Report critical of Financial Regulator

Wed, Oct 14, 2009, 01:00

THE FINANCIAL Regulator has lower levels of resources dedicated to the prudential supervision of banks and insurers than its international peers, according to an unpublished report on the effectiveness of the regulatory body.

Accountancy firm Mazars concluded in a report on the regulator – commissioned by the regulator itself – that the regulator had more of a focus on consumer protection than regulators internationally.

The firm also found that the regulator’s IT systems did not adequately support core aspects of prudential supervision, and that the capturing and management of information was “cumbersome and manual in many cases”.

The report is particularly critical of the regulator’s senior management structure, concluding that a clear management and oversight framework with associated costs, which ensures that issues are escalated through the organisation, were “not fully in place”.

“There was an over-emphasis on internal management rather than reporting of core prudential, policy, market or outward facing activities,” said the report.

Mazars said the agenda of the regulator’s executive board was “primarily financial in nature rather than strategic or regulatory in focus” and that it did not have an executive function.

There were gaps in the level and type of management information provided to management groups and that the production of the information was “overly onerous and inefficient”.

The report, which was commissioned in January 2008 and presented to the regulator’s authority (board) last February, said that, in certain cases, resources were diverted from planned supervisory activities to address “reactive” or administrative support activities.

Lower levels of specialist regulatory support skills were also employed than at other regulators.

The cost of financial regulation was considerably higher in Ireland than in other countries, according to a survey of international regulators examined for the report.

According to the Mazars report, the cost of the regulator per thousand of population is €11.30 in Ireland, compared with an international average of €6. The cost of financial regulation per regulated entity amounted to €43,000 compared with an average of €36,000 among international regulators.