Elderfield will force banks to reveal directors' loan details
The Financial Regulator yesterday unveiled new rules that will force banks to report full details of loans to directors -- and ensure they are not given on favourable terms.
This is aimed at preventing secret directors' loans, such as the €122m given to former Anglo Irish Bank chairman Sean FitzPatrick.
At the Dail's Public Accounts Committee, the head of financial regulation, Matthew Elderfield, said bank lending to related parties "has a special potential to give rise to conflicts of interest and abuse", adding that "loans to directors and senior management have been subject to abuse and excess, if not outright subterfuge".
Mr Elderfield also said there would be a new system of checks and balances to prevent "over-dominant" chief executives -- such as former chairman Mr FitzPatrick and former Irish Nationwide boss Michael Fingleton -- from getting too much control.
"We want fitness and probity standard to prevent some of those people getting into the system and to kick other people out," he said.
The committee also heard that the two preliminary reports into the financial crisis are due at the end of the month.
They will be used to help devise the terms of reference for the Government's behind-closed-doors banking inquiry.
Mr Elderfield pledged to clean up the Irish banking system by tackling an "unholy trinity of bad rules, bad behaviour and bad attitude".
"You have to have a philosophy of early intervention and being a bit pushy and taking it to the firm," he said.
Mr Elderfield said the previous structure to police the banks was not robust enough -- partly because there were only two employees in the regulator's office for every two large banks, such as AIB and Bank of Ireland.
And he warned that the banks would have to pay the full cost of the increased scrutiny -- which will be carried out with the recruitment of up to 350 extra employees.
"The cost of regulation will rise. But judged in the context of the huge cost of a financial crisis, the increase in the cost of regulation must be seen as a price worth paying," he said.
Mr Elderfield, previously the Bermudan watchdog, told the committee that, despite the international financial crisis, the primary cause of the banking crisis here was "home grown" with too much lending creating the construction boom.
Fianna Fail TD Ned O'Keeffe criticised the fact that many of the 1,000-plus staff employed by the Financial Regulator and the Central Bank combined were working a 32-hour week.
Mr Elderfield said that new staff members were being recruited on a new contract -- which is understood to be closer to the standard 39-hour week; while a Central Bank spokesman said the 32-hour week did not include the standard lunch hour.
There was also strong criticism of the work of the former regulatory regime, which created a "pack of lies" about the stability of the Irish banking system, claimed Labour TD Tommy Broughan.