Committee Reports > List of Committees > Joint > 1980 > Committee on Commercial State-Sponsored Bodies > Report No. 10 - Agricultural Credit Corporation, Limited

MIONTUAIRISC NA FIANAISE

(Minutes of Evidence)

Dé Céadaoin, 6 Feabhra, 1980

Wednesday, 6 February, 1980

THE AGRICULTURAL CREDIT CORPORATION, LIMITED

Mr. T. J. Maher, MEP, President; Mr. J. McCarrick, Director General; and Mr. M. Gibbons, Vice-President of the Irish Co-operative Organisation Society Limited called and examined.

83. Chairman.—Arising from your letter to us* there are some questions we should like to put to you. Firstly, is there anything the witnesses would like to say at the outset before we discuss the matters in detail?

Mr. Maher.—I should like to thank the Committee for the possibility of having a discussion on these matters. We asked for the meeting because we were concerned about the Press reports concerning the Committee’s hearing with the ACC. We felt we ought to clarify the situation in the interests of ensuring that there is as adequate and accurate a report as possible finally published. I am sure the Committee would like to achieve that objective also. In the Press reports I do not think the position was clarified in relation to my exact post concerning farm organisations. I have long left office in the IFA but the impression was given that I was still president of that organisation. I accept that it is difficult to keep up to date with all the changes that take place. When I was making the statement referred to in the newspaper reports I was not speaking on behalf of the IFA but on behalf of co-operatives. As the Committee are aware, we are a very strong institution. I am anxious to clarify that matter because it is important that we should know what we are talking about.

We recognise the ACC as being very important an the scene as being the means by which agriculture can get credit. That credit goes mainly to individual farmers, not so much to agri-business, which would, of course, be our main concern as cooperatives. Only about 10 per cent of the resources which are available to the ACC are made available to the agri-business sector. I should point out that the cooperatives today, with 200,000 members, have a turnover of £2,500 million which is very export orientated. We have been concerned for some time that the facilities which are available to enable cooperatives to develop, particularly in relation to their export trade, have not been adequate. The availability, for instance, of foreign currency is not all that great. That was basically the idea we had in mind when we talked about a merchant bank which would help to meet this objective of making currency other than the Irish £ available. In that way we would be relieving pressure on the Irish £ particularly since we departed from parity with sterling.

It was for that reason that we had discussions with the FBD, which is basically the farmers insurance company which was set up by the IFA some years ago, and with the Rabobank of The Netherlands, one of the largest banks in The Netherlands and farmer owned. I was also anxious to point out that the ACC, with our support, some years ago became affiliated to the Association of Cooperative Savings and Credit Institutions in the EEC. The ACC were accepted as a member of that organisation with our support but on the basis that it was an “intending cooperative”. In fact, it could be said that the ACC has been masquerading as a cooperative on the European scene but is not a cooperative, as we all know well.

84. Chairman.—But with your approval?

Mr. Maher.—Yes. We understood that the intention of the ACC was to develop into a cooperative organisation. I have documentation which goes back to 1972 on that matter. Provision has been made, even though it has never been effected, for the election of a certain number of directors of the ACC by agricultural interests. That has never happened but it is something that should be given some consideration as a first step.

The situation has changed considerably in recent times. It is no harm to mention that the FBD was established mainly with the help of the Boerenbond insurance organisation of Belgium. I was directly involved in the establishment of that and I am aware that we would not have been able to get off the ground were it not for the direct assistance and involvement to the extent of 30 or 33 per cent by that insurance organisation which is an offshoot of the farmers’ union and cooperative organisation in that country. The FBD is now a very strong organisation and a new element on the scene. Together with the cooperatives they are now very powerful, financially and otherwise. It is not correct to suggest that the Agricultural Credit Corporation could of its own volition—I think that suggestion has been made by the representatives of the ACC—develop into a co-operative banking organisation if FBD and the co-operative organisation and the farmers’ organisations were not involved. I think it is a mistaken idea that that could happen. If farm organisations, the co-operatives and FBD are taking this general approach, there would be no way that a State institution like ACC could penetrate, as it were, or get support from farmers. The situation at present is that the ACC is drawing only about 25 per cent of its resources from agriculture and if it were to develop into a co-operative bank on its own, say, five years hence, its need for funds would be infinitely increased at that time and it could not possibly develop without very strong support from the general farming organisations. We make this point quite strongly because we think it is an important element in the whole situation. Very briefly, that is our position. We would very much like to see a development towards the general involvement of farmers in agri-business, the farmers and the agri-business sector into the banking scene, as a first step setting up a merchant banking operation and to finance the very large volume of exports. We see here the need for—and that is the reason we have been talking with the Rabobank—the involvement of an important organisation like that which, as you know, is headed by Pierre Lardinois with whom we have good relations and who was previously Commissioner for Agriculture in the European Commission. With their help and of course with the involvement of the ACC we see considerable possibilities for development. We would see it relieving the State of certain responsibilities in this area.

85. Chairman.—Would it be correct to say that you would not see the ACC as presently constituted as developing into a co-operative bank in any circumstances?

Mr. T. J. Maher.—I can express an opinion about it and John McCarrick and Michael Gibbons might have views on it. I think it would be extremely difficult. It would be a remote possibility that the ACC, as presently constituted, and on its own, without good co-operation or involvement with the whole agri-business sector and farmers, would develop into a co-operative bank.

86. Chairman.—There is provision for co-opting people. I was just supposing that there was a liberal utilisation of that facility and a number of people from the co-operative movement and the ICOS were co-opted on to the ACC, is it possible that it then could gradually become the kind of bank that would fill the need for a farmers’ bank? Do you think that something more radical than that is needed?

Mr. T. J. Maher.—I think something more radical is needed. I see the involvement of an organisation like the Rabobank—I am not specifying that bank—in relation to financing exports as an important element in it. If that is left out it makes it more difficult. Merely having people on the board of the ACC as it exists at present will not, I think, provide sufficient incentive or give the involvement or level of involvement that co-ops or farmers would see as necessary. I would not see that as being adequate.

Mr. McCarrick.—On the agricultural or farm lending side we could see cooptions as being a very useful step. The deficiencies we see are on the agri-business side. They are compounded by other developments. The international nature of our agri-business industry and the fact that our food industry is at a disadvantage, being export-orientated relative to the food industries with which it competes on the grounds of the cost of money to it not as a result of higher margins in this country but as a result of greater dependency on an expensive currency to fund it. We would see an international banking development as being necessary to change that, a development that would allow for mixed currencies to be available to the food industry to finance exports and imports such as would balance the risk and the cost of funds in a more attractive way. That is why we are talking about a merchant banking system as being a complementary part of the total development of a co-operative bank meeting the needs of co-operatives and agriculture.

87. Senator Cooney.—Am I right in thinking that you would see agri-business being financed by the merchant bank side?

Mr. McCarrick.—Yes.

88. Senator Cooney.—If that is so, take the case of the farmer and some agri-business and the present co-ops. At the moment they are financed through the commercial banks or the ACC or a mix of both. What difference—I do not know what the noun is—would making the ACC a co-operative make to those people?

Mr. McCarrick.—Co-operativisation is the word we have been using in relation to the ACC and it would help to bring, in the way that it is being proposed—not in just any way; we are not just blandly suggesting that you can wave a wand over it and change it into a co-operative—but in the way we are proposing we think it will help not only the food industry and the co-operatives and agri-business in Ireland but also the state of the economy generally because we are talking about introducing a co-operative bank which is one of the largest banks in the world with very great experience in international banking and finance, the Rabobank. We are also talking about introducing a co-operative in Ireland dealing with insurances which has access to a very fast growing sector of the money market, the whole pensions area and particularly as that applies to agriculture. We would see that as being an extra source of resources that would become available and those two dimensions together with the banks and the Government and the co-operative involvement on top of this—with all this experience—we would consider to be of very great benefit to the whole industry.

89. Senator Cooney.—That is to the agri-business?

Mr. McCarrick.—Yes.

90. Senator Cooney.—But as far as the farmers are concerned? As you say the co-operatives at the moment are using ACC. They are managing very well with the present mix of commercial banks and ACC. are they not?

Mr. McCarrick.—When we talk of agri-business we are talking of that slice of business built on agriculture which includes the co-ops and private and public and multinational operations and organisations. They are at a disadvantage, cost-wise, relative to agri-business in other countries.

91. Senator Cooney.—How do you mean, cost-wise?

Mr. McCarrick.—In other words, the cost of an Irish £ borrowed in Ireland is greater than the average cost of Euro currencies which other firms are borrowing and we are all relating to one common price through the Common Agricultural Policy. The result is that a higher proportion of the total cost of producing dairy products or meat products or pig meat products or grain in this country—and transport of course—is caught up in the financial costs.

92. Senator Cooney.—Does that imply that the development you have in mind would be able to make foreign currencies available to agri-business for part of their financial needs?

Mr. McCarrick.—Yes.

93. Senator Cooney.—Would that not involve the Central Bank and all the exchange regulations and so on?

Mr. McCarrick.—The Central Bank regulations are entirely consistent with the proposition, because farmers do not export directly and agri-business interests do. They, therefore, earn foreign currencies and are in a position, within a mix, to carry a certain proportion of foreign exchange as part of financing.

94. Senator Cooney.—Would they not be already doing that through their merchant banking or existing banking arrangements?

Mr. McCarrick.—Yes, to some degree, but there has not been sufficient development in merchant banking here, even to accommodate or replace the extent to which we were dependent on the London money market, not to mind a development that reflects that we are now trading internationally in Europe and are part of the EMS.

95. Senator Cooney.—Have there been complaints from sectors of agri-business in this regard?

Mr. Maher.—Bord Bainne continue to have difficulties and still needs a State guarantee to carry on, even though it is a co-operative. It is a difficult situation because there is a rather unbalanced state in milk production. They need a lot of money at one time and then there is a valley period. They are an organisation that is a classical example of an organisation having a lot of difficulties in this way.

96. Senator Cooney.—Is it really a difficulty in terms of their trading? The guarantee is readily forthcoming. There is no difficulty about legislation from time to time to deal with Bord Bainne’s financial developments.

Mr. Maher.—I was on the board of Bord Bainne for many years and we spent a lot of time trying to ensure that we would have continued Government support. Threats were made again and again to withdraw that support. So far the support has been forthcoming but should that be necessary? This points to a weakness in the whole system.

97. Senator Cooney.—Those guarantees are sought by people with whom Bord Bainne have commercial dealings. How would the need for something analogous to that guarantee be removed if Bord Bainne were co-operating with or were part of a new co-operative bank or merchant bank?

Mr. Maher.—One area where this situation would be eased would be having, through the kind of institution we are talking about and with the involvement of other organisations, greater and more direct access to currencies other than the Irish pound.

98. Senator Cooney.—Implicit in the proposal, there would have to be an involvement with some banking organisation on the mainland of Europe?

Mr. Maher.—This makes a lot of sense, and is consistent with the whole idea of the development of the European idea.

99. Senator Cooney.—It would be an integral part of the plans for a co-operative bank?

Mr. Maher.—Yes.

100. Chairman.—Could it not be arranged through the links with the co-operatives throughout Europe to make these facilities available to the ACC? Is it necessary to form a completely new bank? Is the ICOS objection or criticism related to the facilities provided by the ACC or do the ICOS want this new bank to be owned by the co-operative movement and not, as the present ACC is owned, by the Government? Is there a fundamental objection to the way in which the ACC is owned or is there a criticism of the range of facilities which the ACC are able to provide?

Mr. Maher.—The ACC by and large are a credit institution for individual farmers and not for agribusiness. They have not gone very far in terms of providing credit for agribusiness. Obviously there is a growing need for this. Also, we cannot ignore the fact that in practically all the European countries with the possible exception of the UK the development of the co-operatives into the money market and into banking has been almost a prerequisite of their development in relation to other areas. That did not happen here. We had credit organisations at the change of the century but for various reasons at difficult times, Government support was withdrawn and they wound-up which was a great pity because the evidence shows that they were in reasonably good shape at the time. It was more a political decision than a decision based on economics or on problems about resources. In all of the European countries, in Germany, France, Italy. The Netherlands or Belgium, banking is a very strong feature in the co-operative movement and they find it essential in regard to co-operative development. It is surprising that we have come so far without having that tool to use. I do not want to be unduly critical of banking organisations but it has often been said that they give one an umbrella on a fine day and take it away on a wet day. There is a certain element of that in the whole situation. We would favour an organisation that would be more intimately involved in the development of agriculture.

101. Senator Cooney.—I presume that a co-operative bank would have to operate according to normal banking criteria which sometimes demand that the umbrella be taken away when a shower comes. Do the board envisage that a co-operative bank would have a more temperate approach to customers and would be able to, as the ACC does quite regularly, roll over debts in times of difficulty, or would it apply the ordinary commercial approach of the commercial banks?

Mr. McCarrick.—We cannot anticipate the decision of the new co-operative bank, but this question of the ownership issue versus the services issue is a valid way of looking at the proposition. We have to accept that it will always be the legitimate aspiration of the co-operative movement to be involved in banking. It is the nature of the co-operative movement to be involved in services. The opportunity for ownership only arises when a new service or new development that it can fulfil is needed. This coincidence of the aspiration of the co-operative movement and the need to provide a new service arises as a result of our membership of the EMS and the fact that we are trading internationally within those currencies. Banking in Ireland has not developed to respond to that and the ACC have said that they wish to be a co-operative bank. The provision is there for it. They have a well-developed farm lending base and a very minor involvement in agri-business. Those circumstances have combined with the result that we can meet this ownership aspiration now because there is a service deficiency that we can deal with.

102. Deputy L. Lawlor.—In relation to the State guarantee to Bord Bainne, did not the Minister for Agriculture within the last week suggest that it should be self-financing as he intended to withdraw State guarantees on the basis of this progress?

Mr. Maher.—He is not the first Minister to say that.

103. Deputy L. Lawlor.—As regards the discussions initiated by the ICOS with the relevant people and the agreement in principle to proceed, is it as a result of the comments based on our discussion with the executives of ACC that this matter is now coming up or was there progress in the background which has now ceased? As regards the make-up, I am not clear about the merchant bank. Would there be a percentage participation by ACC and, as the State is involved in ACC, would there be an on-going guarantee to the merchant bank if State funds through ACC are going into the new banking arrangement? The last time ACC were brave enough to get Euro money made available on the Irish market it turned out to be a financial disaster. The comments now are that this will be a great advantage whereas the result of the last effort was quite the reverse. Possibly the band in EMS may restrict the complications. I should like to know the equity carve-up of the suggested merchant bank and why are the ACC not going ahead with what they suggested was a desirable development?

Senator Cooney.—You stated in the letter which Deputy Lawlor has referred to that you had the agreement of ACC, Rabobank and the major co-operatives. When was that got and how hard is it?

Mr. McCarrick.—There were four points there. In relation to the participation of ACC in the merchant bank we have put forward suggestions. It would be a matter of balance rather than of principle to ensure that the interests of ACC and the co-operatives and other parties were suitably balanced in the mix. I do not see why the Government should in any way have to extend its guarantee of support for ACC through to an associated merchant bank. ACC already have a subsidiary not involved in banking and I do not imagine that that complicates the Government’s guarantee position.

As regards the Euro currency experience, that was lent to farmers and was before we were involved in EMS. The fact that we are involved now is one plus and the other is that we are now talking about lending to people who are exporting, who will borrow in a mix of currencies to reflect the balance of their revenues from different currencies. There will be no question of the bank being involved in covering the risk. By and large the exchange risk should about reflect the interest differentials.

It is true to suggest that no progress has been made for some time in that there was a proposal put and when we read reports of your hearing it jolted us to find the chairman of ACC saying it was not a reality. He said: “Neither my colleagues nor I see it ever happening”. This was a jolt to us in our perception of the rate of progress. Up to that it was different. We were dealing with the management of ACC. There was a series of meetings involving all the parties. A counter-proposal was put by ACC at some stage which was accepted and was assumed to reflect agreement in the sense that they accepted the principle of what we were talking about. They put a counter-proposal and that was accepted by the other parties. It was accepted as agreement by the ACC. By the same token there were separate discussions with each party and together between all the parties.

104. Senator Cooney.—What do you mean by a counter-proposal from ACC? There were meetings between the parties and there was broad agreement on the motion and you say ACC put a counter-proposal.

Mr. McCarrick.—On the proportions of participation. Their counter-proposal related to that and was accepted, which one would normally accept as agreement.

105. Deputy L. Lawlor.—They wanted a bigger share?

Mr. McCarrick.—Yes.

106. Senator Cooney.—It implied the acceptance of the principle?

Mr. McCarrick.—Yes.

107. Chairman.—What is your comment on the statement by ACC that this is not a reality at present?

Mr. McCarrick.—With regard to the merchant bank?

Chairman.—Yes. You put forward proposals and they came back with proposals. One could say it was merely talk. Is it mere talk or do you consider that this could be a reality given a certain amount of action by various people?

Mr. Maher.—There is no question but that it could be a reality. I recollect some years ago being told that the chances of farmers setting up an insurance company were very remote. They would have been had we not got support from them and help in terms of developing expertise and so on which made all the difference. Today there is an extremely strong insurance organisation dealing with the bulk of farming business. That looked even more impossible at that time. With co-operation between the agricultural interests and the co-operatives supported by the farm organisations—if there is a difference in emphasis there is none in principle between the farm organisations and co-operatives on this subject—and also the FBD organisations, I do not see any reason why we could not develop a merchant bank operation as a first step. The chances of that happening are 1.000 per cent more than the ACC ever developing into a co-operative on its own.

108. Senator Cooney.—What is puzzling us is the apparent contradiction between the evidence received from the ACC that it would never be a reality and the letter from Mr. McCarrick, and his expanding on it now, that there was not a hard legal agreement but an acceptance in principle. What do you see the situation of the ACC being as regards the proposal for a merchant bank?

Mr. McCarrick.—Now?

Senator Cooney.—Have you their agreement in principle now?

Mr. McCarrick.—Not on the basis of the transcript here.

109. Senator Cooney.—Until then?

Mr. McCarrick.—Until then, yes. They have made other suggestions as to other participation. As regards the question of whether it is a reality or not there is a £2,500 million co-operative movement behind it and ACC naturally have reservations but have expressed support in principle and it is entirely consistent with eight years of correspondence with the Department and the 1961 Act. It comes down to whether the Central Bank see it as reasonably fitting into the overall banking structure.

110. Senator Cooney.—Have you approached the Central Bank?

Mr. McCarrick.—Yes.

111. Senator Cooney.—What is the reaction?

Chairman.—Guarded! You are on record. If you prefer we can ask that question later in private session. On the other hand you can go ahead if you like.

Mr. McCarrick.—We have had three meetings with the Central Bank personnel. They have expressed the view that there would be nothing against it in principle. The normal questions that they would ask are in relation to the viability of the project and the integrity or substance of the people involved in it. In the case of these questions they are quite satisfied with the answers. The remaining question is the implications of success for the banking structures proposed. That is the one about which they expressed most concern. That is their position. They have also made it quite clear that there has been quite a level of discussion in relation to the whole matter and they do not have to reject the proposition out of hand.

112. Senator Cooney.—How did you reassure them on their apprehensions about its effect within the overall banking structure?

Mr. McCarrick.—By meeting their suggestion of having the ACC involved in it. It was our proposition originally, but they were anxious that we would have the ACC’s explicit support.

113. Deputy L. Lawlor.—I feel that the development is desirable to aid the drive for increased food exports. It is a very important part of the export drive to support CBF, Bord Bainne, the Pigs and Bacon Commission and so on. We are still not clear on the involvement of the ACC. Will this be a five to ten year development assisting in the drive for increased food exports, leaving the ACC to continue to serve the individual farmer? Is it a very small participation by the ACC based on their overall financial structure? Basically that is the question, and we are still not clear on how big this merchant bank will be in relation to the existing services of the ACC.

Chairman.—Could I come in with a question which perhaps you could answer at the same time? Do you envisage the ACC in this merger—or whatever you like to call it—carrying on as they do at the moment, but merely having a certain holding in a new bank which would include holdings by FBD and the Rabobank; that the ACC would merely have a holding in the bank and would carry on much the same as they do at the moment?

Mr. McCarrick.—The concept of this merchant bank arose out of the broad intention of the ACC. There was recognition of the fact that the acquisition of the equity from the Minister and the extra capital needed for it to operate outside the umbrella of the Minister was not a feasible proposition —out of that background came the proposition that the first step towards the co-operativisation of the ACC could be a joint venture developing a business which by and large they are not in today. If that were successful, if the partnership were a happy one, there would be no reason why the 1961 Act could not be acted out, if you like, in terms of whether it would be a merger of the two, or a partnership between the two, or a transfer of equity from the Minister to the partners, or in other ways. There is no suggestion now that the first step involves any more than a proposal to ACC to become involved.

114. Senator Cooney.—Have you talked to the Minister for Finance?

Mr. Maher.—Not yet.

Mr. McCarrick.—Over the years since 1972 the Secretary of the Department of Finance has stated his support in principle for the idea of cooperative involvement.

115. Senator Cooney.—I assume from your answer about the Central Bank conditions that what was causing apprehension was the effect that the new merchant bank might have on existing merchant banks or existing banking structures. I asked you how this apprehension would be removed and you said by ACC participation. How would ACC participation remove apprehension about the effect of this bank on the ordinary commercial banking system?

Mr. McCarrick.—The Central Bank would have to answer that question. That was their suggestion to us on the reservation they expressed about the possibility of disruption.

Mr. Maher.—What one has to keep in the back of one’s mind, or perhaps in the forefront of one’s mind, is what is behind all this. Mr. McCarrick referred to some of the basic reasons. The problem of Irish agriculture, if it can be expressed in a few words, is a marketing one rather than a production one. We are trying to beam in on the marketing side and see what we need to do to strengthen our exports.

116. Senator Cooney.—That would be the main role of the merchant bank?

Mr. Maher.—We believe if we can gear the marketing side the production will come. If we keep on producing and have not got the marketing arm, we are in trouble. That has been the story to a great extent.

117. Senator Cooney.—Some time ago I read that your society saw no reason why the co-operative movement should be confined to the agricultural sector and that co-operatives could have a role to play in industry and in commerce generally. Am I right in my recollection of that? Have you made any advances or progress towards the setting up of co-operatives in the non-agricultural sector of the economy? Have you any long term plans for that?

Mr. Maher.—We have been discussing and considering this area in the belief that there is no reason why they could not. Farmers have been relatively successful in organising their own business and, above all, in owning it, which is very important, in owning the dairying industry and a large part of the meat sector. There is no reason why other people could not get together and perform the same function. The trade union movement is an obvious example. We said we would be more than willing to help them with the experience we have gathered through 80 or 85 years. I do not know whether we could move into the towns and set up co-operatives.

118. Senator Cooney.—Have you been conscious of the possible implications of that for your proposals in the banking area both with regard to a merchant bank and the co-operativisation of the ACC?

Mr. Maher.—Without broadening the discussion too much, we look on the credit union movement as a co-operative movement. We have had some rather fruitful discussions up to now without having set up any structures. We are continuously in discussion with the leaders of the credit union movement. There is a lot of potential there.

Mr. Gibbons.—As a first step we have scrubbed “agriculture” out of our title. We have emphasised the co-operative end.

119. Senator Cooney.—Would you see a role for the non-agricultural co-operative area in your proposed banking structure?

Mr. Maher.—It would be difficult to define. We must be careful not to bite off more than we can chew.

120. Senator Cooney.—I am trying to tease out the long-term implications of your banking proposals having regard to your other plans for expansion of the co-operative idea in the non-agricultural area.

Mr. Maher.—We would be glad if, through our involvement in the money market and better control over money supply, we could help Irish people to develop industry and retain control over it.

Deputy L. Lawlor.—There are many offshoots from agriculture in industry. You are active in the provision of services to agriculture.

121. Deputy Fitzsimons.—When I raised the issue last November I did not think it would give rise to such controversy. It had been suggested in the Dáil by a Fine Gael Deputy that perhaps the ACC should seek a banking licence. I did not realise that plans for a co-operative bank had reached such an advanced stage. There have been amalgamations in banking and it must be said that monopolies are dictatorial. The more banking services the better, whether co-operative or otherwise. There has been mention of the umbrella being given to the farmer on a good day and taken away on a showery day and perhaps it could be said that the umbrella was offered last year and is now being taken away. In view of the fact that you would have to seek substantial equity from farmers, which at this time would be difficult to obtain, do you envisage difficulty in raising money?

Mr. Maher.—It would not be easy, but on the other hand the co-operative movement today does not bear any resemblance to that which existed even 20 years ago. We have strong and powerful organisations and almost every farmer is a member of a co-operative society. Much depends on the proposal which is made to the farmer. Some years ago, when the possibility arose for farmers to participate in the ownership of IMP, a very large undertaking, we succeeded in getting the money because farmers were convinced it was the right thing to do. Between farmers and co-operatives there is an underlying conviction that we should have more involvement in the money market and more control over it in the interests of developing the agricultural industry generally. It would not be easy but I believe it is possible.

122. Senator Cooney.—Have you any idea of the order of magnitude of the money which would be needed in relation to the merchant bank or taking an equity stake in ACC or funding a new bank?

Mr. Maher.—We are talking at this point about taking a short step on the merchant banking side which would not demand a great amount of resources. If and when we move to the next step of providing ordinary banking facilities, the quesiton would then arise.

123. Senator Cooney.—Is that your ambition? It would seem that there must be at this stage some idea of the order of magnitude of the sum involved.

Mr. McCarrick.—We are satisfied that the balance of participations would leave an acceptable and feasible task for the co-operative movement in putting up its share. I do not know that the order of magnitude is a necessary element in the total strategy. We are talking about taking a first step in allowing ACC to meet their objective of becoming part of the co-operative system, which is what they say they are as members of the group at European level.

124. Senator Cooney.—You say the first step is participation in a merchant bank. What would be the equity of that bank?

Mr. McCarrick.—Figures have been discussed but they would be subject to the criteria of the Central Bank. We had agreed proportions but the final figure will be determined by the Central Bank.

125. Senator Cooney.—I am trying to get some idea where the funding would come from. Obviously farmers through the co-operatives or your organisation would be subscribing part of it, but I wonder whether they are in a position to do so. There have been instances in the past few years where a number of co-operatives nearly went to the wall, possibly for reasons of management, and they were saved by a combination of the ACC, commercial banks and special levies on their members. In those rescue operations there was a very heavy dependence on the ACC and the commercial banks. When the co-operative movement was not able to rescue entirely one of its own members in difficulty, how realistic is it to talk of its being in a position to subscribe a substantial amount of the funding of a new banking operation? Have you in mind attracting a lot of foreign funds?

Mr. McCarrick.—This is a sensitive area and I will be able to give some indication later.

126. Chairman.—One of the points which emerged from the ACC is that a great deal of their funds are not from the agricultural community but from their branch in Westmoreland Street. They are able to get deposits because they have a Government guarantee. That is their strength and Senator Cooney is saying that perhaps your weakness is that you would not find it easy to get the funds to be an equal partner with the ACC in a new bank. You mention the setting up of a merchant bank as if it were something quite different. Is not the ACC a merchant bank? From the technical point of view in what way do you suggest that the ACC is not a merchant bank?

Mr. McCarrick.—The ACC is an agricultural credit organisation quite expert in assessing farmers’ credit requirements and meeting them. When we were talking about a merchant bank—this is one of the basic points of difference—we were not talking about a current account bank or a cheque account bank; we were talking about a bank that has access to the international money market outside this country.

127. Chairman.—They are a merchant bank in so far as they are doing agri-business but they are not a merchant bank as far as lending to farmers is concerned?

Mr. McCarrick.—Yes. The extent to which they are lending to agri-business is very marginal relative to the scale of agri-business. We are not saying that there is anything special about a merchant bank but we are saying that to meet the needs we have to combine an international banking expertise with the ordinary merchant banking operation and marry those to provide funds for agriculture.

128. Senator Cooney.—Most of the domestic merchant banks are now linked, some more closely than others, with international banking consortia?

Mr. McCarrick.—Yes, many of them are linked internationally.

129. Senator Cooney.—Are they not in a position to provide this expertise, access to money markets and this funding that the agri-business needs?

Mr. McCarrick.—They are but there is another combination involved, combining interest in and commitment to Irish agri-business and expertise in agri-business with expertise in international banking. All the associated banks, and indigenous banks, may have the commitment but do not necessarily have the expertise whereas the international banks may have the expertise without the commitment.

Mr. Maher.—It boils down to this: if you want a job well done do it yourself. This would mean we would be much closer to the operation.

130. Senator Cooney.—It would be a specialist bank?

Mr. Maher.—The ACC is recognised here as a State institution. While in recent times its image has improved immensely, in the old days its image was extremely bad. It takes a long time to live that down. In my own experience the local parish priest or garda sergeant was contacted with regard to the bona fides of a loan applicant. That has gone but memories die hard. Nevertheless, it is a State organisation and the cooperatives are in a different position. The question was posed: why if a co-operative went down there was not a ready response? That is largely a question of loss of confidence. If people do not have confidence they are not ready to put in finance. There is a big difference between a proposal to develop something farmers can see of great importance to them and, perhaps, the fear of putting good money after bad with an organisation which has shown itself to be inefficient for one reason or another, through bad management or bad decisions at board level. We have had a certain amount of that in the co-operative movement.

131. Deputy Fitzsimons.—I must give credit to the ACC who helped a co-operative in my area, the North Eastern Farmers Organisation, a continuation of Mullagh Co-Op. The latter organisation had its problems. Following a change in management the excellent farmers at the head of the North Eastern Farmers Organisation were helped by the ACC. In my town the co-operative movement has been very successful. I am speaking of the Crannac furniture manufacturers in Navan. While I am keen on the co-operative movement I must pay tribute to the ACC who helped the North Eastern Farmers Organisation. If the ACC was to retain its present structure would the ICOS consider setting up a co-operative bank in opposition?

Mr. Maher.—We would see the ACC as an integral part of development of that kind. It would not be very good logic to ignore the ACC if we could bring that organisation along with us. If we cannot we will have to seek other means because the requirement is still there and it must be met.

132. Chairman.—Taking the long term view, if they do come in and the arrangement works out well with confidence built up between various constituents of this bank, would you envisage the ACC withering away?

Mr. Maher.—I would not have any hang-up about names. Provided we have the right kind of institution or organisation to meet the needs of the people who want such a service, I do not care what it is called; that is not important.

Mr. McCarrick.—We see a need to complement the strength of the ACC in farm lending with the same strength in agri-business lending. Neither would need to compete with the other; they would both have to develop.

133. Senator Cooney.—Assuming that the agri-business end is attended to by a merchant bank, either an independent one composed of the various bodies mentioned or as a subsidiary of a new co-operative venture, and a new co-operative bank is set up with or without the ACC, would that co-operative bank be able to provide the same type of service that the ACC provides at present in that they are not always strictly commercial in how they look after bad or slow debts in time of difficulty? Would a co-operative bank be able to maintain that policy or approach and at the same time meet all the Central Bank requirements in relation to banks?

Mr. McCarrick.—We believe such a bank would meet those requirements. We are talking about commercial people becoming involved in a venture. We believe that a reasonable balance between their long-term aspirations of development of the food industry and agriculture and the development of agri-business here would be reconciled within the structure we are proposing. The Rabobank is long established in this business and would be a major source of expertise. They have established their own means of balancing the expedient with the supportive.

Mr. Maher.—If it could not do better than the ACC there would not be a real justification for development. We must do better in terms of the service we give.

134. Senator Cooney.—But you do not see any potential conflict between the commercial strictures that would be on it, by reason of its being a bank, and having an expanded ACC role?

Mr. Maher.—It would have to behave in a commercial way and that is a fact of life. It will have to observe the commercial criteria.

135. Senator Cooney.—Would that mean a reduction in the type of service, a lessening of the type of temporary service that the ACC provide to farmers?

Mr. Maher.—Is the Senator suggesting that we should behave other than commercially?

Senator Cooney.—I am not suggesting that at all; I believe that you will have to behave commercially but in doing that would you be reducing the type of service that the ACC can give when a customer is in a temporary difficulty? The ACC give that service on a pretty wide scale from time to time, depending on the farming climate.

Mr. McCarrick.—We would not be interfering with the farming clients in any way; they would be separate.

Mr. Gibbons.—The co-ops do some of this already. They carry debts from one season to another in bad times. That is not peculiar to the ACC alone.

136. Senator Cooney.—Would banks, subject to certain commercial standards of operation, be able to do that sort of thing?

Mr. Gibbons.—The position with the commercial banks varies from one manager to another, depending on whether he is an excitable type or a steady fellow.

Mr. Maher.—There is no indication that they are exactly on the poverty line.

Chairman.—It is a question of finding the right confessor!

Mr. McCarrick.—There is an agricultural banking co-operative in every European country, with the exception of Great Britain and Ireland. We have no reason to believe that, having a better co-operative movement by and large in agri-business than any country in Europe, we would prove incompetent in terms of working the co-operative idea in the banking area. It has worked in every other country.

137. Senator Cooney.—Have you had discussions on the co-operative bank idea with the Central Bank, apart from the merchant bank proposal?

Mr. McCarrick.—No. The suggestion was that there be a closer tie between that merchant bank and the ACC—

138. Senator Cooney.—No, you have talked to them about a merchant bank and they have given you their views on that. The other ambition of the ICOS is to see the ACC becoming co-operativised or else to set up a separate independent co-operative bank. Have you discussed that idea with the Central Bank?

Mr. McCarrick.—Only in so far as it impinged on the proposition that we put before them.

139. Senator Cooney.—What was their reaction to it?

Mr. McCarrick.—The reaction is envisaged in the proposition and is incidental to it. Part of their thinking may be—this is only surmise—conditioned by the involvement of ACC in a merchant bank. That may be a useful first step.

140. Deputy Lawlor.—Is it a correct interpretation that you and the Central Bank at this stage want to see co-operation with ACC and you are not prepared to consider anything else because you see the connection with ACC as being the right way of getting involved?

Mr. Maher.—I would not say that we are not prepared to consider anything else but we are proceeding in the logical way and the logic does not always——

141. Deputy Lawlor.—But you have to work the logic out to a conclusion and you are only part of the way?

Mr. Maher.—That is what we want to do.

Mr. Gibbons.—The link with the Rabobank is important also. A growing proportion of our exports is going to Europe and it is important that we should have at least an ally and a participating partner involved in the mainland of Europe. Our exporters welcome that.

142. Senator Cooney.—Would it be naïve to ask if you have had any discussions on these ideas with the commercial or associated banks?

Mr. Maher.—I think it would, sorry.

Chairman.—As there seems to be nothing else to raise with you thank you very much. You have been very helpful and have clarified a number of points.

The witnesses withdrew.

Mr. Michael Collins, Chairman; and Mr. M. P. Culligan, Chief Executive of The Agricultural Credit Corporation, Limited called and again examined.

143. Chairman.—When you were before us last November we talked about the question of a merger and of cooperation between the ACC, the FBD and ICOS and so on. The ACC said something to the effect that they did not regard this as being a reality.

Mr. Collins.—This was in relation to a merchant bank?

Chairman.—Yes.

Mr. Collins.—We did not see it as a reality in the context that at that time there was no real proposal to get to terms with.

144. Chairman.—We referred to this earlier today, and the ICOS take the opposite point of view. They said that they had considerable discussion with the ACC, that they made a proposal and that the ACC came back with a modified suggestion. As far as they are concerned, they put forward a concrete proposal and they see no reason, given the goodwill of the ACC, why this merchant bank should not start work at any time. They did not agree that this cannot be regarded as a reality, or as something that could not become a reality in a short time. Comment?

Mr. Collins.—They are entitled to their opinion. The reality is that this must first be acceptable to our sole shareholder, the Minister for Finance, and to the best of our knowledge no proposal has been put to the Minister.

Senator Cooney.—That is correct, the ICOS said that.

Mr. Collins.—That was the context in which I replied to the question. What one wishes to have and what one deals with is the difference between hopes and reality. We were genuine in our reply and that will be very clear from a reading of the transcript of my evidence and that of my colleague. We would genuinely welcome co-operation in a matter like that, but the more appropriate place to direct a question as to the validity and solidarity of the proposal is to the Department of Finance and to the Central Bank. In the event of it being acceptable to the Minister we would welcome this, because all down the years there has been provision for the hoped for ultimate involvement of farm organisations, as they evolve, in the Agricultural Credit Corporation.

145. Senator Cooney.—If that question were to be asked of the Minister by the ICOS, would not the Minister immediately come back to the board and management of the ACC for their views on this proposition?

Mr. Collins.—We would discuss our views with the Minister in the light of the firm proposal.

146. Senator Cooney.—From discussions with the ICOS, surely the corporation have an idea of the general outline of the proposals?

Mr. Collins.—In the context of a merchant bank, we see that at present the facilities of the commercial banks and ourselves are adequate. We would see a merchant bank of that kind in the position where deposits would come in and they would be in competition with us. We would have to have the Minister’s view on that and on other items before I could answer the question. The Committee will agree, having regard to our last meeting, that we never attempted to evade the question and that we were forthcoming. With regard to solid proposals and with regard to the discussions which the Chief Executive of the ICOS had with our Chief Executive, it transpired that they were searching out each other’s mind on this. It should be clearly understood that there is total unanimity of view between the board and management of the ACC on accepting that working together is in the ultimate interests of farming and would be in the interests of the Minister for Finance in the context that he is our sole shareholder and would have to know the exact proposal and the various nuances of it. We would be ready and willing to actively pursue such a thing, to solve it rather than to oppose it.

147. Chairman.—If a firm, comprehensive proposal were put to the ACC by the ICOS, as they suggested they did, surely at that stage one of the first things the ACC would have done would have been to get in touch with the Minister outlining the proposal so as to get his reaction to it? The ACC are suggesting that the ICOS should have gone separately to the Minister to discuss this and should have then come back to the ACC, whereas I feel that ICOS would have been justified in feeling that if they approached the ACC about it they —the ACC—would have got in touch with the Minister about it.

Mr. Collins.—We through our chief executive, who spoke to their chief executive, said that it would be much more appropriate for them to clear this with the Department of Finance first. It was their opinion that the first hurdle should be cleared with the Central Bank and Mr. Culligan put it that, in his considered opinion, it should first be cleared with the Minister for Finance.

148. Chairman.—They said that they had approached the Central Bank and that the Central Bank had no objection in principle, laying down the usual precautions and so on.

Mr. Culligan.—I understand that it is the view of the Department and of the Central Bank that they have not yet received from ICOS full details of the proposal, which they required to have, before giving a considered opinion on it. So far as we in ACC are concerned we have had purely tentative ideas put forward and little more. We have made it clear to them that if the Minister favoured the idea to that extent we would be happy to co-operate. We have always maintained an open door policy in relation to the co-operative movement.

149. Chairman.—It seems to me that you are not ad idem. You are waiting for them to discuss it with the Minister before you react and one gathers from them that they are waiting for you to react before they bring the matter any further.

Mr. Culligan.—I find that difficult to understand. The owner of ACC is the Minister. This idea is entirely the concept of ICOS. As they have done on previous occasions when proposals for acquiring a shareholding in ACC came up, it would be the logical step for them to consult with the Minister. They agreed with me to make their own approaches to the Department and attempt to secure the Department’s agreement to this proposal.

150. Senator Cooney.—Have they put hard proposals to you?

Mr. Culligan.—They put tentative proposals in relation to the merchant bank project. Otherwise, they have never at any time put concrete proposals to us. They put certain vague proposals over the years, the most recent five years ago, to acquire a stake in ACC on certain terms which the Department found unacceptable at the time.

151. Senator Cooney.—With regard to the merchant bank have they told you the other parties?

Mr. Culligan.—Yes.

152. Senator Cooney.—And have you had any discussions as to the equity structure and the amount of funds needed to get it under way?

Mr. Culligan.—They suggested a figure for the equity stake of the participants.

153. Chairman.—Did that seem to you to be a reasonable figure? Did it measure up to what you thought necessary for a merchant bank? You need not mention any figures.

Mr. Culligan.—Their proposal would have produced a situation where ACC was a minority shareholder in the merchant bank which would be in competition with ACC for agri-business loans and, more importantly, for deposits which constitute our basic resource. I expressed doubt when talking to the ICOS as to the suitability of this situation, given that the Department would be agreeable to the scheme in the first place which we cannot say one way or the other at this stage.

154. Senator Cooney.—Was it clear that they envisaged getting funds by way of deposits for the merchant bank?

Mr. Culligan.—They would have to get the bulk of the resources by way of deposits but the initial shareholding would be substantial and would involve, as was reported in the newspapers at the time, Rabobank.

155. Chairman.—They would not really be in competition if you still had the State guarantee? They acknowledged that your guarantee situation was a very valuable one.

Mr. Collins.—Nothing concrete came out of Mr. Culligan’s discussions with the ICOS to enable him to present a firm proposal to us as a board. I agree with him. in the light of the discussions that arose during the commercial banks’ strike when this matter was discussed, that the first person it has to be cleared with is the Minister for Finance. A realistic question asked at that time and on other occasions by the then Minister for Finance was: “Will you come in on an equity basis on the same grounds as I have lived with the ACC since its foundation, namely no dividend”? We always made it clear, and I stressed this in response to Deputy Fitzsimons’ question, how vital the State guarantee was to us in the build up of our deposits which brought us to the stage where we had not sought money from the State because through the net inflow of deposits and loan repayments we were able to finance the needs of agriculture. Now we have this discussion bordering around the merchant bank to supply not individual farmers but co-operatives. Our penetration of agri-business has not been deep in that it was the deliberate policy of successive boards of the corporation, particularly of this board because advances in farming have been more spectacular during its tenure of office, that no individuals or farmers should ever be at risk through us financing agri-business beyond the farm gate, including the activities of co-operatives etc. I would estimate our share of the co-operative business at 10 to 15 per cent.

156. Senator Cooney.—Does not that raise the point that there may be a need for a new financing institution for agri-business?

Mr. Collins.—There may be.

Senator Cooney.—The point made by ICOS was that the ideal vehicle for this would be the proposed merchant bank.

157. Deputy L. Lawlor.—We were given to believe that the participation of Rabobank would be a useful source of currency other than deposits on the home market. To have another operation competing for the same money is not in your interest. Would this participation from the Continent bring in any new funds which might be to the benefit of agriculture?

Mr. Collins.—It may well bring in new funds. In our evidence to you we stated that we had obtained the equivalent of £25 million in deutsch marks and have processed over £18 million of that already. We informed the Committee that we were going to avail of funds directly for small agricultural businesses from the European Investment Bank. The most important channel to use for Ireland would be the EIB or from an institution in a strong country like Germany willing to lend its money. We have availed of deutsch marks. We sit as an equal member of various banking organisations where the grouping of the banks, Rabobank included, are the eyes and ears of Ireland in Brussels. We are represented on that permanently by our chief executive. We have hosted some of their sessions in Dublin and so on. I know you will understand this; it is to see the validity of the argument, and trying to answer Senator Cooney’s question and your additional one, I would see sufficient funds being available through the European Investment Bank and through our arrangement with the Department of Finance and the Minister to supplement whatever needs there were in a difficult deposit situation in any one year, or a difficult repayments situation for the farmers arising from a lack of confidence and the tough times they are going through. We would see the very active support we got immediately from the Department of Finance and the Minister last year being given to us again willingly for a further injection of money. At our meeting with them in December the European Investment Bank indicated clearly an immediate further facility of £2½ million the moment we were ready to take it and an open door for further advances.

I also feel that in a merchant bank situation, slotting in Rabobank, the ICOS should acknowledge openly, as Mr. Lardinois did, their acceptance that the farming bank in Ireland is the ACC and that the ACC, therefore, would be insisting on vital involvement. I still believe the chief executive was right in discussing this tentative situation with his counterpart in ICOS and saying—and it was not buck passing—that the first thing you must do is to clear this with the Minister for Finance and the Department. As opposed to this time last year we now have a floating currency. We want firm proposals to which we would respond actively. We would have to have clearance from the Department. For fear there would be any implication to the contrary, I want it stitched into the record that it has been stated publicly at meetings we have had over the years with the old IAOS and the new ICOS, the IFA and the ICMSA, that we would willingly welcome cash on the table, an injection of funds to the ACC, and their effective involvement in the ACC for which full provision was made in the 1961 Act in which three places were reserved for farmer representation.

I repeat that I did not see that as a reality because when these talks took place in the past, during my tenure as chairman and previous to that, they finished up as talks and the urgency about a further involvement evaporated. At the time the commercial bank strike was coming to an end.

Chairman.—The lines of communication seem to be a bit mixed up. Let us leave that for the moment. I am sure it can be sorted out.

Mr. Culligan.—May I clarify one aspect because it is left hanging a little in the air? Last November, when the chairman of the Rabobank visited Ireland, a meeting which was publicised took place between him and the heads of the various organisations who were suggested as suitable participants in this merchant banking venture, and also the Department of Finance and the Central Bank. The proposals were discussed at that meeting. It was not felt by the Department or the Central Bank that they had been worked out sufficiently and they insisted that, before they could give a considered opinion on them, a much more detailed proposal would have to be prepared. The present position is that the ICOS are contemplating the establishment of a working party to prepare this detailed proposal. The Department of Finance would have to be represented on that working party. I am not sure whether they have been invited to participate. That is the current state of play.

Mr. Collins.—It is a matter of fact that, when the Department of Finance representatives and the Central Bank representatives attended that meeting, they heard of this idea for the first time. I hope in that context you will understand our position. It was not our place to make the running.

158. Deputy L. Lawlor.—If the ACC, as experts on agriculture and as financial experts, do not come up with firm proposals the matter will not progress. There are two experts in banking, one on the mainland of Europe and the ACC. Is it possible that the ACC cannot take the initiative and state the requirements, which when explored in the past went no further? You are the experts and unless you come up with the guidelines it will never take off. We have spent the afternoon talking about the need for a merchant bank to support the agri-business.

Mr. Collins.—That is a little simplistic. We have been preoccupied in recent years with coping with our huge expansion and providing to the fullest for the needs of agriculture. In trying to get this proposal off the ground we said very strongly at that meeting that the proposition would have to be put to the Department of Finance and cleared through them and the Central Bank. It is on the record of that meeting that I said that, should our shareholders see the need for this and approve of it, we would be delighted to participate. We saw an item like this as the first step to a possible ultimate involvement. Being a realist and having lived through many problems between what was hoped for and the reality, I said strongly that I believed a great deal of further thinking and teasing out would have to be done with the Department. It was our considered opinion that at the time the needs were being met adequately. I fully understand the hopes of the ICOS with a very active president who has enormous support in the country because of what he has achieved, and the hopes of his chief executive. This could be a legitimate aspiration of theirs. We gave evidence to this Committee fully and openly in November. We feel that at the end of another five years. if we have met all the difficult targets we outlined for ourselves, at best we will be in a position in which the Minister of the day will have to consider whether there was a need for a further bank and whether we would meet the criteria which would properly be imposed.

159. Senator Cooney.—The working party has been proposed, the initiative with regard to it to be taken by the ICOS?

Mr. Culligan.—We will be happy to participate very actively in that, provided the Department are agreeable.

160. Deputy L. Lawlor.—They have not made any comment?

Mr. Culligan.—As I understand it, they have not been invited to participate in the working party.

161. Deputy L. Lawlor.—It will not start until the Minister for Finance gives some guidelines to the ACC?

Mr. Collins.—We wondered why we were to have the pleasure of coming back here a second time and only yesterday we cleared that, up to that time, no proposal had been made to the Department.

162. Chairman.—To use a word of your own, you are being a little “simplistic” about this too. The Minister for Finance will not be happy about this proposal unless he has consulted you. It would not be quite accurate to say that you will sit back and let the Minister make the decision and then fall in with whatever he says. He is certain to ask what you think about the matter and will almost certainly give considerable weight to the recommendation he receives from you. You are passing the buck to the Minister?

Mr. Collins.—No. I am saying that no proposition has come to us. I am not passing the buck to the Minister but I am saying that it is his decision. With the very best information from the ACC and the ICOS, it would be impossible to formulate a view unless there were solid proposals. These proposals should first of all be teased out and cleared with the Minister. We could spend a lot of time discussing something which would be totally unacceptable.

163. Senator Cooney.—If the working party meet with representatives of the Department of Finance they will come up with a proposition and you are totally willing to participate?

Mr. Collins.—I believe that all the parties represented to be interested should come together. It is useless to have separate meetings in isolation. We must discuss the realities of what a bank needs. There is no question of buck passing. If the realities are worked out between the participants we will be ready, willing and able to play a leading role.

164. Chairman.—Perhaps we should pass from the mechanics of this coming together and consider the merits of coming together. The ICOS are of the view that whereas the ACC are doing an extremely good job in lending to farmers their input to agri-business is relatively small—about 10 per cent to 15 per cent. They say this new merchant bank is necessary for agri-business because there would be more funds available with the help of some of the European co-operative banks and consequently these funds would probably be available at better rates than can be offered by you. In general terms this new merchant bank would provide more money and at keener rates to agri-business and its facilities would be more advantageous than those of the ACC. Expertise would also be provided by their friends in the co-operative movement throughout Europe. What is your view?

Mr. Collins.—I believe the way to demonstrate whether or not this is so is through this group coming together. We are able to offer a rate which is favourable by any standards. If it is demonstrated in the course of discussion that there is a source of funds available at a better rate of interest, it would be irresponsible of us to deny it.

165. Chairman.—You have an open mind on this matter?

Mr. Collins.—I believe it should be discussed. With regard to expertise, I come back to the point that for many years Mr. Culligan has been sitting as a full member of the European grouping of the co-operative banks. Very frequently they look to our expertise in that officials of these banks come here for in-house training while our officials go for such training with them. I am very pleased to say that the chairmen of the European banks to which our people have gone have told me of their own volition of the extraordinarily high quality of the men who have gone there and the value they place on these contacts with the ACC. Expertise is measurable and the final point which interests me is what would be in the best interest of Irish agriculture. I clearly stated that I saw a continuing place for the commercial banks and that we would hold our share while we remain competitive and set for ourselves one criterion—the pursuit of excellence. I see a very real question being raised in the mind of any Department or Minister as to whether a further bank is needed now or whether these funds could be made available through the co-operative banks in a working relationship with the ICOS channelled through the ACC and if any expertise—we are not the sole holder of expertise—needs to be supplemented through us. I strongly urge that we look at the existing structures before adding any further institution because we can be over-exposed.

Mr. Culligan.—I am not entirely in agreement with the statement that this new bank would supply a sufficiency of funds at a cheaper rate. These are matters which will have to be looked into at greater depth but I am not aware that there is currently a shortage of funds for worthwhile projects in the agri-business area. Between ACC the associated banks and the merchant banks, funds are available. However, they are available at a price which is high at present. The concept of cheap money being available from overseas is very much exaggerated because the cheapness of that money is matched by the seriousness of the exchange risk involved in the use of that money. What may seem to be cheap may turn out to be extremely expensive. On the question of expertise I should like to state that the European Investment Bank which operates throughout EEC countries, and a large part of the under-developed world, considers the ACC to be the only institution in Ireland which is suitable for the distribution of funds to agriculture here. That is sufficient tribute to the expertise we command in that area.

166. Chairman.—Is that not begging the question that you are the only bank available to do that so that you have to get it? The ICOS are saying that there would be an alternative arrangement which would be even more suitable.

Mr. Collins.—I would leave that to the examination of the proposed working party. I should like to stress the point, in regard to working through existing institutions, that there are many people in and out of the Oireachtas who hold the view that Ireland is over-banked at present. We are saying that we have voluntarily set targets for ourselves which were approved by the Department of Finance to put ourselves in a position of providing the ultimate step which is seen as important by our borrowers, the farmers. We will have to strengthen ourselves very much to be in that position.

167. Deputy Lawlor.—Why has the machinery of the 1961 Act never been used to elect farmers to the board of the ACC? Who must take the initiative?

Mr. Collins.—In 1961 agriculture was not very strong.

168. Deputy Lawlor.—If we wanted farmer participation on the board of the ACC who must take the initiative? Why has that not happened?

Mr. Collins.—I cannot answer that.

169. Deputy L. Lawlor.—Is the situation now appropriate for the Minister to take such a step?

Mr. Collins.—There would have to be a positive move from individual farmers. through the farming organisations, the IFA, the ICMSA or the co-operative societies but one of the major problems of co-operatives in the sixties and seventies was the worthwhile equity investment in their own co-operatives. To think that money would be forthcoming to get an involvement in the ACC and where the Minister would be entitled to lay down regulations which the ACC must comply with is wrong. That may not be acceptable to the farming organisations. The fact is that because of their immediate involvement in availing of the opportunities presented by entry into the EEC the farming community for the first time have come together. As with anything like that on the Irish scene there were differences of opinion and priorities were established. In November I stated that I did not see this as a reality. I went further than the tentative merchant banking discussion that took place then. I stated that from my experience I did not think that type of money would be forthcoming from farmers to invest because they would have to ask themselves what they would get out of such a system. They would ask themselves if the ACC as it stands is not sufficient and I believe the general reponse would be that the ACC has proved sufficient.

170. Deputy L. Lawlor.—I agree but I should like to know if in the event of the farming organisations submitting a list of names, these people would be automatically appointed to the board of the ACC?

Mr. Culligan.—It would be a matter for the farming organisations to reach agreement with the Minister for Finance with regard to the terms on which an investment of money would be made. That would be the essential forerunner, money on the table.

Mr. Collins.—It might be of help to the Deputy in explaining why this has not happened to say that in discussions which farming organisations had with the Department many years ago the Department pointed out that they gave a total guarantee for all deposits with the ACC. The Department asked the farming organisations if they became involved in an equity situation with ACC and took their place on the board of that institution if they would be prepared to give the unlimited guarantee that was being given to the ACC by the Department. The response, understandably, was that they would not give that guarantee.

171. Senator Cooney.—Even if they did give that guarantee it might not leave the depositor happy?

Mr. Collins.—That is the key to the whole situation.

172. Senator Cooney.—Presumably, even in a restructured ACC, the State guarantee would have to continue?

Mr. Collins.—The mechanism is there but Deputy Lawlor will appreciate that all appointments to the board of the ACC are made by the Minister.

173. Deputy Lawlor.—I should like to know if the Rabobank after commencing an operation here in co-operation with the ACC, would have a source of money on top of the European Investment Bank source which would result in more money being made available here? We are back to the question of whether there is money available at a better rate than the going rate available here at present. One of the major reasons for the development of a merchant bank on the lines suggested by the ICOS is that the Rabobank would be involved. If that bank was installed here in co-operation with the ACC could they make funds available from sources other than those being tapped by the ACC in Europe?

Mr. Collins.—That could only emanate from positive discussions between those involved. It is my opinion that the availability is there in sufficiency through the European Investment Bank and through the very ready acquiesence we got from the Department for £25 million in deutschmarks for which the State is carrying the foreign exchange risk. We indicated to the Minister that in advance of that money running out we would be back for more. I endorse Mr. Culligan’s earlier statement that there is no real shortage of funds at present. Understandably, the ICOS, like ourselves, think about the possibility of further involvement. We want this examined with all the proposed participants and a decision based on the facts taken.

Chairman.—Perhaps we will perform the function of getting all the parties together!

The witnesses withdrew.

*See Appendix 3.