Just over a week after the overcharging scandal at National Irish Bank (NIB) was revealed, a whole range of investigations is now under way. The Garda, two High Court inspectors, the Central Bank and the Director of Consumer Affairs, are all undertaking inquiries. These come on top of the investigations into the sale by the bank of offshore insurance bonds which may have been used by some investors to evade tax.
No-one could criticise the response of the State authorities to date, but the tasks of completing the investigations and making sure that appropriate action is taken on their findings, still lie ahead. Beyond the immediate investigations, the affair raises broader questions about the regulation of the financial sector, the powers of the Revenue Commissioners and the legislation covering white-collar crime.
NIB management and the bank board face a difficult time, to put it mildly. It was bad enough to have the Central Bank, the Revenue Commissioners and an authorised officer looking into the sale of offshore bonds. Now the bank is also facing inquiries by the Garda Bureau of Fraud Investigation and two High Court inspectors, in the wake of compelling evidence that some of its executives stole money from customers. And, despite this theft being uncovered by internal audits, no moves were made by management to pay back the cash.
The investigations into this affair must be thorough and must be undertaken as quickly as possible. It is no exaggeration to say that the affair has deeply shaken public confidence in the entire banking system and is doing serious damage to the international reputation of our financial sector.
The public needs to be reassured by the Director of Consumer Affairs that no other banks are involved in these practices. If the Director's spot checks find evidence of deliberate overcharging in other institutions, then the matter becomes even more serious. NIB customers need quick answers on how widespread malpractice was in the bank and those defrauded of their money must be repaid. Natural justice demands that the Garda investigations lead to the punishment of those who are guilty.
The Central Bank, meanwhile, has a key role to play in restoring confidence in the financial sector. The argument about whether the bank's regulation should have spotted the malpractice is now an historical one. In recent years the regulatory practices of the banks have changed, while responsibility for non-interest charges rests with the Director of Consumer Affairs.
The Central Bank, however, still decides who should hold a banking licence. Before making any decisions in this area, it must await the outcome of the various investigations. It must also consider the position of NIB customers and confidence in the financial sector generally. But what we know so far suggests that the most serious consideration must be given to the appropriateness of NIB's holding of a banking licence.
Some other issues also arise. Clear demarcation lines are needed between the Central Bank and the Director of Consumer Affairs in regulation of the sector. The regulators must become more open and accountable. The Revenue Commissioners - who to their credit used obscure existing legislation to get access to the names of NIB's offshore depositors - must be allowed automatic access to such bank accounts where there is a reasonable suspicion of tax evasion.
Finally, news of the proposed updating of legislation to tackle white-collar crime is welcome. This has been promised often in the past, but in the current climate there is no excuse for the Government not reforming the law in this area.
