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Banking Sector Regulation

Dáil Éireann Debate, Tuesday - 28 January 2014

Tuesday, 28 January 2014

Questions (178, 179, 180, 181)

Pearse Doherty

Question:

178. Deputy Pearse Doherty asked the Minister for Finance his views on whether the International Accounting Standards Board has given clear and precise instructions on the way banks should account for loan losses; and if he will make a statement on the matter. [3567/14]

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Pearse Doherty

Question:

179. Deputy Pearse Doherty asked the Minister for Finance if banks must recognise expected losses immediately; or if they can delay their recognition in their accounts; and if he will make a statement on the matter. [3568/14]

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Pearse Doherty

Question:

180. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 164 of 15 January 2014, if he will clarify the powers the Central Bank of Ireland has, under the European Communities (Credit Institutions: Accounts) Regulations 1992, SI 294 of 1992, to ensure that banks implement the International Accounting Standards Board framework; and to ensure that banks do not overvalue assets by delaying the recognition of losses. [3569/14]

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Pearse Doherty

Question:

181. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 164 of 15 January 2014 if banks have systematically overvalued loans in their published accounts between 2005 and to date in 2014 in a way permissible under International Accounting Standards Board rules; and if he will make a statement on the matter. [3570/14]

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Written answers

I propose to take Questions Nos. 178 to 181, inclusive, together.

By virtue of Regulation 15(1)(b) of the European Communities (Credit Institutions: Accounts) Regulations 1992, (S.I. 294 of 1992) (1992 Regulations) the Central Bank of Ireland (Central Bank) may bring and prosecute an offence under the 1992 Regulations.

Regulation 5(1) permits a company to prepare financial statements in accordance with Section 149 of the Companies Act, 1963 (referred to as Companies Act individual accounts) or in accordance with the International Financial Reporting Standards in accordance with Section 149A of the Companies Act, 1963 (referred to as IFRS individual accounts).  With respect to IFRS individual accounts, Regulation 5(1B) sets out specific disclosures that are required to be included in addition to those specified by the International Financial Reporting Standards themselves.  None of these additional requirements relate to the implementation of the IASB Framework.

The requirement for banks to prepare financial statements is laid out in the Companies Acts, 1963-2013. The Central Bank of Ireland has no role in the enforcement of the Companies Acts. The Companies Acts come under the scope of the Department for Enterprise, Trade and Innovation. The Director of Corporate Enforcement has widespread powers and functions in relation to potential breaches of the Companies Acts.

I informed the Deputy in a reply on 15 January that I did not accept the premise that Irish banks have systemically overvalued loans in their published accounts. The valuation of loans is a matter of judgement on the part of the banks and auditors.

The auditors of any company - including the banks - are required as part of the audit process, to confirm that the financial reporting framework used in the preparation of the financial statements is in compliance with Irish law and International Financial Reporting Standards, as issued by the International Accounting Standards Board. Companies are also required to disclose in the financial statements their accounting policies which covers the detail of how individual items are accounted for. Listed companies in the EU are required to comply with the International Financial Reporting Standards and their auditors are required to provide a separate opinion in relation to the application of the standards as part of the audit report which is included in the financial statements.

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