Heather Humphreys (Cavan-Monaghan, Fine Gael)

Go raibh maith agat a Cheann Comhairle. I welcome the opportunity to speak on the Central Bank (Supervision and Enforcement) Bill 2011.

At this stage we are all aware of the failures to apply appropriate regulation to our financial institutions in the past. This was one of the key reasons why we now find ourselves in our current economic difficulties. There have been numerous reports conducted into the banking crisis and all have pointed to abject failures on the part of our regulators. A lack of necessary supervision and poor risk assessment were the key factors in leading us to where we find ourselves today - not in control of our own economic destiny. Indeed, the Bill is a further requirement of the EU-IMF programme of support for Ireland.

The Government and the Minister for Finance, Deputy Noonan, are working hard to rectify that situation and to restore our economic sovereignty. In that respect, the Bill will form a crucial part of the new platform for banking in the future. The Bill will strengthen the powers of the Central Bank and provide it with the ability to impose and supervise compliance with the regulatory requirements. Further to this it will allow the Central Bank to intervene where necessary and in a timely fashion.

In respect of our banking system some of the previous speakers have said the Bill could be seen as a classic case of locking the stable door after the horse has bolted. However, if we do not learn from our mistakes we are destined to repeat them. In that respect, we are fully aware of the mistakes that were made in the past in our credit institutions and the aim of the Bill is to ensure that they are not repeated in the future.

We are all well aware of the fact that our banking system and regulatory authorities failed us completely, but we need to acknowledge the role of others in this catastrophe. What was the role of auditors in the banking collapse? They signed off on the accounts presented to the public, and some of these same auditing firms continue to provide services to the State. What was the role of commentators and analysts in the daily and Sunday newspapers, telling people to buy property and invest in shares? Nobody shouted "Stop". If one delayed one was made to feel like a fool and to be missing out on a great opportunity.

Our banks were over-exposed, poorly governed and had inadequate risk management. Our regulatory controls did not work for us and these weaknesses subsequently proved to be disastrous for our banking sector and the wider economy. The Bill seeks to address this issue and gives the Central Bank extensive powers in the area of supervision and enforcement. These powers need to be used effectively and efficiently while working to clear objectives. There needs to be clear lines of accountability and I urge the Minister to ensure that the Central Bank is held accountable and responsible for its actions and where necessary justify why a certain course of action was taken or not taken. I would also ask the Minister to ensure that there is an appropriate skills set within the regulatory authority to enable staff carry out their duties to the highest level.

The Central Bank must have a clear understanding of the outcomes of the decisions it makes. In view of the extensive powers being given to the Central Bank I ask the Minister to ensure objectives are put in place such as market confidence, public awareness, protection of consumers and reduction of financial crime.

Consideration must also be given to sector development. Otherwise we could regulate our industry out of existence. We do not need regulation for the sake of it. We want a sound financial sector properly regulated but at the same time remaining competitive in a global context.

In discharging its functions, the Central Bank must be mindful that a burden or restriction that is imposed on a financial institution should be proportionate to the benefits, and consideration should be given to what the expected result will be from the imposition of that burden or restriction. The Central Bank needs to take account of the international character of financial services and markets, the desirability of maintaining the competitive position of Ireland and the need to minimise the adverse effects on competition in the industry which may arise from such actions. It also needs to be careful that innovation and market growth is not stymied by its approach.

Sweeping regulation across the financial sector needs to be considered carefully, and particularly the effect it will have on the credit union sector. I welcome the fact that the Minister has referred the Bill to the Commission on Credit Unions for a recommendation on its application to credit unions. I also welcome his commitment to give this issue further consideration as work on both Bills progresses

In most other jurisdictions with a significant credit union presence, such as Canada and the United States, credit union legislation is housed within a framework that takes account of the not-for-profit, people-centred ethos of credit unions which is at the core of its principles. I ask the Minister to take this into consideration. I also impress upon the Minister the importance of carrying out a regulatory impact analysis on any material changes to the Credit Union Act. No regulatory impact analysis was carried out in respect of the amendments to section 35 of the Credit Union Act. Credit unions had sought a relaxation of longer term lending restrictions and the Financial Regulator took the opportunity to amend section 35 and put in place very restrictive provisioning requirements which mean many credit unions now find themselves priced out of the ability to lend to their members or reschedule loans to members who are now unemployed or on significantly reduced incomes. Proper regulatory impact analysis must not be sacrificed in the interest of easier oversight.

In my experience the success of the credit union movement lies in the fact that it is cemented in the community for the community. Local knowledge, coupled with the trust and loyalty and special relationship with their membership that credit unions enjoy, is one of their greatest assets which cannot be measured in the balance sheet or taken into account in stress testing exercises. When considering supervision and enforcement of credit unions we need to take account of the special voluntary structure of credit unions which has served the movement well. We need to take cognisance of the continuing unique role of credit unions in society and in all of our communities, particularly in these difficult economic times.

I welcome the Bill but reiterate that with increased powers comes increased responsibilities and accountability. This should always be the case. It is important to remember that we do not live in an economy and that people are not just economic tools, rather we live in a society and community in which each of us has a responsibility for each other.

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