Dáil Éireann Debate, Thursday - 7 May 2015
6. Deputy Peadar Tóibín asked the Minister for Finance the checks, protections and processes in place to prevent insider dealing in respect of banks selling loans to third-party financial institutions at prices significantly lower than would otherwise be realisable. [17566/15]
Amharc ar fhreagraA broad range of regulatory principles could apply in circumstances where the assets of a bank were disposed of in inappropriate manner. For instance, there may be breaches of market abuse rules, company law principles, Central Bank rules on fitness and probity and/or the criminal law.
The rules in relation to insider dealing are set out in the Market Abuse (Directive 2003/6/EC) Regulations, 2005 (S.I. 342/2005), Part IV of the Investment Funds, Companies and Miscellaneous Provisions Act, 2005, Part V of Companies Act 1990 and the Companies (Amendment) Act 1999. In circumstances where loans take the form of transferable securities traded on a multilateral trading facility or junior market then the rules on insider dealing in the 1990 Act may apply.
Where loans or loan books do not take the form of financial instruments such as transferable securities, the Market Abuse regime would not apply but other legal principles and rules would continue to apply. For example specific and general principles of company, financial services and criminal law would continue to apply.
Directors of any Irish company, including banks, incorporated under the Companies Act, 1963, or the Companies Act, 1990, are required to comply with their fiduciary duties to that company, which include:
- acting in good faith and in the interests of the company as a whole,
- avoiding conflicts of interest,
- a prohibition on making undisclosed profits from their position as directors and must account for any profit which they secretly derive from their position as a director, and
- an obligation to carry out their functions with due care, skill and diligence.
In addition, directors of banks operating in Ireland are required to ensure that they have governance and control arrangements in place that comply with, inter alia, the Central Bank of Ireland's Corporate Governance Code and the European Banking Authority's Governance Guidelines. The Central Bank of Ireland's Fitness and Probity regime also requires credit institutions to assess the suitability of members of the management body and requires high standards of behaviour of those individuals on an ongoing basis. Banks are expected to have strong controls in their front line businesses, in their risk management and compliance functions and an effective internal audit capability, such that conflicts of interest are managed appropriately and the associated risks are mitigated. These arrangements are assessed through, for example, external audits and are also subject to ongoing supervisory engagement by the Central Bank of Ireland, including through regular inspections.
If directors were to approve the selling of a company's asset at less than market value where that decision is not objectively justifiable, shareholders would have a right of action against the directors concerned for a breach of their fiduciary duty. As things stand, this duty to the company is a common law one, but with the proposed commencement of the Companies Act 2014 on 1 June 2015, section 228 makes this a statutory duty.
Finally, where an action by a director or employee of a Bank constitutes fraud or offence, they are subject to the rigour of criminal law.
