Dáil Éireann Debate, Thursday - 30 September 2010
5 Deputy Michael Noonan asked the Minister for Finance the action he is taking to replace directors of banks in which the State has an interest who served as directors during the development of the banking crisis; and if he will make a statement on the matter. [34225/10]
Amharc ar fhreagraI have said previously that Ireland as a country has been let down badly by certain individuals who held senior appointments — both at executive and director level — at some of our covered institutions. Their actions and inaction have and will continue to have severe ramifications for the citizens of this country. Deputy Noonan will appreciate that it would be wrong of me to comment on cases which are subject to ongoing investigation by the relevant statutory authorities.
One of the first actions the Government took in this area was the appointment of two public interest directors to all of the major covered institutions. These appointments were persons whom I am sure the Deputy would concur are of high calibre and have undertaken their roles very seriously.
Contrary to public perception, many changes at director and senior executive levels at the covered institutions have taken place. It has to be accepted that a complete turnover of all of the respective appointments at the covered institutions was neither practical nor desirable in one instant. What the Government has sought to do is to bring certainty to the operation of the Irish financial system by making progressive changes.
Since September 2008, the chairpersons and chief executives of all of the covered institutions bar one have changed. In other words, of the six principal covered institutions, five chairpersons and five of the chief executives have changed since 2008. There has also been a substantial turnover of non-executive directors over this period. In total, based on information supplied to me by the covered institutions, 43 directors have vacated their positions for a variety of reasons since September 2008 with 30 new appointments being made. In addition, some 31 senior executives have departed. The House will also be aware that arising from the actions I announced this morning further changes at board and management level will follow at Allied Irish Bank.
I am sure the Deputy will appreciate the need for people filling directorship roles to be well qualified, with appropriate skills and experience, in order to lead the institutions through the major changes that are taking place in banking.
Additional material not given on the floor of the House.
A mix of board members from the domestic market and outside Ireland is also a desirable objective. Since the introduction of the Credit Institutions (Financial Support) Scheme in September 2008, the Central Bank and Financial Regulator have reviewed the procedures under which applicants for senior roles in credit institutions have been considered. A range of measures have been adopted, or are in process, as part of a wider strategy to update the domestic regulatory framework applying to banks and insurers and as part of these measures a consultation paper on corporate governance standards has been issued. The new Central Bank Reform Act will also introduce a new range of powers available to the Central Bank in relation to the appointment of individuals to control functions and pre-approved control functions, which will include directors. An interview process, as part of the fitness and probity procedure, has been initiated for proposed senior roles in credit institutions.
I have said previously that it is not only a change of personnel that is required but a change of culture. The public interest aspect of decisions taken at board level of these institutions has to have a much greater prominence. The pursuit of selfish profit motives, without appropriate regard for risk, has to be challenged both within the banks and by the appropriate authorities. Decisions undertaken by management have to be severely and robustly challenged by board members which as we have learnt to our cost did not happen to the necessary extent in the past.
The Deputy will also be aware that the appointment by the Government of both the Governor of the Central Bank and the Financial Regulator changed previous practices in this area. In this connection, I might also mention that I undertook a public expression of interest procedure in connection with the appointment of board members of NAMA which resulted in three of the final appointees emerging from this process.
The Minister said there have been 43 resignations of directors across the covered institutions. How many of those who were there two years ago remain?
I will have to provide that information for the Deputy and will arrange to do so. Clearly, in the case of Anglo Irish Bank no one remains. In the other banks, as I said, there has been a substantial turnover of directors.
Now that the Minister has total control or a significant shareholding in all the covered institutions, what is the Government's policy on internal recruitment, as against bringing in expertise from the outside, to top levels of management?
It is a matter, in the first instance, for the board of the particular institution to decide what is in the best interests of that institution. Government policy is that persons of the highest competence and expertise should be appointed to senior management positions. It is a matter, in the first instance, for the board.
One matter which we should discuss on an all-party basis, given the degree of State control that now exists in the banking sector, is how appointments are made to directorships in these institutions.
The Minister announced this morning that the chairman and chief executive of AIB are moving on. What severance packages will apply in those cases?
I am not aware of the severance packages that apply. That is a matter, I take it, for their contractual terms and the remuneration committees of the relevant institution.
When his policy is put in place the Minister will own 95% of AIB. That is not a minor shareholding. Does he not have an interest in severance packages, especially when there have been such rows about these kinds of packages in the past?
Ní lá fós é, a Theachta. The position is that persons have contractual rights as well.
