Ireland’s Banking Supervision Framework: A Comprehensive Review

The Central Bank of Ireland (CBI) has been assessed by the International Monetary Fund (IMF) and a group of peer assessors on its banking supervision framework. The assessment focuses on the country’s compliance with the Basel Core Principles for Effective Banking Supervision.

Key Findings and Recommendations

Coordination and Definition

• Effective coordination: The CBI has set up a mechanism to coordinate actions with DETE, the insurance supervisory body.
• Clear definition of “bank”: The term “bank” is clearly defined in laws and regulations, limiting its use to licensed and supervised institutions.

Licensing Criteria and Significant Ownership

• Clear licensing criteria: The CBI has the right to set criteria for licensing banks, consistent with those applied in ongoing supervision.
• Clearly defined significant ownership: The concept of “significant ownership” is clearly defined in Irish laws and regulations.

Capital Adequacy and Risk Management

• Minimum capital adequacy ratio: Laws or regulations require all banks to maintain a minimum capital adequacy ratio, not lower than what was established in the Basel Capital Accord.
• Effective risk management: CBI regulations impose limits on large exposures to a single borrower or “closely related” group of borrowers, and more stringent limits to connected parties.

Supervision Approach and Remedial Actions

• Comprehensive supervision approach: The CBI’s supervision of credit institutions includes an in-depth analysis and evaluation of individual banks for which it relies on both on-site and off-site supervision.
• Authority to take remedial actions: The CBI has the authority, backed by legal sanctions, to take an appropriate range of remedial actions against, and impose penalties upon, banks, depending on the severity of the situation.

Overseas Activities

• Supervision of overseas activities: The CBI has the authority to supervise the overseas activities of locally incorporated banks and to determine whether management is maintaining proper oversight of the bank’s foreign branches, joint ventures, and subsidiaries.

Conclusion

The assessment suggests that Ireland’s banking supervision framework is generally in line with international standards. However, it may need to adapt to new challenges such as innovative operations and increasingly complex activities and products.