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Adjournment Debate. - Proposed Third Banking Force.

Wednesday, 28 February 1996

Dáil Éireann Debate
Vol. 462 No. 3

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Mrs. O'Rourke: Information on Mary O'Rourke Zoom on Mary O'Rourke Thank you, a Cheann Comhairle, for giving me the opportunity to raise this matter. I raise it because of controversy on the issue which was reported in last weekend's newspapers. The programme for Government states that the Government is committed to the promotion of a vigorous third force in banking and that policy will be directed towards ensuring a major role for the existing State banks and the TSB in any future restructuring. That commitment appears to have disappeared into oblivion. Every other week there are media reports to the effect that the third banking force is on or the third banking force is off. The only Government decision following such reports is to initiate a leaks investigation — the Garda has been requested to interrogate politicians and journalists.

The latest instalment of this long-running saga came to light last weekend when the Tánaiste was reported to have scuppered the plans of the Government sub-committee. That report has been denied by the Tánaiste who claimed that the person who leaked the information — who could only have been a member of the sub-committee and whose identity is, I think, known to all of us — was being mischievous. It appears there is a three-way ideological tug within Government in terms of a third banking force. Fine Gael wants to sell off a majority stake in the TSB, Labour seems to be pressing for a new State-led third banking force while Democratic Left does not want to upset Fine Gael and also does not want an outright sell off.

[930] The chaos and confusion which has existed for the past 12 months cannot continue. The Government should announce its decision, even if it is that the Cabinet cannot make up its mind and that the status quo will remain for the rest of this administration. The uncertainty has been damaging to the TSB, ACC and ICC in that management and staff of the companies have been unable to plan for the future. The private banking sector is also concerned at the stalemate and indecision. The paralysis on this issue is very damaging to Ireland's reputation both at home and abroad. My great fear is that in the end a rainbow mixum-gatherum decision will be made which will be bad for all the institutions involved. I call on the Minister to tell the House what exactly the Government plans to do.

Minister for Finance (Mr. Quinn): Information on Ruairí Quinn Zoom on Ruairí Quinn In July 1994 consultants were appointed by my predecessor to identify the various options available to the Government in respect of ACC Bank, ICC Bank and the TSB. The consultants completed their report in October 1994 and presented it to the Department. On the basis of this study, proposals were prepared for the Government which set out a particular view on the way forward. When I took up office as Minister for Finance in December 1994 I was advised of this position. I examined the papers on the matter and concluded that the contextual framework for the study was deficient.

The sum of the considerations, particularly the role of the credit unions who are now a major player in the financial sector for a large number of our people, and the ongoing role of An Post, which reaches out to an enormous number of people who would otherwise have no connection with the banking sector, was not in any way seriously addressed.

The financial sector in general in Ireland is currently going through a period of change. The demarcation line between banks and building societies is becoming blurred. Competition is increasing, putting pressure on costs. [931] Together with advancing technology, this will require the sector to commit large sums to investment. In recent times An Post has made huge advances in retail services. It has also invested heavily in information technology and the automation of its counter services. The credit unions have also made huge strides in the past few years, including the extensive introduction of information technology systems and major expansion of its community-based branch network.

These major and ongoing changes in the nature of the market in personal banking services were given insufficient weight in the proposals presented to me when I took over the portfolio. For the most part, consideration was limited solely to the commercial banks within the State sector. I was therefore, disappointed that matters had not proceeded further and that the broader framework had not been sufficiently addressed. When I took over the portfolio a major amount of work remained to be completed before any serious consideration of the available options could commence. To this end, I met a wide range of interested parties, including representatives of the boards and staff of all the State banks and senior management in those banks which have expressed an interest in participating in any proposed restructuring of the various institutions.

Throughout the life of this Government, the issue of the future structure of the State banking sector, including TSB Bank, has been under continuous consideration. The Government wishes to facilitate the State banks so that they can maximise their impact on economic development as well as their own business success. I am happy to say that all banks, including TSB, ICC and ACC, are reporting record profits and performance.

The wider role of An Post and the credit unions was also considered in this context. The options for restructuring [932] the State banks continue to be examined by myself and a number of Government colleagues with a view to identifying the most effective solution having regard to the nature of the individual institutions, their particular customer markets, the needs of the whole community in its broadest sense and most importantly development in the EU.

I appreciate that this matter has been under consideration for some time. However the issue of how one might best restructure the banks in order to achieve our objective in relation to the creation of a vibrant and competitive banking market is a complex one.

Also, if the matters I referred to earlier had been taken on board when the initial consideration was taking place, we might be further down the road at this stage. I know that the need for detailed consideration is understood and appreciated by all those involved and I am assured that they are continuing to compete profitably in their chosen marketplace taking full advantage of the opportunities presented by the current economic climate.

It would be wrong of me at this stage to make detailed statements about what may or may not happen until the matter has been resolved by Government. Nor am I prepared to comment on media speculation on what may or may not transpire in relation to the restructuring of the State banks. However, I recognise that this process has been taking place for some time. I am very keenly aware of the need to ensure that employees and management in the institutions concerned should not be adversely affected by uncertainty regarding the eventual outcome.

This is why I have been available at all times to those most closely involved and have had numerous meetings with all the participants. My door has always been, and continues to be, open to them.

This Government would, rightly, be attacked as irresponsible if it abused its position in the financial sector in any way. Therefore, I have approached this issue in a careful and constructive way. [933] It would be remiss of me not to take into account all the possible scenarios before arriving at a recommendation which can be put to the Government. However, the Government is very much at one on the overall objective, to arrive at the solution which best addresses the interests of all.

The Government is fully committed to the creation of a strong and vibrant banking market. The issue of how to achieve this is complex and difficult. I refuse to be rushed into recommending a particular solution to it. Getting it right must be the priority.


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