Michael McGrath (Cork South Central, Fianna Fail)

It was back in February 2009 that the fraud squad raided the offices of Anglo Irish Bank, but now towards the end of October 2011, while some files are with the DPP, no prosecutions have been brought and no charges have been laid before any court in Ireland with regard to the practices that went on. For the sake of confidence in the democratic and political system, it is essential those matters are brought to a conclusion in the short term.

It was interesting to note the comments from the outgoing Director of Public Prosecutions in a Sunday newspaper at the weekend that it may be necessary to bring in specialist jurors or to provide training and expertise for lay jurors so that they will have the know-how and wherewithal to adjudicate on some of these complex criminal cases should they come before an Irish court. I hope the Government is taking this matter seriously, because the last thing we want is for cases to come to court and for there to be no satisfactory process whereby justice can be served.

On a positive note, we would all agree that the appointments by the former Minister for Finance, the late Brian Lenihan, of Matthew Elderfield as Financial Regulator and Patrick Honohan as Governor of the Central Bank were landmark appointments. There is wide acceptance across the House and outside of it that these two individuals are performing their functions to the highest standards. They are certainly introducing a new culture in the Central Bank and the financial regulatory system and that is welcome. The Central Bank, which now incorporates the financial regulatory function, now has more staff and a better skills mix. This too is welcome. The figures on the numbers employed by the Central Bank have been outlined and they are significantly higher than the numbers employed in recent years.

We all accept the need to have the right regulations in place and for those regulations to be enforced in an appropriate manner and that is the thrust of this Bill. Its aim, along with the other legislation that has been advanced, is to ensure we have a regulatory system in this country that is fit for purpose and that ensures the scandalous, reckless management of banks, which was allowed to happen for a number of years, never happens again. We can also agree that the model of regulation must focus attention on the areas of most risk. This is an area where there were failings within the financial institutions. The risk assessment systems they employed were almost non-existent. Also, the assessment of risk within the regulatory authority, where the threat to the economy was resting, and the action following that assessment were severely lacking. While we all recognise that the larger banks and financial institutions, which are regulated by the Financial Regulator, clearly contain the highest areas of risk, this Bill applies to over 14,500 financial service providers here, ranging from the major banks to small local insurance providers and all other regulated financial service providers.

The Office of the Financial Services Ombudsman does tremendous work and some 6,000 to 7,000 complaints are lodged every year with the ombudsman. That office holds a wealth of knowledge and experience that can be used and can feed into a proper regulatory structure. I am not sure how much of a tie-in there is between the ombudsman's office and the regulatory structure, but it is something we should look at. Individuals are coming forward with complaints based on their personal experience of dealing with the regulated entities and are, in effect, doing the work for the regulatory function. They are highlighting the areas where there are deficiencies and the areas of risk. Those complaints are being adjudicated on by the ombudsman, but I would like to see clarification from the Minister as to whether all of that information is fed into the regulatory system and is used by the Financial Regulator to ensure, for example, that hire purchase companies, money lenders, mortgage and credit intermediaries perform their functions properly. Insurance companies are also subject to scrutiny by the ombudsman's office and this area will be an increasing area of activity. Last night we had floods in Dublin and we had them in Cork a couple of years ago, where huge issues arose with regard to insurance. This is an area where we can expect to see a growing number of complaints.

It is appropriate that the EU-IMF programme entered into last November contains an emphasis on an improvement to the regulatory system and a requirement that this Bill be advanced. The Bill was published in July and aims to provide the Central Bank with sufficient powers to oversee and enforce the effective regulation of the financial services sector in Ireland. We would all agree that the combination of a well resourced central bank, staffed by skilled personnel, equipped with regulatory powers and within a strong framework is key to the effective regulation of the financial services sector here into the future. The Bill seeks to address a number of the resource concerns, which were identified by the Central Bank in its enforcement strategy 2011-12 and by the new Central Bank enforcement directorate.

Turning to some of the specific elements of the Bill, the provision dealing with the "skilled persons reports" allows the Cental Bank to request an independent report into a regulatory matter. This means the Central Bank does not have to rely upon the information provided by the financial services provider in question, but can require an expert independent report on the issue, paid for by the firm. I welcome that the Bill recognises the need to have regard to the cost implications for the firm being reviewed. However, I would like to raise an issue with regard to this. The company in question nominates a firm or individual to prepare the report, which the Central Bank approves, or if it fails to nominate a firm or if confirmation is denied by the Central Bank, the Central Bank will appoint the firm to conduct a review. I suggest a better system would be for the Central Bank to appoint the firm that will carry out the review so that the onus would not be placed on the company which is subject to the review to identify an appropriate reviewer. It would be a more meaningful review if it was conducted by an independent firm selected by the Central Bank. I am sure it could put together a panel of suitable firms to conduct such reviews, similar, for example, to the various framework agreements the OPW entered into in the context of procurement.

It is important to emphasise the need for real independence when the Central Bank assesses the firm that will undertake the report. Firms with clear financial links to the company concerned might compromise the independence of the report. Sometimes it may be difficult for the Central Bank to get under the skin of the transaction and to determine whether there is a connection between the company seeking the review and the company conducting the review. That is the reason it would be more robust and independent for the Central Bank to arrange for the review to be carried out. In addition, given that many of the financial service providers covered by the Bill are small operations, we all recognise that costs must be kept to a minimum. I will return to that issue shortly.

On the question of authorised officers, the provision consolidates the existing 20 authorised officer regimes into a single regime. The Minister has outlined the legislative challenge it poses. These officers are the front line investigators of regulatory compliance and simplifying the regimes they operate under makes it significantly easier to ascertain information. Under the Bill, they are being given extensive powers and we need to ensure that people of the utmost integrity are being appointed to these positions, people who will not seek to abuse the extensive powers they are granted. They are in a privileged, sensitive position when conducting their work and it is essential there is a proper code of conduct in respect of these authorised officers under the new system.

The whistleblower protection provision protects whistleblowers from victimisation by their employers and from civil liability. If a staff member informs the Central Bank of misdemeanours in the company, he or she will be protected from punishment by that company. We all welcome that in general terms but a number of issues have been raised. In researching this Bill, I came across a number of documents and responses to the legislation. Some of the issues raised are valid, and some of them have been raised by legal firms, accountants and others. While a person who makes a report under the Bill will receive whistleblower protection, it is not yet clear how the reporting obligation will operate in terms of timing. Must reports be made to the Garda Síochána and the Central Bank at the same time? It is not clear what due process, if any, should take place in an organisation before a person makes such a report. Is protection afforded irrespective of whether an internal process has been exhausted? Under the Criminal Justice Act 2011, a person who fails, without reasonable excuse, to report information that could be of material assistance regarding a relevant offence under that Act, or a suspected relevant offence, to the Garda Síochána will be guilty of an offence. However, under the current Bill, the responsibility to report activities is confined to individuals in pre-approved control positions and senior management, not all personnel as set out in the Criminal Justice Act 2011.

Regarding directions, sweeping powers are afforded to the Central Bank and, in general, we do not have a difficulty with this. Similarly, on the issue of making appropriate regulations, a proper framework whereby the Central Bank can conduct intervention actions where appropriate was lacking and has been corrected in this legislation. I also welcome the increase in the level of fines. The lack of a proper deterrent and a lack of willingness to impose the deterrent was one of the factors that contributed to the malaise and the light touch regulatory system in Ireland for some time.

On the issue of sanctions, the Central Bank may revoke the authorisation of a financial services provider, which is welcome. A number of other areas, such as restitution orders and co-operation with overseas regulators, are to be welcomed but I emphasise to the Minister the need to ensure proper consultation with the industry. He referred to consultation in his opening remarks and perhaps he can elaborate on the type of consultation and who he consulted with. Were the representative bodies of small players in the industry consulted? They are the most vulnerable in many respects and the cost implications of ensuring they comply with this legislation will be a major burden for them. We need to ensure that while we weed out any cowboys in the financial services sector, we do not want to stifle the many good operators. At a time when we are trying to restore competitiveness to our economy, costs associated with compliance must be at the forefront of our consideration of this matter.

I refer to the bodies and entities not regulated by this Bill or any legislation, such as debt management advisers and companies such as Home Payments Limited, which collapsed in August with devastating consequences for thousands of its customers in Dublin. While great emphasis is rightly being placed on ensuring regulated entities are comprehensively regulated, we must move with the same urgency to ensure that people in vulnerable positions, such as people struggling with personal debt and mortgage arrears, are also protected from the companies and businesses providing services. We have published a Bill, which is sitting on the Order Paper, providing for the regulation of debt management advisers. The Minister has asked the Central Bank for feedback and is awaiting it. I urge the Minister to move on that issue with the same speed and urgency with which this Bill is making progress. I look forward to detailed engagement on Committee Stage.

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