asked the Minister for Finance if it is his intention to introduce amendments to the Central Bank Act, 1971, within the next year.
Ceisteanna — Questions. Oral Answers. - Central Bank Act, 1971.
3.
I am considering proposals prepared in my Department and the Central Bank to amend the Currency and Central Bank Acts, 1927-1971, with a view to improving the protection of depositors and strengthening the supervisory powers of the Central Bank. I am not yet in a position to say when the legislation is likely to be introduced.
Do I understand the Minister to say that he is going to introduce legislation to strengthen the role of the Central Bank?
Yes, on that point, as I have said, to improve protection of depositors and strengthen the supervisory powers of the bank.
Will the Minister take into account the major changes that have been made in similar institutions in the US and in some European countries, particularly because since the Central Bank Act, 1971, there have been tremendous changes in the financial area, with floating exchange rates, increase in the Eurodollar market and developments of that sort? Will he broaden the extent of that legislation and examine the type of legislation introduced, say, in the US?
We can hardly have a debate on that.
I am asking the Minister if he will go a little beyond the protection of depositors in strengthening the general role and function and independence of the Central Bank, similar to what has happened in other countries.
As I have said, I am concerned not only with the protection of depositors but also with the supervisory powers of the bank. Those are the areas on which the modification of the legislation will concentrate.
The Minister has mentioned two points: the protection of depositors and the supervisory role of the bank. Would he not agree that another very important area is the role of the Central Bank vis-á-vis all financial institutions to try to create a climate for much more effective investment through the financial institutions than is possible at the moment with the various anomalies that exist for historical reasons over the years? Can the Minister not place at the centre of the scope of his review the bringing of our whole banking financial institution system here in line with the reality not just elsewhere but with the need and potential here at this moment?
Concerns such as those raised by Deputy O'Kennedy would be covered by reference to supervisory powers. I take the Deputy's point. They would be covered under supervisory powers because under that heading the Central Bank would have a function in the matter. Of course, as the Deputy knows, some of the things he is suggesting could — I will not say would — involve an extension of the supervisory powers of the Central Bank of institutions that do not now come under those powers. There is a policy discussion which needs to be followed up.
I appreciate the Minister's reply, but could I encourage him to look on this as the main focal point of the Bill, not just in terms of supervision but in terms of creating a climate for investment? Objective observers will say that our system here is not such as to channel investment effectively through our financial institutions generally into economic development the same as elsewhere. While I am on my feet, I remind the Minister that he did not reply to the second element of Deputy Brennan's question which was if he would ensure the statutory independence of the bank. I take it from this that the Minister would want to maintain that independence outside the influence particularly of the Minister for Finance of the day, whoever it would be.
On the second point I am in agreement with the Deputy on the importance of maintaining the statutory independence of the Central Bank and it is in the nature of our legislation that that statutory independence in the discharge of its functions should exist and be safeguarded. On the first question raised by Deputy O'Kennedy, as I have said, there is a wider question of the structures of financial institutions. I have an open mind on the matter. Numbers of suggestions are floating around as to changes in the structures and relationships between financial institutions.
How soon does the Minister think he will have the legislation ready? I appreciate his general attitude on this.
As I said before Deputy O'Kennedy came in, I am not in a position to say when I will be bringing forward the legislation.
I will call Deputy Wilson for a question. Before doing so I do not want to appear to be obstructive or unreasonable, but I am convinced that we will never get any place at Question Time no matter how it is reformed if we are to have cosy mini-debates on every question.
Would the Chair prefer if they were not cosy?
Now that is——
The Chair has made a comment.
If we are to continue to have debates of any description or of any length.
I am worried that the moralising takes place just before I ask for a supplementary question. Does the Minister think that the Central Bank might take an initiative in company with the central banks of the other countries in the EMS and, we hope, finally in the UK, to establish a petro-currency which will save us from the vagaries of the dollar such as we have to suffer at the moment?
That is a separate question.
It is, but for the Deputy's information I tell him that the operation and improvement of the system of the EMS is currently being discussed by the Council of Ministers with the Committee of Governors of Central Banks.
Ceist 4, but before we leave this let me say that I am not blaming the questioners entirely. Some Ministers are much too ready to become involved in debates at Question Time.
I accept your stricture on prolixity, a Cheann Comhairle.
4.
asked the Minister for Finance if he is satisfied that the present operation of the Central Bank Act, 1971, is such as to ensure the statutory independence of the bank.
Yes.
The Minister is taking the Ceann Comhairle's advice and being extremely brief. Will he comment on the suggestion that during the recent bank strike the board of the Central Bank were contacted on a number of occasions by the Department in relation to the dispute that took place there? If that took place, will he accept that that does not amount to total independence of the State and that the answer to the question is that independence does not exist?
The Deputy's question was to ask me if I am satisfied that the present operation of the Central Bank Act is such as to ensure the statutory independence of the bank. My answer to that question was yes.
That seems to refer to Question No. 9.
Will the Minister agree that that independence was compromised in the recent Central Bank dispute by virtue of the fact that the Government were in touch with the board of the bank about the matter on a number of occasions? That is hardly independence.
None of the statements made by the Deputy is well founded.
How can the Minister reconcile his brief reply with the claim he has made in this House more than once recently that he and the Government managed to keep down interest rates in the first six months of last year when they were going up elsewhere as this is the function of the Central Bank? Of course, the Government can cause interest rates to rise because of their policies.
The Deputy is well aware of the relationship between the Minister for Finance and the Governor of the Central Bank. There is no conflict between the statutory independence of the Central Bank and occasional or even regular discussions of matters of mutual interest between the Governor of the Central Bank and the Minister for Finance.
The Minister did not seem to hear me. I asked him how he reconciled his answer with his claim that the Government, not the Central Bank, managed to pin down interest rates at least for the first six months of last year before Government policies were a direct cause of the huge increase. From his own mouth he said in this House that the Government managed to pin down the interest rates. Surely that is not consistent with the independence of or consultations with the Central Bank?
I dispute the second part of the Deputy's allegation. It is not true. Neither is it difficult for me to reconcile what I said about interest rates with the independence of the Central Bank.
Will the Minister accept that the Government should not claim that they kept down interest rates when that is not their function? Instead, should he not acknowledge that the Government can bring pressure to increase interest rates because of their mistaken policies?
The Deputy is now being inconsistent in his questions.
I am not.
I am calling Question No. 5.