The Financial Regulator told an Oireachtas committee today that a "rapid wind-up" of Anglo Irish Bank would be "prohibitively expensive."
Matthew Elderfield told the Joint Committee on Economic Regulatory Affairs that some but not all of the banks involved in his recent recapitalisation assessment "asked for more time to meet our new requirements".
The regulator has asked the banks to increase their capital levels by the end of this year in a move that will involve the five financial institutions participating in the National Asset Management Agency requiring up to €32 billion.
Mr Elderfield said he supported Anglo Irish Bank's plan to restructure itself as a good and bad bank and continue as a going concern, operating the good bank and running down the bad bank.
"The costs of a rapid wind-up of the bank would be prohibitively expensive and that the structure that is being developed is a reasonable way to minimise the costs to the taxpayer," he said.
Mr Elderfield said the era of low mortgage rates in Ireland was "now clearly ending".
Mr Elderfield told the committee that part of the reason for low rates was that the banks' business models were "fundamentally flawed, chasing unsustainable profits through risky property and development lending".
These profits "effectively subsidised aggressive campaigns for mortgage market share and unsustainably low interest rates", said Mr Elderfield.
He said that he was proposing introducing changes to corporate governance at the banks which would impose restrictions on the number of directorships that can be held at one time by board members. The new regulations will also set "a clearer standard for their performance", he said.
Mr Elderfield said that he couldn't comment on the regulator's action to appoint administrators to Quinn Insurance as the matter was before the courts and "sensitive discussions are taking place with various parties".
"I will state that we are faced with a serious and persistent breach of the solvency requirements of a major insurance company and that we are determined to take action to protect the interests of its policyholders," he said.
Mr Elderfield said that the regulator would have to grow its enforcement capability "from what is now a very small base - pretty much from scratch in terms of establishing an investigative capability".
Mr Elderfield said that it was clear that the transition between the different regulatory regimes covering the Irish Stock Exchange could have been handled better in relation to the raising of concerns relating to matters before November 2007.
He said that he had become aware of a number of claims being pursued against stockbrokers regarding the purchase of investment products between 2004 and 2006 but that regulatory changes meant that complaints about pre-November 2007 transactions could no longer be raised with the stock exchange.
"It is unacceptable for such a regulatory gap to persist," he said.
In a questions and answer session following his opening address, Mr Elderfield said the regulator would take a different approach to Quinn Insurance if the company came up with the money needed to fill the solvency breach in how much the company should keep in reserve. However, this hadn't come up.
Replying to a question from Cavan-Monaghan Senator Diarmuid Wilson, who was critical of the regulator's action, Mr Elderfield said he did not believe his action was heavy-handed or that he acted with haste in relation to Quinn.
