John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 79: To ask the Minister for Finance who owns the Central Bank of Ireland; is it State owned, privately owned, or some combination; who are the directors and principal shareholders and who appoints the shareholders and directors and to whom are they accountable. [40664/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The Central Bank of Ireland is a statutory body; it was established in 1942 in accordance with the Central Bank Act 1942 and is now a constituent part of the European System of Central Banks (ESCB) established by European treaty. It is managed and controlled by the Central Bank Commission. The Minister for Finance is the sole subscriber to and holder of the Central Bank's capital. The Central Bank's surplus income is payable to the Exchequer in accordance with regulations made in accordance with section 32H of the Central Bank Act 1942.

The members of the Central Bank Commission are the Governor, appointed by the Government, the Secretary General of the Department of Finance, appointed by the Government, the Deputy Governors, appointed by the Central Bank Commission and between 6 and 8 ordinary members appointed by the Minister for Finance. These are currently: Prof. Patrick Honohan, Mr. Kevin Cardiff, Mr. Matthew Elderfield, Mr. Stefan Gerlach, Mr. Max Watson, Mr. Michael Soden, Mr. Alan Ahearne, Ms. Blanaid Clarke, Prof. John Fitzgerald and Mr. Des Geraghty.

The Central Bank is independent in the exercise of its functions but the Governor and the Deputy Governors may be required to appear before committees of the Houses of the Oireachtas to address certain matters, including the Bank's annual regulatory performance statement.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 80: To ask the Minister for Finance the names and details of the directors of the private commercial banks who have been given money by the Government operating here; if he will name the public interest directors on the bank boards in Ireland; if they issue publicly available reports on their job performance or copies of the written conditions of employment and contractual obligations applicable to public interest directors. [40665/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The Deputy will be aware that directors at the covered institutions, including public interest directors who were nominated by my predecessor, are appointed and remunerated by the respective boards. Accordingly, disclosure of details concerning their remuneration and performance are covered by various rules and procedures. To the extent that such information sought by the Deputy has already been publicly released, it is available in the published annual reports and/or at the web sites of the respective covered institutions.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 81: To ask the Minister for Finance the persons or groups responsible for ensuring compliance with statutory and code of practice regulation of banks and other financial institutions; if he will confirm whether the Governor of the Central Bank and the Financial Regulator have written contracts of employment with clear performance related conditions; within that contract, is there a code of practice or some other integral element of their contracts and conditions; did the most recent Financial Regulators and Governors of the Bank of Ireland have written contracts of employment; if he will further confirm if the performances of the two most recent holders of those offices raise questions about whether the persons involved failed to honour those contracts; are directors of financial institutions, including banks, subject to compliance with the same legal obligations as directors of non-banking companies such as legal structures relating to reckless trading and personal liability; and the reason that the Central Bank of Ireland is now being advertised as a supervisory body as opposed to the Financial Regulator, which was until recently. [40666/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The Central Bank of Ireland is responsible for financial regulation in Ireland. The Irish Financial Services Regulatory Authority (the Financial Regulator) ceased to exist on 1 October 2010 with the commencement the relevant provisions of the Central Bank Reform Act 2010, which created a single structure within the Central Bank controlled and managed by the Central Bank Commission. The powers and functions of the Financial Regulator were subsumed into the Central Bank of Ireland. Under sections 19 and 23 of the Central Bank Act 1942, the terms and conditions of employment of the Central Bank Governor and the Deputy Governor (fulfilling the role largely filled by the former office of Financial Regulator) are matters for the Central Bank Commission. Therefore, I am not privy to the contractual arrangements that apply. However, I am informed by the Central Bank that both positions are subject to the Ethics in Public Office Act and the Central Bank's Code of Ethics and Behaviour. It would not be appropriate for me to comment on the contractual position of individuals who have held these posts previously.

Finally, regarding reckless trading and personal liability, the obligations of managers of regulated financial service providers imposed by Irish financial service legislation are in addition to any obligations imposed on them by other law, including. As regards the Companies Acts, financial institutions are in the same position as all other companies.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 82: To ask the Minister for Finance if he will provide the legal definition of a bank in Ireland; and the legal definition of a banker. [40667/11]

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 84: To ask the Minister for Finance if there are copies of the licences necessary for banks to operate here readily available; are the licence conditions governing foreign banks operating in Ireland different from those of the Irish banks; if it is possible to trade as a bank in Ireland without a licence; the persons responsible for monitoring banks compliance with the conditions of their banking licences and is this compliance transparent; the legal consequences for the banks and their customers if the banks have breached one or more of the conditions of their banking licence; if a bank is found to have been operating in breach of one or more of the conditions of their licence, are the agreements they have entered into while doing so legally binding; is a bank selling loans and mortgages while insolvent in breach of the condition of its licence to operate; and when was the last governmental review of the licence conditions governing financial institutions. [40669/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I propose to take Questions Nos. 82 and 84 together.

The Central Bank Acts – and in particular the Central Bank Act 1971 – set out the principal legal definitions related to banking in Ireland, including provisions relating to 'banking business' and persons deemed to hold themselves out as bankers.

The Central Bank is the statutory body with responsibility for licensing banks and attaching conditions to those licences. Copies of banking licences are not available to the public. However, section 12 of the Central Bank Act 1971 provides that the Central Bank must publish a list a persons holding banking licences at least once a year; that information is published on the Central Bank's website.

With regard to foreign banks the supervisory responsibilities of financial regulators in relation to credit institutions operating in more than one EU member state have been set out by the EU in a number of Directives and cover both home and host state regulators. A credit institution authorised in Ireland must notify the Central Bank if it wishes to operate under a passporting arrangement in another EU Member State. Credit institutions authorised in another EU Member State must notify their home state regulator if they wish to operate under a passporting arrangement in Ireland.

The Central Bank is responsible for monitoring compliance with the terms of banking licences and therefore matters arising from any breach of a banking licence fall under its responsibility. On the question of transparency, the Central Bank is subject to a duty of banking secrecy in accordance with the Supervisory Directives and section 33AK of the Central Bank Act 1942 when carrying out its regulatory functions.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 83: To ask the Minister for Finance the assets that underpin the creation of Irish bank notes; are there any legal requirements that loans advanced by banks should be supported by assets or deposits held by those banks; the body that decides the regularity and the quantities of the Irish euro that are printed; the location at which the is euro printed and the way its printing process is monitored; and the conditions under which money is generated. [40668/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

The amount of Euro banknotes on the balance sheet of the Central Bank of Ireland represents Ireland's share of total Euro banknotes in circulation. Ireland is currently allocated 1.46 per cent of the total euro banknotes in circulation based on its fully paid up share of the capital of the European Central Bank (ECB). These banknotes are backed by assets which relate to Eurosystem monetary policy operations, and primarily comprise loans provided to credit institutions and securities (Government bonds) purchased in connection with monetary policy operations. The income earned on assets backing the Euro banknotes in circulation is pooled by all Eurosytem National Central Banks and distributed back to these Banks in accordance with their respective share of the ECB's capital. With regard to legal requirements in place that loans advanced by banks should be supported by assets or deposits held by those banks, I refer the Deputy to my reply to Question No. 85 on today's Order Paper.

Euro banknotes have legal tender status within the Member States whose currency is the euro. The issue of euro banknotes is not subject to quantitative or other limits. Banknotes are printed in accordance with a pooled production system within the European System of Central Banks. Under this system, the ECB coordinates the annual banknote requirements of the eurosystem with the National Central Banks and allocates banknote production.

The Central Bank of Ireland is typically allocated one denomination per year. Under this pooled production arrangement, the Central Bank of Ireland printed 127.5 million €10 banknotes in 2010.

There are 13 printing works fully accredited by the ECB to print euro banknotes. In Ireland our production allocation of euro banknotes is printed by the Central Bank of Ireland. All accredited printing works must report progress on the production plan to the ECB on a regular basis.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context

Question 85: To ask the Minister for Finance if the fractional reserve banking applies to the banks in the context of their lending policies; if banks are obliged to retain a certain minima of retained deposits relative to their lending volumes and if so the ratios of same; the minima of liquid cash reserves or liquidity ratios financial institutions are obliged to retain in their reserves at all times; the person who decides the ratios relating to solvency and liquidity should be and the person who monitors compliance with any such strictures; the way these ratios are determined; if there have been any changes in these regulations over the years; and the mechanism by which an insolvent bank can give out loans or offer mortgages if it has no money. [40670/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

As Minister for Finance, I have no function in relation to Euro area monetary policy operations. The Governor of the Central Bank carries out his European Central Bank-related functions under the Treaty of Rome and the Statute of the European System of Central Banks (ESCB) and his independence in doing so is guaranteed. Section 19A (2) of the Central Bank Act 1942 provides that the Governor has sole responsibility for the performance of the functions imposed, and the exercise of powers conferred, on the Bank by or under the Rome Treaty or the ESCB Statute. I am advised by the Central Bank that, as part of its approach to monetary policy implementation, the ECB requires credit institutions in the euro area to hold compulsory deposits on accounts with the national Central Banks: these are called "minimum" or "required" reserves. For Irish banks, the reserves must be held at the Central Bank of Ireland. The amount of required reserves to be held by each institution is determined by its reserve base. The reserve base of an institution is defined in relation to prescribed elements of its balance sheet.

In order to determine an institution's reserve requirement, the reserve base is multiplied by a reserve ratio. The ECB applies a uniform positive reserve ratio to most of the items included in the reserve base. This reserve ratio was set at 2% at the start of the monetary union.

The compliance with reserve requirements is determined on the basis of the average of the daily balances on the institutions' reserve accounts over the maintenance period of around one month.

The ECB announced on 8 December that it will reduce the reserve ratio for Euro area banks to 1% as of the reserve maintenance period starting on 18 January 2012. This is part of the ECB's measures to support bank lending.

Bank solvency is a regulatory as distinct from a monetary policy matter and solvency requirements are set out in the Capital Requirements Directive (CRD) which implements the Basel II capital framework in the European Union. By requiring banks to hold minimum levels of capital to absorb unexpected losses that a bank may face, capital requirements provide for continuing bank solvency so that they can continue to provide credit and other functions into the economy. The CRD was adopted in 2006, superseding previous directives in this area, and came fully into effect from 1 January 2008.

The Central Bank of Ireland is responsible, in accordance with the legislation transposing the CRD into Irish law, for the regulation and supervision of the capital, or solvency, requirements of banks in Ireland. Irish banks are required to calculate capital requirements and maintain a minimum level of own funds in accordance with the CRD as a cushion against credit and other risks and to absorb unexpected losses that a bank may face. In addition to capital requirements imposed under the CRD, I am advised that the Central Bank, as part of its prudential oversight of banks in Ireland, imposes qualitative and quantitative requirements on banks in relation to the management of liquidity risk. These requirements are imposed by the Central Bank pursuant to its powers under the Central Bank Act 1971 and the European Communities (Licensing and Supervision of Credit Institutions) Regulations, 1992, (S.I. 395 of 1992). The latest iteration of these requirements is set out in Requirements for the management of liquidity risk, published by the Central Bank in June 2009 and available to download from its website.

Arising from the recent financial crisis, the Basel Committee on Banking Supervision adopted amendments to the Basel capital framework in December 2010 to significantly increase the quality and quantity of capital held within the banking system relative to banks' risk-weighted assets and to impose standard liquidity requirements. These changes, known as Basel III, will require amendments to the Capital Requirements Directive which will be implemented in due course in the EU.