A NEW law extending the powers of the Central Bank and providing for the immediate transfer of large deposits into the account of the recipient's bank was published yesterday.
The Central Bank Bill 1996 also provides for a number of other changes, including giving legal status to the "crossed cheque" in an effort to dissuade intermediaries such as solicitors from holding on to money belonging to their clients.
It further provides for the supervision of bureaux de change by the Central Bank, as recommended to all countries by the Financial Action Task Force, the international body set up by the OECD to combat money laundering.
The Minister for Finance, Mr Quinn, said there was "no direct evidence" of bureaux de change in Ireland being used for money laundering.
At the moment there are five major banks which operate a clearing system for deposits, and about 20 other institutions, such as building societies, which operate through the clearing houses on an agency basis.
An "end of day netting" system is operated, whereby "at the end of each day the five tot up how much they owe each other" according to Mr Richard Shine assistant principal in the finance division of the Department of Finance. These debts are then settled through the transfer of monies between the banks' accounts in the Central Bank.
The problem is that with an ever increasing volume of money going through an increasingly complex system, any credit institution in the payment system going into liquidation could cause a "meltdown" of the system, according to Mr Robert Carey, principal officer with the finance division.
Under the new law a payment above a certain threshold figure, yet to be decided, will be instantly transferred to the payee's bank.
With such a system, should a financial institution collapse, monies which have been passed through that institution earlier that day will not become enmeshed in insolvency procedures.
It is hoped the Bill will become law early next year and the Central Bank will then become responsible for enforcing the system with existing financial institutions and any that might set up here in the future.
An agreement Real Timed Gross Settlement, is to be put in place between all EU countries some time next year, so that large payments are instantly settled between financial institutions throughout the EU.
This in turn will be followed by Trans European Automatic Real Time Gross Settlement (TARGET), which will set up a similar system for the transfer of ecus between the national Central Banks and the EU Central Bank.
The Bill will also make it law that no intermediary, such as a solicitor, will be able to lodge a crossed cheque into his or her own account. Insurance companies had expressed concern to the department about the long periods it was taking for awards to reach the accounts of payees.
"It will now no longer be in the interests of the intermediary to hold on to such cheques (in order to collect interest)," Mr Quinn said.
The bill will also make it obligatory for the Governor of the Central Bank to appear before the Dail Committee on Finance and General Affairs, should he be so invited. Since the establishment of the committee, the governor has responded positively to invitations to appear before it.
