Irish Regulator Taken To Task Over Failures

by Jason Gorringe, Tax-News.com, London

19 January 2009

The Irish Financial Services Regulatory Authority (IFSRA) has come under sustained criticism for overlooking secret loans provided to the former Chief Executive and Chairman of Anglo Irish Bank Sean FitzPatrick over an eight-year period.

The scandal has so far cost the jobs of four Anglo Irish bank directors and the Chief Executive of the IFSRA, Patrick Neary, who handed in his resignation on January 9 and intends to retire at the end of the month. However, some investors and business representatives are calling for more heads to roll at the regulator.

In a statement from the new Chairman of Anglo Irish Bank, Donal O’Connor, the bank apologised to its stakeholders and announced the beginning of a review of governance and possible changes to regulations. O’Connor said: “We recognise and understand the sense of hurt, outrage and disappointment that people feel regarding the Bank. We want to apologise unreservedly to our customers, employees, shareholders and all other stakeholders for creating this situation. The challenge for Anglo now is to restore people’s trust and confidence in the bank and we are determined to do this.”

The scandal, which has dented the level of trust between consumers and institutions, has further weakened confidence in the fragile Irish banking industry. An investigation showed that a breakdown in communication within the regulatory authority enabled the loans, some amounting to more than EUR87m, to go unnoticed for an eight-year period.

The Irish Small and Medium Enterprises Association (ISME) has urged the government to take action and forcibly remove the board of the IFSRA for its "gross incompetence," stating that the financial and banking system relies on confidence and trust, and that the oversight has, in part, contributed to the financial crisis in Ireland.

“Surely the role of the regulatory authority is to be the watchdog, and some would say, bloodhound of the financial services sector, rather than the lapdog of unscrupulous, careless and reckless banks,” argued ISME Chief Executive Mark Fielding.

For its part, the IFSRA has admitted failings in not taking "appropriate timely action" after information about the loans was brought to its attention in December 2008. However, reports suggest that the regulator first became aware of the situation as far back as November 2007 - a charge the Authority firmly denies.

The Authority plans to implement specific changes to its control mechanisms to strengthen regulation.

Irish Finance Minister Brian Lenihan has yet to comment on the matter, and is awaiting the outcome of IFSRA's report on the affair before deciding on a course of action.

"The Minister will consider the Authority's report and will then bring proposals to government in relation to the appointment of a new Chief Executive," the Department of Finance said in a statement.

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