Minister for Public Expenditure and Reform Michael McGrath said that the Central Bank’s €4.1 million fine and rebuke of Davy over a bond-deal scandal will now allow the regulator to turn its focus to individuals.
The Minister noted that, under current laws, the Central Bank can only sanction individuals with powers including fines and barring people from working in a regulated firm after it has found against the financial company first.
"They have now done that and so they can answer questions in relation to individuals," Mr McGrath told RTÉ One's The Week in Politics programme on Sunday.
Mr McGrath added that Minister for Finance Paschal Donohoe will be bringing forward the long-awaited heads of bill "in the coming weeks" for planned laws to make it easier to hold individuals accountable for wrongdoing, without the Central Bank finding against their employer first.
Davy chief executive Brian McKiernan, deputy chairman Kyran McLaughlin and head of bonds Barry Nangle have resigned their roles at the State's largest stockbroking firm amid the fallout from the bond-dealing scandal.
The firm named Bernard Byrne, the former AIB chief executive who joined Davy two years ago as deputy chief executive and head of its capital markets division, as its interim chief executive, according to a statement issued on Saturday afternoon.
The Central Bank revealed on Tuesday it had fined Davy €4.1 million and reprimanded the firm after finding that 16 staff, including top executives, had sought to make a profit by taking the other side of a bond deal involving a client in 2014 – without telling him or the firm’s compliance team.
The Irish Times reported on Wednesday that the 16 staff members of the so-called O'Connell Partnership included Mr McKiernan, Mr McLaughlin, head of bonds Barry Nangle, former chief executive Tony Garry and one-time head of institutional equities David Smith.
The situation quickly spiralled into the biggest crisis in Davy's 95-year history as the Minster for Finance Paschal Donohoe called on the firm to address how it fell "gravely short of standards that are expected of leaders in position of financial responsibility", some of its clients, including the National Treasury Management Agency (NTMA) and Bank of Ireland, expressed concern, and the identities of the most senior participants in the bond deal emerged.
“The handling of the issue [last] week left a lot to be desired, by way of statements that came out from the firm and the way it took a number of days for any level of accountability to be brought to bear by the firm itself,” Mr McGrath said. “It’s an extremely serious issue.”
Mr McGrath said that the National Treasury Management Agency (NTMA), which recognises Davy as the only Irish-owned primary dealer of Government bonds and which uses the firm to sell new debt, is awaiting a response from Davy to the NTMA’s concerns about the company’s behaviour.
“Once there is a response to the by Davy, the NTMA will review the situation and advise the Government accordingly,” he said. “The Government and the NTMA view this matter with the upmost seriousness.”
Davy is currently scheduled to act for the NTMA, along with the other 14 international primary dealers, to find buyers of Government bonds next Thursday as part of a regular debt auction by the agency.