Dáil Éireann Debate, Wednesday - 23 June 2004
3 Caoimhghín Ó Caoláin asked the Minister for Finance if he has received the Irish Financial Services Regulatory Authority’s progress report on its first year in operation; and if he will make a statement on the matter. [18731/04]
View answerI have received a copy of the progress report which has been published recently by the Irish Financial Services Regulatory Authority, IFSRA. The authority was formally established on 1 May 2003. This is the first report on IFSRA's achievements since it was established and is in line with a commitment given in its first strategic plan for 2004 to 2006, which was published in January 2004, to publish a review of its first year in operation. It sets out in detail the progress that has been made to date on the numerous targets it has set for itself and which were set out in its strategic plan.
I am pleased that IFSRA is showing itself to be accountable for its operations. This is in line with the considerable emphasis on openness and accountability in the relevant legislation, which requires publication of strategic plans, budgets and annual reports. In that regard, the report to which the Deputy refers is not one of those required under the legislation but is an additional report to keep its stakeholders informed.
In the introduction to the progress report, the authority has stated that, in line with requirements under the 2003 Act, it will publish in mid-2005 a comprehensive annual report covering the period from 1 May 2003 to 31 December 2004. I look forward to receiving that report in due course.
In light of the revelations about the overcharging of customers by AIB to the tune of €50 million, which is the current estimate, does the Minister believe that IFSRA has sufficient consumer protection powers? As well as the overcharging on foreign exchange, it is now known that, since 2000, between 500 and 600 mortgage holders paid up to €50 extra per month for mortgage insurance without their approval. That is another example of the rip-off culture that is clearly very much a part of Allied Irish Banks. Does the Minister note that all this occurred under the watch of the Central Bank? Does he agree that it exposes, yet again, that the Central Bank failed to regulate the sector properly and to protect properly the customers of financial institutions? Does the Minister agree, therefore, that IFSRA needs to succeed where the Central Bank has clearly failed? This is even more reason for emphasis to be placed on it having sufficient powers to carry out its remit.
Is the Minister aware that the Oireachtas Joint Committee on Finance and the Public Service last week heard a submission from the Irish Bank Officials' Association? Its representatives described a culture of fear among bank employees which resulted in a fear of speaking out. Does the Minister not agree that the recent revelations did not emerge as a result of IFSRA's work but as a result of the courageous actions taken by whistleblowers? As there is a culture of fear, we have depended on whistleblowers.
There is a clear need to ensure that every measure possible to assist the work of IFSRA is introduced as a matter of urgency. It is important that public confidence in financial institutions is restored and that there is public confidence in IFSRA and all its works. A whistleblowers' charter to protect employees who expose actions of gross misconduct on the part of their employers would be desirable in the public interest.
Since the Deputy's question concerned the recently published progress report from IFSRA, it is only fair to point out that the matters to which he referred, namely, the problems with a particular bank, could not have been taken account of in the report because it was published at the end of April and some of those issues only came to light around that time.
As the Deputy is a member of the Joint Committee on Finance and the Public Service, he will be aware of the changes we have made to financial regulations over the past two years. The Central Bank and Financial Services Authority of Ireland Act 2003, which was passed last year, created a single regulatory authority in the area. This only came into effect from 1 May 2003. As the Deputy will be aware, most of the matters to which he referred predate the setting up of IFSRA. The overcharging issue, which was the first major issue brought to light, is the responsibility of the Director of Consumer Affairs under the Consumer Credit Act 1995, which was introduced by a previous Administration. Any deficiencies in that Act were dealt with in the Bill that is currently before the Seanad, the Central Bank and Financial Services Authority of Ireland Bill 2003.
The Deputy and many others are inclined to criticise the Central Bank, but the matter of overcharging was not the responsibility of the Central Bank but of the Director of Consumer Affairs. I am not implying any criticism of the Director of Consumer Affairs — it would have been impossible to find out about these matters — I am simply pointing out how the system works.
Last year's Act set up IFSRA as the single authority in this area. It also made substantial changes. For example, under the old Central Bank Act it was strictly forbidden for the Central Bank to communicate to the Revenue Commissioners information about tax evasion. The prudential mechanism of its supervisory powers was ring-fenced in that regard. This changed after the 1994 money-laundering Act, but that was the legal position until then.
I find it difficult to accept that there was a culture of fear within the banking organisation. Perhaps in any big organisation some people will operate in this manner — there are many in my party and the Deputy's party who do — but I do not accept that it was widespread. AIB is made up of people at many different management levels. It is owned by shareholders the length and breadth of the country and all around the world. It is not a privately-run organisation headed by a single person. There are so many structures in place in these organisations that I find it hard to accept that there was a culture of fear. Perhaps there is at some level, but I do not buy into that allegation.
I have no doubt that a culture of fear exists and that those members of the IBOA who met us, representing all the major financial institutions, explained the reality.
The Deputy was a bank official, was he not?
Yes.
Was there a culture of fear in the Deputy's time?
It was a different fear.
It was a different time. There is a new culture in banks today under which pay is linked to performance. The culture is different from what it was in my time. The Minister should recognise that the basis of payment has changed substantially and is now based on performance and inter-branch competition. It is a serious matter. Because of this, ethics have gone out the door. We have ample evidence of this.
We must proceed to the next question. We have gone over time.
I am sorry the time does not allow us to discuss this further.
I do not have a difficulty engaging in a debate with the Deputy about performance-related pay and related matters in all organisations. I have my own views on this. However, it does not apply only to banking organisations. We will have a debate some time about it.
The Minister has not spoken about IFSRA. We should try to stay on the issue.
Perhaps performance-related pay should apply to the Government. If it did, the Minister for Health and Children would have a negative salary. Is that not the case?
We have used up nearly twice the allotted time for this question. It is completely unfair to other Deputies who are waiting for their questions to be taken.
