Tommy Broughan (Dublin Bay North, Independent)
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28. To ask the Minister for Finance the current governance and probity regulation of the Irish banking sector and on the pay and compensation rules for top banking executives; and if he will make a statement on the matter. [9813/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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Under the Central Bank Reform Act 2010, the Fitness and Probity Regime, provides the Central Bank with powers to ensure the fitness and probity of nominees to senior roles in regulated firms.

The Bank has put in place a pre-approval process for persons who apply for relevant positions (Controlled Functions) in regulated firms, to ensure that they meet the required standards of fitness and probity.

If concerns arise that individuals do not meet the required standards of fitness and probity for such a role, they may be investigated by the Central Bank and could ultimately be prohibited from carrying out that role in their firm, or any other regulated firm. These powers enable the Central Bank to ensure that the people in senior roles are capable, competent and act with integrity.

The Central Bank (Supervision and Enforcement) Act 2013 also provides that if a person has engaged, is engaging or is about to engage in a contravention, the Bank may apply to the Court for an order restraining the person from engaging in the conduct.

The Central Bank (Amendment) Bill which I intend to bring forward this year will further enhance the Fitness and Probity Regime and put a greater onus on individual accountability in the financial sector.

Regarding the pay and compensation rules for banking executives, the European regulatory framework includes specific controls and restrictions in how remuneration can be delivered within financial institutions, including in Ireland. The Capital Requirements Directive (CRD) was amended in 2010 and 2013 (CRD III and CRD IV) to introduce a standardised regulation of remuneration practises across EU banks and promote sound, effective risk management.

This EU wide regime introduced new rules and controls designed to ensure that some of the excesses of the past are no longer permissible, including clawback and malusprovisions, deferral criteria, and limits on the extent of variable vs fixed remuneration.

In Ireland we went significantly further, introducing extensive restrictions on remuneration in the three banks in which the State has an investment (AIB, BOI and PTSB). This includes a ban on variable pay and benefits, which impacts all 23,000 staff at every level in those banks. Base fixed pay is capped at €500,000.

In 2011 the Dáil introduced a ‘Super Tax’ marginal rate of 89% on bonuses over €20,000 in the three banks.

The Department is currently finalising a review of Government policy in this regard to determine whether it remains fit for purpose, and it is expected that it will be published in Q1 2019.