Elderfield predicts a tough regime of regulation

THE financial sector, from banking to IFSC companies, is to face a tough regime of regulation Matthew Elderfield, head of Financial Regulation Central Bank Ireland, promised yesterday.

In a speech to IBEC’s Financial Services Ireland section Mr Elderfield said: “It is clear that we need a fundamental overhaul of the regulatory model for financial services in Ireland. Our new approach will be one of assertive risk-based regulation underpinned by a credible threat of enforcement.”

Mr Elderfield said, following National Asset Management Agency’s take-up of its first tranche of loans, the proposed recapitalisation of the banks and the setting of capital requirements is clear, and the costs of re-capitalisation for the two largest Irish banks can be achieved without adding to public sector debt.

“It is clear that a very rigorous process has been undertaken and that there will be no second act in the process of recapitalising the banking sector. And it is clear that, while there are significant costs associated with the recapitalisation process, these costs are manageable and will be spread out over time.”

He predicted banks will be in a stronger position to starting lending again and to support the economic recovery.

“Free from uncertainty about their capital position, the banks will shortly be in a much better position to start supplying credit than would have otherwise been the case,” he said.

Mr Elderfield announced yesterday that the regulatory approval duties surrounding prospectus documents for certain investment schemes are due to revert to the Financial Regulator by the end of next year.

Since 2005, the details surrounding such schemes as equity, debt and closed-end funds have been approved by the Irish Stock Exchange (ISE). Under EU legislation, however, the role of so-called “prospectus scrutiny” must be returned to each member state’s financial regulator by the end of 2011.

The Financial Regulator announced, yesterday, that the switch in overseeing functions is now under way. The actual scrutiny function is viewed as very important due to the need to ensure that all prospectuses for investment schemes fully comply with relevant legislative provisions.

To allow for a quick and easy change-over of powers, a steering committee – made up of representatives from both the Regulator’s office and the ISE – has been established. Relevant market participants will be represented too, by the establishment of a stakeholder consultative group.

Mr Elderfield, said: “Both organisations are wholly committed to working on a collaborative basis to ensure the prospectus approval process will continue to operate on a business-as-usual basis both during and after the completion of this project.”

The stakeholder consultative group will also help to ensure that the process of regulation of prospectuses continues as normal during the change-over.