ECB concerns cast doubt on Lenihan banking powers
FINANCE Minister Brian Lenihan was dealt a heavy blow last night when the European Central Bank (ECB) raised serious concerns about his far-reaching powers under controversial new banking legislation.
The ECB's concerns come as the minister fends off major criticisms over the payment of a €500,000 bonus to an executive in Bank of Ireland.
Last night's intervention by the ECB is in addition to President Mary McAleese's decision to call a special advisory council meeting tomorrow to decide whether the minister's new banking legislation is potentially unconstitutional.
The ECB's comments represent a significant setback to Mr Lenihan's plans to rapidly overhaul and restructure the banking system.
The Frankfurt-based bank, which is one of three parties overseeing Ireland's €85bn bailout package, last night raised a string of concerns over the legislation that allows the Government to take over banks, sack directors and sell (or transfer) entire chunks of loan books to private investors.
In last night's legal analysis from the ECB, it said it would have "appreciated" being consulted on such a pivotal matter at an earlier stage.
It said the legislation was not "legally certain" in some respects and Ireland appeared to be jumping ahead of its EU partners by introducing such laws in such a tight timeframe.
A spokesman for the Department of Finance said the consultation period was "inevitably and necessarily constrained" as the preparation of the bulk of the Bill only commenced at the end of November.
"Nevertheless, the ECB were sent draft heads of the Bill at the end of November and a close to final draft of the Bill was made available to the ECB on December 11," the spokesman said.
And he insisted there was was "no question" of the Central Bank or ECB as creditors to the guaranteed institutions being exposed financially by the exercise of the minister's powers under the Bill.
"It is very difficult to see how such measures could be designed and executed without the intimate involvement and very close engagement with the Central Bank."
Labour's finance spokeswoman Joan Burton last night said she was "not surprised" at the ECB's analysis after only four hours were allowed to debate the new laws last week.
Fine Gael's finance spokesman Michael Noonan said that ahead of the President's meeting with her special advisory council tomorrow, he didn't want to interfere in that process by commenting.
A spokesman for the Department of Finance refused to comment on the specific criticisms mentioned by the ECB.
Both Fine Gael and Labour have also called on the minister to publicly explain how a €500,000 bonus was paid to a Bank of Ireland executive.
Department of Finance and Bank of Ireland officials have been trawling through confidential documents and contracts over the weekend to establish the details of one of the largest bonuses ever paid in the Irish banking system.
Mr Lenihan has ordered the bank to come forward with an explanation.
A Bank of Ireland spokesman last night confirmed the bank was in "continuing contact" with the department over the bonus payment.