PROPOSALS to give the Central Bank more powers over the operation of the money transmission system have been put to Cabinet.

Agreement on measures to change the system, which will be included in the new Central Bank Bill, would clear the way for the sale of the TSB Bank and decisions on the future of the ACC and ICC banks.

The Minister for Finance has presented a memorandum to Cabinet outlining the proposed changes in the money transmission system which processes paper and electronic payments.

The current system is operated by the Dublin Banks Clearing Committee which comprises the six main banks and the Central Bank. AIB, Bank of Ireland, Ulster Bank, National Irish Bank and TSB Bank are all members of the system. Other financial institutions such as ACC, ICC, Irish Permanent and the building societies appoint the member banks as agents to clear the paper and electronic transactions of their customers.

Late last year the member banks decided to make their own changes the system following criticism of the cost and the difficulty of entry for non members. These changes are due to come into effect later this year.

Under the changes presented by the Minister for Finance to Cabinet this week, the Central Bank would have the power to insist that financial institutions be allowed into the system and would be given some regulatory powers over the system.

The memorandum for Government, which includes the heads of the proposed Central Bank Bill, was produced by the Department of Finance after discussions with the Departments of Enterprise and Employment and the Environment.

Agreement at Cabinet on the details of Central Bank Bill would `allow the Government to move ahead with plans to sell a 70 to 80 per cent stake in the TSB Bank's by tender.

Conditional agreement was `reached some time ago by the cabinet sub committee considering the future of TSB and the State owned banks to go ahead with the sale of a significant majority stake in TSB as soon as there was agreement between the Government parties on changes in the money transmission system.

A TSB buyer would be given an option to acquire the remaining stake after more than five years and the Government would take an option to place the remaining stake with the successful bidder. In the pre Budget White Paper a figure of £100 million was included for the sale of State assets in 1996/97 the sale of the TSB stake is expected to raise over £100 million for the Exchequer.

The bank, which has been courted by National Australia Bank, Ulster Bank and the Irish Nationwide Building Society would be sold by competitive tender.

The highest bidder will with as longs as that bidder satisfies criteria, including employment guarantees set by the sub committee. Bidders will be asked to set out their proposals under five headings capital investment, expansion of networks, expanding expertise, employment plans and guarantees and new products.

While there was agreement on the TSB, the sub committee has not reached any conclusion on the future of the ACC and ICC with proposals ranging from the amalgamation of the banks under a holding company to the sale of both banks to different buyers.

The Government proposal to make changes in the money transmission system comes despite the move late last year by the banks involved to make the system more accessible to other financial institutions. It is understood that the changes now before the Cabinet take into account the moves made by the banks which involve setting up four separate clearing companies which financial institutions could join according to their processing requirements.

Moves which will clarify the future of TSB come just before the bank announces results for the year to end of October, 1995. Despite tighter profit margins, due to intense competition in mortgage and savings markets, profits are expected to show good growth.