Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

These amendments to the Central Bank Act 1971 provide an authorisation regime for branches of third country banks. These branches would be subject to the same standard of regulation as those branches currently passporting into Ireland from within the EU. The Central Bank Act 1971 provides the statutory basis for the authorisation regime for credit institutions in Ireland. The 1971 Act and the related European directive - the capital requirements directive - also provide the basis for the so-called passporting regime within the European Union. Passporting is a system which allows financial services operators legally established in one member state to establish and provide their services in the other member states without further authorisation requirements.

These amendments insert three new sections into the Central Bank Act 1971 to provide an authorisation regime for credit institutions which are authorised outside the European Union to operate a branch in Ireland. These third country banks would be able to apply to the Central Bank for an authorisation on the basis that the institution would remain under the responsibility of its home regulator in terms of prudential regulation, but would be subject to Central Bank rules on conduct of business. The new section 9A provides that the Central Bank can only grant an authorisation where the credit institution is subject to a regulatory system in its home territory which is at least as robust as the Irish system. Furthermore, the level of protection afforded to deposits by virtue of the bank's authorisation in its home country must be at least as robust as that which operates in Ireland under the deposit guarantee scheme. The Central Bank is also required to notify the relevant European authorities of any authorisation under this section. This arises from the requirement in the directive that third country branch authorisations should not offer more favourable terms to credit institutions passporting from outside the European Union than would be available within the EU. This will act as a further check on the system to ensure that this regime does not act in any way to dilute the standard of regulation that applies.

The new section 9B sets out the provisions that are to apply where the Central Bank refuses a grant of authorisation and it is based on the system that already applies to domestic credit institutions.

In short, it affords an opportunity to the applicant to make representations where the Central Bank is minded to refuse the application and before the Central Bank has issued its final decision.

The new section 9C sets out the provisions that are to apply where the Central Bank revokes a third country branch authorisation. These are based on the system that already applies to domestic credit institutions. The grounds for revocation include where the holder becomes unable to meet its obligations to its creditors or no longer provides security for the assets entrusted to it; is convicted on indictment of an offence under any provision of the 1971 Act or an offence involving fraud, dishonesty or breach of trust; or is a company that is being wound up or no longer holds an authorisation from the relevant third country authority. In this case also, the provision affords an opportunity to the institution to make representations before the Central Bank has issued its final decision. The Central Bank must also consult the third country authority unless immediate action by the Central Bank is required, in which case only notification is required.

This section also sets out the responsibilities that are on the branch after its authorisation has been revoked. These mirror the provisions that apply to domestic credit institutions. In brief, the institution's responsibilities towards deposits and other repayable funds do not change post-revocation until those responsibilities have been discharged to the satisfaction of the Central Bank.

Effectively, it has come to notice that certain non-EU banks - banks incorporated in jurisdictions outside the EU - want to set up branches in Ireland. Obviously, this would strengthen our financial services sector and the institutions would be large employers in certain areas. The IDA is in contact with specific institutions. This is the reason for the Seanad amendment.

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