Supervision

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Supervision

Supervisory disclosure is regarded by the Central Bank is a comprehensive policy of transparency. It seeks to make information related to prudential supervision available in a timely manner to all interested parties. It seeks to provide easy access to more detailed information and permit meaningful comparisons of approaches between national authorities in different EU states. It seeks to provide information.

It is designed to enhance the transparency of the legislative and regulatory processes of each state as it implements the capital requirements directive. Pursuant to the directive the Central Bank publishes

  • the text of laws regulations administrative rules and general guidance adopted in the fields of prudential regulation.
  • the manner in which it exercises options and national discretion where available under EU law
  • the general criteria and methodologies used by the Central Bank in the supervisory review and evaluation process
  • aggregate statistical data on key aspects of the prudential framework in Ireland
  • certain further specific disclosures.

Rules and guidance are published in relation to

  • transposition of directives into national law
  • model approval
  • credit risk mitigation
  • specific disclosure requirements
  • waiver of the application of prudential requirements
  • regulatory and financial reporting.

PRISM

PRISM is the probability risk and impact system risk-based framework used by the Central Bank for the supervision of regulated firms. It seeks to challenge firms and judge risks posed by them to the economy and consumers. It seeks to mitigate risks which are unacceptable.

Under PRISM the most significant firms, being those with the ability to have the greatest impact on financial stability and the consumer receive a high level of supervision under structured engagement plans leading to early intervention to mitigate potential risks. Those which have the lowest potential adverse impact are supervised reactively or through thematic assessments. The Central Bank takes targeted enforcement action against firms in accordance with risks which affect the statutory objectives including financial stability and consumer protection.

PRISM is designed to be implemented by a few hundred supervisors on several thousand regulated firms. It is designed to

  • adopt a consistent way of thinking about risks across all supervised firms
  • allocate resources based on impact and probability
  • undertake a sufficient level of engagement with all higher impact firms
  • assess a firm in a reasoned, systematic and structured fashion
  • ensure that action is taken to mitigate unacceptable risks
  • provide clarity around the Central Banks views of the risks they pose
  • operate risk-based supervisory frameworks
  • use quality control mechanisms to encourage challenge and sharpen supervisory approach
  • analyse management information about the risk profiles of firms.

The Central Bank has published a booklet in relation to its approach

Conduct of Business

The conduct team is located within the asset management supervisory division. Its role is to supervise investment firms from a conduct and risk perspective. It works in consultation with the consumer protection directorate.

The main conduct of business areas that the conduct team look at are

  • firm culture
  • suitability and appropriateness
  • client categorisation
  • provision of information to clients
  • best execution
  • inducements
  • conflict of interest
  • complaint handling.

The Central Bank monitors compliance with the conduct of business requirements by way of themed assessment, ongoing supervisory engagement and full risk assessment.

The thematic review team is a cross-sectoral team responsible for conducting themed reviews on a range of supervisory topics in order to assess whether firms are complying with the applicable regulations and using good practice in relation to the topic in terms of policies controls and procedures. They are used to identify risks, practices, and trends and to facilitate the issue further guidance or direction to industry and to initiate remedial action against non-compliant firms. Thematic reviews include on-site inspection reviews and continued supervisory engagement.

The Central Bank requires financial service providers to submit financial data relevant to the business at specified intervals. This is used to monitor their operations and compliance. It is also used for statistical data. The amount and type of information required depend on the particular financial services sector. Annual returns are required and, in most cases, additional returns at other periods. The particular requirements are relative to the sector concerned.

The Central Bank publishes detailed guides on how to complete online reporting requirements through the online reporting system. There is guidance specific to various financial service sectors.

Levy

The Central Bank has the power to set industry funding levies. The purpose is to fund the relevant proportion of the cost of the annual budget for financial regulation. The balance is funded by the Central Bank of Ireland.

Financial service providers who are authorised and regulated by the Central Bank at the end of the year as defined are liable to pay the levy for the following year. Providers who become authorised during the year are liable to pay the levy for the period for which they hold an authorisation within the year.

There are various levy categories according to the type of business concerned. There are 12 categories and the provider may fall into more than one category in which event the levy may be paid in respect of each category.

A levy notice is issued to financial service providers after the regulations are made. This must be paid within 28 days. If the provider fails to do so, the Central Bank may take steps to recover the levy including by way of court proceedings. The obligation still applies regardless of whether notice of levy is made.A financial service provider may submit an appeal against the levy amount within 21 days

Where in the reasonable opinion of the Central Bank the obligation of the entity to pay the levy contribution or supplementary levy would be likely to make it insolvent where the entity is a sole trader bankrupt the Central Bank may waive the obligation to pay the levy. It may waive reduce all or part of a levy or supplementary levy in exceptional circumstances.  The Central Banks advises a regulated entity in writing of its decision in respect of the appeal providing reasons and details of any amount outstanding and the due date applicable for the payment of any outstanding levy liability.

Regulatory Decisions

The regulatory decisions unit of the Central Bank seeks to facilitate the appointment of decision-makers and provide administrative and legal support to appointed decision-makers. Its role covers the following type of cases

  • administrative sanctions procedure enquiries
  • Certain decisions under the fitness and probity regime
  • assessments of the security markets regulation and
  • proposed refusals and revocations of authorisations

The role of the unit is set out in guidelines published by the Central Bank.

One of the regulatory decisions unit’s responsibilities is to facilitate the creation of panels of decision-makers from which may be selected persons to make decisions in some areas set out above. The panels comprise Central Bank employees and external individuals and may be supplemented from time to time as appropriate.

The Central Banks regulatory model consists of a number of intra-locking components namely regulation ongoing supervision and enforcement.

  • Regulation comprises the substantive legislative rules codes and standards underpinning supervision and enforcement
  • Supervision is risk-based assertive inspection and supervision of regulated entities.
  • Enforcement involves gatekeeping investigation and enforcement and administrative sanctions.