Mary Mitchell O'Connor (Dún Laoghaire, Fine Gael)
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Question 84: To ask the Minister for Finance if he will investigate the possibility of increasing the fine to be imposed on credit institution employees found to have committed the offence of mismanagement of that institution, by failing to run the institution according to sound administrative and accounting principals, as per Regulations 16 and 33 of the European Communities (Licensing and Supervision of Credit Institutions), Regulations 1992, S.I. 395 of 1992. [18121/11]

Michael Noonan (Limerick City, Fine Gael)
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The European Communities (Licensing and Supervision) Regulations 1992 (S.I. 395 of 1992), which give effect to EU legislation relating to the licensing and supervision of credit institutions, were amended in 2006 and 2007 to transpose relevant provisions of the Capital Requirements Directive (2006/48(EC). Regulation 16 sets out requirements for credit institutions in relation to governance arrangements, including the requirement to have: a clear organisational structure; effective processes to identify, manage, monitor and report risk; adequate internal control mechanisms; sound administrative and accounting procedures; and remuneration policies and practices that are consistent with and promote sound and effective risk management. These provisions have been supplemented by the Corporate Governance Code for Credit Institutions and Insurance Undertakings, published by the Central Bank in 2010.

Regulation 33 of S.I. 395 of 1992 provides that failure to comply with a provision of the Regulations is a summary offence attracting a fine of €1000 or six months in prison or both. The limitations in respect of the size of the penalties prescribed by Regulation 33, reflect the then existing provisions of the European Communities Acts as enacted by the Oireachtas.

The Deputy might also wish to note that the European Communities Act 2007 subsequently introduced provisions for offences committed in breach of Regulations made under the European Communities Acts to be prosecuted on indictment with a maximum fine of €500,000 and a maximum term of imprisonment of 3 years. These provisions may be applied to regulations made by any Minister of the Government under the European Communities Acts. In the context of any future amendments to S.I. 395 of 1992 which may be required to implement forthcoming provisions of EU law giving effect to the Basel III agreement, I will consider further the level of sanctions and penalties that will apply to breaches of these Regulations.

In addition to these provisions, Part IIIC of the Central Bank Act 1942 provides the Central Bank with the power to administer sanctions in respect of prescribed contraventions by regulated entities and persons concerned in the management of regulated entities. Breaches of provisions of S.I. 395 of 1992 may be subject to proceedings under Part IIIC of the 1942 Act. The following types of sanctions may be imposed by the Central Bank:

·caution or reprimand;

·direction to refund or withhold all or part of an amount of money charged or paid, or to be charged or paid, for the provision of a financial service;

·monetary penalty (not exceeding €5,000,000 in the case of a corporate and unincorporated body, not exceeding €500,000 in the case of a person);

·direction disqualifying a person from being concerned in the management of a regulated financial service provider;

·direction to cease the contravention if it is found the contravention is continuing; or

·direction to pay all or part of the costs of the investigation and inquiry.

In December 2010 the Central Bank published its Enforcement Strategy for 2011 – 2012 which sets out the Central Bank's approach to improving effective compliance by the application of its enforcement powers. Both the Enforcement Strategy and the Corporate Governance Code can be accessed at www.centralbank.ie. I will also be publishing the Central Bank (Supervision and Enforcement Bill) 2011 by the end of July. The bill will provide an opportunity to consider further the sanctions and penalties that apply to contraventions of Irish financial services law and the related supervision and enforcement powers of the Central Bank.