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Wednesday, 17th April 2024
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ECB ‘very preoccupied’ by regulatory issues, seminar told Back  
The wider issues of financial regulation have been drowned out in the controversies over tax, compliance and the single regulatory authority, an Institute of European Affairs seminar heard.
The Governor of the Central Bank and member of the European Central Bank Board of Governors, Maurice O’Connell, told a seminar organised by the Institute of European Affairs that the European Central Bank wanted to increase its regulatory co-ordination role within EU financial services.

While the Maastricht treaty had recognised financial regulation as a matter for national authorities, the European Central Bank was ‘very preoccupied’about systemic risk issues for the eurozone that could arise from strong consolidation of the EU banking sector, O’Connell said. This arose from the fact that the ECB had no legal mandate to act as a lender of last resort, he added.

As reported in Finance Dublin in June, O’Connell said the Central Bank had ‘hotly disputed’ the classification of Ireland as an ‘offshore financial centre’ by the Financial Stability Forum of the G7 group of countries. ‘There is on-going correspondence in relation to the matter’, he added. He also confirmed that the Central Bank was pleased with the IMF pilot study report on financial regulation in Ireland.

Prof. Ray Kinsella of UCD’s Michael Smurfit Graduate School of Business earlier argued that Article 105 (5) of the Maastricht Treaty, which provided for a system of national regulation, was flawed. The euro, market concentration, cross border transactions and internet banking all argued for a stronger system of EU-level regulation. (see full article on page 4).

Though the seminar focused on the issues of the single regulatory authority in the context of European development, there was no indication of developments with regard to a government decision on the matter. Kinsella said he hoped the single regulator idea would be abandoned - and said he thought there was a good chance it would be - because of the differences between consumer protection and prudential supervision roles. However, both Maurice O’Connell and the Director of Consumer Affairs, Carmel Foley, said they favoured the creation of a single regulator.

The Governor of the Central Bank expressed his view that the enforcement of competition should be for a body other than the regulator of financial services. O’Connell said that globalisation, and the possibilities of unprecedented profit opportunities it opened up, worried regulators. A new generation of regulatory procedures was being worked on, ones which were closely focused on efficient allocation of capital by better risk management. Grading, and ultimately, blacklisting, of certain financial centres was another development which was on the cards.

For the Central Bank, a priority was the development of highly trained personnel, O’Connell said. He acknowledged the difficulties the Bank was having in retaining experienced regulators.
Donal Forde, head of the Strategic Development Unit at AIB Bank contended that differential pricing should be recognised by consumer rights regulation in relation to paper-based and non-paper-based services. He said that if the ‘happy harmony’ of security, lack of fraud, charges and profit’ were put askew in one area, compensating mechanisms would be found in others. In the context of rural branch closures, he said that public policy could not aim to have both price controls and widespread social service-type banking. The pressure of one, in a commercial environment, would force a squeeze on the other. Echoing the other speakers, he said that much of the debate on wider issues of financial regulation and the public good had been drowned out by issues such as tax and compliance.

Jonathon Westrup of NCB made a plea that the brief of the new single financial regulator should include increasing the level of financial awareness and education in the consumer population.

Torlach Denihan of the Financial Services Industry Association highlighted that 47,000 people work in financial services in Ireland, and that the sector had contributed nearly ?700 million in corporation tax to the Exchequer last year.

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