Central Bank (Supervision and Enforcement) Bill 2011: Amendments from the Seanad

The Dáil went into Committee to consider amendments from the Seanad.

Seanad amendments Nos. 1, 4 and 6 are related and may be discussed together.

Seanad amendment No. 1:
Section 1: In page 9, subsection (2), line 25, to delete “91” and substitute “93”.

Amendments Nos. 1 and 6 simply correct a section number reference in section 1 and in the Second Schedule.

Amendment No. 4 is a technical amendment to section 6 of the Irish Bank Resolution Corporation Act 2013 and relates to the Bankers' Books Evidence Act 1879. The Bankers' Books Evidence Acts provide for a procedural admissibility of evidence rule. This is one of the permitted exceptions to the hearsay evidence rule and facilitates the admissibility of bankers books into evidence in all legal proceedings. This amendment mirrors a similar provision in section 191 of the National Asset Management Agency Act 2009.

Does amendment No. 4 on the Bankers' Books Evidence Act 1879 - I would be the first to acknowledge that I am not terribly familiar with it - relate to any issue that has been raised with the Department concerning the admissibility of evidence? Is it something officials have identified themselves or is it something that has arisen in the course of ongoing investigations?

The note indicates that section 3 of the Bankers' Books Evidence Acts provides that "a copy of any entry in a banker's book shall in all legal proceedings be received as prima facie evidence of such entry, and of the matters, transactions, and accounts therein recorded". Section 4 of the Bankers' Books Evidence Acts provides for the admissibility of bankers' books evidence, as an exception to the hearsay rule. Section 4 requires that the evidence was created by the bank in the ordinary course of business, is still in the custody of the bank and that the evidence be given by an officer of the bank. The Attorney General's office has advised on the inclusion of this amendment as an avoidance of doubt provision. That is the reason for it. It does not relate to any specific issue.

I seek clarification. As the Minister indicated, the original Act that is referenced dates back to 1879 so the definition of bankers' books is within the meaning of that Act from 140 years ago. Could he explain the position? I do not wish him to dig up the 1879 Act but what are the bankers' books within the meaning of the Act?

They are records of transactions in a bank in written form, which could be used subsequently and would have an evidential quality and could be brought forward as an exception to the hearsay rule once we enact the Bill. As I said previously, it mirrors section 191 of the National Asset Management Agency Act 2009. On reviewing the Bill at this Stage, the Attorney General's office advised that the amendment should be tabled. She calls it an avoidance of doubt provision.

Seanad amendment agreed to.

Seanad amendments Nos. 2 and 7 are related and may be discussed together.

Seanad amendment No. 2:
Section 73: In page 59, after line 47, to insert the following new section:
73.—The Central Bank Act 1971 is amended—
(a) in section 7—
(i) in subsection (1) by inserting “or authorisation under section 9A” after “licence”, and
(ii) in subsection (6)(b) by inserting “or authorisation under section 9A” after “licence”,
and
(b) by inserting the following sections after section 9:
9A.—(1) In this section and sections 9B and 9C—
‘branch’ means a branch of a relevant credit institution;
‘EEA Agreement’ has the same meaning as it has in the European Communities (Amendment) Act 1993;
‘EEA state’ means—
(a) a member state of the European Communities, or
(b) a state (other than a member state of the European Communities) that is a contracting party to the EEA Agreement;
‘relevant credit institution’ means a credit institution whose head office is located in a state or territory other than an EEA state and which holds an authorisation to carry on banking business in that state or territory from the authority that exercises in that state or territory functions corresponding to those of the Bank under this Part (‘relevant third country authority’).
(2) Subject to the provisions of this section, the Bank may grant an authorisation to a relevant credit institution to operate a branch in the State for the purpose of carrying on banking business in the State.
(3) The Bank shall not grant an authorisation under subsection (2) unless it is satisfied that—
(a) the relevant credit institution is subject, in the state or territory where its head office is located, to regulatory or administrative provisions relating to authorisation to carry on banking business in that state or territory and supervision corresponding to those in the State, and
(b) protection of deposits with the branch, corresponding to the protection provided by the European Communities (Deposit Guarantee Schemes) Regulations 1995 (S.I. No. 168 of 1995), is available to depositors.
(4) An application for authorisation under subsection (2) shall be in such form and contain such information as the Bank may from time to time determine.
(5) The Bank shall notify the European Commission, the European Banking Authority and the European Banking Committee of any authorisation granted under subsection (2).
(6) The grant of an authorisation under subsection (2) shall not constitute a warranty as to the solvency of the relevant credit institution to which it is granted and the Bank shall not be liable in respect of any losses incurred through the insolvency or default of a relevant credit institution to which such authorisation is granted.
9B.—(1) The Bank shall not refuse to grant an authorisation under section 9A(2) unless it is satisfied that the grant of the authorisation would not be in the interest of the orderly and proper regulation of banking.
(2) Whenever the Bank proposes to refuse to grant an authorisation under section 9A(2) it shall—
(a) within the period of 6 months after the date of the receipt of the application for the authorisation, or
(b) where additional information in relation to the application has been sought by the Bank, within the period of 6 months after the date of the receipt by the Bank of the additional information or the period of 12 months after the date of the receipt of the application for the authorisation whichever period first expires,
notify the applicant for the authorisation in writing of its reasons for the refusal and the applicant may, within the period of 21 days after the date of the giving of the notification, make representations in writing to the Bank in relation to the proposed refusal.
(3) The Bank shall, before deciding to refuse the authorisation, consider any representations duly made to it under subsection (2) in relation to the proposed refusal.
9C.—(1) The Bank may revoke an authorisation granted under section 9A(2)—
(a) if the holder of the authorisation so requests,
(b) if the holder of the authorisation—
(i) has not commenced to carry on banking business pursuant to the authorisation within 12 months of the date on which the authorisation was granted,
(ii) has ceased to carry on banking business pursuant to the authorisation and has not carried it on during a period of more than 6 months immediately following the cesser,
(iii) has obtained the authorisation through false statements or any other irregular means,
(iv) becomes unable to meet its obligations to its creditors or suspends payments lawfully due by it or can no longer be relied upon to fulfil its obligations towards its creditors, and in particular no longer provides security for the assets entrusted to it,
(v) is convicted on indictment of an offence under any provision of this Act or an offence involving fraud, dishonesty or breach of trust, or
(vi) being a company, is being wound up,
(c) where the holder of the authorisation no longer holds an authorisation from the relevant third country authority to carry on banking business in the state or territory where its head office is located,
(d) if the business of, or the corporate structure of, the holder of the authorisation has been so organised or the holder of the authorisation has come under the control of any other undertaking not supervised by the Bank such that the holder is no longer capable of being supervised to the satisfaction of the Bank,
or
(e) if, since the grant of the authorisation, the circumstances relevant to the grant have changed and are such that, if an application for an authorisation were made in the changed circumstances, it would be refused.
(2) Whenever the Bank proposes to revoke an authorisation under subsection (1) (otherwise than in circumstances to which paragraph (a) of subsection (1) relates)—
(a) it shall notify the holder of the authorisation in writing of the reasons for the revocation and that the holder may, within 21 days after the date of the giving of the notification, make representations in writing to the Bank in relation to the proposed revocation,
(b) the holder of the authorisation may make such representations in writing to the Bank within the period referred to in paragraph (a), and
(c) the Bank shall, before deciding whether or not to revoke the authorisation, consider any representations duly made to it under this subsection in relation to the proposed revocation.
(3) Where an authorisation is revoked under subsection (1)and the holder of the authorisation is not a company which is being wound up—
(a) that person shall continue to be subject to the duties and obligations imposed on it by or under the Central Bank Acts 1942 to 2013 until all liabilities of that person in respect of deposits (including deposits on current accounts) or other repayable funds accepted by it from persons (in this subsection referred to as ‘depositors’) pursuant to the authorisation have been discharged to the satisfaction of the Bank,
(b) that person shall, as soon as possible after the authorisation is revoked—
(i) notify the Bank, and
(ii) as far as is reasonably practicable, notify every depositor concerned,of the measures it is taking or proposes to take to discharge in full and without undue delay its liabilities in respect of those deposits,
(c) in the case where—
(i) that person has notified the Bank in accordance with paragraph (b) and the Bank is of the opinion that the measures being taken or proposed to be taken for the purposes of that paragraph are not satisfactory, or
(ii) that person has not so notified the Bank and the Bank is of the opinion that it has failed to so notify as soon as possible after the authorisation is revoked, or
(iii) the Bank is of the opinion that that person has not taken all reasonable steps to so notify every depositor concerned,
then the Bank may give a direction in writing to that person for such period, not exceeding 6 months, as may be specified therein, prohibiting it from—
(I) dealing with or disposing of any of its assets or specified assets in any manner, or
(II) engaging in any transaction or class of transaction or specified transaction, or
(III) making payments,
without the prior authorisation of the Bank, and the Bank may require that person to prepare and submit to it for its approval within 2 months of the direction, a scheme for the orderly discharge in full of its liabilities to the depositors concerned.
(4) Where a direction to which subsection (3)(c) relates is given the provisions of section 21 shall apply with any necessary modifications.
(5) The Bank shall, before deciding to revoke an authorisation under subsection (1), consult with the relevant third country authority provided however that if immediate action by the Bank is called for it shall not be necessary for the Bank to consult as aforesaid but in such a case the Bank shall notify the authority concerned of the revocation of the authorisation.
(6) In this section ‘control’ includes any power, whether arising from a contract or agreement or otherwise, whereby one party can direct the affairs of another and a parent undertaking shall be deemed to control its subsidiaries and ‘parent undertaking’ has the meaning assigned to it by the European Communities (Companies: Group Accounts)Regulations 1992 (S.I. No. 201 of 1992).”.”.

These amendments to the Central Bank Act 1971 provide for 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.

In effect, 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.

It is good to hear that other financial institutions are seeking to set up in Ireland. I hope that they will provide opportunities for many of those who have lost their jobs. I am conscious of the announcement in recent weeks of 1,800 job losses at Ulster Bank.

The Minister stated that the regulatory provisions would need to be of a corresponding nature to those that exist in the State. Institutions would not be licensed or granted authorisation unless there was a regime of regulation of significant strength in the home territory. Does subsection 3(a) address this matter and stipulate that provisions must be of a corresponding degree? It states: "and supervision corresponding to those in the State." It seems that the institution must be supervised and have authorisation to carry on banking business in this State. Perhaps I am reading the wrong section, but it does not state the strength or force of the supervision.

If a corresponding regulatory regime is required, would that rule out many third countries that do not have the same type of regulatory regime as Ireland or are they more advanced than we are?

Subsection 3(a) states:

the relevant credit institution is subject, in the state or territory where its head office is located, to regulatory or administrative provisions relating to authorisation to carry on banking business in that state or territory and supervision corresponding to those in the State,

It is caught in the phrase "supervision corresponding to those in the State".

I seek clarification. I am sure that I am wrong, but the subsection states:

the relevant credit institution is subject, in the state or territory where its head office is located [we are referring to the foreign country], to regulatory or administrative provisions relating to authorisation to carry on banking business in that state [which is the foreign state] or territory and supervision corresponding to those in the State,

Should the supervision not correspond with this State's or is that not what we are doing in subsection 3(a)? Does the Minister understand what I am trying to say? It seems to read as if the institution needs authorisation to carry out banking business in the state or territory and must have supervision corresponding to those in that state, but the word "state" appears three times in this subsection. Since two are clearly references to the foreign state, is the third reference to this State?

The capital letter indicates that we are talking about Ireland, that is, the "State".

That is news to me.

Seanad amendment agreed to.
Seanad amendment No. 3:
Section 81: In page 67, lines 32 and 33, to delete subsection (7) and substitute the following:
"(7) Section 47 of the Act of 2011 is amended by substituting "If a liability to repay arises under section 46(5)" for "If a liability to repay the Fund or the Minister arises under section 46(4)".".

This technical amendment involves an amendment to section 47 of the Central Bank and Credit Institutions (Resolution) Act 2011. It is a drafting amendment and is consequential on changes made to section 46 of the 2011 Act on Report Stage in this House.

Seanad amendment agreed to.

Seanad amendment No. 4:
New Section: In page 71, after line 11, to insert the following new section:
93.--Section 6 of the Irish Bank Resolution Corporation Act 2013 is amended by inserting the following subsection after subsection (6):
“(7) (a) In this subsection ‘Act of 1879’ means the Bankers’ Books Evidence Act 1879.
(b) Where--
(i) a copy of an entry in a bankers’ book (within the meaning of section 9(2) of the Act of 1879) falls to be produced in evidence,
(ii) the book is in the custody or under the control of a special liquidator or IBRC, and
(iii) the special liquidator or an officer or employee of, or other person duly authorised in that behalf by, the special liquidator or an officer or employee of IBRC gives evidence (orally or by
affidavit) that--
(I) he or she truly believes that the book or record was kept in the ordinary course of the bank's business, and
(II) the book is in the custody or under the control of the special liquidator or IBRC,
then the requirement for proof in section 4 of the Act of 1879 shall be taken to have been satisfied.
(c) The Act of 1879 has effect in relation to the books and records of IBRC as if--
(i) references in that Act to bank or banker were to--
(I) a special liquidator, or
(II) IBRC,
(ii) references in that Act to bankers’ books were to the ordinary books and records of a special liquidator or IBRC, as the case may be, or the ordinary books and records of IBRC in the custody or under the control of a special liquidator, and
(iii) references in that Act to an officer of a bank were to a special liquidator or an officer or employee of, or other person duly authorised in that behalf by, a special liquidator or to an officer or employee of IBRC.”.”.
Seanad amendment agreed to.
Seanad amendment No. 5:
Schedule 2: In page 75, between lines 11 and 12, to insert the following:

7

Section 33AK

(5)

Substitute “2010, or” for “2010.” in paragraph (ao) and insert

the following after that paragraph:

“(ap) for any purpose connected with the functions of the Bank, the Minister, the Governor or the Head of Financial Regulation or a special manager under the Central Bank and Credit Institutions (Resolution) Act 2011.”.

This amendment is also technical in nature and is designed to remedy an incorrect reference in the Central Bank and Credit Institutions (Resolution) Act 2011. The objective is to ensure that the Central Bank is legally able to share confidential information to facilitate the Central Bank, the Minister, the Governor, the head of financial regulation or a special manager appointed under the resolution Act in the performance of its, his or her functions under the Act. This should remove any obstacle to the necessary information exchange.

Seanad amendment agreed to.
Seanad amendment No. 6:
Schedule 2: In page 75, line 37, to delete “91” and substitute “93”.
Seanad amendment agreed to.
Seanad amendment No. 7:
Schedule 2: In page 76, to delete lines 34 to 38 and substitute the following:

1

Section 2(1)

(a) In paragraph (d) of the definition of “related body” substitute “Part 3 of the Central Bank (Supervision and Enforcement) Act 2013” for “Part 5 of the Central Bank Reform Act 2010”.

(b) Insert the following definition:

“ ‘European Banking Committee’ means the committee established pursuant to Commission Decision 2004/10/EC1;”.

2

Section 7

In subsection (1) delete “on behalf of any other person”.

3

Section 10

Insert “or authorisation under section 9A(2)” after “licence” in each place.

4

Section 12

(a) In subsection (1) insert “and of the holders of authorisations under section 9A” after “licences”.

(b) In subsection (2)--

(i) insert “or authorisation under section 9A” after “licence”, and

(ii) insert “European Banking Committee” after “European Commission”.

(c) In subsection (3)--

(i) insert “and of the holders of authorisations under section 9A” after “licences”, and

(ii) insert the following after paragraph (d):

“(dd) the European Banking Committee;”.

5

Section 17

(a) Insert “or authorisation under section 9A” after “licence” in each place.

(b) In subsection (1) insert “or holders of authorisations under section 9A” after “licence holders”.

6

Section 18

Insert “or authorisation under section 9A” after “licence” in

each place.

7

Section 19

(a) In subsection (1)--

(i) insert “or authorisation under section 9A” after “a licence”, and

(ii) insert “or authorisation” after “the licence”.

(b) In subsection (2) insert “or authorisations under section 9A” after “licences”.

8

Section 20

Insert “or authorisation under section 9A” after “licence” in each place.

9

Section 21

Insert “or authorisation under section 9A” after “licence” in each place.

10

Section 22

Insert “or authorisation under section 9A” after “licence” in each place.

11

Section 25

Insert “or authorisation under section 9A” after “licence” in each place.

12

Section 26

(a) In subsections (1), (2), (3) and (6) insert “or authorisation under section 9A” after “licence” in each place.

(b) In subsection (4) insert “or authorisations under section 9A” after “licences”.

13

Section 27(2)

In paragraph (a) insert “or authorisation under section 9A” after “licence”.

14

Section 28(1)

Insert “or authorisation under section 9A” after “licence”.

15

Section 31

Insert “or authorisation under section 9A” after “licence” in each place.

Seanad amendment agreed to.
Seanad amendments reported.

A message will be sent to Seanad Éireann acquainting it accordingly.