Pat Breen (Clare, Fine Gael) | Oireachtas source

I thank Senator Richmond for raising this issue. I appreciate his concern on this and would like to pass on the apologies of the Minister for Finance, Deputy Noonan, who has an important meeting this morning and has asked me personally to take this matter on his behalf. I assure Senator Richmond that I will discuss his concerns with the Minister at a later date. I will outline to the Senator the review of the application process for companies applying for a banking licence.

The primary responsibility for the authorisation of banking licences and its decision process rests with the Central Bank of Ireland and the European Central Bank. They are two very important bodies that make decisions in regard to banking licences. One cannot do it without the other. Both bodies are statutorily independent in the carrying out of their functions and have specific missions. Given the Central Bank of Ireland was established by the Oireachtas, I want to reference its core mission of "safeguarding financial stability and protecting consumers”. That is something we should all remember. This mission requires it to ensure that every bank operating in Ireland meets certain minimum standards and codes of practice before it can be deemed eligible to carry out its activities.

In order to be of assistance to Senators, I will very briefly set out the process for a bank seeking authorisation. More detailed information is set out on the Central Bank’s website, including guidelines on required information and the authorisation process.In summary, the principal stages in the authorisation process are as follows: exploratory phase; the submission of an application and its assessment by the ECB and the Central Bank; and a decision by the ECB on whether to grant a banking licence.

The exploratory phase is the important first stage. Applicants should demonstrate familiarity with all statutory and non-statutory requirements applicable to credit institutions in Ireland. These requirements include a knowledge of key codes of conducts such as those on mortgage arrears and business lending to SMEs which provide vital protections for consumers. If the applicant is satisfied that the proposed business model meets the requirements, he or she should arrange a preliminary meeting with the Central Rank. If compliant, the applicant submits a proposal for authorisation which the Central Bank will review in detail. Following this review, it will provide a preliminary view on whether the applicant should pursue the application for authorisation. If the applicant proceeds with a formal application, the ECB will perform a detailed assessment and further detailed assessment work will also be performed by the Central Bank. I must stress that given the risks and complexities of operating a bank, there are numerous issues to be considered as part of these assessments, including the structure of the bank and its organisation and management, including key personnel, which is extremely important. Also important are the risk oversight mechanisms and its capital, funding and solvency projections, among many other areas.

When the review of the application has been satisfactorily completed, the ECB will make a decision on whether to grant a banking licence. Such a licence will only be granted where both the ECB and the Central Bank are satisfied that the applicant complies with the authorisation requirements. The Government is fully aware of the possibilities and opportunities arising from firms and funds potentially seeking to locate in Ireland. In this respect, the Central Bank has confirmed to the Minister of State, Deputy Eoghan Murphy, that it is committed to providing a clear, open and transparent authorisation process which, importantly, is open to all applications. In assessing such applications the bank will ensure a rigorous assessment against regulatory standards so as to continue a high and consistent level of consumer protection.

The Minister for Finance is fully aware that this authorisation process takes time, but we have learned all too well about the consequences of having a light touch regulatory regime. It may be of interest to the Seanad to learn that a number of recently authorised firms have informed the Central Bank that they would be uncomfortable with the operating environment in Ireland if the authorisation process was too speedy or insufficiently challenging.