1st October, 2008

Speach in Seanad Eireann, 1st October on Credit Institutions (Financial Support Bill).

I welcome the Minister. I wish to emphasise that Fine Gael will be supporting the Bill because it believes it is in the national interest. I acknowledge the major effort the Minister has been obliged to invest in dealing with this matter in recent and extremely trying days.

It is also in the national interest to reflect on how we reached this point. An American central banker once famously observed that the role of a central bank is to withdraw from a party when that party begins to get interesting. It is clear that the opposite happened in Ireland in recent years. The punch bowl, which was full, was left in the middle of the room when the party really got going. We were informed that we should drink deeply and that there would be no hangover in the morning. We are all now reaping the consequences.

While my party does not hesitate to support this Bill, because it believes it is in the national interest, a vital issue that must be addressed is why the people, cultures and attitudes, which have so blatantly failed to regulate the banking industry over the past number of years, have now been given new power and the Minister expects us to believe the wit, determination and expertise to wield that power will appear overnight. We must know if the very culture still that ensured this Government and the authorities it created backed away from making hard decisions and from challenging the vested interests in our banking sector, is still there. Is there the determination to make the decisions and challenge the interests which is vital to the success of our country?

For so long now we have seen how this Government was willing to be the lap-dogs of the banking sector. Is the Government now willing to be the guard dogs of it? Is it willing to use the vast, sweeping powers this Bill gives it for the benefit of taxpayers, families and businesses which are dependent on its leadership, which has been absent over the past number of years?

Two other vital points must be made about this Bill and the culture in the banking sector in Ireland. These are domestic points which we must tackle. The first one is the compensation culture in Irish banking. Much discussion has taken place regarding the salary our bank executives receive but that is missing the point. I looked at the compensation package of one of our top bankers – a top chief executive – and only one third of his compensation package goes into salary. The rest of it goes into stock options, bonuses and to deferred pension plans. Will this Government tackle the compensation culture which has rewarded and driven reckless behaviour for which we are all now paying the price?

When one hears the Republican Party in America talk about the need to cap salaries, one knows it is getting away from the bigger issue which is the stock plans and option plans.

Will the Minister indicate whether he is willing to tackle them and tell the bankers who come in here and look down on us that the way they are rewarded must change for our banking sector to prosper?

Moral hazard has been discussed at length in both Houses. We now enter the greatest period of potential moral hazard our country has faced since its foundation. We are providing a guarantee by taxpayers to some banks which may be in serious financial difficulty. What is to stop them using that guarantee, or indemnity, to trade themselves out of trouble? Given that they have traded themselves into trouble in the first place, how will we ensure this is tracked and monitored by the Government?

Fine Gael supports this Bill because it is in the national interest. On Monday we heard the voices of the financial markets which said they did not trust the Irish banking sector. In the coming months and years, we could hear those voices again but I hope we do not. Those voices will be mild in comparison to the voices of the people of this country who depend on the banking sector for their houses, and for families. As committed as we are to supporting this Bill, if the Government does not use the sweeping powers this Bill gives it, we will articulate those voices and that outrage in the future.