Sunday 18 February 2018

We can take own decision on loans to executives, banks insist

Laura Noonan

BANKS should be able to lend their directors and senior managers up to €1m without having to comply with the Financial Regulator's tough new rules on 'related party' borrowing, the Irish Banking Federation (IBF) and Bank of Ireland have claimed.

The claim is made in two separate submissions to the Financial Regulator's consultation paper on new guidelines to ensure greater transparency in the way banks conduct business with their directors and senior management.

The Regulator's proposals include referring all 'related party' dealings to the banks' boards, including new loans, loan top-ups and changes of loan terms. The rules also prohibit lending to related parties on "more favourable terms" than those given to non-related parties, and cap a banks' exposure to any significant shareholder at 5pc of the bank's value.


In a submission published on the Financial Regulator's website yesterday, the IBF says a "deminimums value" must be applied to the proposals on director and senior management borrowing in order to make the rules "a practical operation for banks".

"Retail activity, including personal loans, overdrafts and credit cards below €100,000, should be excluded," the IBF says.

Bank of Ireland also suggests the need for a minimum value, arguing that board approval for every loan or variation of the terms of a loan "is impractical".

AIB objects to the principle of board approval for director and senior management loans, asserting that "credit decision-making and management are executive functions which should be carried out by executive management".

The bank suggests that instead of requiring board approval for individual loans, the rules may be amended so that "board-approved lending policies" would be implemented by the banks' management.

A submission from the Irish Banking Officials Association, which represents 22,000 bank workers, "welcomes" the Financial Regulator's submissions.

Irish Independent

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