Legislation to create the single financial regulator should be published by the end of the week. The Minister for Finance, Mr McCreevy, is also expected shortly to appoint members of the new authority's board who will act on an interim basis.
The legislation is unlikely to be enacted before the General Election but the Government is working to leave an interim board in place before it leaves office.
The Government has approved the text of the Central Bank and Financial Services Authority of Ireland Bill 2002. Once published, it will have to be considered by the European Central Bank (ECB). The Department of Finance has consulted with the ECB about the proposed legislation. Further discussions could delay its progress to the second stage in the Dáil by a month. Mr McCreevy told delegates attending the annual conference organised by the Finance Dublin magazine yesterday that the legislation was imminent. "It has been necessary for us to do a great deal of technical work to bring the legislation to the publication stage and I expect to be able to publish this Bill very soon."
At the same conference, Central Bank governor Mr John Hurley welcomed the Minister's comments, saying he looked forward to implementing the proposed structure. "We look forward to seeing the Bill published and progressed through the legislative process and also to beginning the work of implementation. This will be no small task but we will do our utmost to ensure a smooth transition, with as little disruption as possible." Mr Hurley, a former second secretary of the Department of Finance, said he was well aware of the difficulties and complexities involved in drafting this legislation. He is satisfied the new legislation will ensure the system of prudential regulation and co-ordination of financial stability matters, should further enhance Ireland's highly regarded regulatory system.
The new framework was first announced by Mr McCreevy and Tánaiste, Ms Harney, in February 2001. It outlined a structure to incorporate the Central Bank and a new consumer watchdog function within a single regulatory body.
In his first public speech since assuming the governor's role, Mr Hurley signalled the need for some refinement of existing regulation following the fraud at AIB's US subsidiary, Allfirst. The Bank has serious concerns about controls that failed to detect the fraud over a five-year period.
It is working closely with the US Federal Reserve to finalise the investigation of events at Allfirst. "Of course there are lessons to be learnt from this matter but, at this point, it is too early to draw any conclusions."
Mr Hurley said the bank was also reviewing its relationship with the regulators of parents and subsidiaries of Irish authorised institutions to identify areas which need to be strengthened following what is now known about what happened at Allfirst.
The governor has written to all credit institutions reminding them of their obligation to ensure that risks are controlled and managed at best international standards.
He has also asked them to arrange for an independent verification of their institution's risk management and control systems with particular emphasis on the management of the relationship between parent institutions and foreign subsidiaries.
