Regulator to ban banks from giving loans to their bosses

BANKS will be restricted from giving loans to their top bosses similar to the €84 million borrowed by former Anglo chairman Sean FitzPatrick, under new powers announced by the Financial Regulator.

Matthew Elderfield will also clamp down on bank executives from holding positions on boards of other organisations, to end what he described as a situation where “close personal relationships in boards” exacerbated bad lending practices, leading to the financial crisis.

But the regulator said new laws going through the Dáil giving powers to his office do not go far enough.

Asked at yesterday’s Public Accounts Committee (PAC) if the Central Bank Bill will give him enough powers, Mr Elderfield said: “No, the current act would not give a lot of the powers which we think are appropriate”, claiming laws protecting whistleblowers, in particular, needed to be strengthened.

Mr Elderfield, who took over as regulator in the wake of the director’s loan scandal preceding the nationalisation of Anglo Irish Bank, said his office has “prepared a detailed analysis of various aspects of the Anglo situation which was given to the Gardaí”.

The regulator will defer any administrative actions until the Gardaí have finished their case because “it’s more appropriate to let the guards have the first go because they have stronger powers”.

Announcing a new statutory code of practice preventing “related party lending” such as took place in Anglo, he said: “Loans to bank directors and senior management have been subject to abuse and excess, if not outright subterfuge.”

Mr Elderfield said his office has a staff shortage of about 50 and will move to increase the amounts institutions will have to pay in regulation fees – something that could potentially push up charges for customers.

Questioned on Quinn Insurance, he revealed the Cavan-based company had no in-house actuary team and instead relied on an outside consultancy.

Actuaries use statistical information to asses how much insurers need to charge its customers in order to cover itself against potential claims.

He said an insurance company without actuaries was “not best practice by any means”.