AIB,IRE, keep watch on these 2 irish banks. The reforms will begin within weeks and “will mark an end to a sorry chapter in Irish banking history,” Ireland’s Cowen Plans Overhaul of Banking Regulation
By Louisa Nesbitt
March 1 (Bloomberg) -- Ireland plans to create a new commission for banking regulation, seeking to end what Prime Minister Brian Cowen said has been a “sorry chapter” for the nation’s lenders.
“There will be radical reform of the system,” Cowen said late yesterday at the annual conference of his ruling Fianna Fail party in Dublin. The Central Banking Commission “will have new powers for ensuring the financial health, stability and supervision of the banking and financial sector.”
Ireland’s banks have been battered by the global credit crisis and face rising bad debts as the domestic property market slumps. At the same time, a series of scandals that have led to resignations across the industry have marred the sector’s reputation.
The government has promised a 7 billion-euro ($8.9 billion) bailout to Bank of Ireland Plc and Allied Irish Banks Plc, the two biggest Irish lenders, and has nationalized a third, Anglo Irish Bank Corp. Police this past week searched Anglo’s offices as part of an investigation by the country’s corporate enforcement agency.
The commission will incorporate the responsibilities of the central bank and the financial regulator, Cowen said in the speech, which was received by e-mail. The reforms will begin within weeks and “will mark an end to a sorry chapter in Irish banking history,” he said.
Canadian Model
The commission will be similar to the model used in Canada, where banks have avoided government bailouts and have had a fraction of the debt-related writedowns recorded globally. Bank of Nova Scotia Chief Executive Officer Richard Waugh earlier this week said Canada’s model is “worth careful consideration” when looking at “ways to improve the global financial sector.”
As he battles to save the nation’s banks, Cowen is also grappling with a soaring budget deficit, the threat of a credit rating downgrade and public anger over proposed tax increases. Ireland’s economy is shrinking at the fastest pace in the euro area and more than 100,000 people marched in Dublin last week against government budget plans.
The government aims to “restore balance” to the public finances by 2013 through a combination of higher taxes and increased spending cuts, Cowen said. Ireland budgeted for 55 billion euros in spending this year and expects to raise a maximum of 37 billion euros from taxes, leaving a shortfall of 18 billion euros.
“Obviously those who have done well through the good times will have to pay more,” Cowen said in an interview with Irish state broadcaster RTE radio today. “Those who have to bear most are those who can bear it best.”
To contact the reporter on this story: Louisa Nesbitt at lnesbitt@bloomberg.net
