Financial institutions suspected of breaching State regulations will be able to strike deals with the new financial regulator rather than face full official inquiries, it has emerged. Mark Hennessy, Political Correspondent, reports.
The Minister for Finance, Mr McCreevy, last week proposed significant changes to the Irish Financial Services Regulatory Authority (IFSRA) when he put forward last-minute amendments to the legislation.
Under the changes, banks, building societies and other financial institutions would be able to pay a penalty "without necessarily" formally acknowledging guilt.
If they do admit guilt, the financial institutions could face "an appropriate penalty" without facing a formal inquiry orchestrated by the regulatory authority.
Defending the decisions in the face of Opposition criticism, Mr McCreevy said: "Such discretion is required as correct action depends on the scale of the issue."
Sharply critical of the changes, Sinn Féin TD Mr Caoimhghín Ó Caoláin said full inquiries were the only way in which "we can establish the full facts".
He added: "We must bear in mind recent events such as the revelation that AIB had been overcharging customers on foreign exchange transactions since 1995, netting an amount originally estimated to be €14 million but now standing at €25 million.
"This is not the whole story - much more will unfold."
If the new rules were in place now, AIB could strike a deal with IFSRA to avoid an inquiry.
"This is wrong. An inquiry is the only means of getting to the rotten heart of these abuses," Mr Ó Caoláin said.
Mr McCreevy dropped plans to set up sanctions panels to carry out investigations into allegations of financial impropriety, following complaints from IFSRA and the Central Bank.
Mr McCreevy told Fine Gael TD Mr Richard Bruton that the Attorney General, Mr Rory Brady, held that that the original text could have been "vulnerable to challenge" in the courts.
Under another change, IFSRA will not be able to levy fines so large that they would threaten to bring about the bankruptcy of the institution.
"Can a doctor who is guilty of misconduct tell the Medical Council that it cannot find against him because, if it does, he will lose his livelihood and may be bankrupted?" asked Labour Party TD Ms Joan Burton.
Mr McCreevy defended the bankruptcy clause on the grounds that IFSRA will investigate allegations in smaller financial institutions, such as credits union, as well as large.
"I don't think anyone would suggest that the credit union should be forced into bankruptcy as a result of action by IFSRA. It would not be in anybody's interest to ensure that a financial institution would go under as a result of such an action.
"A once-off error at the counter may not require an inquiry but a pattern of bad behaviour could require one. That is reasonable," Mr McCreevy declared.
