Oireachtas group wants to increase banks' controls

An Oireachtas committee wants banks' internal watchdogs to be given more power as a safeguard against future scandals in the financial sector.

The Joint Committee on Finance and the Public Service yesterday published an interim report on its investigation into high bank charges and interest rates.

The inquiry was sparked by the wave of financial scandals that hit the headlines over the past few years, including the National Irish Bank overcharging and tax evasion controversy, a series of problems at AIB and concerns that banks are charging customers excessive interest rates and fees.

Committee chairman Seán Fleming told a press conference yesterday that members believed strengthening banks' internal audit divisions, which are there to ensure they comply with the law and regulatory standards, and guaranteeing them independence would help prevent scandals in the future.

The committee recommends that internal audits should be placed on an statutory basis, giving it similar status to external audits.

The report states the law should safeguard internal auditors' independence by requiring them to report to an audit committee which is independent of management, and should specify the qualifications and procedures for internal auditors.

Committee member Joan Burton said that, during the hearings, it had emerged that Irish banks' internal audit procedures were a "bit hit and miss".

She pointed out that this was because they had no equality of power with management.

The committee is also recommending that the Oireachtas should pass legislation that will protect "whistleblowers" - employees who come forward and alert the authorities or the media about wrongdoing in banks - as quickly as possible.

The Bill, which was published in 1999, is awaiting committee stage in the Dáil.

The committee also found that, because most of the business is concentrated in a small number of powerful institutions, there is insufficient competition in Irish banking.

As a result, it says that consumers are suffering by paying higher fees and not getting the benefits of interest rate reductions.