Gerald Nash (Louth, Labour) | Oireachtas source

This is a good but long overdue day. Several years after the Central Bank recommended that our laws be amended to make individual decision-makers and financial institutions responsible for their actions, we finally have a Bill before us to make it a reality. The recent history of banking in this country has been well documented. There was an absence of strong regulation and too close a relationship between bankers and regulators, all egged on by Governments in the 2000 that were satisfied to leave them at it for as long as the stamp duty kept rolling in and mortgage loans were approved. Our society is still damaged by the effects of the financial crash. The victims of the crash and the policies that allowed the collapse to occur are to be found in the lines of those queueing to rent a home they will not get or to view a home they cannot afford. There is a direct line to be drawn between the behaviour of the banks in the early 2000s and the hands-off regulation at the time and the housing crisis we are now experiencing.

Since 2010, the banking regulatory environment has changed dramatically. Serious restrictions are now placed on banks with regard to their capital requirements. Stress testing of potential homeowners in mortgage applications is rigorous. We know that changes have been proposed by the Central Bank. We have a strengthened Central Bank with teeth and a good and functioning Financial Services and Pensions Ombudsman. We have a new banking culture board that aims to drive culture change across the retail banks. These are all welcome developments that will make a major difference to the way in which the retail banking sector operates in this country. It will be better regulated, more customer focused and more transparent but far from perfect.

One piece has always been missing. While this is a good day, the question that must be asked is why we had to wait so long for an individual accountability regime to be established. Earlier I mentioned how our dysfunctional housing system owes much to the continuing playing out of the socioeconomic impact of the financial crash and the collapse of the public finances. It is important to understand that the tracker mortgage scandal of epic proportions, which deprived people of their homes, cost them relationships and cost lives, can be traced back to a culture of impunity at corporate and individual level in all the major retail banks.

Less than one month ago, the Central Bank issued a fine of more than €100 million for a series of significant and long-running failings with regard to 16,000 tracker mortgage customers between 2004 and 2022 in respect of Bank of Ireland. These failings involve the loss of 25 family homes. The Central Bank said this could have been avoided if Bank of Ireland had met its most basic and fundamental obligations. Bank of Ireland is not alone. Mention must also be made of AIB, Permanent TSB, KBC and Ulster Bank. They were all at it. No major bank escapes our gaze on this.

The Central Bank report of 2018 pointed to the fact the tracker mortgage examination noted the cultural failings when it came to the tracker mortgage scandal, along with poor systems, weak internal controls and poor governance. All of these when taken together caused devastating impacts on consumers. We need to reflect on this. We must remember that at the most basic level it is human beings who make decisions, individually and collectively. People make decisions and not just firms. One of the biggest stains on our society is that a single individual has yet to be held to account for the horror the banks perpetrated against thousands of tracker mortgage customers who, when we strip it all down, had money stolen from them in a calculated and deliberate way. This is what the tracker mortgage scandal amounts to.

It is worth reminding the House that to date there has been only one inquiry into the involvement of an individual in the tracker mortgage saga. I understand the person worked for PTSB and the investigation is ongoing. If ever proof were needed of the demand for a functioning fit-for-purpose set of laws and regulations to make individuals accountable for their decisions, it is the very existence of only one investigation regarding tracker mortgages.

We should not be surprised that the level of trust in Irish banking is low. This has been referenced by previous speakers. The chair of the Irish Banking Culture Board, Mr. Justice Hedigan, said when the board published its Éist survey this year that more work needs to be done to address the deeply ingrained feelings of distrust towards the banking sector among the public. Mr. Justice Hedigan went on to remark that continued positive behaviour on behalf of the retail banks is necessary to further restore public trust in the sector. He said this in good faith. It was a week before AIB tried to railroad through a plan to slash its branch network without consultation and with no thought for those who would be most impacted. This was followed by a hasty retreat after a series of significant political interventions. I hope AIB has learned some valuable lessons in this regard. This is not how to win back trust; in fact, it is quite the opposite.

These proposals, which will be exceptionally important in rebuilding that trust, are overdue and it is a pity we had to wait so long for the establishment of a system of individual accountability, the kind of system that has been operating well in the UK and Australia for some years. It is encouraging that reviews of the UK and Australian systems have reported positive impacts on culture and governance and, significantly, that no challenges were experienced in attracting skilled and experienced staff to the financial services sector as a result of the robust accountability regime introduced in those jurisdictions. This is important from the point of view of the financial services sector here, a sector which is becoming increasingly important for the economy and the provision of good jobs throughout the country.

People who work in the financial sector ought not to fear anything from improved regulation and enhanced accountability; in fact, it should be embraced. This new regime should and can be worn as a badge of honour for Ireland and could be seen as another important step towards better governance and compliance with international best practice.

Both the Minister and the Minister of State, Deputy Fleming, have highlighted in some detail many of the key elements of the Bill. The Labour Party supports the Bill and will propose appropriate amendments on Committee and Report Stages. It has been through the regulatory impact assessment process, which has summarised the purpose of the Bill in a succinct way. It states that the intention of the legislation is to act as a driver for the recognition of responsibilities by individuals to mitigate the risk of misconduct by firms and deliver better outcomes for consumers and protected markets. It will introduce conduct standards for controlled function roles in all firms and clarify the lines of responsibility and decision-making processes within relevant firms. It will build on the Central Bank's existing powers and enhance the bank's ability to hold senior executives and other individuals to account. It will bring efficiencies to the supervisory and enforcement work of the Central Bank by enforcing greater transparency in respect of who is responsible for what and how roles and responsibilities work together and interconnect.

The Bill will introduce a new regime of responsibility, governance and sanctions for senior executives who are managing and operating regulated financial service providers, RFSPs, by means of a senior executive accountability regime, SEAR. It will set out codes of conduct for both businesses and individuals, thereby making clear the standards of allowed behaviour, as well as sanctions that would be faced if responsibilities are breached. It will introduce a new duty of responsibility obliging senior executives to take reasonable steps to ensure the firm does not breach its obligations under financial services legislation. It will also revise the processes of the Central Bank to make them more effective and efficient, and to ensure they conform to standards of fairness in the administration of justice. These include the fitness and probity regime and the administrative sanctions procedures, which the Minister provided detail on earlier.

The Bill is detailed and technical in places and I do not intend to give views on every aspect of it. In any case, it seems the efficacy of this legislation will very much depend on the way in which the regulator, the enforcement authority and the Central Bank produce and enforce regulations and how they work with individuals and financial institutions that fall within the scope of the legislation.

Turning to individual accountability, the Bill sets out a clear legal framework on where individual decision-making and responsibility lie. The new laws will place an onus on the RFSPs to assign clear functions and responsibilities to pre-approval controlled functions, PCFs, which is welcome and provides transparency.

Chapter 2 sets out the business standards that must be adhered to, including the legal requirement to act honestly and professionally and to engage in good faith with the regulator. There is also a clear obligation to disclose to the Central Bank any matter relating to the RFSP for which the bank could reasonably expect to receive notice of, and this is a good thing.

Chapter 3 covers duties of responsibility and the new standards of conduct. It is important that the precise parameters of the duty of responsibility are described in the Bill as well as what constitutes inherent and allocated responsibilities.

Throughout the legislation, we will see reference to the need to show the regulator, through the taking of reasonable steps at all times, how an individual or organisation remains compliant with the standards of conduct and behaviour that will be demanded of those who come under the scope of the new legislation. This requirement makes sure that this onerous legislation is balanced and proportionate and will allow the regulators to fully consider the context of any breach that may come to their attention for investigation and, if a contravention occurs, to impose a sanction.

Sections 53E and 53F describe in detail the common conduct standards and additional conduct standards. Section 53G is important in that it empowers the Central Bank to develop guidelines and guidance for those who will be governed by the legislation. It is imperative that an intensive programme of outreach and training be afforded to those who will come under the remit of the new laws. This is only fair and proper, which is recognised in the Bill and acknowledged by the Minister and Central Bank in their commentary on this new regime. This will help to drive compliance and limit the room for excuses. Ignorance will be no defence. The legislation cannot be clearer on what is demanded and required of those who are governed by it.

Part 4 is crucial. It relates to the changes that will be made to the Central Bank's administrative sanctions procedure under the new laws, including the process of investigating breaches and how they will be investigated and so on. It is important this process of investigation and sanctions for contraventions is robust, that it complies with the principles of natural justice and fair procedures, and that it is not at odds with the Constitution. The process has been carefully laid out, step by step, in the legislation and that is a good thing.

The Bill is at pains to reflect the lessons of the Zalewski judgement, as the Minister mentioned earlier. It is critically important when administrative tribunals and regulators undertake the important job of investigating breaches of laws and regulations, and where they pass down serious sanctions, that it is done in a fair and balanced way on the balance of probabilities. In this regard, I raise two points that we in the Labour Party see as important and is something to which we may return on Committee and Report Stages. The Bill has two features we believe are ripe for scrutiny. The first is the rule under section 23, which the Minister referred to earlier, that inquiry decisions do not take effect unless confirmed by the High Court. While he went some way to describe the meaning of "confirmed", we are left to work out what confirmed means in this context and, therefore, I would appreciate further elaboration on precisely what confirmed by the High Court means. What the procedure intends to achieve is quite unclear. It seems the High Court will have no option, if we take a literal view of this legislation, but to apply its confirmation rubber stamp unless it finds an error of law, which is both manifest on the face of the record and so fundamental as to deprive the decision of its basis. If the High Court cannot find such an egregious error of law, the decision of the inquiry and its sanctions must stand. This is what the section seems to insistent upon and it will require further interrogation. I do not see how the participation of the courts at this stage of the process, and to the limited extent as described in the Bill, can cloak it with any greater constitutional legitimacy than it would have without the involvement of the court.

The second provision is in section 67, which prohibits the High Court from granting a judicial review in respect of these decisions, and this requires further elaboration and explanation. The combined effect of these two provisions means we are being asked to legislate for a procedure where the Central Bank can get the law on legal procedures wrong but there would be no legal remedy or access to the courts unless the error can be held to be both manifest and fundamental. The question could be asked why we have such little faith in our regulators that we feel the need to legislate to allow them to get things wrong, even badly wrong, and we only draw the line at them getting things manifestly and fundamentally wrong. These two provisions require additional elaboration.

This is a good day for transparency. We finally have legislation before the Oireachtas that will require banking executives to be responsible for the decisions they make.

It is legislation that we support in principle. It is strong and robust legislation. I look forward to seeing the regulations the Central Bank will be empowered to make to ensure the Bill achieve its objectives. I look forward to engaging with the Minister in more detail on Committee and Report Stages on amendments to the Bill.

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