AUTHORITY: Former Wedgwood chief executive, Mr Brian Patterson, is keen to get on with establishing the new Irish Financial Services Regulatory Authority (IFSRA), writes Siobhan Creaton, Finance Correspondent.
He hopes the new Government will implement the necessary legislation to put the authority on a statutory basis by the end of this year. In the interim, Mr Patterson and the six other IFSRA board members appointed this week by the Minister for Finance, Mr McCreevy, will be proceeding with the task of regulating the financial services sector.
"I am not going to stand around. We have got the ball now and are going to run with it," he told The Irish Times.
Mr Patterson says he was delighted to be asked by the Government to chair the body that will be set up on an interim basis to assume the role of regulating the State's banks, building societies, credit unions and insurance companies and protecting consumers.
IFSRA will have a limited degree of independence from the restructured Central Bank which will be re-named the Central Bank of Ireland and Financial Services Authority (CBIFSA).
To use Mr Patterson's own description, there will also be some glue holding IFSRA together with the Central Bank which will hand down direction and policy guidance.
The restructured Central Bank will continue to be headed by the governor, Mr John Hurley. He will have an over-arching role with the IFSRA and Mr Patterson and the board will be accountable to him. A separate monetary committee will deal with issues such as the euro and carry out the Bank's responsibilities as part of the European System of Central Banks. It will also report to Mr Hurley.
The two men have already met and Mr Patterson says they are committed to working together.
The other members of the IFSRA board represent a broad range of interests. They include former Standard Life chief executive, Mr Alan Ashe, company director and Central Bank board member, Mr Freidhelm Danz, former director of the Irish Business and Employers Confederation, Mr John Dunne, journalist and novelist, Ms Deirdre Purcell, former Revenue Commissioners chairman, Mr Dermot Quigley, director of the National Treasury Management Agency, Mr Jim Farrell and senior counsel and Central Bank director, Mr Gerard Danaher.
Mr Patterson will shortly convene a get-to-know-you meeting for this small group and intends to quickly bring them together to create the IFSRA.
The restructuring of the Central Bank has been a lengthy and controversial process and was finally agreed in a compromise between the Department of Finance and the Department of Enterprise, Trade and Employment.
The degree of complexity involved in tinkering with an organisation as fundamentally important to the Irish economy as the Central Bank has resulted in the creation of a complicated structure.
It has been described as unwieldy and unworkable by observers in the financial services industry and politicians, with Fine Gael finance spokesman, Mr Jim Mitchell, pledging to seek a more streamlined organisation if his party gets into Government in the months ahead.
Mr Patterson accepts the new organisation looks complicated on paper. "This is because so much existing legislation was being amended. The Government was also trying to get the best of both worlds, trying to make the IFSRA independent and yet not separate it completely from the Central Bank."
The chairman says that, from his experience, organisational charts may not be the best way to judge a new structure. "It all depends on how people work together. If a new Government wants to change it then that's alright. We will deal with it."
He has drawn up his own organisational chart to ensure IFSRA will get off to a smooth start. Mr Patterson intends to initially assemble a small team, to act as a steering group to represent the various strands being brought together under the new authority.
This will include representatives of the Central Bank, Department of Finance, Department of Enterprise, Trade and Employment, the office of the Director of Consumer Affairs and the Regulator for Friendly Societies. "They are all affected and should have a voice," he explains.
A pressing task for the board will be to appoint a chief executive. Mr Patterson believes this could take between three and six months depending on whether that person is recruited from inside the Central Bank or from a wider pool.
The legislation also provides for the appointment of a Consumer Director who will monitor the financial services provided to customers and exercise consumer protection powers. The chairman says he is open-minded whether that process should run in parallel with the search for a chief executive or whether the board should wait until that person is in place to have an input into that appointment.
He envisages that the main function of the Consumer Director will be to facilitate greater transparency for customers buying financial products but is realistic that this may not be as easy to achieve as it might seem. "Financial products can be complex and are structured over a long period making transparency less simple. But I have a core philosophy, customers are intelligent people. You know the old saying there's no fooling the customer, she's my wife."
Within IFSRA a financial services appeals tribunal will be set up where grievances between consumers and financial institutions can be resolved.
The board will also have to turn its attention to appointing a registrar of credit unions switching the regulation of that sector from the Registrar of Friendly Societies.
Its core function though will be to regulate the industry and to maintain public confidence in the financial sector. It will be IFSRA's job to ensure these companies can remain solvent and that customers' funds are protected.
"We have to maintain stability and confidence. We can't be in every office around the country looking over people's shoulders to see what is going on. We will be relying on the regulatory framework and will be hoping that institutions behave," Mr Patterson says.
These regulatory functions are currently carried out by the Central Bank and funded by the tax payer. In 2002 this is expected to cost the Exchequer about €15 million.
Under the legislation, IFSRA has the power to impose a levy on the financial institutions it is regulating to fund those activities and take the burden off the taxpayer. Mr Patterson says IFSRA will be asking the industry for funds through a levy but is anxious that this would be agreed in advance.
"A levy makes sense. The intention is that the working of the authority would be funded through a levy. It will take time to get it in place. We will be consulting with the industry. Above all we want to ensure that we are focused on our task and are not distracted by arguments about funding."
These reforms form the first of two pieces of legislation intended by the Government. A second bill would address other issues, such as the establishment of a statutory Ombudsman for the financial services sector. In many ways this legislation will be of greater interest to the banks, building societies, credit unions and insurance companies.
But with an election in the offing, nothing is certain.
