Splitting regulatory role 'was a mistake'
It was a "mistake" to divest the regulation of individual banks from the Central Bank to the Financial Regulator, former Central Bank governor John Hurley said.
"It was something I didn't favour or support," he said.
He believed that in a country as small as Ireland the regulation of individual banks should have been left with the Central Bank but once the decision was made "it had to be respected".
Mr Hurley explained that under the changes made in 2003, the Central Bank had an overall role in relation to bank stability. Financial regulation was "carved out separately" and the supervision of financial institutions became the responsibility of the Regulator.
The relationship between the Central Bank and the individual banks "changed fundamentally", he said, with new legislation.
"We were conscious we were no longer the regulator," he said.
Contact between the Central Bank and the banks "reduced dramatically" as a result and "became confined mainly to ad hoc contacts on economic matters and round table discussions on Financial Stability Reports and operational matters."
Formal financial guidance for the Regulator was "not considered necessary" because the Central Bank Financial Stability reports "set out clearly what the framework was".
He said the Central Bank dealt at a macro level and the Financial Regulator dealt with issues at a micro level.
It was "unfortunate", he added, that the functions of financial regulation were split by Government "just as a bubble was developing".