Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am pleased to be able to respond to this question in the absence of the Minister for Finance, who is in Luxembourg to chair the Eurogroup Finance Ministers and the ECOFIN Council tonight and tomorrow.

We have now had a series of announcements by AIB and the Irish Financial Services Regulatory Authority, IFSRA. These cover a range of matters from foreign exchange charges to transactions at AIB Investment Managers in the early 1990s. It is clear that every bank has a duty to ensure that regulations are complied with and client moneys are handled appropriately. Lapses of control and improper practices of the kind which have been reported are simply unacceptable. These are serious matters that must be addressed in a serious and systematic manner through the application of the investigative powers available to the appropriate regulatory agencies.

Deputies are aware that IFSRA is involved in a substantial investigation of the Faldor foreign exchange overcharging matters, and that other investigations are ongoing. As always in such cases, we should await IFSRA's investigation before drawing any final conclusions. We all want customers to be recompensed. We want bank systems to be fixed, all relevant regulatory authorities to be informed and disciplinary matters and any offences which have been committed pursued.

Specific breaches or failures are one thing, but we must strive to ensure an appropriate culture of compliance within financial institutions. I understand that IFSRA is determined to ensure that the highest standards apply in financial institutions and, if issues of general culture or compliance practices at a general level need to be investigated and corrected either in AIB or any other institution, this will be done.

It is therefore important that the various investigations continue to their conclusion. It is also important that we continue with the very considerable progress made in recent years in the regulation of the financial sector. In particular, Deputies will be aware that, following the enactment of the Central Bank and Financial Services Authority of Ireland Act 2003, there is a second, complementary Bill before the House. Last year's legislation radically changed the structure of financial supervision in Ireland, establishing IFSRA and bringing together a range of supervisory functions that had previously been spread over four separate institutions. It also made much improved arrangements for co-operation between regulatory bodies such as IFSRA and the Revenue Commissioners, and we are seeing the fruits of this in recent events.

This second piece of legislation — on which Report Stage will be resumed today — will make available to IFSRA new powers to impose stiff administrative penalties following an inquiry process. These penalties can be applied where there is breach, for example, of any financial services legislation, codes of conduct issued by the regulator, or any condition, requirement or direction imposed under legislation or codes. Penalties available will include the issue of a reprimand, orders to refund charges improperly applied, monetary penalties of up to €5 million and orders to pay the cost of the investigation. Most importantly, individuals may also be subject to penalties. A senior manager might be disqualified from employment at management level in the financial services sector and a monetary penalty of up to €500,000 might be applied.

This new Bill will also give the regulator considerable powers to require compliance statements from financial institutions. These statements will be in addition to those to be required under recent changes to company law. The current Bill will add to consumer protection, in particular by establishing for the first time a statutory financial services ombudsman scheme and by establishing consultative panels to allow IFSRA to consult consumer as well as industry interests more easily. New offence provisions are also being added on Report Stage regarding bank charges.

The financial services industry is important to this country. It delivers jobs — often of high value — both directly and indirectly to many thousands of individuals. It delivers tax revenues, and its success helps to attract other industries and investments to our shores. The economically important nature of this industry makes it all the more important that it maintains its reputation for high standards and integrity in its dealings, and the financial institutions in Ireland should contribute to that reputation.

There will be lessons to be learned from the issues that have arisen at AIB. These will have to be taken on board as appropriate by the financial institutions concerned, banking institutions and their shareholders, IFSRA and the other regulatory agencies, and the Government and the Oireachtas.

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