Mary Upton (Dublin South Central, Labour)
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Question 295: To ask the Minister for Finance his plans to tighten up the regulatory environment in the banking sector here and the business sector as a whole; if he has plans to introduce harsher judicial sanctions for those found guilty of so-called white collar crime, including liability for losses being extended to include a person's personal assets; and if he will make a statement on the matter. [1828/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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In the area of prudential regulation, the Financial Regulator applies regulatory rules to a range of banking activities in accordance with national, EU and international requirements. The importance of having a regulatory system that provides financial stability and fosters probity has become all the more clear to us now in a time of severe financial dislocation, both nationally and internationally. I have already acknowledged that there were shortcomings in the financial regulation oversight of our banks, not least in the case of the concealment of loans to former directors of Anglo Irish Bank, which has done serious damage not only to the Bank concerned but to Irish banking generally. A better form of regulation is now required with a greater degree of focus on areas such as risk management, compliance, liquidity management and general control processes.

There are a number of reviews underway within the Financial Regulator with a view to identifying any shortcomings in the Financial Regulator's strategic regulatory approach, its structures and its capacity to respond. I await with interest the outcomes of these reviews and will be working with the Regulatory Authority to bring about improvements in our system of financial regulation. As the Deputy will appreciate, steps have already been taken in that regard in the Credit Institutions (Financial Support) Scheme and, as a result of this, the oversight of the banks concerned has been greatly intensified.

The new regulatory framework in Ireland must also have regard to EU and international developments in the global financial regulatory framework. In relation to the EU, there are a number of proposals being developed for adoption this year, including improvements to the Capital Requirements Directive to further strengthen the existing banking prudential framework for risk management. Furthermore, the role and mandates of national regulators has been the subject of in-depth consideration by the Ecofin Council. Common reporting standards for financial institutions are being introduced to enable greater EU wide consistency in supervision. Proposals will be introduced this year following the report of the de Larosiére Group, on ensuring prudential soundness, the orderly functioning of markets and stronger European co-operation on financial stability oversight, early warning mechanisms and crisis management. An initial report on this matter is due to be submitted to the Spring European Council and any reform of our Financial Regulator's structures will be consistent with EU developments.

There is already available, under the Central Bank Act 1942 (as amended), a sanctions regime which allows for the imposition of sanctions on regulated financial service providers, including banks, in a variety of circumstances. Under company law, the Office of the Director of Corporate Enforcement has extensive powers of investigation which can lead to criminal proceedings. Policy responsibility for company law and the Office of the Director of Corporate Enforcement falls within the remit of my colleague An Tánaiste and Minister for Enterprise, Trade and Employment.

Mary Upton (Dublin South Central, Labour)
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Question 296: To ask the Minister for Finance the steps which led to the nationalisation of Anglo Irish Bank; the reason that Anglo Irish could not be allowed to fail in view of the fact that a large majority of its loans was extended to developers, many in respect of developments not even occurring here; and if he will make a statement on the matter. [1829/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Government took the decision to nationalise Anglo Irish Bank after consultation with the Central Bank and the Financial Regulator, which confirmed that Anglo Irish Bank remained solvent. The Board of Anglo Irish Bank was also consulted. In December, as part of the broader recapitalisation programme, the Government committed to reinforcing the capital position of Anglo Irish Bank, so that it remained a sound and viable institution. At the time of the re-capitalisation announcement, I made clear that the Government's offer to Anglo represented the last step short of nationalisation for the bank. The commitment of Government support to Anglo was designed to boost market sentiment by bolstering its capital.

However, the disclosure of the unacceptable practices which took place in relation to loans to the former Chairman of Anglo caused serious reputational damage to the bank. At the same time, overall market sentiment towards Anglo was negative. This sentiment put pressure on Anglo's share price, with the danger of knock-on effects for the confidence of depositors. In this context, the Government decided to introduce legislation which would take Anglo into public ownership.

My advice, from all sources, has been that the viability of Anglo Irish Bank is of systemic importance to Ireland, and that letting Anglo fail would lead to very serious disruption of our financial system. The Government's decision to take Anglo into public ownership was therefore taken to ensure financial stability, and to protect deposit-holders and the reputation of the Irish banking system.

To be clear — the nationalisation of this bank does not relieve its borrowers from any of their obligations. But it does provide reassurance to the hundreds of thousands of depositors and the many bond-holders of the bank, many of whom provide funds not just to Anglo, but to the whole Irish banking system. The Government will ensure the continued viability of all systemic financial institutions.