Ireland: Banking & Finance

The In-House Lawyer Logo

This country-specific Q&A provides an overview of the legal framework and key issues surrounding banking and finance law in Ireland including national authorities, regulation, licenses, organisational requirements, supervision and assets.

This Q&A is part of the global guide to Banking & Finance.

For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/banking-finance/

  1. What are the national authorities for banking regulation, supervision and resolution in the jurisdiction?

    (a) Regulation

    The Single Supervisory Mechanism Regulation (Regulation (EU) No. 1024/2013) (SSMR) provides that the European Central Bank (ECB) is the lead regulator of banking in Ireland with the Central Bank of Ireland (CBI) appointed as the competent regulatory authority in Ireland.

    Other national regulatory authorities also oversee aspects of banking in Ireland, namely:

    (i) the Data Protection Commissioner;
    (ii) the Financial Services and Pensions Ombudsman (relating to unresolved complaints of con-sumers and small and medium sized enterprises (SMEs)); and
    (iii) the Competition and Consumer Protection Commission (CCPC) (consumer and SME guide-lines and enforcement of consumer and SME complaints).

    (b) Supervision

    Since the introduction of the ECB Single Supervisory Mechanism (SSM), the ECB is the supervisory authority for ‘significant institutions’ operational in Ireland. A Joint Supervisory team (JST), led by the ECB and comprised of supervisors from the ECB and the CBI, directly supervises the activities of significant institutions in Ireland. The CBI is the authority for supervision of ‘less significant insti-tutions’ operational in Ireland however the ECB oversees this supervision to achieve harmonisation of supervisory approaches.

    The SSMR distinguishes between core and non-core supervisory responsibilities. The ECB is re-sponsible for all core supervisory responsibilities relating to all banks operating in Ireland while the CBI undertakes all non-core supervisory responsibilities (mainly conduct of business and anti-money laundering) relating to all banks operating in Ireland.

    (c) Resolution

    The Bank Recovery and Resolution Directive (Directive 2014/59/EU) (BRRD) has been transposed in-to Irish law by European Union (Bank Recovery and Resolution) Regulations 2015 (SI 289/2015) (BRRD Regulations). The CBI is the competent authority and resolution authority under the BRRD Regulations other than the ECB will act as the competent authority in respect of specific tasks con-ferred on it under the SSMR.

  2. Which type of activities trigger the requirement of a banking licence?

    Pursuant to Section 7(1) of the Central Bank Act 1971 of Ireland (as amended) (CBA 1971), a banking licence is required if a person is doing any of the following, unless that person is a holder of an appro-priate licence inside or outside Ireland:

    (a) carrying on banking business (any business that consists of or includes: receiving money on the person's own account from members of the public, either on deposit or as repayable funds; or the granting of credit on own account);

    (b) holding themselves out or representing themselves as a banker or as carrying on banking business; or

    (c) accepting deposits or other repayable funds from the public on behalf of any other person.

  3. Does the regulatory regime know different licenses for different banking services?

    As is set out in detail under question 4, a banking licence allows a firm to pursue a wide range of activi-ties which otherwise require individual authorisation. For the avoidance of doubt moneylending (APR rates above 23%) is not an activity that is authorised by way of a banking licence. Separate authorisa-tions can be obtained for individual banking related activities where a general banking licence is not re-quired, for example, investment services, payment services, e-money services and credit servicing.

  4. Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?

    A banking licence as issued in Ireland allows activities beyond those captured under the term ‘banking business’. A bank licensed under Section 9 of CBA 1971 (credit institution) can carry out a variety of banking related and associated activities as listed in Annex 1 to the Capital Requirements Directive 2013/36/EU (CRDIV) (implemented in Ireland by the European Union (Capital Requirements) Regulations 2014 of Ireland (SI 158/2014) (CRRI) and the European Union (Capital Requirements) (No. 2) Regulations 2014 of Ireland (SI 159/2014)), including but not limited to:

    (a) payment services (as defined in Article 4(3) of Payment Services Directive 2015/2366/EU);

    (b) issuing electronic money (E-Money Directive 2009/110/EC);

    (c) investment services (MiFID and MiFID II and its sister regulation MiFIR as of 3 January 2018);

    (d) broker-dealer services in any of the following:

    1. money market instruments;
    2. foreign exchange;
    3. financial futures and options;
    4. exchange and interest-rate instruments;
    5. transferable securities;

    (e) money broking.

  5. What is the general application process for bank licenses and what is the average timing?

    Pursuant to Section 9 of CBA 1971 the ECB is the authority for granting banking licences in Ireland and applications are made to the CBI.

    The principal stages in the authorisation process are as follows:

    (a) exploratory phase:

    1. a preliminary meeting with the CBI is arranged to explore the applicant’s proposed activities and scope of the proposal;
    2. the CBI reviews the document proposal which is to be in same format and level of detail as an application and should include all supporting documentation. The CBI may provide comments or note further information required. At the end of its proposal review the CBI will issue a preliminary view as to whether the applicant should proceed to the formal application stage;

    (b) submission of an application and assessment of the application by the ECB and the CBI:

    the application form is submitted to the CBI for processing and review by the CBI and ECB. The complexity and quality of an application will determine the period of time before an application is deemed complete. The applicant’s speed of response to queries and quality of responses will affect this timeframe;

    (c) decision by the ECB on whether to grant a banking licence

    once review of an application has been successfully completed, the ECB will make a decision whether to grant a licence. The ECB has 12 months from the date of receipt of a completed ap-plication to make a decision on the application. If successful, an applicant will receive an author-isation certificate together with any special considerations issued.

  6. Is mere cross-border activity permissible? If yes, what are the requirements?

    Article 39 of CRDIV provides that any bank authorised in any EEA member state may provide services on a cross-border basis within another EEA Member State provided that it shall notify the competent authorities of the home member state of their intention to do so.

    The home state regulator retains responsibility for the prudential supervision of the relevant bank and will fix the capitalisation requirements for that bank's total business including its cross-border activities. In respect of cross-border services into Ireland, the CBI will supervise the bank’s conduct of business in Ireland.

  7. What legal entities can operate as banks? What legal forms are generally used to operate as banks?

    Section 7 of CBA 1971 allows incorporated bodies, natural persons and unincorporated bodies to act as banks in Ireland. However, Section 18(2) of the Companies Act 2014 of Ireland (as amended) (CA 2014) prohibits private companies limited by shares and incorporated in Ireland from acting as credit institu-tions. As such an Irish corporate entity intending to operate as a credit institution must be incorporated as a designated activity company (DAC) (as provided for under CA 2014) or as a public limited company (PLC). Most banks established in Ireland are DACs or PLCs.

  8. What are the organisational requirements for banks, including with respect to corporate governance?

    (a) organisational requirements

    In the case of an incorporated entity (DAC or PLC), its constitution sets out the rules governing the operation of the company. It defines the relationship between the company, its shareholders, directors and other officers of the company. The constitution determines the company’s objects and powers as well as internal regulation.

    (b) corporate governance

    The CBI’s Corporate Governance Requirements for Credit Institutions 2015 (CGR) sets out strin-gent corporate governance obligations which apply to credit institutions. Minimum core stand-ards apply to all credit institutions in the interests of promoting effective governance with additional requirements imposed on credit institutions designated as ‘high impact’ by the CBI under its Probability Risk and Impact SysteM (PRISM).

    The requirements set out in CGR include:

    1. boards must have at least five directors or for credit institutions designated as high impact under PRISM at least seven directors. Directors shall not participate in decisionn making where there is a potential conflict of interest;
    2. separating the chief executive officer (CEO) and chair role.
    3. the board shall oversee all committees. At a minimum audit and risk committees shall be establsihed. The audit committee must have relevant financial experience and one member must have an ‘appropriate qualification’; and
    4. a credit institution subject to CGR must disclose this in its annual report and submit an annual compliance statement to the CBI.

    The governance structure to be put in place by each credit institution must ensure that there is effective oversight of activities appropriate to the complexity of the activities of that credit institution. Each credit institution shall have a clear organisational structure with consistent lines of responsibility. The board sets the risk appetite for its institution and oversees compliance. The board retains primary responsibility for governance but senior management is responsible for implementing oversight in line with board policy. Credit instituions shall appoint a chief risk officer (CRO) with distinct responsibility for risk management and a risk committee must be established, other than where they are not designated as high impact under PRISM and the CBI agrees to another pre-approved control function.

    CGR confirms that significant institutions designated as high impact under PRISM are subject to CRDIV requirements instead of CGR requirements. CRDIV applies additional rules in respect of:

    (a) composition of the board;

    (b) composition of the risk committee;

    (c) establishment and composition of independent remuneration and nomination committees.

  9. Do any restrictions on remuneration policies apply?

    CRDIV requires banks to establish remuneration policies at group, parent company and subsidiary levels. A bank’s remuneration policy for all staff should be consistent with the objectives of the institution’s business and risk strategy, corporate culture and values, long-term interests of the institution and measures used to avoid conflicts of interest. Remuneration polcies should discourage excessive risk taking and must align with a bank’s overall risk appetite while taking into account the long-term interests of shareholders. Under CGR, a bank’s board is responsible for ensuring a remuneration policy does not promote excessive risk taking.

    CRDIV imposes remuneration restrictions on staff of a bank that are capable of having a material impact on the bank’s risk profile. This includes limiting variable remuneration to 100% of fixed remuneration, or 200% if shareholders approve. The EU Capital Requirements Regulations (575/2013/EU) (CRR) (which has direct effect) (Article 450) sets out disclosure and transparency requirements to be complied with by banks in respect of such staff and individuals who earn more than EUR1 million per year.

    The European Banking Authority (EBA) has issued guidelines on sound remuneration policies under CRDIV and disclosures under CRR (EBA Remuneration Guidelines). The CBI’s policy statement on approach to proportionality relating to the pay-out process applicable to variable remuneration (relevant to less significant institutons) provides that where credit institutions use the principle of proportionality, the CBI’s assessment of compliance with the EBA Remuneration Guidelines will be guided by the European Commission's thresholds in Article 94(3) of its proposal for amendments to CRDIV.

  10. Has the jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?

    The Basel III framework is implemented by way of CRDIV. CRR requires: a capital conservation buffer (CCB) of common equity tier 1 (CET1) capital equal to 2.5% of total risk exposure (in addition to the minimum CET1 ratio of 4.5% of risk-weighted assets (RWA) to be maintained by all banks); and a coun-ter-cyclical capital buffer (CCyB) equivalent to an institution’s total risk exposure amount, subject to transitional arrangements set out in CRRI that allow for the period from 1 January 2018 to 31 December 2018:

    (a) a CCB of CET1 capital equal to 1.875% of total risk exposure, and

    (b) a CCyB of no more than 1.875% of a credit institution’s total risk exposure.

  11. Are there any requirements with respect to the leverage ratio?

    CRR requires annual reporting on leverage ratios by all banks on both an individual and consolidated basis. CRR provides that member states may impose a hard leverage ratio. While Ireland has not im-posed hard leverage ratios the CBI has stated that it strongly supports EU implementation of a binding minimum Pillar 1 leverage ratio of 3%.

  12. What liquidity requirements apply? Has the jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?

    As per section 10 above, the Basel III framework is implemented in Europe by way of CRDIV. CRR sets out liquidity coverage ratio requirement (LCR) and net stable funding ratio requrirement (NSFR).

    LCR requires a bank to hold high-quality unencumbered liquid assets sufficient to cover net liquidity requirements over 30 days. LCR stands at 100% as of 1 January 2018.

    NSFR compares the amount of a bank’s available stable funding to its required stable funding to measure how the bank’s asset base is funded. Banks are required to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. NSFR is a minimum standard as of 1 January 2018.

  13. Do banks have to publish their financial statements?

    Credit institutions and any financial institution incorporated outside Ireland with a place of business in Ireland which would, if it were incorporated in the Ireland, be subject to licensing or supervision by the CBI pursuant to European Union (Credit Institutions: Financial Statements) Regulations 2015. (SI 266/2015), are required to publish their financial statements. Such financial statements are to be prepared in accordance with CA 2014.

  14. Does consolidated supervision of a bank exist in the jurisdiction? If so, what are the consequences?

    CRR governs consolidated supervision. Section 99 of CRRI provides that the CBI is responsible for con-solidated supervision where it has authorised an institution which is:

    (a) a parent institution in Ireland; or

    (b) an EU parent institution; or

    (c) subject to specific exceptions set out in CRRI, any of: a financial holding company in a member state; a mixed-financial holding company in a member state; an EU parent financial holding company; or an EU parent mixed-financial holding company.

    Where the parent undertaking of one or more institutions is a mixed-activity holding company and the CBI is responsible for the supervision of one or more of those institutions, the CBI shall exercise general supervision and overview of transactions between the institution and the mixed-activity holding company and its subsidiaries. The CBI evaluates the risk management strategies, policies, processes and limits established. These include sound reporting and accounting procedures in order to identify, measure, monitor and control transactions with the institution’s parent mixed-activity holding company and its subsidiaries. In addition any institution authorised by the CBI is obliged to report significant transactions to the CBI which shall be subject to overview by the CBI.

    Where the CBI is responsible for consolidated supervision of an EU parent bank with a subsidiary/subsidiaries subject to supervision by the competent authorities of other member states OR where the CBI is responsible for the supervision of a subsidiary of an EU parent bank, it will make all efforts to reach a joint decision with the relevant competent authorities or competent supervisor (as relevant) in relation to:

    (a) internal capital and risk to determine the adequacy of the consolidated level of own funds held by the group of institutions with respect to the group’s financial situation and risk profile;

    (b) any CBI requirement for an institution to hold own funds in excess of the requirements of the prescribed capital buffers (CCB, CCyB, G-SII buffer and O-SII buffer) ;

    (c) any measures to address any significant matters and material findings relating to liquidity supervision.

    CRRI sets out procedures to be followed in relation to reaching joint decisions and also provisions to apply in the event that agreement on decisions cannot be reached or co-operation from the competent authority of another member state has not been forthcoming. The CBI may refer instances of no agree-ment or non-co-operation to the EBA.

    Where the CBI is the competent supervisor of a parent bank with significant branches in other member states, the CBI will set up and chair a college of supervisors, to facilitate co-operation with the competent authorities of the other relevant member states. The CBI will decide which competent authorities shall participate in a meeting of the college. The college shall operate on the basis of written arrangements determined after consultation with the competent authorities. The CBI will develop a framework between itself, the EBA and other relevant competent authorities in order to:

    (a) exchange information;

    (b) agree delegation of responsibilities;

    (c) agree supervisory examination programmes;

    (d) increase supervisory efficiency by removing duplication;

    (e) consistently apply prudential requirements under CRDIV and CRR across all entities within a group; and

    (f) plan and coordinate supervisory activities in preparation for and during emergency situations using, where possible, existing channels of communication for facilitating crisis management.

  15. What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?

    Chapter 2 of Part 3 of CRRI sets out the requirements in relation to the acquisition and disposal of quali-fying holdings in credit institutions.

    A qualifying holding is defined in Article 4(1) of CRR as ‘ …a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking...’.

    (a) CRRI sets out reporting and approval requirements regarding qualifying holdings as follows:

    1. an applicant for a banking licence is required to provide details of all qualifying hold-ings. Full details, including whether there are any holding companies involved in the ownership structure and the rationale for such a structure, must be provided as part of the application;
    2. a credit institution admitted to trading on a regulated market is required to report qualify-ing holdings to the CBI at least once a year. Currently Allied Irish Banks plc (AIB) and The Governor and Company of the Bank of Ireland (BOI) are the only domestic credit institutions listed on stock exchanges.
    3. any person who proposes to acquire a qualifying holding in a credit institution must noti-fy the CBI in advance of the proposed acquisition and must supply such information as the CBI may require. The CBI will assess a proposed acquisition to ensure the sound and prudent management of the credit institution concerned. A proposed acquirer can only complete an acquisition if the CBI advises of no opposition to the acquisition or if the assessment period (60 business days from the date of CBI’s written acknowledge-ment of receipt of the acquiring transaction notification form) lapses without notification of opposition from the CBI;
    4. where a qualifying holding is increased without prior CBI approval, the CBI may make an application to the High Court of Ireland to have the increase upheld if the court is satis-fied that the failure to notify the CBI was inadvertent or that it is in the interests of justice to make such an order;
    5. where an existing qualifying holding is proposed to be increased above or decreased below thresholds of 20%, 33% or 50%, a notification to the CBI is required;
    6. if a credit institution becomes aware of an increase or decrease in a qualifying holding above or below the thresholds noted in (e) above, the credit institution is obliged to in-form the CBI of the movement without delay.

    (b) As stock exchange listed entities AIB and BOI are further subject to the transparency require-ments of Directive 2004/109/EC (Transparency Directive) (transposed into Irish law by the Trans-parency (Directive 2004/109/EC) Regulations 2007 of Ireland (as amended) (SI 277/2007) (Trans-parency Regulations) and the CBI’s rules and regulations regarding issuers of securities on a regulated market (MiFID) (CBI Transparency Rules). The CBI Transparency Rules require that noti-fication be given to an issuer where a person's percentage of voting rights (direct or indirect or an unconditional right to call for shares that create voting rights) in that issuer reaches, exceeds or falls below:

    1. 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100% or, in the case of a non-Irish issuer, 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75 as a result of an acquisition or disposal of shares or Regulation 17 financial instruments; and
    2. an applicable threshold due to events changing the breakdown of voting rights, and on the basis of information disclosed by the issuer.

    Where an issuer is incorporated in an EEA state other than Ireland, a notification must be made based on equivalent events.

  16. Does the regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?

    Further to the information set out under question 15, the rules regarding the acquisition of qualifying holdings have been standardised across the EU by way of Directive 2007/44/EC (Acquisition Directive) (transposed into Irish law by SI 206/2009) which standardises the timeframe within which the CBI must consider an application, the information that may be requested by the CBI as part of the approval pro-cess, the criteria the CBI must use for assessment and a requirement for regulators to work in consulta-tion with each other. The aim of the Acquisition Directive is to ensure that certainty, clarity, and predicta-bility are evident in all changes of control applications across the EU. The 2008 Guidelines for the prudential assessment of acquisitions and increases in holdings in the financial sector required by Directive 2007/44/EC apply. Assessment criteria are: reputation; reputation and experience of those who will direct the business; financial soundness; compliance with prudential requirements; and suspicion of money laundering or terrorist financing.

  17. Are there specific restrictions on foreign shareholdings in banks?

    There are no restrictions on foreign shareholdings in credit institutions.

  18. Is there a special regime for domestic and/or globally systemically important banks?

    Under CRDIV, systemically important financial institutions are subject to rules relating to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs). G-SIIs and, subject to home state discretion, O-SIIs must adhere to prescribed levels of CET1 to be held as a buffer.

    The CBI is the designated authority charged with identifying credit institutions as G-SIIs (on a consolidated basis) and O-SIIs (on an individual basis).

    To be a G-SII, the credit institution must be one of the following:

    1. an EU parent institution;
    2. an EU parent financial holding company;
    3. an EU parent mixed financial holding company; or
    4. a bank or an investment firm.

    Systemic importance is assessed by the CBI (as the designated authority charged with identifying credit institutions as O-SIIs) on the basis of at least one of the following criteria:

    1. size;
    2. importance for the economy of the EU or Ireland;
    3. significance in terms of its cross-border activities; or
    4. interconnectedness of its group with the financial system.

    Where a group is subject to a G-SII buffer and a separate O-SII buffer, the higher will apply.

    The CBI reviews its O-SII designations annually. The CBI’s 2017 review resulted in six credit institutions being designated as O-SIIs, namely, AIB, BOI, Citibank Holdings Ireland Limited, Ulster Bank Ireland DAC, Unicredit Bank Ireland plc and DePfa Bank plc. All O-SIIs are subject to varying O-SII buffers with phase in periods from 1 July 2019 to 1 July 2021.

    Under CRDIV each member state may introduce a systemic risk buffer of CET1 capital for the financial sector or one or more subsets of that sector. Ireland has not implemented this measure but may recognise buffers introduced by other member states.

  19. What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?

    Part IIIC of the Central Bank Act 1942 of Ireland (as amended) and Regulation 54 CRRI provide the CBI with the power to impose sanctions in respect of regulatory breaches by regulated financial service providers and by persons concerned in their management who have participated in the breaches. These include:

    1. caution or reprimand;
    2. a public statement that identifies the natural person, institution, financial holding com-pany or mixed-financial holding company responsible, and the nature of the breach concerned;
    3. an order requiring a natural or legal person responsible for the contravention to cease, and desist from, the conduct concerned;
    4. direction to refund or withhold all or part of money charged or paid, or to be charged or paid, for the provision of a financial service by a regulated financial service provider;
    5. suspension of the voting rights of the shareholder or shareholders held responsible for the contraventions;
    6. administrative pecuniary penalties of up to twice the amount of the benefit derived from the contravention where that benefit can be determined;
    7. direction to pay to the CBI a financial penalty (not exceeding the greater of €10,000,000 or 10% of turnover where the regulated financial service provider is a body corporate or an unincorporated body and not exceeding €5,000,000 where the regulated financial service provider is a natural person concerned in the management of a regulated finan-cial service provider);
    8. in the case of a regulated financial service provider which is not authorised by the ECB under the SSMR, suspension or revocation of the authorisation of that regulated finan-cial service provider;
    9. in the case of a regulated financial service provider which is authorised by the ECB un-der the SSMR, the submission of a proposal to the ECB to suspend or revoke the au-thorisation of that regulated financial service provider;
    10. in the case of a natural person, a direction disqualifying the person from being con-cerned in the management of a regulated financial service provider for a prescribed pe-riod of time;
    11. direction to cease a contravention, if it is found the contravention is continuing;
    12. direction to pay the CBI all or part of its costs incurred in an inquiry/investigation.
  20. What is the resolution regime for banks?

    The BRRD Regulations provide the CBI with powers for dealing with failing banks with a view to minimising the ecenomic impact of a failing bank or in-scope investment firm.

    In order for resolution of a bank to be deemed necessary the following conditions must be met:

    (a) the determination of the CBI that that the institution is failing or is likely to fail;

    (b) in the CBI’s opinion there is no reasonable prospect of alternative private sector measures;

    (c) in the CBI’s opinion resolution action is necessary in the public interest. In this regard the CBI must be satisfied that a winding-up under normal circumstances would not achieve continuity of critical functions, avoid significant adverse effect on the financial system, achieve protection of public funds, depositors, client assets or client funds;

    (d) the CBI is obliged to inform the Minister for Finance.

    The CBI can apply to the High Court of Ireland for a capital instruments order to write-down or convert relevant capital instruments into shares or other instruments of ownership in respect of a failing bank.

    To avail of the resolution tools ((i) sale of business tool, (ii) the bridge institution tool, (iii) the asset separation tool (iv) and the bail-in tool (utilised individually or on a combined basis)), the CBI must make a proposed resolution order and then make an ex parte application to the High Court for a resolution order. The subject bank, a shareholder, or the holder of a capital instrument or liability affected by a resolution order may apply to the High Court within 48 hours of publication of the order, for the order to be set aside. The resolution order may provide for, amongst other things: the transfer of shares, assets and liabilities; the reduction of principal/outstanding amount under capital instruments or eligible liabilites; the conversion of capital instruments or eligible liabilities into shares; the cancellation of debt instruments excluding secured liabilities; the termination of financial contracts; the removal and replacement of management by a special manager.

  21. How are client’s assets and cash deposits protected?

    Financial Services (Deposit Guarantee Scheme) Act 2009 of Ireland (as amended) and the European Un-ion (Deposit Guarantee Schemes) Regulations 2015 (SI 516/2015) provide for the national deposit guar-antee scheme (DGS). DGS is administered by the CBI and is funded by the credit institutions covered by the scheme. DGS protects:

    (a) eligible depositors in the event of a credit institution being unable to pay deposits;

    (b) up to €100,000 per person per credit institution; and

    (c) current accounts, deposit accounts and share accounts in credit institutions.

  22. Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered?

    The CBI may use the bail-in tool to recapitalise a bank provided the conditions for resolution as set out in question 20 are met. Liabilities that cannot be covered by the bail-in tool are:

    (a) covered deposits (the amount actually covered);

    (b) covered bonds;

    (c) liabilities in the form of financial instruments used for hedging purposes and secured in a manner similar to covered bonds;

    (d) liabilities arising by holding client monies or client assets;

    (e) liabilities arising in the context of the bank acting as a fiduciary;

    (f) liabilities to other institutions (not part of the same group) with a maturity of less than 7 days;

    (g) certain liabilities to employees;

    (h) liabilities to deposit guarantee schemes;

    (i) preferred debts owing to the Revenue Commissioners or the Minister for Social Protection;

    (j) liabilities to commercial or trade creditors in respect of goods and services that are critical to the institution’s daily functioning;

    (k) liabilities arising from client monies or client financial instruments where the institution is an investment firm; and

    (l) liabilities to systems designated under the Settlement Finality Directive (98/26/EC).

    (m) secured assets related to a covered bond cover pool. Such secured assets must be kept segregated with enough funding. However, where appropriate, a resolution order may allow a bail-in cover that part of a secured liability which exceeds the value of the collateral pledged.

  23. Is there a requirement for banks to hold gone concern capital (TLAC)?

    TLAC (total loss-absorbing capacity) applies to G-SIBs (global systemically important banks). TLAC requirements take effect from 1 January 2019 for investments in most G-SIBs, but later for those whose headquarters are in emerging market economies. TLAC requirements are set by the Financial Stability Board.

    MREL (minimum requirement for own funds and eligible liabilities) will be set for credit institutions by the CBI on a case by case basis, and will depend on factors such as size, systemic risk and the identified resolution strategy for that credit institution. MREL setting has yet to occur.

  24. In your view, what are the recent trends in bank regulation?

    The CBI’s management of bank regulation in Ireland will continue to focus on the implementation of in-creasingly stricter regimes to reduce risk and to protect consumers. The main factors influencing bank regulation are continuing legacy issues from the financial crisis, financial innovation and a changing mac-ro-financial environment with a focus on Brexit.

    In the context of legacy issues, as well as dealing with existing regulatory breaches the CBI seeks to bring about cultural changes in the financial sector particularly with regard to appetite for risk.

    Bitcoin is the subject of much recent commentary. The CBI’s reported view is that bitcoin/cryptocurrencies may adversely affect control of the banking system and undermine monetary policies used to manage inflation. As it stands there is no regulation of cryptocurrencies and therefore no AML and CTF controls over their users. In relation to Fintech generally, the CBI has established a Fintech group. The CBI’s assessment of innovations will take into account associated risks to ensure that any failures are manageable.

    Brexit has sparked significant uncertainty in the Irish financial sector. While it is broadly acknowledged that Brexit will be damaging to the Irish economy, a potential gain is the possibility of relocation of a percentage of financial services firms from London to Dublin to facilitate their passporting of services to other EU member states. The CBI has stressed that transparency and predictability will be prioritised in its assessment of applications from UK firms exploring operational relocation to Ireland. In relation to firms passporting services into the UK, the regulatory landscape remains unclear and the CBI is strongly encouraging firms to review their business models in the context of potential loss of business attached to loss of passporting rights to the UK.

  25. What do you believe to be the biggest threat to the success of the financial sector ?

    Brexit, as dealt with under question 24, is an obvious threat to the Irish financial sector. However, the CBI has ensured that it is sufficiently resourced to manage incoming applications for relocation of bank operations from London to Dublin. This will facilitate the financial sector in capturing any Brexit upside that may be available. Another concern is the Irish financial sector’s reliance on Irish real estate. While banks are certainly taking a more cautious approach to LTV levels in the context of secured lending in this post financial crisis era, it nonetheless remains the case that the domestic banks’ retail and SME secured loan portfolios are heavily reliant on real estate. Recent history has shown that Irish real es-tate, regardless of location, is not an absolute certainty. Values currently attached to commercial and residential real estate in major city and urban areas are considered inflated.