Financial Crime World

Ireland’s Banking Regulation: A Risk-Based Approach

Ireland’s Central Bank (CBI) employs a risk-based approach to regulate banks, categorizing them as ‘high impact’, ‘medium-high impact’, ‘medium-low impact’, or ’low impact’. This categorization determines the number of supervisors allocated to each bank and the level of scrutiny it will face.

Authorisation Process

The CBI is responsible for authorising Irish banks. Branches of non-EU banks are regulated by the CBI under domestic legislation, while EU-based banks can operate in Ireland through the ‘passport’ procedure, which requires notification to their home state regulator and compliance with certain conduct-of-business rules.

Primary Legislation

Ireland’s primary banking laws include:

  • Central Bank Acts 1942-2018
  • European Union (Capital Requirements) Regulations 2014
  • EU Directive 2013/36 (CRD IV)

Banks must also comply with various secondary legislation, codes, and guidelines issued by the CBI.

Recent Regulatory Themes

The CBI has emphasized the importance of sustainable finance, urging banks to play a key role in financing Ireland’s transition to a more sustainable economy. The regulator is working closely with the European Banking Authority (EBA) on its Sustainable Finance Action Plan.

In response to the COVID-19 pandemic, the CBI has requested that banks take a consumer-focused approach and adopt measures such as:

  • Short-term payment breaks
  • Restrictions on dividends and share buy-backs

The regulator has also intensified interactions with institutions to assess new risks arising from financial crime.

Key Regulatory Developments

Recent regulatory developments include:

  • The European Commission’s proposal for changes to sustainability reporting requirements for credit institutions, including the introduction of mandatory ESG reports audited by external auditors.
  • A ‘Dear CEO’ letter from the CBI emphasizing the need for boards to show clear ownership of ESG risks and promoting cultural awareness within their organisations.

Conclusion

Ireland’s banking regulation framework is designed to ensure the stability of the financial system and protect consumers, with a focus on risk-based supervision and prudential requirements. The CBI continues to monitor the evolving regulatory landscape, including sustainable finance and COVID-19-related challenges.