particular scheme for its members with one of the main banking groups. It is notable also that ICC have long operated a venture capital arm.

Senators will recall that the banks have made available £10 million under the young entrepreneurs scheme. In the context of the Programme for Economic and Social Progress the four associated banks agreed in December last year to provide a further £15 million for the creation or development of small and medium sized businesses with employment potential. These schemes offer loans at reduced rates of interest and do not require personal security from suitable applicants. More than 220 projects have so far been assisted under these schemes. These are new business projects which in all likelihood would not have proceeded without the availability of these schemes.

Also in this general connection I can indicate that my officials have been holding discussions with the life assurance and unit fund industries regarding the impact of the DIRT changes on their products. The importance of equity investments for small and medium sized Irish industry is one of the major factors to be taken into account in regard to any changes which may emerge from the current discussions.

To return to the provisions of the Bill, I have already referred to the fact that the increase in the borrowing limit of £300 million provided for in this Bill will not be guaranteed by the State. Following the enactment of the Industrial Credit (Amendment) Act, 1990, my Department in conjunction with ICC undertook an examination of this question in so far as it relates to the corporation. As a result of this examination I am satisfied that the corporation can — and indeed should — tap the market for unguaranteed deposits. I wish to repeat that the position of depositors and lenders who already have funds with ICC is not affected by this change.

Following the passing of this Bill, ICC propose to establish a subsidiary company which will take deposits on an unguaranteed basis from the outset. Deposits with the parent company will continue to be guaranteed within the limit of £1 billion. In this way ICC will distinguish clearly between deposits which are guaranteed by the State and those which are not guaranteed. This arrangement will enable ICC to continue their normal business, but their further growth will be funded from the new unguaranteed deposits through the proposed new subsidiary. The ICC will underpin the subsidiary with their resources.

ICC are of the view — and I accept their view as they are the ones who have to operate the arrangements on the ground — that it is essential to adopt this structure. They have done their research on this matter and their considered conclusion is that this is the arrangement which will best maintain confidence in the bank. Any other arrangement could create confusion about the level of guarantee possessed by a particular depositor. It is very important not to create any uncertainities in a banking situation and ICC's proposals in this regard are designed to maintain full confidence in the ICC.

I might add that this arrangement is not part of the Bill itself, but I thought that it would be of interest to Senators to know how ICC propose to adapt to the change in the guarantee arrangements. I am confident that ICC are in a sufficiently strong financial position to make a success of this substantial change in the manner of their funding.

I now turn to the provisions of the Bill. Section 1 is the definitions section and is self explanatory. Section 2 provides for a change of name of "ICC" to "ICC Bank plc". The use of the word "bank" in ICC's title serves to emphasise its commercial orientation. It is seen as helpful from a marketing and development viewpoint. Also, in international terms, it is desirable that the word "bank" be used for ease of recognition.

Section 3 provides for the application of certain supervisory provisions contained in Central Bank legislation to the ICC at a date, or dates, to be determined by ministerial order and after consultation with the Central Bank. The supervisory provisions will be administered by the Central Bank itself; in other respects I, as Minister for Finance, will continue to exercise my existing functions with regard to ICC. The proposed Central Bank supervision is in line with Government policy in this area, namely, that given the small scale of resources available for financial supervision of deposit-taking institutions in Ireland and given EC requirements for the regulation of financial markets, it is appropriate that a body such as the ICC should come within the prudential supervision of the Central Bank.

This provision is similar to a provision in the ACC Bank Act, 1992. The change has already occurred in the case of the Trustee Savings Bank and building societies and is part of the consolidation process that is required by the imminent completion of the internal market in financial markets, with its attendant increase in competition. ICC are fully supportive of this new relationship with the Central Bank and see it as an essential step on the way to becoming a competitive banking institution subject to the same rules and regulations as the other credit institutions supervised by the Central Bank. ICC have for some time now been submitting financial reports to the Central Bank on an informal basis similar to those which the bank requires of other credit institutions.

Section 4 is concerned with making explicit the powers of the corporation to engage in normal modern banking and financial transactions and to provide associated services. The existing principal objects of ICC date back to the 1933 Industrial Credit Act, which established the corporation, as amended in the 1971 Industrial Credit (Amendment) Act. These provisions required that the principal objects of the company should include dealings of the corporation with trade or industry in the State. There will be no change in ICC's traditional role as a merchant bank primarily for the small and medium sized indigenous business sector except that the scope of their operations will be somewhat enlarged. The section also provides that the exercise of the revised objects may be made subject to such conditions or limitations on amounts as may be determined by the Minister for Finance or the Central Bank, as appropriate.

The section is similar to section 5 of the ACC Bank Act, 1992. Given that both State banks are expected to operate on a commercial basis and that both will be subject to Central Bank prudential supervision, it is desirable that similar principal objects should apply to both banks.

Section 5 provides for an increase in the borrowing powers of the ICC from £1,000 million to £1,300 million. The last increase was in 1990, and the increase now proposed should last for a number of years, given ICC's concentration on existing assets, rather than the pursuit of asset growth.

Section 6 requires the ICC to amend their memorandum and articles of association to bring them into line with the provisions of this Bill.

Section 7 is a technical measure which extends the scope of the Bankers' Books Evidence Act, 1879, as amended, and the Bills of Exchange Act, 1882, as amended, to ICC. These Acts already apply to banks and building societies, and to ACC Bank, and it is desirable that ICC should be covered similarly. The first part of the section relates to the acceptance of bank records as evidence in the courts, and the second part to the rules relating to bills of exchange, cheques and promissory notes.

Section 8 gives the short title, collective citation and construction.

I commend this Bill to the House.

Mr. Staunton

The Bill presents no difficulty for Fine Gael. It is fairly mundane and is similar to many Bills relating to Government banks such as the ICC and the ACC that have gone through the House.

The Minister said the main purpose of the Bill was to provide for the continued development of the Industrial Credit Corporation. Given that the corporation are a State bank, it is obvious that there will be occasions when it will be necessary to come before the Legislature to make provisions in line with development. We want to assist in that regard.

The Bill allows for an increase in the amount of borrowings that the corporation may undertake. That is accepted. While under the Bill the ICC may increase their borrowing limit to £1,300 million from £1,000 million, it is interesting that the extra £300 million will not be covered by guarantee. That is a welcome innovation. We have to move away from the notion of continued Government guarantees for banks and the establishment of Government controlled banks in the commercial marketplace in a different way from the way commercial banks are set up. I know that the intention within the ICC is to set up a separate structure by way of a separate company to administer the increased borrowing so that the issue will not be clouded for depositors already investing under a guarantee arrangement. New criteria will be laid down for future lenders.

The change of name is a non-issue; it is a marketing feature. The title "Industrial Credit Corporation" may seem a little cumbersome and, perhaps in this age of marketing "whiz-kiddery" the change to "ICC Bank plc" is a more jazzy title.

The supervision of the company by the Central Bank is in line with the Government policy of seeing that State banks compete with private sector banks on fairly identical terms. Such a regulation is necessary.

As the Minister mentioned, many of the elements dealt with in this Bill have a parallel in the legislation for the ACC that went through the House some time ago. The main scope for debate in relation to this issue is not so much the narrow confines of the Bill but rather the implications of the legislation.

The most serious matter was the decision in principle taken to carry out in conjunction with the consultants, Stokes Kennedy Crowley, an in-depth assessment of the Industrial Credit Corporation. The consultants were also asked to make recommendations to the board of the ICC, recommendations that would be of compelling interest also to the Government. The consultants had no difficulty in recommending that the Minister sell all his shares in the corporation. Given the movement towards privatisation that is evident these days, the Cabinet subsequently agreed in principle to that recommendation. Matters were taken a little further and the ICC were then bidding for a suitor, Government shares were being sold, leading to the privatisation of the bank, a fairly dramatic development that might have been unthinkable some years ago.

Enormous changes are taking place within the ICC. Initially the ICC were set up as a State bank and were narrowly confined to the industrial sector, as indicated by their name. The original title of the bank, which still remains, was the "Industrial Credit Corporation", not the "Commercial Credit Corporation" nor the "Business Credit Corporation". The primary purpose of the corporation was to be a main arm of Government in the industrial sector. There was a structure of funding companies, an equity structure, a borrowing structure and, possibly, a Government grants structure. An element within that was credit.

In the early years it was recognised as an extremely difficult task to get industrial projects off the ground without the provision of a benevolent bank that had State support and whose raison d'etre was to work in that sector. The huge changes that have occurred probably reflect the change in the structure of Irish industry. In the early years the ICC were heavily involved in the funding of many indigenous Irish industries and in that regard they performed a very major and satisfactory role. That kind of banking was very difficult because it was concerned with a high risk sector of the economy. With the movements towards free trade with Britain and the European Community that objective became more and more difficult. A massive investment in Ireland through multi-national companies and the activities of the IDA also had to be taken into consideration. To a large extent the multi-national companies were not banking with banks such as the ICC.

There was a major levelling of Irish industry through European Community membership and substantial rationalisation in the textile sector and there was a change in the ICC's attitude towards business. The portfolio of the ICC today reflects a much smaller proportion of the total lending, short, medium and long term, involved in the sector for which they were established, namely the industrial sector. It is obvious that before there was a change in investment there had to be a change of policy within the ICC. Before there was ever a question of privatisation, of changing the name or of getting involved in marketing, the corporation which was set up by the State to bank industry gradually became much more involved in commercial banking in areas unrelated to the raison d'être for which they were established. The ICC became heavily involved in hire purchase, leasing and all kinds of commercial activities in the services sector. Those activities had nothing to do with the industrial sector. Arrangements were entered into with pubs, shops, restaurants and hotels, activities far removed from the bank's original purpose.

It is disappointing that with the ICC in the marketplace and with a supposed huge number of people invited to consider purchase, there is no buyer. The Minister stated that no suitable purchaser of the State's shares in the ICC has emerged so far. One of the problems is that measured in either international terms or in Irish terms — when one considers the size of our two big banks, the Allied Irish Bank and the Bank of Ireland — the ICC are a very small bank. The Minister referred to several options the State might have in this area. He talked of a possible merger with the Agricultural Credit Corporation. That is what is needed here, given the relatively small size of the ICC and the ACC; the fact that the ACC are becoming involved in mainstream commercial banking activity to a greater extent; the problems in agriculture and that the ICC are adopting an identical policy in which a much lesser proportion of lending is in the industrial rather than the commercial sector.

Where there is this convergence of the two banks in the centre, and given that they are both relatively small banks, it would seem to me that the most rational approach the State could adopt if they are interested in privatisation — and I would support the privatisation of these two banks — would be to positively seek such a merger. We must consider the convergence and the fact that these two banks are dealing with the State and know how to deal with Government. The idea of knocking heads together might not commend itself to some people working within the system when one thinks of the personnel issues involved, but objectively, from a Government point of view it might be the best route to take — to get the ACC and the ICC moving together, to privatise a merged single bank rather than attempting to sell off two relatively small banks.

The Minister referred to the venture capital issue and the fact that the ICC are involved in it. That is one of the biggest problems confronting the Minister today. We talk about creating jobs here, but it is a very difficult environment. Sometimes there is a very hostile and conservative attitude to risk in this country. The Government abolished NADCORP, which was a State venture capital agency. I regret that very much, because a body like NADCORP was established specifically to get into venture capital only. I do not think the record of banks becoming involved in venture capital is all that good, because you are talking about training, which is completely different. If one is trained for banking or for the disciplines associated with it, one is being trained to adopt an attitude in the assessing of high risk ventures which is not the appropriate training for this area. I have seen cases where banks involved in venture capital simply continued to encounter huge problems because their personnel are trained as bankers and not as venture capitalists. I take a serious view that the present Government do not have a venture capital arm. It is not good enough to say that there is a venture capital arm in the ICC, that that is the arm of Government in the venture capital sector, because at the end of the day it is a bank which is behaving more and more commercially in competition with the commercial banks and commercial interests.

The Minister may have to re-examine this entire venture capital issue. There are huge problems in the Irish industrial economy, particularly when one sees the huge proportion of industrial wealth now held in the multinational sector or how dismal is indigenous Irish performance in the industrial sector. Let us make a comparison with some other countries, such as Finland and Sweden. Finland was a country decimated by World War II. They fought both sides in the war and had huge war debts to be paid to the victors. They have harsh climatic conditions. The Finns have legislation which will not allow foreign companies to come in and take majority participation in industrial companies. Yet from a nil base they were able to build up an indigenous industry. This was built by the Finns through technical institutes, through learning, through banks, where their resources and activities are much more in the hands of their own people than are ours.

To be frank, for a long time I have not regarded the ACC and ICC as benevolent banks or arms of Governments. In the morning I would happily hive them off into the private commercial sector. I would not see them as being special, with a special brief, because that has not been happening. The gap remains. The Minister should take a very close look at the dearth of available fresh capital. I think he should agree with me that, for all the reasons to do with the wrong kind of training, a bank is not the appropriate structure. There is a glaring need for the State to look at some type of structure similar to NADCORP before that situation can be rectified.

Having said that, I congratulate the ICC on their success over the years. I know their recently retired chief executive. I know their present chief executive fairly well and admire him very much. ICC are a competent organisation and I wish them well.

Mr. O'Keeffe

Obviously, the purpose of this Bill is to update the activities of ICC set up originally under the 1930 Act. A lot of adaptations have taken place in the interim period, the latest being that of 1990 when the Minister of the day extended the limit on their borrowing from £800,000 to £1 billion.

What is being sought under this Bill is an expansion of their activities into other areas. There were and are restrictions on them at present. The Bill suggests that their scope is too limited, that they should expand from the definition of what is described as the small and medium sized business sector. Under the provisions of this Bill the ICC will be able to deal with the professional sector, including solicitors, architects and engineers. That will necessitate new contacts, which it is to be hoped will ultimately increase their present volume of business.

While the Bill will bring the operations of the ICC under the supervision of the Central Bank, from our experience that will mean little change. To date they have been providing information to the Central Bank — a requirement of this Bill — which I do not think should pose any difficulty for ICC.

What has happened is that the ICC have found themselves approaching their borrowing limit of £1 billion. Therefore, it was expected that within three years they would reach their current limit of £1.3 billion. Obviously, we will be exhorting the Minister, if ICC are still in State ownership when that time comes, to be in a position to cater for that eventuality.

I understand also that ICC want to remain a specialist bank in the smaller and medium sized business sector. In fairness to them, it has to be stated that they have been a resounding success. For instance, last year they paid a dividend to the State of £1.8 million, not an insignificant sum to the State coffers. My understanding is that with the increase in the borrowing limit this dividend will increase substantially. We should never forget that they were subjected to a tax charge of £1.5 million last year, giving to the Exchequer a total yield of £3.3 million.

Interesting points have been raised about privatisation. It is interesting to examine the valuation of the company. It has fluctuated from between £45 million to £75 million. That raises the whole question of what the Government should do with this bank. Should they privatise if? If we look at it in the cold, calm light of day we see that, even if we were to spend 50 per cent of it we would still have an asset worth in the region of £35 million. Any Minister for Finance will have to look seriously at that option and ask why he should hold on to a State asset which can yield the Exchequer £35 million almost immediately.

I understand that the time may not be right for flotation, given the recent experience of Guinness Peat Aviation. Under the new provisions it might be advisable to allow this bank to extend its activities and to become even more attractive and more commercial.

Of course the question of their amalgamation with ACC arises. If that occurred it would allow the base of operations of the two banks to be extended and ensure that in the event of privatisation we had a far more valuable asset to float and that they would have representation in almost all our large towns and cities. The Minister must seriously examine that prospect. Between them they would be an extremely valuable and immediate asset to the State, something from which the Exchequer could benefit while at the same time continuing to reap the benefit of profits from a privately owned operation.

As a result of the expansion in the building societies, the trustee savings banks and others, the financial services market is competitive. It will become even more competitive and we can be proud of the achievements of the ICC in looking after this specialist sector.

Many people will complain how expeditiously they move against businesses in difficulty; I understand they topped the league at one stage, but to be commercially viable nowadays a bank must look at their operation and ensure that they have a return for their money. However, as a State enterprise we can all be proud that they achieved what they set out to do.

Given that we have expanded both ACC and ICC the Minister should allow them to become much more commercial, at the same time keeping in mind that the amalgamation will ensure greater competition in the financial services market. It will increase the State asset value of both companies and when the time is right I will exhort the Minister to consider amalgamation and privatisation. I have no difficulty in recommending this Bill to the House.

Dr. Upton

This Bill appears to be a measure to make the ICC a more attractive proposition for privatisation. Their new name, the ICC Bank Ltd., creates the right aura for that element of society who, from time to time, like to purchase a bank. The prospect of the privatisation of the ICC must be seen in the context of the experience of recent privatisation attempts in this country. I do not want to rake over the painful history of these privatisation traumas; suffice it to say that the public's confidence in the whole process has been very seriously eroded. The decent and correct thing for the Minister to do now is to restrain himself from rushing down the road to further privatisation, even if this haste is carefully disguised in the form of an innocuous Bill which is designed to give the right impression to people in the financial world who are able to understand the process of financial wink and nod. These wise financial people understand only too well the political contortions that a good Minister has to go through. These are the people who get value for money from the weekend newspapers where the finer points of the political game are explained to them. Indeed, on that score, to digress slightly, a particularly curious columnist appears in one of these newspapers — a colleague in either the Minister's House or this House — and expresses his or her omniscient views at great length. It is remarkable that a politician with that amount of column space keeps his or her name secret. Maybe someone as pious and knowledgeable as the Minister might be able to solve the mystery.

Mr. B. Ahern

Whoever it is he does not like me very much.

Dr. Upton

I had not noticed and I read it most weeks. The provisions of the Bill give explicit powers to the ICC to provide a full range of banking and associated financial services. As far as I can see that appears to be another move to clear the decks and get rid of unwanted restrictions and baggage attached to the ICC which those people who favour privatisation find troublesome and inconvenient and indeed an inhibitory factor in the whole process of privatisation.

The process today is the third act of a three part serial involving the privatisation of three banks, the ACC, the Trustee Savings Bank and now the ICC. The least one would expect is that the Minister would have left a longer interval before getting back on the course of privatisation. The aims of the Bill are secondary to the objective of facilitating Irish industrialists trying to develop the economy. The main role of this legislation, introduced on the last day before the recess, is quite simply to polish up the family silver prior to it being flogged for a quick financial fix. Indeed, the extent of the financial fix involved is fairly small if Senator O'Keeffe was correct when he said that the bank is worth £35 billion. If he is correct, then it is not a great surprise that the rumours to the effect that nobody is prepared to purchase it appear to be consistent with the value Senator O'Keeffe put on it.

The thinking process behind the Bill is indicative of the Government's inability to think strategically in relation to the possibilities for linking the existing banking institutions, namely the ACC Bank and the ICC, although I was pleased to hear the Minister at least allude to the fact that this is still a possibility. If those banks were brought together they could fill a valuable role in the context of the developing Europe and they would have the potential to bring considerable financial benefits to the country from the huge European market which we voted to become an integral part of recently. There has been much criticism, rightly, levelled at the commercial banks because of their lending policies and their reluctance to apparently take any significant risk in relation to their ability to invest and to support industry. The Irish commercial banks seem to be committed to the idea of restricting their investing and their lending to safe bets. If this country is to develop there will be a need for what Senator Staunton called "a greater supply of venture capital". There is a crying need for considerable developments in that area.

In invigorated new banking group under the indirect control of the State and perhaps in association with some dynamic element of the banking world could provide worthwhile and badly needed competition for our excessively cautious commercial banks. It is very important when the economic control of this country is rapidly moving to Brussels that we should have a banking group committed to providing venture capital and support for Irish industry.

Senator Staunton was correct when he spoke in terms of the lamentable state of investment in Irish industry and indeed the manner in which Irish industry has performed compared with the levels of performance of the multinational industrial sector located in Ireland. Our indigenous industry has fallen behind these multinationals to a considerable extent. Part of that problem relates to the availability of venture capital and another part to the excessively cautious nature of Irish banks. That is understandable from their point of view because banks exist to make profits for their shareholders and various other proprietors. They do not exist to develop the economy and it is important that the Government put in place the various aspects of a banking service needed to facilitate such development.

I am disappointed at what I believe to be the basic reason behind the introduction of the Bill at this stage. It is essentially part of a process towards further privatisation and I do not believe that that should be the priority. In terms of our priorities we should be setting in place a system of banking which will supply venture capital for those Irish industrialists committed to the development of indigenous Irish industry.

Mrs. Honan

I welcome the Bill and we should be aware that it affects the lives and jobs of many people. This legislation is important to many families.

The ICC are a merchant bank of some standing, particularly in the small and medium sized business sector. They have played a major role in the financial services and support of Irish businesses for over 60 years. They see themselves as being involved with customers in a partnership to their mutual advantage. I have strong views on the banks and their support of industry which helps to create jobs. Down the years, I have been impressed by ICC and their closeness to their customers. The company have also accumulated an understanding of business and its needs. We talk in this House today of changes, and we had a debate recently on banking and my colleagues and I criticised banking in the nation today.

The ICC have stayed closer to their customers than some of the other banks. With all the changes in the European scene, there are changes also in the banking world, but they aim to build on their strengths to enhance further their position and provide for the financial services and the business sector. They are involved in cash to tourism, to the food sector, to engineering and to the retail sector. I pay tribute to the board and their members. Sometimes it is only the person upfront who gets credit. The ICC have a good record. I will leave privatisation issues to people who are more familiar with finance and to the Minister.

The Bill is short and it is important. Mr. Michael Quinn, the managing director of ICC recently said:

Our long experience as a specialist Business Bank laces us in the unique position to partner the growth of Irish enterprise.

He intends to build further on this specialisation and expertise being entirely focused on servicing the financial needs of business, in particular small and medium-sized business. Over and over again in this House, I have talked to Ministers for Industry and Commerce and Ministers for Finance and hoped that they would listen to my suggestion that there should be more finance, even small finance, in place to back up Irish industry that got into financial trouble. I am not moving away from the Bill, even though I am really referring to the IDA, to finance and to industry.

This bank has saved some companies that would otherwise have gone to the wall, but sadly we still have not got our act together in protecting and putting in place finance for Irish based and Irish owned companies. We seem to think that the Irish entrepreneurs are not as good at being industrialists and employers as foreign companies. They are not listened to by Ministers, officials and the authorities. I have said this over and over again, I will continue to say it until some Minister takes a hard look at home-based industries to ensure that they are given the same if not better concessions than the people who come into the country but if they hit trouble, they leave. Members in this House know of many such cases.

I welcome this important Bill and thank the Minister for bringing it to this House. I hope that in the quieter weeks a couple of Ministers will sit down and listen to me. Irish industries that need finance would have closed by now but for the fact that they were tough. I know some of these entrepreneurs. I am aware of the challenge facing all of us — the banks, the insurance companies and industry. This bank has survived and has a good record. I have no problem with this bank being privatised or left as it is as long as it continues to back small and medium sized businesses that will maintain jobs. They play a major role in tourism and industry which creates jobs.

I welcome the Bill and I thank the Minister for bringing it to the House.

Mr. Costello

I agree with Senator Honan's remarks in relation to the need for the banking industry to be more sensitive to the needs of indigenous businesses.

The ICC have a consistent track record as the Minister indicated. Since its incorporation it has made a profit and has paid dividends to the Exchequer over many years. It has been a success. One always wonders why something that is a success has to be tinkered with or changed. We would hope that any changes will be for the better.

According to the annual report of the Director, Mr. Quinn, the ICC's core activities, lending, treasury and venture capital, achieved record profits in the past year. It was a good year for the ICC. There were certain limitations in the hire purchase and leasing areas and the Minister was very critical at the time that their performance in these areas was somewhat disappointing. It is interesting to note that the ICC divested themselves of those activities. They withdrew from the hire purchase and leasing markets and ceased fund management where they were having difficulties. That is the mark of a good management team. As a result in the past six months, they have increased profitability with a pre-tax profit level of 9 per cent and a 6 per cent dividend which is strong by any standards.

As the Minister indicated the Exchequer received £1.8 million last year, a sizeable sum. The Exchequer is doing quite well from what Senator O'Keeffe described as an asset valued at about £35 million if sold on the open market. The profits in the six months, to end of April, were £4.65 million. The bank have rectified the difficulties experienced in 1991 and concentrated on the core business, which is the area of lending and venture capital. They have had enormous success in an area they penetrated over the past three or four years, foreign exchange services and treasury risk management and at present have an 11 per cent growth rate compared with the norm of 2 per cent. Clearly they are able to identify new areas and cut adrift from loss-making ones. That is a sign of a very healthy operation and a very healthy management structure.

The question which Senator Honan focused on is one which we as legislators and partners in the social partnership comprising industry, business, the farming community, the trade union movement workers and the Government must consider. Her question related to industrial policy and how best we can promote the policy outlined in the Programme for Economic and Social Progress. ICC are a key player in this regard because that is their function, they were set up to provide industrial credit and to specifically target small and medium-sized indigenous industries. That still remains a major part of their operation, whether in tourism, small manufacturing units or the agri-business, in which the ACC are also involved. They have been successful in this area as well as in the venture capital area and have done a reasonably good job.

We should be focusing our attention on some of the larger banks who have more assets but have been extremely cautious in making them available to the Irish investor, industrialist, or developer. We must realise that the banks, particularly the State banks have an enormous responsibility to participate to the full in the development of our infrastructure, and our industrial base so as to create employment opportunities for our people.

Every Minister must focus on this and examine the track record of the banks. The banks promised in the region of £50 million under the Programme for Economic and Social Progress towards the achievement of certain targets. That is peanuts, as the Minister knows from the various schemes he has introduced to reduce the unemployment figures. It will not work. The necessary investment is not being made and jobs are not being created. The Programme for Economic and Social Progress is wilting as a result of a lack of investment and in sufficient money from the commercial sector and the failure of the small and medium sized businesses to expand sufficiently.

The ICC deal to a large extent with this area as well as with group schemes in the State and semi-State sectors. The teaching and the nursing professions, publicans and many people in the State and semi-State sectors are involved with the ICC.

The question of how we might improve indigenous investment should be considered by the Minister. The Minister when commenting on section 9 said that there have been suggestions that the State's banking activities should be amalgamated, perhaps sold to the private sector and that the simple merger of the ACC and ICC have also been suggested. We have to look at all the options.

First, on the option to sell the Government attempted to sell ICC last year and as I understand, found no takers. There simply was not sufficient interest in the open market. In my view the extra fillip being given in this legislation is directed at attracting the private buyer and investor to ICC. It is clear that the additional £300 million borrowing limit that is not guaranteed by the State is directed towards operations in the private sector. I imagine the Minister intends to look for private offers.

It would be a shame if that was to happen. The ICC have consistently returned a profit to the State. They have been successful. In the venture capital area management are level headed, have made good moves, and have cut back where they found themselves in a loss-making situation. What we have to do is work towards the amalgamation of State corporations, whether ACC, the ICC and the Trustee Savings Bank, all of which have been touched by legislative proposals in the recent past, into a new State financial structure. In the first instance we need a strong financial base with good financial assets which none have on their own but would have if amalgamated. That is necessary in the European context because competition will be much greater in the Single Market.

Secondly, we need it because of Government policy; the policy which this Minister, more than anybody else, enunciated in the Programme for National Recovery and in the Programme for Economic and Social Progress. The thrust of the social partnership is to deal with unemployment, the social problems and the social services. To resolve our problems we need the fullest co-operation from the banking system, I do not think that has been forthcoming. One way of doing it is to suggest that these amalgamated corporations, which will be banks in the full sense of the word, should follow that direction in the future.

Something I have often wondered about both in the context of the postal services and the post offices is the fact that there are offices around the country that would be an ideal base for a level of banking. A certain level of banking is taking place. Let us look at our own municipal and county authorities and the city of Dublin for which Dublin Corporation last year had a budget of £218 million which is a substantial amount of money. I am sure Dublin County Council had a similar budget. If we go around the various local authorities we will find that there has been a substantial amount of money — not less than £1 billion — going through their hands in the course of a year in the form of their annual budget. I do not see why the local authorities could not have the benefit of the State banking system to deal with the processing of that money rather than the present situation whereby it is put into one bank or the other. Rather than set up a municipal bank this is an area from which we could be looking for further investment, further indigenous funds which could be used for the purpose of building up local industries.

Because the new legislation removes the ultra vires rule allowing the local authority to set up their own business, their own enterprise, that is an area on which we could fruitfully focus attention. I would direct the Minister's attention to the latter option — not at the privatisation option — of examining the original function for which the bank was set up, the extended function that has been given to it now, extending the assets further, making it more competitive and refocussing its attention on the development and support of indigenous Irish industry. The National Development Corporation which has seen lean days in recent years should also be brought into the reckoning here.

We have a successful operation here in the ICC and I hope the proposals in the Bill will continue to make it more successful in competitive and expansion terms. I hope the thrust of the bank's activities will be further refocused on an internal, national capacity as well as on operating on a broader European plain. The bank's assets and investment should be directed towards the alleviation of the unemployment crisis and the Minister for Finance should direct his energies towards improving the strength of the State banking system through amalgamation rather than through privatisation.

Mr. Hussey

I welcome this Bill, the main provisions of which are to provide for the continued development of the Industrial Credit Corporation, to allow the corporation to increase the amount of borrowing, and also to change the name from the Industrial Credit Corporation to the Industrial Credit Corporation Bank plc. and also to give supervisory power to the Central Bank. It is very important that our banks would be streamlined, particularly when at the end of the decade we will have to face the biggest change of our lifetime, the introduction of the EMS, when we will have a European Central Bank made up of representatives from all the other banks of the European countries. This will result in enormous change and it is important that our banks be geared up for it. We all have our own ideas about banks and banking and very often I think that banks are only concerned about profit margins and the amount of profit they show at the end of the year. It is important that they show themselves to be profitable but it is also important that they make a major contribution to the development of the economy and particularly industry. I would like to see the banks paying more attention to native industries because very often those industries are starved for finance. As public representatives we meet people from time to time who are trying to set up industry and they tell us that they cannot get adequate finance to do so, whereas foreign industrialists coming in seem to be able to get all the concessions they seek provided they are able to create jobs. I would like to see the banks leaning more towards native industry, giving more assistance to people who are prepared to make a commitment and who are prepared to create jobs in their own locality because we need something radical like that at present. Banks should not just be concerned only with the profits they show at the end of the year; they should be concerned about the development of the economy, the creation of jobs and so on. I would certainly like to see them give more attention to that particular area.

The Industrial Credit Corporation — as they have been known up to now — have given great assistance to small industry: indeed, that was the purpose for which they were set up many years ago. They have succeeded in bailing out many industries and giving them a helping hand along the way and they still have continued to show profits. That proves that they have been a good organisation. I hope in the years ahead they will continue to prosper, to help Irish industry and to create employment where possible.

Professor Conroy

I will be brief. I had a three hour speech but in view of the day that is in it I will abbreviate it. The Minister has indeed brought in an important Bill and the fact that he is with us and has seen the necessity and importance of getting it through before the end of the session is something to which we in this House should respond by welcoming and passing it this afternoon.

It is a particularly appropriate this afternoon that a banking Bill should be passing through because it is an afternoon when everyone has been waiting very intently, as indeed my colleague Senator Hussey has inferred, to hear what the Bundesbank have decided at a very crucial meeting today. If the rates are being increased, particularly the Lombard rate, that will have very significant effects for banking throughout the rest of the European Community. It is also an appropriate day to have a banking Bill in this House; it is very relevant also that it is the ICC. ICC has been one of the success stories of the Irish State and one of the success stories of Irish banking. It is appropriate that we in this House should, from time to time, look with a very critical eye upon our banking institutions. It is also appropriate that we should give them the great credit they deserve in that they have shown outstanding ability within the Irish State.

The professional ability of our bankers is second to none. They often have a relatively small staff as compared with their various competitors. Among those success stories has been the ICC. I join in sending congratulations to the previous chairmen and boards, the present chairman and his board and the excellent executives and staff of that bank. I wish them well in the future. They have suffered under a number of disabilities. One of these, which is being clarified today, is their title. I have dealt with this bank on many occasions and have referred to them on many occasions even outside this country. However, even in London, just next door to us, if you mention "industrial corporation", they do not know what you are talking about. They wonder if it is a discount house or some form of factoring financial institution. You try to explain to them that it is a merchant bank, that it is not really a merchant bank, however, but does have merchant bank capability. It is really a little bit overdue that it should have this title of "bank". That is what it is, and a very good one.

It is also relevant that we have recently put through the ACC Bill and that there have been developments in relation to the trustee savings banks. It would be reasonable to expect that with the opening up of the banking situation further banking institutions will come into this country, even though the market is a relatively small one. But for all sorts of reasons it still has certain attractions for other banking institutions. Whatever may have been the case over the last couple of years regarding privatisation, I think with this Bill and with the development in the monetary system in western Europe it is not unlikely that we will find some foreign banking institution in some way taking a share or co-operating in the development of the ICC and indeed having some sort of relationship perhaps with the ACC and TSB.

I am not absolutely convinced that those three institutions, or any two of them, should come together. They are very different institutions, as the Minister rightly pointed out. The ACC, for example, is primarily a retail banking institution, which the Industrial Credit Corporation is certainly not. In terms of size, the actual critical mass size that one would have between ACC, ICC and TSB is not very relevant in banking terms. Even the combined group would be extremely small. That does not mean that a small group cannot succeed; but it would be an illusion to imagine that in some way bringing those three together would in itself necessarily make a significant strategic difference. There might be other reasons for bringing them together.

While we are on the subject of size, it is again appropriate to be passing this legislation today because it is today that the Hong Kong and Shanghai Bank have started to totally change what used to be the great banking institution in these islands, the Midland Bank. It was the great bank over so many years in the United Kingdom and indeed had various associations over here.

Let me come back to my initial remark about occasionally being critical here of the banks. I hope the banks will listen to some of this criticism, but they very likely will not. Maybe someone somewhere or another will actually read what we are saying — and I think we have had pretty restrained debate both this time and previously. If the banks lose touch with their customers, if they do not listen to this or if they ridicule it or do not bother about it, they may well find happening the sort of change that happened with the Midland Bank, where they ignored, for example, the private retail sector. Now, too late, they made a desperate attempt to come back and call themselves "the listening bank" and had all this meretricious public relations campaign. It ended up being taken over by another banking institution.

It is very much a time of change in the banks. This Bill, the very last we are looking at in this session, is in fact probably a very important Bill in some of its implications in relation to banking in this country. I would like to join in welcoming the Minister for Finance on coming into this House on our last day here and bringing in this important Bill. I join in wishing the Industrial Credit Bank well in the future. I am sure it will be even more successful than in the past.

Minister for Finance (Mr. B. Ahern)

I thank all the Senators, who on this last day of this session have stayed back to participate in this debate, for their interest in the matter.

The Industrial Credit Corporation have contributed very well to the economic development of this State for over half a century and I think that Senators who spoke recognised this contribution. I would also like to pay tribute to the excellent work done over the years by Mr. Jim Barton, who spent much of his lifetime in various roles in ICC. In my earlier job in the Department of Labour I regularly had contact with him on different matters and he was very helpful to the Department over all of those years. I want to express my recognition of his work. The present chairman, Mr. Redmond, who has taken over since March, is an excellent chairman and I wish him well in the job.

The proposals in this Bill will add to ICC's capacity to continue their good work. As Senator O'Keeffe indicated, there is no doubt that ICC have helped many small and medium sized Irish businesses to expand and prosper over the years. As I said at the outset, ICC are already very close to their statutory borrowing limit and without the increase proposed in this Bill the company's development would come to a halt. ICC are constantly evolving their services in the light of the changing needs in our economy.

This Bill allows for the continued progress of the company in line with modern banking practice. For example, the change in the name to ICC Bank is regarded by ICC as a significant improvement in terms of easy recognition of the company as a bank and in terms of their marketing activities. It does not mean, as one Senator indicated, that I am going to sell it during the summer recess. That comment is slightly off the wall. I would tell the Senator that he is wrong. ICC are already supplying the usual banking returns on an informal basis to the Central Bank and look forward to the formal supervision by the central Bank entailed under section 3 of the Bill. It is very important, given the need for a coherent and consistent prudential supervisory system for all deposits taken in banking institutions, that ICC should be brought into that system.

The principle objectives contained in the Bill will make explicit for the first time in the legislation the powers of the ICC to engage in normal modern financial transactions and to provide a full range of financial services. Senator Staunton went back over some of the work which they have done over the years and I would like to thank him for his comments on what is going on generally in the banking system. I will certainly take note of his words of wisdom about just how we should structure some of the arrangements in the period ahead. The previous provisions in this regard date back to 1933, with some minor amendments in 1971.

The Bill will confer on ICC certain protections under the Bankers' Books (Evidence) Acts and the Bills of Exchange Acts, which have long applied to the private sector banks.

ICC is a merchant bank of some standing, particularly among the small and medium sized businesses. Senator Honan referred to their customer base. The measures proposed in the Bill are particularly appropriate, given their more commercial orientation in recent years. It may be said that ICC are one of our more successful State companies, because although they have the benefit of State support for their borrowings through the State guarantee and did derive benefits from various schemes they administered on behalf of the State over the years, they are now in a position to go forward without such supports, and I want to thank the Senators who welcomed that. ICC have been consistently profitable and are one of the few State companies to pay a dividend to the Exchequer on a regular and predictable basis. Some of our State companies have successfully done that over a few years and have then gone into decline, but there are a few who continually pay a dividend to the State and that is a success for the company concerned.

ICC do of course have to operate the same prudential policies in regard to their lending activities as other banks do. Nevertheless, they have gained a reputation, particularly among the small and medium sized indigenous business sector, for their approachability and flexibility in dealing with the clients' financial needs. Indeed, many leading companies in that sector in Ireland today have been clients of ICC when they were smaller.

ICC face the same challenging future as other banks in the open market conditions which will apply from next year. Following a £40 million subordinated debt issue earlier this year, which improved their capital adequacy ratio, they now have a firm capital base. They are a profitable bank which can face the challenges of the future with confidence. Although they are a small bank in a European context, sometimes it is not realised that with assets of approximately £1,000 million, they are the fifth largest bank in the State. We need to keep that in mind. The type of responsive and flexible customer service which they have learned to provide will stand them in good stead over the coming years. The provisions of this Bill will assist them to progress. Senator Honan and Senator Costello referred to the service they provide for their customers and the progress they have made. Senator Hussey paid tribute to them for the contribution they have made to the financial sector.

As Senators will recall, I dealt with the question of guaranteed and unguaranteed borrowings in my opening speech. As I said, there should be a clear understanding that existing depositors and lenders with the ICC are not affected by this change. Their position will remain fully guaranteed within the existing limit of £1,000 million. As Senator Staunton said, this is a useful innovation. The State guaranteed base has been decreasing for a number of years, and this is the proper way to proceed. Previously all borrowings were State guaranteed.

The 1933 Industrial Credit Act which established the ICC envisaged that the predominant function of the company would be in the giving of credit while also investing in equity shares, debentures, etc. There is no departure in this bill from the fundamental principles enshrined in the original Act 60 years ago. As Senator Staunton said, the ICC were established specifically to provide loans for industry. The principal objects set out in the 1933 Act referred to trade and industry. As happens in the case of most legislation, the people who drafted that Act had a lot of foresight.

Since their foundation in 1933, venture capital has been the core activity of ICC. Through direct subscription-purchase of shares, underwriting and the exercise of options, ICC became a shareholder in a wide variety of Irish businesses. The provisions of the Bill will not diminish ICC's activities in the venture capital area. During the past decade a number of significant developments both in Ireland and internationally have led to a greater awareness of the importance of investment capital for growth. For example, it has been recognised that exclusive reliance on debt finance might not always be the most appropriate form of capital formation and there has to be a willingness on the part of individual entrepreneurs and management teams to allow outside investors to become shareholders in their businesses. ICC's relationship with the small and medium sized sector has been and is more focused than other financial institutions in the State. This sector are increasingly interested in venture capital to improve their debt-equity ratio and to provide permanent capital for growth. In 1986 ICC, in recognition of the growing importance of this sector and of the higher risk profile investment capital presented, decided to concentrate activities in a separate division. The nature of banking with its fixed margin lending, often secured, is fundamentally different from venture capital with its total risk and no security.

Over the past five years between £25 million and £30 million has been invested annually by Irish venture capital companies. This figure excludes the BES schemes. Relative to GDP, Ireland has an extremely high level of venture capital activity. Some Senators do not seem to be aware that this is the case. ICC seek to invest between £3 million and £5 million per year. To date, a portfolio in excess of £20 million has been built up, representing both publicly quoted companies and approximately 30 private companies. Senator Honan referred to the significant contribution they have made in the provision of venture capital to small and medium sized industries. Despite the higher risk associated with the provision of investment capital, because of their strong traditional involvement in small and medium sized enterprises ICC have a unique role to play in the provision of funds for indigenous Irish industry. Of necessity, a prudent and very selective policy results in a relatively small number of suitable investments, as ICC concentrate on established business rather than startups.

With regard to the general availability of venture capital — Senator Staunton and Senator Upton referred to this issue — I think it can be accepted that ICC are doing their share in this regard. I referred to this issue in my opening speech. Senators will recall the various changes introduced in the recent past, for example, a total of £25 million under the young entrepreneurs scheme, and its successor scheme agreed under the Programme for Economic and Social Progress, which offer loans at reduced rates of interest and do not require personal security; the recent initiative by the Small Firms Association with one of the main banking groups regarding charges for their member firms and other related matters; the ongoing discussions about the impact of the DIRT changes on the life assurance and unit fund industries and the IDA's operations in the area of equity finance for indigenous industry which is likely to be increased in line with the recommendations in the Culliton report. The IDA have taken over the NADCORP portfolio.

I will continue to meet with the banks and emphasise that the availability of finance on a reasonable basis to Irish industry is in their long term best interests. The provision of an adequate supply of capital to our indigenous industry, including fledgling firms, will enable our economy to prosper and grow and will assist in our employment creation efforts. Senator Costello referred to the contribution the main banks can make in this regard. This prosperity and growth will, in turn, feed into the bank's bottom line in the normal way. The Irish banking industry is a success story by and large and I should not like to see an excessive degree of caution creeping into their operations in the light of present difficulties.

Senators Staunton, O'Keeffe, Costello and Upton referred to the merger of the ICC and the ACC. With regard to the future of the ICC and the ACC, the principal objects of both bodies will be the same after the enactment of this Bill. That does not mean the two banks will operate in exactly the same markets. The ICC are a merchant bank who concentrate on the business sector with few retail outlets. The ACC bank are now largely a retail bank with a traditional concentration on the agricultural sector. The main change for the ICC in regard to their objects is that they will no longer be restricted to lending to trade and industry within the State. It is not intended that the ICC will expand significantly into personal banking or abroad. Nevertheless, if suitable opportunities were to arise in such areas the ICC should not be restricted from pursuing them.

Any questions in relation to the future of the ICC-ACC will be dealt with after full consideration of all the options. I should like to give both banks time to settle down under their respective new Acts before taking final decisions. Of course, there is also the possibility of the sale of ICC to the private sector should a suitable purchase emerge. That item is still on the agenda. I am not ruling out any course of action in regard to this matter; all options are being kept under close review. Obviously the possibility of a merger between these two State banking institutions exists. However, the close similarity between the provisions of key aspects of their respective legislation is not an indication of any decision in that regard. I want to make it clear that the matter is still under consideration.

Legislation has been introduced in respect of the trustee savings banks the ACC and the ICC. The trustee savings banks merged over the past six months. I believe the various institutions should be given time to adapt to these changes. Any merger would be likely to involve substantial disruption while rationalisation took place. It must be remembered that each of these institutions has a long and proud history and each has its own market niche and customer base; each is successful and profitable in its own right. I would not be interested in change for change sake or merely to have a single entity which, while it would, of course, be bigger than the individual parts, would not necessarily be more successful than the parts. It is arguable that the bigger the entity the more remote from their customers they are likely to become.

We need financial institutions in the State which are in close touch with their customers and responsive to their needs. That was the conclusion reached in the debate on 11 June. Practically every speaker had a go at the main banking groups because they felt that the managers in the regions had very little control and were not able to make decisions. Whether that is perception or reality, it was the conclusion of many contributors to the debate in this House on 11 June.

The existing State banking institutions have an excellent reputation and I need to be convinced that any changes will not cause a setback in their evolution. We must look at these matters very carefully.

This Bill is not preparing ICC for privatisation. This is not, as Senator Upton suggested, its main purpose. We are not polishing up the family silver for sale. If we get the right bid, I will not even polish it. The introduction of this Bill is motivated by the fact that ICC have reached the limit of their borrowings and they want to change for market reasons and to fulfil their own ambitions. It should be remembered that the founding legislation allows the Minister for Finance to dispose of his shares in the company as and when he thinks fit.

There was, in effect, a flotation of the company in 1933. Some Senators with ideological views think that flotation was started in the Thatcherite era. It should be remembered that there was a flotation of ICC 59 years ago, designed to facilitate private ownership of at least part of the shares in the company. In the event, relatively few of the shares were taken up by the public. At the moment no more than 770 shares out of a total of 12 million are held by private shareholders. ICC still retain their Stock Exchange listing. Far from doing anything new, we are reverting to what was being done almost 60 years ago. Perhaps we are catching up with the past rather than changing things for the future.

Senator O'Keeffe thought that the valuation would be of the order of £35 million. That point was taken up by Senator Upton. The net assets of ICC are listed in their most recent balance sheet at £54 million and I would expect the sale value to be somewhat greater than the net asset value. The figure of £35 million would not be correct.

Senator Conroy referred to the changes in the German interest rates announced today by the Bundesbank. It is to be hoped that these changes will not cause adverse results. We have been closely following that meeting today, as has everybody in Europe. The latest information is that the Bundesbank have raised the discount rate by 0.75 per cent. However, they did not raise the Lombard rate, a move which might have had an adverse effect here. We were all worried about that, but so far there has been no dramatic reaction in the ERM. Italy has raised its discount rate in line with Germany. While it does not affect the Lombard rate, I think it will put an end to any view that we might see a decrease in rates in the remaining part of the year; at least it means no increase. In recent days we thought that might be the difficulty. All is not too bad.

I thank all Senators who spoke for their constructive and generally supportive contributions.

Question put and agreed to.

Bill put through Committee, reported without amendment and received for final consideration.

Question proposed: "That the Bill do now pass."

Minister for Finance (Mr. B. Ahern)

I thank Senator Staunton and Senator O'Keeffe who handled the ICC Bill. I also thank Senator Upton and all the other Senators who spoke. As in the Christmas session, I am spending the last minutes in the Upper House. I take the opportunity to thank all Senators for their co-operation. We have put through five or six Bills since Christmas dealing with the area of finance. A lot of time has been spent in the Upper House and I thank Senators for their assistance, co-operation and guidance in getting the legislation through.

I also thank them for facilitating the taking of the Committee Stage of the Finance Bill in their domain on a unique and historic occasion. In the autumn when we are all more rested, including the staff whom I thank for their help and co-operation at all times, we will introduce a second Finance Bill and the Bill dealing with the Office of the Comptroller and Auditor General.

Mr. McMahon

During the debate yesterday a Member stated that he would continue to incite people to break the law and that he would be happy to assist people in breaking the law.

An Leas-Chathaoirleach

The Senator appreciates that this matter is out of order. That was yesterday's business.

Mr. McMahon

This is a very serious matter. I propose——

An Leas-Chathaoirleach

This is not the time or the place to raise it. It is a matter for the Committee on Procedure and Privileges. I am asking the Acting Leader of the House to suspend the sitting until 4 o'clock.

Sitting suspended at 3.50 p.m. and resumed at 4 p.m.

Acting Chairman (Mr. Fitzgerald)

I now ask the Acting Leader to say when it is proposed to sit again.

Mr. E. Ryan

The Seanad will adjourn sine die.

Seanad Éireann díospóireacht - Thursday, 16 Jul 1992