Joanna Tuffy (Dublin Mid West, Labour)
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Question 73: To ask the Tánaiste and Minister for Finance his views on recent reports of irregularities with respect to the short-selling of Irish banking stocks; the progress of the investigation into these reports; his further views on whether the Financial Regulator has sufficient powers to bring such investigations to a successful conclusion; if he proposes to introduce tougher sanctions for malicious trading practices; and if he will make a statement on the matter. [15618/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I should first explain that policy responsibility for market abuse legislation is a matter for my colleague, the Minister for Enterprise, Trade and Employment. The legislative framework relevant to market abuse issues is S.I. No. 392 of 2005, the Market Abuse (Directive 2003/6/EC) Regulations, 2005. Responsibility for the administration of that legislation is a matter for the Central Bank and Financial Services Authority of Ireland.

I am aware of the recent reports of alleged irregularities with respect to the short-selling of Irish banking stocks. I am of course concerned to learn that such practices may be occurring. On 20th March, the Financial Regulator (FR) made a statement drawing public attention to incorrect rumours circulating in the market and reminding market participants of their responsibilities in handling such rumours. In the course of that statement the FR advised that it was examining certain transactions, as one would expect it to do when such unusual trading takes place. I understand that the FR has been in contact with market participants and will be working with other regulators including the UK Financial Services Authority (FSA) to uncover the source of false and misleading rumours circulating in financial markets at that time. I am satisfied that we have a robust and effective legislative framework in place in Ireland closely based on the EU Market Abuse Directive which embodies best practice international standards to guard against market misconduct.

As regards the type of sanctions that could apply in the case of illegal trading practices, I would direct the Deputy's attention to Section 32 of the Investment Funds, Companies and Miscellaneous Provisions Act, 2005 which provides, in the case of conviction on indictment under Irish market abuse law, for a fine not exceeding €10 million or imprisonment for a term not exceeding 10 years or both.

Jan O'Sullivan (Limerick East, Labour)
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Question 77: To ask the Tánaiste and Minister for Finance if he is satisfied that there is sufficient liquidity in the banking system here in the context of the ongoing international credit crunch; his views on whether tighter regulation of the banking system should be considered in view of recent developments in international and inter-bank credit markets; and if he will make a statement on the matter. [15606/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Irish banks' liquidity arrangements are sound and the Governor of the Central Bank and Financial Service Authority of Ireland has recently stated his view that the sector is comfortably meeting the more stringent prudential liquidity requirements introduced by the Financial Regulator before the recent market disruption commenced. This view is echoed in the recent report of the OECD, which points out that Irish banks entered the current period of international financial turmoil in a very strong position and that they, therefore, have considerable capacity to respond to unexpected developments. The OECD noted that Ireland's sustained economic growth in recent years has ensured that Irish banks are well positioned to deal with recent market developments. In this regard, the OECD welcomed the findings that Irish banks have little exposure to the sub-prime market, hedge funds and the private equity sector.

In relation to the question of tighter regulation, I note the clear recommendation in the recent OECD report that the costs and benefits of regulation be carefully weighed so as to continue to secure the benefits of financial innovation in reducing liquidity constraints, a wider spreading of risks and development of new products to meet a wider range of borrower needs. EU Finance Ministers are alert to the need to ensure an appropriate balance in regulation that yields both effective and efficient regulatory outcomes that safeguard the interest of consumers. To this end, they have adopted an extensive programme of work aimed at putting in place a comprehensive response to developments in financial markets. This road map includes reviewing, along with the EU's international partners, how to further improve transparency of complex financial instruments, valuation standards, the prudential framework, risk management and supervision and market functioning including the role of ratings agencies. Ireland is fully participating in this work.