The Central Bank Reform Act, 2010 (the “Act”) became law on 17 July 2010. 

The Act creates a new unified structure for financial regulation within Ireland. The commencement order has been signed and the two-pillar governance structure of the Central Bank and Financial Services Authority of Ireland and the Financial Regulator has therefore been replaced with the governing body being the Central Bank of Ireland (the “Bank”). The Bank, in turn, is directed by a unitary board called the Central Bank Commission (the “Commission”).

The Commission will be chaired by the Governor. The current Governor is Prof. Patrick Honahan. The Governor remains solely responsible for the Bank’s functions in connection with the European System of Central Banks. The Bank will be responsible for the overall stability of the financial system in Ireland, the prudential regulation of Irish-authorised financial institutions and the protection of consumer interests. Two new posts, namely Head of Financial Regulation and Head of Central Banking, are also created under the Act. The first occupants of these posts will be Mr Matthew Elderfield and Mr Tony Grimes respectively.

The key provisions under the Act include:

• enhanced powers of the Bank to issue new standards of fitness and probity applicable to directors and senior managers of regulated entities and to direct that a person should not be appointed to, or that they should be removed or suspended from, a position where those fitness and probity requirements are not met;
• the transferral of responsibility for consumer information and education to the National Consumer Agency. The Bank will retain some consumer related powers, including the power to establish an expert group to advise it on the exercise of its consumer functions;
• amendments to insurance legislation to enhance compliance by the insurance sector and to legislation governing credit unions to allow them greater flexibility with regard to the provision of loans; and
• enhanced accountability and oversight mechanisms relating to the governance of the Bank and its regulatory performance.

It is anticipated that a second Bill will be brought before the Oireachtas later this year, which will enhance the powers and functions of the Commission. It is proposed that a third Bill will eventually consolidate the existing statutory arrangements for financial regulation in Ireland.  However, the timing of the third Bill is uncertain.

For further information please contact John Larkin.