Richard Bruton (Dublin North Central, Fine Gael)
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Question 44: To ask the Minister for Finance if he has satisfied himself with the effectiveness of the powers of enforcement when regulatory failures or failures of corporate governance occur in the banking sector. [11993/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As the Deputy will be aware a detailed and comprehensive legal and regulatory framework is in place in Ireland for the regulation and supervision of the financial services sector. This framework is underpinned by an extensive series of EU directives governing the conduct of financial services activities on a cross-border basis within the EU Single Market.

Clearly, an effective system of enforcement is central to the effectiveness of any system of financial supervision. Under the statutory framework which established the Central Bank and Financial Services Authority of Ireland, the Financial Regulator was conferred with significant powers to impose sanctions for prescribed contraventions of legislation or regulatory rules.

The Financial Regulator has wide-ranging powers to conduct an examination where it suspects that a regulated financial service provider and/or person concerned in the management of a regulated financial service provider has committed a "prescribed contravention". If the examination concludes that there are reasonable grounds to suspect that there is or has been a prescribed contravention, the Financial Regulator can establish a inquiry. The inquiry shall decide if the prescribed contravention has occurred and determine the appropriate sanctions.

The legislation provides that, at any time up to the conclusion of an inquiry, the Financial Regulator may enter into a binding settlement agreement with a regulated financial service provider and/or a person concerned in its management to resolve the matter. Where a financial services firm or individual enters into such an agreement early in the pursuit of a sanctions case, the terms of the settlement will reflect the savings in time, resources and money that would result. Administrative sanctions procedure decisions can be appealed to the Irish Financial Services Appeals Tribunal.

My Department has been advised that the Financial Regulator has concluded 26 enforcement actions since it received the legislative powers to do so. Seven people have been disqualified from being involved in the management of regulated financial services providers for various periods of time and one person stepped down as a director. Seven of the firms sought the voluntary revocations of their authorisations.

In addition to the powers available to the Financial Regulator under the administrative sanctions regime, specific criminal offences are provided for under various national and EU legal instruments where a breach of regulatory requirements might arise. For instance, certain offences under the Markets in Financial Instruments Directive are punishable in Ireland by up fines up to €10 million and/or up to ten years imprisonment. The same punishments also apply in the case of other EU legislation.

Clearly, in restoring the reputation of the regulatory system through the reform of our regulatory structures, it will be a priority for the Government to ensure that any measures required to strengthen the powers of enforcement available to the new Central Bank of Ireland to ensure that a credible and robust enforcement regime is in place for the future. In that regard, my Department is in discussions with the Financial Regulator, now headed by Mr. Matthew Elderfield, and the Central Bank and Financial Services Authority of Ireland, to which Dr. Patrick Honohan has recently been appointed as Governor, to assess possible areas of improvement to its enforcement powers and supervisory resources with a view to including appropriate provisions in forthcoming legislation on the restructuring of the Central Bank.

There will be three Bills by the end of the year related to the reform of the Central Bank.

Richard Bruton (Dublin North Central, Fine Gael)
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Does the Minister share the dismay of the public that, 18 months into the financial crisis, no one has been held to account? In the US there are 42 bankers in jail and the banks are paying money back to the state for the assistance they got. Are inquiries or sanctions being pursued against the financial institutions that are at the core of the failure? Does a vagueness in the definition of the offences prevent the criminal or civil arms of enforcement from taking action? It certainly appears to the public that serious misdemeanours took place.

Are changes being introduced in respect of boards of directors which failed their shareholders so that board members have suitable qualifications, know their business and act effectively?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Deputy has gone beyond the remit of the question but I am happy to deal with the additional matters raised. In regard to boards of directors, there has been substantial change in personnel and this process will continue. The entire board of Anglo Irish Bank changed when the bank was nationalised, with one exception who had been appointed a few weeks earlier. We have also seen substantial change in the other institutions in respect of chairs and chief executive officers. As part of recapitalisation, we have insisted on a rotation scheme in both Bank of Ireland and Allied Irish Bank.

The investigations into particular matters, which are warranted by what has been established, have moved beyond the regulatory stage and I understand they are now at a criminal stage of investigation. This investigation has to take priority over the regulator and is being conducted on a parallel basis by the Garda Síochána and the Office of the Director of Corporate Enforcement.

Richard Bruton (Dublin North Central, Fine Gael)
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The fraud squad has been involved for the past 12 months and the Office of the Director of Corporate Enforcement stated at least ten months that prima facia evidence existed of a criminal offence ten months ago but nothing has happened. We have not even seen the legal changes that would clarify the offences and the type of probity and fitness required to serve on a board. Nothing has happened that would give the public new confidence. We have seen neither tough enforcement nor new standards. For the sake of public confidence, these measures have to be implemented.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The first element of public confidence was established by the appointment of the new regulator, who has certainly inspired confidence in all his actions to date. As I indicated to the House yesterday, I intend to ensure any legislation introduced enhances his independence and freedom of action and ensures that a credible statement is made both at home and abroad about the proper regulation of our banking system.

We will have to deal with three items of legislation pertaining to the Central Bank and while I accept the third will be a consolidation measure-----

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister's colleagues told us months ago that charges were imminent.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Responsibility for these matters rests not with the Government but with the bodies entrusted with instituting charges. It would be a criminal offence for me to contact the Director of Public Prosecutions on this matter. Legislation to this effect was enacted by a national coalition Government in 1974. I have limited scope for initiative in this area.

The other bodies mentioned jealously guard their independence, as they must, in the context of prosecutorial discretion and the preparation of cases. Just a few weeks ago, a Minister of State resigned because he wrote a letter pertaining to a summons. I do not understand how I am supposed to correspond with the authorities on these matters. Naturally I share the public unease about the delays that have already arisen because it is important these matters are brought to justice as quickly as possible. I agree with Deputy Burton's earlier comments in that regard.