Banks and other credit institutions are licensed and authorised by the Central Bank, formerly the Financial Regulator.  A banking business is defined principally, as the taking and receiving monies on deposit.  Retail credit firms are regulated in a similar fashion, by the Central Bank.  Certain other financial services providers, including, in particular, building societies are subject to a similar regulatory regime.

EU legislation allows a credit institution established in one member state to establish a branch in another member state.  In this case, the home state regulator is the principal regulator in relation to prudential and ability to do business.  The code of conduct of the local state in relation to “doing business” / consumer protection requirements.

A bank licence holder must satisfy the Central Bank that it has clearly defined structures and the ability to perform its functions as a bank. The Central Bank looks behind the corporate structure at the managers and shareholders and assesses their competence, capacity and integrity. Central Bank consent is necessary to the acquisition of significant shareholdings and applies when certain shareholding thresholds (20%, 33% and 50%) are crossed.

Key managers and directors must be qualified and approved. The management structure must be suitable. Relevant persons must comply with the fit and proper person requirements.

Financial Requirements

The European Union Capital Requirements Directive applies to credit institutions and provides for a minimum capital regime. It implemented the so-called Basle requirements.  These have been reviewed in view of the calamitous financial crisis. There are minimum paid-up capital requirements. Most prudential requirements are provided for on an EU wide basis

The EU Directive specifies requirements in relation to liquidity and the requirement to have cash on hand.  There are qualitative and quantitative requirements.

There are obligations in relation to funding that limit the extent to which funding may be held from one depositor or associated depositors.  The ten largest deposits must not hold more than 50% of deposits.

Controls on Lending

Lenders must have policies relating to management and the control of lending.  This must include risk management, credit assessment, credit review, monitoring and control of large exposures and provisioning for loan losses.  Lenders must have administrative and accounting procedures and control mechanisms to identify all large exposures and changes in them.

Central Bank notices limit the employment of assets in loansNot more than 25% should be with one client or connected group.  The aggregate of large exposure should not exceed [100%] of own funds.  Large exposures must be notified to the Central Bank.

Exposure to directors is limited by reference to amounts owed by individual directors and directors collectively and to entities with which they are connected.  There are limitations in respect of exposures to shareholders, groups of clients and connected persons.

Institutions should not have risk assets amounting to 200% of their own funds in any one sector or activity, subject to a common predominant risk factor. Information returns must be made to the Central Bank on an ongoing basis.

There are special requirements in relation to account management and internal controls. Internal controls and reporting arrangements must be in place.  Comprehensive risk systems are required.

The Regulator

In 2004 the Financial Regulator was formed as a single regulator of the financial services industry.  The structure of the regulation was revised in 2010, consequent upon the financial crisis and the Financial Regulator was merged into the Central Bank.  The Central Bank is now the regulator of all credit institutions.

The Central Bank has powers to enquire into breaches of laws, codes of practice and standards by credit institutions.  It can impose significant fines or regulatory sanctions on the bodies and on their directors and key managers and employees.

The Central Bank is obliged to regulate financial credit institutions in the best interests of their users.  Its remit covers credit institutions, banks and building societies together with insurance undertakings, intermediaries, certain professional bodies, credit unions and stock exchange.  It finances its operations by charging levies on the regulated bodies.

There is a Central Bank consumer director, who deals with consumer protection matters including housing loans, certain consumer Credit Act compliance and codes of conduct. The codes of conduct cover smaller businesses, with a turnover of less than €3,000,000 annually.

Compliance Enforcement

The Central Bank requires regulated financial service providers to provide a compliance statement.  Compliance extends not only to legal compliance, but also to the codes of conduct and guidance notes.

Auditors can be required to provide a compliance statement.  Auditors have duties to report specified matters to the Central Bank.  This includes circumstances that may impact the ability of the institution to carry out its functions.

The Central Bank has powers to investigate and impose sanctions in respect of “prescribed contraventions”.  This covers not only legal obligations but also codes of conduct and standards of proper conduct.  The criteria are broadly similar to those applicable to the adjudication of complaints, by the Financial Services and Pensions Ombudsman.

The Central Bank can hold an enquiry as to whether there has been prescribed contravention.  It may accept an acknowledgment that there has been a prescribed contravention without an enquiry.  It can apply a range of sanctions. Enquiries are held with as little formality and technicality as possible.  Witnesses can be summoned and obliged to give answers under oath.

The Central Bank must give notice of its determination.  There is a possibility of appeal,  mentioned later.


Sanctions can include

  • a caution or reprimand;
  • a direction to refund;
  • a monetary penalty up to €5 million for the institution and €500,000 per person;
  • disqualification from acting in a management role of a regulated body;
  • reprimands and cautions
  • a direction to cease;
  • a direction to pay costs.

Account is taken of the nature and seriousness of the contravention, the conduct after the contravention, previous record and certain other matters.  Decisions may be appealed to the Financial Services Appeals Tribunal, with a further appeal to the High Court.  The decision does not come into force until the appeal is determined.  Internal management can be sanctioned in a personal capacity.


The Financial Services Appeals Tribunal deals with regulatory investigations. It also deals with appeals relating to the grant and revocation of licences.  Any person affected by a decision, including in particular, the institution, may appeal within 28 days.  A further appeal can be taken to the High Court.  The Tribunal can refer a question of law to the High Court.

FSPO & Consumer Complaint

The Financial Services and Pensions Ombudsman provides an informal alternative to Court in relation to complaints against regulated financial bodies.  This covers credit institutions, insurance companies and intermediaries. Consumers eligible for the purpose of the regulations include private persons, but also businesses with an annual turnover of less than €3 million. Complaints must not be the subject of legal proceedings and must have been made within the last six years.

An individual consumer must first complain to the institution itself and give it an opportunity to deal with the matter. Regulated financial providers must have an internal complaints procedure.  Generally, the complaint must first be put through this procedure before a complaint can be made to the Financial Services and Pensions Ombudsman.  The financial services provider must have confirmed the complaint was not resolved to the satisfaction of the consumer.

If legal proceedings are taken by the financial services provider and the Financial Services and Pensions Ombudsman reasonably suspects they were taken to prevent or frustrate the complaint to the FSO, the complaint may be heard by it.  The consumer is entitled to take legal proceedings at any time.

The Financial Services and Pensions Ombudsman can reject complaints if they are frivolous and vexatious, not made in good faith, too remote in time, there is an alternative satisfactory means of redress or if the complainant has no interest in the conduct complained of.

FSPO Process

The FSO is obliged insofar as possible, to try to resolve the dispute or complaint by mediation.  Mediation is voluntary and is not required if it is not desired. Generally, anything said during the mediation, is not admissible in any subsequent investigation.

When the complaint is the subject to adjudication, the Financial Services and Pensions Ombudsman investigates the complaint.  Each party may make submissions.

The Financial Services and Pensions Ombudsman can require the financial services provider to provide information verbally or in writing, to produce documents and copies of documents that are relevant.  This does not apply to documents that are subject to legal professional privilege.  The Financial Services and Pensions Ombudsman can summon employees or agents, examine them on oath with the same powers as a Judge of the High Court.  Investigations are conducted in private.

The Financial Services and Pensions Ombudsman may enter premises and inspect documents.  It can apply for and obtain a compliance order from the Circuit Court if persons fail to comply with requirements, summonses or obstruct an investigation. The FSO may refer legal questions to the High Court.  It is an offence to obstruct the FSO or to fail to comply with its requirements without reasonable excuse.

FSPO Decision

The Financial Services and Pensions Ombudsman can decide that a complaint is substantiated in part or in whole or can dismiss it.  It must give copies of its findings to the complainant, the financial services body concerned and the Central Bank.  A complaint can be substantiated not only on the basis of legal compliance, but also on the basis

  • that it is unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant.
  • although lawful or an established practice, that the strict legal position or established practice is unreasonable, unjust, oppressive, improperly discriminatory in its application to the complainant
  • based on improper motives, irrelevant grounds or considerations
  • based on a mistake;
  • no proper explanation given,
  • the conduct was otherwise improper.

FSPO Remedies

Following substantiation of a complaint, the FSO may

  • direct review or rectification,
  • require mitigation or a change of conduct or its consequences,
  • require the provision of explanations,
  • required a change in practice,
  • required payment of  compensation up to  €250,000
  • require the taking of other lawful action.

A complaint from the Financial Services and Pensions Ombudsman may be appealed to the High Court.  The High Court can uphold the Order, set it aside or send it back to the Financial Services and Pensions Ombudsman for review.  The regulated provider must comply with the direction within such period as is allowed. It must within 14 days of that period notify the Financial Services and Pensions Ombudsman of the action taken or proposed to be taken.  If it does not comply, the Financial Services and Pensions Ombudsman may complain to the Circuit Court in order to obtain an enforcement order.


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Draft Articles; The articles on this website are in draft form and are subject to further review for typographical errors and, in some cases, updating and correction. It is intended to include references to the sources of materials and acknowledgements in the final version. The content of articles with [EU] in the title and some of the articles in the section on Agriculture are a reproduction of or are based on European or Irish public sector information.

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