Wednesday, 28 March 2001
Dáil Eireann Debate
Mr. Boylan: Before the debate adjourned I was making the point that it would be both unfair and unacceptable if management and staff in provincial branches of the ACC Bank were made scapegoats in this exercise. I can only speak of my own knowledge of the management and staff of the bank in Cavan town who have provided an excellent service over the years. The branch has operated there practically since the bank was founded in 1927. I understand the difficulties and trauma that the current manager and his staff are facing. The bank's staff have always given their clients good advice which was taken. They are in no way responsible for the terribly bad business decisions that were taken at a higher level and which are causing this rushed sale. Anything that is rushed is never done correctly. It seems, however, that time is not on our side. People obviously did not read the warning signs which were ignored or other people decided to leave before the situation got too hot for them to stay on and face up to the decisions they had made which led the bank into the current mess. I do not deny that the ACC Bank is a small player in the Irish banking business and that it needed a partner. The process of finding a suitable partner with which to merge and grow, however, should have been done over a period of time.
We need this banking facility. As you are aware, a Leas-Cheann Comhairle, services in rural areas are being closed down at a time when the economy is growing. If the economy is to grow further we should continue the existing services and improve them. Banking is an important  service, yet we see closures all over the country, not only of bank branches but also of post offices. How are people in rural areas expected to obtain such services? Is it felt that such services are only viable in larger, developing areas, both rural and urban? Does it no longer pay to have a manager and staff in a small provincial town? If we are going down that road we will be making a serious mistake. The banking system, including the ACC Bank, has much to offer. The bank's background was in agriculture and its staff understood the farming scene as well as small retail businesses. Earlier in the debate I heard Deputy Perry speaking about the rip-off that is taking place because of a lack of competition. At the inquiries in Dublin Castle we heard about a system that was put in place known as “creaming” customers' accounts. Pressure was put on bank managers to bring in profits at all costs. Making a profit was the bottom line and people were obliged to pay for every transaction. I am informed it now costs £20 to make an appointment to meet one's bank manager. I am not sure whether one then pays by the minute or the half hour while one is talking to him or her.
Mr. Boylan: We are in the same position as bank managers in that we also provide advice. The difficulty is that people often do not listen to us. However, the Minister of State, Deputy Treacy, and the officials from the Department are listening to what I am saying.
Mr. Boylan: Perhaps we should seek to increase our knowledge of the science of banking. We must address the difficulties and shortfalls which obtain in the ACC. As already stated, we should not be attempting to cut back on banking or post office services in rural areas. We should, instead, set about upgrading and improving those services.
Everyone should be aware of what is happening in the banking sector. Apparently people were shocked by the fact that money was being creamed off their accounts. These people were not overly diligent, they had the utmost respect for banks and bank managers and would not ask questions. Lo and behold, however, this system of creaming off was put in place without their knowledge and with the sanction of higher authority. I am not pointing the finger at ordinary bank managers or staff in this regard because the order to put this system in place came from top  level management. It is not acceptable that people in high places made bad business decisions and ordinary customers – be they creditors of or shareholders in the bank – were obliged to pay for them.
I hope my comments will be taken on board. Whatever happens to ACC Bank, I hope it will emerge from this debacle in a restructured form and that it will continue to provide the service it has provided since its foundation in 1927.
Mr. J. Bruton: I was disappointed by the contribution of the Minister of State, Deputy Cullen, because he did not deal, in any serious way, with the problems the ACC faces. He referred briefly to the bank's apology for the position in which it found itself in regard to deposit interest retention tax and stated that “ACC has not yet reported its figures for the year ending 31 December 2000 but a loss for the year is anticipated.” He proceeded to say the legislation should continue to allow the taxpayer to guarantee the borrowings of the ACC to the tune of up to £500 million. It is not acceptable that the Minister of State made such casual remarks about losses being anticipated, the impending sale and the fact that the State will guarantee loans to the tune of £500 million without explaining the position, indicating how we got into that position, and outlining how the Department of Finance failed in its supervision of the ACC. The Department of Finance is the sole shareholder in the ACC and it has a responsibility to take action when a bank in which it is a shareholder systematically evades tax.
There was clearly a failure of supervision on the part of the Department, particularly when one realises that tax legislation it brought before the Dáil was contravened by the ACC. The Minister for Finance is represented on the board of the ACC. Why was his representative on the board not aware of what was happening in the bank? To use a colloquial phrase, it might be stated that, as far as the DIRT scam was concerned, “They were all at it”. However, I understand that, on a proportional basis and given the size of its deposit portfolio, the ACC was involved in considerably more abuse of the DIRT system than other institutions. That was not explained by the Minister of State.
The Minister of State also failed to explain the business strategy of the Department of Finance and the Agricultural Credit Corporation in regard to the sale of shares. It is requested in the last section of the Bill that the Minister for Finance be given discretion to, so to speak, activate the various powers, including the authority to sell shares, being conferred on him. Given that the Minister of State was not prepared to indicate when the Minister intends to exercise the powers he is asking the House to confer on him, one would expect that he would clearly outline the criteria that will be used in making the decision regarding when the power to sell shares will be activated. However, the information he provided in that regard is vague.
 The House has been given no guidance as to the strategy of the Department of Finance or the Government in regard to the sale of a bank whose business will be guaranteed by the taxpayer to the tune of £500 million. That is not an acceptable way in which to treat the House. The lack of courtesy and frankness in the Minister of State's initial speech is compounded by the fact that he is not present to listen to my contribution. I do not believe there is any excuse for this or for the fact that the Government proposed – I assume the Opposition agreed – to order the taking of Second Stage today when everyone was aware that the Minister for Finance would be in the Upper House to take Committee Stage of the Finance Bill. To order the taking of an important item of Finance legislation, the ACC Bill, in the Dáil on the same day the Minister responsible could not be present, was poor parliamentary business.
The circumstances in which the ACC must be sold are not propitious. For example, interest rates are set to rise in real terms. The spring bulletin of the Central Bank makes it clear that we can anticipate a rise in real interest rates because European Central Bank rates are not going to fall any further while real inflation is going to fall. This will mean borrowings will be considerably more difficult to service than heretofore. There was a substantial decline in car sales during the first month of the year, which is a sign of flagging consumer confidence. In addition, there has been a sharp decline in the housing market. In the second half of last year, there was a 16% decline in the number of houses registered under the home bond scheme. This indicates a slowdown in house building. To the extent that the ACC's business and that of other banks lies in the property market, and disproportionately so, a decline in the buoyancy of that market will affect the value of their loan books. This will not only affect the ACC, but also the ability of those who might be considering purchasing the bank to finance the purchase at a reasonable price. In addition to a decline in the increase in the value of housing stocks, agricultural stocks are also likely to fall in value as a result of foot and mouth and BSE.
Banks are increasingly moving into areas that are fundamentally unproductive. In the past year, the rate of increase in property lending was approximately twice that of the rate of increase in lending to manufacturing. It is manufacturing which generates the profits that allow people to purchase property. If there is no increase in manufacturing investment, there will be no income to service property investments. There is an increasing imbalance in the economy in that regard, which is a reflection of the fundamental imbalance in the United States' economy. The level of indebtedness of the Americans, who for the past ten years have been borrowing money from the rest of the world, is unsustainable. They are now in a situation where they have borrowed up to their limit and beyond. When they see the  value of their houses fall – they have already seen the value of their stock market holdings fall – many will find themselves in a position of negative net worth. That will mean a drop in consumption and will lead to a recession in the United States. That situation can be postponed by the Federal Reserve bank reducing interest rates but it cannot be put off indefinitely. The longer the necessary adjustment in the American economy is postponed, the more severe the recession is likely to be.
Selling the ACC into that sort of marketplace is not to sell from a good position. Serious questions must be asked of the Minister for Finance, of the Department of Finance and of previous Ministers for Finance as to why the Government failed to sell the ACC earlier. The ACC could have been sold at a much better price at an earlier time. Why did that not happen? Was the eye taken off the ball?
There are a number of difficulties that the ACC faces in moving forward as an independent institution, if it was to attempt to do so. There is a huge investment in technology required from any bank to provide an integration of branch network services, Internet services and ATM services. Customers want all those services available whenever it suits them and at no cost. A small bank has to invest just as much as a big bank to provide this. The technology is not cheaper the smaller the organisation. It is the same cost no matter what the size of the organisation.
A small bank like the ACC is at a structural disadvantage in making the technological investment required. The ACC is in the difficult situation that it does not have a particularly good branch network. Its branches are not in premium locations. They are in non-premium locations. It does not have the option of getting into the intermediate market where it could, for example, use auctioneers and other professionals to sell its products. Most good auctioneers and other professionals already have links with financial institutions, be it the EBS, First Active, Bank of Scotland or others. The companies left for ACC to snap up, if it wishes to move in that direction, are not great.
The original remit given to the ACC was a valid and necessary one. In recent years however, it took its eye off the ball and did not move when it should have moved. Against that background, one has to ask very serious questions about the investment by the ACC in the Four Seasons Hotel. The ACC's former chairman, Mr. Dan McGing, who is a man I know and like, was involved as both chairman of the ACC and a director of the company that was developing the hotel. That strikes me as a conflict of interest. As chairman of the bank he could not be as objective as he ought in determining the arrangements for lending money to the hotel company of which he was already a board member—
Mr. J. Burton: The Irish Times mentioned this man by name in its Thursday, 17 August, 2000 edition. I am quoting from that source. There is no problem with that. It is impossible to discuss this matter without mentioning this person by name. However, I will not mention him further.
The Minister for Finance should explain to the House what protocol exists as far as this matter is concerned. The House should also be informed what the banking arrangements were between ACC Bank and the Four Seasons Hotel. My understanding is that these were quite unorthodox arrangements.
There is a need to probe in more detail the reasons for some of the provisions in the Bill. Why is it necessary in section 6 that the State guarantee the bank's loans to the tune of £489 million? Will those guarantees remain in place after the bank is sold? Will the State continue to guarantee loans to a bank that it no longer has a shareholding in? These matters are not clarified in the Bill.
I question a number of investments made by ACC. In the 1997 annual report we are told that ACC owned a subsidiary called ACC Bank Isle of Man Ltd. What purpose does a State owned bank, supervised by the Department of Finance which is responsible for tax collection, serve by having a wholly owned subsidiary in the Isle of Man for the purpose of operating secret offshore accounts? Why did the ACC buy and set up a wholly owned subsidiary in the Isle of Man? Why did it sell that subsidiary?
Why did the ACC invest so heavily in property? The ACC has three subsidiary property companies. It owns Harcourt Street Investments, ACC Investments, and Fortfield Services Limited – all property companies. Why did the bank get involved in setting up property companies? It is a well known piece of business advice that one should stick to what one knows best. ACC does not know the property business. Its staff know the banking business well but why get into property? Why did it move outside its appropriate area of expertise? I note that those property companies are still in operation as subsidiaries of the ACC. Are those companies in a sound financial position?
I am disappointed with the extremely thin speech presented to the House by Minister of State at the Department of Finance, Deputy Cullen, on this Bill. He confined himself to telling us what is in the Bill, which was quite unnecessary as the explanatory memorandum tells us that. He failed to explain why the Bill is necessary, why the State is proposing to sell its shares, how it proposes to go about selling those shares and what the consequences of the sale will be for the State. These issues ought to have been dealt with in the House.
I regret that the Minister for Finance, Deputy McCreevy, is not here. One of the purposes of a debate is that there should be some exchange in the House. I am not long a backbencher and have not been one for quite a while. I am disappointed  with my first debate as a backbencher for some time. I notice that Members come to the House, deliver their speech, then walk out. Nobody listens to anyone else. There is no interchange. All contributions are for the local media. There is no sense that Members are speaking to one another, they are speaking only for the record. Other Members might as well not be in the House as far as discussion is concerned. There was no interruption, no questioning from Members, though that is permissible in Standing Orders. To me, that is an indication that nobody is listening to other Members.
It is a case of Hamlet without the prince because the prince, the Minister for Finance, is in the Seanad. The princeling, the Minister of State, is somewhere else and we have the Minister of State with responsibility for science instead.
Mr. J. Bruton: I know the Minister of State has a reputation for tackling any brief, regardless of whether he has read it, and I commend him for that. That is the courage I would expect of a Galway man, perhaps not always as well guided but courage nonetheless.
I am disappointed by the debate and a lack of any real interaction, and I blame that on this obnoxious system of lists of speakers. People are put on a list. There is no advantage in coming in here to listen to other people because if someone is No. 6 on the list and they come in to listen to speaker No. 1, they will not be called next. The other person who floats into the Chamber not having been present is called before that person so there is no advantage in sitting here to listen to anybody else, and people do not do that. The result is that the debate is not a debate.
I have digressed sufficiently because this is not relevant to the Bill. I appreciate the Leas-Cheann Comhairle's patience but this is an important point and it is a pity we have not had a debate about an important Bill. I hope that the proposals my party put forward in the democratic revolution document we published a while ago, which would abolish speakers' lists and require 20 Members to be present in the House all the time, would ensure that we would have a real debate about this type of question rather than the perfunctory series of addresses we are now hearing. In any event, I want to express my thanks to Deputies Ring and D'Arcy, and the Minister, for listening to me.
Mr. Ring: I am delighted to welcome Deputy John Bruton to the backbenches. If he reads the Official Report he will realise that he has made the same speech I have been making here since I became a Member of this House, and I will be here seven years in June. Even today I spoke about this issue at the Fine Gael Parliamentary Party meeting, and I am not divulging any secrets in that regard.
 Where did the Minister for Foreign Affairs, Deputy Cowen, make the announcement on the Nice referendum? He did not make it in this House but outside it. Where was this Bill first announced? It was announced on “Morning Ireland”. This is the House of Parliament yet we cannot get an answer from a Minister or by way of Dáil questions.
When Members are elected to this House, and they are lucky enough to be sitting where the Minister of State, Deputy Treacy, is sitting now, the first thing they do is go to Bunny Carr's organisation to learn how not to answer the question.
Mr. Ring: —gets a note from the officials, and I mean no disrespect to them, to the effect that the question cannot be asked. Many questions are asked in this House but answers are not given. I agree with Deputy Bruton and I hope he will support my campaign to bring back power to this House.
I asked this question previously. For which constituency did the chairman of the National Roads Authority stand? How many votes did he get? To whom is he answerable? To whom is An Bord Pleanála answerable? When was it elected and how many votes did it get? County managers and county secretaries have too many powers.
Mr. Ring: That is a problem and we will discuss that matter another day. If one goes to a public meeting there are representatives from Leader groups, Western Development, Meitheal Mayo and various other people at the top table but the TD is at the back of the hall. The only time they refer to the TD is when they want somebody to blame, but the TDs have fewer powers than the people at the top table. They are the gods and the lords but we are the people who take the rap for everybody.
I am delighted I have another convert to my campaign to bring the power back into this House because the people elect us to represent them in this House. We write to county managers and county secretaries but they do not reply. The health boards should answer the Dáil questions. They should not be referred to the chief executive  officer, the 40 or so officials or the press people to put a spin on it. The questions should be answered here.
We are talking about the proposal to sell the ACC Bank. I compliment Deputy Bruton who has done a great deal of research in this area. He asked very telling questions and I hope whichever Minister responds, with the help of the officials, will answer the serious questions that have been asked. One only has to look at the case of the Four Seasons Hotel, the risk involved and the way those people were treated, or the small individual in County Mayo who may have borrowed £19,000 or £20,000 from the ICC Bank and who may have been brought before the courts and prosecuted. That person may not have £20,000 but he or she may have made every effort in the ten or 15 years to repay it. They may have got into difficulty because the farming scene had changed or because they had not kept up with the times, and they may have had their land taken off them. The Four Seasons Hotel will continue because some other investor will be found. The debt will probably be written off and, as Deputy Bruton said, I hope we will see the arrangements and conditions that were put in place in respect of that loan when it was given to that company. Something smells in that case and it is wrong.
Mr. Ring: We should know exactly what happened and we should also know, as Deputy Bruton said, about the liabilities and other arrangements that may have been in place in terms of other people in the State. What will be the cost to the taxpayer when this deal is put in place? If the bank is sold we could not have picked a worse time. I was castigated from the opposite side of the House when I made the point last December about inflation running at 10% or 12%, the first person to do so. I was told that was not the case. I listen to men and women who shop in supermarkets and I knew inflation was rising. The cost of living is increasing daily and we can now see the result of that. We can also see what is happening on the American scene.
I will give an example of what is happening now. Last December, somebody in my constituency was looking for a job and I made representations to an American-German company. That company, Henniges in Ballina, gave me a guarantee that the person would start work in January of this year. The company announced in January that it will let go 175 people. I got a letter a few weeks ago from the company to the effect that it had intended to take on my constituent but it was not taking on any further people this year, so there is a downturn in the economy here and in America.
Deputy Bruton raised the problem of housing and cars. We will see many defaulters over the coming months because the banks gave a lot of money to people to whom they should not have given money. Those people were unable to pay  back those loans when this crisis occurred. They had over-reached themselves and we will see many cars repossessed and the banks will have many more difficulties in that regard. There is a downturn in housing also. The Bacon report did its work last year in relation to the investors, although the Minister made a change to that area in the budget. I was against that because I believed he was correct last year and he should have held on for another year and given young people an opportunity to get into the housing market again.
The banks have pulled out of many small rural areas in my own county. They will not even install ATMs in places like Louisburgh. The banks removed their services from Foxford, Achill and other areas. It is a disgrace that the Government is unable to control the banks which are making outrageous amounts of money yet they cannot provide some services to rural people. Those services could be provided out of the profits made in the major cities but in any event it is wrong that the banks should take away a vital service from a small rural area. We now have the Government telling people not to hold money in their homes but they expect people to travel 30 or 40 miles to get to the nearest bank. That is wrong. The Government should be able to introduce legislation in the House to stop the banks from taking everything and giving nothing back to the people. They have an obligation to the people and they have made money. When the banks were in trouble, there was an emergency in the State. I do not know what party was in Government at the time.
Banks will not operate travelling banks in some places. It is not that banks are not making money, but that they are not making enough profits. We saw recently the amount of money they are making. It is a disgrace. The Government should introduce legislation. I do not expect banks to operate in every village, but small towns, such as Louisburgh and Foxford, should have the same opportunities as the cities, even if they do not make the same huge profits as in cities and larger towns. They should be able to subsidise it so that a service is provided within a region, whether it is 40, 50 or 60 miles between towns and villages.
As regards the sale of the bank, I was disappointed this morning to hear someone criticising the fact that shares were being given to the workers. The workers provided a good service over the years and they worked hard for this company and for the banks. There is nothing wrong with giving them a little reward from the sale of the bank. Eircom did it for its workers and the ESB will have to do it for its workers. It is only  right that if the ACC Bank is being sold by the State, the workers should get part of the reward.
There are many questions to be answered and many statistics to be given to the House. I agree with Deputy John Bruton that the Minister of State's speech was poor. It was like a speech that Ministers and civil servants put together when they want to avoid giving the correct information. It was coded and it did not say enough. It is time the facts were put before the House, including the risks involved and the agreement the bank has entered into with the Four Seasons Hotel in particular. We want to know what liability faces the taxpayers.
I want to raise an issue which people have raised with me in my clinic. Everyone in the State does not have a bank account. If the council pays a worker tomorrow morning and he or she does not have a bank account, he or she must go into the bank and get the cheque cleared before he or she can get the money. That is outrageous and it is a step too far. Something should be done about that. There was a time when one could go into a bank, get a cheque changed and walk out the door. Banks are advertising on-line banking, 24 hour services and new modern equipment, but they must remember we have an elderly population. Elderly people are affected by this and it is wrong. Banks are only thinking about the students who have been trained in computers in recent years. It does not bother them as they can access networks, including the Internet, to book air flights and do their banking transactions. However, it is not right that a person in this State cannot change a cheque, regardless of the type of cheque, if they can prove their identity. This is about money and profits.
The Government should ensure that the banks provide a service for the people and that the people pay a fair price for it. They should not be ripped off and charged for things they do not know anything about. People often wonder what the charges are for on their bank statements. It should be like other businesses, including pubs which must display a price list. People should know when they go into a bank how much a transaction will cost. There should be signs on the walls to let people know what they must pay for. There should not be any hidden costs. We will wait with bated breath for the Minister's response to our questions.
Mr. J. Bruton: Can the Minister of State at the Department of Justice, Equality and Law Reform, Deputy Mary Wallace, tell us when the Minister for Finance will come into the House or are we wasting our sweetness on the desert air?
Minister of State at the Department of Justice, Equality and Law Reform (Miss M. Wallace): The Minister of State is taking Committee Stage of the Valuation Bill. He will be back here as soon as that is finished.
Mr. Ring: Someone came into my clinic recently and complained that when he requested a copy of his bank statement, he had to call back five days later to get it. He told me he did not have £200 in the bank, but wanted to know what transactions had taken place. That is outrageous and a step in the wrong direction. We should put further pressure on the banks. We regulate the country and we should regulate the banks and make them give a service to the people at a reasonable price.
Mr. D'Arcy: I did not intend to speak on this Bill but I am greatly disappointed that the Minister and the Minister of State have not done justice to this Bill and listened to the debate in this House. It is a shame.
Miss M. Wallace: The Minister for Finance is in the Seanad taking the Finance Bill and the Minister of State is taking Committee Stage of the Valuation Bill. As soon as Committee Stage of the Valuation Bill is concluded, he will come back into the House. They cannot be in three places at the one time.
Mr. D'Arcy: I do not accept that as an excuse. I was a Minister of State and I know it is the duty of the Minister for Finance and the Minister of State at the Department of Finance to be present for such debates. The ACC Bank is an important body.
Mr. D'Arcy: The reason I want to speak is that I served as a director of ACC Bank for a number of years. I pay tribute to the staff at head office and in the offices throughout the country over the years. The Department of Finance did not give the ACC Bank the type of support it should have got throughout the years. There was always one problem after another. During my time there we managed to persuade the then Minister for Finance, Richie Ryan, to allow us to spread the interests of the ACC Bank across the country. I was a member of the ACC Bank from 1972 to 1977. During that period we bought offices throughout the country. When the commercial banks refused to give farmers money to finance their operations during that development period, the ACC Bank stepped in. It is a pity it did not get recognition for doing that. I was not pleased when it sold off large numbers of outlets across the country, including one in Gorey and Enniscorthy. We managed to keep the branches in Wexford and New Ross. It was a mistake to sell them off. They did not get the support of the Minister for Finance during that ten year period when there were difficulties supplying finance.
I support Deputy Bruton in his criticism of the Minister delivering a short three page script. The purpose of this Bill is to provide for an increase in the authorised share capital of ACC Bank, and to put in place the enabling provision required to facilitate the establishment of an employee share ownership trust for the bank. I have no problem with that. The Bill also provides for the future sale of ACC Bank, subject to the approval of the House, at the appropriate time. I object to this provision. I have been of the opinion for many years that this country needs a third financial institution with some strength in it. We do not have that. The two main banks, Bank of Ireland and AIB, have far too much control over the finances of the country. They now control about 65% of the total banking business. That is a monopoly and is not allowed in any other country. Their profits are in the region of £1 billion per year, or £3 mill ion per day. Their services are poor. I call on the commercial banks to immediately reduce their interest rates by at least one to one and a half per cent. They are overcharging for money and have done so for the past year and a half.
Agriculture has been going through a difficult time for the past two years, and the threat of foot and mouth disease is having a serious effect on profits in the agriculture industry. The banks show very little sympathy to farmers. Interest rates in the UK have been reduced since Christmas by one and a half per cent, but our banks have refused to give any reduction in the rate of interest, because of the monopoly. I ask the banks to be sympathetic to the agricultural community for the next three years, because it will take at least three years to get over this very difficult time in farming. The net income in farming has reduced over a five year period by approximately 16% to 18%. While the Minister for Agriculture, Food and Rural Development will claim there will be an increase in net profits this year, the facts are that the net profit will be down again for the third year in succession.
Section 8 proposes that the Registration of Title Act, 1964, shall not apply to ACC. Section 8(2) proposes that all estates and interests in freehold land and all leasehold interests in land which, before the commencement of this section, have been conveyed, granted or assigned to ACC, shall vest in ACC. How does this section work? Perhaps the Minister could explain the purpose of this section. Anyone wishing to register a property must go to the Land Registry office and the process can take up to 16 or 17 weeks. My understanding is that ACC Bank has a large property portfolio and I wonder if these properties are registered. I do not understand this section and I ask the Minister to explain what the section means so that people with borrowings from the ACC will know where they stand.
I read with interest an article in The Irish Times of 17 August, 2000. It makes the following points: “bad debts provisions increased from £700,000 in 1999, to £3.6 million this year following a review of ACC's corporate loan book, a review which is still continuing. Mr. Darling says the provision relates to a number of loans outside of the agricultural sector. Part of this provision is understood to relate to borrowings sanctioned for the development of the Four Seasons Hotel in Ballsbridge, which has run substantially over budget.” That was a continuing saga.
Will the Minister explain what is the situation in respect of those losses? There were three financial institutions involved in that development, not just the ACC. Will the Minister say what share of the losses were forced on ACC, and why was that bank made to carry losses over and above the percentage of the other financial institutions?
Another paragraph from the article makes interesting reading: “The bank's former chairman, Mr. Dan McGing, is a director of a company linked to the development of the hotel. The bank  is keen to emphasise the merits of its new business strategy which involves repositioning ACC largely towards the business market.”
I have always argued that the ACC should have been allowed operate outside the agricultural sector. The Department of Finance consistently refused to allow the bank to do so. I know the bank finally did so in the past ten to twelve years. Its DIRT liabilities last year were in the region of £14.5 million, and I understand that profits next year will be minus £2 million or £3 million. That is a serious situation. I do not understand why the bank did not diversify into other areas of the economy. I wonder if the Department of Finance is still insisting that it operates largely within the agricultural sector. I would welcome the Minister's comments.
My main point today is to request that the commercial banks show some sympathy for their customers. The recession could come this year or next year. There are already difficulties in America, in Japan, in Europe. The banks have enjoyed a monopoly and the two major banks are now recording profits of £1 billion per year each. I ask that they reduce their interest rates immediately by at least one and a half per cent.
Mr. Higgins: (Dublin West): The ACC Bank Bill, 2001, provides for the privatisation of a State bank. The ACC Bank is now to be subject to the same treatment at the hands of Fianna Fáil and the Progressive Democrats as other crucial national assets over the past four years, since this Government came to office. This House must now listen with regular monotony to Ministers of the Fianna Fáil-Progressive Democrats Government, proposing privatisation after privatisation of what are crucial national assets. Telecom has been the biggest so far. They then made provision for the sale of Aer Lingus, ICC Bank, TSB Bank, and now ACC Bank. It is a real misfortune for the Irish people and will in the years ahead be seen to be so. It will be seen to be a real misfortune that politics in this State is unfortunately dominated by not one but three capitalist parties at present. Fianna Fáil and the Progressive Democrats and the largest so-called Opposition party are enthusiastic supporters of the privatisation of State assets and the deregulation of industries and services to the benefit of speculators and, on occasions, chancers. The main parties in this State have become intoxicated by the current growth rates in this capitalist economy, rates which have remained consistently high for a number of years. The Minister for Finance and the Government behave as if they believe these high growth rates will continue indefinitely, that the low rate of unemployment will be sustained and that job creation levels will remain at their current high levels. That will not happen.
The privatisation of extremely important State-owned assets is politically corrupting and constitutes a rip-off of assets which properly belong to the Irish people. It is clear to almost everyone that the Telecom Éireann privatisation was a  huge confidence trick foisted on the Irish people by the present Government. Ordinary people were induced, through a very slick advertising campaign, to invest their hard earned savings and in many cases to borrow money to purchase shares. I warned prior to that privatisation that benefits would accrue to major multinational companies, major players in the Stock Exchange and big business interests, not ordinary Irish people and that is precisely what happened. A small minority made an obscene killing on what was properly an asset of the Irish people. The thousands of people conned into buying shares have been extremely disappointed and that should serve as a warning to people about this Government's programme.
Mr. Higgins: (Dublin West): Not really, I am arguing against section 5 of the Bill on the disposal and issue of shares in ACC Bank. I am merely outlining the outcomes of previous privatisations in terms of who has benefited from them, leading to the conclusion that the ACC should not be privatised.
The privatisation of the mobile phone licence was a blatant abuse of a resource which belonged to the Irish people. The licence, which was awarded for a pittance, is making an absolute fortune for private individuals and companies. The process of privatisation is corrupting because it has now become clear that large donations were give to political parties by those who benefited from such privatisation. Ordinary people see this for what it is, irrespective of whether it was illegal.
The privatisation of ACC Bank will be bitterly regretted in the future, as will previous and ongoing privatisations. The current growth rates have created a complacent attitude about levels of employment and other economic indices, but the cycle of capitalism has inescapable consequences for the State's economy and for its 1.7 million workers and their dependants. As sure as night follows day, the laws of the market dictate that recession follows a boom period. So it will be here in the years ahead.
We have received early warnings from the US economy of what will happen in the economies of EU member states and this will have an even greater effect on the Irish economy due to the Government's policy of introducing myriad American multinationals into the State, virtually turning Ireland into a springboard for US multinationals into the EU. Many leading US companies have issued profit warnings.
That ordinary people and businesses are seriously over-extended is a sign of impending recession. When that happens, what will we have  to fall back on? We have privatised or are privatising assets which were formerly or are currently State-owned. If these assets had remained or were to remain in State ownership, they could act as a buffer against the power of multinationals and big business corporations which will simply up and leave when a recession occurs, leaving thousands of unemployed people in their wake. Privatisation moves more and more control away from Irish people into the hands of people who are not accountable to them. It is a recipe for huge problems in the future when the State will have less and less control.
This Government plays fast and loose, with abandon, with resources which properly belong to the Irish people. Some weeks ago, I tackled the Minister for the Marine and Natural Resources about Fianna Fáil giving away our natural gas wealth off the Mayo coast and asked him how much the gas would be worth to the multinational company involved. I was astounded that the Minister was unable to tell me the price. We must be alarmed when another national asset in the form of an established State bank is put forward for privatisation.
This Bill is presented in a context in which one can envisage a real role for a State-owned agricultural credit corporation. The foot and mouth crisis is currently dominating Britain, Ireland and some other European countries. This serious crisis has been visited upon the population as a whole, precisely because control has been increasingly taken from the hands of ordinary people – small producers, small farmers, butchers, local abattoirs etc. – and placed instead in the hands of agri-business companies and major conglomerates which dominate agriculture in the EU. This has given rise to huge intensification of farming and has created the precise conditions in which diseases such as foot and mouth have spread like wildfire, causing devastation to the farming community and immense difficulties for small businesses, small operators in the tourism trade and thousands of workers in the meat, agricultural and tourism industries, not to speak of the intense suffering of the small farming community affected. That is the result of removing power from local areas and from the people and giving it to faceless and unaccountable interests. I hoped that lesson might have been learned by the Government but, unfortunately, that is not the case.
It is undoubtedly the case that agriculture and agricultural practices within the EU must change. Even the British Prime Minister, Mr. Blair – more Tory than the Tories, generally – and Chancellor Schröder have said as much in recent weeks. There must a return to natural means of production in farming and a move away from the ever increasing control by the agri-business sector, big business and giant supermarkets which indirectly played a major role in the spread of foot and mouth disease by requiring that meat and live animals be transported hundreds of miles, something which facilitated the wildfire  spread of the disease in Britain. A change of policy is needed.
If we had a Government with vision it could lead that change of policy and ACC Bank could be a crucial feature in providing for that. There could be a declaration from the State that it had learned the lesson of the perversion of nature in modern agricultural practices which gave rise to BSE and other disasters. There could also be a major policy turn towards organic free range practices and away from the appallingly cruel practices used on animals in the intensification of agriculture. There could also be a development of the organic sector to be a major part of the economy. This is the way the voice of consumers – ordinary people – is going in Ireland and other European countries. A State agricultural bank could play a role in this. It could be part of a movement towards an agricultural revolution which would root out the perverse practices super profit mongers have inflicted on our farming practices and on the agriculture sector, return farming to a holistic means of producing wholesome food and end the type of conditions which create appalling suffering for animals and where disease can spread with the appalling rapidity we have witnessed in Britain in recent weeks.
This is not the time or place to discuss this in detail but the policy of wholesale slaughter, which has devastated communities and traumatised the farming community, is not a sustainable practice. Were we to have a disaster in Ireland – and I sincerely hope we do not – we would have to have a serious discussion on a completely different means of managing the foot and mouth situation with vaccination and other means of control and not with the scorched earth policy unthinkingly employed in Britain simply because it has done it for 100 years. However, that is a different debate, albeit partly related.
An ACC Bank continuing in ownership of a State with vision and understanding could play a crucial role in the renewal of agriculture in Ireland and could lead the way in Europe and even worldwide. That is what should happen to ACC Bank. The involvement in the DIRT scandal was outrageous and there is no question about that. Those responsible must be called to account. Unfortunately, State owned enterprises have been run too bureaucratically since their inception. There is a need to open up State owned enterprises to real democratic control. There should be a consumers' representative on the board. The workers should be represented much more on the board and involved in formulating policy.
The bank should be seen as an asset of the people and of the workers in the industry. A completely different approach and ethos to publicly owned industry would create a dynamic new sector. When the chill winds of recession inevitably blow, we would still have many factors within the control of the people to counteract the effects of a worldwide capitalist recession. However, the Government goes recklessly in the other direc tion giving away all levers of control which end up in the hands of massive banking concerns in the case of banks and massive international corporations in the case of Eircom.
Is oth liom a rá gur Bhille náireach ón Rialtas de chuid Fianna Fáil agus na Progressive Democrats atá againn inniu atá faoi phríobháidiú a dhéanamh ar Bhanc ACC. Tiocfaidh an polasaí seo maidir le príobháidiú na comhlachtaí Stáit ar ais nuair a chífimid sna blianta le teacht an géarcheim eacnamaíochta atá le teacht agus an slí a bheidh sé leis na míllte den lucht oibre atá anois i lámhaí na comhlachtaí móra idirnáisiúnta agus gan aon srian ag an Rialtas nó an Stáit orthu. Tiocfaidh a leithéid de Bhille mar seo ar ais chun a rá gur dearmad, botún agus polasaí mícheart atá againn anseo. Ba cheart dúinn na comhlacthtaí Stáit a chaomhnú agus a fhorbairt mar is iad siúd na comhlachtaí gur féidir linn muinín a bheith againn agus ag an lucht oibre asta, go háirithe nuair a thiocfaidh géarchéim eacnamaíochta, rud atá deimhim agus cinnte.
Mr. Hogan: The ACC Bank has had a chequered history since it was founded in 1927 at the same time as many other institutions of the State, such as the Garda, Army and political institutions of the State which we have come to take for granted. Deputy Joe Higgins was often an unwilling participant and is now a willing participant in the democratic institutions of the State. I am delighted to hear him say the bureaucracy of State owned enterprises is the reason for the failure of many of them over the years and that they should be opened up to consumer and customer representation. That is a major and welcome change in socialist thinking and dogma.
Mr. Hogan: As regards telephone charges, I would not like to have continued to pay 80% more in charges under the State monopoly of Telecom Éireann. I am delighted to know competition now exists and I am sure Deputy Higgins's constituents are delighted to know they pay less in charges now than they did under that State owned monopoly. We should realise that. It should be acknowledged that competition, in partnership with the State, is the only way to achieve good value for the customers we represent.
Mr. Hogan: I understand what socialism stood for, but I also understand what the ACC Bank stood for given the difficult time it was established in the fledgling years of the State. In the  1930s, the bank played a major role in the context of an economic war and stemming the tide of rural depopulation and creating some semblance of enterprising support for the agricultural community. Over the years, the ACC Bank played a major role as a development bank when other financial institutions did not want to lend too expansively to farmers to enable them develop their enterprises under the land project in the 1940s and 1950s. In the industrial era in the 1960s, there was much more competition for capital and the ACC Bank could be relied on to develop the agriculture industry.
The bank came into its own as a result of developments that took place following Ireland's membership of the European Union in 1973. The Mansholt plan and other European programmes under the farm modernisation scheme gave farmers an opportunity, with EU grant assistance, to develop their agricultural enterprises into modern and competitive entities. They brought them up from the subsistence level to which they were accustomed since before the foundation of the State. Up to recent years, the ACC Bank played an important role in the development of the agricultural economy and consequently the development of rural communities.
The agricultural community did well in the 1970s and 1980s from a low base. If farmers had not had seed capital and grant assistance from the European Union to inject into their plans, the dark old days and bad old ways of agriculture would still be in existence as they are still in many eastern European countries. I look forward to the enlargement of the Community. This will create opportunities for state investment and EU assistance to be made available to communities to enable them to develop in the same way as western European countries and the Iberian peninsula developed over the past 20 years.
The importance of agriculture has not ever been more evident than it is today as a result of the concern over BSE and foot and mouth disease. We are all aware of the inter-relationship between all sectors of the economy. However, there is a realisation in all our constituencies that has not existed for many years about how a potential disaster, like that in County Louth, could bring about a standstill in every aspect of economic activity in the country. Before I came to the Chamber, I received some worrying news about developments in my Kilkenny constituency in relation to the foot and mouth disease scare. I hope the steps being taken are only precautionary because I am aware of the enormous havoc that would be created not only for business and others in my constituency, but throughout the country if the disease spreads beyond the current exclusion zone in County Louth. The Minister of State is from the same region and he understands the impact it would have not only on farming families, but on the tourism industry and businesses which are already feeling the pinch since the scare about this dreaded plague began.
 The future of the ACC Bank is a worrying issue for the bank and its employees. The bank did not do itself any favours with the type of lending arrangements it made and the tactics it used for recovering some loans in the 1970s and 1980s. It did not endear itself to many customers at that time, but, overall, it was an essential part of the development of agriculture for 20 years from the time Ireland joined the EU. In recent years, the bank appears to have failed to develop and broaden its commercial base and exposure in the same way as other financial institutions. Given the way in which the ACC Bank was involved in community development, particularly in rural areas, it could have advanced itself as doing much of the work credit unions are now undertaking in many communities. In rural areas, the ACC Bank missed an opportunity in terms of capitalising on that niche market. As a State owned bank, with a reasonably small capital base compared to other private financial institutions, it would not ever have had an opportunity to compete with the major financial players in the economy. It should have done more to develop a niche market for itself. The community base and support it enjoyed, particularly in rural areas, should have been tapped to a greater extent.
It is ironic that the ACC Bank wants the House to approve an increase in capital from £50 million to £100 million. It is blaming much of the need for this on the liability to which it was exposed as a result of the DIRT inquiry. However, I am not optimistic about commitments from the management of the ACC Bank in the light of recent history about absolute commitments to ensuring full compliance from the bank's management. The losses the bank has successively accrued over the past three years do not inspire confidence given that there were many opportunities in the economy. The Celtic tiger was roaring, but the ACC Bank sustained losses aside from the DIRT inquiry, the matters it exposed and the amount the bank had to repay as a result.
The need for the Bill is due largely to the failure of the management to make profits for the company at a time when it was never easier to make profits in the financial services area and the failure of the protracted negotiations about merging with the ICC and the TSB. Why did the ACC Bank fail to conclude negotiations with those two institutions? We did not receive any explanation from the Minister during his short contribution about why the negotiations broke down. If they had been successful, the legislation would be unnecessary.
Deputy D'Arcy mentioned the losses the bank accrued in the Four Seasons hotel project. This hotel is in Dublin 4, but I am sure there were many wry smiles from people, particularly in the agricultural community, who came under pressure and suffered harassment in the 1970s and 1980s from local ACC Bank branch managers trying to recover small sums of money from them. It appears there was a sweetheart deal and that a golden circle was involved in putting the consor tium together. It is ironic that the softest touch appears to have been the ACC Bank, which is a State bank. However, the Minister did not address the issue of what happened in that debacle, the current position in terms of the exposure of the ACC Bank and whether the financial institution will ultimately suffer a loss or recover the loans it advanced. Will the money be substantially recoverable or was a deal done with the new investors to get the project completed?
If one had to endure a tough master in school, one takes the opportunity to have a go at him when one can in later life, However, the tactics used by the ACC Bank in particular over the years to recover debts did not endear it to people in terms of increasing its customer base when subsequent legislation enabled it to broaden into the housing market and the industrial area. I mentioned this aspect previously, but it left a sour taste in many people's mouths at the time. The Minister has no option but to increase the capital. However, I do not know what eventual benefit to an employee will be a share option in a company which is going into reverse as a financial entity.
I do not wish to say the ACC is losing the confidence of the people because of its failure to successfully conclude a merger and the fact that we need to produce more capital at a time when there should be no need for it, but I do not know to what other conclusion the public can come. If employees are offered shares in the company, I hope they will get a better return than was the case following the flotation of Telecom Éireann. From the point of view of a good bet on the Stock Market employees will be very wary about putting their trust in the management or subsequent sale of the bank. Before entering into any agreements, they would be wise to take careful stock of the past performance of the bank, particularly in recent years in the context of the merger negotiations. Nevertheless, I appreciate the Minister has not many options but to improve the share capital. He should continue to seek a purchaser for the ACC bank because as a stand-alone bank, considering what has been said about it in the context of the Committee of Public Accounts inquiry and the direction in which the bank is heading, it does not have any option but to seek a purchaser in order to remove itself from the exposure it has received over the years and its lack of direction in anticipation of the current economic boom.
Mr. Durkan: I declare a certain interest and certain exchanges of views I have had in the past with the ACC bank, particularly in the context of the DIRT inquiry. Having said that, I will try to be as dispassionate and impartial as possible in what I have to say about that financial institution, including financial institutions in general.
It is important to remember that financial institutions must make a profit. There must be a healthy profit, healthy investment and incentives for investors to invest in order for the institutions to blossom and survive in the financial market.  There must be a recognition of the customer who is the consumer. Over the years customers have had to pay high interest rates, very often penal and punitive interests rates, so that the financial institutions could survive. Very often, as a consequence, the customer could not survive. A number of other speakers referred to this aspect. Anyone who studied closely what took place in the 1970s, and particularly in the 1980s, when the economy performed badly and interest rates were running at 14%, 15% and 16%, would note that some financial institutions charged people who were already in great difficulty as much as 28%, 29% and 30%. This put many customers in a position from which they could not possibly extricate themselves. Debt doubled every three years and countless companies went out of business throughout the country at a time when the country could ill-afford it. Many local enterprises in various parts of the country did not survive as a result of an encounter with financial institutions.
Given the tiger economy and the jungle which world economies have become, it behoves us all to remember that era and not forget that the customers, the people who keep the financial institutions in business, who borrow money and invest money with the financial institutions, do not always get the recognition they deserve. That attitude continues to this day. If one studies the activities of ACC bank and all the other financial institutions, and evaluates the degree to which the interests of customers are observed in the first instance, one will find that customers' interests are secondary to the interests of the financial institutions. That is not the way things should be. The customer is the person who is paying for a service. He or she is not getting a free service. There are very few free services in that area. Together with paying for the service, customers must accept the diktats of the financial institution concerned. If one has an argument with them, as we have all done from time to time, one will inevitably find that the financial institution will always claim to be right. How would right be on the side of the financial institutions at all times?
Surely the law of averages would dictate that the financial institutions should be wrong once or twice. However, for some unknown reason, that is never the case. It appears the financial institutions are correct because they make the rules and customers abide by the rules. If customers break the rules drawn up by the financial institutions, the customers must pay. Why should that be? What precedent has been set to support the theory that in all such instances the rules of behaviour, rules of operation and rules of procedure drawn up by the financial institutions, and paid for by customers, should be observed by customers? Customers must pay for and abide by the rules which are not their policy but the policy of the financial institutions, the purpose of which is to protect the financial institutions. In today's enlightened world – by that I mean enlightened in terms of fair play – it would be a good idea to consider the degree to which the financial insti tutions return in kind the trust placed in them by customers and treat customers with a little bit of respect.
There has been a reference to the share options offer. I have no problem with this proposal, nor have I a problem with the system whereby share options are offered to employees. This should be the case to ensure that employees are retained. I am not sure that is the real reason behind the proposal. Probably the chief reason for the proposal is to get acceptance for the deal. The principle of share options is not wrong and it should not have to wait for a merger, changeover or sale of a financial institution for that to become the normal working practice and procedure. By the same token, it should not become the norm to expect the sale price for shares in such cases is not of an inflated nature to the extent that the unfortunate shareholder will pay a bigger price at a later stage by buying an overly inflated share on the date of issue. I can recall one or two serious instances in that regard in recent years. One would not want to have the longest memory in the House to figure that one out.
What amuses me most of all is the hype, effort and cost which goes into promoting the share price to certain groups. The share option does not work this way. In recent flotations all the hype has gone into inflating the attractiveness of the share to the consumer who naturally thinks he or she is getting a great deal and will get a good return in a few years. However, that person might never make a bob on it and people blame everyone else for what they said and when they said it. There should be no mystery about this issue as it is simple. If the share price is too high in the first place and people try to redeem or salvage their savings at a later stage, it is too late. I have no difficulty with the preferential shares for employees as it will encourage staff to stay on in the bank. This is important as it is difficult to get good staff. However, it should not be done simply to reach agreement on a proposal regarding a sale or merger.
The ACC Bank was previously the Agricultural Credit Corporation. The agricultural scene has changed over the years and the demands are much greater than they were 25 or 30 years ago. These demands will get even greater and the market will become much more competitive. When I was much younger there was a much greater number of banks and financial institutions. At the time it was decided that the major banks would merge into various blocks we were told this was good for the consumer, the country and banks which would be able to give a better quality and more effective service. What has happened? They have withdrawn from the scene and become totally focused on profit margins and keeping investors happy. There is much more to the banking business than this. Like other major employers, financial institutions have a function in the economy and other functions apart altogether from keeping their investors happy and having a  healthy annual report which shows massively increased profits. We must keep in mind this element of financial business and services.
We were also told that there would be greater competition as a result of these mergers. That was one promise which rang hollow. Was this greater competition to ensure higher profits for the financial institutions or to meet the needs of customers? The customer was not foremost in the minds of those who suggested that there would be greater competition. I am not restricting my criticism to the ACC Bank. Many other banks must also look at the changes in the marketplace, the changed requirements and the different customer expectations. It is no longer enough for financial institutions to tell customers, “we have made these rules, this is the way it is and you must accept it”. They must say whether these rules are legal and effective and outline their purpose. If the purpose is purely self-serving on the part of the financial institutions there is no use trying to stuff that information down the throats of customers.
Times have changed and we have moved on. At one time there was a huge level of respect for banking and other institutions, including political institutions. Everyone has paid a price in the intervening period. The financial institutions are better placed than most to become customer friendly, to address their concerns and to ensure they provide a decent and transparent service to customers and investors and do not resort to tactics which are better placed in jurisdictions which do not have a democratic disposition. I make this point in all sincerity. I have more than a passing interest in this debate and will take this up at a later stage.
Minister of State at the Department of Finance (Mr. Cullen): I thank the Deputies for their interesting contributions. I will try to address all the issues raised. I understand that during my absence queries were raised by some Deputies. I wish to inform them that I was dealing with the Valuation Bill at the Select Committee on Finance and the Public Service, as were the Finance spokespersons for Fine Gael and Labour. It does no justice to us as politicians when Deputies try to score points when Ministers are busy elsewhere. This gives credence to the perception that we are not working if we are not in the House.
Mr. Cullen: This is most unfortunate. Sometimes there is an overlap. I have been on my feet, so to speak, since 10.30 a.m. I am not pleased about this but if that is the demand at times then I am prepared to accept it. Deputies who know better should not try to pretend something is other than it is, particularly when Opposition spokespersons are involved in the same work as me. I would prefer to deal with one issue at a time but sometimes this is not possible. I am fully  aware of the points raised during my absence and will deal with them.
Deputy Mitchell referred to the Committee of Public Accounts' inquiry which he chaired and which dealt with the DIRT issue and the banks. I agree that the ACC, in common with most other banks, did not come out of the episode in a good light. The fact that the ACC is a State owned entity made it less acceptable in its case. I do not intend to run through all the events since the findings of the inquiry were published but I will touch on a number of them.
The Minister wrote to the board on 20 March 2000 and introduced a new reporting structure for the bank to address the finding that the reporting procedures had failed in relation to the DIRT issue. Under this structure, which is in addition to the normal reporting procedures required under the State bodies' guidelines, the chairman of the bank is required to meet and brief the Minister on a quarterly basis. The chairman has met the Minister on five occasions since March 2000. The chief executive officer is required to meet appropriate officials of the Department on a quarterly basis and to brief it on all matters of interest. Four quarterly meetings have taken place.
The bank has implemented new compliance functions and procedures and reporting methods have been changed by the bank to ensure all issues are brought to the attention of the board. New auditors from PricewaterhouseCoopers have been appointed by the bank and the board has requested them to evaluate all the changes in procedures made by the bank. This work is in train and the board expects to report to the Minister shortly.
The board has replied to the Minister's letter of 18 September in which he expressed his deep disappointment at the need for the ACC to have made a settlement with Revenue and informed them that it was unacceptable that any bank, particularly one in which the Minister for Finance is a shareholder, should have failed in its tax compliance obligations. The chairman in his replies in October and November agreed with the Minister's views, set out a comprehensive reply to all of the issues arising from the findings of the Committee of Public Accounts report and assured him of the board of management's absolute commitment to ensuring full compliance in the future.
The issue of strategy was raised by a number of Deputies. Deputy Mitchell wondered whether the closure of the Dublin branch network was wise. It is part of its new strategy in its preparation for sale. It was decided to refocus towards business accounts and high net worth personal accounts. Branches are not essential to deliver such services to customers. Five business sales teams have been set up in Dublin and there are also four business service centres in Dublin. A centralised streamlined personal banking unit has been established for personal customers. Part of the rationale behind the closure of the Dublin branches was to address the cost income ratio. Overall ACC would not perceive this as a negative from a potential pur chaser's point of view as it is now doing business with customers in a more effective efficient manner.
The question of the use of proceeds was also raised. The proceeds from ICC have been taken into the Exchequer and the Minister is giving consideration to the best use of these and will make an announcement in due course. Deputies should note that placing such funds, as has been suggested by some, in the national pensions reserve fund would require a resolution to be passed by the Dáil under section 18(5) of the National Pensions Reserve Fund Act, 2000. The issue of the bank's worth and the sale timetable was also raised. The valuation of a bank is a complex business which involves taking into account the market value of quoted banks, the particular portfolio of the bank to be sold and the fit between the bank and the tenderer's own business and the terms on which the bank is being sold. It would not be appropriate for me to comment directly on what price would be accepted for the bank. However, I would state that it is not proposed to sell the bank for less than its true value. Furthermore the matter will be considered by Government before there is any decision on a sale. Under section 5 of this Bill the Minister will bring forward a motion for approval in the Dáil in the event that he intends to dispose of any of his shares in the bank following such a proposal from the board of ACC bank, with the exception of his disposal of shares in relation to an ESOP.
In relation to the timetable, the bank is pushing ahead with its preparations including commencing negotiations on the ESOP. The Minister has indicated to the board that he wants to see a change in the ownership structure over the course of the next year. The purpose of the enabling provisions in this Bill is to allow the bank to move quickly when appropriate to do so. The role of this House is safeguarded by the requirement for the Minister to secure a motion of approval before making any sale of the shares. Deputy Bruton wondered why that was necessary. He should be aware following debates involving the ICC, the TSB and now the ACC. I am sure he is aware, given developments in the domestic and EU banking sectors in recent years, both in terms of competition and the regulatory environment, that the Government's policy in relation to banking is that the State no longer requires to be involved in the sector in an ownership capacity. ACC bank has been facing intense competition which has been reflected in reduced margins in its niche sectors. Capital will also be scarce within the public sector and it cannot be guaranteed to be available whenever it is required. In view of this, and given the impact which the euro will have in terms of competition within the banking sector, the maintenance of State banks within the public sector was not considered to be a viable option and nor was it considered to be in the best interests of the staff of the bank.
The issue of potential purchasers is a matter for the board of the bank who will form a view and  make a recommendation to the Minister. It would be inappropriate for me to make any further comment on the matter. Deputy Fleming suggested it was wrong of the bank not to make a clear provision for the DIRT settlement in the 1999 accounts on the basis that the accounts were finalised in April and the settlement was reached in August. The rise in the bad debts provision, which Deputy Fleming questioned, arose from a fundamental review of the large corporate loans. I cannot comment further on individual cases. The bank is prohibited under legislation governing it from informing the Minister about individual cases.
There have been many calls for help for bank customers affected by the foot and mouth situation to be helped by the banking industry in general and the ACC in particular. This is primarily a matter for the credit institutions and their representatives. There have been calls on the Minister to instruct ACC to introduce a moratorium. This would be a matter for the board which is charged with running the bank on a commercial basis in order to produce a return on the money invested by the State. The bank has informed the Minister that it would treat affected borrowers sympathetically and such cases would be considered on an individual basis.
On the issue of An Post, the Minister for Public Enterprise answered a parliamentary question yesterday on the matter. She stated that she had received a report prepared by Mr. Phil Flynn at her request and that she would be announcing the action she proposes to take on foot of the report when the Cabinet has completed its deliberations. Mr. Flynn's report considered the matters concerning the role of An Post in providing banking related services. Deputy D'Arcy asked about the operation implications of section 8 which relates to section 23(2) of the Registration of Title Act, 1964, and concerns property owned by or leased by ACC, even if the registration process is not complete. This only affects property owned by the bank. It has nothing to do with property held as security. This section has been included to provide legal certainty as to the ownership of the bank's properties at the time of the sale. The section will only be commenced when the contract for the sale is being completed.
In response to Deputy Hogan, ACC will make a loss in respect of the year 2000. It made a pre-tax profit of £19.25 million in 1999 and £20.5 million in 1999. ACC is continuing to trade strongly and made good operational profits in 2000 which were offset by the DIRT settlement, restructuring costs and an increase in bad debts provisions following a review of the corporate loan book. The bank is trading well this year. Deputy Bruton asked if the section on State guarantees provides for the continuation of existing guarantees. This will only happen when the bank has been sold. In any sale process the Minister will require the production of a counter indemnity from the purchaser of the existing guarantees. This was the  situation in the sale of ICC also. The reason for the continuation of these guarantees is that the State cannot unilaterally withdraw from them in any case. The level of the guarantees has been reducing over time and it has been policy for some time that no new guarantees are to be issued. The figure of £489 million is the position at the end of 2000.
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