Home Knowledge Central Bank and Credit Institutions (Resolution) Bill 2011

Central Bank and Credit Institutions (Resolution) Bill 2011

The Central Bank and Credit Institutions (Resolution) Bill 2011, which was published on 28 February 2011, aims to provide an effective and expeditious regime for dealing with failing credit institutions while minimising the cost to the state. The Bill will replace the temporary emergency regime of the Credit Institutions (Stabilisation) Act 2010 which is due to expire on 31 December 2012. The Bill, if enacted, will apply to all authorised credit institutions in the State but will not apply to a credit institution while the Credit Institutions (Stabilisation) Act 2010 Act applies to it. The Central Bank will be given sweeping powers to intervene where a credit institution is failing.

There are various pre-conditions which must be met before the Central Bank can intervene and these include:

  • That there exists a present or imminent serious threat to the financial stability of the credit institution or serious concerns relating to its financial stability or that of the State
  • That the credit institution has failed or is likely to fail to meet a regulatory requirement
  • That it is not in the public interest to wind up the credit institution immediately

The Bill proposes that a fund be established for the resolution of financial instability in credit institutions. This fund would be financed by a levy on credit institutions and any contribution from the Minister for Finance. The fund would be managed by the Central Bank.

If the pre-conditions are met and if it is considered necessary, the Central Bank would be able to:

  • Make an order to transfer assets and liabilities of an authorised credit institution to a bridge-bank established to hold such assets and liabilities temporarily.
  • Make an order imposing a special management regime on a credit institution

These orders would require High Court approval.

The Central Bank would be able to present a petition to the High Court for the winding up of a failing credit institution in certain circumstances. No-one would be allowed to petition to wind up a credit institution without giving the Central Bank notice and receiving the approval of the Central Bank.

The Central Bank would be able to direct an ailing credit institution to submit and implement a recovery plan. The Central Bank could itself prepare a resolution plan in relation to a credit institution.

Contributed by Shane Kelleher.