Brian Cowen (Laois-Offaly, Fianna Fail)

As the Deputy will be aware, the most important safeguard of financial stability is the existence and effective operation of the financial regulatory and supervisory regime. Following the establishment of the Central Bank and Financial Services Authority of Ireland in 2003, encompassing an independent Financial Regulator responsible for prudential supervision of financial institutions and consumer protection, we have such a system in place in Ireland. The Central Bank and Financial Services Authority of Ireland integrates within a single institutional structure both the supervision of individual financial firms by the Financial Regulator and the monitoring of overall financial stability, which is the independent responsibility of the Governor of the Central Bank. This structure yields significant advantages in terms of monitoring and maintaining financial stability in ensuring effective and timely co-ordination of these two key functions.

It is important to emphasise that the framework for financial regulation here is shaped by a detailed and comprehensive template which applies across the EU. There have been a number of positive assessments of the effectiveness of our system of financial supervision. A recent report from the International Monetary Fund, a body that carries out comparative examinations of financial regulation internationally, acknowledged the strengthening of the financial regulatory and supervisory system in Ireland in recent years.

The Financial Regulator adopts a risk-based approach to the supervision of financial firms, targeting its supervisory resources on those businesses and sectors with higher risk profiles and with the propensity to have the greatest impact in the event of failure. In doing so, it must balance a number of key objectives including the safety, soundness and competitiveness of industry, and it must facilitate innovation.

In the current financial market environment, the most important point that needs to be made in the national context is that Ireland's banking system is well capitalised, profitable, liquid and soundly regulated in this regard. I look forward to the publication of the Central Bank's 2007 financial stability report in November, which will set out the bank's current assessment of the financial environment.

There are obviously important lessons to be learned from recent events in international financial markets. This process of review and examination is already under way. At the recent ECOFIN Council on 9 October, EU Finance Ministers agreed on a set of common principles and a roadmap of further actions to enhance financial stability arrangements and the ability of authorities to respond to serious disturbances in EU financial markets.

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Ireland will of course participate fully in this work to ensure there is an effective EU-wide system to maintain financial stability, taking into account the important cross-border linkages that now exist in EU financial markets. My Department is continuing to work closely with the Central Bank and Financial Services Authority of Ireland to oversee national financial stability planning arrangements in line with EU requirements.

It is also important to note the key role of the Central Bank and Financial Services Authority of Ireland operating within the overall context of the Eurosystem and the European Central Bank in maintaining financial stability overall. The Governor of the Central Bank and Financial Services Authority of Ireland has recently highlighted the fact that the euro area operational framework has functioned well in response to recent financial market developments.

I am satisfied Ireland has an excellent regulatory regime and a solid and robust banking system.

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