Dáil Éireann Debate, Wednesday - 27 October 2004
218 Mr. Durkan asked the Minister for Finance if, in the event of a company (details supplied) or similar banking situation in the future, the responsibility to deal with the matter will be his or solely the responsibility of IFSRA; and if he will make a statement on the matter. [26186/04]
View answerI might first explain that the Minister of Finance is responsible for the development of the legal framework governing financial regulation. Once the necessary legislative framework has been put in place, day-to-day responsibility for the supervision of credit institutions is a matter for the Irish Financial Services Regulatory Authority, IFSRA. I might also point out that the primary responsibility for managing a bank and preventing fraud lies with the management of that institution. No supervisory regime can guarantee a financial institution will never be a victim of internal fraud. However, I am satisfied that we have a solid legislative framework for banking supervision, and that the creation of a single financial services regulator in the form of IFSRA provides an effective organisational structure for enforcement of that framework. Up to May 2003, the Central Bank of Ireland was the independent statutory authority for banking supervision. IFSRA now has that role. However, the primary regulators of the activities of the institution in question were the relevant US authorities. Moreover, the Central Bank — now IFSRA — had the role of monitoring the overall consolidated position at the group level. Clearly, for consolidated supervision to be effective, there must be close contact and information exchange between the home and host country supervisors. This is typically governed by the provisions of a memorandum of understanding or letters setting out the terms for exchange of information. Where the foreign-based undertaking is in another EU member state, arrangements for co-operation between the home and host country supervisors would also be governed by the provisions of EU directives. It will be clear from the foregoing that a banking situation such as that referred to by the Deputy would be a matter for IFSRA. Where, in the light of experience of dealing with a particular situation, IFSRA felt that it required new or amended powers, requiring new legislation, then this would be brought to the attention of the Minister for Finance for consideration.
Deputies will also recall that as soon as my predecessor became aware, in February 2002, of the events concerned the Central Bank was asked to provide a report, on the completion of its investigations, as to whether it considered that any changes to legislative provisions governing banking supervision might be required. The Central Bank reported that there was no evidence that the Irish legislative framework contributed in any way to the losses concerned, and that it already had sufficient powers to work with the US regulators. Accordingly, the bank did not consider it necessary to recommend any changes in legislation in the area of supervision.
