# Role of Financial Regulator



## bamboozle (27 Feb 2009)

is still amazes me how the nation's media (and trade unions) seems to be focusing its energy into allocating the blame of the nations Financial system squarely at the feet of the bankers.
Yes some bankers were rogues, yes some bankers were extremely well paid, yes some laws of corporate governance may have been broken but surely the finger should be pointing at those who are charged with monitoring & regulating the Financial Industry.
How the financial regulator can be allowed to resign and then given such an obscene payoff for quite clearly not doing his job is beyond me.

we can hark on all day about naughty bankers and their obscene salaries and rightly so but focus should be on how a financial system allowed such activities occur and bringing in measures to ensure the national financial system will never be so poorly regulated again.

remember it was over 2 years ago when the Irish Financial System was branded 'the wild west' for its lax regulations.

Finally, i am not a banker (in case anyone thinks i'm trying to stand up for them!)


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## Damian85 (27 Feb 2009)

I feel that the media has actually focused a large amount of attention to the questionable performance of the Financial Regulator. While not on the same scale as the bankers, but the Financial Regulator has had its' reputation shot down significantly.

It is in recessionary times and/or in times of scandal when we truly realise the shortcomings of regulators and auditors. When the tide goes out, we see who's swimming naked!

I have no doubt that regulation will be revised and hopefully it wouldn't be in the same manner as SOX has been in the US, where regulation went from one extreme to the other.

As regards the obscene payoff for the Regulator? A cynical opinion might be that he was given the extra 200k to keep quite about the issues that are now coming to light and perhaps future issues down the line! Another opinion might be that the Regulator regulated within a system of capitalism, and ironically experienced the benefits of what appears to be our current capitalist system; excess compensation for poor performance!


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## bamboozle (27 Feb 2009)

surely the issues that are coming to light should have been exposed at the earliest possible opportunity?
how on earth can the office of the financial regulator be aware of Fitzpatrick's loans since last March and no-one think of telling Neary?
it just defies all logic.
we need outsiders to come in and root out the dead wood in our Financial Industy and install a new Regulatory Authority


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## Cayne (27 Feb 2009)

The ineptness of the Financial Regulator was flagged well in advance of the recession. In the years preceeding 2004 AIB stood over a system of overcharging its foreign exchange customers - software systems were updated to facilitate the overcharge.  The system of over charging was known from the top management down in AIB, this was no error.

While the FR did facilitate the refund to customers which ran into 10s of millions of euro, not one piece of action was taken against the bank in terms of fines, not even a wrap across the knuckles.


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## Damian85 (27 Feb 2009)

bamboozle said:


> surely the issues that are coming to light should have been exposed at the earliest possible opportunity?
> how on earth can the office of the financial regulator be aware of Fitzpatrick's loans since last March and no-one think of telling Neary?
> it just defies all logic.
> we need outsiders to come in and root out the dead wood in our Financial Industy and install a new Regulatory Authority


 
Interesting times.

What type of structure do you think that a possible reformed Regulator may take? And then the next question is who regulates the Regulator?

How a body is regulated poses a problem. Self regulation has downsides. Government regulation also highlights shortcomings. Conflicts of interest, competency issues, and independence concerns seem to be a common theme that is following many associate bodies.

Are there any positives which we can take from the Financial Regulator and perhaps build on such positives?


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## bamboozle (27 Feb 2009)

Damian85 said:


> Interesting times.
> 
> What type of structure do you think that a possible reformed Regulator may take? And then the next question is who regulates the Regulator?
> 
> ...


 

well first of all, the banks need to know who is boss and to whom they are answerable to, the laughable 'soft regulation' which existed needs to be replaced with 'rock hard/water tight regulation' copy the German system or some other credible system

second answer, the financial regulator has been and is answerable to the Minister for Finance....yes the same Minister who 'forgot' to read that report on Anglo...


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## Damian85 (27 Feb 2009)

I'm aware that the Regulator is answerable to the Minister of Finance and a Financial Regulatory Board. Would you see this form of Government oversight suitable, as it could alter depending on the political agenda of whichever Government is in power?

Would you see any positives on the Financial Regulator's performance in recent years which could be kept and developed upon when the inevitable shift in regulatory change?


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## bamboozle (27 Feb 2009)

Damian85 said:


> I'm aware that the Regulator is answerable to the Minister of Finance and a Financial Regulatory Board. Would you see this form of Government oversight suitable, as it could alter depending on the political agenda of whichever Government is in power?
> 
> Would you see any positives on the Financial Regulator's performance in recent years which could be kept and developed upon when the inevitable shift in regulatory change?


 

you make a very good point, however i'd imagine it would be nigh on impossible to give an independent body powers over a state body (i could be wrong)

in fairness though, its the role of government to govern, the minister of finance should have been making sure his department was watching the state bodies which are under it.
perhaps something like an independent body of economists (Ahern in UCG would be ideal) who would meet on a quarterly basis to report on developments.

i think we'd all agree that Dail Committees are not the answer given the nature of the lack their powers.


as for positives....we were all well entertained with the 'i dont know what a traker mortgage is' ad...am struggling after that!


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## Damian85 (27 Feb 2009)

I like that notion of an independent body to make quarterly assessments of a regulation system. Keep the scorecard for on a regulators performance is important. 

However, the question remains if there are such people/ groups out there who would not have inherent politicial or business bias, and also have the expertise and courage to met awkward issues and potential dangers head on.

I would consider that the Regulator has had limited positives. On a day to day level, banks and financial institutions are aware about potential misleading in their advertisement. This is a small step, but it is good to have that awareness at a branch level. (And no, I am not condening the serious issues which the Regulator has not addressed concerning banks). The Regulator, while concentrating too much on the smaller issues, has solved a day to day problem that plagued the consumer.

Another positive has been the Credit Union sector of the Regulator. This section seems to have set appropriate guidelines concerning credit union activities, and has effectively caught poorly governed and poorly performing credit unions by ''the scruff of the neck''. Credit unions seem to have stabilised after a wobbly few years, although some bad debt and investment issues are still outstanding.

They would be two positives which I would compliment the Regulator on.


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## bamboozle (2 Mar 2009)

pretty damning appraisal of the Financial Regulator on morning Ireland this morning by Peter Oakes of Compliance Ireland.


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## Damian85 (6 Mar 2009)

Any further update on the proposed changing structure of the Financial Regulator?


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## Ozzie (11 Mar 2009)

bamboozle said:


> pretty damning appraisal of the Financial Regulator on morning Ireland this morning by Peter Oakes of Compliance Ireland.


 
I was not that tough on the regulator was I?  I had a listen to the audio again(http://www.complianceireland.com/Press.html) and I think the most I said in responding to a question about criticising the Financial Regulator was (a) the Oireachtas didn’t get the regulatory result it desired despite having a (satisfactory) set of laws in place (using a board and management analogy); (b) that other regulators got it wrong (not a solid argument I grant you); and (c) no jobs for life for public servants in terms of being appointed to top regulatory roles – but rather we should have appointees appointed on a per term basis.  I don’t believe that my answers were a ringing endorsement of the Financial Regulator or Central Bank either.

Funny, another person in another forum said I was very easy on them.  Well at least there is some good debate on these issues in the public forums - which is what we should have been doing collectively since 2003 (and may be earlier).  But I guess that bad news is the seller.

I think, as an ex-UK (FSA) and Australia regulator and now in constant dealings with IFSRA here, that I would like to add that I don't support throwing to the wolves lower level regulatory staff who (i) in their hearts know that what their superiors did (or did not do) was wrong, (ii) want to do better, (iii) are capable of doing more, and (iv) will do more, if an independent non-entrenched (i.e. Irish bank/financial services operative) is appointed to lead and most importantly engender a new way forward. I am forever an optimist (not to be so in the current climate would lead one to jump off a bridge!).

I believe the same issues apply equally in our banks and other financial/insurance entities too.  There are some tremendous 'next level of management' types chomping at the bits to take the reins and restore the confidence so badly destroyed by their superiors. I was talking to one tonight who is in the pot as the next CEO of an Irish financial business.  He is conversant in finance, strategy, marketing etc but what struck me was that despite all these rudimentary skills for a CEO, he thought the most important thing was governing the business in a moral and ethical way.  When I pressed him on this idea, he said that survival is now judged on long term results and that the attitude of quarter by quarter results can no longer prevail.  He has a hefty mortgage.  So it looks to me that he his aligning his personal goal (paying off a large long term mortgage) with his corporate goal (long term shareholder value).  Possibly a new way of thinking for the next crop of CEOs??

I don't get a chance to read this forum regularly, so if anyone is going to slag me off, please do so to my private email peter@peteroakes.com 

Keep up the informed debate.  


Peter Oakes
Compliance Ireland
[broken link removed]


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## Bronte (11 Mar 2009)

Ozzie said:


> , if an independent non-entrenched (i.e. Irish bank/financial services operative) is appointed to lead and most importantly engender a new way forward. I am forever an optimist (not to be so in the current climate would lead one to jump off a bridge!).
> 
> 
> 
> ...


 
It's hard to be so optimistic when one has seen so many bank scandals over the years with no one ever brought to book and actually the level of scandal getting worse. I would love to share your optimism. In fact if I saw a banker dragged into court I would start to have some optimism. Instead we have them swaning around golf clubs in Marbella and elsewhere and I don't just mean Seanie. These people have no shame and obviously they get no flak from their peers either. And why would they, all they get is pats on the back because obviously their peers are in on the game too and when will that change - never.


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## bren1916 (11 Mar 2009)

Folks on the same subject of FR ineptitude,

I wonder could any of you point me in the right direction of reporting the following scenario:

2 guys 'paid off' from a Financial Firm some time ago for some extremely sharp practice and more.. at the behest and indeed insistence of the FR.

Same 2 guys in a different guise have been licensed to operate in the exact same sector by the same FR??!!

Obviously I won't namenames on here but I do want to report this to proper authorities - any advice?


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## z109 (11 Mar 2009)

bren1916 said:


> Folks on the same subject of FR ineptitude,
> 
> I wonder could any of you point me in the right direction of reporting the following scenario:
> 
> ...


I'm no expert on this, but is the FR subject to the ODCE?


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## Askar (11 Mar 2009)

yoganmahew said:


> I'm no expert on this, but is the FR subject to the ODCE?


 
No. ODCE monitors compliance with Companies Acts. FR is a statutory body.


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## OPTIMUM (11 Mar 2009)

the Financial Regulator is regulated by the Financial regulator !!


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## bren1916 (12 Mar 2009)

OPTIMUM said:


> the Financial Regulator is regulated by the Financial regulator !!


 
Well that's just about Ireland today in a nutshell..!

Surely there is *some *dept in this country I can contact about this ridiculous situation? If not, the Dept of Finance and Lenihan should be ashamed of themselves..


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## Cayne (12 Mar 2009)

bren1916 said:


> Well that's just about Ireland today in a nutshell..!
> 
> Surely there is *some *dept in this country I can contact about this ridiculous situation? If not, the Dept of Finance and Lenihan should be ashamed of themselves..


 
Easy... The financial regulator is answerable to the Minister at the Dept of Finance.


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## bamboozle (12 Mar 2009)

Cayne said:


> Easy... The financial regulator is answerable to the Minister at the Dept of Finance.


 
do we have a minister for finance?


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## bamboozle (24 Mar 2009)

well in continuing my crusade against the ineptness of the financial regulator...

http://www.rte.ie/news/2009/0324/aib.html


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## Damian85 (24 Mar 2009)

Any optimism that the Regulator may put these issues behind them and learn from these mistakes and scandals?


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## Bronte (25 Mar 2009)

Praise to the likes of Eugene McErlean, I don't know what price he has paid but I hope he does really well in life. The likes of him seem few and far between in our completely hopeless financial and regulatory country.


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## bamboozle (25 Mar 2009)

Damian85 said:


> Any optimism that the Regulator may put these issues behind them and learn from these mistakes and scandals?


 

maybe i'm a cynic but i dont see any reason to be optimistic, the Financial Regulator/central bank needs to be radically overhauled

employ sufficiently qualified people for top jobs not life long civil servants
ensure Regulator & Central Bank have sufficient Powers
ensure Minister for Finance is fully aware of all issues of national relevence
ensure the close relationship between FR and CB is split
ensure FR does his job properly, if he does his job right, the banks do their jobs right, simple as

for example, howcome Bernard Mandoff is currently in jail in the states, while people here who have been done from fraud such as that pryamid scheme guy Breffni are walking the streets as free men while their victims are left out of pocket?
We need to ensure firstly the FR has sufficient power to come down hard on the banks when needed, then we also need to have adequate legislation in place to ensure white collar crime will be dealt with properly.


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## Centaur (9 Apr 2009)

In between the FR and the Minister is the IFRSA board with oversight duties.  

It is incomprehensible to me that they have not been asked to resign as a body.  

Of course they are just the usual political appointees lining their pockets at our expense and looking after their own.

Centaur


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## Spondulicks (19 Jun 2009)

Fianna Fail bring in Sir Moneybags from the City to advise on financial regulation. This is how far the so called republican party have drifted from their ideals and also how devoid of ideas or expertise they are.

Now we have a banking commission with consumer information being moved to Cork. Is this another version of decentralisation?

The banking sector must be thrilled.

The sooner somebody runs an enema through the banking system to expel the accumulated toxins the better. 

I hope all those people getting pension statements and savings statements let their financial providers have a piece of their mind about what type of behaviour will be demanded of them in the future.


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## kaplan (23 Jun 2009)

@Damian
While it appears the credit union regulator was more active it does not mean it was more effective. Yes the regulator has been active but is hamstrung by a law that does not permit it to publish mandatory codes of conduct or business rules. Worst still it is hamstrung by a reluctant government which remains politically captive of the ILCU and fearful of its lobbying power. 

Had the Register of Credit Unions, an office created in 2003, been listened to in 2004 and legislation changed to restrict credit union risk taking, they would not have lost  500m+ in their “investment” portfolios. 

The regulator was forced by the Irish Finance Ministry to go through a protracted convoluted consultative process, during which the ILCU and its partner Davy refused to agree to a voluntary code and then obfuscated and lobbied Government over the head of the regulator. The result was watered down investment restrictions issued in a non-binding code in late 2006 by which time it was too late.

Good regulation has to be timely to be effective and regulators should have the support of civil service and governing Ministry. This has not been the case with credit unions in this country. Instead what we have is a powerful trade body which threatens votes when its corporate agenda is likely to be weakened. 

Quite the most disgraceful aspect of this behaviour saw the ILCU actively lobby against a state deposit guarantee for credit union savers.


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## Brendan Burgess (23 Jun 2009)

Hi Kaplan

Just to be clear though, I don't think that the Regulator should be blamed for this. The Registrar of Credit Unions did everything possible to impose discipline on the Credit Unions. He resisted the wishes of the Department of Finance as far as he could. He effectively stopped them from making long term loans for the purchase of property. He is now stopping those which are making losses from paying dividends. He is doing a very good job under the difficult circumstances which you outline. 

If the Financial Regulator had taken a similar line in its dealing with the banks, we would be much better off. 

Brendan


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## kaplan (23 Jun 2009)

@Brendan
The blame rests with three parties (1) ILCU for promoting a high risk investment strategy, (2) credit unions for following it and (3) a Minister for Finance who did not do what the regulator asked him to do. I have called the process enforced forebearance - which occurs when politicians become captive of trade body self interests and force a regulator to back down. 

The regulators initial restrictions would have brought Irish credit unions into line with their international counterparts. In other jurisdictions, including the US with its multi-billion dollar credit unions, they are only permitted to invest in bank deposits and government stock. 

This year Irish parochial politics (more particularly the Fianna Fail variety) may once again get in the way of prudential regulation and supervision; credit unions may be allowed to raid their reserves. It's a good test of the current Minister's mettle in standing off the intense lobbying of the ILCU and activists who are currently gearing up.

The galling thing is had the regulator been listened to and acted on, most if not all of the €500m+ in investment losses would not have happened. Still I can't help thinking that it did not exercise its full powers in cases of glaring non-compliance - which of course may result from Merrion Street ambiguity and memories of the great DIRT fight which forced a previous Minister (McCreevy) to climb down as the then coalition was threatened. Watch for the independent TD's positioning on use of credit union reserves - the scene is set for another political compromise.


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