Questions for the Financial Regulator

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
 
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

Speed 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
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2006
2. Unsatisfactory Performance
a) Slowness 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
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2007 performance review
10. Style 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 Section 33 AK to refuse to comment on anything to anybody. There are exemptions in the Act which it rarely uses)

d) The Panel has looked at the regulatory practices in other jurisdictions and finds it worthwhile to contrast their approaches with that adopted here. While legal and cultural differences exist we surmise that these do not fully explain why some jurisdictions operate more robust and more public forms of regulatory enforcement
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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?
 
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?
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Sorry but what is "SMT"?
 
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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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.
 
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).
 
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
 
Brendan said:
From my knowledge of the Financial Regulator, I would be astonished if Pat Neary was not informed of it.
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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"?
 
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.
 
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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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.
 
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
 
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
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Surely if there was overcharging the regulator would order the bank to repay the customers? Isn't that his job?
 
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.

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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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.
 
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.
 
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!
 
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!
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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.
 
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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