Regulator 'added to slump' by failing to curb property bubble (Irish Times)
The Financial Services Consultative Consumer Panel, which is tasked with monitoring the performance of the Financial Regulator, said in a report issued yesterday that most consumers have lost “significant amounts of money” due to the inadequacies of the financial regulatory structure. It also criticised the “deficient” response of the regulator to threats to consumers, including the domestic property bubble.
“We are unclear as to why the regulator did not move to dampen the bubble at an earlier stage, for instance by requiring banks to set aside more capital for riskier products,” the report said, highlighting products such as interest-only loans.
“This product enabled consumers to buy property that they couldn’t actually afford and may have contributed to the house price bubble,” it said. “This shows the indispensable need to scrutinise new products in financial markets.”
It added: “It is not good enough for the Financial Regulator to ignore products or players it feels are not within its remit.” For instance, subprime lending was initially not regulated by the Financial Regulator because the lenders involved were not deposit-taking institutions. Any wrongdoing by the regulator should be investigated by an external authority, it advised.
The panel also recommended that the next chief executive of the Financial Regulator should be a person with a strong track record of “independent thinking” and “facing down vested interests”. The selectors should draw on a wide range of candidates, including those from the private sector and from overseas.
On the Government’s proposals to merge the consumer functions of the Financial Regulator and the Financial Services Ombudsman, the panel demanded that the ombudsman maintain its independent role. Yesterdays report was prepared by a sub-group of the consumer panel which was chaired by Sean O’Sullivan, managing director of Cork technology firm Seabrook Research. The other members were Kathleen Barrington, John Maher, Prof Noel Mulcahy and Raymond O’Rourke.