The Governor of the Central Bank has defended the bank's role as regulator of the financial institutions. At the Public Accounts Committee Inquiry into allegations of DIRT evasion, Maurice O'Connell said that the integrity of the banking system was not called into question by the DIRT controversy. Mr. O'Connell repeated that the Central Bank was aware of the concerns of DIRT evasion through bogus non-resident accounts. However, he stressed that this was a tax matter, over which the Central Bank had no control and no powers of inspection.

The Committee heard that a letter was sent to the Central Bank from Midland and Western Building Society, which made allegations of fabrication of addresses by major financial institutions. Mr. O'Connell said that this letter was passed on to the Department of Finance. Mr O'Connell also said that he believed the Central Bank had made a correct judgement call in not interfering in discussions between AIB and the Revenue Commissioners in 1991 over DIRT tax obligations. He said that the Central Bank would not normally become involved in tax matters unless the solvency of the bank was in question. He said that, in this case, it had been proven that they were correct not to intervene.

Mr. O'Connell earlier described the Comptroller and Auditor General's report into DIRT tax evasion as inadequate. Mr. O'Connell, who is also a former secretary of the Department of Finance, rejected claims that there was any trade off between protecting exchange rates and turning a blind eye to DIRT evasion, saying that the suggestion was too simplistic. He said that tax was just one of the problems facing the country at the time and that the national debt had increased five fold between 1978 and 1988.

After Mr. O'Connell, the Public Accounts Committee heard submissions from the Irish Banking Federation and the Institute of Bankers in Ireland. Kevin Kelly, the President of the IBF, told the committee that the IBF was aware of the problem of bogus non-resident accounts, but was not aware of the extent of the problem. Mr. Kelly added that the IBF was concerned about the outflow of non-resident funds after the introduction of DIRT. He said that the IBF had no role in governance of the banking sector, but made representations on operational matters with the Department of Finance and Commissioners.

Earlier in the day, the former Labour Party Minister, Barry Desmond, told RTÉ that a handful of Fine Gael backbench TDs threatened to revolt during the 1980s Fine Gael-Labour coalition over the proposed introduction of measures to curb tax evasion. At yesterday's session of committee, two former Finance Department officials, Maurice Doyle and Sean Cromien, said that it was the politicians who lacked the courage to tackle tax evasion, because they feared the flight of capital from the country and the anger of those hit by any such measures.

During this morning's session, the Secretary General of the Department of Finance, Paddy Mullarkey, answered questions on the relationship between his department and the revenue commissioners on the administration of DIRT liability. Mr. Mullarkey told the committee that he did not seek advice on concerns regarding bogus non-resident accounts. He said that the issue was not a live issue until the present. The committee also raised questions on changes made to the declarations required of non-resident account holders between 1986 and 1997. Mr. Mullarkey accepted that the changes to the requirements made them less onerous, but he said that there was a fear of putting pressure on genuine non-resident account holders at that time.

Committee chairman Jim Mitchell asked the Mr. Mullarkey to furnish the inquiry with any documents referring to the problem of bogus non resident accounts during the from 1986 to 1998. Deputy Mitchell said that he found it puzzling and perturbing to discover what he described as "the silence of the files of former secretaries of the Department of Finance".