Irish financial services regulation
22 April 2002
31 July 2013
Changes to Belgian law on late payment in commercial transactions to enhance protection of creditors
14 November 2013
12 February 2014
9 July 2013
24 June 2013
Responsibility for the regulation of financial services in Ireland currently rests with different regulators. The Irish Central Bank regulates the majority of providers, including credit institutions, investment firms, insurance intermediaries, exchanges and the mutual funds industry. The Department of Enterprise Trade and Employment regulates insurance undertakings, the Director of Consumer Affairs handles consumer protection issues and the Registrar of Friendly Societies credit institutions and industrial provident societies.
The envisaged regime making its way through parliament is a single authority, to be known as the Irish Financial Services Regulatory Authority (IFSRA), which will act as a one-stop shop for the bulk of the financial services industry in Ireland. It will be a separate statutory authority within a restructured Central Bank of Ireland. The aim is for efficient coordination between both the exercise of monetary policy functions and prudential/consumer interest regulatory functions.
IFSRA will have its own board, chief executive, registrar of credit unions and consumer protection director. While the Central Bank will set high-level policy, IFSRA will be independent in exercising its functions. A greater emphasis is being placed on the consumer. Consumer protection issues are split between the Central Bank and the existing Office of the Director of Consumer Affairs (the Director), which is separate from the Central Bank. The functions of the existing Director extend to consumer interests over all sectors. The establishment of a new Director within the Central Bank will result in the more efficient transfer of information between the prudential regulatory and the consumer interest sides, presently hampered by EU rules restricting transfer of confidential information. It is hoped that the result will be the ability to deal with regulatory problems more efficiently to the benefit of the entire industry.
A financial services appeals tribunal is also being established. It is being established in the context of a wider review being conducted to update existing sanctions and penalties. With such a change in the regulatory environment, the industry's concern is to ensure that the new authority will remain practical and flexible, ensuring Ireland's continued competitiveness.
Following the establishment of and the transfer of functions to IFSRA from existing regulators, the second phase of change will be the establishment for the first time of a statutory ombudsman scheme and consultative panels. These bodies will form the basis of a second bill currently being worked on. In addition, new rules tightening up the reporting requirements of auditors to the regulator will be introduced.
The ombudsman scheme is welcome. There are currently two voluntary schemes, one for credit institutions and one for insurance undertakings, but the new scheme will cover all providers. The new consultative panels are also welcome and will provide a formal system for industry and consumer representatives to make their views known to the regulator.
The new regulator will, of course, be keeping a close eye on EU developments. There are more than 45 new initiatives arriving from Europe, which are expected to gather speed post-Lamfalussy. The broad range of these proposals will result in some radical changes to the regulatory environment in Ireland. The new authority will have a lot to grapple with when it is up and running. Companies operating in the industry must also face up to the tide of regulatory change and factor in the new developments. As an example, those in the insurance sector face an amendment to the solvency margin requirements in proposed new insurance directives. For the larger insurance undertakings, the effects will not be major, but the implications for captive insurance companies, which normally operate on minimum levels of capital, will be substantial. These need to financially prepare for this change to their solvency margins.
The banking industry is also keeping a close eye on Basle II developments and is already ramping up for the more onerous disclosure requirements, even though that implementation might not be for a further four years or so.
Exciting times for the industry and indeed for the new regulator. Let's just hope that they're up to the challenge.