Brian Lenihan Jnr (Dublin West, Fianna Fail)

It is not there at present but the purpose of this legislation is to produce it. That fits in with the Government's general policy in recent years which is to raise the standard of corporate behaviour in business generally, particularly in the case of financial institutions who are entrusted with other people's money. The progress report published last week by the authority confirms that is the approach it is adopting in dealings with financial institutions, focusing on the probity of senior management and the adequacy of compliance arrangements.

The crucial point is the authority has to encourage a co-operative rather than an adversarial approach in this area. We need the financial institutions to be forthcoming with the regulator when they have breached their legal obligations, rather than having them adopt an unduly defensive approach. The regulator must be focused on remedying any wrong that may have been done to customers and putting systems in place to ensure that such behaviour is unlikely to occur. In those circumstances it is important that the regulator has available a discretionary power which would not exist were the Senator's amendment passed.

For example, if a financial institution commits a minor breach by some error and immediately notifies the regulator when it discovers the error, there is a case for the regulator to consider requiring the institution to make good any loss to its customers and perhaps pay a fine, but without requiring the institution to go through a drawn-out public process. This might be the case particularly if the institution had a good record of compliance. On the other hand, if the institution had a bad record of compliance or there had been a more serious breach, it might be more appropriate for the regulator to use the formal public inquiry procedure involving the right to legal representation and the further rights of appeal to the appeals tribunal and the High Court. Even when the regulator uses its discretion to act under those sections, it is obliged to publish an annual summary of its actions.

It is important that the authority has these discretionary powers not to hold formal investigations and to reach agreements with institutions without necessarily requiring an admission of fault. That allows the regulator to have a carefully calibrated response in the particular circumstances of an alleged contravention, taking into account the seriousness of the contravention and the compliance record of the institution concerned.