Wednesday, 10 March 2010
Department of Finance
Financial Services Regulation
Question 62: To ask the Minister for Finance if he is satisfied with the effectiveness of the powers of enforcement when regulation failures or failure of corporate governance occur in the banking sector. [11610/10]
As the Deputy will be aware a detailed and comprehensive legal and regulatory framework is in place in Ireland for the regulation and supervision of the financial services sector. This framework is underpinned by an extensive series of EU Directives governing the conduct of financial services activities on a cross-border basis within the single EU market. Clearly, an effective system of enforcement is central to the effectiveness of any system of financial supervision. Under the statutory framework which established the Central Bank and Financial Services Authority of Ireland, the Financial Regulator was conferred with significant powers to impose sanctions for prescribed contraventions of legislation or regulatory rules.
The Financial Regulator has wide-ranging powers to conduct an examination where it suspects that a regulated financial service provider and/or person concerned in the management of a regulated financial service provider has committed a 'prescribed contravention'. If the examination concludes that there are reasonable grounds to suspect that there is or has been a prescribed contravention, the Financial Regulator can establish an inquiry. The inquiry shall decide if the prescribed contravention has occurred and determine the appropriate sanctions. The legislation provides that, at any time up to the conclusion of an inquiry, the Financial Regulator may enter into a binding settlement agreement with a regulated financial service provider and/or a person concerned in its management to resolve the matter. Where a financial services firm or individual enters into such an agreement early in the pursuit of a sanctions case, the terms of the settlement will reflect the savings in time, resources and money that would result. Administrative Sanctions Procedure decisions can be appealed to the Irish Financial Services Appeals Tribunal.
My Department has been advised that the Financial Regulator has concluded 26 enforcement actions since it received the legislative powers to do so. Seven people have been disqualified from being involved in the management of regulated financial services providers (for various periods of time) and one person stepped down as a director. Seven of the firms sought the voluntary revocations of their authorisations. In addition to the powers available to the Financial Regulator under the Administrative Sanctions regime, specific criminal offences are provided for under various national and EU legal instruments where a breach of regulatory requirements might arise. For instance, certain offences under the Markets in Financial Instruments Directive are punishable in Ireland by up fines up to €10m and/or up to 10 years imprisonment. The same punishments also apply in the case of other EU legislation.
Clearly, in restoring the reputation of the regulatory system through the reform of our regulatory structures, it will be a priority for the Government to ensure that any measures required to strengthen the powers of enforcement available to the new Central Bank of Ireland to ensure that a credible and robust enforcement regime is in place for the future. In that regard, my Department is in discussion with the Financial Regulator, now headed by Mr. Matthew Elderfield, and the Central Bank and Financial Services Authority of Ireland, to which Dr. Patrick Honohan has recently been appointed as Governor, to assess possible areas of improvement to its enforcement powers and supervisory resources with a view to including appropriate provisions in forthcoming legislation on the restructuring of the Central Bank.