Changing our business mindset is key to lasting banking supervision reform
LASTING reform of bank supervision will only come with a change in mindset in both the private and public sectors, but challenging the status quo is culturally difficult in Ireland, a top Central Banker has said.
Fiona Muldoon, the director of credit institutions at the Central Bank, said the new single European banking supervisor due to come into force next year will mean a new way of doing business.
She told an economics conference at the University of Limerick that banking union would strengthen bank supervision.
The Single Supervisory Mechanism (SSM) will switch bank oversight from national central banks to the European Central Bank (ECB). The move will help insulate supervisors from the cultural and political pressures associated with being close to the industry that it regulates, according to Ms Muldoon.
"Of course, coming with challenge and outsiders' perspective will also require a new culture or way of doing our business," she said.
"This can only strengthen supervision in a small country such as ours where consensus, compromise and political nous, all of which are valuable in and of themselves but are sometimes valued at the expense of independent thought, accountability and the ability to deliver.
"Reform begins when we allow such challenge to our accepted thought process and way of doing things. Such challenge to the status quo is rarely comfortable and appears to be particularly culturally difficult for us here in Ireland."
She said it was important under the new supervisory system that supervisory practices and procedures converge into a common approach as quickly as possible.
But she warned this was likely to take time.
"In my experience in both the private and public sector, the structural constraints are significantly more challenging in the public sector and it takes considerable time, energy and collective organisational effort to implement such changes and processes and more time again to ensure that they have taken hold amongst all of the many folk working on such matters."