The regulator’s challenge

The departing deputy governor of the Central Bank, Matthew Elderfield, during his three and a half year tenure as financial regulator, has made a major contribution to fixing Ireland's broken banks, and helping them to regain some of the trust and credibility they have lost, with their customers and the financial markets. More needs to be done, however, as the Financial Services Ombudsman, Bill Prasifka, highlighted this week in critical comments on how banks and other financial institutions fail to deal adequately with customer complaints, and where once again he called for a major improvement. Mr Elderfield's successor, Cyril Roux, a French national, who takes over in October, is well qualified for the post, given his wide range of professional skills and his varied banking experience in France at the highest level, in the private and public sectors.

His appointment comes, as Minister for Finance Michael Noonan has said, at an "important juncture" in the restructuring of the financial sector. Mr Roux is set to continue the regulatory reforms that Mr Elderfield has advanced in what should be a seamless transition involving no loss of momentum. For Mr Roux, given his background and range of experience, is well equipped to meet the challenges that lie ahead: first, in tackling the mortgage arrears crisis, where at present almost one in five Irish home loans are not being fully repaid; and second, in preparing for the stress tests that the domestic banks will undergo next year. These solvency tests will establish whether more money may be needed to recapitalise the banks - in addition to the €64 billion bailout sum they have already received.

The problems in the banks stemmed in part from light touch regulation of their operations, with little effective oversight of their lending activities. Mr Elderfield as financial regulator, avoided the excesses of either light touch or heavy-handed regulation of the financial sector. Mr Roux will do well to emulate his predecessor’s success in establishing a steady middle way.