Basically saying they need to improve regulation like everywhere else due to this world financial crisis…
text below.
Wire: Company and Economic Releases (CRL) Date: 2009-01-09 21:13:41
IRISH REGULATOR’S STATEMENT ON REVIEW INTO ANGLO IRISH LOANS
The following is a statement from the Irish Financial Services Regulatory
Authority issued via e-mail on Jan. 9, 2009.
Statement by Authority
The Committee established by the Authority on Saturday 20 December 2008 to
undertake an urgent review of directors’ loans at Anglo Irish Bank and the
regulatory response has today (Friday 9 January 2009) delivered its report to
the Authority. The Authority has accepted the report.
The essential task of the Committee was to look within the organisation at two
issues: when the information about these loans was obtained by the
organisation, and how the information was communicated and followed up by way
of response. It did not include an examination of any other issues relating to
Anglo Irish Bank, which are the subject of a separate and ongoing
investigation.
The Authority is subject to strict obligations of confidentiality under
legislation and has been legally advised that it may not publish the
Committee’s Report. Nevertheless, it is conscious in the interests of
transparency and public interest in this issue to outline the essence of the
main elements of the Report.
Conclusions
In summary, in relation to dealing with the issue of directors’ loans in Anglo
Irish Bank, the Committee concluded that 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.
In particular, the Committee concluded that:
* if the information available from Anglo quarterly returns had been
monitored more comprehensively the issue of directors’ loans could have been
identified much earlier from the returns dealing with Large Exposures;
* once the matter of directors' loans had been identified it was pursued
actively by the Banking Supervision Department (BSD). Two meetings took place
between BSD and Anglo;
* the organisation did not use its discretion under its legislation to
alert the Director of Corporate Enforcement at the initial stages;
* the matter was not pursued with Irish Nationwide at the time. It is
now being pursued under the separate review initiated by the Authority;
* the discussions with Anglo were not broadened out to include Anglo's
Head of Internal Audit, the Chair of the Audit Committee and the external
auditors;
* while concerns persisted in BSD the matter was not pursued partly
because a letter from Anglo went missing and partly because of the pressure on
officials from the unfolding of liquidity problems in financial markets and in
individual institutions;
* the Committee noted that while the pressures referred to above did not
explain what occurred they are an essential part of the background;
* the issue did not surface again internally, even in Autumn 2008, when
major stability and strategic issues were being addressed by the authorities
including the Government;
* in relation to the particular issue of whether this matter had been
mentioned to the Prudential Director and Chief Executive after a wider meeting
had concluded in January 2008, the Committee was impressed with the coherence,
clarity and belief in their stated recollections of the people concerned and
their integrity. Nevertheless, the evidence presented to the Committee on this
issue could not be reconciled by the Committee. 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.
Recommendations
In its concluding remarks, the Committee noted that it had been greatly
impressed by the quality, dedication, commitment and strong work ethic as well
as the integrity of the officials with whom they engaged. The Committee noted
the pressures that the staff had faced since the onset of the crisis in the
global financial system in August 2007 and noted issues with staffing
requirements. The Committee noted that the adequacy of existing resources
would need to be kept under review particularly where modification of the
approach to regulation and more intensive supervision would require more staff.
The Committee observed that the system of regulation that operated in Ireland
was highly regarded internationally. However, the events of 2007 and 2008 in
the financial environment globally pointed to serious inadequacies in systems
of regulation operating across the world. Ireland is no exception and a much
more intensive type of regulation has been introduced here under the Government
Guarantee Scheme and this position is developing all the time.
The Authority notes and accepts the recommendations of the Committee and is
committed to implementing them in full. These are:
* The review of our strategic regulatory approach in the light of
developments in 2007 and 2008, to which the Authority is already committed,
should be advanced as quickly as possible. The review should ensure that the
organisation meets its statutory mandate and responds to the changed regulatory
environment and to EU and international developments in financial regulation.
* The staffing requirements for the organisation should be reviewed on
the basis of both the strategy review and also of the outcome of the work being
undertaken by external consultants for the Authority, specifically the Business
Process Review and Benchmarking against comparator financial regulators and
other similar businesses, which is expected to be concluded shortly.
* Any changes recommended by these consultants in the organisational
structure and reporting lines within the Financial Regulator should be examined
and if considered appropriate acted upon by the Authority as a matter of
urgency.
* While no process can eliminate the need for the exercise of good
judgement by officials, existing internal communication and escalation
procedures and procedural manuals should be reviewed taking account of the
lessons to be learned from this report and the ongoing separate review of
directors’ loans initiated by the Authority.
* Filing and document management and tracking arrangements should be
improved.
* The review instigated by the Authority to determine the treatment of
directors’ loans in all institutions covered by the Government Guarantee Scheme
should be completed at an early date.
* Loans to directors should be examined in greater detail, especially to
ensure that loans to any business in which a director has a major interest
(defined as 10 per cent or more of the shares or voting rights) are being
included in returns to the Financial Regulator.
* Arrangements should be made to ensure more effective monitoring of the
more important prudential returns, including those for loans to directors, with
on-line submission and built-in data validation and checking processes A
progress report should be made to the Authority by end-February 2009.
-ends-