Thursday 24 May 2018

Central Bank will keep its powers to punish rogue bankers under new rules

Repro Free. 10/10/2013: Central Bank of Ireland staff photography. Picture Jason Clarke Photography.
Repro Free. 10/10/2013: Central Bank of Ireland staff photography. Picture Jason Clarke Photography.
Colm Kelpie

Colm Kelpie

THE ECB will have no powers to punish rogue bank directors, even as Frankfurt takes over responsibility for bank supervision across the euro area later this year.

Instead, the Central Bank here will continue to hold on to powers to impose penalties on bank directors after new common EU banking rules come into force, Financial Regulator Cyril Roux has said.

The European Central Bank (ECB) will become Europe's new banking supervisor at the end of this year. It will have powers to discipline banks but not individuals, Mr Roux said.

"The Central Bank will be exclusively competent to impose administrative penalties on a natural person (eg a member of the board). The ECB has no sanctioning role in relation to individuals," he said.

The Frankfurt-based ECB will become the common supervisor for all major European banks in November as part of Europe's ambitious banking union plan.

Mr Roux told a conference organised by Deloitte yesterday that the ECB will be able to impose fines on big banks, especially if they breach capital rules, and the Central Bank will be able to do so on "less significant credit institutions".

But the Central Bank will be exclusively able to impose administrative penalties on individuals.

"In prudential and regulatory terms, 2014 will be a remarkable year," Mr Roux said.

"SSM (Single Supervisory Mechanism) implementation represents a considerable challenge within a demanding timeframe, but it is undoubtedly a positive step in banking supervision for Ireland, for the eurozone, and for the EU as a whole."

Ahead of the ECB taking on its supervisory role, banks across Europe will be subject to stress tests in the autumn.

Some 128 banks will be tested, including five in Ireland – AIB, Bank of Ireland, Ulster Bank and Permanent TSB will be examined as well as the Irish operations of global bank Merrill Lynch.

The process is aimed at uncovering any hidden risks or losses in the banks by the end of October, before the ECB takes responsibility for overseeing them in November.

Estimates suggest the shortfall across Europe's banks could range from €280bn to as much as €770bn.

Domestic Irish banks went through so-called asset quality reviews (AQR) late last year as a prelude to the main tests to be carried out in the autumn.

The 128 banks will also be subjected to a stress test looking at whether they need more capital to deal with future crises.

Banks will have to pass capital thresholds of 8pc for the baseline scenario and 5.5pc for adverse conditions.

Mr Roux said the stress tests would represent another step in Ireland towards restoring confidence in the banking sector.

And he said the right time to disclose information about the comprehensive assessment, and last year's AQRs, was when the exercise is completed.

Irish Independent

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