The former head of financial regulation in Ireland has told the Oireachtas banking inquiry the State needs to do more to tackle white-collar crime to "restore public confidence in the enforcement system and its ability to deter financial crime".
In a written statement to the committee, Matthew Elderfield, head of financial regulation in the Central Bank between January 2010 and October 2013, said the "track record of the Irish authorities should be stronger".
“This requires a careful and comprehensive examination of the administrative arrangements for investigating and tackling civil and criminal action, in terms of the resourcing and effectiveness of the current institutional arrangements, as well as the thoughtful assessment of the legislative framework defining offences and the powers available to the public authorities,” he said.
Mr Elderfield suggested this review might be carried out by a “wise persons’ group” comprised of a former attorney general or judge with the support of “relevant experts”. He also warned that progress since 2010 in the independence and assertiveness of the supervisory model “could easily be eroded as memories fade, industry and political pressures return to discourage robust supervision, and capabilities deteriorate as pay differentials with the private sector for key skill sets widen to unmanageable levels”.
He said the position at the start of 2010 at the financial regulator was of an institution “badly demoralised and critically underresourced” with “weak powers, a confused institutional structure and mandate” and “lacking a clear supervisory model and robust, independent approach”.
Mr Elderfield said legislative reforms and the advent of the single supervisory mechanism in the euro zone had strengthened banking supervision but “not without some risks”.
He said while Ireland’s EU-IMF bailout had “proved largely effective”, there were still “lessons to be learned”. He said its original structure had taken “too little account of debt sustainability”.
“Also, the failure to permit senior debt restructuring for nonviable banks, while based on a reasonable concern at the time over contagion risk, was in my view the wrong course of action by the EU and Kg7 authorities, adding to sovereign debt and weakening popular support for the programme.”
He added that a lack of domestic consensus on a balanced approach to mortgage arrears inhibited faster progress in “this important area”.
Mr Elderfield, who now works for Lloyds Banking Group in the UK, is believed to have been prepared to appear before the committee but a decision was taken that a written statement would suffice, given that his successor, Cyril Roux, had already given evidence.
