Financial Regulation – McDowell’s Report, and the role of Bertie.

[Hillmanhunter1]

Back in 1998/99 Michael McDowell chaired a group that considered the most appropriate regulatory architecture for Ireland. The Group’s point of departure was the decision in principle by the Government that a Single Regulatory Authority should be established. The report was published in 1999, and they recommended to the Government the establishment of a completely new organisation outside, and independent of, the Central Bank.

Although the report ran to approx 100 of evidence, argument and opinion, with the benefit of hindsight, the key section was a footnote on page 46 which read as follows:
“Reservation: Mr Dermot McCarthy considers that a Single Regulatory Authority with the characteristics set down in paragraph 6.3 could be achieved by its establishment as one pillar of a reconstituted Central Bank. The members and Chief Executive could be appointed as proposed in Chapter 6, and could be made, by statute, accountable to the Minister for Finance and the Oireachtas.
The relationship of the Board of the Authority to the board of the restructured Central Bank could secure accountability and operational autonomy, and provide a framework linking the regulatory function to the other, cognate responsibilities of the Central bank, while facilitating a significant degree of continuity with respect to staffing and institutional reputation”.

These 113 words from Mr McCarthy, who as Assistant Secretary of the Department of the Taoiseach (and now Secretary) was Bertie’s man in the group, proved to be the crucial contribution. It was the vision of the Department of the Taoiseach in this footnote, and not the core recommendation of the group, that was subsequently implemented. The effect of this was to ensure that although the Central Bank might be statutorily independent, the Financial Regulator (effectively a division of the Central Bank) was politically accountable. This was what Bertie wanted, and Bertie got what he wanted.

Mr Regling and Mr Watson, the two global banking experts commissioned to conduct a preliminary inquiry into the origins of the Irish banking crisis, might do well to take this as their starting point!

[Lightning Rod]

Good post.

This dodgy recommendation by Bertie's man was the faulty linchpin that led to the failure of our banks.

[Lightning Rod]

Back in 1998/99 Michael McDowell chaired a group that considered the most appropriate regulatory architecture for Ireland. The Group’s point of departure was the decision in principle by the Government that a Single Regulatory Authority should be established. The report was published in 1999, and they recommended to the Government the establishment of a completely new organisation outside, and independent of, the Central Bank.

Although the report ran to approx 100 of evidence, argument and opinion, with the benefit of hindsight, the key section was a footnote on page 46 which read as follows:
“Reservation: Mr Dermot McCarthy considers that a Single Regulatory Authority with the characteristics set down in paragraph 6.3 could be achieved by its establishment as one pillar of a reconstituted Central Bank. The members and Chief Executive could be appointed as proposed in Chapter 6, and could be made, by statute, accountable to the Minister for Finance and the Oireachtas.
The relationship of the Board of the Authority to the board of the restructured Central Bank could secure accountability and operational autonomy, and provide a framework linking the regulatory function to the other, cognate responsibilities of the Central bank, while facilitating a significant degree of continuity with respect to staffing and institutional reputation”.

These 113 words from Mr McCarthy, who as Assistant Secretary of the Department of the Taoiseach (and now Secretary) was Bertie’s man in the group, proved to be the crucial contribution. It was the vision of the Department of the Taoiseach in this footnote, and not the core recommendation of the group, that was subsequently implemented. The effect of this was to ensure that although the Central Bank might be statutorily independent, the Financial Regulator (effectively a division of the Central Bank) was politically accountable. This was what Bertie wanted, and Bertie got what he wanted.

Mr Regling and Mr Watson, the two global banking experts commissioned to conduct a preliminary inquiry into the origins of the Irish banking crisis, might do well to take this as their starting point!

Got link?

[captainwillard]

Good post.

This dodgy recommendation by Bertie's man was the faulty linchpin that led to the failure of our banks.

You cant be serious. One poor decision lead to the collapse of our banking system? Surely not. We all have apart to play in the greed and avarice of the last dozen years.

[kerdasi amaq]

The effect of this was to ensure that although the Central Bank might be statutorily independent, the Financial Regulator (effectively a division of the Central Bank) was politically accountable. This was what Bertie wanted, and Bertie got what he wanted.

Or Bertie wanted it on somebody's behalf and Bertie made sure that, that somebody got what they wanted! Now, who could that somebody be? I've no idea.

As for the Irish Central bank; is it owned by the government or is owned independently of the State?

[birthday]

Why do we hear so little about Bertie's man in relation his influence on so many other issues?

[Lightning Rod]

[SIZE="2"]The Commissioner for Public Service Appointments (CPSA) Mr Dermot MCarthy[/SIZE]

Mr Dermot McCarthy, Secretary General to the Government...
Mr. McCarthy is currently Chairperson of the National Economic and Social Council...

He previously served as Assistant Secretary in the Department of the Taoiseach with responsibility for the Economic and Social Policy Division, following service in the Department of Industry and Commerce and the Department of Health.

So let me get this straight.
Bertie places his man McCarthy on this reform commission.
The commission recommends separating the proposed regulatory position from the Central Bank, however Bertie's man includes a 'reservation' in the final report opposing this and recommends the proposed regulator be a government appointment ie. another of Bertie's men.
Bertie follows this 'reservation'.

Do I have that right?

[Lightning Rod]

You cant be serious. One poor decision lead to the collapse of our banking system? Surely not. We all have apart to play in the greed and avarice of the last dozen years.

Not me.
I'm innocent.

[Hillmanhunter1]

[SIZE="2"]The Commissioner for Public Service Appointments (CPSA) Mr Dermot MCarthy[/SIZE]



So let me get this straight.
Bertie places his man McCarthy on this reform commission.
The commission recommends separating the proposed regulatory position from the Central Bank, however Bertie's man includes a 'reservation' in the final report opposing this and recommends the proposed regulator be a government appointment ie. another of Bertie's men.
Bertie follows this 'reservation'.

Do I have that right?

Pretty much, except I don't know if the regulator(s) were Bertie's men, as far as I know both CEO's of the regulator (Liam O'Reilly set it up, and Pat Neary oversaw the collapse) were Central Bank lifers. They didn't need to be Bertie's men however because the legislation provided that the CEO had to be approved by the Minister for Finance, so if the Minister didn't like them (i.e. if they were inclined to rock the boat) they didn't get the gig.

[Hillmanhunter1]

Got link?

Well, yes and no!

Here's a link to the Department of Finance's website:
Implementation Advisory Group on a Single Regulatory Authority for Financial Services Report - Department of Finance - Government of Ireland

An here's a link to the same report on the Department of Enterprise. Trade and Employment's site:
DETE - CR-Commercial Regulation - REPORT OF THE IMPLEMENTATION ADVISORY GROUP ON A SINGLE REGULATORY AUTHORITY FOR FINANCIAL SERVICES

Neither of these versions contains the relevant footnote (or any footnotes). I have a paper copy of the report, and I've been unable to find a pdf of the report online. If I can, I'll scan the relevant page and see if I can get a 10 year old to load it up somewhere where it can be seen (all advice welcome)