March 02, 2009

Ireland's political leader Brian Cowen announced sweeping reform of the Irish banking sector at the weekend, including the use in future of a regulator from abroad.

Ireland, a small country of just 4.5 million people, has been shocked by details of how its recently failed, third-biggest bank, Anglo Irish Bank, habitually obtained fleeting loans from other banks to make its accounts look stronger immediately prior to audits. A string of top bank executives have resigned, as has The Financial Regulator, and opposition politicians are agitating over what they term the "cozy club" of banks and their Regulators. The ruling Fianna Fail party faces its lowest ever popularity ratings.

Taoiseach Brian Cowen, vowed at the Fianna Fail party's "ard fheis"—the equivalent of the U.S. national convention—to "bring an end to a sorry chapter in Irish life."

Ireland will move to a regulatory system based on a Canadian model, the Taoiseach said. The Central Bank and the Financial Regulator (an oversight body created in 2004) will be combined, he said, and an overseas banking regulator will be brought in.

"In the weeks ahead," the Taoiseach said, as quoted in The Irish Times newspaper "I will introduce new standards of banking regulation and new standards of corporate governance, which will restore our reputation and move us to the forefront of best international practice."

The police have been brought in to investigate the operations of Anglo Irish Bank, which was nationalized in January.

According to a poll released later that month, Irish people have undergone a greater drop in trust in businesses than those in 20 countries included in The Edelman Trust Barometer. In Ireland, 83 percent of respondents said they had lost trust in business, compared with 62 percent of respondents overall in the U.S. and Western Europe.

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