Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

Question 132: To ask the Minister for Finance if he is satisfied that adequate steps are being taken or are expected to be taken to restore traditional banking and lending practices in the future; and if he will make a statement on the matter. [45554/08]

Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context

Question 136: To ask the Minister for Finance if he is satisfied that the regulatory system has to date served its purposes with particular reference to adherence to lending and borrowing practices; the extent to which this is expected to change in the future; and if he will make a statement on the matter. [45558/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 132 and 136 together.

The guarantee Scheme for financial institutions put in place by the Government has been successful in safeguarding the stability of the Irish banking sector and in restoring its liquidity position in order to support its normal lending activities. The Scheme is intended to provide a detailed framework for the positive and constructive changes that must flow from this to restore and uphold for the future the traditional banking values of responsible and balanced risk-taking and lending in order to underpin the long-term sustainability of the banking system.

Financial institutions, particularly those participating in the guarantee Scheme, have a key role to play in supporting both individuals and businesses in the current challenging economic and financial environment. As I made clear when presenting the Guarantee Scheme to the Oireachtas in mid-October, the boards and senior executives of the participating institutions have a key role to play in ensuring that the finance is channelled appropriately to support and underpin sustainable economic activities on a prudent and responsible basis which is clearly in the interest of both the bank, the borrower and wider economy. The Deputy will be aware that at recent meetings with certain financial institutions I asked them to consider the contribution that they can make to the economy through appropriate credit initiatives in relation to small and medium sized businesses and otherwise. Subsequently certain institutions have already announced new initiatives to help the SME sectors. I welcome these important announcements and look forward to further dialogue on this important issue in the coming days and weeks.

The regulation of lending practices of Irish financial institutions is the statutory responsibility of the Financial Regulator. In addition to what is contained in the guarantee Scheme, the Financial Regulator has instigated a series of new regulatory measures to take account of the changed financial environment, including an increased focus on the management of credit and liquidity risks of the banks. Among the actions the Financial Regulator is taking are the following:

the immediate recruitment of an additional 20 senior supervisory staff with banking experience to be placed on-site in key banks to monitor developments;

requiring banks to set out new business plans focusing on the need to reduce their risk profile and how their models of banking are sustainable in the new environment; and

enhanced reporting obligations in relation to capital, asset quality and individual large loans to supplement daily liquidity reporting requirements.

Work has begun at an international level on forging a new model to govern the conduct and behaviour of the financial sector. Ireland will play its part internationally and particularly at EU level in seeking to ensure that the re-design of the financial system and in particular of financial regulation is consistent with the objectives highlighted in the Guarantee Scheme. For the future, it is important to focus on the objective of effective regulation of financial services within the common EU framework under which the regulatory system in Ireland operates and on how best to achieve the integrated and more intensified approach which will help maintain financial stability and safeguard the interests of all consumers of financial services.