Dáil Éireann Debate, Wednesday - 15 February 2017
121. Deputy Pearse Doherty asked the Minister for Finance the legal and regulatory measures that have been put into place since the banking crash to ensure that the culture of reckless behaviour that contributed to that crash has been changed; and if he will make a statement on the matter. [7578/17]
Amharc ar fhreagra122. Deputy Pearse Doherty asked the Minister for Finance his views on whether bankers are more accountable for their actions since the banking crash; if so, the basis on which he is of this view; and if he will make a statement on the matter. [7579/17]
Amharc ar fhreagraI propose to take Questions Nos. 121 and 122 together.
A comprehensive overhaul of the legal and regulatory framework in the financial sector has been pursued at both domestic and at an EU level since the financial crisis. A whole raft of new European regulations have strengthened controls over the banking system and have resulted in an overhaul of regulation, supervision and resolution regimes.
The Capital Requirements Directive and Regulation which came into force in 2014, brought about significant enhancements in the quality and quantity of capital that banks are required to hold and the setting of minimum liquidity requirements.
The Banking Recovery and Resolution Directive and the Single Resolution Mechanism have transformed the framework for dealing with failing banks and are designed to provide a financial safety net and a means for recovery and resolution with minimum disruption to the sovereign.
The Single Supervisory Mechanism (SSM) is now responsible for the prudential supervision framework for euro area banks. Building on the single rulebook, the SSM transfers key supervisory tasks for significant banks in the euro area to the European Central Bank. Daily banking supervision is now conducted according to a detailed ECB supervisory manual including frequent and intrusive onsite inspections.
This new regulatory framework is supported by the presence of new European institutions, such as the Single Resolution Board, to address weaknesses in the institutional structures and to improve cross-border cooperation, ensuring consistent enforcement of rules and systemic oversight.
While the reform of our statutory code for the financial services sector has been and continues to be driven by comprehensive reforms brought forward at EU level, a number of significant domestic legislative reforms have been undertaken towards building a strengthened domestic regulatory framework for the financial services sector which complements the strategically important reforms at EU level.
The Central Bank Reform Act 2010 created a single fully-integrated Central Bank of Ireland with a unitary board, the Central Bank Commission, chaired by the Governor of the Central Bank. The unitary Central Bank structure gives the Commission members a more complete remit over prudential regulation and financial stability issues. The Central Bank has demonstrated its willingness to use its macro prudential, micro prudential and enforcement powers to strengthen capital and liquidity positions, business model resilience and governance arrangements of the banks operating in Ireland.
The Central Bank (Supervision and Enforcement) Act 2013 introduced a more assertive supervisory approach and overhauled the Central Banks powers across a wide range of areas and throughout the regulatory life cycle of firms. It strengthened the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely assertive prudential interventions. The Act also provided the Central Bank with greater access to information and analysis and underpins the credible enforcement of financial services legislation in line with international best practice.
The 2013 Act provides the Central Bank with early intervention powers including the power to issue directions to regulated entities and their related undertakings to address emerging problems, including where the entity has become or is likely to become unable to meet its obligations to its creditors or its customers, or where it is not maintaining or is unlikely to be in a position to maintain adequate capital or other financial resources.
The 2013 Act also gave the Central Bank extensive powers to make regulations including in relation to areas identified as weak points in the post crisis analysis such as risk management, consumer protection, audit processes and lending, including lending to 'restricted persons' such as those who work within the bank or family members.
Measures have also been introduced to address cultural change and behaviour in banking. In 2011, the new Fitness and Probity regime was rolled out by the Central Bank in accordance with the provisions of the Central Bank Reform Act 2010. The regime provides for new powers to be exercised by the Central Bank to ensure the fitness and probity of nominees to key positions within financial service providers and of key office-holders within those providers.
The Central Bank has put in place a pre-approval process for persons who apply for relevant positions, known as Pre-Approval Controlled Functions, in regulated firms, to ensure that they meet the required standards of fitness and probity. If concerns arise that a person or persons in Controlled Functions in a regulated firm do not meet the required standards of fitness and probity, they may be investigated by the Central Bank and could ultimately be prohibited from carrying out a Controlled Function in their firm, or any other regulated firm. These powers enable the Central Bank to ensure that the people in senior roles are capable, competent and act with integrity.
The 2013 (Supervision and Enforcement) Act also provides that if, in the opinion of the Bank, a person has engaged, is engaging or is about to engage in a contravention the Bank may apply to the Court for an order restraining the person from engaging in the conduct.
At present, a one year on report is being prepared for Minister of State Murphy on the findings and recommendations of the Joint Oireachtas Committee of Inquiry into the Banking Crisis. This report will set out the actions taken to date in relation to the Committee's Report and whether further actions are necessary for consideration by Government and/or other bodies.
