Wednesday, 23 June 2004

Questions (24, 25, 26, 27)

Tom Hayes


9 Mr. Hayes asked the Minister for Finance his views on whether consumers have enough legal protection to ensure that a bank’s overcharging practices (details supplied) cannot be repeated anywhere. [17937/04]

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John Perry


51 Mr. Perry asked the Minister for Finance for the latest information on the investigation of a bank’s unlawful and improper activities (details supplied). [18699/04]

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Joan Burton


70 Ms Burton asked the Minister for Finance the steps he will take to prevent customers from being exploited in regard to the statement the Tánaiste issued after the disclosure that banks (details supplied) overcharged foreign exchange customers for eight years; if he will change consumer credit legislation to provide for the imposition of penalties when financial institutions exceed charges authorised by the regulatory authorities. [13962/04]

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Eamon Ryan


74 Mr. Eamon Ryan asked the Minister for Finance the role of his Department in overseeing the work of the Irish Financial Services Regulatory Authority on the regulation of Irish bank charges; if he is satisfied with the level of IFSRA’s enforcement and punitive powers in existing legislation in view of the recent evidence that a bank (details supplied) persistently overcharged for foreign exchange transactions; and when he will introduce legislation to provide the regulator with further powers. [13908/04]

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Written answers (Question to Minister for Finance)

I propose to take Questions Nos. 9, 51, 70 and 74 together.

Last year the regulatory structure of Irish Financial Services was radically adjusted. At the time the Government promised the following Bill would provide enhanced consumer protection. The Central Bank and Financial Services Authority of Ireland Bill 2003 will confer new powers on IFSRA to impose stiff administrative penalties. It can be applied where there is a breach of: any financial services legislation; codes of conduct issued by the regulator; or any condition, requirement or direction imposed under legislation or codes.

Penalties will include the issue of a reprimand, orders to refund charges improperly applied, monetary penalties of up to €5 million and orders to pay the cost of the investigation. Individuals may also be subject to penalties. For example, a senior manager might be disqualified from employment at management level in the financial services sector and a fine of up to €500,000 could be applied. These provisions will apply to breaches of consumer protection provisions as well as to breaches of prudential requirements.

In addition, amendments presented on Report Stage will specifically make it an offence for credit institutions and bureau de change to charge fees in excess of those notified to IFSRA under the Consumer Credit Act 1995.

The new Bill will also give the regulator considerable powers to require compliance statements from financial institutions. They will be additional to those required under recent changes to company law. The Bill will also enhance consumer protection by establishing for the first time a statutory financial services ombudsman scheme. IFSRA will also have consultative panels available to it for consultation with consumer and industry interests.

My role in regard to the work of IFSRA is set out in the Central Bank Act 1942, as amended by the Central Bank and Financial Services Authority of Ireland Act 2003. IFSRA is accountable to me in regard to its budget, the raising of levies from the industry and the form of its strategy statement. It also reports to me on regulatory matters relevant to my role in setting the legislative framework for regulation. It is required to report publicly on its activities and is accountable to the Oireachtas Committee on Finance and the Public Service.

Since April IFSRA has overseen an investigation into the amounts charged by AIB to its foreign exchange customers. The initial investigation concentrated on identifying the amount involved and the customers affected. The latest indications are that it should be possible to identify from records at least two thirds of the people concerned, representing about 80% the value of the transactions. IFSRA also agreed with AIB that a €25 million deposit would be made with the Central Bank to cover anticipated costs of reimbursing customers, including interest. AIB was also obliged to appoint an external expert to inquire into how the problem arose. A first report, compiled with independent assurance, will be rendered to IFSRA and AIB before the end of July.

IFSRA has also overseen another investigation on certain matters concerning AIB Investment Managers Limited during the period 1989 to 1996, inclusive. These matters concern taxation, inappropriate dealing transactions and other regulatory issues. As a result AIB has already taken action on some of these issues, including disciplinary measures and has committed to pay restitution plus interest to affected clients. The Revenue Commissioners have also announced that they are conducting an investigation into the tax aspects of this matter.

Lessons will be learnt from the issues that have arisen at AIB. These lessons will have to be taken on board as appropriate by the financial institutions concerned, by banking institutions and their shareholders, by IFSRA and the other regulatory agencies and by the Government and the Oireachtas. It is clear that the public have the right to expect and receive the highest levels of service and corporate responsibility. I am satisfied that the regulatory structures put in place last year, together with the provisions of the complementary Bill that recently passed Report Stage in this House, will go a long way towards ensuring that problems of this nature will not arise in the future. Suggestions, if any, by various investigations for further legislation will be dealt with as a matter of urgency.