THE GOVERNMENT has announced a major overhaul of financial regulation in Ireland with the merging of the Central Bank and Financial Regulator in a new Central Bank of Ireland Commission.
Minister for Finance Brian Lenihan has said the reforms will be supported by a significant expansion of “regulatory capacity” and “substantial additional staff”.
Mr Lenihan said the commission will be chaired by the Central Bank Governor and will be responsible for the supervision of individual companies and the stability of the financial system generally.
Under the existing regime, the Central Bank monitors the stability of the financial system, while the Financial Regulator supervises firms operating within the system.
The reforms will mean the end of the two respective boards attached to the Central Bank and the regulator and the creation of a single board, chaired by the Governor. Below that role will be two top-level positions – head of financial supervision and head of the Central Bank, who will be members of the commission.
A recruitment process to find the head of financial supervision, which replaces the existing position of chief executive of the regulator, is under way. Sir Andrew Large, a former deputy governor of the Bank of England, is advising on the recruitment process.
The current director general at the Central Bank, Tony Grimes, is expected to assume the role of head of central banking. John Hurley, the Governor of the Central Bank, is to remain on in his position for several more months, probably until the autumn. His term ended in March but he was asked to remain on.
“The Governor has agreed to remain on for a period of additional months to facilitate the smooth transition to the new arrangements,” the department said. It is understood that London recruitment firm, the Zygos Partnership, is involved in the process to find Mr Hurley’s successor.
The existing system of financial regulation has been widely criticised for failing to act on warnings about an over-heated property market and excessive lending by the financial institutions.
The department said the reforms would “underpin a much more effective and efficient financial services regulatory system aligned with best international practice.” “Our approach mirrors arrangements proposed at EU level and will ensure a cohesive approach between critical elements of effective financial regulation,” said Mr Lenihan.
The consumer information and education role which employs 30 people within the regulator’s consumer directorate will be moved to the National Consumer Agency.
The Government will also try to improve the accountability of the new regulatory structures to the Oireachtas, the department said, and strengthen the evaluation of the regulatory performance.
The department said Mr Lenihan was “determined these changes are progressed quickly” and that a group chaired by officials in his department and including representatives of the Central Bank and the regulator had been established to expedite the proposed changes.
Fine Gael finance spokesman Richard Bruton described the proposals as “a red herring”. The Minister “should be bringing in new faces and a fresh culture instead of tinkering with the institutional architecture”.
