The Central Bank is to seek a report each year on tax compliance from the board of every bank licensed in the State and will monitor a voluntary code of ethics in the sector from next year.
The Bank will write to the boards of 56 commercial banks early next week, asking them to draw up and submit a code of standards and ethics, which it must approve. The commercial banks will be obliged to make an annual review of this to the Central Bank.
A separate report on tax compliance will be requested from each institution. This must be compiled by the tax compliance officer at each of the commercial banks, who must report every year to a board meeting. The Central Bank will seek to inspect the minutes of these meetings.
The initiative follows strong criticism of the Central Bank in the report of the Dail Public Accounts Committee (PAC) on DIRT tax, which said it had "an insufficient concern" with ethics and supervision when dealing with widespread abuse of the tax in the 1980s and early 1990s. The report said its supervision was "inappropriate and outmoded".
A Central Bank spokesman, Mr Neil Whoriskey, said it had been planning the initiative before it appeared before the PAC inquiry on DIRT last August, but wanted to wait until the report was published before finalising its proposals. The bank was leading discussion on ethics with its European counterparts, he said.
"We do think it's necessary to be seen to respond in a pro-active manner to the recommendations contained in the report. It's important that the institutions are equally seen to respond to our forthcoming letters to them and we've no doubt that they will."
The new requirements on ethics and tax requirements will be voluntary only - they will not have a basis in legislation.
Asked if this might prove to be an inherent weakness, Mr Whoriskey said: "That's an argument. It is generally accepted in industry that it is best that industry set its own standards and that these are reviewed by their own regulator."
Mr Whoriskey said the Central Bank would request a "legislative solution" if the banks did not co-operate with it. In a statement yesterday, the Bank made no comment on strong criticism by the PAC of its "inappropriate" reliance on "capital flight theory" in deciding against pursuing the question of bogus non-resident bank accounts.
Nor did the statement comment on its failure to contain breaches of exchange control regulations in the evasion of DIRT tax, which was heavily criticised.
Asked about this, Mr Whoriskey said: "Exchange control was examined [as a possibility] by ourselves, the Department of Finance and the Revenue Commissioners, and all decided at the time that the exchange control path was not the one to take. We would stand over the judgment that was made at the time."
However, it did accept the need to give increased attention to professional standards and ethics.
