Irish coalition partner wants stricter bank watchdog
Ireland's financial regulator needs to be given tougher powers after its chief stepped down following a loans scandal at Anglo Irish Bank (ANGL.I), a government coalition partner said on Saturday.
The regulator's chief executive Patrick Neary said late on Friday he would retire at the end of January after an internal committee completed its findings into events at Anglo Irish.
The committee found there was a "breakdown" in terms of internal communications at the watchdog and in the regulatory follow-up.
The niche commercial lender sent shockwaves through the financial industry last month when then chairman Sean FitzPatrick acknowledged that had he kept shareholders in the dark about 87 million euros ($119 million) of loans he received from the bank.
"What's happened in our financial system in the last six months has been a failure of regulation as much as anything else," said Dan Boyle, chairman of the Green Party.
"It is not enough to change personnel -- there is also a need to increase the tools that are available to a regulatory authority to make sure this type of event does not happen again," he told Reuters in an interview.
Last month, it was disclosed that some regulatory staff became aware of the loans in January 2008.
Neary said on Friday he was not advised of any such matters in early 2008, adding there was no "oral, written or e-mail escalation of these issues to me or to the authority" over the period until Finance Minister Brian Lenihan raised it with him in December.
Neary said he had decided to retire "conscious of the need to uphold the good standing of the regulator."
Ireland is an important financial hub in Europe, handling nearly 1.7 trillion euros ($2.325 trillion) worth of funds.
Boyle, who is a member of Ireland's senate and the party's finance spokesman, called for greater distance between the regulator and the central bank of which it's a part of.
"(There is) a need to introduce a degree of professional distance and a culture of fear that the regulator can and will take action against bad practices in financial institutions," Boyle said.
"There is the need to readdress the legislation that gives powers to our regulatory authority and see how it can and should be increased in terms of tools available to it and powers available to it," he said, adding his party sought the changes.
Among the findings of the committee probe were that internal communication and escalation procedures at the regulator should be reviewed.
Lenihan said in a statement on Friday he would review the committee's recommendations.
"Ireland's international reputation and creditworthiness among international financial markets and investors is dependent on maintaining stability in the banking system," Lenihan told the Irish Times in an interview published on Saturday.
The revelations at Anglo Irish triggered a purge of senior management with FitzPatrick and chief executive David Drumm resigning within hours of each other last month.
Finance Director and Chief Risk Officer William McAteer resigned on Wednesday and Anglo Irish said it would reconfigure its corporate governance structure to rebuild trust.
[Source: By Jonathan Saul, Reuters, Dublin, 12Jan09]
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