Vol. 515 No. 1
24 Mr. McDowell asked the Minister for Finance the steps, if any, he will take arising from the recent report of the Comptroller and Auditor General which found that there was scope for improvement in a number of areas in regard to the performance of the Central Bank; and if he will make a statement on the matter. [5255/00]
I understand the Deputy is referring to the recent report by the Comptroller and Auditor General entitled Central Bank Financial Regulation, report no. 34 of December 1999. This report was submitted to me by the Comptroller and Auditor General on 18 January last and was published on the 2 February. I understand the next step would be for the Committee of Public Accounts to consider the report.
This report was the outcome of a detailed examination by the Comptroller and Auditor General into the systems, procedures and practices employed by the Central Bank in the discharge of its role as the main regulator of the financial services sector in Ireland. The report was comprehensive and provided a clear and useful guide to the way in which the Central Bank carries out its function as a financial services regulator. Overall, the report notes that current international practice is followed by the Central Bank for prudential supervision.
The Central Bank currently has responsibility for some 1,000 financial institutions and 2,000 collective investment schemes. The bank has a proven record in pursuing the mandate of prudential regulation, which is to ensure that individual financial institutions comply with a set of rules which are designed to ensure their continuing solvency and liquidity – prudential supervision; that risks to the financial system as a whole are minimised – systemic supervision; and that there is a degree of protection for depositors with credit institutions and for clients of investment firms – conduct of business supervision.
Regulation in a dynamic, complex and evolving sector is a process which must be continually reviewed and brought up to date. The Central Bank is very conscious of this requirement and it has welcomed this review of the process. The report puts forward some positive suggestions as to how the regulatory process could be enhanced and the Central Bank has indicated that it is fully prepared to take on board and implement the various suggestions for improvement contained in the report.
Following examination of the report by the Committee of Public Accounts, the board of the bank will consider any recommendations of the committee. I would be prepared to consider any legislative changes that may be required to implement any of the recommendations in the report or the recommendations of the Committee of Public Accounts.
With respect, I am familiar with the content of the report but I want to know the Minister's response to it. Is the Minister satisfied with the Comptroller and Auditor General's conclusion that in spite of the fact that since 1989 external auditors have been required to report to the Central Bank any material defects in internal control or suspicions of impropriety, no such reports were received by the bank and the bank apparently did not pursue them? Is the Minister satisfied that the documentation of the risk profile of credit institutions could be improved upon and is he satisfied with various other recommendations contained in the report? If he is not satisfied with those recommendations, what does he propose to do about it? Does the Minister agree that this report makes it all the more urgent that the Government would act on its decision of October 1998 to set up a single regulatory authority?
We should not be confused about the role of this report. This was the type of normal review, such as a value-for-money audit, which is carried out by the Comptroller and Auditor General on many institutions.
This is the first time the Central Bank has been reviewed.
The report does not make any findings in respect of financial institutions other than in respect of their dealings with the Central Bank. For example, the report specifies that external auditors of financial institutions should in future be required to furnish an annual report stating that they did not find any matters of concern rather than the situation which has pertained heretofore where auditors only reported to the bank if they found something wrong. No such reports of irregularities have ever been made to the Central Bank by external auditors.
This report will be examined by the Committee of Public Accounts which requested it in the first instance and the committee will comment on the report. The board of the Central Bank is also currently reviewing the report. If it transpires that certain matters require to be addressed in terms of legislation, I will ensure that happens.
I take it from the Minister's reply that he does not have a view on the matter at this time. Exchange controls were one of the areas for which the bank was responsible. In November 1997, the Minister read a letter from the Governor of the Central Bank into the record in regard to the implementation of exchange control regulation arising out of the McCracken tribunal. The Minister referred the letter to the DPP and intimated that he would return to the House when he received the DPP's observations. To the best of my knowledge the Minister has not done that; perhaps he would inform us of the current position.
A later question from Deputy McDowell relates to that matter. This question relates to the recent report of the Comptroller and Auditor General and I have dealt with questions on that issue.
The later question refers to the Moriarty tribunal. I am specifically asking the Minister about the Central Bank, the regulation of exchange controls, the comments which issued from the McCracken tribunal, which is now more than two years' old, and the letter which the Minister read into the record in November 1997. The Minister said he referred the letter to the DPP to obtain his observations and would return to the House on the matter but he has not yet done so. I am inviting him to do so now.
I will deal with that question later.
I somehow doubt that.
It is not referred to in this question.
