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Thursday 30 March 2023 Dublin: 11°C
Screengrab from Oireachtas TV
# Backsliding
Financial regulator: Holding onto best-skilled staff is a battle
Deputy governor of the Central Bank Matthew Elderfield told the Public Accounts Committee that supervisors cannot rest on their laurels.

MATTHEW ELDERFIELD TOLD the Public Accounts Committee today that the Central Bank faces a challenge to keep its best-skilled staff because of a “difficult pay environment”.

It is a battle and a struggle, he said.

Currently, the Central Bank employs 620 people. That is fewer than the 750 the deputy governor said would be required for a robust regulatory service. However, he explained his initial estimate could be trimmed down to 600 because tasks performed in relation to the Troika and the bailout programme will begin to “roll off” shortly.

Warning politicians that the regulator will always be playing catch-up with the industry, Elderfield said the moment of risk for Ireland will be when another “bubble” occurs.

“Regulators are an irritant,” he said. If people complain about the processes, there have to be questions asked about their motives, he explained, and policymakers must be “wary of amnesia when it comes to financial crisis”.

In his opening address, Elderfield told the sitting TDs:

…can I just sound a note of caution at the outset: while good progress has been made in improving financial regulation and supervision in Ireland, we are by no means all the way there yet.  Indeed, as a supervisor you are almost always playing catch up with industry and it is dangerous to think you will get to a point when you can rest on your laurels.

“It’s also especially important to be vigilant against backsliding and attempts to compromise the independence or dilute the diligence of regulation, especially when times start to get good.”

Bailout II?

Elderfield would not be drawn on his opinion on whether Ireland will require a further bailout.

The banks are going to need more capital in the future, he conceded, but the question is how soon that position will arrive and can the banks “get their on their own?”

“We know there are more losses to come in the banks,” he noted, adding that it is unclear if there is currently “enough in the pot” to cover them. That is something that will be examined during the Central Bank’s next stress tests.

The big unknown for banks is how they will be impacted by insolvency legislation, according to the regulator.

Mortgage arrears

Elderfield has been vocal in the past about his frustrations with the lack of progress made by Irish banks on the mortgage arrears crisis and he reiterated those concerns this afternoon.

In response to a question from deputy Paul Connayghton, he repeated his belief that repossessions will rise in the coming year.

The Central Bank is focussed on ensuring lenders are providing sustainable solutions to troubled homeowners. The regulator wants to see a heightened effort to speed up the process and offer more options. A blanket approach of short-term, interest-only loans is not acceptable, said the deputy governor.

At the end of December last year, just 52 split mortgages had been put in place by lenders.

“Unfortunately, there will be repossessions,” he continued, noting that some people’s situations will be “so bad” or that some clients do not engage with the bank at all.

“We do have to steal ourselves for a significant increase in repossessions. It is not desirable and a last resort…There will also be more voluntary surrenders.”

On his watch

Today marked Elderfield’s probable last appearance in front of the PAC as he leaves the job in October. He outlined to Deputy Shane Ross that his reasons for resigning were personal and not related to the work of the Central Bank.

“I know there is unfinished business,” he said. “I debated a lot about it. I know there are still challenges ahead.”

He noted that there were a number of friends and family lobbying for his return to London.

Looking back at the “fateful night” of the bank guarantee, Elderfield said he could not make a “hindsight judgement” about whether the collapse of the Irish economy would have happened under his supervision.

However, he noted that if the supervisory and regulatory framework – including the bank wind-up regime – that is currently in place was established, the government would have known that Anglo Irish Bank was not solvent and that Irish Nationwide Building Society was in trouble.

During the hearing, he also called for a review of how Ireland handles white collar crime cases. He said past cases did not deal sufficiently with individuals.

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