Le: Aire Airgeadais; Paschal Donohoe
Foilsithe
An t-eolas is déanaí
Teanga: Níl leagan Gaeilge den mhír seo ar fáil.
Check against delivery
Good morning. I would like to begin by thanking the Central Bank of Ireland for inviting me to speak to you this morning and Governor Makhlouf for his opening remarks. It is great to be together in the Aviva today for one of a series of exciting events taking place on these grounds over the next few weeks.
Together you represent the wide range of stakeholders, which are key to operating a successful, stable, and safe financial system.
Today, I will give a brief update focusing on my perspective as Minister for Finance on a number of issues:
The title of this conference is “Supporting the Economy, Delivering for the Consumer”. At first glance, it might seem that the focus is skewed towards “what can the financial system do for us?” as a society and as consumers. However, in order for private financial institutions to operate in Ireland, it must be attractive for them so it allows them to make a return for their investors.
We aim to do this by balancing the interests of the economy and consumers with those of corporate entities so that the resulting system is one which:
The financial system is changing. And the pace of this change keeps increasing. Established players are leaving, new players are joining, new financial products are being developed, and the very way we access financial products and services is changing so quickly, with the impact of digitisation.
In order to deal with the rapid and continuous change in the financial system, it is of critical importance that all stakeholders come together and address these changes in a coordinated way.
Whether they are financial firms, consumer groups, or indeed the ultimate consumer, these stakeholders are the financial system. The system is not a stand-alone entity; it is the sum of all involved.
The importance of this coordination is highlighted by the unprecedented situation we are currently dealing with here in Ireland.
Retail banking, in particular, affects us all. We all need a current account to go about our normal day-to-day lives:
The withdrawal of Ulster Bank and KBC from the market is regrettable, but it is a business decision for the firms involved. But that doesn’t mean they just shut up shop and walk away. The whole process is being managed by a host of stakeholders who are coordinating on an ongoing basis.
It involves:
A business decision by just one or two firms highlights the importance of the systemic response to change which is required for the smooth operation of financial services.
One of the panel discussions later this morning is entitled “Delivering for the Consumer in a Changing World”. The consumer is the backbone of the financial system.
It is so important that the consumer is afforded the benefits of the changes happening in financial services, and that consumers are protected to the highest possible level when accessing financial products and services.
Ireland, as a jurisdiction, is at the forefront of consumer protection legislation, whilst at the same time allowing new products and services to be offered to consumers to enhance their choices in the financial landscape.
Earlier this year, legislation passed through the Oireachtas to reform the high-cost credit sector. The amendments made to the Consumer Credit Act will set interest rate caps on high cost credit products.
This will protect the consumers who rely on these small-value short-term loans. The associated regulations will come into effect in the coming weeks, just in time for the annual increase in spending and borrowing at Christmas.
We also streamlined the licensing process for these providers. The providers will now be able to register for a national licence, renewed every five years. These changes will both ensure better protection for consumers, whilst at the same time modernising the way these credit providers are regulated.
The Government also amended the Consumer Protection Act this year. This brings providers of buy-now-pay-later products, consumer hire and hire purchase within the remit of the Central Bank and provides better protection for consumers who choose to use these products.
The Central Bank has begun a process to review its Consumer Protection Code. I welcome the publication of the discussion paper, and the inclusive, open and engaged approach taken by the Central Bank. I call on all other relevant stakeholders here to engage in the process. A systemic approach of coordination and cooperation is always the best way to achieve and address change.
In light of the changing landscape for banking in Ireland, in 2021 I instructed officials in my Department to undertake a broad-ranging review of the retail banking sector.
The Retail Banking Review commenced its work in late 2021, covering a wide range of issues that I have mentioned before, including access to branches and access to cash. The Retail Banking Review team will present its recommendations to me later this month.
This afternoon, there will be a discussion on culture in financial services. The Government published “The Central Bank (Individual Accountability Framework) Bill 2022” in July this year, and I am taking the Bill through the Houses of the Oireachtas at the moment. The legislation seeks to address the recommendations from the Central Bank’s Culture Report, which I requested on foot of the Tracker Mortgage Examination.
The centrepiece of the new legislation is the Senior Executive Accountability Regime (or SEAR). This is a commitment of the Programme for Government, which seeks to improve the culture of the financial sector and restore public trust in the sector.
We expect SEAR to drive positive changes in terms of culture in the financial services industry and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles.
Any new regulatory regime must be practicable and proportionate. The issues being addressed by this legislation are complex and must be constitutionally sound.
The additional powers are significant, and it is important that the correct balance between these powers and the protection of individuals’ constitutional rights is struck.
For this reason, we had to give very careful consideration to the proposals. This has involved lengthy engagement by my officials with both the Attorney General’s Office and the Central Bank, to ensure that the legislation is both effective and constitutionally robust. The legislation is necessary and timely and will drive positive changes to the wider banking culture.
A large proportion of the financial regulations governing firms in Ireland come about as a result of cooperation at a European level. Ireland is at the very heart of this cooperation as a key player in the global financial services landscape.
Across the financial services sector, we are working with our European colleagues to update the Capital Requirements for banks under the Basel III agreements. The Payment Services Directive is also being reviewed, with the consultation process underway. I know you will be welcoming Commissioner Mairead McGuinness here tomorrow to discuss these developments.
The international financial services sector in Ireland is creating more opportunity for more people across the country than ever before. Direct employment in the sector is at its highest levels with over 52,000 people working in a diverse array of firms in banking, investment management and insurance. That does not include the many thousands working in the provision of highly skilled services that support the sector in legal, audit and accounting firms.
Regulating for a global financial market brings many challenges involving cooperation with international bodies with the view to synchronising supervisory standards to the level which allows for the smooth and fair oversight of international financial activity.
The IMF recently completed their regular Financial Stability Assessment Programme (FSAP). The FSAP process takes about 18 months to complete, and takes place every 5 years or so, and it is a good way to evaluate the soundness of our financial system.
It is a good idea to have peers from outside our own system do such evaluations, as they bring experience garnered from other jurisdictions which can inform recommendations to improve our financial system.
This most recent FSAP programme focussed quite a lot on the international connectivity of the Irish financial system, and how the benefits and associated risks of such a system could impact the economy.
Ireland is proud to play its role on the international stage. Today’s event provides a wonderful opportunity to reflect on this in the financial services context.
In summary, the only thing that stays the same is the fact that nothing stays the same. This is especially true for financial services.
Whether you are a fintech disruptor, a traditional retail bank, an investment firm, an insurer a supervisor or a government official, or a Minister for Finance, you are part of the system, and so have a responsibility to adapt to the changes.
We all need to coordinate and cooperate in order to deliver to the economy and the consumer a successful, stable and safe, financial system.
Thank you once again Governor Makhlouf for the invitation to speak here this morning.
And thank you, all of you here today in the Aviva, and online, for listening. I wish you all the best with the rest of your discussions.