Sir, – Congratulations to John McManus (Business Opinion, "Blame McCreevy and Harney not regulator for light touch", May 5th) for bringing some insight and perspective to the Anglo trial debate and the demonisation of former financial regulator Patrick Neary. I would go a little further and suggest that the depth and severity of our current crisis, if not the crisis itself, was in no small way attributable to the political ethos of "unfettered capitalism" which was core to the PD political movement. – Yours, etc,
Sir, – I refer to the Business Opinion piece by John McManus on where the blame for the Anglo-Irish Bank crisis lies. I would like to correct the record.
He tells his readers that the decision to create a new financial regulator had its origins in a report of mine. That is simply not so.
The report of the Implementation Advisory Group on a Single Financial Regulatory Authority, a group which I chaired in late 1998 and early 1999, indicates that its “point of departure” was the prior decision in principle already taken by the government to create a single regulator. The report is still available online.
Months earlier, in July 1998, a report of an All-Party Oireachtas Committee (which numbered among its members three members of today’s Government) had recommended, and the then government had decided, that there should be a new independent financial services authority, an “FSA”.
That all-party committee had criticised the then Central Bank which, “while empowered to regulate banking institutions, has been largely unable to prevent the types of malpractices under current investigation”, referring to the banking sector involvement in widespread tax evasion and systematic overcharging of customers.
The advisory group that I chaired was subsequently established to advise inter alia on the powers and functions of the new single regulatory authority and whether the new regulatory body (to the establishment of which the government was already committed) should be located within the existing Central Bank or as a free-standing separate regulatory authority, a matter on which opinion in the government was then divided.
Nowhere does the report of the group which I chaired discuss, advocate, or even remotely deal with or touch on issues of “light-touch regulation” or “principles-based regulation” or of making the financial regulator “smaller and cheaper” as Mr McManus now suggests. The opposite is the case, as the report makes quite clear.
The advisory group report argued for high standards of regulation, and expressly recommended radically improved new enforcement measures including sanctions such as multimillion fines, personal disqualifications and sanctions, etc, and a statutory tribunal to enforce these standards.
The group’s report also dealt comprehensively with early implementation and with the requisite interim statutory and comprehensive legislative underpinnings.
I never championed “light-touch regulation”, or “unfettered capitalism”, or “free markets” in the context of banking and financial services where bankers were left alone to make as much money as possible as Mr McManus now suggests.
On the contrary, at the time I publicly likened “light touch-regulation” to “light-fingered regulation”, and stated my view that an effective balance had to be struck by Ireland between “heavy-handed” and “light-touch” regulation in the financial service sector.
I have always supported reforming our laws and institutions to ensure that regulation of corporate activity and financial services was effective. Indeed, the report of the Company Law Enforcement and Compliance Group which I also chaired in 1998 and which was, happily, accepted and implemented by government, shows that I was not an advocate of “light-touch” regulation but of effective regulation.
The Implementation Advisory Group’s majority report (of which I was part) concluded that the new financial regulator should be a free-standing body separate from the Central Bank, and the report also contained a dissenting minority view (held by the Central Bank and the Department of Finance representatives) that the new single regulator should instead be located within the Central Bank.
In the end, the government to which I reported rejected the model in the group’s majority report, and instead adopted a compromise “twin-pillar” structure which had featured in a footnote to the report.
I would invite your readers to read the report online to judge for themselves whether it merits the comments made by Mr McManus. – Yours, etc,