Irish Central Bank Regulation Bill Published
Monday, August 01, 2011

In response to the regulatory failures of the financial crisis, the Irish government has published major new legislation designed to enhance the regulatory powers of the Central Bank.

The Central Bank (Supervision and Enforcement) Bill 2011 was published on July 28 by Finance Minister Michael Noonan. According to the Department, the Bill enhances the Central Bank’s regulatory powers, drawing on the lessons of the recent past in Ireland and abroad. It is designed to strengthen the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. It is also intended to provide the Central Bank with greater access to information and analysis, and underpin the credible enforcement of Irish financial services legislation in line with international best practice.

In particular, the Bill provides for the following:

• Skilled person reports. The Central Bank will be able to require a financial service provider (or related undertaking) to prepare an independent expert report on a regulatory matter, meaning it will not have to rely on information submitted by the financial service provider alone. According to the Department, the reports could be used for diagnostic, monitoring and compliance purposes, including stress tests for example.
• Authorised officers. A consolidated authorised officer regime will replace some 20 existing regimes. This is intended to bring greater clarity and certainty – for the Central Bank and financial service providers – regarding the ability of the Central Bank to access premises and records and seek regulatory information. The Central Bank will also be able to attend financial service provider meetings, with a safeguard to prevent this compromising the Central Bank’s ability to take action afterwards.
• Whistle-blowing protections. The bill provides protection from civil liability and victimisation for whistleblowers. The bill also provides a mandatory disclosure regime for those performing pre-approval controlled functions (senior or influential positions within financial service providers). Failure to disclose could be grounds for an investigation and action under the fitness and probity regime.
• Directions. The Department argues that the power to issue regulatory directions is a central provision in the bill and allows for prudential regulatory interventions by the Central Bank across the range of its responsibilities in specified serious circumstances.
• Power to make regulations. The bill provides what the Department says are extensive regulation-making powers for the Central Bank. The provisions relate in many cases to matters which are already Central Bank requirements under codes: for example, consumer protections, related party lending and minimum competency requirements.
• Fines. The maximum penalties chargeable under the administrative sanction regime will be increased from EUR5m to EUR10m (or 10% of turnover) for firms, and from EUR0.5m to EUR1m for natural persons.
• Sanctions. A regulated financial service provider may have its authorisation suspended or revoked as an administrative sanction.
• Restitution orders. Where a regulated financial service provider is guilty of an offence or contravention under financial services legislation, and where they have been enriched unjustly in doing so, the Central Bank will have the facility to apply to the Court for a restitution order. This will require the guilty party to pay a specified sum to the Central Bank for disbursement to those who have been identified by the Court as entitled to restitution.
• Co-operation with overseas regulators. The Central Bank may use its information-gathering and authorised officer powers to collect information in co-operation with overseas regulators. The Department has stated that this provision is necessary to allow the Central Bank to become a signatory to the Multilateral Memorandum of Understanding of the International Organisation of Securities Commissions.

Commenting on the measures, Noonan said: “The publication of the Central Bank (Supervision and Enforcement) Bill 2011 represents a significant further step in the reform of financial regulation in Ireland. The changes introduced by the bill will underpin an assertive, risk-based model of regulation supported by a credible threat of enforcement.”

The bill's publication is also in line with the government's requirements under the EU-IMF programme of support, as it introduces legislation intended to strengthen the supervision and enforcement powers of the Central Bank. The bill is expected to reach its second stage in Parliament in the autumn session.