Ireland defends finmin powers in new bank law

DUBLIN (BestGrowthStock) – Ireland defended on Monday sweeping powers granted to the finance minister in a controversial new banking law that has raised concern at the European Central Bank.

The ECB has said the new law could ursurp its rights over collateral security and impair its liquidity operations in the euro zone. It also expressed concern over the legislation’s impact on the rights and independence of the Irish central bank.

Ireland’s Department of Finance said the bill, which was passed by parliament last week but could yet be referred to the Supreme Court, did not expose the ECB or its own central bank to additional risk.

“There is no question of the central bank, ECB or any NCB (national central bank) as creditors to the guaranteed institutions being exposed financially by the exercise of the minister’s powers under the bill,” a finance ministry spokeswoman said in a statement.

The statement said the finance minister would not make specific directions or implement asset transfers without the support of the central bank.

“Indeed it is very difficult to see how such measures could be designed and executed without the intimate involvement and very close engagement with the central bank,” the statement said.

There was no immediate comment from the central bank.

Ireland’s parliament approved the banking law, which will allow the government to impose losses on subordinated bondbolders, last week. However, Irish President Mary McAleese will convene on Tuesday a meeting after which she may decide to refer the bill to the Supreme Court, raising doubts about its constitutionality.

McAleese needs to sign the bill for it to become law.

Opposition lawmakers in the center-right Fine Gael party and the center-left Labour party had criticized the bill for giving the finance minister wide powers over the banking sector. They also criticized the fact it was rushed through parliament.

In its opinion paper, signed off by President Jean-Claude Trichet, the ECB said it would have “appreciated” being consulted about the legislation at an earlier stage.

As a condition to accessing an 85 billion euro ($113.1 billion) EU/IMF bailout, Ireland has pledged to shrink and radically overhaul its banks, whose balance sheets were ruined after the collapse of a decade-long property boom.

(Reporting by Yara Bayoumy; editing by Carmel Crimmins)

Ireland defends finmin powers in new bank law