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In response to the publication of the Commission of Investigation into the Banking Sector in Ireland, the Minister for Finance, Mr. Michael Noonan T.D. said:

The publication of the Commission’s report and the statements on the report in the Dáil tomorrow will provide an opportunity for public debate and consideration of this report.

The Government has decided to ensure that the Commission’s report is referred to the Oireachtas for effective consideration so it can make recommendations for the future of the banking sector in Ireland.

Unfortunately, due to the failures of the previous Government to effectively address the Abbeylara judgement, it is not possible for Oireachtas Committees to effectively fulfil this important oversight role.  Therefore, the Government proposes to hold a referendum to address the consequences of the Abbeylara judgement.  The Government will bring forward proposals on this in the course of this year.”

Government Actions

The Government has made a number of other decisions to address the findings of the Commission:

Enhance the Capacity of bank boards and management

The Commission’s report is highly critical of the role played by the board members and senior management of banks in failing to properly oversee their institutions.   As a result of these board-level failures, the Minister for Finance is setting out three measures regarding Bank Boards and Bank management:

• First, the chairman of each institution will be asked to provide the Minister for Finance and the NTMA with a Board Renewal Plan.  The Board Renewal Plan will have regard to company law and regulatory requirements and will set out, for each institution, the steps to be taken to ensure that the skills and competence levels of board members are fully adequate to the demands of the current situation and the planned future for the Irish banking system;
• In this regard, a programme of rotation of board members, commencing with board members appointed before September 2008, will be expected to be part of the plan. This should apply to both Executive and Non Executive Board members and provides a process to ensure a smooth succession of incumbent board members who were in place before September 2008.  I would expect this succession to be substantially completed by early 2012, and will use my powers as shareholder to affect such changes if necessary.
• Second, the board of each institution will be asked to provide the Minister for Finance and the NTMA with a Management Renewal Plan.  The management renewal plan will set out for the relevant institution the steps to be taken to ensure that the skills and competence levels of senior managers are fully adequate to the demands of the current situation and the planned future for the Irish banking system and that each senior manager individually will be capable of meeting the Central Bank’s new fitness and probity standards,
• Third, it is essential that Boards of banks would continue to have some independent non-executive directors.  Having regard to the size of its shareholding in each institution, and the necessity of ensuring that the State’s interest is properly represented on each Board, the Minister for Finance will actively nominate members of the boards of each bank, from among qualified individuals with appropriate skills and experience.

State Oversight

A stand-alone unit accountable to the Minister through the Department of Finance and with a clear set of objectives to manage the government’s holdings in the financial sector will be created to fulfil the oversight role.

The restructuring of the banks announced already by the Government must be implemented.  This will require a hands on approach by the Banking Unit in the Department of Finance, which will drive the reform.  This Unit will be strengthened as necessary and will draw on the resources of the NTMA to carry out its work.

In the first instance, the Unit will operate within the Department of Finance but in due course, it will become more independent of the Department while still reporting to the Minister for Finance.  A detailed implementation plan will be developed in consultation with all the relevant organisations.

Enhancement in Central Bank Powers

A number of measures have been put in place since the onset of the crisis. These include legislative changes to merge the Central Bank and Financial Regulator and to enhance the powers of the unified organisation. Further enhancements to the Central Bank’s powers will be introduced to the Oireachtas shortly in the Central Bank (Supervision and Enforcement) Bill.

Structure of Banking Sector

The Government’s plans to radically restructure the banking sector have already been announced on 31st March last.  This is a structured programme of disposal of non-core assets in the banks between now and 2013 so the two Pillar banks are in a better position to serve the economy as functioning banks.

In conclusion, Minister Noonan said:

This Government has already brought about a radical restructuring of the banks so as they can support economic growth and jobs.  Unfortunately, as we have seen in the Report of the Commission and other issues today, there remain legacy issues in the banks that this Government must draw a line under.