ECB chief warns on independence of Central Bank
European Central Bank (ECB) president Jean-Claude Trichet has warned the Government that draft legislation on plans to bring the financial watchdog back under the wings of the Central Bank was not sufficiently clear on the extent of the bank's future independence.
The comments were contained in a lengthy opinion from the ECB on the outline of legislation, which Finance Minister Brian Lenihan submitted to Frankfurt on February 22.
"The draft heads (of the Bill) are not sufficiently clear as to whether Ireland's central bank will be a fully independent institution entrusted with ESCB-related (European System of Central Banks) tasks," it said.
The ECB also warned that because of the lack of a consolidated central banking statute, the system "is lacking in transparency".
"The requirements of legal clarity and transparency suggest that the Irish Government should take the first suitable opportunity for a consolidation exercise, and the ECB welcomes the indication . . . that such an exercise is envisaged," it said.
Mr Lenihan yesterday welcomed the publication of the opinion on the heads of the Central Bank Reform Bill 2010, which was unveiled two weeks ago. "To the extent that issues have been raised, these have already been addressed in the final text of the bill or can be dealt with as the bill progresses through the Houses of the Oireachtas," he said.
"I am keen to work closely with the ECB to ensure the best possible reform of the structures of the Central Bank of Ireland. This opinion is an important part of that process," he said.
Mr Lenihan had first signalled his intention last June to re-merge the Financial Regulator with the Central Bank, after a six-year hiatus. The separation of the watchdog -- given an unofficial 'light touch' mandate -- from the bank was widely viewed to have contributed to the property bubble and ensuing financial crisis.
Mr Lenihan also recently signalled that his department was working on a three-stage programme to overhaul the regulatory framework.
Once the bill is passed by the Oireachtas, it is envisaged that further powers and functions will be given to the Central Bank. Finally, Mr Lenihan plans to consolidate all existing legislation.