Central Bank to push for new financial whistleblower legislation

THE Central Bank is to push for legislation to protect so-called whistleblowers keen to expose fraudulent practices in Irish banks.

New governor of the Central Bank, Patrick Honohan yesterday told the Dáil Committee on Economic Regulatory Affairs that there had been “a serious failure” in Ireland’s financial regulatory system in recent times and that banks’ lending practices weren’t regulated tightly enough. He said that one targeted solution would be a statutory regime to encourage whistleblowers and to provide a specific process for them.

“Thousands of financial firms in Ireland are regulated entities. Experience worldwide shows how hard it is for regulators to detect all fraudulent behaviour on the part of financial firm management. Very often important breakthroughs are made thanks to the revelations of whistleblowers,” he said.

Mr Honohan also touched on the area of bank chief executives’ salaries — saying that the cap was “plenty”, although some exceptions that could see that amount rise would be understandable if it meant getting the right person for the job.

However, he told the committee that his office was against the payment of performance bonuses for banking executives on the back of short-term profits being made and said the issue is a “matter for regulation” at which the Central Bank/Financial Regulator will be looking.

Elsewhere, Mr Honohan said that he had found “no ideal solution” to the issue of getting credit flowing freely to SMEs again, but said that the Government’s newly proposed credit review system — as outlined in last week’s budget announcement — could be a catalyst for such improvements.

He also said that his office — though supportive and welcoming of foreign-owned financial institutions entering the Irish market — would not allow Ireland to become “a soft option” for firms or activities that are no longer welcome elsewhere.

“I also feel that specific steps need to be taken to ensure that there is no expectation that the state would come in to take exceptional steps to rescue such entities,” Mr Honohan added.

Mr Honohan had earlier told the same committee that the Government could end up partly nationalising AIB and Bank of Ireland to the tune of 50%.