Central Bank Regulation

Table of Contents

Regulatory Powers

The Central Bank has broad regulatory powers over financial service providers, encompassing risk management, internal procedures, accounting, auditing, client provision of services, information disclosure, customer dealings, loan information, protection of money, insolvency events, and effective complaint mechanisms.

Before making rules, the bank must consult with the Department of Finance. Using this power, the bank formalised former codes and made regulations on matters previously subject to codes of conduct.

The Central Bank has extensive powers to ensure financial institutions comply with obligations. Institutions may be required to have recovery plans to handle potential crises.

The European Central Bank has taken over the direct regulation of certain larger-scale financial institutions of systemic significance. It monitors regulation by member state regulators, including the Irish Central Bank.

The acquisition of certain percentage stakes in financial institutions is controlled. Persons intending to acquire relevant holdings must notify and pre-notify the proposed acquisition. Certain sise holdings in stock exchanges and credit institutions must be notified to the regulator.

The Central Bank may issue directions if it believes the entity acquiring an interest could be detrimental to the institution’s prudent and sound management. Appeals can be made to the Irish Financial Services Appeal Tribunal, and decisions may be appealed only to the court through judicial review.

Central Bank Regulations

The Bank may make regulations for the proper and effective regulation of regulated financial services provided. It may require procedures to be adopted in identifying, monitoring, reporting on risks to which they are exposed, including

their management and minimisation;
provision regarding administrative accounting, auditing and reporting arrangements of regulated financial providers;
provision for monitoring and recording by providers of training and qualification of their officers, employees, and intermediaries;
provision about the resources to be required, procedures, systems, checks, compliance obligations, assurance, provision for securing that they do not prejudice access to banking and financial services.
provision specifying information to be given to consumers including marketing and advertising, promotional material, mandatory giving of information, identification of risks, warnings regarding volatility and risks,
giving information regarding incentives, including the disadvantage and advantages of the incentive, duration, and cost
making of comparisons between financial service providers
identifying other commitments and obligations arising from the product,
giving of information regarding costs and charges.
customer statements.
recommendations and endorsements.

Provision may be made for the restriction of unsolicited phone calls or visits.

Prescribing Doing Business Regulations

Provisions may be made requiring financial service providers to seek and take account of information regarding

customer’s knowledge,
understanding,
experience in relation to financial services,
suitability having regard to such personal circumstances,
requirements in relevant circumstances.
provisions relating to determining the suitability of financial services for customers.
provisions for the management of conflict of interests may arise between consumers and financial institutions and their financial service providers and their officers, employees, agents, and intermediaries.
provisions of standards to be met by financial service providers in the execution of customer orders
provisions in relation to making loans and credit facilities available including the provision in relation to unsolicited facilities
specifying processes in relation to assessing applications for loan or credit
setting out circumstances in which a security or guarantee may be required
requiring the giving of notices of persons giving security or guarantees
specifying processes by which loans or credit may be declined, including giving explanations and specifying conditions on which credit may be available.
prohibiting financial services being dependent on the provision of another product.

Regulation may be made regarding the making of loans or credit facilities to a restricted person, including restrictions on the terms under which loans may be made, varied or managed. In relation to such persons, there may be specified systems to be adopted in relation to such loans specifying circumstances in which Central Bank approval is required for such loans or requiring reporting of loans made to such persons.

Disputes and Redress

Provision for the processes and procedures to be adopted in relation to the processing of rebates and refunds due to customers.

Provisions for the way in which errors are to be corrected.

Provision for simple and inexpensive resolution procedures for disputes between financial service providers and customers for securing that customers’ complaints are dealt with speedily, efficiently and fairly. The provisions may be made in respect of

the first point of complaint,
recording of complaints timescales,
remedies and redresses,
keeping or retention of complaint records.

Redress for Default

Where the Central Bank is satisfied there have been widespread or regular defaults of a particular type by a regulated financial service provider and in consequence, customers have suffered or are suffering damage, it may direct the financial service provider to make appropriate redress for customers.

Default means overcharging, providing services unrequested, providing unsuitable services, providing inaccurate information material to a decision about a financial service, the failure of systems or prescribed contraventions.

The redress may be monetary or otherwise in nature. The fact of making redress does not constitute an admission of legal liability. The direction may set out the periods applicable and incidental provisions to give effect to the scheme.

A failure by a regulated financial provider to comply with its obligations under financial services legislation is actionable by any customer of the provider who has suffered loss or damage as a result.

Restittuion / Compenaiton

The Bank on the application to the High Court may apply for an order of restitution on the basis that a has been unjustly enriched or another person has suffered loss or adverse effect in consequence of a prescribed contravention of financial services legislation. The person subject to the application may be required to provide accounts and information to establish the extent of the unjust enrichment, loss or adverse effect.

The High Court may order the person to pay such sum as appears just, having regard to the extent of unjust enrichment, loss, or adverse effect as the case may be and the extent to which the person was so enriched. The monies are to be paid to such persons are distributed as the High Court directs.

Various Regulation

Regulation may be made for

giving reasons for refusals of quotations for insurance cover,
giving notification in relation to decisions on claims under policies and insurance contracts and works done thereunder and
giving information in relation to appeals provision procedures.

Provision may be made requiring statements of account by financial service providers to their customers including, the form frequency and manner in which statements are to be given.

Provision may be made about the standards to be met and procedures and checks to be followed by financial service providers in dealing with withholding assets and monies of customers, including safeguarding of rights in the event of insolvency, use to which such assets may be put and management of accounts.

Provision may be made requiring financial service providers to facilitate switching of business to other financial providers.

Provision on how regulated financial services providers are to deal with customers in financial difficulty, including considerations to be taken into account in dealing with them, information to be provided and resolution processes to be adopted.

Provisions may be made in relation to the transfer of the business of financial service providers or mergers and acquisitions.

Provisions may be made in relation to financial service providers’ deterioration in specified financial circumstances .

Provision may be made for service providers to provide and keep such records as may be required for effective management and regulation, including the manner in which they are kept verification, permission for access and other provisions as may be specified.

Regulations in relation to restricted persons may specify a person as restricted if he holds a certain type of office or position, provides services in relation to a financial service provider, or other circumstances including being connected as may be provided.

There is a procedure in relation to making of regulations which requires consultation by the Bank with other Ministers.

Investigatory Powers

The Central Bank Supervision and Enforcement Act 2013 enhanced the Central Bank’s powers as a regulator of financial institutions and other regulated entities. As part of a more intense financial services regulation, the Central Bank maintains constant contact with significant financial institutions, gaining substantial information through ongoing supervision.

The Central Bank has investigatory powers in relation to regulated entities. It can appoint authorised officers with the power to obtain information, including documents and records, and attend meetings of regulated firms. It may issue warrants to enter premises. Disclosure of information to the bank’s officers does not constitute a breach of any duty, including client confidentiality.

Where information is subject to legal professional privilege, the bank may apply to the High Court for a determination on whether the information is privileged. Persons may be obliged to answer questions despite potential self-incrimination, with failure to answer truthfully or at all constituting an offense. However, this evidence may not be used in a criminal trial, and issues of constitutional rights may arise.

Requiring Reports

The Central Bank may serve notice on a bank or related business to provide a report on specified matters related to regulation. This is for the purpose of proper and effective regulation. The Central Bank must consider the adequacy of its powers for investigation and the knowledge and expertise available.

Notices to regulated entities may specify deadlines for completion of reports by a nominated reviewer. The costs are borne by the entity reviewed, and the reviewer provides assistance to the Central Bank regarding the report.

The Central Bank may serve notice on a bank’s auditor to conduct an examination or provide a statement on the bank’s compliance with obligations. These requirements are specified based on the nature, scale, and complexity of the activities and conform to internationally recognised standards.

The Central Bank enjoys extensive immunity from litigation in its regulatory functions, ensuring its actions do not grant third parties any right of action due to failures in exercising supervisory powers in regulation, licensing, and supervision.