Davy scandal will not hurt Ireland's ability to borrow, Finance Minister says

The National Treasury Management Agency withdrew Davy's authority to act as a primary dealer in Irish Government bonds. Picture: Sasko Lazarov/RollingNews.ie

The decision to cut Davy as dealer in selling Irish Government bonds will have no impact on the State's ability to borrow, the Finance Minister has said.

Paschal Donohoe said the scandal surrounding the stockbroking firm "cuts to the very heart of the standards that we expect from those in a position of responsibility within financial services".

Davy was fined €4.1m for its failure to supervise a group of 16 of its employees in their 2014 profiting from personal dealings in the sale of Anglo Irish bank bonds.

The Government’s National Treasury Management Agency (NTMA), which organises sales of sovereign bonds for the State, has struck off Davy from its roster of primary dealers just days before a €1.5bn auction in which the scandal-hit broker was due to play a key part.

Davy closed its bond desk, with four people made redundant as a result. An independent third party is to be appointed to review matters arising from the recent findings, Davy has said.

Speaking on his way into Cabinet, Mr Donohoe said: "Our ability to issue debt on behalf of our country and to continue with the borrowing that we need to fund our response to Covid-19 will not be in any way be affected by the decision that the National Treasury Management Agency took yesterday not to use Davy in those type of transactions in the future.

"We will be able to continue with the kind of activity that we need to support our country in dealing with the pandemic and supporting our public services."

Mr Donohoe added that the decision made by the board of the NTMA "reflects how seriously the State and the Government take this issue that has developed within Davy".

Representatives from the Central Bank will appear before the Oireachtas Finance Committee later today where they are expected to say that the scandal has highlighted "weak internal controls" that existed when it came to conflicts of interest.

In remarks set to be delivered to the Oireachtas Finance Committee, Derville Rowland, director-general, Financial Conduct, will say such weaknesses served to create an elevated risk of investor detriment.