Davy was fined €4.1m by the Central Bank last week
Ms Rowland said that now that the full details of the investigation are out into the public domain, the bank is satisfied to engage with other unnamed agencies who may see a relevant role with them, adding that it has had tentative engagements with some.
“But I absolutely intend to have a proactive discussion with a number of agencies about this, including An Garda Síochána and the Office of the Director of Corporate Enforcement, to sit down with them in the full facts of the information so that from their perspective they can consider this matter,” she said.
She said the Central Bank has regular ongoing contact with other state agencies.
Asked by Sinn Féin’s finance spokesman, Pearse Doherty, if investigations would be opened by the bank into the conduct of individuals involved in the case, Ms Rowland said she could not be drawn.
“Right as we speak, we are engaged in a very dynamic and significant regulatory engagement with Davys and it is a very evolving situation and I can’t be drawn…in commenting on future regulatory actions against individuals,” she said.
But she added that the Central Bank had fought for the outcome with Davy and it had caused the stockbroker “a moment of reckoning.”
She said the outcome means Davy has questions to answer about conduct and culture and it is right that it does answer them.
“But it is also right that the Central Bank of Ireland keep all of its actions open and don’t prejudice any of its actions with commentary,” she added.
She added that the case remains “a live supervisory matter.”
In response to questions from Fianna Fáil’s justice spokesman, Jim O’Callaghan, Ms Rowland outlined the nature of the difficulties it came up against when conducting the probe.
She told the committee that during the first engagements, when the transaction became public, there was contact from Davy that in the bank’s view sought to minimise the transaction and mischaracterise the seriousness of the events.
She added that further information was subsequently provided and it later transpired after a “forensic and diligent investigation” that the initial characterisations of the events that occurred lacked the candour the Central Bank expects from regulated firms it supervises.
Ms Rowland said statutory powers were used in what was a very contentious investigation, and because of that the Central Bank had to have recourse to its statutory toolkit to compel large quantities of data and information from the firm.
Asked by Mr O’Callaghan if she was satisfied there were no other victims, Ms Rowland said only that this had not been the Central Bank’s first engagement with the firm.
She said Davy had confirmed there had been significant change in respect of governance, risk management, compliance and controls and confirmed external parties had reviewed that.
“I can tell you that didn’t happen by accident,” she said referring to those changes, and added that the Central Bank does not conclude any investigations unless it is satisfied that the issues complained about have been repaired.
Asked by Mr Doherty whether the bank is satisfied that senior figures in Davy continue to act as directors of the group’s parent companies, Ms Rowland said she could not be drawn on specifics.
But she said in general terms the Central Bank has a very serious role to play around authorising firms, as well as the fitness and probity of individuals in senior roles in those firms.
She added that the bank also plays a role in scrutinising the shareholdings at certain thresholds in regulated entities and is highly focused on the issue.
This afternoon’s session before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach, followed the handing down of a fine of €4.1m by the Central Bank to Davy last week.
The regulator concluded the stockbroker had breached several regulations around a deal in 2014 where a client sold a bond to a buyer and was not told the purchaser was a consortium made up of 16 Davy staff.
Three senior figures at Davy resigned on foot of the findings last weekend, while the National Treasury Management Agency yesterday withdrew the firm’s authority to act as a primary dealer in Irish Government bonds.
“The reprimand and fine imposed on Davy reflects the serious regulatory breaches and aggravating factors in the investigation, including the firm’s lack of candour when first reporting the matter to the Central Bank,” said Derville Rowland, Director General of Financial Conduct at the bank, in her opening statement.
Ms Rowland, who attended along with Deputy Governor, Ed Sibley, told the committee that robust enforcement action is a critical component of the Central Bank’s work to protect consumers and investors.
“It is a key part of the regulatory and supervisory toolkit,” she said in her statement.
“Enforcement action supports and runs alongside other supervisory interventions to help drive the remediation of risks and issues in the governance, risk management and control frameworks of the firms we supervise.”
She also said that when it concludes enforcement actions, the bank publishes detailed statements on the breaches, sanctions and reasons as it believes “sunlight is the best disinfectant”.
“Publicised enforcement outcomes send a wider message to firms and individuals to drive improvements in compliance, behaviour and culture across the financial system,” she said in her statement.
Ms Rowland also told the committee that the bank has concluded 141 enforcement actions, resulting in monetary penalties of over €128m, and has also issued a number of individual disqualifications and prohibitions.
She also outlined how the bank is currently conducting enforcement investigations against firms and individuals under the Administrative Sanctions Procedure and Fitness and Probity regime, and has and will continue to use its full toolkit in appropriate cases.
But the statement said that notwithstanding the strong suite of existing enforcement powers the bank has, it does believe that the regulatory framework requires “further strengthening with regard to individual accountability”.
“We regard the Individual Accountability Framework, including the introduction of conduct standards for individuals and the Senior Executive Accountability Regime (SEAR), as necessary enhancements to our supervisory and enforcement toolkit to support effective culture in regulated firms,” the representative told TDs and Senators.
On the topic of Ulster Bank’s plans to wind down operations in the Republic of Ireland and Bank of Ireland’s plans to close a third of its branches, Ms Rowland’s statement said such decisions are matters for the boards of those firms.
“The Central Bank cannot require firms to keep operating in the State if it wishes to stop, nor can it force banks to keep branches open,” she said.
“We can ensure that changes are done in an orderly manner; that the impact of such decisions has been carefully considered across the full customer base and at the appropriate levels; and that firms adhere to regulatory requirements, including the Consumer Protection Code 20123.”
Regarding the payment of business interruption insurance by insurers, the Central Bank representative said that as a result of their supervisory interventions, a number of insurers have already accepted and commenced settling claims.
The statement also said the judgment in the case taken by four pubs against FBD is welcome and significant, and reinforces the bank’s system-wide supervisory action.
“I can confirm to you that all firms in scope have accepted the outcome of the judgment and we therefore expect that all valid claims will be handled and paid by the firms in accordance with their claims handling processes and in compliance with their legal and regulatory obligations,” Ms Rowland said.
In relation to Covid-19, the bank representative told the committee that dealing with distressed debt remains a key priority for the regulator.
Her statement said that of the 172,000 borrowers who received payment breaks, 90% have returned to full payment on either existing or extended terms, while the remaining 10% have indicated they require further support.
“Support to borrowers continues now on a case-by-case basis and through more regular forbearance measures,” Ms Rowland said.