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Sunday, 14th April 2024
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Cowen sets out Government’s perspective on financial sector Back  
 
Delivering a speech at the annual Financial Services Ireland dinner, The T?naiste and Minister for Finance, Brian Cowen TD, said he believes that the success of the industry ‘has been far broader and vastly more important than can be captured by measures of employment or export growth’.
‘This is very much a success story for the Irish economy. Physically, the investment and redevelopment of acres of previously derelict areas of this city is testimony to that success. Perhaps more tellingly, Dublin and Ireland now reckon in global assessments of international financial services centres. I note the second assessment by the City of London of global financial centres saw Dublin increase its position by seven places to number 15. This is clear demonstration of the progress that continues to be achieved in building Ireland’s presence as an international financial centre,’ said Cowen.

‘We have in Ireland a highly effective financial regulatory and supervisory regime. This is central to the well being of the sector, helping to maintain financial stability, ensuring effective prudential supervision and promoting the interests of consumers. The integrated structure we have adopted confers significant advantages in terms of monitoring and maintaining financial stability in ensuring effective and timely co-ordination of these functions.’

‘Of course the Irish financial sector is part of an increasingly integrated European financial market environment. Hence, important issues have also been taken up at the European level and are being addressed in a roadmap of work approved by European Finance Ministers. Ireland will be an active participant in this work.’

Cowen then moved his attention from the European arena to concentrate on the work of the Financial Regulator in Ireland. He was complementary of the manner in which the Regulator implements the principles based European approach to a more practical level for Irish business.
‘I now wish therefore to turn to developments in Financial Regulation and Government initiatives over the last year. As this audience is only too well aware; our financial services regulatory regime is largely derived from an EU blueprint. The raft of new initiatives that flowed from the EU Commission’s Financial Services Action Plan has now largely come to rest, at least in so far as the legislative phase is concerned. However, I am mindful that for practitioners, the reality of implementation continues to engage and challenge. The MiFID reforms have just gone ‘live’ and, come 1 January next, the Basel II reforms become fully operational under the Capital Requirements Directive.’

‘The EU approach to financial regulation is essentially principled-based, but high-level principles need to be complemented by guidelines to explain how the principles should work in practice. However, these guidelines must not be so tightly drawn that they deny service providers desirable and necessary freedom of action to hold a leading position in competitive markets. I don’t intend to labour over the details tonight, suffice to say that to date we seem to have got the balance right overall.’

‘Not only do we have sound and stable financial institutions, but as I have already mentioned our ranking among international financial services centres is steadily improving. Such is our good standing in this sphere that we host a constant stream of delegations from other countries, both developed economies and emerging ones, who seek to emulate our success in this industry.’
‘I will conclude by speaking of measures Government is taking to continue the process of positive engagement with the industry. The current framework for financial regulation has evolved over a considerable period, largely grafting on new requirements to a base framework that predates contemporary practice. In line with its broader commitment to regulatory reform, Government has for some time been exercised to ensure the consolidation and modernisation of the regulatory framework to ensure we are properly equipped to meet twenty first century needs.’

‘Earlier this year, I appointed Mr. Padraig O’ Riordan as Chairman of the Advisory Forum on Financial Legislation and in recent weeks the Forum has commenced its work. The task before the forum is challenging, I am satisfied that the model of the Forum, which provides for the active participation of the wider community of stakeholders, is the right and best way to undertake this task. I believe that in the Forum we have the have the structure and tools to complete this task. It is important, indeed essential that industry delivers its full commitment to this project providing promised expertise and practical support.’

‘The Advisory Forum on Financial Legislation is by no means the Government’s sole engagement with your industry. The Government, through the Clearing House Group process works in partnership with the industry. There is no doubt that this shared effort has been a significant factor in our success. We will continue in that vein towards the ongoing development of a modern flexible environment in which international financial services - and indeed all business - can operate.’

Also addressing the dinner, Denis Casey, FSI chairman, warned that critics of the Irish financial services sector were often ill-informed in their comments on the topic, while going on to praise the Financial Regulator in its principles based approach to regulation.

He said, ‘Our competitors, stung by our unrivalled success will seize every possible opportunity to undermine our standing and our reputation. In this context, it is a source of some disappointment when local commentators present an inaccurate and uninformed analysis of the Irish financial sector and the regulatory environment in which it operates. Given the importance of the financial services industry to the economy and to peoples’ daily lives, it is only right that we should be held to account, however, it is also reasonable, I think, to expect that such comment be informed and fair.’

‘These tests are not always satisfied and an example in point is the wide of the mark comment and analysis attributing a degree of responsibility to the Irish regulatory environment in the collapse of some conduits and SIVs over the summer. A small amount of research would have identified that these entities are, and always have been regulated, through their parent companies, by BAFIN – the German regulatory authority.’

Casey went on to praise the efforts of the Financial Regulator in providing a conducive regulatory environment in which to do business.

‘Over the last five years, the FR in Ireland has been committed to a principles-based system of regulation with a focus on ensuring that we have well-run entities with professional management who are fit to do the job and with enough capital to meet their commitments. Those that would have us embrace a rulebook approach to regulation would do well to understand the limitations and shortcomings of a system that seeks to develop rules for every possible eventuality. These shortcomings were clearly demonstrated in the case of Northern Rock in the UK and in relation to the issues that arose with German SIVs.’

‘In contrast to this, the Financial Regulator’s commitment to risk based supervision and its emphasis on capital adequacy ensured that this jurisdiction has been less exposed. However, to read some of the commentary you would be forgiven for thinking that there was something dramatically wrong with the regulatory environment in Ireland although, in fact, our system has served us well through the current testing conditions,’ commented Casey.

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