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Tuesday, Irish Central Bank Governor Patrick Honohan said he is determined that there will be a renewed emphasis on regulatory enforcement, even at the risk of the regulator incurring legal costs in unsuccessful actions.
Honohan, who is also a Governing Council member of the European Central Bank said in a speech in Dublin that the term "principles-based regulation" became a code for deferring to the preferences of the regulated entities. But in future, Honohan said, "You may expect to see challenging and assertive supervisors taking an independent and robust view of the risks of a firm, and insisting on mitigation."
Banks have become largely dependent on the Government for capital and on the ECB for liquidity. He noted that the interlinked process of securing the banks' access to liquidity and rebuilding their capital is just now coming to crystallization with the imminent asset purchases by the National Asset Management Agency and the injections of risk capital that will promptly follow. Ireland will service a heavy, but manageable debt burden in the years to come, said Honohan.
Given the pressures on the public finances, he said, the public purse cannot indefinitely pay half of the costs of regulation. "Moving to a 100 per cent charge-back arrangement for at least some of these activities seems inevitable to me," he added. Further, he said the practice of paying bonuses on the basis of apparent short-term profit is particularly harmful.
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