Dáil Éireann Debate, Thursday - 11 December 2025
355. Deputy Ken O'Flynn asked the Tánaiste and Minister for Finance whether his Department has issued any guidance, circulars, or internal directives setting out lessons learned from supervisory shortcomings identified in the reports of Honohan, Nyberg, or the Banking Inquiry; and if so, to publish such guidance and explain how it informs current oversight of the Central Bank. [71159/25]
View answerThe systemic reforms implemented in the years since the financial crisis which characterise the modern regulatory and supervisory system remain fundamentally informed by the analyses of the causes of the financial crisis which included supervisory shortcomings.
The Deputy has referenced the Banking Inquiry in his Parliamentary Question. This was able to build on the information provided in the Honohan report, the Regling and Watson report and the Nyberg report. The witnesses that were called and the documents provided were able to provide an overall view of the events leading to the financial crisis.
These reports outlined the many failures relevant to the impact of the financial crisis in Ireland. The Honohan report specifically presented five root causes specific to the collapse of the Irish banking system:
• A comprehensive failure of bank management to maintain safe and sound banking practices;
• A regulatory approach which was too deferential and accommodating, insufficiently challenging and not persistent enough;
• An under-resourced approach to bank supervision that, by relying on governance and risk management procedures, neglected quantitative assessment and the need to ensure there was sufficient capital to absorb the growing property-related risks; and
• An unwillingness to take on board sufficiently the real risk of a looming problem and act with sufficient decisiveness and force to head it off in time; and
• Macroeconomic and budgetary policies that contributed to the economic overheating, and which relied to an unsustainable extent on the construction sector and other transient sources for Government revenue;
Financial regulation and supervision has transformed significantly since then.
The Central Bank of Ireland has undergone significant organisational change in terms of structure, culture and resources 2004 to 2008 period and the financial crisis.
The former Central Bank of Ireland and the Irish Financial Services Regulatory Authority were re-amalgamated into one body, the Central Bank of Ireland (the Central Bank). The approach to banking supervision has radically changed to one that is more assertive, risk-based, and challenging, and one which is underpinned by new legislation, predominantly the Central Bank Reform Act 2010 and the Central Bank Supervision and Enforcement Act 2013.
The 2010 Act also increased the transparency and accountability of the Central Bank. For example, the Central Bank will soon publish its annual performance statement, which will be laid before the Houses of the Oireachtas. The Act includes a requirement for the Governor and the Deputy Governors to appear before an Oireachtas Committees if requested and to provide information regarding the annual regulatory performance statement.
The Central Bank and Credit Institutions (Resolution) Act 2011 provides the necessary mechanisms to enable the Central Bank to intervene where a credit institution gets into serious difficulty and is in danger of becoming destabilised or otherwise failing.
The Central Bank (Supervision and Enforcement) Act 2013 further strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely regulatory interventions.
The Government further strengthened the Central Banks powers in 2023 with the enactment of the Central Bank (Individual Accountability Framework (IAF)) Act 2023, which aims to improve governance and culture in the financial services sector by increasing the accountability of individuals, particularly senior executives.
A comprehensive review of the Consumer Protection Code was carried out to ensure it remains fit for purpose and continues to protect consumers of financial products today and in the future. The revised Code (published in March 2025 and will take effect from 24 March 2026) delivers an updated and modernised Code that reflects developments of recent years and the services and delivery channels being accessed today.
Since November 2014, the Single Supervisory Mechanism (SSM) has placed significant institutions in participating countries under the direct supervision of the European Central Bank (ECB). The new European Supervisory Authorities, namely the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) commenced operation in January 2011. At the same time, the European Systemic Risk Board (ESRB) was established.
Through the European System of Financial Supervision (ESFS), the above European authorities, together with the national supervisory authorities (including the Central Bank of Ireland), work to ensure harmonised financial supervision within the EU Single Market.
These legislative reforms have been supplemented by a significant increase in regulatory activity by the Central Bank, with a corresponding increase in staff numbers and skill levels. The Bank is independent in its functions which is an important requirement for a regulator and supervisor of financial sector entities.
The Central Bank now has a regulatory strategy of “assertive risk-based supervision underpinned by a credible threat of enforcement.” A credible threat of enforcement means that the Central Bank will pursue evidence of wrongdoing through the deployment of intensive enforcement investigations and inquiries where there is evidence of wrongdoing.
So at a domestic and EU level, the entire regulatory perspective and strategy has been totally transformed and all logistical and administrative materials that support and explain the financial and regulatory system fundamentally reflect this modern approach.
