Tuesday 16 July 2019

Central Bank aims to make financial institutions pay full cost of regulation

Ed Sibley, Deputy Governor, Prudential Regulation, Central Bank of Ireland.Credit: Tony Gavin
Ed Sibley, Deputy Governor, Prudential Regulation, Central Bank of Ireland.Credit: Tony Gavin

Shawn Pogatchnik

THE Central Bank says it hopes to make all financial institutions in Ireland pay the entire cost of their own regulation within the next five years, a move that would save taxpayers tens of millions annually.

While the big three domestic banks – Bank of Ireland, AIB and Permanent TSB – already repay the full costs of their regulation and supervision via levies, hundreds of other institutions from foreign-owned banks to corner credit unions currently repay only a portion of the State's financial policing bills.

Friday’s publication of a new regime for collecting levies from banks, investment firms, foreign exchange dealers, insurance intermediaries and others shows that staged increases are imminent for every financial sector.

Deputy Governor Ed Sibley, who is responsible for prudential regulation, said the Central Bank plan “is based on the principle that the regulated financial services firms operating in and out of Ireland should pay the regulatory costs.”

In 2018, the cost of regulating Ireland's financial institutions totalled €213m, 15pc higher than in 2017. The regulated companies paid €145m in levies and fees, the Central Bank the remaining €68m.

Mr Sibley said the Central Bank would face increased regulatory costs “to address Brexit and the strengthening of financial conduct regulation. We are committed to stabilising staff numbers and costs to ensure our long-term financial independence and to limit the rate of future increases in levies on regulated firms.”

Reducing the State’s regulatory costs to zero by 2024 will mean, according to the Central Bank, gradually ratcheting up levies by financial sector. All other banks operating in Ireland beyond the big three will see their current requirement to repay 80pc of regulatory expenses rise to 90pc this year and 100pc in 2020.

Investment funds currently repaying 65pc of costs will repay 80pc of 2019 costs, 90pc for 2020 and 100pc from 2021 onward.

A wide swathe of other businesses, including moneylenders and bureaus de change, will not reach the 100pc repayment requirement until 2023.

On the slowest path of all are credit unions, which currently repay just 9pc of regulatory costs linked to their operations. The Central Bank timeline remains murky for this sector, suggesting a goal of reclaiming 20pc this year and 50pc of regulatory costs by 2022 but containing no hard targets beyond that date.

The reformed levy regime will deliver a delayed sting in the tail for those facing higher levies. While the Central Bank currently collects these funds in September within the same year of assessment -before the full bill for that year is known, requiring subsequent top-ups or refunds - the new system will delays settlement to the following year. This means the increased levies for 2019 won’t be collected until the third quarter of 2020 and so on. 

Online Editors

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