The Guarantee Scheme for financial institutions put in place by the Government has been successful in safeguarding the stability of the Irish banking sector and in restoring its liquidity position in order to support its normal lending activities. The Scheme is intended to provide a detailed framework for the positive and constructive changes that must flow from this to restore and uphold for the future the traditional banking values of responsible and balanced risk-taking lending in order to underpin the long-term sustainability of the banking system.
Financial institutions particularly those participating in the guarantee Scheme have a key role to play in supporting both individuals and businesses in the current challenging economic and financial environment. As I made clear when presenting the Guarantee Scheme to the Oireachtas in mid-October the boards and senior executives of the participating institutions have a key role to play in ensuring that finance is channelled appropriately to support and underpin sustainable economic activities on a prudent and responsible basis which is clearly in the interest of both the bank, the borrower and wider economy.
The Deputy will be aware at recent meetings with certain financial institutions I asked them to consider the contribution that they can make to the economy through appropriate credit initiatives in relation to small and medium sized businesses and otherwise. Subsequently certain institutions have announced new initiatives to help the SME sectors. I welcome these important announcements and look forward to further dialogue on this important issue in the coming days and weeks.
The regulation of lending practices of Irish financial institutions is the statutory responsibility of the Financial Regulator. In addition to what is contained in the Guarantee Scheme, and building on revised capital and liquidity measures which it introduced during 2006 and 2007, the Regulator has instigated a series of new regulatory measures to take account of the changed financial environment, including an increased focus on the management of credit and liquidity risks of the banks. Among the actions the Financial Regulator is taking are the following:- the immediate recruitment of an additional 20 senior supervisory staff with banking experience to be placed on-site in key banks to monitor developments; requiring banks to set out new business plans focusing on the need to reduce their risk profile and how their models of banking are sustainable in the new environment; and enhanced reporting obligations in relation to capital, asset quality and individual large loans to supplement daily liquidity reporting requirements.
In conclusion, many aspects of our regulatory systems have proved themselves to be robust and sound in the recent turmoil. But it is also clear that regulators in Ireland as elsewhere need to learn the lessons of recent events. I am relying on the Financial Regulator to do just that, and to adapt its regulatory systems to new conditions, to take on new skills and to ensure that Ireland has a top class regulatory system.