Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

On Committee Stage the Minister indicated that he would introduce this amendment to the Central Bank Act 1971 to 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 European Union. 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 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 state 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 regulations, but would be subject to Central Bank rules on the 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 of the European Union than would be available from within the European Union. 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 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 and is also based on the system that already applies to domestic credit institutions. The grounds for revocation include circumstances in which the holder becomes unable to meet its obligations to its creditors; no longer provides security for the assets entrusted to it; is convicted on indictment of an offence under the provision of the 1972 Act; is convicted of an offence involving fraud, dishonesty or breach of trust; is a company that is being wound up; or no longer holds an authorisation from the relevant third country authority. In this case, the provisions afford the 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 on the branch after its authorisation has been revoked and these mirror the provisions that apply to domestic credit institutions. In brief, the institution's responsibilities towards deposits and with regard to other repayable funds do not change post-revocation until those responsibilities have been discharged to the satisfaction of the Central Bank.

I indicated earlier that we would be moving with these amendments. The Minister flagged these amendments on Committee Stage. It is hoped these will add some dimension of competition to the Irish domestic banking situation in order to encourage the third country banks to establish branches in Ireland. They would be subject to the same oversight and regulatory environment as other institutions in this country. If such banks could be encouraged to come to Ireland, albeit in a small way, this would be a means of ensuring a competitive banking system.