IFSC could become 'wasteland' without suitable financial rules

THE FAILURE to establish a suitable financial regulatory system will turn the IFSC into “a waste-land” within 10 years, the chairman of a financial services consultative panel has warned.

David Went, chairman of the Financial Services Consultative Industry Panel, said that an intrusive single approach to regulating both domestic retail banks and international financial services firms would damage the industry.

“We desperately need to avoid a one size fits all prescription,” said Mr Went, who is also chairman of The Irish Times Limited.

“Just because the domestic banks and the foreign retail banks here made a pig’s ear of their business doesn’t mean we should laden heavy-handed regulation on the international industry that’s here.” Mr Went said “in some ways” he recommended two-tiered regulation to cover systemically important retail banks and international financial companies.

“A two-tiered approach is fully justified by the fact that the covered institutions are a significant risk as far as the taxpayer is concerned and the foreign retail banks were up to their necks in getting us into this mess,” he said.

The panel said the proposed Central Banking of Ireland Commission, the new regulatory body which will merge the Central Bank and the Financial Regulator, needed to be staffed with quality regulators who receive pay in line with competitive market rates.

“Compromising on the quality of the staff would be the ultimate penny wise, pound foolish,” said Mr Went.

A recruitment notice for the new director of financial supervision, who will assume the role of chief executive of the Financial Regulator, appeared in the Financial Times yesterday and is published in The Irish Times today.

Asked whether Irish banking can be properly regulated, Mr Went said the sector could be supervised. He said the enforcement of regulations had to be “tougher, quicker and more effective”. The panel recommended that the roles of market supervision, prudential regulation and consumer protection be clearly defined to avoid possible conflicts.

Aileen O’Donoghue, a panel member and director of strategy and policy at the Irish Stock Exchange, said integrating market and prudential supervision ran counter to the EU model, but that did not mean it could not be achieved.