Minister for Finance Brian Lenihan TD announces major reform of the institutional structures for regulation of financial services in Ireland
The Minister for Finance, Brian Lenihan TD, today (18 June, 2009) announced the Government’s agreement to the establishment of a single fully integrated regulatory institution, the Central Bank of Ireland Commission. This new structure will replace the current board structure of the Central Bank and the Financial Services Regulatory Authority to achieve the highest performance standards for the new organisation.
The new Central Bank Commission will be chaired by the Governor of the Central Bank and will be responsible for both the supervision of individual firms and the stability of the financial system generally. This range of reforms will underpin a much more effective and efficient financial services regulatory system aligned with best international practice.
Commenting on the reforms, the Minister for Finance, Brian Lenihan TD, stated:
“The Government is taking the necessary measures to allow the domestic banking sector to service effectively the needs of the real economy and to restore the reputation of the country as a sound and secure centre of excellence in international financial services. We will ensure Ireland is regulated to the best EU and international standards. Our approach mirrors arrangements proposed at EU level and will ensure a cohesive approach between critical elements of effective financial regulation.”
Two top-level posts will be established within the Central Bank of Ireland as ex-officio members of the Commission. A Head of Financial Supervision will report to the Commission on the regulatory and supervisory functions and objectives of the new structure. A Head of Central Banking will report on the performance of central banking functions (other than those that relate to the independent role of the Governor under the EC Treaty and Eurosystem and ECB structure).
The process of recruiting the new Head of Financial Supervision is already underway, under the auspices of the Central Bank and Financial Regulator, in close consultation with the Minister for Finance. Sir Andrew Large, former Deputy Governor of the Bank of England and former member of the UK Monetary Policy Committee is also advising on the recruitment process. The search for the appropriate candidate is wide-ranging in order to ensure that the person chosen will be of the calibre, reputation, experience and expertise to lead the reform outlined.
The reforms will be supported by a significant expansion of regulatory capacity within the new structure. Substantial additional staff with the skills, experience and market-based expertise needed to meet the objectives of the new structures will be appointed. Those recruited will also have the expertise to regulate the international financial services sector.
The consumer information and education role, currently carried out within the Consumer Directorate in the Financial Regulator will be re-assigned to the National Consumer Agency (NCA). The NCA is being amalgamated with the Competition Authority. The functions to be merged in the new body are highly complementary and share a common goal of enhancing consumer welfare.
The Financial Regulator is already working through business changes in light of a business review process and the functions of the Board and Authority will be aligned as far as possible within the existing legislative and institutional framework in anticipation of the new structures.
In the legislation which will underpin the new structures, the Government will seek to enhance the accountability of the new regulatory structures to the Oireachtas and to strengthen evaluation and quality assurance of regulatory performance.
The Minister is determined these changes are progressed quickly. Accordingly, he has established a high level group, chaired by his Department and including representatives of the Central Bank and Financial Regulator, to expedite the implementation of the Government’s decision and undertake appropriate consultations.
As already announced by the Minister earlier this year, the current Governor of the Central Bank, John Hurley, was requested to continue in office, past the completion of his term in March 2009, for a short period to ensure continuity and leadership during the disruption in financial markets. The Governor has agreed to remain for a period of additional months to facilitate the smooth transition to the new arrangements.
Notes for Editors
The Government’s decision follows the Minister’s announcement in his speech on the Supplementary Budget in April 2009 that the role of the Central Bank of Ireland would be reformed to place it at the centre of financial supervision and financial stability oversight.
No change is proposed in the current role and responsibilities of the Registrar of Credit Unions. Regulation of credit unions will remain within the Central Bank of Ireland structure.
The proposed reforms will not impact on the current separate statutory role of the Financial Services Ombudsman who adjudicates on individual customer complaints concerning financial institutions.
The implementation of the reforms will also address the different characteristics of the International Financial Services (IFS) located in Ireland.