Patrick Neary to step down as regulator

 

Chief Executive of the Irish Financial Services Regulatory Authority, Patrick Neary, is to step down, it has emerged.

The Financial Regulator announced his decision this evening to retire, effective from January 31st. He will step down as a member of the Irish Financial Services Regulatory Authority's board, and also as a member of the board of the Central Bank and Financial Services Authority of Ireland.

Mr Neary has come under pressure in recent weeks after it was claimed that staff at the regulator's office first learned in January 2008 that the chairman of Anglo Irish Bank Seán FitzPatrick had been transferring loans of up to €87 million off the bank's book to conceal them from shareholders.

This evening, Mr Neary said he had not known of the issue before December 10th.

"I had deferred a decision about my retirement until the Report of the Committee of the Authority examining the internal communication of matters relating to loans to Directors of Anglo Irish Bank Corporation was concluded," Mr Neary said in a statement.

"So far as I am concerned, I was not advised of any such matters in early 2008 and there has been no oral, written or email escalation of these issues to me or to the Authority over the period until the matter was raised with me by the Minister on December 10th, 2008."

The committee outlined its findings this evening, although the full report cannot be published for legal reasons.

It found there was "a breakdown in terms of internal communications and process and in the regulatory follow-up and response of the organisation".

"This resulted in a failure to take appropriate and timely actions in relation to what was a serious matter and to escalate the matter to the Authority," it said.

The committee said the loans issue could have been identified earlier if the information available from Anglo's quarterly returns had been monitored more comprehensively.

It said that while concerns persisted in the Banking Supervision Department, it was not pursued. This was partly due to a letter from Anglo going missing, and partly because of the pressure put on banking officials due to the liquidity problems in financial markets.

"There is no suggestion from any party that any communication - verbal or written - on this issue was made to either the Prudential Director or Chief Executive in the period (subsequent to January) to December 2008," the report said.

Minister for Finance Brian Lenihan said he would consider the authority's report and bring proposals to Government in relation to the appointment of a new chief executive.

The Irish Financial Services Regulatory Authority has appointed Consumer Director, Mary O'Dea, as acting chief executive, while the authority's chairman, Jim Farrell, will assume enhanced responsibilities.

In a statement this evening, the authority said Mr Neary brought "a wealth of experience" to the role and discharged his responsibilities with "dedication, commitment, a strong work ethic and integrity".

"During his time as chief executive, Mr Neary has made a significant contribution to the development of the organisation and to the principles based approach to regulation, which was adopted by all of the stakeholders in Ireland. The system is of course now under review in the light of the global financial crisis, which has posed such major issues for regulators worldwide," it said.

Fine Gael's finance spokesman Richard Bruton said Mr Neary's resignation was "inevitable".

"The failure of the banking regulatory regime exposed in recent weeks and months made this resignation inevitable. It remains to be investigated why the practises identified in Anglo were not reported up the line and acted upon," he said.

"This resignation may be the first tangible signal that the people in Irish banking, both at a commercial and regulatory level, that brought our banking system to this low ebb will not and cannot be the people that bring us out of this mess."

Green Party finance spokesperson Dan Boyle welcomed the regulator's announcement that he would retire at the end of the month.

"It is clear that confidence in the Irish financial services sector has been badly eroded by the events of the last six months," he said.

"While much of this is down to practises within the financial institutions themselves, the inability of the regulatory authority to acquire appropriate information pertaining to the stability or otherwise of Irish financial institutions has meant that Mr Neary's stepping down had become inevitable. It is a necessary measure to restore confidence that had been so badly dented."

He called for strengthened powers for the regulatory authority to avoid a recurrance of recent events in the Irish financial sector.