Brian Lenihan Jnr (Dublin West, Fianna Fail)

The importance of having a regulatory system that provides financial stability and fosters probity has become all the more clear to us now in a time of severe financial dislocation, both nationally and internationally. A new and better co-ordinated approach to ensuring financial stability and regulation is now required, with greater focus on areas such as risk management, compliance, corporate governance and general control processes.

As the Deputy will appreciate, steps have been taken in that regard in the Credit Institutions (Financial Support) Scheme Act and, as a result, the oversight of the banks concerned has been intensified greatly. This new regime provides for heightened direct engagement with each of the covered institutions and new reporting arrangements, including the provision of scheme compliance certificates by the covered institutions themselves and by their external auditors.

The bank guarantee scheme requirements and conditions are the first step in a new system of financial regulation and supervision. The joint boards of the Central Bank and Irish Financial Services Regulatory Authority have written to me and have outlined their views on the reform of the system. This reply does not reflect that fact as I received their opinions only yesterday. They are under consideration in my Department.

Regulatory reviews, both domestic and international, are under way: The regulatory authority is reviewing its overall strategic regulatory approach; the Financial Regulator business process review is now close to finalisation; the Financial Regulator is processing a strategic plan for 2009; at EU level, new regulatory proposals, including improvements to the capital requirements directive, are due for adoption in early 2009; and, at ECOFIN, work is being done to incorporate, at wider international level, the role and mandates of national regulators.

I will take account of the various reviews under way on regulatory reform but I accept that, as Minister for Finance, I am responsible for the legislative framework within which the regulator operates. When I have considered the issues fully, I will bring my proposals for reform to Government.

I indicated I propose to have external international validation of any proposals I bring to the Government or of any process for the selection of a replacement regulator. At the time of the departure of the chief executive of the Financial Regulator, I made clear no replacement was to be appointed before the completion of the review. It is an urgent matter. I am not conducting a review — I am formulating proposals to bring to the Government.

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