Micheál Martin (Cork South Central, Fianna Fail)
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To ask the Minister for Finance his views on whether there should be more distance created between bank regulators and the banks they regulate; and if he will make a statement on the matter. [54056/12]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank of Ireland is responsible for financial regulation in Ireland. The Irish Financial Services Regulatory Authority (the Financial Regulator) ceased to exist on 1 October 2010 with the commencement of the relevant provisions of the Central Bank Reform Act 2010, which created a single structure within the Central Bank controlled and managed by the Central Bank Commission. The Central Bank Reform Act gave effect to significant structural changes in the operation of financial regulation in Ireland. The Central Bank (Supervision and Enforcement) Bill responds to the regulatory failures of the financial crisis. The Bill strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. It also provides the Central Bank with greater access to information and analysis and will underpin the credible enforcement of Irish financial services legislation in line with international best practice. The Bill builds on the new structures provided for in the 2010 Act and will introduce new and revised powers of supervision and enforcement for the Central Bank. The Central Bank (Supervision and Enforcement) Bill is expected to commence committee stage in the Dáil shortly.

In recent years the Central Bank’s level of regulatory activity has intensified with increases in staff numbers and skill levels at the Central Bank. On-site inspections and review meetings have more than doubled. The Central Bank has also taken a number of measures under its “new approach” to banking supervision including reorganizing its banking supervision structures, investing heavily in training all supervisory staff and introducing a new risk assessment regime known as PRISM.

The Central Bank’s Annual Regulatory Performance Statement sets out details of regulatory performance. The most recent Statement for 2011/2012 showed the following developments;

· The Bank made further progress in meeting the targets for the stabilisation and restructuring of the banking sector under the EU-IMF Financial Assistance Programme. It also published the Financial Measures Programme which provided a thorough assessment of the capital and liquidity conditions and needs of the domestic banks.

· The new Probability Risk and Impact System (PRISM) was introduced in 2011 which enhances the Bank’s supervisory approach with a risk based framework making it easier for supervisors to challenge the financial firms that they regulate.

· In terms of consumer protection, addressing mortgage arrears has been a key focus of the Bank’s work in 2011 and 2012. The revised Consumer Code on Mortgage Arrears came into effect on 1 January 2011 which set out the framework which lenders must adapt when dealing with people experiencing difficulties with mortgage arrears.

· Significant work was carried out on fitness and probity standards during 2011 and 2012 which included a fitness and probity review of the directors of the Covered Institutions.

A key element of the Bank’s overall enhanced approach to a more rigorous enforcement regime is the Bank’s new Enforcement Strategy 2011/2012 which sets out the newly established Enforcement Directorate’s risk based regulatory framework. This strategy document sets out the Bank’s statutory objectives, strategies and high level goals for supervisory and enforcement interventions.