# Questions for the Financial Regulator



## Brendan Burgess (20 Dec 2008)

I have always tried to provide a balanced assessment of the Financial Regulator. I have been highly critical of some aspects of their behaviour but I have also sought to provide balance when everyone else seemed to want their heads to roll over the credit crisis. 

But the Anglo Irish Bank issue raises some very serious questions for them to answer. Am I right in the following facts?

1) The Financial Regulator discovered the directors loans through its inspection of The Irish Nationwide in January 2008.
2) They took no action other than to tell Anglo to disclose these loans in the next set of published accounts. 
3) They did not inform the Department of Finance or the Minister who spent the next few months sitting across the table from Seán Fitzpatrick and David Drumm not knowing the character of these individuals.
4) It was the directors of Anglo who informed the Department on last Thursday. 

Question 1
Why did they not take action on the non disclosure of these loans immediately on discovering them?  Such action should have resulted in the immediate public disclosure and resignation of the directors involved. Why wait 12 months? 

I suspect that the Financial Regulator did not want to undermine confidence in the banking system at a very sensitive time by not disclosing this publicly. 

Question 2
Why did they not inform the Department of Finance and the Minister for Finance? 

I cannot think of any excuse for this. 

Question 3
What is the Financial Regulator doing about the Irish Nationwide? 
The Irish Times submitted the following questions to the Irish Nationwide yesterday and they responded that there was no impropriety.



> Who in INBS sanctioned the loans that Seán FitzPatrick temporarily transferred from Anglo Irish Bank? Why did INBS sanction the loans?
> Were the loans sanctioned with the approval of Mr Fingleton? Were they approved with the approval of Mr Walsh or Mr Cooney? Were they approved by the INBS credit committee? Did the loans fall into any special category in which specific board approval was required?
> What does the INBS and its top management and board say to the suggestion that INBS inflated its own profits by granting loans of this nature to Mr FitzPatrick?
> What does the INBS and its top management and board say to the suggestion that INBS facilitated improper transactions in this case which have tarnished the reputation of Irish banking and Irish business in general?
> ...


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## Duke of Marmalade (20 Dec 2008)

_Boss_, I too am a bit embarrrassed these days, having been prepared to give the FR the benefit of the doubt. 

Brendan Keenan, as always, addresses the issue in a very balanced way in today's Indo. He points out that an FR is always striking a balance between disclosure and protection of the system's reputation in these sort of matters. Worst case is to cover up the matter and then be found out as has hapenned here. I presume PN was doing his job as best as he saw fit but events have shown him to have made a serious error of judgement.

But why did he not tell the Minister of Finance? A number of possible explanations:

1) He DID tell him Then we really do have a scandal.

2) If he has chosen the cover up option (with the best of intentions) then he can't tell the Minister. Wasn't it Oliver North called this giving the president "deniability". I think this is the reason.

3) He didn't think it that important. Bad error of judgement.

4) There is a whole heap more similar scams, where should he start? I hope and don't think this is the reason.

5) He was trying to protect the persons involved as part of an old pals act. Again I don't think this is the case.


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## Brendan Burgess (20 Dec 2008)

So you think he was protecting the Minister by not telling him? 

I know that this was hidden for 8 years, but at some stage it has to come out. Irish Nationwide might not have been in a position to repeat the trick this year which would have uncovered it.

I actually think he didn't think it was that important backed up by the Financial Regulator's indecision and hoping it might go away. The FR jumps into action when it sees a clear breach of some rule e.g. APR not disclosed in an ad. But if something doesn't break any law or if it can get a legal opinion to say that something does not break the law, the FR doesn't really have the courage to make its own judgement on a matter. 

Hiding loans from the shareholders is wrong. It is a resigning matter. The FR might not have been able to impose a sanction, but they could have used moral suasion to force a few resignations. They seem to lack the courage to do this. 

Brendan


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## mathepac (20 Dec 2008)

Duke of Marmalade said:


> _..._
> But why did he not tell the Minister of Finance? A number of possible explanations: ...
> 
> 4) There is a whole heap more similar scams, where should he start? I hope and don't think this is the reason.
> ...


4) There are "more similar scams" apparently - €150m's worth to date in Anglo alone (Fitz  put his hands up for "only" €87m that I can see). Where did the €67m difference hide?

5) Why would that not be the case, given the auditors' Pontius Pilate stance and the old pals routine with Anglo's year end loan account with Fingleton's outfit? Is it conceivable that these were the only ones in on the numbers game?


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## capall (20 Dec 2008)

It is inconceivable to me that the regulator would have not informed the minister of finance of the fitzpatrick loan issue at least by the time the government was negotiating the bank guarantee scheme

There has to be more to that story

If the FR believed that it was not an issue the government needed to be informed of and he took that decision himself,then he should have been fired this week. Why is an investigation even needed into this and why has the government not shown decisive action in dealing with the FR
This is what is making me think that the gov must have known


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## 10romans (20 Dec 2008)

The silence is deafening from the Minister and the Financial Regulator which is completely unacceptable.  In the first place we need the Regulator to tell us the following -

what he knew? 
when he knew it? 
what action he took?
why did he take the actions he took?

Without jumping the gun it is hard to see how he can hold on to his job but in fairness I think he should be given the chance to answer these questions.   We also need to put the same questions to Minister and all the key people in the insititutions involved.  No soundbyte lynchmobs.   Answers to questions first and the appropriate and accountable actions (sackings)

Is anyone confident that that we will get to the bottom of this?  It is vital for the public interest that we do.   The ordinary Irish citizens are paying a huge price.


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## Brendan Burgess (20 Dec 2008)

One further thing occurs to me - The FR has really snatched defeat from the jaws of victory. 

A lot of people conspired to hide these loans from the shareholders. 

They did it very cleverly because the external auditors did not manage to pick it up. 

The Financial Regulator's inspection team discovered it. That should have been a feather in their cap - discovering something which the auditors had missed. They could have dramatically increased their reputation and authority if they had followed through on the discovery and taken strong action quickly. Instead they have damaged their own reputation by doing nothing about it. 

Brendan


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## mercman (20 Dec 2008)

Now wait until the FR goes through Anglos books to ascertain the crazy lending practices. Then the dirt will hit the fan properly.


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## Duke of Marmalade (20 Dec 2008)

[broken link removed] Now Mary Hanafin has stepped in, just stopping short of calling for his head. I fear PN is toast.


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## z109 (20 Dec 2008)

I think you're right DoM. When the trumpets blow, you can be sure Joshua is around somewhere with knocking down walls in mind.

I have a horrible feeling that this is the tip of the iceberg. I would discredit that feeling, as I have done in the past, if I hadn't been proved right so often in the last year and a half. The reasonable, sensible answer has been proved to be bluff and bluster so often; the cynical, cruel assessment has been right. What is your gut feeling, Brendan?


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## Brendan Burgess (20 Dec 2008)

I think we have to wait until we see what Pat Neary says. However, to quote Mary Hanafin 

“It’s very difficult to see the circumstances as to why the Minister for Finance, at a time of actively negotiating with the financial sector, did not receive that information.”

I am not sure what you mean by "the tip of the iceberg". My gut feeling is that what happened in Anglo is unique. Anglo was under the direct control of Seán Fitzpatrick. The Irish Nationwide is run by Michael Fingleton, so if he had wanted to do something like this, he could have got away with it, but I would be surprised if he did. 

I doubt if the Managing Directors of any of the other banks would have got away with it. At most, they may have borrowed money during the year and paid it off. Or they may have done this some years ago and stopped. 

I would be very surprised if it was widespread. But I am very surprised that Seán Fitzpatrick did it and so I could be very surprised again.


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## Bank Manager (20 Dec 2008)

Brendan,

Agree insofar as I think it very unlikely that this would have happened in any of the four main clearing bank's - in our own case there's a whole section in our code of conduct as to how our own finances are to be managed and I'd be shocked that any of our own directors would have done such a thing.

Hope I'm right....

Regards,

BM


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## Brendan Burgess (20 Dec 2008)

I am sure that you will find that Anglo had a similar code. Sometimes the top executives consider themselves to be exempt from such codes.

Brendan


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## Brendan Burgess (20 Dec 2008)

The board of the Financial Regulator has issued a statement today:



> The Board of the Irish Financial Services Regulatory Authority met on 19 and 20 December to discuss matters surrounding directors’ loans in Anglo Irish Bank. The Board takes a very serious view of these issues, which were first brought to its attention on 17 December 2008.
> 
> 
> The Authority has taken the following actions:
> ...


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## Brendan Burgess (20 Dec 2008)

So the board of the Regulator did not know. I would say that they are annoyed at this. 

They are reviewing the response of the Regulator. I am not sure why this should take three weeks. This is very typical of the pace at which the Regulator works. This should all be sorted in a few days. 

Brendan


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## z109 (20 Dec 2008)

Brendan said:


> So the board of the Regulator did not know. I would say that they are annoyed at this.


I'm a bit confused by this. The org chart of the FR is here:
[broken link removed]
Patrick Neary is on the board, he is also a member of the executive, as is Con Horan who is Prudential Director. Mary Burke, head of Banking Supervision is not, not is Michael Deasy, head of Financial Institutions and Funds Authorisation - I presume it is one of these two that would have had the information?

So are they now trying to spin it that the word didn't get out of the relevant department and push the blame down? In any company that is cheap. In a watchdog, saying that the buck stops below me is a thundering disgrace. 

Or, are they saying that the executive didn't bring it to the attention of the board? Given that two members of the executive are board members, this is splitting hairs as at least some members of the board knew and chose not to pass the information on to the rest of them.

Any ideas Brendan? Like Mr. Neary's appearance on Primetime, statements from the FR only seem to serve to confuse matters, whether intentional or not, I don't know.


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## Brendan Burgess (20 Dec 2008)

I don't see where the confusion lies. 

Presumably Pat Neary and Con Horan knew about this as executives. I would guess that the other executive director, Mary O'Dea knew about it as well.

For some reason, they did not brief the rest of the board i.e. the non-executives. It is the non-executives who would be annoyed by this. 

It's unclear if the Chairman was briefed. 

Obviously, they decided that this was a matter for the executive and not for the board. 

And this will be one of the items to be reviewed by the committee. 

Brendan

Brendan


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## Complainer (20 Dec 2008)

One further question for the regulator is;

Are you satisfied that Irish Nationwide had satisfactory security for a loan of that magnitude, given the short-term nature of the borrowing?

I'm struggling to work out how INBS could get satisfactory security on a short term basis.


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## z109 (20 Dec 2008)

Complainer said:


> I'm struggling to work out how INBS could get satisfactory security on a short term basis.


A solicitor's undertaking?


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## z109 (20 Dec 2008)

Brendan said:


> For some reason, they did not brief the rest of the board i.e. the non-executives. It is the non-executives who would be annoyed by this.
> 
> It's unclear if the Chairman was briefed.
> 
> Obviously, they decided that this was a matter for the executive and not for the board.


Sorry, that was what I wasn't clear on - whether the senior executive knew or whether they were going to stuff responsibility down. Thanks for the clarification.


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## Complainer (21 Dec 2008)

yoganmahew said:


> A solicitor's undertaking?


For €87million? Wouldn't they need to ensure that the solicitor has resources or insurance to back up an undertaking of this size?


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## webtax (21 Dec 2008)

Duke of Marmalade said:


> I fear PN is toast.



Looks like it - Lenihan looks to be sending a clear signal to the board:

"It is not my job to express confidence in people. The chief executive is accountable to the board," Mr Lenihan told the Sunday Independent. "I am deeply concerned that this information only came to light when I asked about it. Clearly the board have a job to do, and must resolve this matter as soon as possible."

Would be better for the Finance Minister to show some leadership and demand PNs resignation himself, but I suppose that will never happen in the public service.


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## Padraigb (21 Dec 2008)

webtax said:


> Looks like it - Lenihan looks to be sending a clear signal to the board:
> 
> "It is not my job to express confidence in people. The chief executive is accountable to the board," Mr Lenihan told the Sunday Independent. "I am deeply concerned that this information only came to light when I asked about it. Clearly the board have a job to do, and must resolve this matter as soon as possible."
> 
> Would be better for the Finance Minister to show some leadership and demand PNs resignation himself, but I suppose that will never happen in the public service.



I think you interpret the Minister's words correctly at one level, and in your final paragraph you, if I may improvise a word, uninterpret them.

As the Minister is not his direct employer, it would be wrong for him to demand PN's resignation. I think Lenihan is being very correct on protocol, but making his wishes clear.


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## Duke of Marmalade (21 Dec 2008)

Appears to be just one possible explanation that would let PN off the hook.  This is if his office knew but he didn't.


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## z109 (21 Dec 2008)

Duke of Marmalade said:


> Appears to be just one possible explanation that would let PN off the hook.  This is if his office knew but he didn't.


From the chat on the various radio shows this morning, this appears not to be the case and that the regulator knew at least a few months ago and almost certainly before the meetings last week.


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## webtax (21 Dec 2008)

Padraigb said:


> As the Minister is not his direct employer, it would be wrong for him to demand PN's resignation. I think Lenihan is being very correct on protocol, but making his wishes clear.



I don't think it is a time for following protocol. To ask a hypothetical question, if the boards decided to leave PN in place should be minister be bound by their decision? The country is crying out for some strong leadership and this is a clear case where some could be provided. I would imagine that the reluctance of the government to start sacking people for incompetence is beacuse they can see that in no short time they would be getting a knock on their own door!


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## Padraigb (21 Dec 2008)

webtax said:


> I don't think it is a time for following protocol. To ask a hypothetical question, if the boards decided to leave PN in place should be minister be bound by their decision? The country is crying out for some strong leadership and this is a clear case where some could be provided. I would imagine that the reluctance of the government to start sacking people for incompetence is beacuse they can see that in no short time they would be getting a knock on their own door!



Protocol is more than a matter of being mannerly and pleasant: it is a matter of doing things the right way.

Yes, we need leadership, and I agree that the government generally has not been impressive in its response to the crisis. But if we tear up the rulebook, what we get is not strong leadership, but tyranny.


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## webtax (21 Dec 2008)

Padraigb said:


> But if we tear up the rulebook, what we get is not strong leadership, but tyranny.



Fair point, hopefully PN will do the honourable thing after having a read through the sunday papers...


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## NorthDrum (21 Dec 2008)

Padraigb said:


> Protocol is more than a matter of being mannerly and pleasant: it is a matter of doing things the right way.
> 
> Yes, we need leadership, and I agree that the government generally has not been impressive in its response to the crisis. But if we tear up the rulebook, what we get is not strong leadership, but tyranny.


 
I know what you are saying, but has the rulebook not been shredded in the last couple of months considering what has happened.

What we are getting is long drawn out committees or slow decisions made at all levels.

These are desperate times and confidence in the banking sector and financial regulator are at a shocking low. For me leadership comes with decisive action, sometimes unpopular, sometimes ripping up the rulebook.

Now isnt the time to be diplomatic about how you approach a crisis thats gripped the country. 

Perhaps it could be argued that the government are keeping their heads when all around them are losing theirs. Thats a fair point, but they need to quickly instill confidence in the FR ! !

Brendan is right, the FR had a chance to be the knights in shining armour, the clean cut regulators we all crave, but instead look just as "dodgy" as the banking sector. I know this isnt the case, but in trying to keep confidence in the banking sector, they have further eroded any feeling that they are being regulated or that there are any repurcussions to their actions . .


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## Padraigb (21 Dec 2008)

NorthDrum said:


> I know what you are saying, but has the rulebook not been shredded in the last couple of months considering what has happened.
> 
> What we are getting is long drawn out committees or slow decisions made at all levels.
> 
> These are desperate times and confidence in the banking sector and financial regulator are at a shocking low. For me leadership comes with decisive action, sometimes unpopular, sometimes ripping up the rulebook...



We need decisive action (provided it is the right action); we need it reasonably quickly; tough decisions need to be made, and people should suffer the consequences of the things they have done wrong through commission or omission. But we need it done the right way, or we are just as bad.


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## Brendan Burgess (21 Dec 2008)

It is the board of the Financial Regulator which must make the decision on whether to terminate Pat Neary or not. 

They should carry out a quick investigation and make the right decision based on the facts. They should not fire Pat Neary because it is politically expedient or because of media headlines. 

If, for example, Pat Neary told the Chairman, and the Chairman decided against bringing it to the board or to the Minister, then it would be the Chairman who should go. There is no evidence for this, but it is one possible explanation. 

Brendan


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## Carramore (21 Dec 2008)

Going back to Duke of Marmalade's contribution at the start of this thread, I too am struggling to understand why the FR may not have told the Minister of Finance.  DOM speculates on one possibility:  that he did tell him, in which case we really do have a scandal.

There is another possibility.

Going back to last January, when the FR discovered the warehousing during its review of IN, Brian Lenihan wasn't the Minister for Finance.  We had a very different regime, with Bertie in overall charge and Biffo in Finance. In that environment, it is much easier to believe that the FR told the Minister and was given his riding instructions not to do anything about it.  This could also explain why Brian can honestly say that he didn't know.  Is this speculation too far-fetched?


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## Brendan Burgess (22 Dec 2008)

I see little point in a conspiracy theory. 

The Financial Regulator says that they did not inform their board or the Minister. 

The Minister says that he was not informed. 

The FR works in strange ways and we should focus on trying to guess why he did not inform his board or the minister.


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## Mixednuts (22 Dec 2008)

Guys,
Something tells me there is a lot more to this and a lot more to come , Is it just me or is the silence for all camps just a little to weird ? 

It seems like everyone knows whats coming down the river , I think we might be reading alot more in the coming weeks .

Call me paranoid but something smells fishy here ?


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## LDFerguson (22 Dec 2008)

Two questions that I'd be curious about: - 


What was FitzPatrick's €87M used for?
Why did he go to such lengths to hide these loans over an eight year period?


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## onekeano (22 Dec 2008)

Complainer said:


> One further question for the regulator is;
> 
> Are you satisfied that Irish Nationwide had satisfactory security for a loan of that magnitude, given the short-term nature of the borrowing?
> 
> I'm struggling to work out how INBS could get satisfactory security on a short term basis.


 
Just wondering if Seanie & Mr Fingleton complied with all money laundering legislation ie. did Seanie bring down one of his old gas bills and passport / driving licence when seeking to arrange the warehousing facility. I was amazed to hear Minister Hanafin saying "there's no laws broken here and we accept that" - sounds premature for such statements to say the least!

Roy


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## Brendan Burgess (22 Dec 2008)

Here is another possible scenario.

1) The FR discovers the loans to Sean Fitzpatrick
2) They decided that they were not illegal
3) They did not want to publicise anything in case they would rock confidence in Irish banks
4) Sean Fitzpatrick said that he would repay the loans before the company's year end, so they would not appear in the books and he would not take out the loans again.
5) The FR accepted this - problem solved. 
6) Sean Fitzpatrick was unable to repay the loans - problem unsolved.


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## Sunny (22 Dec 2008)

Brendan said:


> Here is another possible scenario.
> 
> 1) The FR discovers the loans to Sean Fitzpatrick
> 2) They decided that they were not illegal
> ...


 
Possible but still doesn't excuse the regulator. They knew that the bank did not make full disclosure to shareholders and should have acted. At the very least they should have informed the Banks auditors and let them decide if they could sign off on the accounts without the disclosure. I have talked to people in the market in London over the past few days and the reputational damage that this has done Ireland should not be underestimated. He might not have broken laws (I would imagine there are shareholders getting opinions on this as we speak) but what Fitzpatrick did was to severly damage the credibility of Irish Banks financial statements. (And they didn't need any help in this regard!) The Regualtor has by staying quiet for whatever reason damaged the credibility of our our entire regulatory framework.


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## Dave Vanian (22 Dec 2008)

Brendan said:


> Here is another possible scenario.
> 
> 1) The FR discovers the loans to Sean Fitzpatrick
> 2) They decided that they were not illegal
> ...


 
Hi Brendan, 

I think your scenario above ignores the fact that Seanie repeatedly did his little dance with Fingers and INBS each year for eight years. In discovering (1) above, the FR presumably also discovered that the exercise had been repeated seven or eight times. While it may not have been illegal, it's obvious that it was done to withold information from shareholders. 

In my opinion, the FR should have advised the Minister at latest at the time the Guarantee Scheme was being implemented so that the Minister would have a clear idea as to the character of the people running the banks so guaranteed.


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## Padraigb (22 Dec 2008)

Sunny said:


> ... The Regualtor has by staying quiet for whatever reason damaged the credibility of our our entire regulatory framework.



There is an issue more fundamental than those questions posed by Brendan to open this discussion: the culture of regulation in relation to the financial sector has been described as "light touch". To some people, that means not regulating very much, being easy on the institutions, and nudging them gently towards correct behaviour rather than taking a strict line; to some other people, it seems to mean letting the institutions do pretty much as they please. I don't think many people have a view that the regulation regime is one of close supervision and enforcing strict compliance.

That culture was not created by Patrick Neary on his own (although it seems to me that he accepted it fully). It emerged from interactions between our political, administrative, and financial establishments. In effect, regulation was close to being a sham. 

Sunny is right that the credibility of our regulatory framework has been damaged. But I don't think anybody can say it was unfairly damaged.


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## Brendan Burgess (22 Dec 2008)

Folks, I am not excusing the behaviour of the Financial Regulator by suggesting the above scenario. 

If it transpired along the lines above, then I think that it will be difficult for Pat Neary to justify retaining his job. 

I showed the Financial Regulator evidence of systematic overcharging of all Irish Nationwide customers in arrears and then I sat back waiting for action. 3 years later and they have done absolutely nothing. I cannot understand it and they won't tell me why they have done nothing. In the light of the Anglo issue, they may have told the Irish Nationwide to change the way they calculate arrears and settle all court cases on the subject and wait until the rest are statute barred. 

Brendan


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## Brendan Burgess (22 Dec 2008)

I looked back at the Performance Reports produced by the Consumer Panel over the past few years. And in each year, we referred to the slow,legalistic style of the Financial Regulator.  The full reports are all available on the Financial Regulator's [broken link removed]which is best accessed using Internet Explorer as it's not fully Firefox compatible. 

*2005 Interim report*



> *S**peed of response/overall style/crispness of delivery/fitness for purpose*
> Dealing with overcharging by financial institutions – well done.
> Dealing with fraudulent completion of mortgage applications – well done.
> *Needs improvement : Very slow in dealing with complex or contentious issues*




*2006 *


> *2. Unsatisfactory Performance*
> *a) **S**lowness and excessive caution in dealing with controversial issues*
> The Regulator responds slowly on consumer issues. It communicates with such caution that *it gives the impression that if it can find a reason not to act; this will be the preferred outcome*. It appears to seek complexity and obstacles rather than to seek consumer oriented solutions to current and emerging problems


  2007 performance review 


> *10. **S**tyle of Operation: Definite room for improvement*
> 
> b)  Questions have arisen about the impact of Section 33AK of the Central Bank Acts 1942-2007 on the manner in which the Regulator operates. In the past month, the Panel has submitted its own legal opinion to the Regulator regarding the interpretation of Section 33AK covering professional secrecy and the disclosure of information for the benefit of consumers. We look forward to resolving this interpretational issue in order to facilitate more disclosure within the parameters of the Act which will be beneficial to both the interests of the Financial Regulator and most importantly consumer of financial services
> _(Brendan’s note: The Financial Regulator uses __S__ection 33 AK to refuse to comment on anything to anybody. There are exemptions in the Act which it rarely uses)  _
> ...


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## kaplan (22 Dec 2008)

The FR CEO and SMT appear to be in quite serious trouble. Lenihan is far more forthright today in his condemnation of Fitzpatrick’s behaviour. One senses there is more to this than meets the eye and it could well be that people did know – but didn’t know officially – if this is the case then one has to wonder what about the dealing is so sensitive that they couldn’t officially know. Anyone close to the top of organisations knows of the difference between being informally told of something and being formally advised. It’s the latter that demands action. It could well be the case that people knew and hoped the problem would be sorted. When it wasn’t well the trigger was pulled and the FR stitched up – if so then who is being protected by the stitch up?


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## onekeano (23 Dec 2008)

kaplan said:


> The FR CEO and SMT appear to be in quite serious trouble. Lenihan is far more forthright today in his condemnation of Fitzpatrick’s behaviour. One senses there is more to this than meets the eye and it could well be that people did know – but didn’t know officially – if this is the case then one has to wonder what about the dealing is so sensitive that they couldn’t officially know. Anyone close to the top of organisations knows of the difference between being informally told of something and being formally advised. It’s the latter that demands action. It could well be the case that people knew and hoped the problem would be sorted. When it wasn’t well the trigger was pulled and the FR stitched up – if so then who is being protected by the stitch up?



Sorry but what is "SMT"?


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## Brendan Burgess (23 Dec 2008)

From today's [broken link removed]



> The authority is currently conducting an inquiry into its handling of the revelation that Anglo Irish Bank's former chairman Seán Fitzpatrick hid loans worth €87 million for eight years.
> The organisation became aware of the loans in January, but Mr Neary has maintained he was made aware of the issue only when it was raised with him recently by the Minister.


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## Sunny (23 Dec 2008)

To be fair to Mr. Neary, it wouldn't surprise me if he wasn't told about it but I guess as head as the organisation he has to take responsibility and the buck stops with him but it sounds like others have cases to answer as well. I guess we will have to wait for the inquiry to see exactly who knew what and why it wasn't deemed important enough to pass up the chain.

Something still stinks about this whole exercise. I can understand why Fitzpatrick would be keen to hide the loans from this years accounts but I can't understand why he felt he had to do it during the good years when he and Anglo were the golden boys of the investment community and the loans wouldn't have raised an eyebrow. I can't help feeling there is more to this than meets the eye.


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## Padraigb (23 Dec 2008)

The Irish Times piece quoted by Brendan is astonishing. Are we to believe that somebody in the Regulator's office became aware of these loans and decided not to report to the Regulator? And if the Regulator was made aware of it so late in the day, how much time did he have to reflect and seek advice before confidently assuring us that nothing about it was illegal (a view that some informed commentators question).


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## Brendan Burgess (23 Dec 2008)

From my knowledge of the Financial Regulator, I would be astonished if Pat Neary was not informed of it. 


I would not be surprised if they did not tell the non executives on the board.

The FR operates its secrecy to a ludicrous extent. It doesn't surprise me that they chose not to tell the board or the Department of Finance on the grounds that they did not think it necessary to inform them of something which was not illegal in their opinion.

Again, I am trying to explain, I am not excusing them.

Brendan


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## Padraigb (23 Dec 2008)

Brendan said:


> From my knowledge of the Financial Regulator, I would be astonished if Pat Neary was not informed of it.



From my less informed perspective, not knowing much of how the Financial Regulator's office works, but having a reasonably good understanding of how organisations operate, I would also be astonished.

So did the Irish Times get it wrong in saying "Mr Neary has maintained he was made aware of the issue only when it was raised with him recently by the Minister"?


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## Carramore (23 Dec 2008)

I agree with the above comments.  A friend worked for a time in a senior position in the FR, having previously worked in the Civil Service, and said that the FR was far more bureaucratic.  Middle ranking managers in parts of the CS are prepared to take decisions but he said that, in the FR, managers are afraid to make a decision without referring to a more senior colleague or to the Board.  Given that culture, I cannot see how the CEO wasn't  told of Fitzpatrick's loans.


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## Complainer (24 Dec 2008)

onekeano said:


> Sorry but what is "SMT"?


Senior Management Team


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## Spondulicks (31 Jan 2009)

How did the Regulator's actions square with its own professed objectives, principles and goals?

What information is furnished to the Board and what is kept from it and who decided what should be included in each category?

How long does it take to act on serious issues?

Why so secretive? 

It seems short run secrecy has led to catastrophic outcomes for Ireland.


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## setanta1 (1 Feb 2009)

The Financial Regulator is secretive because it is part of the Central Bank, which in turn is part of the European System of Central Banks. Secrecy is a universal and necessary characteristic of Central Banking - fiat money is, after all, a confidence trick. Note that information held by a Central Bank is not merely confidential, it is secret, and as with other State secrets, leaking Central Bank information is a criminal offence. 
The reason therefore why the Financial Regulator is secretive is beause the law says that the information it gathers in it's day-to-day business is a secret, and that if an employee breaches the law s/he is liable to prosecution.


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## Brendan Burgess (2 Feb 2009)

The Financial Regulator claims a blanket secrecy over everything it does, quoting Section 44AK (?) of the Central Bank Act.

I have long disputed this as it is allowed an exemption in the public interest. It is also allowed an exemption when the company involves allows it to comment publicly.

The Consumer Panel also claimed that this section only applied to their prudential activities and not their consumer protection activities. The FR disagreed with this.

What particularly frustrated me was when I made complaints about misleading advertising e.g. The BCP Quadruple Growth Bond, the FR took no action and would not explain why they took no action. I argued that advertising in particular, was a public event and they should explain why they felt that such ads complied with the code.

The main reason for its secrecy is that it comes from a Central Bank culture. They were answerable to no-one. They were elitist and arrogant. This culture needs to be changed by the appointment of a strong outsider as the Chief Executive.

Brendan


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## Bronte (2 Feb 2009)

Brendan said:


> I showed the Financial Regulator evidence of systematic overcharging of all Irish Nationwide customers in arrears and then I sat back waiting for action. 3 years later and they have done absolutely nothing. I cannot understand it and they won't tell me why they have done nothing. In the light of the Anglo issue, they may have told the Irish Nationwide to change the way they calculate arrears and settle all court cases on the subject and wait until the rest are statute barred.
> 
> Brendan


 
Surely if there was overcharging the regulator would order the bank to repay the customers?  Isn't that his job?


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## Joe Hill (3 Feb 2009)

Brendan said:


> The Financial Regulator claims a blanket secrecy over everything it does, quoting Section 44AK (?) of the Central Bank Act.
> 
> I have long disputed this as it is allowed an exemption in the public interest. It is also allowed an exemption when the company involves allows it to comment publicly.
> 
> ...


 
I want to pick up on two points here. The first is that there a danger here we confuse the public interest (a notoriously difficult concept to define) with that which interests the public, but for which there is not an exemption from the secrecy law.  

The second comment is that the references to the culture of the Central Bank (whatever that might be) are irrelevant, the sole reason for the secrecy is that, as in every other developed economy, it is mandated by law. You are right to say that Central Bankers are answerable to no-one - this is because in liberal democracies we have learned the hard way that Central Banks must be independent of fiscal authorities. This may be a bad system, but it is better than the alternatives. The Financial Regulator needs a new CEO from outside the organisation in order to reorganise and revitalise it, but regardless of who that person is the law will still say Central Bank secrecy provisions will apply to the regulator - the only way to escape this is to take the regulator out of the Central Bank.


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## mercman (3 Feb 2009)

I wrote to the Regulator a number of times in the past year concerning serious problems i have encountered in the investment business arena. They simply didn't want to know. The last time they mentioned that they would deal with problems if the matters are brought to their attention by the Ombudsman. Hopefully the change in regime will change matters and the Public's interest will be taken into account. Until then however the Regulator's office will remain a smokescreen for the Irish Financial industry, its providers and the Rogues.


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## Joe Hill (4 Feb 2009)

The Reglator's sole _raison d'être _is to serve the public interest. On their website they say that their purpose is twofold:

Help consumers to make informed decisions on their financial affairs in a safe and fair market; and
Foster sound, growing and solvent financial institutions which give consumers confidence that their deposits and investments are secure.
Achieving these objectives is in the public interest (I acknowledge that the degree to which they have succeeded is a different matter). A change in regime is unlikely to change this focus, all regulators around the world have a similar set of objectives. 
The bee in mercman's bonnet, and perhaps Brendan's too, relates to failures by the Regulator to disclose to you what if any action they took on foot of a complaint that you made. I'm sure that this is frustrating for both of you, but with all due respect it is hardly a matter of public interest!


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## mercman (4 Feb 2009)

Joe Hill said:


> I'm sure that this is frustrating for both of you, but with all due respect it is hardly a matter of public interest!



Frustrating is one matter but a matter of Public Interest is of paramount importance. How else are Financial Providers going to policed and to cease their attitude of greed, carelessness and dishonesty. And forget the amounts. It's the actual fact that such institutions, do it so persuasively and are able to carry on without any retraction.


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## Joe Hill (4 Feb 2009)

I must agree with you that matters of public interest are of paramount importance, however the public interest, like beauty, may be in the eye of the beholder. 
The interests of a member of the public (or even a large group of members of the public) is not the same thing as the public interest. From your posts all we know is that you had a tiff with the Regulator - nothing in that suggests, of itself, that matters of public interest are at stake.


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## mercman (4 Feb 2009)

Joe Hill said:


> I must agree with you that matters of public interest are of paramount importance, however the public interest, like beauty, may be in the eye of the beholder.
> The interests of a member of the public (or even a large group of members of the public) is not the same thing as the public interest. From your posts all we know is that you had a tiff with the Regulator - nothing in that suggests, of itself, that matters of public interest are at stake.



No, I had no tiff with the Regulator's office at all. I wished to lodge a complaint /objection as to how a Financial Provider acted dishonourably at a number of levels at their operation and they simply will not take the complaint. All wrongdoings were in breach of the Consumer Code operated by the Regulator.


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