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Banking Sector Regulation.

Dáil Éireann Debate, Tuesday - 23 March 2004

Tuesday, 23 March 2004

Ceisteanna (182, 183)

Bernard J. Durkan

Ceist:

180 Mr. Durkan asked the Minister for Finance if he has satisfied himself that the banking sector is secure and free from the possible recurrence of problems (details supplied). [9137/04]

Amharc ar fhreagra

Freagraí scríofa

I understand the Deputy is referring to events that occurred at Allfirst Bank some time ago. 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 Irish Financial Services Regulatory Authority. 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. The primary regulators of Allfirst's activities were the US Federal Reserve Bank and the State of Maryland banking regulator. When, in February 2002, I became aware of the events at AIB's then US subsidiary, Allfirst Bank, 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 at Allfirst 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.

Bernard J. Durkan

Ceist:

181 Mr. Durkan asked the Minister for Finance if he has satisfied himself that interest charged on loans and interest paid on deposits by the banking sector leaves adequate latitude for business to survive; and if he will make a statement on the matter. [9139/04]

Amharc ar fhreagra

I have no function in connection with the setting of interest rates. The setting of official interest rates for the euro zone is a matter for the European Central Bank. Retail interest rates are determined by financial institutions themselves in the context of a competitive market among commercial entities.

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