Brian Lenihan Jnr (Dublin West, Fianna Fail)

This Bill is concerned with the supervision and regulation of the financial services industry in Ireland. The financial services industry plays a major role in the economy, giving as it does direct employment to about 50,000 people and providing the wide range of services and products that are so vital in a modern economy. As the industry has changed and grown during the years, there have been considerable changes in the legal and regulatory framework to keep pace.

In recent years the distinctions between banking, building societies and insurance have become blurred at the edges. Firms in each of these sectors are increasingly active in overlapping markets. Banks have moved into areas of insurance and the provision of mortgages. Life insurance companies are now strongly focused on long-term savings products. A complex mix of intermediaries also operate in the market. As the sector becomes more and more integrated, regulation needs to take a more integrated approach.

The Government has recognised that the regulation of the financial services sector has not been helped by the multiplicity of regulatory bodies with differing regulatory powers and functions. In a small country like Ireland there is a powerful case from both an effectiveness and efficiency perspective for building a critical mass of skills relating to financial regulation in a single location. This is particularly the case because of the increasing complexity of risk management throughout the financial sector.

In the regulation of banking, insurance and investment firms fundamental changes are under way internationally in response which will change the way regulation is done. The skills required of regulators will expand dramatically. We need a centre of expertise in Ireland where those skills can be developed. The Government does not intend to wait until after the Basle II exercise in the banking sector and the Solvency II process in the insurance sectors are complete before recognising and acting on this. We wish to act now to restructure regulation in order that the expertise can be in place as the new regulatory approach emerges internationally over the next four to five years.