Financial sector to stump up cost of regulation by 2024, Central Bank says

A phased increase in levies will see taxpayer funds out of the equation in five years

The Central Bank of Ireland has agreed a new approach to financial regulation whereby the taxpayer will no longer stump up costs for policing the sector in a move that will see the industry wholly fund its own regulation by 2024.

In a statement on Friday, the regulator said it was "providing early notice" to the industry on how costs for regulatory investigations would be funded. It said an approach has been agreed with the Department of Finance based on a "user pays" principle.

Since 2015, the financial services industry has moved from paying about half of the costs of regulation to about two-thirds in 2018, the Central Bank said. Over the next five years, it intends to increase that to 100 per cent in a move backed by the Minister for Finance, Paschal Donohoe.

Bank of Ireland, AIB (including EBS) and Permanent TSB, already pay 100 per cent of the costs associated with regulation but this is not the case for other financial services groups.


“Today, we have set out our plans to move, with some limited exceptions, to full industry funding over the next five years,” said Central Bank deputy governor Ed Sibley.

“This is based on the principle that the regulated financial services firms operating in and out of Ireland should pay the regulatory costs,” he added.

Mr Sibley noted the cost of regulation has increased over the past few years resulting from changes to the bank's supervisory mandate and the growth of the industry arising from Brexit.

Credit unions

According to its 2018-2019 performance statement, the costs associated with regulating credit institutions was €55.88 million. For insurance, it was €35.49 million and for investment companies the cost was €20.9 million.

While these costs will be eventually covered by the industry in full, it’s unclear whether credit unions, too, will ultimately have to pay for their own regulation. This year, credit unions are expected to pay 20 per cent of the cost of regulation, rising to 35 per cent next year and 50 per cent by 2021.

The cost of regulating the 277 credit unions that existed in 2018 totalled €1.68 million.

The bank said that credit union recovery rates from 2022 onwards “will be subject to review and a public consultation to guide strategy once 50 per cent recovery rates have been reached”.

In response to the Central Bank’s 2015 public consultation, the Irish League of Credit Unions said it had concerns about the “extraordinary levels of profit generated by the [Central] Bank in recent years”.

Insurers, which paid 80 per cent of costs associated with regulation in 2018, were also previously critical of the move. In its response to the 2015 public consultation, Insurance Ireland said the move could negatively affect Ireland’s competitiveness as a location for international insurance. It added, that customers, who ultimately pay for the regulation, should receive “demonstrable value for money”.

Peter Hamilton

Peter Hamilton

Peter Hamilton is a contributor to The Irish Times specialising in business