Michael McGrath (Cork South Central, Fianna Fail)

I welcome the opportunity to contribute on Second Stage of the Central Bank (Supervision and Enforcement) Bill 2011. This Bill was commenced last year following the adoption of the Central Bank Reform Act and it forms part of an overall package of measures designed to reform the regulatory system which is crucial for the future of our economy.

We all recognise the abject failure of the regulatory system in Ireland to properly supervise the financial sector during the years of the Celtic tiger. This was, undoubtedly, one of the key factors leading to the severe economic difficulties we now face. The taxpayer has been left with a bill in order to recapitalise the banks. To date, direct capital support by the State runs to approximately €64 billion, which exceeds 40% of Irish GDP. By any international comparison, this is a remarkable figure and it is a measure of the scale and the extent of the failure of the regulatory system to supervise and intervene where necessary in respect of the actions of the very large financial institutions in particular.

We all recognise that the system of regulation was seriously deficient, deferential to the banks and lacked teeth. There was also an unwillingness to act within senior levels of the regulatory system.

It was not just a failing at the level of the Financial Regulator. The Central Bank also failed in its duty to raise any red flag on the prudential side or to warn Government in a robust and vigorous way of the implications for the broader economy of the over-reliance on the construction sector or of the scale of lending that was going on among the principal banks here and the foreign banks. While reckless lending was undoubtedly a prominent part of the system for many years, others in the banking system were possibly also guilty of fraudulent and criminal activity. We should take the opportunity in this debate to say how galling the lack of progress on the investigations is for ordinary people. The investigations into certain transactions at Anglo Irish Bank and other institutions have been going on for almost three years.

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