The European Central Bank (ECB) has expressed concerns about some of the points in the Credit Institutions Bill that is being proposed by Ireland as part of a restructuring of its banking system.
The bill was expected to allow the government to pump in more cash into Irish banks and allow the minister of finance to transfer loans and deposits out of the lenders in an attempt to reduce the size of the banking system.
But the ECB believes that the draft law is insufficiently legally certain on a number of critical issues for the Eurosystem.
The ECB would expect that nothing in this Act would affect operations, rights or entitlements of the Central Bank or the European Central Bank, or any other central banks within the ESCB, the bank added.
The bill, which was passed by the Irish government on Friday, is expected to help restructure Irish banks as a part of the requirement of receiving the ECB/IMF-sponsored bailout last month.
ECB recommended that the member states should act in a coordinated manner when adopting measures to deal with the financial crisis, in order to avoid significant differences in national implementation having a counter-productive effect, which may involve distortions in global banking markets.
Many of the other recommendations in the draft bill were, however, in line with the consensus emerging at the EU level, ECB said in the report.
In view of the expected introduction in Ireland of legislation on bank resolution by the first quarter of 2011, the draft law needs to clarify how it will interact with the powers and tools under the future bank resolution regime, ECB added in the report on Friday.