The Government is introducing new laws to reign in rogue bankers following renewed calls by the Central Bank after the Davy scandal for greater powers to punish individual misconduct.
inance minister Paschal Donohoe told the Dáil yesterday that the forthcoming Central Bank (Amendment) Bill would include provisions for a senior accountability regime (SEAR) which would impose “binding and enforceable obligations” on bankers to meet expected standards.
“The additional powers that will be provided to the Central Bank are significant, and it is important that the correct balance is struck between these powers and the protection of individuals’ constitutional rights,” Mr Donohoe said.
The Central Bank has made the case for several years that its regulators need a stronger toolkit to enhance their ability to enforce banking rules.
Under current rules, senior individuals in financial firms can only be held personally accountable for wrongdoing if their misconduct is linked to a breach by their firm.
But the potential new powers to investigate individuals under SEAR would make it easier for regulators to act against senior executives based exclusively on their own conduct.
The subject gained new relevance in March when Davy Group was fined €4.13bn for a 2014 bond deal in which the firm acted on both sides of a trade without disclosing this to their client.
Although all 16 Davy employees involved, including managing director Brian McKiernan, either resigned or were forced out of the firm, none have faced personal regulatory repercussions.
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The Heads of Bill for the new law are to be published before the Oireachtas breaks for summer recess at the end of the month.
Meanwhile, Irish banks are likely to be able to reverse some of their impairment charges after a series of optimistic economic forecasts and data indicated that pandemic loan losses will probably not be as bad as feared.
The Central Bank and Economic and Social Reseach Institute have both raised their forecasts for the Irish economy in recent weeks in expectation of a massive boom in consumer spending.
The release of pent-up savings is due to improve numerous economic indicators such as employment, income and business profitability.
Coupled with continued economic support from the State, banking analysts are optimistic that loans to both businesses and individuals will recover some of their quality in the coming months.
Irish banks took a cautious approach to loan impairments in the beginning of the pandemic in anticipation of major economic damage, but the improving conditions are making it more likely that those charges can be written back.
“The rise in the Central Bank economic forecasts... and slight improvement in the labour market and consumption figures gave a bit more comfort on our revenue figures, but the more material move on government spending reflecting the ongoing fiscal support was set to be a tailwind to asset quality,” said Goodbody banking analyst Eamonn Hughes.