Regulator to bring in 20 more staff for monitoring of foreign banks

THE FINANCIAL regulator is to appoint 20 more staff to its banking supervision unit to focus on “more intensive supervision” of foreign-owned banks and financial firms operating within the State.

The regulator has also created a special investigations team to speed up inquiries into the banks and reporting of its findings to the regulator’s authority (board).

Regulatory staff have already been appointed to the six guaranteed Irish-owned banks and building societies, and are working on site in the institutions.

Mary O’Dea, acting chief executive of the regulator, said the Government guarantee scheme had given the regulator greater supervisory powers. “We have moved to a more intrusive, questioning and less accepting approach of supervision. Our direct focus is on monitoring credit risk and the management of liquidity and impairments [bad bank loans],” she said.

Ms O’Dea said the regulator had increased its “interaction” with the boards of the guaranteed financial institutions and “where necessary we sit in on credit committee and board meetings”.

The 20 staff are being recruited in addition to another 20 staff who have been hired for the regulator’s banking supervision division.

She said that the new recruits would be assigned to other areas, but that they would be primarily working on the supervision of IFSC-based financial companies and foreign-owned banks operating in Ireland. “We will keep it fluid but that is primarily where they will focus.”

The regulator had asked the Government for more resources for its prudential supervisory functions, which are expected to be reformed under proposals to improve financial regulation in Ireland with the creation of a new central banking commission.

Taoiseach Brian Cowen announced at the end of last month that the Central Bank and the supervisory and regulatory functions of the regulator would be merged in the new commission.

The consumer protection unit at the regulator will merge with the Office of the Financial Services Ombudsman to form a new financial services consumer agency.

Ms O’Dea welcomed the proposals to reform bank supervision.

She said that the financial crisis had shown that the areas monitored by the regulator and the Central Bank had overlapped and that it was not possible to “silo one from the other, but they had to be looked at in the round”.

She said that “micro-prudential” issues such as capital solvency which have been monitored by the regulator’s prudential division needed to be supervised with “macro-prudential” issues such as the growth in credit and property lending, which are monitored by the Central Bank.

“We need to have a system where information can flow between the organisations,” she said. She believes that housing the consumer agency separately was “a very good idea”.

The fact that this crisis began in the US subprime mortgage market, where borrowers were sold home loans they could not afford to repay, showed that consumer protection was essential to protect the wider banking system.