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Financial Services Regulation

Dáil Éireann Debate, Wednesday - 31 March 2021

Wednesday, 31 March 2021

Questions (52)

Pearse Doherty


52. Deputy Pearse Doherty asked the Minister for Finance the status of the legislation providing for a senior executive accountability regime and other provisions; the planned scope of this legislation across financial services; and if he will make a statement on the matter. [17477/21]

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Oral answers (6 contributions) (Question to Finance)

I apologise to the Ceann Comhairle for the delay. I thought this business was scheduled to start at 7 p.m. My question relates to the status of legislation to introduce a senior executive accountability regime, SEAR, and other provisions. This legislation is much awaited. It is more than three years since the Central Bank argued for such provision to hold senior people in financial entities to account. We in Sinn Féin have argued for it for much longer. The Minister has committed a number of times to publishing the legislation. When will we see it?

As the Deputy is very well aware, the Central Bank has recently reprimanded Ulster Bank and Davy for regulatory breaches that resulted in substantial fines being issued. I wish to recognise the extensive work undertaken by the Central Bank in achieving those results. The bank already has extensive regulatory powers to investigate and impose sanctions where there are breaches of financial services legislation. The introduction of a SEAR will complement those existing powers, ensuring that the Central Bank has the additional powers necessary to provide appropriate regulation.

The legislation required to provide for a SEAR is complex as it gives rise to a number of constitutional issues. Careful consideration has been given to the proposals due to the need to ensure they are robust and can withstand legal challenge. Officials from my Department have been in ongoing and detailed discussions with the Central Bank and the Attorney General's office on the detail of the proposed Bill.

The SEAR will require firms to set out clearly the roles and responsibilities of their senior executives, including the production of management responsibility maps documenting key management and governance arrangements in a comprehensive and accessible way. This should ensure there is clarity as to who is responsible for what. The legislation will include conduct standards for individuals and firms, giving the Central Bank additional powers to enforce obligations on financial services providers, and relevant individuals working within them, with respect to expected standards of conduct. The legislation will further enhance the existing fitness and probity regime and break the participation link to facilitate the Central Bank in taking action against either a firm or an individual where a contravention of legislation occurs.

As work on the various aspects of the legislation is advanced, I will consider how the SEAR will be rolled out across the various sectors of the financial services industry. I expect that the most significant financial sectors will be encompassed by the legislation.

I intend that the heads of the Bill will be drafted and presented to the Government before the summer recess. That is subject to the Attorney General's advice and the adequacy of the safeguards included to the protect the constitutional rights at stake.

I thank the Minister. Does he know he gave the same speech two years ago? We are talking about holding senior executives in banks and financial institutions to account but the Minister has just given the same information that he did two years ago. The problem is his party, Fine Gael, has been part of the Government for the past ten years. The Minister has been part of that Government since 2013, which is a hell of a lot of time in which that party could have enhanced the individual accountability regime or strengthened the Central Bank's toolkit for holding individuals to account. The Central Bank sought this power as far back as December 2017 to mirror British legislation introduced in 2016.

In April 2019, two years ago this month, the Minister committed to having that Bill published and available to the Dáil soon after the summer of that year. Two years later, we still do not have the legislation. What has caused the delay and why has the Minister not been able to deliver on the commitment he gave to the House two years ago in April 2019? Is it just that the Government's priority in holding individual senior bankers and those in financial institutions to account does not meet the required standard?

The party of which I am a member is the one which introduced, with its colleagues in government at the time, the Central Bank regulations of 2014 and there is sufficient legislation available to the Central Bank to allow it take action against individuals if it believes a case is merited. The inference of the Deputy is that legislation is not in place to allow action be taken against individuals but it is if the Central Bank decides such action is merited. Of course, it is the same Central Bank with the same powers that have been granted by this Government, the previous Government and the one before that, which has levied such significant fines on financial sector companies over the past number of weeks in recognition of the gravity of concerns and misbehaviour with which those companies were involved.

The legislation is in place to allow action to be taken. Particular concerns relate to Articles 37 and 38 of our Constitution, as well as other articles, including Articles 40 to 45, inclusive, which concern the balance between the rights of the individual and the matters we are debating.

If the legislation exists, why would the Government introduce new legislation? The reality is the legislation is not robust enough. The Minister knows, I know, and he should not make a fool of the public, that the reality is the Central Bank cannot go after an individual until the firm in question has been found guilty. How does the Minister know this? His predecessor, another Fine Gael Minister, Michael Noonan, got a letter from the Central Bank Governor in 2015, six years ago, saying there was a lacuna or hole in the law that allows senior people to lie to the Central Bank without any reproach because the firm has to be found guilty first. In that case it was the insurance industry. This is why in the case of Ulster Bank individuals cannot be held accountable until the examination finishes. We know Ulster Bank is winding up its operations.

The Minister gave a commitment two years ago that this Bill would be published. Before that he gave other commitments and he has given commitments since. We still do not have legislation to hold senior bankers to account. There is not one party in this House, including the Minister's party, that believes the legislation is not warranted. The Central Bank has sought it for nearly four years and it is in place in Britain. The problem is the Minister's party and Government have not prioritised it. Is that not the fact?

We are giving it priority. Fines have been levied against companies for unacceptable behaviour. Action has been taken, for example, by the National Treasury Management Agency in dealing with the Davy matter and it demonstrates the seriousness with which the State has taken such matters, including the behaviour I condemned and which has been the subject of very heavy fines from the Central Bank with the legislation made available to it by the past three Governments.

We have very strong and robust legislation in place and the Central Bank has the ability to take action against individuals. It must also consider whether sanctions apply to the company. I have explained what is the difficulty and the delay being caused. Some of it can be explained by the fact that we were putting in place a Government across last year but that is not to justify all the delay. When the delay is resolved, we will have robust legislation to add to the strong powers already in place.