Thursday, 8 July 1971
Seanad Eireann Debate
Parliamentary Secretary to the Minister for Finance (Mr. Lemass): The main purposes of the Bill are to provide for the control, through the agency of the Central Bank of Ireland, of the setting up and operation of banking businesses and the soliciting of deposits from the public; to facilitate the merging of banking businesses in the interest of more efficient banking and to remove the anomaly between the existing statutory provisions requiring parity between Irish currency and sterling and this country's obligations as a member of the International Monetary Fund. Several other changes are also proposed. These relate chiefly  to the Central Bank and the Bank of Ireland and I shall be referring to them in greater detail in the course of my remarks.
The Bill is the first major change proposed in banking legislation since the passing of the Central Bank Act, 1942, under which the Central Bank of Ireland was established. The Central Bank superseded the Currency Commission which was set up under the 1927 Currency Act, the Currency Commission being the first native institution given power to regulate the issue of Irish currency following the establishment of the State. This power and some other powers of a minor nature possessed by the Commission passed to the Central Bank.
The 1942 Act also gave the Central Bank the general function and duty of taking such steps as it deems advisable from time to time to safeguard the integrity of our currency and ensure that in the regulation of credit the aim shall be the welfare of the whole community. Since 1942 the Bank has widened the scope of its activities in various ways, bringing them into line with the activities of central banks in other developed countries. It has done this in harmony with the commercial banks and with the support of the public as well as of the banking system.
Some examples will illustrate the progress made by the Central Bank since it was founded. The Bank's legal tender note fund—the backing for the currency—which originally consisted almost entirely of sterling, has been substantially diversified. In addition to sterling, it now holds gold, US dollars and US Federal Government securities, as well as assets representing this country's subscription to the International Monetary Fund and a balance in the general fund of the Bank. Over the years our external reserves have come increasingly under the Bank's control. The foreign exchange assets of departmental funds have been transferred to the Bank. In 1968 and in 1969, following the sterling support arrangements—generally referred to as the Basle arrangements—most of the sterling assets of the associated banks were similarly transferred. Thus, virtually all the country's external reserves are now controlled by the Bank.
 In 1955 the Bank, for the first time, helped to improve the liquidity of the associated banks by rediscounting Exchequer Bills and Bills of Exchange. It has since, as and when appropriate, continued to exercise this function. In 1958 regulations were made requiring the associated banks to settle their domestic clearings through the Central Bank and to maintain deposits with the Bank for that purpose. In 1965 the Bank commenced the issue of guidelines to the associated banks on domestic credit creation. The issue of comprehensive advice every year on credit policy, covering the entire banking system, is now an important function. In 1965 also, responsibility for the day-to-day administration of foreign exchange control was transferred from the Department of Finance to the Bank.
In 1969, the functions of the Minister for Finance relating to payments to and receipts from the International Monetary Fund were transferred to the Bank as provided for by the Bretton Woods Agreements (Amendment) Act. The Bank also has responsibility for the operation, as far as this country is concerned, of the special drawing rights scheme which was put into operation by the IMF in 1970. Arrangements have also been made under which issues of Exchequer Bills are now made through the Central Bank. In addition, the issue and registration of various National Loans is now the responsibility of the Bank.
Another new activity of the Bank is the fostering of an active money market. The centralisation of the external reserves, which I have already mentioned, is relevant in this context. For the same purpose, arrangements have been made for the acceptance by the Central Bank of a wide range of shortterm deposits from the banks and finance houses, for active dealings by the Bank in short-dated Government securities and for the issue of exchequer bills to the banks at more frequent intervals. Money which was formerly placed in London is now being placed at home and a native money market has been initiated with the Central Bank playing a role of increasing importance.
Under the present Bill many new powers and duties will be conferred on  the Bank. As I have already mentioned, a major purpose of the measure is to give greater protection to persons depositing money in banks and finance houses, all of which will have to hold licences issued by the Bank before they can accept deposits. This is necessary because nowdays the potential saver is faced with a bewildering range of deposit-taking institutions, domestic and foreign, many offering attractive inducements, such as high interest rates and easy withdrawal terms. The business of dealing in money is no longer the preserve of the banks as that term is commonly understood by the general public. In this situation, the existing supervision of the opening and operation of banks is clearly inadequate and needs to be strengthened.
At present, anybody can open a business to take deposits from the public on obtaining a licence from the Revenue Commissioners, which must be issued on application and payment of a fee of £1. A licence is required, however, only if the business accepts deposits payable on demand or on not more than seven days notice. If the business uses in its name or in advertising the word “bank”, “banker” or “banking” or any analogous word, it must make a deposit of £20,000 with the High Court in cash or securities, but otherwise it is free to conduct its business without making any deposit. Apart from powers to collect information, the Central Bank has scarcely any formal supervisory or controlling function in relation to banking and similar businesses.
We have virtually an “open door” policy. There are over 80 bankers' licences currently in force. This number includes the eight associated banks and their subsidiary companies and about 20 other Irish concerns without known external affiliations. The remainder are subsidiaries, branches or affiliates of external institutions; most of these commenced business within the past decade. The Bill provides for a regulatory licensing system with the Central Bank as the licensing authority. The Bank will have discretion in granting licences but will not be able to refuse a licence without the consent of the Minister for Finance. The applicant  may make representations to the Minister who must consider them before giving his decision. A licence may be refused only if refusal is in the interest of the orderly and proper regulation of banking. Conditions may be attached to licences.
With the Minister's consent, a licence may be revoked on certain stated grounds, namely if the holder so requests, if the business has ceased, if the licence holder is unable to meet his obligations, fails to maintain the required deposit with the Central Bank, is convicted on indictment of any offence under the legislation, is convicted summarily of an offence involving fraud, dishonesty or breach of trust, or if the circumstances have so changed that the licence holder would not be granted a licence under current practice. The licence holder may make representations to the Minister for Finance regarding the proposed revocation and the Minister is obliged to consider any representations.
Every licence holder will have to keep a deposit in the Central Bank equal to 5 per cent of his customers' deposits within the State, subject to a maximum of £500,000 and a minimum of £20,000. The Bank will have power to prescribe books and records to be kept by licence holders, to inspect the books and records and to obtain returns from the licence holders. If it appears that a licence holder has become or is likely to become unable to meet his obligations, the Bank may direct the licence holder to suspend the taking of deposits and the making of payments unless with the Bank's permission. The licence holder will have a right to appeal to the court against any direction. Directions may also be given by the Bank as to the information to be published in any advertisement or requiring the cessation of advertising. There are special provisions to facilitate depositors in recovering their money through court action where a licence holder fails to pay amounts due.
I am satisfied that it is necessary to give these extensive powers to the Bank in order to ensure adequate protection for depositors. The controlling authority must be in a position to act quickly if  there is good reason to believe a default is likely to occur. Action after a business has defaulted could be too late.
The Bill also contains provisions designed to give more effective control of credit by strengthening the monetary policy instruments available to the Central Bank. The Bank has operated monetary policy in recent years by means of credit advice to the banks, with a fair degree of success in normal circumstances. The gradual emergence of a more complex and sophisticated banking system makes it desirable to provide more formal powers of control. Variable reserve and liquidity ratios are used by many central banks as a strong and flexible instrument for regulating the amount of bank lending and it is considered that the administration of monetary policy would be strengthened by giving similar powers to the Central Bank. The Bill provides, therefore, that the Bank will be able to require holders of banking licences to maintain specified ratios between different types of assets and liabilities.
In view of the increasing number of banks in Ireland, it is in the interest of the public generally that facilities for the clearance of customers' cheques should be widely available on reasonable terms. It is, therefore, provided in the Bill that licensed banks will be required to accept from customers, for collection and crediting of the proceeds to the customers' accounts, cheques drawn on other licensed banks. It is also provided that the Central Bank will have power to supervise the conditions under which these facilities are made available, including arrangements whereby one licence holder acts as banker for another.
I referred earlier to the rapid increase in the number of banking and financial institutions which have opened here in recent years, many of them of external origin. The foreign banks have helped to introduce new skills and techniques and to promote the inflow of investment capital. When the associated banks were closed last year, they provided much-needed banking services. They have been welcome for these reasons. Nevertheless, the Government consider that widespread penetration of Irish banking by external interests  would be undesirable. We have a long-established and well-developed banking system with branch banks widely spread throughout the country. It might, indeed, be said that we are already overbanked. Our attitude towards the opening of new banks and of new branches of existing banks must, therefore, be one of caution. Our policy would, of course, have to have regard in due course to any obligations we might incur as members of the European Economic Community regarding participation by non-nationals.
Provisions are included in the Bill to facilitate the transfer and merger of banking businesses. I hope these provisions, which are basically similar to those of the National Bank Transfer Act, 1966, will be availed of to rationalise our banking system in a way that will make for greater efficiency and more economic use of banking resources. The two major banking groups have rationalisation schemes in progress and I trust that these will contribute to a great improvement of the banking structure. At the same time, I should add that the Government are fully alive to the dangers that might arise from too great a concentration of banking.
Part IV of the Bill deals with the standard unit of value. It expresses the par value of the Irish pound in terms of gold and provides that the Government may, by order, change the par value after consultation with the Central Bank. There has been some misunderstanding of this provision. What is intended is solely a technical change. The existing position is that the 1927 Currency Act established a fixed parity between the Irish pound and the pound sterling. Under this provision the exchange value of the Irish pound, while remaining the same as against sterling, automatically follows changes in the value of sterling vis-à-vis other currencies. This position is inconsistent with the obligations arising from our membership of the International Monetary Fund. These obligations are set out in the following three quotations from Article IV of the Fund's Articles of Agreement:—
As I have already made clear, the question of devaluation of our currency in relation to sterling does not arise. The Government have no intention whatsoever of changing the existing parity with sterling and the policies we are committed to following will ensure that no such eventuality will arise. Indeed, we are looking forward to the prospect of membership of the European Economic Community in which, if present proposals materialise, there will be a progressive movement towards fixed parities between the currencies of all the member countries. I hope that no more need be said to dispel misapprehensions on this score, particularly as financial confidence is so important a foundation for economic development. Given this importance, I have no doubt that Senators will act with a sense of discretion in any comments they may make.
The last part of the Bill—Part V— contains a number of miscellaneous provisions. The former Currency Commission had power to carry on normal banking activities but, although the functions of the Commission generally were transferred to the Central Bank, the 1942 Act has been construed as limiting the Bank to the specific powers listed in the Act. It is proposed to restore the express power to engage in banking activities, particularly in view of the further provision, to which I will refer in a moment, namely the proposed transfer of the Exchequer Account to the Central Bank.
The provision regarding reserve bonds is related to the transfers— which I mentioned earlier—of sterling by the associated banks to the Central Bank for inclusion in the official reserves. In the first instance, it is proposed that the bonds be issued against some of the sterling transfers. It is considered desirable that power should be available to the Bank to issue these bonds so that they may be available to licence holders as a form of transferable domestic liquidity reserve for use within the banking system. It is expected that they will facilitate the development of the domestic money and bond market.
The proposal to transfer the Exchequer Account from the Bank of Ireland to the Central Bank will bring our practice into line with that of other countries. The Bank of Ireland also holds the registers of several Government Stocks and the Land Bonds registers. Arrangements are being made to transfer these to the Central Bank but legislation is necessary only in respect of the Land Bonds registers. Almost from its establishment under the pre-Union Irish Parliament, the Bank of Ireland has acted as Government banker. It is only fitting that I should say that the Bank and its officers have over the years carried out this function in an efficient and helpful manner and that I should express the Government's thanks to them. The transfers are being arranged by mutual agreement and will be phased over a period to facilitate both sides.
At present the Bank of Ireland, by reason of the charter and the special legislation under which it operates, suffers from some disabilities as compared with the other banks to which the Companies Act applies. Provision is made in the Bill to remedy this so that, in future, shareholders of the Bank of Ireland may be in the same position as shareholders of the other banks in regard to the management of the business.
There is doubt as to whether the Moneylenders Acts apply to some forms of banking. Under the Bill, holders of licences are, as such, being exempted from any obligation they might have to register as moneylenders under  these Acts, leaving the control and regulation of banking to be dealt with under the provisions of the Currency and Central Bank Acts.
The maximum number of members of the board of the Central Bank is eight, in addition to the governor. Of the eight, three, known as banking directors, are drawn from a panel elected by the associated banks, that is the eight commercial banks which were the shareholding banks in the former Currency Commission and which were associated with the Central Bank by the 1942 Act. Changes in the banking scene since then, including the emergence of two predominant groups amongst the associated banks, make it necessary to review the arrangements. The existing procedure of selection of banking directors by means of a panel system is overelaborate in the new circumstances and, following the various mergers, it is not considered necessary to have three directors representing the associated banks. The Bill provides, therefore, that in future the Minister for Finance will appoint two banking directors from amongst persons who are directors of associated banks. As the total number of directors will remain unchanged, the Minister will be able, if he so wishes, to appoint a further non-banking director and thus broaden the representation on the board.
When the Decimal Currency Act, 1970, was debated in the House, a point was raised about the validity after the end of the changeover period of informal contracts drawn in £sd terms. To remove any possible uncertainty, I have decided to include a provision in this Bill substantially repealing section 14 of the Decimal Currency Act, 1970. In addition specific provision is made to secure that the £sd system may continue to be used for all contracts and other transactions. I am advised that these measures will suffice to ensure the continued validity of contracts made in £sd, whether formal or informal and no matter when made.
The provisions of the Bill will add considerably to the responsibilities of the Central Bank. It is important that the Bank should have the freedom and discretion, as well as the administrative competence, to enable it to discharge  these responsibilities fairly and efficiently and with full regard for the public interest. I have every confidence in this respect in the Bank's board and staff.
It is intended that there should be the fullest co-operation between the Government and the Central Bank. The Government does not, however, propose to interfere with the administration of the Bank which will be independent in the carrying out of its functions. This independence is possessed by almost every Central Bank throughout the world and is a very desirable provision.
...such steps as the Board may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole.
This statutory function of the Bank in relation to monetary policy does not, of course, diminish the ultimate responsibility of the Government in that sphere. There can be no question about the responsibility of the duly-elected Government for national economic policy, of which monetary policy is an important and integral part. The need for integrating monetary policy with general economic policy and the ultimate authority of the Government in regard to both are evident. They are fully recognised here and throughout the world.
At the same time, because of basic public interest considerations and historical experience, it has been recognised universally to be desirable to have a special institution, differing in constitution from, and enjoying more independence than, a Government Department, charged with the immediate responsibility for monetary policy. There are very few independent countries  in which there is not a Central Bank. In some countries the ultimate authority of the Government for national economic policy is expressly indicated by a statutory provision for the issue of a policy directive by the Minister for Finance to the Central Bank. Elsewhere, the ultimate authority of the Government, even though it may not be expressly defined, is nonetheless undisputed. Everywhere, subject to this ultimate need for reconciliation of monetary with general economic policy, the maximum independence and discretion is assured to central banks.
In our case the relationship between Government and Central Bank rests as much on mutual confidence as on statue. It is sustained by frequent consultations between the Minister for Finance and the governor of the Central Bank on all aspects of economic policy, by a frank interchange of information and comment in the policy field and by the fact that the Government has an official representative on the board of the Bank. It has worked well since the establishment of the Bank in 1943. The Bank has always had regard to national economic policy in considering monetary policy and I have no doubt that it will continue to do so. I do not regard the provisions of the present Bill as calling for any change in the basis of the present relationship.
I do not wish to dwell on the dispute which for many months last year suspended the country's main banking services. It caused widespread trouble and inconvenience to the business community and private persons alike and it is now clear that in its overall effects it was damaging to the economy, mainly as a result of the excessive expansion of credit which took place. Professor M.P. Fogarty has made a valuable report to the Minister for Labour on the dispute and the Central Bank will be publishing shortly the results of its survey, with the Economic and Social Research Institute, into the economic effects. In addition to these official inquiries, the dispute and its consequences have been widely debated over the past year. There is nothing to be gained from continuing to hark back to past events. The lessons are clear and it must be the aim of all concerned to  avoid any recurrence. I welcome, therefore, the discussions now taking place within the banks between management and staff and trust that a new era of fruitful and harmonious relationships will emerge.
Meantime, the powers proposed in the Bill will put the Central Bank in a strong position in various ways to deal with banking problems, whether arising from a bank closure or otherwise. The Bank will, for example, be able to engage in any necessary banking activity, including clearing activities. It will also, as I have already indicated, hold the Exchequer Account.
I am asking the House to approve the proposals in this Bill. I believe they will add considerably to public confidence in our monetary institutions and strengthen the efficiency of the monetary system, which is indispensable for successful economic and social advancement.
Mr. Russell: I think most of us would reply to the Parliamentary Secretary's concluding paragraph by approving generally the proposal in this Bill. The comments I have to make will be those of a layman as I do not regard myself as an expert on banking. I hope they will be accepted by the Parliamentary Secretary as being helpful and constructive.
First, I should like to express appreciation of the very comprehensive statement which the Parliamentary Secretary has made. From time to time we have had reason to complain in this House of the very brief briefs of Ministers and Parliamentary Secretaries introducing various Bills. On this occasion I think that nobody could find fault with the Parliamentary Secretary for the trouble he has taken to explain in non-technical language the purpose of the Central Bank Bill, 1969. Nobody could accuse the Government or the Minister for Finance of being too impetuous or of rushing into this legislation. One considers the fact that the Bill is dated 1969 and it is now just over two years since it was first introduced.
It is only right that a Bill of this kind should not be rushed through the  Houses of the Oireachtas. It is essentail that very proper and full consideration is given to all its implications. There is now a much more widespread interest in banking and monetary policy generally over a wider section of the public than there was even a decade ago. It is proper that this interest should be carefully considered and that every effort should be made to secure its support when Bills of this type are going through the Houses of the Oireachtas.
As the Parliamentary Secretary has indicated, there have been many changes in the banking and monetary system in this country since the enactment of the 1927 Currency Act, which is now 44 years old and which set up the Currency Commission. That was followed ten years later by a banking commission which issued a majority report and, I think, at least one minority report. The reason I mention it is because it has some historic significance in that one of the minority reports was issued by a former Fianna Fáil Deputy still happily with us, Mr. Peader O'Loughlin of Ballyvaughan, County Clare, now well into his eighties. He was a very remarkable man, very much in advance in his thinking in those days. I think most people disagreed with some of his proposals, one of which was to cut the link with sterling. He felt at that time, and I have on several occasions discussed the matter with him since, that we should have allied our currency with the dollar, not with sterling. It is interesting now to conjecture what would have happened in the late 1930s if we had decided to ally our currency with the dollar rather than with sterling.
The Central Bank since their establishment following the 1942 Act, as the Parliamentary Secretary stated, have expanded their activities enormously in conformity with the expansion which has taken place generally in banking and monetary affairs over the past 25 to 30 years. It is interesting to view the scence in retrospect and to see how the general banking and monetary scene has changed dramatically and the huge increase in the number of deposit and lending institutions established to cater for the expanded demand for capital  for industrial, commercial and personal needs.
It is encouraging to reflect that this demand for increased banking and deposit facilities has gone hand in hand with the expansion in our economy over successive Governments during the past 25 or 30 years. One of the things not specifically referred to in the Parliamentary Secretary's speech, but worth noting, is the manner in which the banks have changed their image from being primarily deposit institutions, whose first consideration and sometimes only consideration was the safety of their customers' funds, to lending institutions playing a vital part in the development of the public and private sectors of the economy. In conformity with this changed image the banks have developed new and technical departments which can offer expert advice to clients in the industrial and commercial spheres.
We have now reached a stage in this country, as has been reached in other countries, where the banks are not only lending institutions but are now in a position to offer expert advice to their customers on the merits of projects and the necessary capital requirements. As a trader myself, I, and I am sure others in this House, and members of the farming community would like to pay a tribute to bank managers in general who have been most helpful over the years in dealing with their clients' requirements. They do not often get praise, sometimes they get the opposite. We should pay a tribute to the ability and the acumen of the bank managers and their employees who man the various associated and unassociated banks throughout the country because, in addition to their expanded activities in the lending fields, their advisory service is now available on a very expanded basis.
The banks have also moved indirectly, it must be stated, into the field of hire purchase, a development that would have been unthinkable only a few years ago. They have introduced innovations such as personal loans, bridge-financing for house purchase—which is rather difficult to obtain at the moment— and loans to young farmers. These are all examples of personal risk lending  which have brought a more personal image to the banks. These are all developments we can commend. They make banking a more human institution and a more personal development than it was in years gone by.
The banks also loan substantial sums of money to firms setting up in this country for the first time. The Government also play a very important part in this by giving substantial grants and attractive tax concessions. Here again, the commercial banks are called on to provide a substantial proportion of the capital required by new industries financed to a large degree from outside the country.
Concurrent with the expansion in the commercial banks we have also witnessed over the past 20 to 25 years a big expansion in the activities of institutions such as the Industrial Credit Company, the Agricultural Credit Corporation and the growth of building societies and merchant banks. All these, in their own way, have played a significant and useful part in promoting industrial, commercial, and agricultural expansion and also in assisting people to purchase their own houses, and to purchase personal requirements of various kinds. This indicates that the banking system has not been slow to adapt itself to the changes in other countries, particularly the United States of America.
The Parliamentary Secretary referred to the substantial increase in the number of non-associated banks, particularly North American banks, operating in this country. I was glad that the Parliamentary Secretary paid a tribute to the service rendered by these banks during the recent closure—I do not know if I should call it a lock-out or a strike. There seems to be some divergence of opinion, but the trading and commercial community have no doubt as to what its effects were. During this unfortunate period we would have been in a far more serious predicament were it not for the very effective and efficient service provided by the non-associated banks. I have no statistics to assist me in making an estimate of the growth or otherwise of legal and illegal money lenders, but I suppose they can be regarded as playing  a part, however dubious, in the business of loaning badly needed finance.
As the Parliamentary Secretary has indicated, the time is opportune for new legislation to ensure effective control over, if not of, the monetary systems so that the integrity of all currencies is preserved, the interests of both depositors and borrowers are safeguarded and the monetary policy is regulated in the best interest of the economy with a degree of flexibility necessary in the often rapidly changing circumstances of our times. The Parliamentary Secretary did indicate the obvious need for the Central Bank to be in a position to take rapid action if such was required.
There is no point in locking the stable door after the horse has bolted. The powers which are now being given to the Central Bank are obviously desirable. It is good to know they will now be in a position to act promptly if the necessity arises. I often think it is a pity that legislation of a similar kind cannot be provided to take care of similar urgent situations in the industrial and commercial field. We have had several examples recently of serious industrial collapses with great hardship ensuing to workers and traders generally.
It would be a worthwhile development if the Government, through something like the Board of Trade in Britain, could have some institution that would be in a position to act promptly before a major industry or some such commercial activity got into difficulties, if necessary by assisting it by improved management, by giving capital where required, but at least by being a watchdog in the interests of the community and particularly in the interests of the staff and workers, traders and creditors, who might be involved if there were a sudden close-down of a large commercial undertaking.
The Parliamentary Secretary has referred, understandably briefly, to the recent bank strike. I do not intend to flog this dead horse beyond making a few comments. We were undoubtedly the wonder of the outside world that any country could carry on for six or  seven months without its banking system. People regarded us as somewhat of a freak in the monetary and financial world that such could happen without consequences, as far as they saw. Everybody here will know from his own personal local experience that that bank closure caused considerable distress amongst the business and commercial community, amongst the farming community and amongst hundreds—perhaps I could say thousands—of people in small businesses who were put in considerable difficulties through not being able to negotiate cheques and other payments of that kind.
I read the official report on this dispute and some very alarming statements were undoubtedly made. Not all of them—let us be fair—were substantiated by subsequent evidence. I think it is right to say that a very big number of traders were seriously embarrassed without going out of business. One cannot judge the effect of the bank strike by the number of closures or bankruptcies. Anybody who has intimate knowledge of or connection with the trading and commercial community will know that a big number of them suffered very severe embarrassment. In some cases a person's health was affected by the stresses and strains of his financial position both during and after the bank closure.
There is no question at all about it, but that the reactions to the bank strike will be felt in this small country of ours for many months to come. Without wishing to make any wild or alarming statements—and I think most of the Senators here would agree with me in this—I feel that the effects of that bank strike were really not clearly seen, because traders do not like to advertise financial embarrassment: it means their credit and their standing in the community is affected perhaps for all time. Rather than admit that their business, farm or other enterprise is in difficulties they will do their best to cover up the difficulties and make sacrifices, possibly at considerable cost to themselves and their families, to carry on. We are very proud in this country of our own good name or the good name of our business.
 Whatever the results of that bank strike, I hope both sides will appreciate the terrible damage done by it to the trading community and individual people, and that every effort will be made by both sides to act promptly on Professor Fogarty's Report. I join with the Parliamentary Secretary in expressing every hope that that report will be accepted or will at least from the basis for a final and lasting settlement of any differences that may exist between the bank directors and their staffs.
As an outsider looking in it seems to me that a lot of this trouble arose originally from a lack of dialogue, from lack of personal contact between the people at the top of the banking institutions and the ordinary rank and file of the staff. I must say my own experience through the years has been— and I am sure it is shared by others in this House—that where you lose personal contact all sorts of suspicions, perhaps quite unfounded, and fears seem to creep in; but where dialogue can be established and continued these little irritants can be got out of the way in good time before they grow into something very serious and very foreboding. I hope that one of the things that will come out of these talks that are now getting under way will be a better system of contact and dialogue between the staffs and directors of the banks.
One feature, about which I can speak with personal experience during the bank strike, was the attitude or the policy adopted by certain importers of essential raw materials where they demanded cash or else they intimated their intention to charge what was then the bank interest rate on outstanding accounts. Even where traders paid them by cheque those cheques were ignored and the traders concerned had to bear substantial bank interest. The only alternative to that was if a trader was fortunate enough to have an account in a Northern Ireland, a British or American bank he could certainly pay his account or if he happened to be in the unique position of having cash to pay for substantial imports, but these were very few and far between. That is one effect that I know of, from personal experience, of the bank strike.
paying a tribute to the non-associated  banks, building societies hire purchase companies and other lending institutions who helped to carry the economy during the bank strike, it is only proper to pay a tribute to the general body of traders and shopkeepers who supplied an extraordinarily good service during that bank strike. They cashed cheques and provided cash by a system of co-operation between traders that was quite remarkable. Senators will agree with me that if it had not been for the fact that the ordinary shopkeepers in their home towns cashed cheques for, in some cases, complete strangers, many people otherwise would have been unable to keep their wives and families fed and clothed. They provided a very essential and very real service to the community. Unfortunately, some of them have had to pay dearly for their service by the number of cheques which found their way back to them as soon as the banks had opened.
I note that reference was made in the Dáil by some Deputies to the closure of the Hibernian Transport Company. Here again I should like to support the Deputies from my own constituency and my own area who referred to that disaster, because it could be called nothing else. Again, I can speak from personal experience of traders who cashed cheques for the staffs and workers of that undertaking only to find when the banks reopened that they were worthless.
This sort of thing emphasises what I was speaking about a few minutes ago: the necessity for some watchdog, something like a board of trade or similar body who would, at the first warning signs, be able to take action to ensure that a disaster like the closure of the Hibernian Transport Company would not occur again. In a comparatively small city like Limerick the vibrations of that very real disaster are still being felt throughout the city and throughout the contiguous counties.
Most of the controls which the Parliamentary Secretary has outlined and which are covered in this Bill are, I think we would all agree, necessary, such as the licensing of banks. I was interested to see that we have 80 licensed banks in the country. On the control of  clearing arrangements for the maintenance of a 5 per cent deposit of reserves, perhaps when the Parliamentary Secretary is replying he might give some indication of what is meant by reserves. Does this apply only to reserves within the country, or can it apply to reserves outside the country? Can it be applied to holdings in foreign currency or does it apply only to holdings in Irish currency or gold? It could have quite an important effect if that 5 per cent were related only to reserves held within the country.
One of the fears I have about the Bill—and I should like the Parliamentary Secretary when he is replying to give an assurance that perhaps my fears are unfounded—is that it seems to me one of the purposes of the Bill may be, and I say “may be” because I could be misreading the Bill, to limit competition between the associated and non-associated banks. We have, as we all know, only two major banking groups now, Allied Irish and the Bank of Ireland Group. The non-associated banks are prohibited from extending branches throughout the country.
It is true that the Central Bank will now be in a position to operate as a commercial bank, but I wonder if the Bill is not being too severe on the non-associated banks. I say that having very carefully considered the situation and the point the Parliamentary Secretary has made. I think that it is not only most desirable but essential that the bulk of Irish banking should remain under local control. I hope that position will continue to obtain if and when we enter the EEC.
I am not quite clear from the Parliamentary Secretary's speech if we can continue to keep the major share of Irish banking services under our own control or if that control could pass out of our hands in EEC conditions. I know that the Parliamentary Secretary did say that this Bill, when being drafted, kept in mind developments in the Common Market countries; but do those developments include the right of any continental bank to come in here and set up branches throughout the country? If that is so, I think the hope expressed by both the Parliamentary  Secretary, and supported by myself, that the bulk of Irish banking should remain in Irish hands is likely to disappear. An assurance from the Parliamentary Secretary on that point would be welcome indeed.
It is essential that we have active competition between the banks in this country. In saying that, I do not wish to appear critical of the service provided by the two main banking groups. They provide a first-class service, they cover every town and almost every village in the country; but I think it would be a pity, to say the least of it, in the interests of efficiency and in the interests of giving the best possible service to industrial trading and to individuals, if competition were not preserved and, in fact, increased. Every possible effort should be made to encourage competition between the banking institutions. I hope that the Parliamentary Secretary will keep that in mind.
There was a time when competition was almost non-existent among the banks. Even when we had more groups of banks than we have now there was a time, and others will confirm what I am saying, when it did not very much matter which bank you went to. If you were refused by one you were refused by all. That situation, strangely enough, has changed to some degree, although the number of banking groups has been reduced. Recent indications are that there is in some cases, I might almost say, unhealthy and certainly undignified competition between the banks. To substantiate this statement, I think a case was quoted in the other House where the fanatical and undignified efforts of the two banking groups competing for the accounts of two or three of the health boards throughout the country left a lot to be desired. I am all for competition, but not the kind of competition where you have bank managers coming round to public representatives looking for their support and that support being switched at consecutive meetings of those health boards.
I should now like to say a few words on the board of the Central Bank. The Parliamentary Secretary said in his statement that there are eight members together with the chairman of the  Central Bank. They include three representatives of the associated banks. It is now proposed to reduce the representation of the associated banks to two, presumably one from each of the major groups. These representatives will be selected by the Minister for Finance from the existing directors of the associated banks.
I have divided views on that set-up. If you are are to have the banking community represented on the board of the Central Bank, then all sections of the banking community should be represented. I think there is a strong case for a representative from the non-associated banks being on the board too, and possibly from the merchant banks and some of the other lending and deposit institutions. If it is the intention to tie-up or associate more closely the Central Bank with the associated and non-associated banks obviously the thing to do is to have a wide range of representatives on the board. If, on the other hand, the Central Bank should be completely independent of the associated and non-associated banks and other lending institutions, I do not think there should be any representative of the associated banks or any other lending institutions on the board.
By and large, I must say that my preference would be for a Central Bank completely independent of the associated, non-associated and other banks or lending institutions. It should be there as an independent board, a watchdog on behalf of the State and the community, sufficiently independent to advise the Minister on critical matters but at the same time containing among the personnel men expert in economic and financial matters. I feel that this would be the best arrangement. There may be very good reasons why my viewpoint does not find favour with the Parliamentary Secretary and perhaps in his reply he will be good enough to take up the point and let us have his views. I feel that one of the great strengths of the Central Bank must be its absolute independence from any entanglement—I use that word for want of a better one—with the associated or other banks, because a situation could arise where the policy of the  Central Bank might be divergent from that of the associated or non-associated banks. If the Central Bank is acting, as the Parliamentary Secretary has said, and will continue to act in the national interests it should be free to advise the Minister accordingly. There may be very good reasons why this viewpoint cannot be sustained but perhaps the Parliamentary Secretary will give some thought to it and reply to it in due course.
The sort of representation I should like to see on the Central Bank board, assuming the point I have made is a valid one, would be obviously a Minister's nomination, an economist, at least one person representing trade and industry, a person representing agriculture and a person representing trade union interests. In other words, it would be a board representative of the community rather than one which would too closely represent the associated and non-associated banks.
Another section of the Bill to which the Parliamentary Secretary has referred and which would probably call for comment from several Senators is section 43. That section, as the Parliamentary Secretary has stated, gives the Government freedom to change parity of the Irish £ after consultation with the International Monetary Fund. He made an appeal to Senators not to become alarmist and refrain from saying anything that might confuse this issue. I certainly will abide by his wishes in that regard. However, I should like to ask the Parliamentary Secretary why it was necessary to make this change. One of the great bulwarks of our currency has been the fact that we are allied to sterling. In saying that I must add that I was one of those who, many years ago, thought we might do better by being allied to some other currency. However, experience during the years has shown that the strength of the Irish £ rests largely on the strength of sterling. Anything that might suggest a change in that parity could have injurious effects for the country as a whole and for the standing of our Irish £.
I know the Parliamentary Secretary has assured us that it is not proposed to make any change in this regard but, if it is not proposed to make any chang  either now or in the future, could the present arrangement not stand? Even though this House and the other House have dealt and will continue to deal responsibly in this matter, there was a suggestion that this move preceded a possible change in the present parity between Irish currency and sterling. If it becomes impossible to carry on without making such a change and if we have to bring our laws into line with EEC conditions, there is nothing we can do about it. Having regard to our peculiar situation, our historical and economic association with Britain and the fact that our country is still partitioned, anything that would even suggest a change in parity with sterling at this juncture should certainly be resisted. I feel the Parliamentary Secretary has spelt out the Government's views in this regard, but people tend to believe what they want to believe and not what people tell them. Perhaps the Parliamentary Secretary would comment a little further on that matter when he is replying.
It would also be helpful if the Parliamentary Secretary could indicate a situation where it might become desirable to change the parity of the Irish £. I cannot visualise, particularly with our impending entry to the Common Market, a situation where the parity of the Irish £ would be changed except to bring it into line generally with continental or Common Market currencies. If it is changed for that reason alone it would be quite all right. I should like the Parliamentary Secretary, when replying, to give us even one example of a situation whereby a change in the parity of the Irish £ might be called for. It would be most helpful if he could do so.
The 1969 Bill follows the 1968 Bill. In other words, this legislation has been simmering now for the past three years. During those three years there have been quite a number of events which impinged on the standing of our currency. Some of these events have been referred to by the Parliamentary Secretary in his remarks and others have not been referred to at all. The Parliamentary Secretary referred to— and this is worth repeating—the integrity  of our currency and that oe of then purposes of this Bill is to safeguard it. I shall quote from his introductory speech in which he, in turn, quoted from the 1942 Act which is still very appropriate today. He said:
We shall take such steps as the board may, from time to time, deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that in what pertains to the control of credit the constant and predominant aim shall be the welfare of the people as a whole.
I am sure everybody here would entirely agree with that statement. However, I should like to point out to the Parliamentary Secretary that the integrity of the currency and the welfare of the Irish people are primarily matters for the Government and not for the Central Bank or any other lending or deposit institution.
It is a sobering thought to recall that during the three years that have passed since the 1968 Bill was introduced— and its successor the 1969 Bill—our currency has been debased by something between 25 and 30 per cent. That was not due in any way to the lack of powers of the Central Bank. It was due to lack of control by the Government and not lack of control by the Central Bank. While not wanting to flog that point I want to emphasise that in the final analysis it is the Government who will preserve the integrity of the currency and ensure the welfare of the people, not the Central Bank or other similar institutions.
I am sure most Senators have read the publications of the Central Bank which are issued from time to time. These publications are somewhat heavy reading, but nevertheless they are very interesting. One fault I would find with them, however, is that their warnings tend to be belated. Would it be possible for them to issue independent warnings or advisory notices to the Government and the country generally before it is too late? Maybe there are difficulties involved in doing that. The information may not be to hand and they have to be very cautious, and are very cautious, in the statements they make, but a  warning administered in good time to any Government and to the people in general would be far better than a warning coming five or six months later when the damage has been done. The upshot of those warnings is usually “We told you so”.
I have already referred to the second development which aided in debasing our currency during the past three years—the banks closure. I do not wish to refer again to that matter. The third development is our impending entry into the EEC. All these developments have taken place during the last three years and they must have some effect on a Bill which was drawn up originally three years ago.
If the Government do their duty and govern, the work of the Central Bank will be confined to its proper functions, and the general banking service can be carried out by those best equipped to do it—the commercial banks, with their branches and experienced managers in every corner of the land. These men are the real custodians of the depositors' funds, not the Central Bank, because with their intimate local knowledge, they know how best to make use of the funds at their disposal for the benefit of their clients and the economy as a whole.
In other words, we should have a three-tier structure—the Government, obviously, primarily charged with the responsibility of maintaining the value of our currency and of looking after the welfare of the people; the Central Bank, which should be a completely independent institution, in my view, staffed by men with necessary qualifications, such as economists; and then what I might describe as the men in the field, the bank managers and their staffs throughout the country who are the people who make the best use of the deposits they receive, because they know whom to lend money to and whom not to lend money to. Whatever controls are to be exercised by the Central Bank, no inhibiting control should be placed on the activities of the commercial banks and their managers throughout the country.
At the outset, I paid a tribute to these men, but even though my own requests did not always find favour with them  there were always good reasons why they did not. I hope that this intimate local service, administered by the various branches of the banks throughout the country, will be continued without any hindrance. I should like to see more competition between the banks. The best use of our available funds will be made in a situation of free competition with experienced men who know their job looking after their clients' deposits and lending money to worthwhile projects, whether it is for trade or industry or for farmers or for anything else. They are the people who know best. Every possible encouragement should be given to them to carry on their task.
There are other points which I should like to make but they would be more properly raised on Committee Stage. In general, the Bill is to be heartily welcomed. The Parliamentary Secretary has gone to considerable trouble to explain its meaning to lay people, like myself. Apart from the few points which I have raised, he can be assured of every support from our side of the House in getting it through the Oireachtas.
Mr. Keery: I listened with interest to what the Parliamentary Secretary and Senator Russell said. However, towards the end of Senator Russell's speech, a touch of contradiction came into his remarks, because, on the one hand, he opened by welcoming the provisions of this Bill and the increased influence which the Central Bank might have on our economic pattern through the exercise of various controls and he finished up by paying a tribute to the men in the field, the individual bank managers, saying that he hoped nothing would happen that would inhibit their activities in any way. To me this is an implicit contradiction.
Mr. Keery: On inflation, and this is part of our problem, one tends to feel that the individual has no direct part in inflation, that he has no direct responsibility. Somehow, it is a communal thing that happens. As individuals, whether we are bank managers,  people looking for loans, or trade unionists, we feel that our case is in some way distinctive, that we are individuals and are outside this community problem; that we are not rocking the boat if we are looking for a loan or if we are looking for a wage increase.
The point of much of what I wish to say is that this is one of the major causes of inflation. Inflation is a matter of concern to every individual, whether he be a bank manager, a trade unionist, a Cabinet Minister, whatever he might be. If each individual realises that his attitude towards the management of his own affairs, towards his own income or salary, towards his own wage or towards the planning of his domestic budget, and his individual actions play a part in the general pattern of inflation, we shall have a much greater sense of responsibility in our community and a much greater prospect of bringing inflation under control.
Many of my best friends are bank managers and I do not consider it is necessary to pay tribute to their work. Indeed, it is dangerous to place a great deal of credence on Senator Russell's notion of the value of their intimate local knowledge. I regret to say it, but on many occasions a bank manager's intimate local knowledge of a person consists in the fact that he knows him in the golf club and for that reason is prepared to be reasonably soft with him and to let him continue his overdraft.
It is this attitude which is most dangerous in trying to control inflation and to provide a proper constructive growth in our economy. Irish banks got a real jolt when foreign bankers came into the country with a completely new technique. They were not interested in the look of “Joe Bloggs” who was looking for a loan, or if he was a good golfer: their prime interest was in the ability of that man to make money out of whatever he might borrow from them—his ability to invest the money and to be able to repay it from productivity and production. To do this effectively, the foreign banks had to apply fairly stringent standards of investigation to their potential clients.  They had to find out as much as they possibly could about the various investment proposals put up to them.
This is an extremely delicate science but one which leads to a form of lending which is of most value to this community, namely lending which produces employment and money, not money which enables some individual to make a swift buck, live ostentatiously and leave behind a mass of ruins. This can often be the case, if the criteria used in assessing the creditworthiness of an individual are not of proper stringent scientific standards.
I welcome this change towards the scrutiny of the potential borrowers, particularly large borrowers, and I support Senator Russell when he appeals for a watchdog to keep an eye if at any time there should be a sign of stress in a firm which is going through financial difficulties. Apart from a watchdog, I hope that the Government will also do their best to make sure that in our firms—and indeed in every walk of life; for years it has been a particular problem in agriculture—anybody engaged in a productive activity should be encouraged to keep thorough current accounts and records of their affairs which will be accurate, which will be properly audited and then will be made available for examination at a time when they are seeking loan facilities or at a time, on a confidential basis, when some research unit of the Central Statistics Office is interested in obtaining reliable figures which will help to chart the future development of the economy.
In this context I found it interesting, looking at the background to this Bill, to find that the statement of the general function of the Central Bank is almost a fair statement of what is the prime economic problem facing the State at the moment. I quote from the Central Bank Act, 1942:
...the Bank shall have the general function and duty of taking (within the limit of the powers for the time being invested in it by law) such steps as the Board may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant and predominant aim  shall be the welfare of the people as a whole.
This makes the Central Bank a public body. That statement of duty is a statement of our main difficulty at the moment—the problem of inflation, the problem of controlling inflation. Having pointed to the closeness between the duties of the Central Bank and the objectives of government, I very much support what the Parliamentary Secretary had to say about the relationship between the Central Bank and the Government.
The relationship must be one in which the Central Bank is independent and yet with a spirit of mutual confidence which allows a useful interchange between the two institutions. This independence of the Central Bank is vital and particularly valuable when, from time to time, a Central Bank analysis of the economy may lead to different conclusions from an analysis produced by the Department of Finance.
In pointing to the importance in value of the Central Bank I also agree with the Parliamentary Secretary that the effectiveness of the Central Bank depends on the quality of their staff and resources. I should like to join in tribute to the staff of the Central Bank. At the moment they are one of the largest employers of professional economists in the country and I hope they will always be given the resources to allow them to do their job at the highest possible level and in an independent manner. I hope when the Central Bank have their new building in Dame Street that outward symbol may help to bring home to the community their importance.
I should like to refer to one power which the Central Bank have. It is the power to collect and study data relating to monetary and credit problems and to publish informative material in regard to such data. I agree with Senator Russell that the information material which the Central Bank provide from time to time is extremely valuable. In my view, individual responsibility where the problem of inflation is concerned is something which can be strengthened if individuals have a proper understanding of the inflationary situation, if they  have some knowledge of the working of the economy.
This is brought out in Professor Fogarty's report of his inquiry into the recent banks closure. He points out there that some of the actions of the bank officials were such that if they had shown an appreciation of the economic pattern, which is a matter in which they should surely be professionals, they would have seen that many of the actions they were taking and some of the attitudes they held were bound to be counter-productive. This means that many of the bank officials were not as aware as they should have been of the position of wage agreements and salary claims and their effects on the inflationary pattern in the economy. I should think if everyone in banking had been regular readers of the annual reports and the quarterly bulletins of the Central Bank they might not have acted in this way and might have had a much more constructive attitude towards the dispute and we might all have been much happier for it.
The provision of information to trade unionists about the pattern of the economy would have been extremely valuable, particularly if trade unionists had run education courses for their members as to how the economy works. If we could build up in that way an understanding of inflation and patterns of inflation among workers we would have a much better chance in the long run of ensuring that the pattern now established by the national wage agreement might be continued in the future.
Speaking as a legislator, I think it is invaluable to have a regular supply of information about the working of the economy. As a legislator one is forced to try to understand matters as difficult as central banking and it is invaluable to have reports and bulletins of the Central Bank. I have a number of different hats under which I have received information. I think the annual report is always circulated to Members of the Oireachtas but I am not sure if the quarterly bulletins of the Central Bank are circulated also as a matter of form. I urge that they should be.
It is strange that I, for one, did not receive as a matter of procedure Professor Fogarty's report of the banks  inquiry. I had to make a special request through the General Office of the Houses of the Oireachtas for it. This is something that should not happen. The Departments of State should be aware that it is in their interests to have informed legislators when they must deal with important technical legislation and matters that are so currently controversial as the banks dispute. They should take special measures to ensure that important documents such as Professor Fogarty's report are given, as a matter of course, to all legislators. The provision of information can give a lot of help to the general understanding of economic matters, an understanding which in the long run helps legislation and helps an understanding of the working of inflation and helps towards the betterment of the community.
When the specialists of the Central Bank are preparing further issues of their bulletin they might consider publishing material on what the nationalisation of our banking system would mean. I found it extremely interesting that at the time of the banks dispute, from sources that were far from radical, one often heard it springing from people's lips: “Why not nationalise the banks?” It is an interesting question. I have no idea what the technicalities involved are. It seems to me it is a question that might well be asked from time to time and might be helpful in something like the Central Bank bulletin if we had some kind of an analysis of what, in the Irish context, the nationalisation of banks would mean. I commented in my opening remarks on the role of the foreign banks.
On the point which Senator Russell raised in regard to the issue of a standard unit of value here, I was surprised at and could not quite follow his view that in some ways it was a retrograde step to sever the tie between the value of our pound and the pound sterling. It seems to me that this is a measure to be welcomed, particularly at a time when the idea of sovereignty is under debate in the context of our application to enter the EEC. We would not be losing our sovereignty in  entering the EEC, because, as I understand it, we have not had it. Part of the issue of sovereignty in a country like Britain, for example, is their power to determine the value of their own currency. This is an aspect of sovereignty which, as I understand it, we have not had and which we are now claiming. But, if we are successful in our application to join the EEC, we will be handing it over again.
When we enter the EEC, and particularly when we become involved in the moves which the Community are making towards economic and monetary union, we will need to be much more sensitive than we have been to the relationship between the Government, the Central Bank and other central banks. As the European Economic Community advance towards economic and monetary union, the community system of central banks will be an extremely powerful body and unlike the national relationship between the Central Bank and the Government, there is as yet no clearly defined relationship between the Community central banks acting together and some European governmental or parliamentary control. This is a problem of which we should be aware and should try to keep under scrutiny in the future. It is part of the whole problem of trying to ensure that the European Community has the same pattern of Government as a nation state, namely that institutions such as the Central Bank are, in the last analysis, under governmental and proper parliamentary control.
Mrs. Robinson: I also welcome this Bill which has been long delayed but is now, eventually, before us. I shall confine my remarks to certain sections of the Bill as I do not regard myself as a financial expert and I had better keep within a rather narrow context.
The first point I should like to make relates to the granting and revocation of licences, that is under sections 9, 10 and 11 of the Bill. I am surprised at and not at all happy with the fact that the granting and revocation of licences is purely the function of the bank with  the consent of the Minister, without any appeal to the courts, or any provision for a person to dispute this. A licence to operate a bank is a form of property. I wonder then, first of all, if this is constitutional and, if it is, whether it is desirable? In order to check the point I looked at the Employment Agency Bill which we passed during this session. There, in relation to employment agencies, section 5 of the Bill quite clearly grants an appeal against revocation of the licence and refusal to grant a licence.
Where the Minister proposes to revoke a licence under this Act, he shall duly notify the holder of the licence of his proposal, and the holder may appeal to the High Court against the Minister's proposal.
Where the Minister refuses to grant a licence under this Act to an applicant for such a licence, he shall notify the applicant within 21 days of his decision, and the applicant may appeal to the High Court against the Minister's decision.
A provision concerning the Central Bank granting licences in relation to banking or revoking a licence for the reasons given in the Bill, with an appeal to the court such as the provision in the Employment Agency Bill, should also be continued in this Bill. This would give greater confidence to banking concerns in the community; and there may even be a constitutional issue involved.
The second point I want to make on the Bill relates to deposits at the bank for the purpose of licences under section 13. As I understand it companies who have bankers' licences hold securities with the courts of justice and these are usually Government securities. If these securities have to be realised there might be a loss on this, and there should be the possibility of a transfer of these securities. This may be possible under the terms of section 13 and I would be grateful if the Minister would comment on this.
In relation to the 5 per cent of the total deposits which must be lodged,  there is provision that this amount be calculated and, if less than 5 per cent is lodged or if the value is less than 5 per cent, this must be increased to the proper amount within seven days. But there is no provision for reciprocal treatment if the amount is over 5 per cent. I think that in relation to a large amount this might be inequitable treatment and there should be provision that the amount over 5 per cent be paid out if on calculation it was discovered that more than 5 per cent was deposited at that time.
Another section which puzzles me and on which I should like the Minister to comment is section 19 relating to the publication of business statements by holders of licences. I am not quite clear about this. Does it amount to a special form of audited account and, if so, are the Central Bank laying down a particular format for published accounts of banking companies? This should be of great interest to the profession of accountants. I should like some clarification of the meaning of business statements in this section.
Again, I am not quite clear as to the meaning of section 24 of the Bill in relation to the power of the bank to require deposits by holders of licences in certain circumstances, and these deposits would not bear interest. Is this, in fact, a provision for some form of credit regulator?
I am not clear if making such regulations refers to individual holders of licences and to the amount they must deposit without interest. This again would be an invasion of a property right. I would like to have clarification on this.
There are one or two other points I think might be considered. One of them is this: if a licence is revoked under the present Bill what is the procedure for the company whose licence has been revoked in relation to giving back their deposits and how would this be carried out? Secondly—and I think this is an important point—it might  be possible for the Minister to consider an amendment of section 344 (4) of the Income Tax Act, 1967.
Section 344 (4) provides for exemption from income tax on the first £70 interest earned on deposits from certain companies. These companies are specified in the Income Tax Act, 1967, and are classified as commercial banks. They are set out as such banks as the Bank of Ireland, the Royal Bank of Ireland, etc., and also such people as Ansbacher and Company Limited, the Commercial Banking Company Limited and Guinness Mahon Limited.
As the Parliamentary Secretary must be aware there are other concerns which are comparable to these banks and it seems both discriminatory and inequitable that those banks should have this power of having the £70 tax free preferential treatment. This provision for the £70 tax free should apply to deposits of any company which have been granted a licence under this Central Bank Bill. That would be a much more equitable matter and I think it would be a reasonably simple amendment.
That is all the comment I wish to make at this stage of the Bill. Any other remarks would be matters for the Committee Stage. Perhaps the most important matter which I have referred to is in relation to the granting and revocation of licences, that there is no access to the courts in relation to that procedure.
Mr. Alexis FitzGerald: I want to make it very clear, in case anyone has any other idea, that my knowledge of this subject is very much that of a gentleman, if I understand what a gentleman is: someone who does not consider too deeply all the implications of what he has to do but behaves by instinctive movements in the direction he thinks he ought to be going.
There are some things I can perhaps say which might be found to be worthwhile recording. One of the things is a question rather more than a comment. I tried to prepare myself to some extent for this debate which, alas, although no one can say the debate is  premature, has appeared on the Order Paper more unexpected by me than perhaps by others. I would like to know if I am correct in saying that the totality of the legislation with regard to the Central Bank is contained in four Acts: the Currency Act, 1927, the Currency Amendment Act, 1930, the Central Bank Act, 1942 and the Central Bank Act, 1964. The 1930 Act merely amended the powers of, I think, the then Currency Commission which preceded the Central Bank as to the nature of the investments which it was entitled to make and the Central Bank Act of 1964 provided for investment in the International Monetary Fund.
I said no one could say that this debate is premature. The Parliamentary Secretary might be interested in being reminded that the following words were uttered at a date which I will give him after I have read them:
In recent years there has been a substantial growth in the number and type of banking and other financial institutions operating in the State. There is considerably greater freedom of entry here into the business of banking than is allowed in other countries and on the recommendation of the Central Bank, I propose to seek the approval of the Government shortly for the introduction of legislation to control through the agency of the Central Bank the establishment of such institutions and to keep their operations under review so as to provide greater protection to people depositing funds with them and to ensure that, as far as possible, future developments in banking are in conformity with the national interest.
This was not taken from Deputy Colley's first, second or third Budget speech, or from Deputy Haughey's last Budget speech or his penultimate speech. The words were uttered by the  Minister for Finance on 11th April, 1967. How quick is “shortly”? Here it was apparently recognised that it was necessary to keep the operations of the banks under review to provide people who were depositing in them with greater protection. It has taken us four years and three months before we in this House have had an opportunity of considering whether the protection to be given to depositors by this Bill is adequate.
I think perhaps that comment is fair to make, as it indicates a snail's pace of progress. Here is a decision made in 1967 under the advice of the Central Bank. It is not a question of going to open up a review. Indeed, in this field, I should like to say that the pace of change ought not be fast. Looking at the operations of the first Currency Commission and then the Central Bank over the years, it has been—as I view it at any rate—a model of how things ought to be done.
There has been no history on this. There has been a constant improved flow of information and advice to the public. There have been very considerable changes, if you look back at what the Currency Commission were first doing, which was to provide a note issue here to fill the void which—I think I am correct—legally existed from the withdrawal of British forces at the end of 1921 and the beginning of 1922, when there was no effective legal tender here. This was the first object of the Currency Commission of 1927.
Then we had this really extraordinary banking commission. Unlike the first committee which recommended the Currency Commission, the Parker Ellis Committee issued interim reports rapidly to meet a real need. The Currency Commission sat through a period of four years, between 1934 and 1938, and one of the unexplained mysteries of history is why the Government appointed to that commission the people who were appointed to it. It was like putting white billiard balls on the table and then expressing surprise because only white billiard balls emerged. All the Government's policies received the severest criticism from the Commission the Government appointed,  containing persons from whom it would have been expected they would have received just this sort of criticism. I am sure we will get enlightened in due course as to the undoubtedly deliberate nature of this operation.
If I am not wandering away from the subject, I think it is worth looking at the persons who have been in charge of our currency since its foundation. Thank God, all of them are alive and still with us. It is interesting to reflect that the first chairman of the Currency Commission, the first governor of the Central Bank, was the chief adviser to the chief British Government representative in 1916 and was the first head of the Irish Civil Service. I wonder whether there are many historical precedents for that transformation, but it took place. He was in the best tradition of the service that he served in and academically brilliant. He was followed by another, a man who was cleverer and caustic and very much aware of our national defects. It was said of him, without trespassing on the time of the House, that when the flags in Leinster House were taken down at the beginning of August he used to say: “The Government of Ireland can now recommence”—once the debates in Dáil Éireann ceased. He was followed by a very patriotic and modest man, articulate and deeply aware of the capacity of our people to be inspired by rhetoric. He was followed into this day by one of the new men, a natural leader, a man who sensed a void which he determined to fill at considerable risk, I should have thought, to himself.
It is interesting to note the less important point about these men who after all have presided over the policy of the bank that we are today legislating about—all of them are non-bankers. All of them, in fact, are or were civil servants. It is interesting to note that at a time when it seems to me to be under contemplation in this legislation a rather substantial shift of power to the Central Bank. I do not know whether this should be debated at this point or at the point where the sections come under review. I think I should like to leave it there.
I should like to refer to one other characteristic of these four gentlemen  and that is they all shared the same capacity, which I imagine has been inherited by the present head of the civil service, to give Ministers advice they would not want to get and to reiterate it to the point of dislike, not always right but very often right. I should like to make this general comment, which I think is true, that is if you compare the activities of the first Government of the State and the second ten years after that there was a very conservative policy indeed pursued by the Ministers, by the Central Bank and the Currency Commission preceding it. People are inclined to ask why did not the old dame buy that property in 1927 when it would have been so much cheaper. This kind of talk is fallacious because you have got to look at the values that you are buying as well as the monetary unit that you are using to discover whether it is, in fact, much dearer to do it now than it would have been then.
Much of the credit of the State which is enjoyed and respected today is due to the conservatism of those first 20 to 25 years. I like to think that the progressive policy which has been pursued started in 1948, though one was learning what one was doing at that time. If you look at a section of the Finance Bill of this year you will find the capital redemption fund is providing its thirtieth annuity. I hope I am correct on this. I have not checked the point. Perhaps it is the twentieth annuity but 1950 was the year when borrowing for capital purposes that were within the Current Budget was first initiated. Be that as it may, the economic development programme matured in 1959 or 1960 and let us not discuss who was responsible for that. If we had not had the conservatism of the first 25 years I do not think that we could have enjoyed the international confidence that we have since enjoyed.
This leads me on to another observation I should like to make with regard to this measure. Senator Keery, in particular, welcomed the provision in this Bill with regard to the ability of the Government to limit in the fashion set forth in the section, to have a different ratio in relationship with  sterling. I am unhappy about this, I must confess, because I think once one has established an independent unit of currency, one invites speculation in it. Speculation of this kind, first of all, could be mustered against you. Have we the resources to combat it? Even if it were not mustered against you there is that natural instinctive search for gain going on throughout international capital. I just ask the question whether at this time this particular change is wise?
I believe that, already, in anticipation of this Bill being enacted, the country is, in fact, losing money, that there is a natural tendency to protect funds against any possibility. These are very sensitive areas indeed. I would regard as unthinkable and shocking that there should be any variation in the ratio between sterling and the Irish monetary unit. I understood the Parliamentary Secretary to say there is no intention whatever to do this. One of the most honourable politicians of this century was Sir Stafford Cripps. He put an end to any evaluation of any Minister's proclamation of an intention not to devalue. In fact, very shortly after having announced that there was no intention whatever of devaluing he devalued. That was in 1949.
There is a great deal of merit in having a legal situation which would make it necessary for the Government to come to Parliament and pass, through both Houses, a measure which would entitle them to devalue. I do not wish to go into this matter in any great depth. Above all I feel, I should not by my remarks encourage anyone to believe that there is any intention to devalue.
There are two types of devaluation. There is the devaluation which a Government determine they should have and there is the devaluation which is forced on a Government by foreign speculation or movements of that kind. Having said that—and it is an important point—I do not welcome this proposal at this point of time.
Speaking now as a legislating lawyer I welcome very much the provision in this Bill which gets rid of the embarrassment of the Moneylenders Act for certain institutions whose borrowers,  fortunately, did not become aware of the possibilities of operating the section. In England they altered it in the Companies Act, 1967, while we altered it in the Central Bank Act.
May I also welcome the adoption by the Minister—though I would have liked, I must confess, out of natural vanity, to have seen my name mentioned in the Parliamentary Secretary's address —of a suggestion I made in this House that a certain section of the Decimal Currency Act might render invalid informal transactions expressed in £sd. This has been changed under this Bill and I welcome that change. It is a very necessary change to make.
There is a good deal to be said for making the two big banking institutions equal in status, notwithstanding the historic priority of the Bank of Ireland. Perhaps the Minister will have a look at the Bank of Ireland Act, 1929, section 2 (1) (j) where he will find a very valuable subsection providing that the bank, and I quote:
We can rely to a very great extent on the extraordinarily ready patriotism of investors here to resist, if they are shareholders in either institution, an offer to be taken over by some other enormous bank. Even the largest of our banks is not among the 200 largest banks in the world. Either of them is capable of being taken over if legal protection is not provided to ensure that this does not happen. We have such legal protection in relation to the Bank of Ireland and we should have a similar protection in relation to the other institution. There should be at least a saver such as “with the consent of the Minister for Finance,” or something of that kind.
The Minister's colleague has talked about legislation to protect banks against takeovers and mergers but may I say this is very dilatory legislation? There exists “monopolies and mergers” legislation in Britain but I do not think  they have used that legislation yet. Britain is a much easier type of country in which to operate these powers than here. If we have a specific provision in a statute dealing with the Bank of Ireland stock and its status for the purposes of trustee investment—which the Allied Irish Banks stock only got about two years ago by virtue of an order approved by us in this House, which rendered them as equal as it is possible to render them, but not completely equal because the Bank of Ireland stock is trustee investment for the purposes of the British investor as well as for an Irish trustee investor— it should be extended to the other institution.
If the Minister will have a word with the Minister for Justice, he will find that that Minister may recommend him to accept a section of the Succession Bill which I introduced and which was supported by Senators McDonald, Kelly, Belton, O'Brien and Butler. In the circumstances which I hope will mature, having regard to views that have been presented to me, it might be desirable not to press that Bill, in all its sections, at this time in order to allow us time to gain more experience of the operation of the Succession Act, 1965. In those circumstances I may, with the permission of the House, withdraw that Bill.
Section 2 of that Bill, which I would not imagine has been keeping the Minister awake at night, contains a provision which would be appropriately dealt with in the Central Bank Bill now before us. I shall read that section. The Principal Act is the Succession Act, 1965. I do not want, for obvious reasons, to go into too much detail on this point. One of the institutions connected with banking and trustee work has a charter which does not permit it to take out grants of probate in Britain. A very uncomfortable situation is created because of that charter. It creates a situation which is expensive and inconvenient generally. I proposed an amendment to the Principal Act, that is the Succession Act, 1965, that we should add to section 30 (4) (b) the following subparagraph:—
A company whose management and control is in the State, having an  authorised capital in stock or shares of not less than £250,000, of which not less than £100,000 has been issued and fully paid up in cash and which has a wholly-owned subsidiary of trust corporation as defined in subparagraphs (i), (ii) and (iii) of this paragraph...
I have made one proposal which by the lifting of one beaker, a little pouring from the bottle, would lift up the other beaker by another pouring from that bottle. In fact, this would qualify a very well-known trust corporation to take out probates in Ireland which, under their existing constitution, they cannot now do and which leads to a very inconvenient situation. I can, when we come to Committee Stage, develop this point if that is desirable. I mention it at this stage so that the Minister will have an opportunity of considering it before Committee Stage. I should be glad to provide him with any further information that he might wish to have in regard to the matter.
I will not be silenced by the fact that I was nominated by the Banks Standing Committee and without their nomination I should not be here, though I may follow Burke, who published a letter to his electors in Bristol and who did not getre-elected following this letter. Still, I am unhappy at those provisions for amalgamation. I understand their purpose, which deals with the transfer of personnel.
I am sorry that Senator Mrs. Robinson is not here to dwell on the constitutionality of this. I wonder what is wrong with the section which was in fact operated to effect the dissolution of the old National Bank and their combination with the Bank of Ireland? I think it is section 201 of the Companies Act which covers this. Why do we want special provisions whereby the Minister can do all of this? Is it because our judges will be slow in carrying out the operation, and that this Bill will enable the Minister to make an order to facilitate a desirable amalgamation? I see that a contemplated amalgamation might be desirable, but I should like a particular subsection dealing with the transfer of personnel. Bank staffs are not soccer players or slaves, and I  do not know if the Minister has power to make this particular transfer. Can I, if I am in one employment, be made to serve another employer by a Minister's order the following day? I should have thought not but it would be worth the Minister's while to have a look at that.
The present position is that by far the greater part of the net external assets of commercial banks now happen to be in the hands of the Central Bank. The real revolutions appear to take place without being noticed by anyone. The much-talked-of event sometimes does not happen. What is important happens without anyone noticing it. This has taken place and perhaps there is a very good reason for it. The significance of the switch relates to the guarantee against the devaluation of sterling, which is given to external holdings, under the Basle Agreement, where these are held in the Central Bank's external reserves. If this is an explanation for the shift, it is one that ought to be given. It may have been given already and published in one of these very informative Central Bank publications that are read with such interest, and which maintains its staunch independence of the Department of Finance and, indeed, of the Government generally in its criticisms and observations about our economy. It would be desirable if that were given.
When I was a young man, the most exciting and intellectually stimulating debate, which took place in Dáil Éireann, was on the Central Bank Bill in 1942, when the war was raging. Day after day, this intricate measure was debated and the monetary authorities were cited and quoted backwards and forwards across the House. It is interesting to note the comparison between the debate that then took place and that now taking place. We have had many prosaic contributions and we can read those made in the other House. I should like to point out, particularly to members of my own party, the radical stream that is to be heard now from Fine Gael in these debates. It is astonishing to go back and read the contributions of General Mulcahy and Professor Patrick McGilligan, both happily still with us. It is interesting to note, if one looks at  the time their contributions were made, they always began about 6 o'clock, when certain other members of the party left to have their tea. These gentlemen then got going on very radical speeches on the Central Bank Bill.
I am sorry that my contribution has been a bit disjointed, but I wish to repeat that I am unhappy with the legislation. I recognise the obligations taken on, but confident sovereign powers should not be burdened overmuch with obligations to international bodies. If any damage may result to ourselves from enacting a piece of legislation that might be thought necessary to remove disharmony if this disharmony is not costing us anything and if removing it is going to cost us something, the plain duty of Parliament is to the people, to do what is good for them. We should not be talking about a link with sterling but about a link with economic reality. Unless there is a complete transformation in the pattern of our trade, there must be parity with sterling. If there must be parity with sterling, why do we provide here for any possible alteration, when the Parliamentary Secretary tells us that the Government have no intention of changing it? If it ever became necessary or desirable to do so, he could get his measure through the Seanad and the other House in 24 hours. I should like to press him very strongly on this.
I should also like to remind the Parliamentary Secretary of what I said with regard to the proposed amendment of section 2 of the Succession Bill. I should also like to press him on the additional restriction on the takeover of the other of our banks.
Dr. West: I have considerable doubt as to whether I fit into that category so carefully defined by Senator FitzGerald at the beginning of his speech. Although I have lectured to students of economics in the course of my daily duty, my knowledge of economics itself is severely limited. Like the other Senators who spoke on this Bill I will avoid all the technical aspect of things. I realise how complicated the business of banking has become and how complicated our whole economic system is becoming.  If one is to speak with any expertise one really needs to study the particular issues involved in great depth and detail.
I should like to make some remarks and to ask the Parliamentary Secretary a few questions arising from the Bill. I have consulted a number of people who know a great deal more about this subject than I do and I have no doubt that there has been a great need for regulations of the type before us. The banking system has increased considerably in magnitude. The figure given in the Parliamentary Secretary's speech is 80 bankers' licences currently in force and there is no doubt that we need to be able to assert some central control over these institutions. For that reason it is obviously very important that a Bill of this type should come before the Oireachtas and be passed.
There are some specific points which I should like to raise. One is in connection with the number of bankers' licences which have been issued. The number is 80, and if the minimum deposit which a licence holder must make in the Central Bank is £20,000 that gives a minimum deposit of £1,600,000. The figure, I presume, is a great deal larger. Perhaps the Parliamentary Secretary could give us an idea of the figure because there is a minimum of £20,000 and a maximum of £500,000 per licence holder. Perhaps he could give us some more details about what happens this money. Presumably it is held in gilt-edge securities and the interest goes to the holders of the licences. What does the Central Bank do with this money? Perhaps the Parliamentary Secretary could tell us what sort of sum is involved, because it is obviously a very large one. Perhaps the Central Bank have special regulations dealing with this.
Another point which has been raised by Senator Alexis FitzGerald is the problem of a difference which is proposed here, that we get away from sterling. We have a slightly different standard which is the one recommended  internationally. I should like the Parliamentary Secretary to assure us that, if a change in the value of our £ and the £ sterling does, in some event, occur, there is no chance of people making a quick and easy killing at our expense on the international money market. I am sure this is the case, but I should like the Parliamentary Secretary to give us a few details. This sort of thing has happened before, in the 1920s and 1930s, when people made their pile by switching from one currency to another. If such a thing happened this country could be at a serious disadvantage.
The Parliamentary Secretary referred to the bank strike which we are glad is now over. Even though there are consultations going on at the moment concerning the problems involved, we cannot be absolutely sure that there will not be another strike of a similar nature in the near future. I feel that in strike conditions some people who would normally have no claim to being bankers would, by the very nature of the emergency situation created, be bankers under the terms of the definition in part II of this Bill. I should like to know what would happen as far as the law was concerned in the case of an emergency such as a bank strike, in which individuals or organisations who do not normally regard themselves as bankers operated as such? These people would be forced to do this because there is some necessity to change one's financial method of operation in an emergency such as a bank strike. What would the Department of Finance do in such a situation? I cannot quote any particular instances, as I have not got the technical background, but I am sure there are people who, during the last bank strike, would have come under the definitions of part II as bankers. Would they be required to pay the penalty of £250 a day? What would the Minister for Finance do in such a situation when the Bill in front of us is enacted and is in force?
In common with the other Senators who have spoken I welcome this Bill. I feel that we are developing quite a happy system of State control. It is not too rigid but it is rigid enough. Of our  bigger institutions there is no doubt that, in the present economic set-up where things are complex and highly technical, we need to have this measure of State control. I have no doubt that the Central Bank in their new role will discharge their functions efficiently and fairly to the benefit of this country.
Mr. McDonald: I welcome this Bill and, indeed, any enactment that helps to bring banking facilities more up-to-date and into line with modern trends and techniques. There were a number of points in the Parliamentary Secretary's brief about which I am not clear. He said at one stage:
In view of the increasing number of banks in Ireland, it is in the interest of the public generally that facilities for the clearance of customers' cheques should be widely available on reasonable terms. It is, therefore, provided in the Bill that licensed banks will be required to accept from customers, for collection and crediting of the proceeds to the customers' accounts, cheques drawn on other licensed banks.
In the event of another bank dispute would the bank be required to accept cheques? During the last strike it was impossible to cash a cheque unless it was presented to the actual office on which it was drawn. It would be in the interest of the customers if what the Parliamentary Secretary said here is exactly what is meant. Perhaps the Parliamentary Secretary would clarify this.
Some effort should have been made this year to bring back the banking institutions on the higher plane on which they had been up to now. The banks lost some good will and this is a pity. It is only in recent years that the banking institutions have made an effort to move with the times.
Mr. McDonald: Before lunch I was speaking on a small point which was highlighted just before the bank dispute last year. It is worth noting in the  Parliamentary Secretary's Second Reading speech the following admission by a Government spokesman:
Surely the Minister for Finance and the Government had a duty to intervene in that dispute and ensure that the amount of damage would be greatly reduced and the hardship it caused to many people would be at a minimum.
I also feel that the Government were perhaps neglectful in not providing some special service for our tourists last year during that strike. Many tourists experienced grave difficulty in having travellers' cheques cashed and by not having banking facilities at their disposal. If we are seriously interested in continuing in the tourist business we must give some type of preferential treatment to those people who opt to come and visit our country. Our tourist industry is of sizeable proportions and we must safeguard what has been built up. The national investment in the tourist industry is sufficiently high to ensure that if a bank strike were to occur again tourists would have all the facilities they require made available to them.
The agricultural industry is in grave need of a worthwhile injection of capital. I am not too clear in what way this Bill affects the Agricultural Credit Corporation but I see it is mentioned in section 7. The agricultural industry is in dire need of an injection of at least £100 million in the shortest time possible.
Mr. McDonald: It is difficult to see how a comprehensive piece of legislation like this should exclude completely the Agricultural Credit Corporation. On that point also perhaps the Parliamentary Secretary would be kind enough to let me know, just as a matter of interest, whether the Local Authority  Loans Fund can be looked upon as a banking institution or if that will be affected in any way by this legislation; also the municipal authorities, the insurance people, who facilitate local authorities to quite an extent with loans. I would just like, in passing, to ask the Parliamentary Secretary if this new Central Bank Bill will in any way curtail the activities of these two institutions which readily come to mind from the point of view of a local authority.
With the steep appreciation in the price of farms recently we need to have introduced as quickly as possible some system of long-term financing for farm purchase. It is now quite evident that it would take three generations of farmers to pay off the price of a new farm, especially in the midlands and in the east. This is surely something that should be tackled if some of our farmers' sons are to have an opportunity of continuing on in that profession. I do not particularly like the way the Chair is looking at me but then again I am not too sure whether agriculture is at all important under this Bill.
It seems strange that we can have, in an agricultural country, any piece of legislation that does not in some way adversely affect the major industry in the State. Perhaps the Department of Finance should have by now made a greater effort to rehabilitate the banking institution to the high esteem in which it had been held up to now. Their prestige suffered considerably last year. This, perhaps, has reacted on some of the staff. It does not concern us here now, but nevertheless the point is that these people have a job to do and by and large they do it very well.
In these difficult, inflationary times the changes that have been made in the day-to-day operations of our banking system must be welcomed. In this industry, if one might call it so, the new thinking of our banks in promoting women, for the first time, to the more onerous positions of assistant bank managers is indeed a step in the right direction. I do not suggest for a moment that I am in favour of women's liberation or this kind of thing; nevertheless this is a desirable trend, and having regard to the numbers of people  employed in this business it is long overdue.
Another point I should like to mention is the fear of the Department of Finance. Over the past few years the Department have tended to rake off an excessive amount of the credit from the commercial banks. This has had a devastating effect on the ordinary members of the community. Bank squeezes, such as we have on and off over the past couple of years, certainly do not help to promote confidence in our country. In a country that has a very high emigration rate, those of us who wish to stay and stake our claim in our own country should, if we have a worthwhile idea, be allowed to have freer access to capital. The difficulty has been that the Government, on a number of occasions each year, insist on the commercial banks subscribing to their loans and Exchequer stock and so on. This certainly leaves very little for the ordinary citizens. It is more difficult now to negotiate a loan for a few pounds for some of our not so wealthy people down the country than it is perhaps if you get into the realms of high finance. This is perhaps something that could be looked at. I know that the Agricultural Credit Corporation have over the past couple of years made tremendous strides in facilitating and meeting the demands and the needs of the people whom they are established to help. Again, I think that the Agricultural Credit Corporation could do with a huge injection of capital. While the farming community have not been slow to invest in the Agricultural Credit Corporation, nevertheless their investment could be stepped up. In addition, the Government could, with considerable benefit to the economy as a whole, consider seriously investing another £50 million or £100 million in the Agricultural Credit Corporation for distribution through the various loans to the farming community.
The only other point I should like to raise is in the section which proposes to alter the composition of the board of the Central Bank. Here again it would be desirable, if a few more lay people, from a banking point of view, were on  that board. While their quarterly bulletin is quite often down to earth, nevertheless the people in these high financial circles very often fail to grasp the conditions under which ordinary mortals must live and survive on very small incomes. Therefore, I feel that it is of the utmost importance that at least a few members of that board should not only be from parts of the country other than Dublin but should also be people not engaged full-time in the banking business.
There are a few other points which I should like to have clarified. Perhaps it would be easier and quicker for me to raise them as we go through the Committee Stage. I, too, would like to welcome this Bill.
Professor Quinlan: We can welcome this Bill as a long overdue modernisation of the functions of the Central Bank. Going back to the Currency Commission of 1937-1940 when the then Central Bank emerged, it was in no way a very progressive course. Indeed it did not match up to some of the farseeing requirements at that time, especially those advocated by the late Professor Busteed and Rev. Dr. A. O'Rahilly who were far ahead of their time in foreseeing that the Central Bank had to be a real positive and dynamic force in any economy. Unfortunately at that time, the conservative opinion prevailed and the commercial banks went their way with few restrictions.
The proposals before us here are very much a step in the right direction, but I should like to have seen a thorough review made by some body. I know many are sick and tired of commissions and the use that is very often made of commissions to delay. Still this was a case where at least we could have had a joint committee of both Houses of the Oireachtas to look at our banking system over the last three or four years. A long hard look should have been taken at it by a joint committee since the last disastrous bank strike. Our Government have little to be proud of in their continued reluctance to use joint committees of both Houses. They are lagging behind the committee participation envisaged in the Six Counties. If they are serious in upholding  and pressing the rights of the minority in the Six Counties to be properly consulted and to feel they are part of the legislative process there, I challenge the Government to set the example. Begin at home and let us have a proper involvement of all parties in committees, especially committees in areas which are obviously non-political like this banking system.
Many of us, arising out of the unfortunate experience of the last bank strike, would have had useful views on how to prevent a recurrence of this disaster. Frankly, I cannot say that the present Bill does that in any way. With our recent experience, it should be possible to design this Bill so that, independent of any strike action in the other banks, the Central Bank would continue to function and would continue to keep the commercial and financial life of the country going. To do this we would have to face the fact that the Central Bank would be in some ways a step above the other banks. By “a step above” I mean in the type of personnel they employ or in the commitments they exact from these employees. Frankly, I say we should be prepared to pay a premium to employees in the Central Bank in return for any absolute guarantee of no strike action.
The banking sector is one where we cannot afford the luxury of strike action. Surely if there is any hope for agreed and binding arbitration in any section of our community, it must begin at that very vital sector, the Central Bank. I am sorry that the Government has not made any effort to grapple with this problem. The unfortunate experience of the last strike has been a victory for strike action. That has been due in many respects to the very outmoded human relations and staff relations policy being pursued by our banking system up to this and the almost Craigavon “not an inch” approach by them in the early stages of the negotiations. After one or two offers we see in their programme last year what was frankly the complete collapse of the negotiating team from the bank side where, in effect, concessions were given that were greater than those which would have settled the strike at a much  earlier stage. Concessions were given at that time that have since proved to be highly inflationary.
The bungling intervention by the Minister for Labour in July last did nothing to help the situation. His intervention showed a complete lack of tact and advice in accordance with what was likely to emerge at that time. Nobody could have suggested at that stage that the Minister's big-stick intervention was likely to help the bank employees to vote for a return to work. Of course, they did not return to work and subsequently the Minister had to swallow his own words. His contention was that there was a black-and-white case about the question of whether the claim was for payment during the strike or whether it was, in fact, a strike at all. There were many grey areas in the situation and the Minister, having intervened in the way he did, showed a tremendous lack of expertise in the matter.
If intervention was called for it should have been in the form of an Act which would insist that the banks should be opened and which would insist on compulsory arbitration. What is needed here more than anything else is an Act that would make it absolutely illegal for any strike committee or any organisation of employees in this country to send ballots out of the country. It is one thing to have a strike here and decide it by ballot of the people on both sides who are suffering hardship because of it. It is another thing to realise that the latest trend in strikes has been for the young members, and, indeed, the not-so-young members, to clear off to England and elsewhere and obtain good alternative employment there. This raises the whole question of what is considered lawful in strike action.
Strike breaking, such as the passing of picket lines and so on, by members of kindred organisations is not tolerated here. I suggest that this latter practice of large numbers of workers, such as the bank strikers, setting off for England is totally wrong. By doing so they are dragging out the strike. Our Government should react quite strongly to that trend, and I am confident they  would have the support of all fair-minded people for taking such action. The Government should say to these workers: “You can go off to England if you wish but ballots will not be sent out of the country.” In this day and age with its great strides in speed and communications, it is farcical to think that we have to wait up to eight or ten days before we can obtain the results of a ballot. Surely the result of a ballot should, when confined within this country, be obtained within two days. We have got to modernise in this regard. The use of the strike weapon by the more privileged sections of our community is a really serious matter and calls for deep consideration by all concerned.
An Cathaoirleach: The Senator will appreciate that we are discussing the Central Bank Bill and the question of industrial relations does not arise. The bank strike is a marginal issue. Banking as such is covered by this Bill, but I think the Senator is speaking in too great detail in this respect.
Professor Quinlan: With all due respect, a Chathaoirleach, I am pointing out how the Government have failed to grapple with the main problem posed by the bank strike. Had this Bill been brought in a year before the strike the situation would not have been any different from what it is today. Is there any section or recommendation in this Bill that has its origin in the bank strike? If it does contain such a recommendation it is one which such has failed to tackle the main problem. I appeal to the Minister to tackle that problem now. Perhaps, on Committee Stage, the Minister will be able to bring in some amendment that will go a little way towards solving this problem. The Minister has failed to tackle this problem in this Bill but I appreciate that the principle of it is something that may have to be looked at more generally.
I am sure I am voicing the great discontent of all concerned when I condemn the sudden emergence of the strike weapon in the hands of privileged groups within our community. I suggest hat trade unions who have been using  the strike weapon up to this should take a look at the new groups that are now using it. As the bank strike brought home to us, when there is no longer a question of starvation or of any member being forced back to work due to lack of funds a strike becomes almost a prestige strike. Nowadays it is a question of staying out on strike until it becomes clear that your side has won. In other words, the privileged groups today can afford to suffer more themselves and thereby inflict far greater damage on the community than the ordinary trade union strikers have been able to inflict in the past. It is wrong that matters should be so and it is up to the Government to remedy the situation. I suggest they should begin with this problem so as to ensure that the strike weapon will not become a means whereby privileged groups will extract more than their fair share from the economy. In doing so I am confident they will have the support of the rank-and-file members of our trade unions.
A good deal of damage has been done by the publication of the banks' profits over the past year. I am sure nobody can say they are reasonable. The recent returns from the Bank of Ireland group showed that they had higher profits last year than the year before. Surely that is something which requires to be looked at seriously. I welcome the fact that there are some outside banks operating in the country. I know this may be against our ideas on rationalisation of the banking system, but it is a necessary ingredient when the Government have not provided, and apparently are not going to provide, a Central Bank that will guarantee to keep the economic life of the country functioning.
I welcome the provisions for licensing. While some outside banking business is desirable and an asset to us, the multiplicity that has occurred and is threatening to occur in even larger measure in the future, is something we should avoid by all possible means at our disposal.
We look back now to the time of the setting up of the Allied Irish Banks and the change in legislation which was required. It was held by the Government that that body would rationalise  the banking system and give a somewhat cheaper and better service. This is somewhat similar to the old chestnut of rationalising the Civil Service. It is one of those pious hopes often expressed but never realised. If the banking system continues to grow apace, we cannot look with any measure of confidence to the continuation in the future in small towns of two or three branches of various banking systems. That is all wrong. If we are to have proper Central Bank control, it should aim at the rationalisation of this and at the gradual merger of branches in the smaller towns.
There are other points to which I should like to refer but they would be more properly discussed on Committee Stage. I welcome the gradual improvement that has taken place in the liquidity arrangements associated with our banking system since 1955, and I hope that this will continue. I realise that at present we are facing the problem of becoming members of the Common Market, and we must bring our banking institutions into line with those in the EEC. I do not know what the position will be with regard to the opening of branches by outside agencies. It could mean that some of the legislation proposed in this Bill may have to be amended within the next year or two.
I deplore the very great increase in foreign borrowing that has taken place during the last couple of years. While the Central Bank has given credit guidelines, I wonder have they given any real guidelines about foreign borrowing? I am very uneasy about that, as are many people, when it is realised that such an amount of money is leaving the country. If the same interest as we are paying was paid, there would be a considerable portion of it finding its way back into the Exchequer through income tax.
There is obviously scope here for getting the Central Bank to pioneer the way towards encouraging savings at home. There does not seem to be any innovation as regards savings since the advent of prize bonds in 1956. It is about time we had something new, and I appeal to the Minister and to the Government to tackle this problem.  Were it not for the very favourable upturn in the balance of trade in our agricultural products over the past six to ten months, we should be in really serious financial difficulties at present. We should, therefore, use the breathing space that has been given by this favourable upturn to try to put our house in order. I do not consider that this Central Bank Bill does that. It is a pity that a joint committee was not rapidly established after the bank strike to find ways and means, through the Central Bank Bill, to ensure that such damage would not again be inflicted on the country. This was done by two stubborn old-time nineteenth-century gentlemen, who conducted negotiations as though they were playing a nice polite parlour game, and as though they could afford to wait perhaps three years, so long as the game went according to the rules of the last century. It is not good enough if we have not profited by the unfortunate experience.
Mr. A. O'Brien: First of all, I should like to join with the Senators who welcomed the introduction of this Bill. It is a highly desirable Bill and it is good tosee that it is being introduced. However, I should like to draw attention to a few points. I was very interested in listening to Senator Keery and I agree in toto with a number of points he made, particularly with regard to inflation and the general belief that each individual does not contribute to that in any way and the lack of appreciation of the fact that every time we demand more wages for the same, or even for a lesser, service we are contributing to inflation. However, I cannot understand why he stopped short of drawing attention to the fact that umpteen times the Central Bank Report drew attention to the fact that one of the main causes of inflation was Government overspending. That was one of the danger signals pointed out by the Central Bank several times down the years, but the Government continued to ignore them and we then found ourselves with galloping inflation, without any serious effort on the Government's part to curb it, having been informed that it was coming.
With regard to the bank strike, I share the sentiments expressed by  Professor Quinlan. It was disappointing that there was no indication whatever in this Bill that the Government would bestir themselves at an earlier stage and get down to doing something to prevent the same situation arising this year or next year. It should have been obvious to everyone at a very early stage of the bank closure last year that for a number of reasons this could drag on interminably. Leadership was sadly lacking. The Government should have stepped in and prevented this disastrous event which had an upsetting effect on our economy and which caused a great deal of worry and annoyance to many people who normally look to the Government for protection in a time of crisis. That protection was not forthcoming and, as far as I can see, there is no indication that it will be forthcoming the next time either.
I should like to refer to a statement made about bank managers throughout the country being influenced in accommodating people whom they meet socially in places such as in golf clubs. That is a refutable statement and is an unfair criticism of people who have rendered a good service. It is not proper to say that bank managers throughout Ireland are influenced by what they see in golf clubs, when they wish to aid initiative or help someone by way of a loan. It was an uncalled-for criticism of people who have given a good service down the years.
Finally, I consider it is regrettable that the Minister should, under certain circumstances, debar from a court of appeal the question of granting licences or the revocation of licences and so on. That should go to the Supreme Court. It is an unfortunate factor in life at present that far too many believe that if you are of the right political belief you can get certain things done. Every opportunity should be availed of in order to prevent that and to get people into the frame of mind where they believe that things generally are judged on merit; it should not depend on political affiliations. Every opportunity that arises to curb and to check the growth of that belief should be availed of by the responsible Ministers.
 We have the attitudes which prevail with regard to permission for planning development. It is unnecessary that the Parliamentary Secretary should be dragged in here as to a court of appeal with regard to matters concerned with the licensing of banks. It is a regrettable step. It would be a great step forward if such matters were taken away from a political head of a Department and put in the hands of the judiciary.
Parliamentary Secretary to the Minister for Finance (Mr. Lemass): I am very glad that the Bill has been accepted and has not been opposed as such. The Seanad may agree that this Bill is essentially a Committee Stage Bill rather than a Second Stage Bill. However, there were some points raised which I should like to comment upon, although these can be discussed on Committee Stage.
Senator Russell expressed some concern about the Hibernian Transport Company. I do not think that the collapse of the Hibernian Transport Company can be attributed to the bank dispute. Whether they would have discovered their situation sooner but for the dispute is a moot point. I do not think we should discuss matters of this kind in any great detail because the liquidation is taking place. The proceedings are bound to be long and difficult. The case is more or less sub judice while the liquidation is going on.
Senator Russell was quite concerned about the position of reserves. Senator Quinlan touched on the position in relation to foreign borrowing. The composition of our reserves at the end of May, 1971, was as follows: gold, £6.8 million, sterling, £209.6 million, other currencies, £91.1 million, that includes US dollars and Deutschemarks; reserve position in the International Monetary Fund, £12.6 million, special drawing rights in the IMF, £11 million. That means our total official external reserves are £331 million.
The significant thing about the reserves is that, in spite of the fact that we have had a difficult balance of payments position in the last few years, our external reserves have not been decreasing. We have adequate external reserves. While we would like to see  the balance of payments position improving considerably and very quickly, the trends of recent years have not put us in a bad position in so far as our reserves are concerned. I should like to make it clear to Senator Russell also that the remarks in my opening address referred to all reserves.
A query was also raised with regard to the establishment of foreign banks here. The EEC Treaty provides, as all the Senators know, that nationals or firms in any member state would be given the right to establish themselves in and supply services in another member state. The progress in so far as banks are concerned has been very slow. No liberalisation has yet been effected in the banking sector. A draft directive to eliminate the restrictions in relation to activities in banking has been before the EEC Council since 1965. It has not been adopted. The Commission is now working on a new draft programme of work in this sector. This envisages the preparation before the end of 1972 of directives on the co-ordination of legislation relating to the control of banks, freedom of establishment and free exercise of services. There does not appear to be any likelihood of decisions being reached before we become a member or, indeed, for quite some time afterwards.
The Central Bank does not discriminate between domestic and foreign banks. The proposed EEC directive would be relevant, however, to the exercise by the Central Bank of licensing and supervisory powers under the Bill in that, if it were adopted, it might not be possible to apply to banks established in other EEC countries conditions or criteria related to national origin which might make it more difficult for them to establish themselves in this country or to do business here.
Senator Russell was rather concerned about the representation on the board of the Central Bank. Generally, the Senator took the line that no banker should be represented on it at all and that it should be completely independent of the ordinary banking houses. At the moment the board consists of Mr. Patrick Burke of Allied Irish Banks and Mr. Donal Carroll of the Bank of  Ireland Group, Mr. McElligott, former secretary of the Department of Finance and ex-governor of the Central Bank, Professor Ryan, an economist, Dr. Greene, a former president of the NFA and a large farmer, Mr. Smith an industrialist, and Mr. C. H. Murray, secretary of the Department of Finance, who is a service director.
Senator Russell should be satisfied that the set-up in the bank is independent. Looking ahead, the strength and composition of the board may need to be reviewed in the light of experience in the operation by the bank of their new powers under the Bill. Immediately, however, the proposed reduction of one in the number of banking directors will enable the Minister to make an additional appointment. In making this appointment the importance of ensuring a broad representation of all sections of the community will definitely be borne in mind.
I tried very hard this morning to ask Senators to be discreet in relation to their reference to a certain part of the Bill—that dealing with the value of the currency. In the original draft I would have asked the Senators to act with a sense of responsibility. It is no harm to mention that again. It is set out very clearly in the original text that the changes that are being made are technical changes. They are being made simply to conform with our obligations as a member of the International Monetary Fund. Article 4, section 1 (a) of the Fund Agreement provides:
Each member shall express the par value of its currency in terms of gold or United States dollars... The par value agreed with the Fund may not be altered except to correct fundamental disequilibrium in the balance of payments.
The par value of the Irish pound was fixed at the same figure as that of the pound sterling, namely, 2.43328 grams of fine gold, when we joined in 1957. The parity with sterling is to be maintained. I should like to assure Senator FitzGerald also that there is no evidence that funds are leaving the country because of fears of devaluation against sterling. This is the type of statement that I was hoping would not be made.
 The Senator was also concerned about the timing of this change. I do not know if there is ever an appropriate time to take this type of action. As a final word on this matter, I wish to put it in the Official Record that the parity of sterling will be maintained. There is a page and a half in my original text dealing with that matter and there is no evidence of funds leaving the country because of any fears of devaluation against sterling. Sensible people know this will not happen and that parity will be maintained.
Senator FitzGerald also asked about the 1929 Act where it says that the Bank of Ireland could not be absorbed by any company whatsoever. The Senator suggested that it might be opportune to apply a similar provision to the Allied Irish Banks. The power in the Bill to revoke a licence, if there has been a change in circumstances since the original licence was granted of such a nature that a licence would not be granted in the new situation, will take care of the danger of a major banking group passing to foreign control. If the Central Bank sees a change in circumstances where, for example a foreign bank may be taking over Irish banks, they can revoke the licence under the powers of this Bill. I am not prepared to be emphatic on it but the Bill seems to revoke the section referred to in the 1929 Act. This is my personal view but I would prefer to have this matter clarified by the Minister on Committee Stage.
Senator Keery raised the question of the quarterly reports of the Central Bank. I get a copy of these reports myself and I thought they were circulated. I will undertake to Senator Keery and to the House that this matter will be investigated. I agree with the Senator that these reports should be circulated and that the legislators should have the maximum available knowledge before them. This also applies to the Fogarty Report.
In this connection I can go on to the general question of the bank dispute. Several Senators have said there are no provisions in the Bill to prevent a similar dispute taking place in the future. Three inquiries have been held  regarding the bank dispute. One was the joint ESRI-Central Bank inquiry into the domestic effects of the dispute. The ESRI covered business concerns and the Central Bank surveyed the financial institutions, including the part played by the public sector.
The second inquiry was undertaken by Professor Fogarty of the ESRI. He was appointed by the Minister for Labour to report on the causes of the recent bank dispute, having particular regard to the possible influence of industrial relations, personnel policies and working conditions and to make recommendations as to what action might be taken to avoid future bank closures because of industrial action. His report, as we all know, is at present being examined.
The third inquiry is being conducted by the Allied Irish Banks. A survey is being made among the staff of its three banks in an effort to ascertain the root causes from which bank disputes tend to originate. I do not agree with Senator Quinlan's remarks regarding the handling of the situation at that time by the Minister for Labour. The steps that have since been taken make it clear that a thorough and complete investigation is being carried out in order to work out ways and means to prevent a similar situation arising again. The Fogarty Report was very straightforward in its remarks.
Most of the matters raised by Senator Robinson would normally be more suitable to a Committee Stage debate. The Senator raised one matter about the constitutionality of sections 9, 10 and 11. This could be compared with the constitutionality of the Livestock Marts Act, 1967, which was tested in the High Court. The High Court found in favour of the plaintiffs but on appeal the Supreme Court reversed the judgment of the High Court.
Mr. Lemass: I have a long sheet here and I do not wish to read it all out. I believe it is on the basis of this decision that the Government are advised that these sections of the Bill will be constitutional.
Senator Robinson and Senator  Quinlan complained about banks disclosing their profits. I understood the complaint from the trade union sector was that the banks were making profits that had not been disclosed in the past. That was my understanding of the position when I was a trade union executive. In 1969 the associated banks declared their intention of disclosing their actual profits and total reserves. The bank dispute and its aftermath have resulted in the postponement of the publication of the new accounts and they will not now be available until next year. The balance sheets will show full assets and accumulated reserves. However, they cannot be published in the retrospective way for which there has been some demand because new accounting arrangements are involved.
Senator West asked a good question in relation to what will happen to deposit money from £20,000 to £500,000 that will be paid in by the banks in respect of their licences. It is probable that when this Bill is enacted many of the £1 licensees—anyone can get a licence now by paying £1 to the Revenue Commissioners—will go out of business. It is difficult to calculate the exact amount that will be collected but the main interest to the Senator is that interest will be paid at not less than the Exchequer bill discount rate to the people who have lodged these deposits. They will get interest on their deposits. The nearest estimate I could make was that the deposits will amount to between £4 and £5 million, and this, of course, will form part of the Central Bank's general funds and be available to finance the bank's operations.
At the outset this morning Senator Russell said quite rightly that a Bill of this nature should not be rushed. The Senator referred to the fact that the date on the Bill is 1969 and he felt quite pleased that it was taken in slow stages. Senator Alexis FitzGerald complained, however, that it was four years since the Minister for Finance promised legislation. It is true that after the promise of legislation of this kind it took two years to introduce the Bill and it has taken two years for the Bill to reach this stage. But whether Senator Russell or Senator FitzGerald is right in his approach to this I am not prepared to comment.
Senator McDonald asked whether in the event of a dispute other banks that are not in dispute can accept cheques. Of course they can accept cheques, but they certainly will not credit them to anybody's account unless they can get value for them themselves. In relation to that section of the Bill the situation is as it has been before. There is no change.
The Senator was also inquiring about the Agricultural Credit Corporation and the Local Loans Fund. I should like to point out that they are not affected by this Bill. The ACC is, in fact, exempted under section 7 of the Bill specifically. I should also like to say to Senator McDonald that he gave us the impression that this is the first time the Minister for Finance was saying that the bank dispute had caused any widespread trouble or inconvenience. However, on the Second Stage of the Central Bank Bill, on 24th February, the Minister said:
At no time did I pretend that the long bank closure in 1970 did not give rise to hardship or inconvenience to the community. I am well aware of that hardship and inconvenience. I am also aware of the valuable contribution made by shopkeepers, traders and businesses generally by cashing cheques and providing other facilities for customers.
The Minister at no time tried to conceal the fact that the bank dispute caused trouble and inconvenience. The economic effects of the dispute have  only recently become apparent, as up-to-date banking statistics became available. They have been published by the Central Bank in its bulletin.
Senator McDonald was also concerned about tourists during the bank dispute. On the whole tourists faced fewer problems than the residents since they held foreign exchange or travellers cheques. Hotels were only too happy to cash these cheques. In the main tourist centres, such as Killarney, and the local tourist development organisation set up change bureaux. The queues outside the American banks probably had as many citizens of Irish origin looking for foreign currency to go abroad as they had tourists.
Senator Quinlan was complaining about lack of joint committees. I understand, if my recollection is correct, that all parties have agreed to examine the whole procedure of the House and the running of both Houses. This matter, as far as I am aware, is under examination now, so it is not for me to comment upon it.
I would like also to assure Senator Quinlan that during the bank dispute the Central Bank did not come to a standstill. It functioned very effectively indeed. Should such a situation recur the Government will be in a better position because the Central Bank will have the Exchequer account instead of the Bank of Ireland which had it the last time.
I agree with Senator A. O'Brien that inflation is still bad I am happy to say to him that the indications of the first quarter of this year, as a result of the Government reducing its gross in-expenditure by half of what it was in previous years, show that the rate of inflation is slowing down. It is a bit soon in the year to say that the Government policies as applied in this year's Budget will have all the effects hoped for but the indications at the moment are good.
When this Bill becomes law—and as I say there may be some amendments required at Committee or Report stage, but that is another day's work— there is no doubt but that the Central Bank will have more power and influence and will be able to help the Government more effectively in its  economic and social policy. I sincerely commend this Bill to the House.
Dr. Belton: On the Order of Business for next Wednesday we have agreed to take the Committee Stage of the Higher Education Authority Bill. Are we going to take the Second Stage of the Health Contributions Bill on the same day?
Professor Quinlan: Might I suggest that a week is a very short time for putting amendments to such a major Bill as the Central Bank Bill? We are not likely to have the Official Report of the Second Stage debate available before Wednesday. We should have at least two weeks.
Mrs. Robinson: I would agree. It is very difficult to put down amendments. We do not get the Official Report of the Seanad Debates until may be monday or Tuesday, and if it is being taken on Wednesday it is very difficult to try put down amendments.
Acting Chairman (Mr. Sheldon): May I point out to Senators that ordering it for next Wednesday and taking it next Wednesday are two different matters? On Wednesday it will be a matter for  the House to decide what is being discussed. The ordering of a next Stage does not necessarily mean that it will in fact be taken that day.
Mr. Eoin Ryan: I suggest we should order it in any event. We will be sitting Tuesday, Wednesday and Thursday, if necessary. It may not be reached until Thursday, but I think we should order it for Wednesday and see how the business goes next week.
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