Seventeen years to the month since Brian Cowen’s government was forced to guarantee the Irish banking sector, the legacy of the crash still lingers.
It’s in how Irish households and businesses are paying higher interest rates on loans than the European Union (EU) average, creaking infrastructure, and a post-crash shortage of capital for residential development that has given rise to the current housing crisis.
The “never again” mantra that followed the crash led to a decade and a half of regulatory reforms. But the pendulum is now swinging the other way in some places.
The last Donald Trump administration rolled back on a number of reforms, including oversight of smaller banks that contributed to the 2023 regional US banking crisis.
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His current regime has downsized the consumer financial protection bureau and reduced bank merger oversight, while regulators have proposed easing the capital rules for big banks.
In the UK, chancellor Rachel Reeves plans to water down a series of post-crash regulations, including ring-fencing rules that force the country’s banks to separate their retail and investment banking activities.
Now Banking & Payments Federation Ireland (BPFI) has entered the debate, arguing in a report that there needs to be a significant simplification of regulation in Ireland – especially where the Central Bank has opted to go beyond EU rules.
Most of its suggestions – such as the need for a local Irish rule book to give firms greater clarity of what is expected of them, and a more transparent and consistent approach to how rules are applied depending on a company’s risk profile – are a helpful contribution as the European Central Bank (ECB) weighs proposals for regulatory simplification for banking oversight across the euro zone.
It’s to be welcomed the BPFI is not calling for deregulation or an easing of bank capital and liquidity rules.
But its calls for the Central Bank to be given back an explicit competition mandate – albeit a secondary one to the focus on financial stability and consumer protection – should be resisted. That’s even as the lobby group insists it is not talking about giving the regulator a role in promoting financial services development – something it had during the boom years and is seen as contributing to the crisis.
A better approach would be follow through on a recommendation from the Department of Finance banking review three years ago: that the Central Bank be required to provide clear assessments of costs and benefits when introducing new domestic regulations.
