Political inertia delaying financial regulator

A lack of interest and political will is behind the delay in establishing an independent single regulator for the financial sector, the Fine Gael spokesman on finance, Mr Michael Noonan, said yesterday.

A report recommending the establishment of a new independent authority was presented to the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy, in May of last year. However, no memorandum on the subject has yet been brought to Cabinet and there are no indications that a development is imminent.

Mr Noonan said senior officials from the Department of Finance were against the majority recommendation of the committee, chaired by Mr Michael McDowell SC, which reported last year, while senior officials in the Tanaiste's department were for it. The matter would have to be resolved at political level.

"The Government is nervous about opening up a conflict between the Tanaiste's department and Mr McCreevy's," Mr Noonan said. "There is a lack of political will to resolve the issue, and I don't believe either minister is particularly interested in the issue."

Mr McDowell was appointed to chair an implementation group to look at the issue in October 1998. The group reported in May last year, with a minority recommendation, representing the views of the Department of Finance and the Central Bank, calling for a continued role for the Central Bank. Since the report was published, Mr McDowell has been appointed Attorney General.

It is understood the matter has been passed from official level to political level and is awaiting resolution by Ms Harney and Mr McCreevy personally.

A spokeswoman for Mr McCreevy said the minister was examining the matter and she would not comment further. A spokesman for Ms Harney said he had no comment.

Fine Gael has said it is in favour of the minority recommendation in the McDowell report, saying the course recommended by the majority of the committee would have seriously adverse consequences for the financial services industry and particularly the International Financial Services Centre.

In general terms, it supports the minority recommendation that the new single regulatory authority be located within the Central Bank. Relationships that the Central Bank had built up with regulators in other jurisdictions might not transfer to the new institution, Mr Noonan argued.

And excluding the Central Bank from regulation would "raise questions about the independence and competence of the single regulatory authority in carrying out its functions".

The Central Bank has come in for strong criticism in recent times, but it has defended itself vigorously. Earlier this year, the Moriarty Tribunal examined the failure of the bank to detect the existence of secret Ansbacher deposits from the 1970s to the 1990s. It is not clear if the tribunal has finished hearing evidence in relation to the performance of the Central Bank in this regard.