Reorganisation

In the wake of the financial crisis, the Central Bank Reform Act 2010 established the Central Bank of Ireland as a single regulator.  It is led by the Governor of the Central Bank.  The Irish Financial Services Regulatory Authority was dissolved and its functions were brought back under the umbrella of the Central Bank of Ireland.

The Central Bank and Financial Services Authority of Ireland was renamed the Central Bank of Ireland.  They are managed and their affairs are controlled by the Central Bank Commission.  The Commission is chaired by the Governor and includes the head of financial regulation, head of Central Banking, secretary general of the department of finance and six to eight other appointees appointed by the Minister for Finance.

The Central Bank Commission comprises the Governor, two Deputy Governors (Head of Financial Regulation and Central Banking), the Secretary General of the Department of Finance, and six-panel members appointed by the Minister for Finance.

New Approach

The Central Bank of Ireland is responsible for both central banking and financial regulation. It replaced the former Financial Services Authority of Ireland and Central Bank.

The Central Bank established a new strategic approach to supervision.  This is intended to challenge and be more intrusive than the pre-existing scheme of regulation which emphasised principles of self-regulation to a greater extent.

The  Central Bank Supervision and Enforcement Act 2011 provided more extensive protection for whistle-blowers and greater regulatory powers for the Bank. The 2013 Central Bank (Supervision and Enforcement) Act increased and enhanced its power.

The 2010 legislation transferred certain of the Consumer Director powers of the Financial Regulator to the National Consumer Agency, now transferred to  Competition and Consumer Protection Commission. The CCPC provides information to consumers in relation to financial services to promote financial education and capability.  Certain functions are vested in both the Central Bank and the CCPC concurrently.

it directly supervises. The European Central Bank has its own significant investigatory and sanction powers.

Functions

The Central Bank is responsible for

• the overall stability of the financial system,
• regulation of financial services in the best interests of consumers
• the operation of the payment and settlement system,
• analysis and comment to support national economic policy,
• such other functions as may be assigned.

The Bank may do anything necessary or reasonably incidental to the performance of its function.  It participates in international monetary and financial services regulatory bodies.  It publishes and collects data on monetary matters.  It assists the Central Statistics Office in the compilation of financial and economic statistics.

The high-level goals and objectives of the Central Bank are the stability of the financial system in Ireland and across the euro area and proper and effective regulation of financial institutions (PRISM).

The Central Bank identifies strategic issues in terms of consumer protection. The Central Bank also provides economic analysis, research, and statistics to government and other policymaking bodies. It publicises it to the public and the market.

The Central Bank’s co-regulatory objectives are

• to carry out assertive, risk-based prudential supervision of institutions and markets, in order to foster a robust and competitive financial sector;
• and to ensure the stability of the financial system;
• to strengthen and maintain consumer protection so that financial services operate in the best interests of consumers.

Regulation

The Central Bank regulates most financial services bodies in Ireland. It authorises financial services providers within Ireland and supervises them. The Central Bank publishes much of its information on its regulation and supervisory functions for the various areas on its website.

Financial services entities that require licence include credit institutions, funds, fund service providers, electronic money institutions, credit unions, insurance and reinsurance undertakings, insurance and reinsurance intermediaries, investment firms, investment intermediaries, moneylending,  mortgage intermediaries, certain regulated markets themselves, retail credit firms, approved professional bodies, credit service firms.

Approach

The application for authorisation looks thoroughly through the organisation. It considers the ownership of the applicant, the fitness and probity of directors and senior management, adequacy of internal controls and risk management, adequacy of capital, level of resources and staff. An application is made by furnishing the prescribed documentation.

Directors and management are primarily responsible for the proper management and supervision of the financial services provider. A key part of the authorisation process is an assessment of their fitness, probity, qualifications. The appointment of senior persons must be reported through the submission of a detailed online questionnaire concerning the individual which must be approved by the bank.  The Central Bank also looks at the owners and shareholders in terms of their fitness and probity.

Risk-based supervision focuses on areas which pose risk to the central objectives of the Central Bank, entities that pose risk to the financial stability and to consumers. PRISM the probability, risk and impact system is the framework currently used in the supervision of financial services provider.

Highest under the PRISM system, firn s which pose the highest level of risk receives the highest level of supervision. However, the system is a supervisory tool with a software element. It seeks to adopt and can alert the regulator to adopt a consistent method of measuring and considering risk across all forms, allocate resources based on risk, assess risk in a systematic and structure and function, provides clarity for supervised entities, its quality control mechanisms.

Supervision and Inspection

Central Bank exercises supervisory functions in the context of authorisation and ongoing supervision. Monitoring includes examining weekly, monthly and annual returns, conducting regular review meetings, onsite inspections. Developing systems and procedures to monitor activity and detect noncompliance, issue guidance notice to enhance supervision.

Inspections and review meetings are central elements of the supervision. It confirms its compliance with internal governance structures, controls, risk management systems. Prior notice is given of the meeting.

The length of the time and personnel involved will depend on the nature of the firm. A post-inspection letter issues. A further review meeting will consider further compliance issues. A review meeting considers compliance issues arising since the previous inspection. Notice will be given with an agenda.

Fitness and Probity

The fitness and probity regime commenced in full on 1 December 2012. Senior financial positions and pre-approval control functions PCFs for financial service providers. Prior approval of the Central Bank is required for appointment to these roles. An individual questionnaire must be submitted.

Since November 2014, European Central Bank is the competent authority for fitness and probity of the management board of significant credit institutions.

The fitness and probity provisions provide for controls functions. They include persons who exercise significant influence on the affairs of the provider including those monitoring compliance and performing functions in a consumer-facing role. Prior approval is not required.

Standards require that an individual providing either a pre-approved control function or a control function must be competent and capable or is ethical and act with integrity, be financially sound. The provider may not allow an individual to perform the functions unless they are satisfied on reasonable grounds that they comply with the fitness and probity standards. Guidance is published by the Central Bank in relation to the obligation.

Preapproved control functions include Chief Operating Officer for all regulated financial service providers; Head of Claims for insurance; Signing Actuary for non-life insurance; Head of Client or Asset Oversight for investment firms; Head of Investor Money Oversight;

Head of Credit for retail firms. Six new positions were added in 2014.

Fitness and probity regime applies to credit unions as of 1 August 2013. The manager and chair require prior approval. Other functions are control functions requiring compliance with fitness and probity standards equivalent to above.

Consumer Protection

The Central Bank through its Consumer Protection Code seeks to ensure high standards of consumer protection. Consumers are to be provided with clear and accurate information including cost during the sale process. Products and services must be appropriate to their needs and suitable. There are three complaint mechanisms, processes for dealing with error, follow-up advice, policy renewals, and other follow up.

The Central Bank monitors compliance with consumer protection through inspections, mystery shopping, monitoring of advertisements, reviews, research.

Enforcement

The new model of financial regulatory compliance involves assertive risk-based supervision with credible sanctions. Central Bank is determined to use its full enforcement powers to hold regulated entities to account, ensure they act in a transparent manner.

A prescribed contravention may be the subject of administrative sanctions. See generally the sections on enforcement. One or more of the following sanctions may be imposed:

• caution or reprimand;
• direction requiring the refund of monies to charge for a financial service;
• direction to pay the Central Bank a monetary penalty of up to 1% of the turnover of €10 million or €1 million in the case of a natural person, whichever is greater;
• disqualification of a person being involved in the management of regulated financial service provider;
• disqualification, revocation or suspension of authorisation;
• direction to cease contravention;
• costs.

Financial Services Ombudsman Council

The Financial Services Ombudsman Council has a supervisory role in relation to the Financial Services Ombudsman’s office.  It prescribes guidelines under which the Ombudsman is to operate.  It determines fees and charges and appoints the ombudsman and deputy financial services ombudsman.  It keeps the operation of the bureau under review and advises the government.

The Council may make regulations as may be necessary to enable the Ombudsman to perform its function.  They may prescribe

• matters which the Ombudsman may take into account when investigating and deciding on a complaint a complaint
• prescribe procedures in relation to complaints
• specify circumstances in which a complaint may be dismissed without considering the merits.
• specify that copies of complaints are to be made available.

Minimum Competency

The minimum competency requirements apply as of 1 January 2007. They provide minimum professional standards to individuals within financial services providers. The minimum competence code replaced the 2007 rules in December 2011.

There are minimum competence requirements applicable to persons undertaking control functions and preapproved functions. There are obligations on regulated entities in relation to ensuring compliance with the competent standards. Further, Addendum to the Minimum Competency Code was published in 2014.

EU Branches

In the case of an EU financial service provider, operating as a branch or providing services in another jurisdiction, the home regulator is responsible for prudential supervision. The Central Bank as the home regulator is responsible for

• Irish authorised financial services groups,
• Irish subsidiaries of financial services groups authorised by another EU regulator,
• overseas branches of Irish authorised financial service providers,
• liquidity of EU branches in Ireland, jointly with the home State,
• compliance with anti-money laundering by EU branches in Ireland,
• compliance with conduct of business requirements by all financial services providers operating in business, whether authorised in Ireland or elsewhere.

Significant Institutions and ECB

Significant institutions are supervised by a joint supervisory team comprising the Central Bank and the European Central Bank representative. The European Central Bank has ultimate responsibility for prudential supervision of all credit institutions within the Eurozone. Central Bank supervises those not subject to European Central Bank.

Recovery and Resolution

The Central Bank has been central in implementing and leading, the recovery and resolution plans within the banks, credit unions and other institution. This has included stress testing of institutions to ensure adequate capital.

The European Central Bank act  as Single Resolution Board for resolution plans for the banks which