Pearse Doherty (Donegal, Sinn Fein)
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123. To ask the Minister for Finance the estimated saving that would accrue from moving the entire cost of regulation of the financial sector onto the industry; and if he will make a statement on the matter. [32121/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Central Bank's total funding requirement for financial regulation activity is determined on an annual basis by the resources required to discharge its legal responsibilities under domestic and EU law. Section 32D and 32E of the Central Bank Act 1942, as amended, provide that the Central Bank Commission may make regulations relating to the imposition of levies and fees on the financial services sector in respect of the recoupment of the costs of financial regulation.

As it stands, the financial services industry currently funds 50% of the costs incurred by the Central Bank for financial regulation, with certain exceptions including the banks which had participated in the Eligible Liabilities Guarantee (ELG) Scheme, namely AIB, Bank of Ireland and Permanent TSB, which are required to fund 100% of the Central Bank's regulatory costs. Credit Unions currently contribute approximately 8% to the cost of their regulation.

The current 50% funding arrangement translates into a corresponding reduction in the annual surplus remitted by the Central Bank to the Exchequer. The total cost of financial regulation in 2016 was approximately €150 million; industry levies were €79m and subvention was €70 million. Therefore in the order of €70 million of the Central Bank's 2016 surplus income was redirected to make up for the difference between the costs of regulation and the funding received from the financial services industry, which would otherwise have been surrendered to the Exchequer.

However, following on from a joint Department/Central Bank Public Consultation on funding the costs of financial regulation, the Minister for Finance approved an increase to 65% of the costs of financial regulation being borne by industry, with certain exceptions (for instance, the ELG banks and credit unions will maintain their existing funding arrangements, among other exemptions). This will be implemented in the 2017 industry funding levy regulations. The arguments in favour of a move to a funding model where industry bear a greater proportion of the costs of financial regulation were articulated in the public consultation paper. These include, the scale of resources devoted to regulation, the escalating costs that are borne by the taxpayer, and the changing landscape of the industry where consumers are located both here and abroad. My Department and the Central Bank are in the process of finalising a joint Feedback Statement to the Public Consultation which will be published in Q3 2017.

Therefore, the 2017 industry funding levies will recoup 65% of the costs of financial regulation from industry (with certain sectoral exceptions). This means that the subvention from the Central Bank will amount to approximately 35% of the total cost rather than 50%. What this translates to in monetary terms will be determined by the resources required by the Bank to discharge its legal responsibilities during the year.