# Consumer Panel reports on Financial Regulation crisis



## Brendan Burgess (3 Jun 2009)

The Consumer Panel of the Financial Regulator has published a report entitled

[broken link removed]

Brendan


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## Afuera (3 Jun 2009)

A couple of years too late perhaps, but it is at least positive to see some of the failings of the institution being brought to light. Hopefully it will be used to initiate the change that is needed rather than simply pay lip service to the obvious. Time will tell.


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## Brendan Burgess (8 Jun 2009)

Hi Afuera

I gave a presentation recently at which I extracted some of the comments made by the Consumer Panel, most of which can be found on the Financial Regulator's website. The Consumer Panel has been very clear in its comments. Unfortunately, they were dismissed by the Financial Regulator.

*Comments made by the Consumer Panel between 2005 and 2007 *
Sources – Annual Reports and Performance Reviews 

The big failing of the Financial Regulator is the *slow speed* at which the Financial Regulator operates. 

The Financial Regulator seems *indecisive*.

The Financial Regulator operates with *undue complexity* and formality.

The Financial Regulator adopts and *excessively legalistic* approach.

We have seen very little evidence that the Financial Regulator *has the resolve* to stand up to some institutions and individuals who are misbehaving. It seems that when challenged by misbehaving institutions, the Financial Regulator simply backs down. 

The FR 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.  

The Financial Regulator *hides behind the confidentiality* clauses in the Central Bank Acts to avoid explaining its inaction 

*Fitness and Probity is not about form-filling*.


*Good things *



The *Registrar of Credit Unions has done a particularly good job* in facing up to hostile credit unions. 

The Financial Regulator has got refunds in a very prompt manner for customers who have been overcharged. 

The cost surveys and *consumer guides and website are  particularly good*

Overall the Financial Regulator has got the balance about right between the *protection of*
*consumers and the need to keep the level of regulation appropriate. *There can be no arguing that the Financial Consumer is far better off now than before the setting up of the Financial Regulator.


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## z109 (8 Jun 2009)

Brendan said:


> There can be no arguing that the Financial Consumer is far better off now than before the setting up of the Financial Regulator.


Red rags and all that 

As long as that consumer didn't own shares.
As long as that consumer didn't buy a pension from an Irish pension company and invest in one of their 'balanced' funds.
As long as they didn't invest in ISTC.
etc. etc.

The illusion of regulation is more dangerous than no regulation. If you know the waters are shark infested, you are cautious about taking a dip. If there is a big sign saying "No sharks here!", unless you notice it is written in crayon, you plunge straight in.

Joe Meade has been more effective than the Financial Regulator at keeping the banks honest to their consumers....


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## Brendan Burgess (9 Jun 2009)

I have now had some time to read this report. I agree with a lot of it - I disagree with some of it.

*I agree with the following:
*"The Financial Services Ombudsman should remain independent"

"The change [required]is as much about the willingness of the regulator to act as it is about any formal structures".

"There is a false dichotomy between principles-based regulation and rules-based regulation"

My personal view is that we do not need any new major regulations for financial services. We can have all the legislation in the World, but if the FR doesn't take action, then it will be of no use. 

*I disagree with the following:*

"Financial Products should be pre-approved by the Financial Regulator in the same way in which drugs are pre-approved"

It takes years for drugs to get through the approval process. The cost of pre-approving financial products would be huge and would be borne by the consumer.  In Ireland, products were not the problem. 

The main problem was overlending to property developers. Pre-approval would not have prevented these products from being pushed out.

*I am uneasy about the following:
*"The current downturn was magnified by the Regulator's failure to control the property market bubble. We are unclear why the regulator did not move to dampen the bubble at an earlier stage" 

This suggests that the property market bubble was the sole responsibilty of the Financial Regulator.  But, more importantly, to the best of my knowledge, the Consumer Panel did not raise any concerns about house prices until I sent [broken link removed] to the Financial Regulator in March 2007. 

The Financial Regulator presumably shared the same view as the vast majority of commentators that Ireland would have a soft landing. No financial regulator in the entire World forecasted the US sub-prime crisis and its devastating impact on the World's financial institutions which resulted in the current credit crunch. 

In March 2007, I think that the Consumer Panel fairly summed up the views of most people: 



> The relatively high level of house prices has resulted in a very high level of borrowings by individuals. It also increases the risk of a fall in house prices.



We felt that there was a risk, but we were not calling it a bubble.


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## Spondulicks (14 Jun 2009)

There is little doubt but that the Consumer Panel needs to challenge the whole design of the financial market henceforth 

- fundmanagers extract hundreds of millions  from pension funds as they go down the toilet
- well funded insitutions turn out to be short of capital
- deposits yield better returns than equities
- health insurance costs spiral out of control as no household can get a firm fix on health insurance or health care costs
- credit is available when you don't need it at ludicrously cheap prices which destabilises markets
- the dishonest at the top of the pile get off scott free with their assets intact.

In the past they may have been seduced by the plamas of the Establishment - they need to be more abrasive now and be ready to be more difficult.


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