Vol. 548 No. 5
53 Mr. Sargent asked the Minister for Finance his views on whether IT programmes to ensure traceability of transactions should be made mandatory, in view of the scandal involving international financial transactions (details supplied); and whether this traceability would make a Tobin tax feasible. [5582/02]
Banks involved in foreign exchange trading have various risk management controls to monitor their activities. Appropriate IT systems are an essential tool in achieving the goal of risk management. I have no doubt that all financial institutions with substantial treasury management exposures will be looking, among other areas, at their IT systems. Clearly IT systems, which automate the processes of control and reduce manual interventions, have an increasing part to play but it would be very easy to underestimate the tasks concerned. IT systems development would not, of itself, eliminate the risk of fraud; as even in the modern world, many tasks require a human element.
In carrying out its prudential and systemic supervisory functions in relation to credit institutions, the Central Bank sets down various rules designed to ensure their continued solvency and liquidity. It also is concerned to ensure that there are adequate systems of internal control. It is a matter for the Central Bank, in exercising its day-to-day responsibility for the supervision of banks, to decide the standards it will apply to banks.
In the light of recent events, the Central Bank will be reporting to me on whether any changes to regulatory provisions governing banking supervision may be appropriate. These could possibly include recommendations for increased statutory powers. I will review the situation when I see the bank's report.
In relation to the Deputy's query concerning the Tobin tax, difficulties relating to practical implementation of the tax are not the only issue. There are many questions arising in relation to its likely effectiveness in addressing destabilising currency speculation, which was the primary rationale of the original proposal, and how it might affect the sound operation of financial markets. I am not convinced that the link that has been made between the revenue such a tax could, in principle, raise and the much wider issue of assisting the development of the world's most impoverished countries. It would not appear that the traceability issue raised by the Deputy would be a factor of any significance when set against the numerous practical and other problems that arise in relation to the proposal.
