Saturday 24 September 2016

Banking Inquiry: Bankers and Central Bank are 'not buddies'

Clodagh Sheehy

Published 10/06/2015 | 14:26

Ciarán Lynch is the chairman of the Banking Inquiry
Ciarán Lynch is the chairman of the Banking Inquiry

There is no close relationship between bankers and the Central Bank, one of the latter's leading staff members has said.

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“We’re not buddies” the Banks Deputy Governor, Cyril Roux, has told the Banking Inquiry.

“They come to us asking for approvals. We play it by the book,” he said in response to questions from Senator Susan O’Keeffe.

Mr Roux pointed to the fact that five banks had paid a total of €5.4m in penalties for breaches of regulation in the past two years.

These included AIB (€490,000) Citibank (€500,000) Ulster Bank (€3,500,000), UniCredit Ireland (€300,000) and Bank of Montreal (€650,000).

Chairman Ciaran Lynch asked about tougher penalties and jail terms for individual bankers.

Mr Roux said since August 2013 institutions could be fined up to 10pc of their turnover.

Read more: Banking Inquiry: Investigative team sent into Anglo got 'defensive' response - former acting Financial Regulator

Elsewhere penalties were even higher but he found it “baffling” that although institutions could be fined hundreds of billions “there is still wrong being committed.

He explained that under the new rules individual bankers could be fined up to €1m but the level of evidence required to put people in jail was “very, very high.

“To attach failure to any individual is a very high bar. It is something that has to be considered in the round”.

He told Deputy Michael McGrath he believed that the ECB now had sufficient powers to take direct action against banks. “They are the decision makers now”

The banking supervision section of the Central Bank had 16 vacancies at the moment in an approved staffing level of 140 but it was difficult to get people to stay.

Staff were paid the same rate for the job regardless of experience and tended to move on, either within the bank or elsewhere because of this.

The Central Bank he added, had dedicated teams of four to six people for each of the main banks - Bank of Ireland, Allied Irish Banks, Permanent TSB and Ulster Bank.

In addition they had an on-site division of 40 people who could go into any financial institution and an analysis division staffed by experts.

Asked by Deputy Eoghan Murphy about the biggest challenge Mr Roux said this had been in on-site supervision where his staff spent weeks on end in individual institutions. It was very intensive and time consuming.

Mr Roux believed that lessons had been learned during the crisis “about the appropriate way to resolve the difficulties of banks that are failing or likely to fail”.

There were very different risks now. A rise in interest rates could be a very serious issue since experience showed that when this happened it usually did so very quickly and rose quite high.

Cyber attacks were another risk with determined attempts to take down the European system.

These were very different risks but very alive, different from the past and requiring different ways to address them.

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