The Comptroller and Auditor General (C&AG) has paid tribute to the Central Bank's regulation of the financial services sector saying it has proved to be very sound.
Presenting a report commissioned by the Dail Committee of Public Accounts yesterday, Mr John Purcell said the Central Bank had implemented most of the C&AG's recommendations which arose out of the DIRT Inquiry and was discharging its function in line with international standards.
"The system of regulation is sound and conforms in all respects with international norms. Any changes recommended should be seen as desirable refinements to a sophisticated system rather than in response to any shortcomings," he said.
His comments were made days after the Government announced a new regulatory structure which leaves the regulatory function with a restructured Central Bank. The Governor, Mr Maurice O'Connell, told the committee he was satisfied with the Government's decision and was hoping to have some input into the legislation, on technical issues, to ensure the effectiveness of the new body. "We are glad the Government has made the decision and it will be challenging to implement it. There has been uncertainty for too long," he said.
Since the DIRT report, Mr O'Connell said the Central Bank now requires the banks to issue it with tax compliance reports. It is also in the process of finalising a structure to facilitate regular interaction with the banks' external auditors and is looking at international models in regard to how it should interface with the Revenue Commissioners.
Mr O'Connell said the C&AG's report's recommendations, which include a risk rating system and better co-ordination of information from various agencies, have been very useful. It also pointed out that the number of inspections undertaken by the Central Bank had fallen short of its own targets. Mr O'Connell blamed the diversion of resources towards providing information to public tribunals and other investigations for this. The Governor urged the PAC committee to give the new environment a chance to prove itself. "The whole scene has changed," he said.
Mr O'Connell once again raised his concerns about the rate of credit growth in the Irish economy, which had been in excess of 20 per cent per annum. He said he would like to see this slow down and that the Central Bank was continuing to convey its concerns to the financial institutions.
