Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

There is general agreement that the light touch supervision that prevailed in Ireland and elsewhere before the banking crisis was one of its causes. Everywhere, including Europe, has moved away from light touch regulation. From a policy point of view - driven by the AAA countries in Europe - anything like a common banking system could be put in place. In other words, before other people would take responsibility centrally for the debts of banking systems and other sovereigns, an effective supervisory system is the first step that must be put in place. Instead of the Irish Central Bank and the Irish regulator being the sole regulator of the Irish banking system, its regulation would move to Frankfurt.

The regulatory system would be organised and driven by Frankfurt. In practical terms, there are approximately 6,000 banks in Europe and there is a debate about the extent, but the Commission proposal is that all 6,000 banking institutions in Europe should be under the supervisory control of the European Central Bank in Frankfurt. How it would work in practice is that it would be the legal entity which would be empowered to regulate. It would work to a common rule book for all the banking institutions in Europe but in the actual application of the regulation there would be nothing to prevent Frankfurt from delegating its legal supervisory authority to local regulators. However, it would also have an override provision, where it could intervene where it thought it was necessary to impose its regulatory regime directly.

These are the things that are being worked out. I am outlining the shape of it to the committee. Whatever its shape, it must be refined, agreed and be in place early next year, and a legal framework must be in place by 1 January. That is what is meant by the supervisory position.

On the question about the IBRC, it is true that I wrote to Alan Dukes and asked him to talk to the board of IBRC to ask it to apply a pay cut across the pay levels. It was done in the public service and I cannot see why it would not be done elsewhere. At the time, it was discussed by the board of IBRC but the members of the board did not think it was wise or prudent to take the pay cut. The members said the IBRC was losing staff and that it would be very difficult for it to hire. However, my position is that while they have the legal authority to set the pay scales arising from the articles of agreement they entered into at the time the status of Anglo Irish Bank was changed by the previous Government, there is a public interest as well and I will continue to push it. We will see where it goes. The Deputy is correct that I wrote to the bank, but the board said it did not think it would be prudent to apply a reduction in salaries. However, we are working on it. At the same time, the board of IBRC took a 20% reduction in its director fees and took another 15% reduction subsequently. The chief executive has a salary this year that is approximately €200,000 less than what it was last year.