FINANCIAL REGULATOR Matthew Elderfield says he expects legal challenges to fitness and probity tests from executives and directors who served in Irish banks before the financial collapse and who wish to serve in senior posts after January 2012.
Such tests would examine their individual performances before the crisis and could lead to them being removed from office and barred from serving as company directors.
Speaking in London to a Thomson Reuters event, Mr Elderfield said he would write to banking executives and directors to see if they planned to be in their posts after January 2012, “so that they may make their plans accordingly”, followed by an individual case-by-case assessment.
“You can’t bring this to a conclusion in Ireland without facing up to the role of the banks boards in this. We will have an assessment process to take account of the particular bank and the individual executive, or non-executive.
“How long were they there? Were they there in the key period when decisions were taken? Were they there in a bank that marched through their credit limits and caused big exposures?
“And then we have formal investigative powers: we have the right to suspend and we will then decide which individuals to investigate.”
Mr Elderfield said he planned to review “the fitness and probity of all existing executive and non-executive board members at the Irish banks who have received Government assistance against the new standards, including, where it is relevant, their competence and track record in the period leading up to the financial crisis”.
Warning that tough action would be taken against those who were deemed to have failed the tests, he said: “Where they fall short of the required standards, we will not just remove individuals, but we will also, where appropriate, issue notices to prohibit individuals from continuing as directors.”
Saying that Ireland’s financial crisis was not solely caused by “weakness in international standards of bank capital or liquidity, although they certainly played a big part”, Mr Elderfield said the Central Bank was prepared to act with more rigorous standards than prevail internationally in corporate governance rules.
“There are some notable examples of Irish financial companies who have suffered from over-dominant chief executives, or ineffective challenge in the board room.
“Poor governance at the Irish banks was exacerbated by the concentrated nature of corporate life in Ireland, with challenges and awkwardness in the board room perhaps blunted by the social constraints of working and living in a small business community in a small country.”
Separately, he said Ireland may impose up to €4 billion worth of losses on senior bondholders at Anglo Irish Bank and Irish Nationwide Building Society if the institutions, which are being wound down, required more capital – a move which would put Ireland in conflict with the European Central Bank, which fears the contagion risks that could be caused.
