Monday 21 October 2019

Central Bank to make firms pay full cost of regulation

Central Bank deputy governor Ed Sibley
Central Bank deputy governor Ed Sibley

Shawn Pogatchnik

THE bulk of financial institutions in Ireland will be forced to pay the entire cost of their own regulation within five years, under Central Bank plans outlined yesterday.

The cost last year across financial institutions totalled €213m, 15pc higher than in 2017. Regulated companies paid €145m in levies and fees. The Central Bank carried the other €68m.

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AIB, Bank of Ireland and Permanent TSB already pay all costs of their regulation and supervision via levies under their bailout terms, but hundreds of other firms only reimburse the regulator for a portion of costs.

The Central Bank published a blueprint yesterday for broadening levies.

It said staged increases are coming for every corner of financial services, with this year's bills due in the third quarter of 2020.

Deputy Governor Ed Sibley, who is responsible for prudential regulation, said the bank believes "financial services firms operating in and out of Ireland should pay the regulatory costs".

However, industry leaders say they are being made pick up the tab for the regulator's own rising costs.

Diarmuid Kelly, chief executive of representative group Brokers Ireland, said if the industry was required to "fund the Central Bank, then it should be allowed to question its spending.

"Full 100pc industry funding is not good financial practice if there is no incentive for prudent management. The Irish League of Credit Unions said the costs hike was coming despite "extraordinary levels of profit generated by the (Central) Bank in recent years".

Insurance Ireland said it could mean an erosion of Ireland's attractiveness as a base for multinational insurers.

Industry group Banking and Payments Federation Ireland has sought greater scrutiny by the Department of Finance of costs amid what it called "concerns about the ongoing increasing cost of regulation".

Mr Sibley said the Central Bank would generate moderately higher costs in 2019 "to address Brexit and the strengthening of financial conduct regulation".

"We are committed to stabilising staff numbers and costs ... to limit the rate of future increases in levies."

The Central Bank plan to reduce its net regulatory costs to minimal levels by 2024 will mean gradually ratcheting up financial sector levies.

Banks not already subject to the full cost of regulation will see their costs contribution rise from 80pc to 90pc this year and to 100pc in 2020.

Investment funds now pay 65pc of costs, rising to 80pc this year, 90pc in 2020 and 100pc thereafter.

Moneylenders, bureaux de change and many other sectors will hit the 100pc level in 2023.

The outlier are credit unions. They currently pay just 9pc of regulatory costs.

The Central Bank timeline sets out a rise to 20pc this year and 50pc by 2022, but no hard targets thereafter.

Irish Independent

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