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Banking Sector Regulation.

Dáil Éireann Debate, Thursday - 14 October 2004

Thursday, 14 October 2004

Questions (62)

Joan Burton

Question:

59 Ms Burton asked the Minister for Finance the action which has been taken by his Department and the Revenue Commissioners arising from the report of the High Court inspectors on a bank (details supplied) which was published on 30 July 2004; and if he will make a statement on the matter. [24642/04]

View answer

Written answers

I am advised by the Revenue Commissioners that prior to the receipt of the report of the High Court inspectors, the Revenue Commissioners were investigating investments made by individuals through the financial institution named. Settlements made to date with individuals amount to €48.12 million in respect of tax, interest and penalties with a further €4.7 million received as payments on account of the individuals' final liability. The investigations into the tax liability of the remaining cases are continuing. The report of the High Court inspectors is being examined in detail as part of the Revenue Commissioners' continuing investigation, including the possibility of prosecution of offences under the taxes Acts should the appropriate evidence be available.

Apart from the tax matters, the behaviours outlined in the report may suggest weaknesses or failings in compliance with certain other regulatory and legislative requirements, such as those relating to money laundering, exchange controls and notification of fees and charges. The findings in the report and the bank's response are being examined in detail by the Irish Financial Services Regulatory Authority, IFSRA, which has already stated that any actions or measures that are required will be taken. In light of this and other widely reported issues IFSRA is currently engaged in an industry wide exercise focusing on appropriate systems and controls to ensure that all credit institutions are fully in compliance with all relevant laws and requirements. IFSRA is also making sure that there is proper monitoring of the fee and interest reimbursement programme, which has been commenced by the bank.

The role of the Minister for Finance in financial regulation is to bring forward legislative proposals whereby a duly empowered financial regulator can regulate and supervise the financial sector in accordance with those powers. The necessary legislative framework has been put in place and day to day responsibility for the supervision of credit institutions is a matter for IFSRA. IFSRA is independent in the exercise of its supervisory functions and my Department does not get involved in its day to day activities. However, my Department has recently written to IFSRA seeking its views as to whether there are any issues to be addressed regarding the reported practices, and in particular on whether any legislative change might be required to strengthen the regulatory framework in this regard.

The regulatory structures governing financial institutions have changed enormously in recent years, taking into account many of the lessons already learnt from this case and others. However, if further examination by IFSRA or my Department indicates that additional powers are required to prevent a recurrence of similar practices I will address that as a matter of priority.

The exchange control implications of this case were first raised in early 1998, and as this House has previously been informed, were investigated by the Central Bank, at the request of the then Minister for Finance. The bank's interim report to the Minister for Finance in May 1998 was not conclusive and the bank indicated that it would defer concluding its consideration of exchange control matters pending the finding of other investigations. Legal advice at the time was that the report was not sufficient to warrant its referral to the DPP. It should be noted that exchange controls were phased out progressively, especially from 1988 and were finally abolished on 31 December 1992. My Department has written to the governor of the Central Bank asking him to arrange for a review of the situation having regard to both the recent High Court inspectors' report and the 1998 report of the authorised officer.

Finally, the report has been referred to the DPP and criminal charges might therefore follow. While it would not be a matter for me, the relevant authorities will presumably consider whether the behaviours reported in this case are of a type that could also have potential implications for named individuals both from a company law and a financial services regulatory point of view.

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