Wednesday, 10 December 2003
Dáil Eireann Debate
148. Mr. Durkan asked the Minister for Finance if he has satisfied himself that adequate banking controls exist to ensure against situations similar to the Allfirst issue; and if he will make a statement on the matter. [30443/03]
Minister for Finance (Mr. McCreevy): The Minister of Finance is responsible for the development of the legal framework for most of the regulation of the financial services sector carried out by the Irish Financial Services Regulatory Authority. The day-to-day responsibility for the supervision of credit institutions is a matter for the authority after the legislative framework has been put in place. The authority has independent statutory responsibility for regulating and supervising credit institutions so that their financial stability is maintained and shareholder and depositor funds are protected.
Primary responsibility for managing a bank and preventing fraud lies with the management of the institution in question. No regulatory authority can put in place a supervisory regime to ensure that a financial institution can never be a victim of fraudulent activity within the entity concerned. I am satisfied that we have a solid legislative framework for banking supervision, however. The creation of a single financial services regulator in the form of the Irish Financial Services Regulatory Authority provides an effective organisational structure for enforcement of that framework. The IFSRA came into formal existence in May 2003. The Central Bank of Ireland was the independent statutory authority for banking supervision at the time of the events in Allfirst. Deputies will recall that the primary regulators of Allfirst's activities were the US Federal Reserve Bank and the banking regulator of Maryland.
Deputies will also recall that when I became aware in February 2002 of the events at AIB's then US subsidiary, Allfirst, the Central Bank was asked to provide a report on the completion of its investigations as to whether it considered that changes to legislative provisions governing banking supervision might be required. The Central Bank reported that there was no evidence that the Irish legislative framework contributed in any way to the losses at Allfirst. It stated that it already had sufficient powers to work with the US regulators. Accordingly, the bank did not consider it necessary to recommend any changes in legislation in the area of supervision.
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