Malcolm Byrne (Wicklow-Wexford, Fianna Fail)
Link to this: Individually | In context

228. To ask the Minister for Finance his views on whether the Central Bank has gone beyond the requirements of EU rules on the regulation of financial services; if in the regulation of any financial services or products, the Central Bank is applying additional rules beyond that set out in EU law; and if he will make a statement on the matter. [40458/25]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context

The Central Bank of Ireland has provided me with the following information on the matter.

It is useful to first to set out some key information on the source of the Central Bank of Ireland’s (the Central Bank’s) mandate in relation to the regulation of financial services.

The Central Bank’s role derives from both domestic law (e.g. the Central Bank Acts 1942-2023, the Consumer Credit Act 1995 etc.) and European Union law (e.g. Capital Requirements Directive, Solvency II) where the Irish government has appointed the Central Bank as competent authority or designated authority (as the case may be) in respect of that EU law.

As the European financial services sector is part of Europe’s internal market, many elements of EU financial services legislation are directly applicable (e.g. EU Regulations) while European Directives set out measures that must be transposed into Irish law by the State. These measures have been transposed in the State both by means of Acts of the Oireachtas and secondary legislation, mainly in the form of statutory instruments (e.g. Ministerial regulations).

A key objective of EU financial services law is to achieve harmonisation; there are two levels of harmonisation under EU law:

· Minimum harmonisation: Member States must meet the EU’s basic standards but are free to adopt stricter laws if they choose.

Maximum harmonisation: Member States must align precisely with the directive, prohibiting stricter measures to ensure uniformity across the EU.

Member States cannot impose requirements which deviate from those matters which are fully harmonised at EU law. However, where a matter is not fully harmonised, Member States may impose more stringent requirements on regulated financial service providers where it is considered necessary and proportionate to achieve a particular regulatory objective (e.g. consumer protection) at domestic level.

Moreover, the harmonising effect only applies in respect of those matters that are specifically within scope of the EU law (e.g. where EU law provides for a harmonised approach in relation to prudential matters, this would not prevent Member States from imposing conduct requirements in respect of how the regulated financial service provider conducts its business with its customers).

Accordingly, where a matter is not harmonised or is not fully harmonised at EU level, the Irish State may impose additional requirements on a regulated financial service provider where that is necessary and proportionate as a matter of Irish law.

Certain enactments confer a limited regulatory or rule-making power on the Central Bank.

For example, Section 17A of the Central Bank Reform Act 2010 provides the Central Bank with the power to issue regulations for the purpose of ensuring that financial services firms:

a) act in the best interests of customers and of the integrity of the market,

b) act honestly, fairly and professionally, and

c) act with due skill, care and diligence.

Section 48 of the Central Bank (Supervision and Enforcement) Act 2013 (Central Bank Act 2013) provides the Central Bank with the power to impose requirements on regulated financial service providers (by means of regulations) for identified matters. These matters include, inter alia:

a) conduct of business areas, including consumer protection areas, for example, conflicts of interest, provision of information, advertising, etc.;

b) minimum competency requirements; and

c) dealing with customers who are or are likely to be in financial difficulty.

The Central Bank has used its legislative powers to protect consumers by imposing a number of codes of conduct and requirements on regulated firms, including:

· Consumer Protection Code (the Code);

· Code of Conduct on Mortgage Arrears;

· Code of Conduct on the Switching of Payment Accounts with Payment Service Providers;

· Minimum Competency Code;

· Lending to SMEs Regulations.

By way of example, the Code developed by the Central Bank is an important pillar of consumer protection in financial services. However, where consumer protections are provided for in harmonised EU legislation, or in other domestic legislation, the application of the Code has been restricted. For example, the provision of investment services subject to the Markets in Financial Instruments Directive (MiFID) is outside of the scope of application of the Code because of the maximum harmonisation nature of MiFID and the fact that MiFID provides for an equivalent degree of relevant protections.