| Industry welcomes initiatives but expresses concern over resourcing |
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| The Financial Regulator's recent trip to the US, its revised focus on international financial services, and its current dialogue with the financial services industry with regards to outsourcing, have all been welcomed as being positive developments in the Financial Services Consultative Industry Panel's annual report. However, the panel expressed on-going concern over the resourcing of the Regulator, particularly with regards to information technology, as well as the system of calculating the industry's contribution towards the funding of the Regulator. |
In its annual report, published on June 15th, the Financial Services Consultative Industry Panel praised the Regulator's initiative earlier this year to meet with both industry and fellow regulators in the US, and recommended that similar events take place in other major centres such as London and Paris.
In the past, the industry panel has argued the case for the inclusion of an international director to sit alongside the prudential and consumer directors on the board of management of the Regulator. However, speaking to FINANCE, James Deeny, chairman of the panel, said that the panel is no longer looking for such a role to be created, as it is satisfied with how the Regulator has responded to its request.
Deeny outlined the Regulator's increased international/ wholesale focus as follows: 1) in its Strategic Plan, the Regulator took on board the differentiation between regulation of the retail and wholesale sectors; 2) the Regulator has recently appointed a co-ordinator for EU and international affairs, Breda Cassidy; and 3) the Regulator has accepted a new high level goal of innovation and competitiveness.
The annual report also touched on an issue which is at the top of concerns of many in the international financial services sector - outsourcing. The Financial Regulator is currently in discussions with the funds industry regarding relaxation the minimum activities rulings, which require the entire funds servicing process to be carried out in Ireland, and in the report, the panel encourage further dialogue with industry with regard to such outsourcing models.
'This is a long-term issue which could have serious repercussions for Ireland, as cost pressures force service providers to move basic operations overseas. While core management control and compliance functions of regulated entities would by definition have to remain in Ireland, we would encourage the Financial Regulator to dialogue with industry,' said Deeny.
Costs
The Regulator's budget for 2007 stands at €51.6 million, and while the panel expressed no concern with this concern, it did criticise the process by which the 50 per cent levy is calculated amongst industry members, as being both 'cumbersome and bureaucratic'.
Moreover, the panel also expressed concern over the €16 million figure allocated to shared services costs, as, 'there is a lack of transparency about these costs which creates difficulties when assessing value for money'. In addition, the panel said that it was concerned that the costs the Regulator is paying for these services are significantly higher than the levels prevailing in the private sector.
With regards to one particular area of shared services, Information Technology (IT), the panel again described this as being a critical issue in the report, as it is, 'an area that has been starved of resources and one where major investment will be required'. The Financial Regulator's web site is also flagged in the Panel Annual Report as requiring significant upgrading, and according to Deeny, there is potential to significantly streamline the regulatory process with improved information and technology systems.
The panel currently has 20 members, and the direct cost of the Industry Panel for 2006, including the major industry survey it conducted, amounted to €108,000. To see the full annual report as well as the membership of the group, log-on to: www.financialregulator.ie/consultative panels/industry panel. |
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| Article appeared in the July 2007 issue.
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