Chapter 1

Background to Establishment of Implementation Advisory Group

Background

1.1. On 20 October, 1998 the Government agreed in principle to the establishment of a single regulatory authority for the financial services sector at the earliest date possible; and agreed to the immediate establishment of an Implementation AdvisoryGroup to progress the necessary work.

Membership

1.2. The membership of the Group was as follows:

Chairman: Mr Michael McDowell, Senior Counsel

Other Members:

Mr Liam Barron, Deputy Director General and Secretary, Central Bank of Ireland,

Mr Tom Considine, Assistant Secretary, Department of Finance,

Mr John Corcoran, Assistant Secretary, Department of Enterprise, Trade & Employment,

Ms Carmel Foley, Director of Consumer Affairs,

Mr Roger Kenny, Second Legal Assistant, Office of the Attorney General,

Mr Dermot McCarthy, Assistant Secretary, Department of the Taoiseach,

Mr Joe Moran, Former Chief Executive, ESB,

Mr Maurice Tempany, Former President, Institute of Chartered Accountants in Ireland.

Secretary to the Group: Mr Jim O’Brien, Director, Department of Finance.

Terms of reference

1.3. The Implementation Group was set up to advise the Government on:

The role and functions of the single financial regulatory authority (e.g. prudential supervision, the maintenance of orderly markets, safeguarding of clients’ funds, consumer protection, the development and regulation of conduct of business rules),including consideration of the issues arising from combining the functions of monetary policy and prudential regulation.

The range of financial service providers to be overseen by the authority (e.g. banks, building societies, Post Office Savings Bank, insurance companies and brokers, investment intermediaries (including lawyers and accountants in as much as theyhandle clients’ funds), exchanges, credit unions, friendly societies, finance companies, moneylenders, etc.) also taking account of the development of electronic commerce which may involve new types of service providers.

The extent to which, if any, existing regulators (e.g., the Director of Consumer Affairs, Registrar of Friendly Societies, Central Bank and Department of Enterprise, Trade and Employment) would continue to have functions in relation to the regulation of the financial services sector and the extent to which any alteration to the status quo would impinge on the non-regulatory functions of the Central Bank.

The organisational structure for the authority, including the manner of its public accountability.

The funding, resourcing and staffing of the authority (and issues arising in a transition to a new structure, including staffing and industrial relations, and the extent to which the authority could be self-financing).

The legislative changes necessary for the establishment of the authority.

The time schedule (including, insofar as necessary, a phased implementation) for achieving the objective of a fully operational single financial regulator at the earliest date possible.

Work of the Group

The Group was originally due to report to the Tánaiste and Minister for Enterprise, Trade & Employment and the Minister for Finance before the end of February 1999. However, due to the complexity of the subject matter, the number of submissions received and the number of meetings with interested parties, the Government extended the report date for the Group. In the period since the Group was set up in November 1998, it held 22 meetings and received submissions from 64 interested parties, particularly in response to an advertisement placed in the main national daily newspapers in November, 1998, inviting submissions. In particular, the Group met with representatives of the staff currently employed in the area of financial services supervision. A copy of the advertisement is attached at Appendix IV and a list of the those who made submissions to the Group is attached at Appendix V.

The Group also met with a representative of the UK Treasury and with a representative of the UK Financial Services Authority. The Group took account of the Report of the Joint Oireachtas Committee on Finance and the Public Service on the regulation and supervision of financial institutions (July 1998). The situation in other countries was examined (see Appendix III) and the views of all the relevant interested parties who made submissions to the Group and those who met the Group were carefully considered. Account was also taken of the analysis undertaken by the Working Group on Banking and Consumer Issues established by the Minister for Finance in April l998 the remit of which was overtaken by the establishment of the Implementation Advisory Group.

The Group also noted that the terms of reference of the Moriarty Tribunal include a remit to make whatever broad recommendations the Tribunal considers necessary or expedient for enhancing the role and performance of the Central Bank as regulator of the banks and of the financial services sector generally. However, as the Tribunal had not reported before the conclusion of the Group’s work, the Group was not in a position to take account of any work which the Tribunal may have undertaken in relation to this matter.

The Report contains a considerable amount of material detailing aspects of the financial services industry and the associated regulatory framework. This material has been prepared on the basis of submissions made to the Group and other material supplied. The Group has endeavoured to ensure that the material is as comprehensive and as accurate as possible and that it gives a fair representation of the existing situation. However, it wishes to stress that the Report should not be regarded as a legal interpretation of the relevant legislation.