Rising staff and professional costs to push financial regulation bill up 15pc
The Central Bank has estimated the cost of financial regulation this year to be around €154m – 15pc higher than last year’s projection due to a rise in professional and support fees and the cost of extra staff.
The cost of regulation has more than doubled since 2009, when it was just €60.2m.
The industry funds about half of the cost of regulation through a levy, although the Central Bank recovers its full supervisory costs in respect of AIB, Bank of Ireland and Permanent TSB.
Supervisory costs that the banks must pay have risen from an estimated €14.9m for last year, to €28.2m for this year.
Governor Philip Lane also said the Central Bank would be setting aside a contingency fund of €15m to meet potential extra pay costs and pay for outside expertise in terms of enforcement actions, according to documents released under Freedom of Information. Should these costs arise, the Central Bank said they will be partly recouped from the industry.
In a letter to Finance Minister Michael Noonan late last year, Governor Lane said the financial regulation budget was €20m higher than in 2015.
He attributed this to an increase of €6.7m in pay costs, due to an increase in staff in the banking and insurance sectors; an increase of €4.6m in non-pay costs due to a hike in the budget for professional fees associated with likely enforcement actions; and a jump of €8.9m in support services costs, which the bank said reflected an increase in the expected demand for legal, IT and communications services.
The Central Bank said it expects to collect €80.2m this year, including levy income of €76.8m and other fees of €3.4m.
The balance will be borne by the Central Bank. Dame Street wants to move to full industry funding with some exceptions, specifically in the credit union sector.
In September, the Bank noted the industry’s concern towards the rising cost of regulation, emphasising in particular the sharp increase in costs associated with the Bank’s pension scheme.
To mitigate this, the Central Bank said the impact of pension volatility would be spread over a rolling ten year period, with a €2.8m figure pencilled in to be recouped for “future years”.
In his letter, Governor Lane also said the contingency reserve of €15m would be made up of €5m for potential extra pay and €10m for non-pay costs in connection with external assistance for enforcement activities. The Governor has previously said the bank intends to take on an extra 150 staff this year.
“When setting the 2016 Budget, conservative assumptions in relation to when this additional headcount would come on board were applied. In the event that these additional resources are recruited earlier than budgeted, the use of this contingency budget may be required,” a spokeswoman said.