Ivana Bacik

Second Stage Debate -  01/10/08

Senator Ivana Bacik:  I am grateful to Senator O’Toole for sharing time. I agree with the Senator that we share a unity of purpose and we all appreciate the necessity that the Government take decisive action to maintain confidence in the economy. Nevertheless, I will criticise the Bill, albeit in a constructive manner, rather than for the sake of it. I am genuinely unhappy with many aspects of the Bill about which there is immense uncertainty. While I note Ministers’ comments that the proposed measure will not cost the taxpayer up-front, there is no doubt they expose taxpayers to an enormous potential liability. The figure of €400 billion is extraordinary. We are effectively giving a guarantee to a banking sector which, in the words of Government spokespersons, has acted recklessly in the past. The Bill provides insufficient guarantees that it will not act recklessly in the future.

I cannot accept the assurances of Ministers and others regarding the substantial equity-based buffer of €80 billion because it sounds like a fiction based on an overvaluation of the property and assets held by banks. It is clear these assets were overvalued and there is no doubt Irish banks hold some toxic debts. None of us knows the extent to which their debts are toxic or the precise liability to which we are exposing ourselves. Given this degree of uncertainty and in the absence of stronger guarantees for the taxpayer and stronger assurances on when the charging regime will come into play and how banks will be penalised if the taxpayer is forced to pay out money, it is difficult to support the Bill.

We were told the measures in the Bill would extend to six institutions. It is difficult to see the reason only six institutions were chosen. An argument has been made about increasing the number. Clearly, however, if more institutions are covered by the measures, the potential liability for the taxpayer will increase. This is another matter of concern. We already know the measures have the potential to impose significant costs on the State coffers should the cost of borrowing increase. The Bill has received strong support from bankers and financial institutions, as one would expect if the measures amount to some sort of bailout. It is very difficult to take their assurances at face value. As Senator O’Toole noted, it is difficult to trust institutions when we know that much of what we have been hearing about the stability of the sector has not been true. If the capitalisation is so secure, why do we need to give this guarantee in the first place? With this level of uncertainty, it is hard to support the Bill, much as I appreciate the need for some form of package to ensure confidence in the economy.

Committee Stage Debate -  01/10/08

Senator Ivana Bacik:  I support this very important amendment. As the Minister said, part of the problem we now see is as a result of a disproportionate reward of excessive risk-taking by some bankers. I accept what he said that not all bankers were reckless. However, it is clear there were bankers who were reckless and who were disproportionately rewarded. That is politically unacceptable and, as Senator Kelly said, people are very concerned about it.

If the Minister does not accept this amendment, he might tell us if it is proposed to insert in the scheme he will bring before the Houses, a measure to control the share option offers and the earnings, perks and so on given to senior officers and employees.

The Minister said it is envisaged the scheme will provide for a representative of the public interest to be placed on the boards of institutions which seek financial support. That representation might be one way to ensure controls. I ask that the representative to be placed on the boards of such institutions be a representative of the Financial Regulator.

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Senator Ivana Bacik: With respect to Senator Walsh, this is about corporate misgovernance. The Bill is and must be about corporate governance. What we have asked is that the Minister clarify the situation and include, perhaps in the scheme he will bring before the Houses, some conditions relating to chief executives and higher bank officials in terms of a cap on their salaries and expenses. This is a limited request.

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Senator Ivana Bacik:  I support the amendment. If the Minister is not willing to accept it, he might consider putting something similar into the scheme he is presenting before the Houses. It seems eminently sensible to have some provision for review of salaries and bonuses paid to board members and senior officers of institutions which are seeking financial support under the Bill.

SECTION 6

Senator Ivana Bacik:   This amendment gets to the root of the problem some of us have with the Bill. The Minister has suggested we are obsessed with the assets and liabilities of the institutions. However, it is appropriate and responsible to examine the potential exposure of the taxpayer to liability under the Bill in the terms of the guarantee scheme proposed by the Minister. While we accept and all hope that only an extraordinary set of circumstances would give rise to any real exposure by the taxpayer, we must examine the potential level of exposure. In doing this we must examine levels of assets and liabilities. Many of us would have an issue with the €80 billion cushion that was spoken of, and would see it as a gross overvaluation of the banks’ assets. It is important we examine the safeguards in the Act, and this is one important safeguard that could be in it but is not. Another would be to have a representative of the Financial Regulator appointed to the board of any institution getting financial support. Another would be for the Minister to agree to set limits on the levels of salaries and perks for chief executives and senior officials of banks. We need to see more safeguards and this oversight committee could be an important safeguard.

Amendment No. 24

Senator Ivana Bacik: I support this amendment which goes to the heart of providing a safeguard and an adequate degree of oversight to the guarantee the Bill provides. It would address some of the concerns we have with the legislation. The Minister has already indicated he would like to see a representative of the public interest appointed to the boards of institutions receiving financial support. Will he clarify if that representative of the public interest effectively would fulfil the functions envisaged in the proposed amendment?

Amendment No. 26

Senator Ivana Bacik: This is an important measure as, presumably, were financial support to be provided, this would be a matter of public record. Therefore, were financial support to be provided for an institution, it would be in the public domain. Consequently, it makes sense that if financial support is being provided for an institution, there should be a report, at least on a monthly basis.