The new regulatory framework for financial services should be seen as an opportunity to begin the building of an outward looking financial services industry in Ireland that is blessed by being backed up by a regulatory system of excellence. The aim of IFSRA should be to provide Ireland, and financial services companies operating within and from the Irish jurisdiction, with a quality of regulation second to none internationally.
Such a mission would best serve the interests of all three interest groups involved - the (Irish and international) consumer, the industry, and the regulators themselves, whose mandate also involves promoting the national economic interest.
There should be no conflict in theory between the three interest groups. The task of politicians, regulators and industry now should be to put together a system of regulation, taking the framework presented in the Government’s announcements as a starting point.
There has been much half baked analysis on the topic, particularly by those seing the matter as simply one of ‘turf wars’, party politicking or indeed politicking between Government ministers. Building the new system will take some ingenuity and vision.
In building the system the following issues will arise: consumer welfare, the funding and costs of regulation, how monetary policy and the stability of the banking system fit in to the picture, the independence of the Irish regulatory approach from the EU bureaucracy, and the (not trivial) question of the career interests of the hundreds of public servants who will be charged with implementing the system. It should not be forgotten that these public servants have delivered a level of expertise that has repeatedly been praised as a key element in the success of Irish finance and the IFSC.
This latter consideration - the success of the IFSC - would be a good starting point for the regulatory agenda of 2001.
Consumer protection is at the heart of the new regulatory initiatives. This is a welcome emphasis that may not have been there previously. Over the years, the financial services regulatory system operated in Ireland tended to acquire its consumerist focus from outside - notably the EU. Yet Ireland has been an enthusiastic player in this process - it was only the second EU country to implement the first EU UCITS Directive, the principal focus of which was consumer interests.
Indeed, as any employee of Ireland’s burgeoning funds administration industry will testify, consumer protection is at the heart of what the industry does every day. The quality of that work, and the quality of regulation that has come over the years from the Central Bank of Ireland in the area has been recognised in the most dramatic way possible by the faith placed in it by consumers globally, as evidenced by the huge growth of funds under administration.
The stability of the currency has always been at the heart of the regulatory framework - and that included the stability of the banking system. Of course, there is a potential conflict to manage in a system, which incorporates stability of the system and the interest of the consumer. Banking profitability is key to banking stability but can sometimes be at the expense of the consumer. However, banking and financial services profitability will tend not to seriously conflict with the interest of the consumer when a sufficient levl of competition is in operation. The opening up of financial markets, the growth of e-banking and the development of cross border financial services are all to the benefit of the consumer, and in this context perceived difficulties that spring from a bygone era are inappropriate to a modern debate about the shape of financial services regulation. |
