Financial Regulator

Financial Regulator Announces New Plans to Control Loans to Bank Directors at D il PAC Meeting

Independent Reports on Investigation into Banking Crisis now “Imminent”

13 May 2010

The Financial Regulator intends to introduce new rules to regulate loans given by banks to their own directors.

At today’s D il Public Accounts Committee, Financial Regulator, Matthew Elderfield told Committee members that such loans had “the potential to give rise to conflicts of interest and abuse.” He went on to say that “loans to bank directors and senior management have been subject to abuse and excess, if not outright subterfuge……in one notorious case, in a matter that was designed to avoid detection.”

The Regulator intends to impose a statutory code of practice concerning lending by banks and building societies to related parties. This new code aims to ensure such lending is on an “arms length” basis.

The regulator also informed the Committee that the two independent reports by the Commission of Investigation into the financial crisis are “imminent.” The findings of these reports will help the Government and Oireachtas as they prepare the terms of reference for the next stage of the investigation.

Committee Chairman, Bernard Allen TD said;
“The introduction of a stricter regime governing loans by banks made to their directions is a welcome step. There have been some outrageous incidents of this practice within the Irish financial system in recent times, with one such case referred to today as “notorious” by the Regulator. Such actions bring disrepute to, and discredit the Irish financial sector.

We cannot tolerate a situation whereby significant sums of money are lent to directors or individuals connected to banks in an uncontrolled and unrestrained way. In order for people’s faith in Irish banking to be restored there must be greater levels of transparency in the future.

The Committee is also pleased that the two independent reports into the crisis will be finalised shortly. These reports will help the Oireachtas continue the next stage of its investigation, an investigation which I believe should allow for discussions with former office holders of the relevant agencies.”