Council of State set to meet over banking bill

PRESIDENT Mary McAleese has called a meeting next Tuesday of the Council of State to consider the Credit Institutions (Stabilisation) Bill on the reform of the banking sector.

Under the constitution, the President may call such a meeting of the Council of State, which includes Taoiseach Brian Cowen, High Court President Nicholas Kearns and Attorney General Paul Gallagher, to discuss a bill before either signing it or opting to refer it to the Supreme Court.

The Dáil has passed the bill, which instructs financial institutions to sell assets and impose losses on banks’ subordinated creditors as part of an agreement with the European Union and IMF to restructure the country’s banking system.

Labour finance spokesperson Joan Burton said her party is not opposed to bank resolution regimes, but the legislation would give the Finance Minister “an astonishing range of powers seldom seen outside totalitarian regimes”.

Finance Minister Brian Lenihan said the legislation will allow the Government to refashion the banking system so that it is focused on the domestic market, while empowering ministers to instruct banks to sell assets and impose losses on banks’ subordinated creditors.

It will also allow for a capital injection into Allied Irish Banks, eventually bringing the state’s stake in AIB to over 92% from 18.6% currently, and a restructuring of nationalised Anglo Irish Bank and Irish Nationwide.

Dr Theresa Reidy, lecturer in the Department of Government at UCC, said: “The main reason the council will meet is to discuss the constitutionality of the bill; if the President has any concerns the bill is in conflict with any element of the constitution, she can refer the bill to the Supreme Court. It’s rarely used, because once a bill is referred to the Supreme Court, if it is upheld, then it cannot be challenged.”

A president has referred a bill to the Supreme Court only 15 times since 1937.