The Minister for Finance, Mr McCreevy, has laid the foundation for the creation of a restructured Central Bank that will incorporate consumer protection and prudential regulation of the financial services sector.
The Central Bank and Financial Services Authority of Ireland Bill 2002 provides the legislative framework for the Central Bank and Financial Services Authority of Ireland that will be headed by Central Bank governor, Mr John Hurley. It will supervise banks, building societies, credit unions and insurance companies. Within this structure the Minister is proposing to create the Irish Financial Services Regulatory Authority that will be charged with regulation of the financial sector and will report to the restructured Central Bank.
Mr McCreevy has appointed an interim board to the regulator that will be chaired by former Waterford Wedgwood chief executive, Mr Brian Patterson. The other board members are: Mr Alan Ashe, former managing director of Standard Life; company director, Mr Friedhelm Danz; Mr Gerard Danaher SC; former director general of the Irish Business and Employers' Confederation (IBEC), Mr John Dunne; director of funding and debt management of the National Treasury Management Agency, Mr Jim Farrell; journalist, Ms Deirdre Purcell; and former Revenue Commissioner, Mr Dermot Quigley.
The interim board will manage the transition to the new regulatory body and will appoint a chief executive. Mr Patterson and the regulator's new chief executive will become members of the Central Bank and Financial Services Authority of Ireland board. The regulator also has the power to impose a levy on the financial institutions being regulated to offset all or part of the cost to the Exchequer.
In 2002, that cost is expected to be €15 million.
Publishing the legislation yesterday, Mr McCreevy said it would provide for the co-ordination of the Central Bank's functions within the European Central Bank and the functions of a single regulatory authority for the financial services sector.
The creation of a single regulatory body was first signalled by Mr McCreevy and the Tánaiste, Ms Harney, in February 2001. Yesterday, Ms Harney said the regulator would represent the most far- reaching reform in financial service regulation in this State. "This Government wants the new regulator to be responsive to the needs of both industry and consumers. I am confident we are giving it the independence to achieve this".
The regulator is designed to have a degree of independence from the restructured Central Bank authority although policy and guidelines determining its operations will be handed down to it from the main board. It is also required to consult Mr Hurley.
The Bill also provides for the appointment of a consumer director, who will be a member of the board of the regulator. The director will also monitor the provision of financial services to consumers, bringing prudential regulation and consumer protection activities together.
A registrar of credit unions will also be appointed within the new structure to act as the regulator for the credit union system. This role is currently undertaken by the Registrar of Friendly Societies.
The Bill announced yesterday is broadly unchanged from that signalled earlier by the Government. The main difference is the creation of a monetary committee rather than a separate monetary authority within the overall Central Bank authority. It was originally envisaged that this monetary authority would be given a degree of independence from the Central Bank, which currently carries out this function. This has now been downgraded to a committee with the monetary functions carried out by the Central Bank largely being left unchanged.
Mr McCreevy said a second Bill would be brought forward later this year to establish a financial ombudsman and consultative panels to interface between the financial services industry and consumers. It will also address recommendations in a report by the Attorney General, Mr Michael McDowell, which examined the scope for reform of the Central Bank.
