Financial Regulator criticised three years ago for its failures
Bill to give revamped office additional powers over banks
THE Financial Regulator was warned three years ago that it was not up to scratch, according to the report by the Comptroller and Auditor General John Buckley on the regulator's tardy and "insufficient" response to the financial markets crisis.
A report on the regulator published in 2007 warned that inspections of financial institutions were infrequent and recommended that the regulator be examined by other regulators to see whether it was good enough, Mr Buckley wrote in a report released yesterday.
The regulator has since acknowledged that it failed to regulate the banks properly and has now imposed stricter monitoring such as formal weekly reporting, daily reviews of some banks' liquidity and monthly information on loans and impairments.
"The regulator has acknowledged that, in retrospect, the actions it took were insufficient," Mr Buckley wrote in his 87-page analysis of the problems with the regulatory system.
He recommended the Dail ask the regulator to give an annual statement on supervisory matters while banks' auditors should be forced to publish reports on banks' corporate governance.
The report by the Comptroller and Auditor General, a watchdog which investigates various matters on behalf of the State, also looked at the Financial Regulator's procedures and practices as the credit crisis unfolded.
"The regulator has acknowledged that, in general, a more intensive form of regulation is now required," the report says.
"The regulator is working with the Government and the EU with regard to their plans for further improvements in regulation."
Finance Minister Brian Lenihan yesterday confirmed plans to publish a bill aimed at bringing the financial watchdog back under the umbrella of the Central Bank. He said this was the first of a three-stage legislative programme to create a new and fully-integrated structure for financial regulation.
Government sources said the second step would be to give the watchdog additional powers. It is understood that one of the top items on a wish list from the new head of regulation, Matthew Elderfield, is to give his office statutory powers in the area of fitness and probity of top bankers. The third stage will see the Government consolidating all the relevant legislation into a single bill.
Other reasons for the collapse in the banking sector include low interest rates, tax incentives such as mortgage interest relief and even "positive commentaries on the Irish economy", the Comptroller and Auditor General said.
The Financial Regulator yesterday welcomed the publication of the report, adding that it had already addressed many of the issues identified.