Dáil Éireann - Volume 492 - 18 June, 1998

Adjournment Debate. - State Banking Sector.

Mr. Sargent: Go raibh maith agat a Cheann Comhairle as cead a thabhairt dom an cheist seo a ardú inniu. The matter I am raising is the subject of a report in today's Irish Independent. There are a few basic points worth making about the TSB for the information of the House, the Minister, his officials, the trustees of the bank and the public. The trustees do not own the bank. Dating back to l863 their role has been administrative and supervisory. It is morally wrong for trustees so empowered to behave as if they were the freehold possessors of the title deeds to the bank. It is also wrong of the Minister and his Department to deal with the trustees as if they owned the bank, when they do not.

The Trustee Savings Bank was deliberately created by people, of like mind to what could be called the green constituency, who had vision and were sufficiently precient to ensure the bank belonged to no one so that eventualities like that discussed in this morning's papers would not arise.

Incidentally, it is fascinating that Tony O'Reilly's Irish Independent had that story this morning while The Irish Times which, not unlike the TSB, exists for reasons other than pure profit, did not. Is this another aspect of payback time?

The manner in which the Trustee Savings Bank was created dictates that, whatever legal provision may have been slipped into the Trustee Savings Bank Act, 1989, nobody has a moral right to effect the sale of the TSB and certainly not without first consulting its customers and clients.

Those most interested in pushing a sale will be those with most to gain in career and financial terms, but the sale of the TSB will serve no purpose that is beneficial to the community. Arguably, such a sale will not even benefit the Exchequer but, if anything, would be an unnecessary and unprofitable diminution of the net worth of the Irish State. There is no doubt that since 1989 the TSB has lost its way. As evidence of that, I adduce a recent statement by its chief executive suggesting that the TSB might involve itself in offering 30 year mortgages. This is a deceptively angled proposal because although at first glance it seems attractive in current circumstances, what it means is that if I can get a 30 year mortgage to purchase my first home, others [1350] will have to get one as well if there is to be competition on price. The result is a further ratcheting upwards of house prices, more turnover and greater profitability for the socially indifferent financial institutions and even more people excluded from the housing market.

For the TSB, in particular, to come up with such a profoundly anti-social proposition is shocking. I am not sure whether the Minister had time to study the economic theories of Mr. Adam Smith during his formative years or later in the course of the distinguished career that has seen him assume his present office. If he had, he would be aware that Adam Smith is regarded as the founder of the capitalist theory and that the Fianna Fáil Party has adopted this broad theoretical framework as its economic philosophy. He may be aware that central to Adam Smith's thinking was the idea of an invisible hand that guides things along towards the greater good in pure capitalist terms.

Has the Minister ever considered that the reason Adam Smith's invisible hand is invisible is because it does not exist? It seems it was scepticism, like my own, on the invisible hand of capitalism that informed the thinking that went into the creation of the Trustee Savings Bank. If, as the Minister, his party and Government partners seem to desire, the TSB and the ACC proceed to form a plc, it will have as its primary objective the maximisation of shareholder value and, according to that theory, the pursuit of that by those who will have a shareholding in the new company will produce social benefits, but I do not know about that. What it will produce is greater costs for TSB customers. It is clear both from this country and from the UK, after the decade of Thatcherite and post-Thatcherite demutualisation, that mutuals offer better terms to their customers and members.

Is it the Minister's party, or the junior partner in the coalition, that is most gung-ho about this proposal? If I was to put the theory of why I believe this move is coming about into an article it could well be entitled, “There is no such thing as society — there are only private interests” and that underlies the attitude to the TSB proposal.

Minister for Finance (Mr. McCreevy): From replies I have given to parliamentary questions the House will be aware that late last year the Government authorised me to enter discussions with the respective boards, managements and staff of ACC and ICC Banks regarding the future of the banks, including, in principle, the option of disposing of up to 100 per cent of the State's interest in the banks.

On foot of this Government authorisation, I had separate discussions with the boards, managements and staff representatives of both banks in December 1997 and, following receipt of submissions setting out their individual views, I held further separate meetings with them on 20 May 1998. The meetings provided a welcome opportunity for all participants to engage in a useful [1351] and constructive exchange of views and the positions discussed are being developed in ongoing contacts with officials from my Department.

The position of the unions representing the staff of ACC Bank in these discussions is that they favour a merger of ACC and TSB and a subsequent flotation of the merged entity. As the trustees of the TSB had shown no interest in this position, it was a proposal which I could not realistically address. In this context, Deputies will recall that I informed the House on many occasions that under the Trustee Savings Banks Act, 1989, the trustees alone have the right of initiative in regard to any change in the status of the TSB. However, recently I was approached by the trustees of TSB who indicated their general interest in a merger and flotation of ACC and TSB. In light of this approach, I am reconsidering the proposal and I also met representatives of the board and management of ACC Bank to discuss with them this expression of interest by the trustees. I wish emphatically to deny suggestions in the media that I have already approved this proposal. I have not ruled it in or out.

I have a completely open mind on this proposal and I propose shortly to seek Government approval to enter into discussions with the boards, managements and staff of both banks about it. That is the background to the issues which Deputy Sargent raises. The proposal regarding the merger first came from the ACC group of unions, not from my party or our partners in Government.

Mr. Sargent: I am concerned for TSB members.

Mr. McCreevy: When the Deputy quoted Adam Smith, he claimed the proposal came from my party or the Progressive Democrats. It came from neither.

Mr. Sargent: I asked a question.

Mr. McCreevy: The processes for consultations between the trustees and unions within TSB are a matter internal to the TSB and I do not propose to interfere in them. Nevertheless, I understand [1352] the situation in this regard within the TSB is excellent and I expect it to continue.

With regard to consultations between TSB and its customers, the position of the TSB should not be confused with that of a mutual building society. In the case of a mutual society, as the Deputy is aware, the agreement of voting members of that society is sought if it is proposed to change the society into a company. Even in the case of a mutual society, not all customers of that building society are consulted as only eligible voting members of the society are. A trustees savings bank is not a mutual society and it has no members to consult.

With regard to customers, Deputy Sargent's underlying concern appears to be that their interests will somehow be damaged if the TSB is reorganised. The best interests of the customers of TSB will be served by having available to them a full range of banking services, competitively priced and easily accessed.

Mr. Sargent: They have.

Mr. McCreevy: That will be achieved if the bank has sufficient access to capital to continue to compete effectively and if the trustees continue to discharge their responsibilities as diligently as they have up to now. I have every confidence in them.

However, if Deputies have concerns on any of these scores, they will have full opportunity to follow them up if and when this House debates any order I propose to make with regard to the future of the TSB. In this context, I remind Deputies that any reorganisation of the TSB requires the prior approval of both Houses of the Oireachtas. Small stand alone banks face an increasingly competitive market, which will intensify further with Ireland's accession to EMU. It is against that background that I am looking to the best interests of ACC and ICC Banks. With regard to the TSB, it is for the trustees to determine where the strategic interests of the TSB lie. They have now approached me about their interest in a merger and subsequent flotation of TSB and ACC and I am considering their approach.

The Dáil adjourned at 4.35 p.m. until 2.30 p.m. on Tuesday, 23 June 1998.