Vol. 495 No. 7
45 Mrs. Owen asked the Tánaiste and Minister for Enterprise, Trade and Employment her views on the need for an independent financial services regulator; the impact, if any, this regulator would have on companies for which her Department has responsibility; the reason for the delay in setting up this regulator; and if she will make a statement on the matter. [21876/98]
There is an undeniable case, in a small country such as ours, for building a critical mass of skills related to financial regulation within a single body. However, it is simply not possible to proceed to the immediate introduction of legislation on the matter. The current regulatory system for financial services in Ireland is hindered by the multiplicity of regulatory bodies, each of which has different powers and functions. The establishment of a single regulatory authority will be a major task involving a review of the functions and activities of all existing regulators, including my Department and the Central Bank. This is the first Government to take positive action to deal with the issue and it is my intention that it should be tackled effectively and expeditiously.
The Government has decided to establish an implementation group to furnish proposals on the role, scope and functions of the new authority and to progress the work necessary to enable it to become operational as soon as possible. I am making available a copy of the full terms of reference of the implementation group for inclusion in the Official Report. The implementation group, which will hold its first meeting this week, has been asked to report back with its recommendations by the end of February next. The insurance section of my Department regulates insurance undertakings and the market for insurance products. In addition, the Registrar of Friendly Societies has responsibility for regulating credit unions, friendly societies and industrial and provident societies while the Director of Consumer Affairs is responsible for the authorisation of mortgage and credit intermediaries and the monitoring of all customer charges by credit institutions under the Consumer Credit Act, 1995. With the establishment of the single regulatory authority, it is likely that responsibility for these areas will transfer to the new regulator.
Terms of Reference of the Implementation Group for the Financial Regulatory Authority To advise the Government on:
a) the role and functions of the single financial regulatory authority e.g. prudential supervision, the maintenance of orderly markets, safeguarding of clients funds, consumer protection, the development and regulation of conduct of business rules — including consideration of the issues arising from combining the functions of monetary policy and prudential regulation;
b) the range of financial service providers to be overseen by the authority — e.g. banks, building societies, Post Office Savings Bank, insurance companies and brokers, investment intermediaries, including lawyers and accountants in as much as they handle clients' funds, exchanges, credit unions, friendly societies, finance companies, moneylenders, etc. — also taking account of the development of electronic commerce which may involve new types of service providers;
c) the extent to which existing regulators — e.g., the Director of Consumer Affairs, Registrar of Friendly Societies, Central Bank and Department of Enterprise, Trade and Employment — if any, would continue to have functions in relation to the regulation of the financial services sector and the extent to which any alteration to the status quo would impinge on the non-regulatory functions of the Central Bank;
d) the organisational structure for the authority including the manner of its public accountability;
e) the funding, resourcing and staffing of the authority, and issues arising in a transition to a new structure, including staffing and industrial relations, and the extent to which the authority could be self-financing;
f) the legislative changes necessary for the establishment of the authority;
g) the time schedule including, in so far as necessary, a phased implementation, for achieving the objective of a fully operational single financial regulatory authority at the earliest date possible.
In meeting its terms of reference, the implementation group should be cognisant of, and take into account as appropriate:
(i) the findings of the working group, established by the Minister for Finance, which is at present examining legal and consumer issues in banking;
(ii) the findings of the Moriarty tribunal in so far as its remit extends to the regulation of the financial sector;
(iii) the findings of the Report of the Joint Oireachtas Committee on Finance and the Public Service on the regulation and supervision of financial institutions;
(iv) the regulatory arrangements operating in other jurisdictions, with particular reference to how the individual consumer is afforded protection; and
(v) the importance of the International Financial Services Centre.
Does the Minister think there is need for more regulations to protect the consumer as opposed to consolidating existing regulations? Has the working group been informed of this or is it being asked to decide whether there is need for more regulations? What will be the role of the Director of Consumer Affairs if the new regulator will be responsible for dealing with such matters as bank charges, the responsibility for which was delegated recently to the Director of Consumer Affairs?
There is need to enforce existing regulations. It is disappointing that in many respects existing company law is not being enforced. As the Deputy is probably aware, in September I appointed a working group to look at the enforcement of company law and it is due to report within the next few days. It is looking at whether there is need for change. There is need, however, to move away from prudential regulation of financial institutions to aggressive regulation on behalf of the consumer. As the Deputy is aware, the Director of Consumer Affairs has a wide remit, of which the charges imposed by credit and financial institutions form a small part. The newly appointed director, Carmel Foley, will be a member of the implementation group which is looking at the issue.
What is meant by the term "aggressive regulation"? What extra regulations are required to protect the consumer? Is there a difference between what the Minister and the Minister for Finance think should happen?
Before the summer the Minister for Finance and I appointed a working group of officials to look at this issue. We were of the view that there was need for a single financial regulator. It is unsatisfactory that there is a plethora of regulatory bodies. The taxpayer is not getting value for money and the consumer is not receiving adequate protection. On the existing regulations, it has much to do with culture and ethos. Traditionally the role of the Central Bank was one of prudential regulation with a view to ensuring financial institutions were sound and financially stable. It also managed the currency well and advised Government.
In the context of what has come to light recently and the changes occurring with the introduction of euro there is need for less passive regulation. We should be as concerned with the interests of the consumer as we are with prudential regulation. To a large extent what is required is a new attitude and culture, not new laws. It is not fair to expect a body which is supposed to protect institutions to take action on behalf of the consumer. This conflict of responsibilities may be part of the problem. That is the reason we established an implementation group on which the Central Bank, the Director of Consumer Affairs, my Department and the Department of Finance are represented. There are also three outside persons involved. It is the most appropriate group to come forward with recommendations on the most effective way of putting in place a single financial regulator.
When does the Minister expect to receive the group's report and will she ensure it is published as quickly as possible?
Given the scope of the chairperson to do things ahead of time, as he proved in the case of the company law enforcement group, it may be presented before the deadline of the end of February. It is the intention to publish it.
