Press Release 21 June 2010
The Central Bank today publishes a new strategy on banking supervision in Ireland - ‘
Banking Supervision: Our new approach’. The paper outlines the new approach to regulation for retail, wholesale and international banks in Ireland.
Publishing the paper today, Jonathan McMahon, Assistant Director General, Financial Institutions Supervision said, ‘All banks can expect a more intrusive and challenging approach to banking supervision and this paper sets out why we think the relationship between banks and the State has to change. This is a fundamental and far reaching shift. Banks can expect that we will challenge and question business plans and approaches to lending. We expect to see changes in how banks operate. Banks must change their behaviour and improve governance, risk management and lending practices. A complete re-think on how banks lend and sustain their growth is required’, he added.
Patrick Brady, Assistant Director General, Policy and Risk, said, ‘There will be a paradigm shift in our regulatory approach. We will demand decisive follow-through by both supervisory staff and supervised institutions. While in no way promoting a concept of an adversarial relationship between supervisors and institutions, there will be significantly greater challenge, underpinned by a greater degree of intrusiveness and assertiveness that was lacking previously, as highlighted in the Honohan report. While regulatory actions will be informed and measured, they may nevertheless require significant change in behaviours that will impact on business. This is in the interests of the proper and, more importantly, sustainable functioning of the market.’
The paper outlines four major work items that the Central Bank will be taking this year to understand the progress banks have made in reforming themselves in the aftermath of the financial crisis, which will provide an insight into the nature and pace of change in banking practices in this market.
The four in-depth reviews will examine:
-
Governance and risk management;
-
Lending standards:
-
Individual bank strategies; and
-
Remuneration practices within the banks.
A summary of the key actions outlined in the paper is detailed in the Appendix.
View speech by Jonathan McMahon, Assistant Director General, Financial Institutions Supervision
View speech by Patrick Brady, Assistant Director General, Policy and Risk