Bernard Durkan (Kildare North, Fine Gael)
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Question 108: To ask the Tánaiste and Minister for Finance if he and or his EU colleagues directly or through the European Central Bank or otherwise have issued instructions or guidelines to deter practices such as over indulgence on sub-prime lending with a view to maintaining the confidence of international markets; and if he will make a statement on the matter. [8108/08]

Bernard Durkan (Kildare North, Fine Gael)
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Question 109: To ask the Tánaiste and Minister for Finance the extent and when he and his European colleagues first became aware of the high level of sub-prime or unwise lending; the steps taken, directly or through the European Central Bank or national central banks to combat the problem; and if he will make a statement on the matter. [8109/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 108 and 109 together.

At the outset, I would point out to the Deputy that as far as the national position is concerned, the Government have taken steps last October under Section 19 of the Markets in Financial Instruments and Miscellaneous Provisions Act, 2007, which amended Part V of the Central Bank Act, 1997, to provide for an appropriate system of authorisation and supervision of retail credit firms engaged in specialist or so-called sub-prime lending and home reversion providers not previously subject to financial regulation in respect of lending activities. The primary purpose of this amendment was to extend to customers of these firms the benefit of the consumer protections provided for in the Financial Regulator's Consumer Protection Code. This regulatory regime is in place since 1 February.

Non-traditional or specialist mortgages, sometimes referred to as sub-prime mortgages, are estimated to account for about 1% to 2% of the Irish residential mortgage lending market, compared to about 15% in the US. In Ireland, these products have provided a new mortgage mechanism for customers who might previously have experienced difficulty obtaining a mortgage from a mainstream lender because, for example, of the nature of their work, they are new to Ireland, or they have impaired credit histories. The CBFSAI in its Financial Stability Report 2007 found that the Irish banking sector has a minimal level of involvement in the Irish residential mortgage market for these non-traditional customers. The Report states that the Irish market is characterised by limited mainstream banks' involvement in the market, the relatively very small size of the market and generally modest average loan-to-value ratios.

It is very important to be clear, therefore, that the very significant system-wide difficulties that have emerged in relation to sub-prime lending practices are an issue that have arisen in the US mortgage market. The substantial write-downs of investments that have occurred for some European financial institutions arise from their investments in securities whose value depend on the credit quality of US sub-prime mortgages. The CBFSAI states in its Financial Stability Report 2007 that our credit institutions do not have significant exposures to the sub-prime market, either directly or indirectly. The current market dislocation began with concerns globally, from mid-2007 onwards, about investors' exposures to mounting losses in the US sub-prime mortgage market. Further information on the background and the approach to Financial Stability in the Central Bank and Financial Services Authority of Ireland are set out in the address of the Governor to the Joint Oireachtas Committee on Finance and the Public Service on 30 January 2008.

At the EU level, there is a co-ordinated response to financial stability arrangements and the ability of authorities to respond to market developments, largely set out in the set of common principles and a roadmap of further actions published at the conclusion of the ECOFIN Ministers' meeting on 9 October, 2007. Ireland is participating fully in this work to ensure there is an effective EU-wide system to maintain financial stability taking into account the important cross-border linkages that now exist in EU financial markets.

I am satisfied that the steps taken at national level and the work underway at EU level represent an appropriate response to the need to safeguard financial stability.

Bernard Durkan (Kildare North, Fine Gael)
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Question 110: To ask the Tánaiste and Minister for Finance the steps that have been taken or are expected to be taken to prevent recurrences of financial scandals throughout the banking systems, nationally and internationally; and if he will make a statement on the matter. [8111/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The primary responsibility for managing a bank and for preventing fraud or inappropriate working practices in that bank lies with the management of that institution. No regulatory authority can put in place a supervisory regime to ensure that a financial institution can never be a victim of fraudulent or reckless trading activity from within. It is up to management to have appropriate controls to prevent or detect such activity.

As regards our own financial regulatory system, I am glad to advise the Deputy that a recent IMF examination has confirmed that it reflects best international practice.

There may well be lessons for legislators to be learned from recent adverse experiences in other Member States. The EU Commission is currently addressing a range of issues set out in roadmaps handed down by the Ecofin Councils in October and December 2007. When the Commission reports back on these issues, the question as to whether any further regulatory action would be appropriate can then be considered.

Bernard Durkan (Kildare North, Fine Gael)
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Question 111: To ask the Tánaiste and Minister for Finance the extent to which he and his EU colleagues have examined, discussed or evaluated banking and financial services practices at national or European level having particular regard to the need to ensure the security, integrity and application for best practice at all times in order to ensure public confidence in the banking systems here and throughout the European Union; and if he will make a statement on the matter. [8112/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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There is already an extensive body of harmonised EU financial regulation in operation across the Union. This regulatory regime reflects best practice globally and this is reflected by the fact that EU financial regulation standards are now being followed by countries outside the Union.

Recent discussions at EU Councils of Ministers have focused on the broad issue of international financial market turmoil and on its implications for financial stability and economic growth. Given the comprehensive regulatory framework already in place across all Member States, no regulatory response is contemplated at this time. However, the EU Commission has been asked to look into a number of issues and to report back to Council over the coming months.

As regards financial regulation in Ireland, I am glad to say that our regulatory arrangements have been positively assessed by the IMF as recently as last September.