Regulatory Structure Pre-2010

Table of Contents

Regulation

Financial services are regulated by the Central Bank. Until 2010, regulation of financial services was divided between two branches of the same entity — was regulated by the Central Bank and Financial Services Authority. The Central Bank and Financial Services Authority of Ireland was established on 1st May 2003.

The Financial Regulator was responsible for the regulation of all financial services. The aim was prudential in terms of ensuring the ability of the providers to function, competence, prudential assurance, and consumer protection.

The Central Bank was responsible for monetary policies, financial stability, currency, and the payment system and services for the government. The Central Bank is part of the European Monetary Union system and, together with other Central Banks and the European Central Bank, form the Eurosystem. The Eurosystem’s prime function is to maintain price stability in the Eurosystem.

The Central Bank is presided over by a Governor who was appointed to hold office for seven years. The person must not hold another position. The Governor is responsible for managing the bank and performing functions prescribed by law.

There was a Board of Directors comprising the Governor and certain other persons, including Secretaries General of the Department of Finance, the Chairperson of the Regulatory Authority, the Chief Executive of the Regulator and seven other directors. The Governor is independent of government in carrying out his duties.

The principal methods of regulation comprise:

prudential authorization;
prudential regulation;
conduct of business/consumer protection

Former Financial Regulator

The financial regulator and IFSRA were a constituent element of the bank. The Financial Regulator consisted of a Chairman and nine members. It included divisions dealing with

Prudential matters
banking supervision
financial institutions and firms authorization,
banking supervision,
insurance supervision,
investment services supervision,
market supervision,
consumer division dealing with consumer protection and information,
Registrar of Credit Unions and
Legal and Enforcement Division.

The Governor and the board of the Central Bank could issue directions to the Financial Regulator with guidelines and policies it was required to implement in performing its functions or exercising powers. The Financial Regulator was required to comply with guidelines issued by the Board or the Governor. They must be published.

The Financial Regulator comprised 8 to 10 members. One was Chief Executive, and Consumer Director, and other six to eight were appointed by Minister for Finance.

Levies are imposed by the Financial Regulator on regulated bodies, which fund 50% of its running costs. There are different categories of levies which apply to the principal categories of regulated entities.

CB Functions

The Central Bank’s functions and objectives are as follows:

The primary objective is to maintain price stability.

It must

coordinate the constituent parts of the bank,
promote the development of the financial services industry (but not in such a way as to affect the objective of contributing to the stability of states financial system);
represent and coordinate the bank on international financial bodies and its international meetings
establish and maintain contact with monetary authorities and other territories;
provide government and financial institutions and other institutions advice on matters within its expertise;
provide banking services to its constituent parts;
collect and study data to deal with monetary and credit problems and publish information;
provide advice and assistance for the central statistics office,

As part of and a member of the Eurosystem, the Central Bank’s responsibilities include

contributing to the maintenance of price stability and a stable financial system, ensuring safe and reliable payment and settlement systems to enable firms and individuals make payments;
produce and distribute Euro Banknotes and call currency to ensure the security and integrity of all currency;
manage foreign exchange assets on behalf of the European Central Bank.

Compliance

Regulated firms must have adequate resources devoted to compliance. There must be a designated compliance officer. Ultimately, it is the board’s responsibility to ensure compliance.

Financial services firms are authorized to provide particular services or products. There is a wide range of firms ranging from credit institutions to intermediaries, brokers, and agents. Financial services firms must have comprehensive internal control systems.

The scope of the assigned functions varies with the size of the firm.

Compliance Officer

The compliance officer must implement and report on the compliance policies of the organisation.

Insurance intermediaries and equivalent firms must have a designated compliance officer. The compliance officer must be at the management level within the entity, have the necessary access to assistance records and people at all levels and have a duty to report to the board and the audit committee.

The Financial Regulator’s approval is required to the appointment of the compliance officer. Changes must be notified. There should be a written compliance policy statement. The compliance officer should prepare an annual compliance plan setting objectives. The regulator may review the compliance plan. The compliance officer should

identify legal regulatory and code requirements for which the firm is authorized and licensed to operate,
must establish controls,
oversee and ensure adequate record keeping to evidence compliance on an ongoing basis,
prepare and update compliance manuals for use by staff in key areas,
monitor and oversee compliance,
verify new products and services for compliance purposes,
advise management of new regulation standards,
advise or train staff to ensure compliance,
promote compliance,
liaise with regulators in relation to regulatory breaches and inspections
report to the board or audit committee,
establish and overseas customer complaints investigation,

The compliance officer must have the requisite resources. The Compliance officer should be a member of or report to senior management. The compliance officer may hold other functions. The compliance officer should be free of conflicts of interest.

The compliance officer should be independent. Compliance should entail ongoing monitoring and supervisory functions. There should be a monitoring program and methodology to ensure compliance.

Financial institutions must maintain a register of breaches of compliance. The compliance officer should ensure proper internal complaints handling the procedure. Customers must be advised of their right to apply/appeal to the Financial Services Ombudsman.

Compliance officers must report to senior management and the board in a structured manner.

Financial Regulator

The Financial Regulator, now the Central Bank, is responsible for the regulation of

credit institutions, banks, and building societies.
retail finance firms,
insurance companies,
insurance,
investment management firms,
insurance and investment intermediaries (brokers and agents,
stock brokers,
mortgage intermediaries,
credit union,
collective investment schemes,
moneylenders,

The Financial Regulator was obliged to consult with panels and advisory groups for consumers and the financial services industry. The consumer director was responsible for performing certain functions and protecting consumer interests.

The Financial Regulator has the power to hold enquiries into suspected prescribed contraventions by regulated financial services providers. They can impose significant administrative sanctions and punishments without a court hearing.

The Financial Regulator may sanction prescribed contraventions by regulated entities and breaches of criminal, taxation, health, and safety or competition legislation. The Financial Regulator may apply fees and levies on financial services regulators in order to, finance itself.

The register of Credit Union is an independent registrar within the regulator.

EU-Cross Border

The regulations in respect of credit institutions, insurance companies, intermediaries and firms are on the basis of EU wide criteria. The EU system of passports allows these bodies to provide services in another EU country from Ireland. They also have the right to establish a branch or separate entity within another EU State.

If they form a branch, then prudential regulation is undertaken from the home country (Ireland). They are subject to the “doing business” code of conduct /consumer protection rules of the host state in which the services are provided.

Other EU States’ financial services providers may provide services in Ireland on this basis.

Consumer Director

The consumer director managed and performed certain specified functions in relation to the provision of financial services to consumers. The consumer director’s functions included

regulation of housing loans,
regulation of consumer services charges and
consumer codes of conduct.

The consumer director of the Financial Regulator is a different entity from the former Director of Consumer Affairs (now the Competition and Consumer Protection Commission)

Compliance Enforcement

The Financial Regulator can require financial services providers to furnish a compliance statement to the effect that it has complied with designated laws, codes of conduct and guidance. It can require the auditor to prepare a report in relation to the compliance statement to the effect that it is fair and reasonable in light of the information available to the auditor.

The auditor’s report and compliance statement must be delivered to the Financial Regulator. It is an offence not to provide a compliance statement where required. A member of management may also be liable for the offence, unless the offence was committed without his knowledge or he took reasonably practicable steps to avoid it.

Financial institutions must audit and submit their accounts to the Financial Regulator. Auditors have specific reporting requirements to the Financial Regulator as well as the office of the Director of Corporate Enforcement in certain circumstances.

There are various obligations on auditors to report matters to the Financial Regulator, including material defects, inaccuracies, potential fraud or defects in the system for money handling. If they resign or do not seek reelection, the auditor must report the matter.

There are reporting obligations for auditors across the range of legislation affecting most of the regulated entities.

Auditors must in addition to other general duties, report certain events to the Financial Regulator. In certain circumstances, there is a duty to report, whereas in some other cases, the duty to report arises if certain circumstances arise.