REPORT OF THE IMPLEMENTATION ADVISORY GROUP ON A SINGLE REGULATORY AUTHORITY FOR FINANCIAL SERVICES

The Tanaiste and Minister for Enterprise, Trade & Employment, Ms Mary Harney TD and the Minister for Finance, Mr Charlie McCreevy TD agreed to the publication of the Report of the Implementation Advisory Group on the establishment of a Single Regulatory Authority for the Financial Services Sector to facilitate public consideration of the issues.

The Government will consider the Report in the near future and a further announcement will be made at a later date.

Table of Contents

Summary of Main Recommendations by Chapter

Chapter 1:Background to Establishment of Implementation Advisory Group

Chapter 2: Current Role and Functions of Supervisors/Regulators of the Financial Services Sector

Chapter 3:The Range of financial service providers to be overseen by the SRA

Chapter 4:Single Regulatory Authority - Roles and Functions

Chapter 5:E-Commerce and Financial Services

Chapter 6:Structure and Location of the Single Regulatory Authority

Chapter 7:Arrangements for the Imposition of Sanctions and Penalties on Regulated Entities

Chapter 8:Funding, Staffing and Resourcing

Chapter 9:Outline of Legislation Required and Timeframe for Establishment of the SRA

Appendices

1. Range of financial service providers to be overseen by SRA
2. Minority's Alternative Model
3. International Comparisons
4. Copy of Advertisement Inviting Submissions
5. List of submissions received
6. Glossary of terms used in the Report

To: Ms Mary Harney, T.D., and Mr Charlie McCreevy, T.D.,

Tánaiste & Minister for Enterprise, Minister for Finance,

Trade & Employment, Department of Finance,

Kildare Street, Upper Merrion Street,

Dublin 2. Dublin 2.

Ministers

I have pleasure in submitting the Report of the Single Regulatory Authority Implementation Advisory Group.

As you are aware, the Group’s point of departure was the decision in principle by the Government that a Single Regulatory Authority should be established. The Group’s task was, largely speaking, prospective; in these circumstances, we wish to emphasise that our recommendations which suggest significant changes are not intended in any way to be an adverse verdict on the record of the existing regulatory bodies and officers or on the hardworking, skilled and dedicated employees who serve in them.

The Group would like to thank all those who took the time to make written and oral submissions which the Group found useful and informative; some of the recommendations will be particularly useful to the Single Regulatory Authority when established, and to which they will be made available.

The Group wishes to record its gratitude in respect of the contributions of Mr Hugh Burns of the U.K. Treasury and Mr Andrew Whittaker of the U.K. Financial Services Authority, made during their respective appearances before the Group in Dublin.

The Group would also wish to express its great debt of gratitude to its Secretary, Mr Jim O'Brien, of the Department of Finance, and to his assistant, Mr Richard Shine, also of the Department of Finance, for their outstanding and unfailing diligence, competence and courtesy during the Group’s deliberations. We also wish to thank most sincerely the team of support staff from the Department of Finance: Ms Katherine Kavanagh, Mr Conor O’Mahony and Mr Michael Perkins, who worked so hard behind the scenes to service the Group.

Lastly, the Group sought and obtained an extension of the time frame for its activities in order to deal thoroughly with its terms of reference in a manner befitting the complexity and importance of its task. We are confident that the consequent short delay was warranted and has resulted in a more robust and worthwhile Report.

__________________

Michael McDowell

Chairman

19 May 1999

 Summary of Main Recommendations by Chapter

Chapter 3: Range of Financial Service Providers to be Overseen by the SRA

• ??Given that the Government had decided, in principle, that a Single Regulatory Authority for financial services should be established, the Group considered that all financial service providers should, in principle, be dealt with by the SRA and that a compelling case would have to be made for the exclusion of any provider from its remit. The recommendations of the Group in relation to the range of financial providers to be overseen by the SRA are summarised in Appendix I. In particular, a statutory position of Registrar of Credit Unions should be established within the SRA.

Chapter 4: Roles & Functions of the SRA

• ??The Minister for Finance should be responsible for the SRA.
• ??All prudential supervision, including decisions concerning licensing and authorisation, of financial services should be assigned to the SRA.
• ??The SRA should be given statutory responsibility for consumer issues related to the entities for which it is to be responsible.
• ??A statutory position of Customer Protection Director should be established within the SRA.
• ??Two panels, representative of consumer and industry interests, respectively, and chaired by high ranking officials of the SRA, should be established.
• ??The Deposit Guarantee and Investor Compensation Schemes should be operated by the SRA.
• ??A single statutory ombudsman scheme for all financial services provided by regulated entities, to operate independently of the SRA, should be established.

Chapter 5: E-Commerce and Financial Services

• ??The SRA should adopt a proactive approach to relevant developments in the e-commerce area so that Ireland is well-placed in Europe as a location for such business.
• ??The SRA should be given a role in raising public awareness of the potential risks involved in accessing financial services web sites.
• ??The SRA should be cognisant of developments at EU level and the recommendations of the International Organisation of Securities Commissions.
• ??The SRA should ensure that it is fully conversant with the information available and the issues arising so that it can pursue, and make an effective contribution to the development of, appropriate strategies and actions, including any necessary legislation for this area.

Chapter 6: Structure and Location of the SRA

• ??The Group's recommendation is that the SRA should be an entirely new independent organisation. A minority of the Group prefers to locate the SRA within a restructured Central Bank.
• ??The SRA should have a public interest Board, the non-executive members of which should be selected for their experience of legal, financial, consumer issues, etc.
• ??The Board should comprise nine members, six of whom, including the Chairman, should be appointed by the Minister for Finance, following consultation with the Minister for Enterprise, Trade and Employment. The Board should also include the Chief Executive Officer, the Customer Protection Director and the Secretary General of the Department of Finance.
• ??The Chief Executive Officer of the SRA should be appointed by the Board of the SRA, for a fixed term, with the consent of the Minister for Finance, following an open competition conducted by an appropriate independent body. The person appointed should be responsible, under the SRA’s Board, for the implementation of functions in relation to prudential regulation and consumer protection.
• ??A high-level Standing Committee should be established by statute which would be chaired by the Department of Finance and be composed of representatives of the Central Bank and the SRA, the purpose of which would be to ensure the maximum degree of co-operation and information disclosure between the SRA and the Central Bank.
• ??Arrangements to provide for Ministerial and Parliamentary accountability are also proposed.

Chapter 7: Arrangements for the Imposition of Sanctions and Penalties on Regulated Entities

• ??The SRA should have power to impose sanctions on a financial services provider for breach of the relevant regulatory code. In the event of the provider expressly accepting the determination and sanction, the same would be binding on the parties.
• ??An independent disciplinary Tribunal should be established to make determinations and impose sanctions in instances where financial services providers do not accept a determination by the SRA and to review decisions taken by the SRA in relation to licensing conditions.
• ??The financial services provider should be entitled to appeal against the determination of the Tribunal and/or the sanction imposed to the High Court.
• ??Should the financial services providers neither appeal the determination of the Tribunal nor indicate its acceptance of the determination and/or sanction, the SRA should be entitled to apply to the High Court ex parte seeking confirmation of the determination and/or sanction.

Chapter 8: Funding Staffing and Resourcing

• ??The SRA should be funded by industry. However, the funding structure used should incorporate sufficient and appropriate safeguards to ensure that costs imposed on individual bodies are fair having regard to the nature and extent of services being provided.
• ??The competitiveness of the financial services industry should not be undermined by the charges imposed. This applies both to the competitive position of financial services entities relative to each other and to the competitiveness of the financial services industry internationally.
• ??There should be consultation with the industry in relation to the determination of fee structures.
• ??Arrangements for funding in the transitional phase are also proposed.
• ??The staff required by the SRA should, to the maximum extent possible, be recruited from amongst the staff currently involved in regulation.
• ??The SRA should have full autonomy in relation to the staffing arrangements, including recruitment and remuneration, applicable in its area. The Group noted that the implications of this recommendation for overall public pay policy would have to be taken into account.
• ??The detailed arrangements concerning staffing should only be settled following full consultation between the various organisations concerned and the representatives of the staff involved.
• ??The Group also makes recommendations in relation to financial accountability.

Chapter 9: Legislation Required and Timeframe for Establishment

• ??The SRA should be established as quickly as possible but should not begin its operations without the necessary statutory powers to effectively fulfil its remit being in place. In order to meet these objectives, it should be established on a statutory basis through the minimum legislation necessary to achieve that objective.
• ??Initially, the existing statutory basis for regulation should be maintained and amending legislation should transfer responsibility for its execution to the SRA.
• ??The Group considers that the establishment of the SRA could be realistically achieved within one year of a Government decision to proceed.
• ??As soon as possible after the establishment of the SRA, legislation should be enacted to consolidate all the statutory provisions related to the SRA.