Elderfield clashes with AIB's Somers on cost of regulation
In what are likely to have been his last public comments before stepping down from the role within a matter of months, financial regulator Matthew Elderfield effectively launched a broadside against deputy AIB chairman Michael Somers.
Strong regulation and an adequately resourced watchdog are essential if the "terrible costs" of the banking failure to taxpayers and society are not to be repeated, he warned.
Mr Somers, the former head of the National Treasury Management Agency, who's a government-appointed director to AIB, claimed last week that global banking giants such as Goldman Sachs are leaving the International Financial Services Centre in Dublin due to over-regulation.
But Mr Elderfield, who made his speech at the European Insurance Forum in Dublin yesterday, railed against any loosening of regulations designed to keep the financial sector in check.
He referred to comments made a few years ago by "now notorious" former Anglo Irish Bank boss Sean FitzPatrick, who insisted that the "tide of regulation has gone far enough". He did not directly refer to Mr FitzPatrick by name.
"I would hope that the debates on regulation and supervision are done transparently and they are given short shrift if they take place as a vaguely articulated concern about burden and competitiveness without being grounded in specifics to ensure informed debate on policy," said Mr Elderfield, who is leaving to be compliance director with Lloyds.
He said that concerns regarding the cost of employing staff to enforce regulation needs to be balanced with stark realities.
"Concerns over costs need to be tempered by recollection of the terrible costs to Ireland's taxpayers and society of financial failure," he said.
"The €64bn capital investment from the taxpayer into the Irish banking system represents a staggering 1,409 times the current year costs of banking supervision."
Mr Elderfield also said the Government has warned senior bank executives at state-controlled institutions that they risk losing their jobs if they fail to properly tackle distressed mortgages.
The Central Bank set targets in March for banks to deal with such home loans by next year. If they don't, loans more than 90 days in arrears that haven't been properly restructured would have to be written down to their repossession value.
"I think we have set the targets and I think the CEOs in the banks are very committed to getting to the targets. But we've said it's not just a matter of doing any deals, they have to be on sustainable terms," said Mr Elderfield.
He said the bank CEOs are taking the targets "very seriously".
"They know that if they're not successful in meeting the targets, the implications in terms of capital are significant.
"The provisioning rules that will come in will make them write down those that are not on a sustainable basis and I think the Government has said to the government-controlled banks that the senior management have to make this happen if they want to stay in their jobs."