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Regulation has failed miserably - Ó Caoláin

12 February, 2009


Speaking in the Dáil against the Government motion endorsing the terms of its recapitalisation of the Bank of Ireland and AIB, Sinn Féin Dáil leader Caoimhghín Ó Caoláin said that the new regulatory regime for banks introduced in 2002 had "failed miserably". He said Finance Minister Brian Lenihan was asking us to trust the Government and the banks on the day after he admitted withholding from the Dáil the truth about the €7 billion fraudulent transaction between Irish Life and Permanent and Anglo-Irish Bank.

Deputy Ó Caoláin told the Dáil:

"When the Central Bank and Financial Services Regulatory Authority Bill was debated at 2nd Stage here seven years ago I pointed out that not only did the Central Bank allow the DIRT fraud to flourish they actually lobbied the Government not to intervene as they claimed it would cause a flight of money out of the economy, or so they told us. I asked if the Central Bank was prepared to turn a blind eye to this, what other failings were in their operations?

"Now, seven years later, we have to ask the same question about the very regulatory regime introduced by that 2002 legislation. This was the new regime that was going to change everything. But it has failed miserably. We are promised tightened regulation. That was the promise in 2002 as well." ENDS

Full text of speech:

"On the day taxpayers are asked to put €7 billion into the Bank of Ireland and AIB parents and children and teachers across this State are devastated that special needs teachers are being taken away from children who desperately need them and all for a paltry so-called saving of €7 million.

"It speaks volumes of the mentality of this Government that it should impose such a cut on the most vulnerable children in our education system. In 2007 alone the Chief Executive of the Bank of Ireland was paid €3 million. How many multiples of €7 million in salaries and bonuses have he and others like him pocketed in their bank careers, yet we are expected to applaud his virtue and that of his cohorts for taking a pay cut. Forgive us if we do not cheer.

"What has been happening yesterday and today is almost unbelievable. We are being asked to trust the Government and trust the banks as €7 billion of public money is poured into the two largest financial institutions in this State. This is being asked of us by the Minister for Finance the day after he made the extraordinary admission that his Department knew last October of the fraudulent €7 billion transaction between Irish Life and Permanent, that he did not read the relevant section of the Price Waterhouse Cooper Report and, most bizarre of all, that when he did know he did not tell the Dáil about it on 20 January when he asked us to nationalise Anglo-Irish.

"What I find extraordinary is that the Minister sought to justify this by saying that to tell the Dáil about the €7 billion merry-go-round transaction would have been to undermine confidence in banking as it would be revealing customer detail! It was as if we were talking about a citizen and their meagre savings account. What he withheld was the truth about what can only be described as a fraudulent transaction involving the very same amount of money that we are pumping into Bank of Ireland and AIB today.

The fraudulent transaction between Irish Life and Permanant and Anglo-Irish Bank raises another very serious question. Was this a one-off or did this end-of-year cooking of the books happen before with these or other institutions? Has it been a practice in Irish banking? We need to know this and we need to know the position of the regulator. Either the regulator simply did not know which was bad or else he knew and did nothing which was even worse.

"As I pointed out at the Order of Business, Irish Life and Permanent is now claiming that it informed the Financial Regulator of its dodgy deal, the September €7 billion transfer between it and Anglo-Irish, within days of it being carried out. This is a very serious charge. We need to know if this is true. If it is true it completely undermines confidence in the Financial Regulator. Let's be clear. Anglo-Irish falsified its accounts. It transferred money to IL&P and then got IL&P to transfer it back so it could be falsely presented in the accounts as a customer deposit. The Department knew in October. When did the regulator first know? Above all why was the Dáil only told about it yesterday? We need the Minister to answer those questions.

"When the Central Bank and Financial Services Regulatory Authority Bill was debated at 2nd Stage here seven years ago I pointed out that not only did the Central Bank allow the DIRT fraud to flourish they actually lobbied the Government not to intervene as they claimed it would cause a flight of money out of the economy, or so they told us. I asked if the Central Bank was prepared to turn a blind eye to this, what other failings were in their operations?

"Now, seven years later, we have to ask the same question about the very regulatory regime introduced by that 2002 legislation. This was the new regime that was going to change everything. But it has failed miserably. We are promised tightened regulation. That was the promise in 2002 as well.

"It's not on. It's not good enough. The people deserve better than this Government's response. If you won't listen, if you won't learn, then leave. Others will face up to the challenge."

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