Jimmy Deenihan
Question:14 Mr. Deenihan asked the Minister for Finance the current position in relation to proposals to regulate the financial services industry; and if he will make a statement on the matter. [18199/00]
Priority Questions. - Financial Services Industry.
As the Deputy will be aware, the report of the McDowell implementation advisory group on the establishment of a single regulatory authority – SRA – for the financial services sector was published in June 1999. Discussions have taken place between officials of both my Department and the Department of Enterprise, Trade and Employment. The matter is being jointly considered by the Tánaiste and me. When our proposals in this regard have been finalised, our joint proposals will be submitted to Government for decision.
As the Government has had over a year to consider the McDowell report which strongly recommended the establishment of a new greenfield regulator that would combine the roles of the Central Bank and a beefed-up consumer regulator, why has this clear recommendation not been implemented?
I explained on a number of occasions that it has not been easy to reach a consensus on this matter. The Government decided to set up a single regulator and Mr. McDowell was asked to chair an implementation group to consider how that might be done. Nine eminent people were appointed to the implementation group and the majority of them came up with the idea of a greenfield site. Two members thought the regulator should be established as an in-house division of the Central Bank and a third person came up with the idea of a separate pillar or twin pillars approach. Therefore, I received three distinct proposals from the nine eminent people.
When the matter was being considered outside the House, the Fine Gael Party spokesperson expressed the view that the party would favour the approach advanced by the Department of Finance and the Central Bank, namely, the establishment of an in-house division within the Central Bank. As far as I am aware, the Labour Party view, expressed by Deputy McDowell, favours the majority view. Deputy Deenihan will appreciate that we do not have unanimity on this matter and that, having received various views from bank representatives, financial analysts and Mr. Duisenberg, President of the European Central Bank, I have been overwhelmed with all manner of advice. It is a pity most of that advice is conflicting.
It has not been easy to arrive at an appropriate way in which to proceed with this matter. The Tánaiste and I, together with officials from my Department and the Department of Enterprise, Trade and Employment, are doing everything in our power to arrive at the best solution. This is a very important matter and, as the Leader of the Fine Gael Party stated, it is vitally important that we get it right. This is not something we can simply take a chance with. One can make certain decisions which, although they might be politically earth shattering, will not do everlasting damage to the country's finances. We will make every effort to obtain agreement on this matter but it has not been possible to achieve that to date.
Is the Minister aware of the comments expressed today in a national newspaper report by the Governor of the Central Bank, Mr. O'Connell, to the effect that the uncertainty which is being created is leading to a loss of staff and creating difficulties in recruiting staff? Is the Minister concerned about these comments?
I meet the Governor of the Central Bank quite regularly and although I have not read the newspaper report, I am aware from those meetings of Mr. O'Connell's views on this matter. Mr. O'Connell has conveyed the message to me directly on a number of occasions that the future uncertainty of regulation presents difficulties in regard to recruiting and retaining staff and I will certainly bear that in mind in trying to reach a decision. However, as I pointed out, it has not been easy to arrive at an agreed solution and it is vital that we arrive at the correct solution.
In spite of all the revelations made in recent years and in spite of the strong criticisms made of the Central Bank inside and outside this House, it must be recognised that, internationally, the Central Bank has an unbelievably good reputation. Foreign financial institutions which set up in this country and those which deal with Ireland go out of their way to praise the Central Bank. They do not praise the bank because they feel they are expected to do so, rather they compare it with the treatment they receive in other countries. Our Central Bank has a very high international reputation and we do not want to lose that whatever happens. It has taken a long time to build up that reputation and we cannot just throw it away as it would be very difficult to get it back. Most responsible people in this House and outside it are cognisant of that fact. There is no unanimity between the parties in this House as to how we should proceed, nor was it possible to achieve such unanimity among the nine members of the expert group.
Surely the uncertainty which is being created is damaging our international reputation among world banks and financiers? Mr. O'Connell basically asked when the regulatory authority would be established and stated that it must be established as soon as possible. Can the Minister tell us when the authority will be set up?
The fact that we have not done anything is not damaging our reputation, but our reputation could be damaged by setting up an authority which could be perceived negatively internationally and which, in years to come, could give the Irish regulatory framework a bad name.
The Minister should set up the right framework.
The time for Priority Questions has expired. We will proceed to Question No. 15 which will be taken in ordinary time.