In response to the Deputy's question theMoriarty Tribunal made a number of observations and recommendations in relation to Financial Regulation. The report suggests that failures in regulation in the period concerned were related more to the attitude of the Regulator towards the regulated than any inadequacy in regulatory powers or the overall system then in place. This accords with the extensive analysis of Professor Honohan which concluded that there needed to be a greater degree of intrusiveness and assertiveness on the part of regulators. Recent reforms of the Central Bank have taken this point through new appointments at top level in the Bank; increased staffing and skills and a programme of legislative reform.
Findings of the Report
The Moriarty Report made the following observations and recommendations in respect of financial regulation:
1. The conduct of Guinness and Mahon Bank which gave rise to elements of the report (i.e. the operation of a tax avoidance scheme) failed to be regulated by the Central Bank under the last system but one (whereby there was a single Central Bank with regulatory functions). Since then the Central Bank and Financial Services Authority of Ireland (CBFSAI) was established in 2003 and abolished in 2010.
2. Failures in regulation were related more to the attitude of the regulator towards the regulated than any inadequacy in regulatory powers.
3. The future vigilance of the regulator can best be ensured by the heightened vigilance of public representatives.
These findings are consistent with those of others, such as Professor Honohan in his report on financial regulation and the Comptroller and Auditor General.
Reforms of the Central Bank:
Significant changes have recently been made to the structure governing financial regulation and oversight of the Central Bank. These matters were included in the Central Bank Reform Act 2010.
The Irish Financial Services Regulatory Authority, which was a constituent part of the CBFSAI, was dissolved, the posts of Chief Executive of the Regulatory Authority and Consumer Director were abolished. Two new posts — Head of Financial Regulation and Head of Central Banking — were created.
The Bank is now a single fully-integrated structure with a unitary Board, the Central Bank of Ireland is responsible for the stability of the financial system overall, for prudential regulation of financial institutions and for the protection of consumer interests. The Governor remains solely responsible for European System of Central Banks (ESCB) related functions.
The Bank's statutory function of promoting the development within the State of the financial services industry was removed.
Annual Performance Statements on regulatory performance prepared by the Bank, presented to the Minister for Finance and laid before the Houses of the Oireachtas. (Note: this will be in addition to the Bank's Strategy Statement which is to be prepared at least every three years and its Annual Report and Accounts). A committee of the Oireachtas may call the Governor and/or the Heads of Functions to be examined on the Performance Statement.
Regular international peer reviews of regulatory performance with the report of same forming part of the Performance Statement for the relevant year.
In addition, the appointment of Professor Honohan as Governor and Mr. Elderfield as Head of Financial Regulation marked a significant change in attitude and approach. Mr. Elderfield is undertaking a very significant programme to enhance the Bank's regulatory capacity which has included the appointment of new staff at all levels within the organisation.
Enhancing the Supervisory and Enforcement powers of the Central Bank:
The Supervisory and Enforcement powers of the Central bank are due be strengthened via the Central Bank (Supervision and Enforcement) Bill 2011. The Bill responds to the regulatory failures of the financial crisis. It strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. It also provides the Central Bank with greater access to information and analysis and will underpin the credible enforcement of Irish financial services legislation in line with international best practice.
The Bill was published in July 2011 (Government Decision S180/20/10/1435 of 26 July 2011 refers) in accordance with the structural benchmark under the EU-IMF Programme. The Bill completed Second Stage in October 2011 and is anticipated that it will go to Committee Stage shortly.
The report suggested that the necessary change of attitude by regulators to bring about increased vigilance "can probably best be encouraged by increased vigilance on the part of elected representatives." The Central Bank Reform Act 2010 enhances accountability and oversight mechanisms relating to the governance of the Bank and its regulatory performance. A Committee of the Oireachtas will receive an annual Regulatory Performance Statement — a new mechanism to increase accountability in respect of regulatory obligations. This is in addition to more general provisions already in the Central Bank Act 1942 relating to the appearances of the Governor and certain office holders before Oireachtas Committees. It is also consistent with the recommendations of the C&AG in his special report on the Financial Regulator.
Proposal 1: Proceedings involving civil and criminal aspects
The Revenue Commissioners have advised me that they have put administrative arrangements in place which are designed to enable the civil and criminal aspects of appropriate cases to be managed separately when required.
Proposal 2: Independence of the Revenue Commissioners
Section 101 of the Minister and Secretaries (Amendment) Act 2011 has placed on a statutory basis the independence of the Revenue Commissioners in the exercise by the Commissioners of their statutory functions under the various taxation and customs enactments. This has given effect to the recommendation of the Report of the Tribunal into Payments to Politicians and Related Matters (that is, the report of Mr. Justice Moriarty), that the principle or convention of the independence of the Revenue Commissioners be placed on the more robust status of a legislative provision.
Proposal 3: Representations to Revenue by Office holders
In relation to this proposal I as Minister for Finance remain of the view that this recommendation could best be considered in the context of the Government's overall approach to political and parliamentary reform. Representations are a valid part of the political process. The Government may wish to consider whether this recommendation should be confined to Revenue, or to Office holders, or whether the Commissioners decision to publish data on the volume of representations made by each Deputy is an adequate response.
A further recommendation related to the transmission to other agencies of information obtained by Revenue under bilateral agreements has been considered. These agreements are international treaties which are very precisely drawn as to the purpose for which information may be used and would not permit such transmission. However if opportunities arise in the future, the Commissioners will consider the matter further. The Deputy will appreciate that Revenue is not in a position to comment on matters relating to individuals for reasons of taxpayer confidentiality.