As Minister for Finance, I have responsibility for the development of the legal framework governing financial regulation, including banking and insurance. The day to day responsibility for the supervision of financial institutions is a matter for the Central Bank which is statutorily independent in the exercise of its regulatory functions.
I have been advised by the Central Bank that according to Chapter 3.11 of the consumer protection code 2012: 'where a regulated entity intends to cease operating, merge with another, or to transfer all or part of its regulated activities to another regulated entity it must:
- notify the Central Bank immediately;
- provide at least two months' notice to affected consumers to enable them to make alternative arrangements;
- ensure all outstanding business is properly completed prior to the transfer, merger or cessation of operations or, alternatively in the case of a transfer or merger, inform the consumer of how continuity of service will be provided following the transfer or merger; and
- in the case of a merger or transfer of regulated activities, inform the consumer that their details are being transferred to the other regulated entity, if that is the case'.
If a firm does not provide a consumer with two months' notice of their intention to cease operating, this is a potential breach of Section 3.11 of the Consumer Protection Code. The consumer can make a complaint to the Financial Services Ombudsman who deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers.
It should be noted that Consumer Protection Code 2012 is intended for situations where regulated entities are in a position to provide such notice, i.e. in the cases of mergers and transfers, and not in the case of insolvent liquidations. If there has been a breach of the Consumer Protection Code then the Central Bank is in a position to consider enforcement action.
Under the Central Bank's Consumer Protection Code, banks are required to give a minimum of 2 months' notice before they close a consumer's account. It is important that consumers are given adequate notice to allow them to take the required steps to close or transfer their accounts. All banks providing current accounts in Ireland are subject to the Central Bank's Current Account Switching Code, which is designed to make the process of switching current accounts easier and quicker and to offer protection and support for consumers when switching bank account.
Two banks have in recent times announced their intention to withdraw from the Irish market. This is consistent with developments across Europe where banks have retrenched within national borders.
With regards to insurance we have seen the recent withdrawal of Setanta Insurance Company Limited from the market and its subsequent liquidation. Setanta Insurance Company Limited (Setanta) is a Maltese incorporated company which was both authorised and prudentially supervised by the Malta Financial Services Authority (MFSA). While the financial position of Setanta is not supervised by the Central Bank, the firm is supervised by the Central Bank for conduct of business rules, i.e. consumer protection obligations.
On 16 April, 2014, Setanta determined that the company was insolvent. This means that Setanta does not have sufficient funds to be able to honour its full obligations towards claimants, policyholders and other creditors. Setanta was formally placed into liquidation by the MFSA following a meeting of the creditors which took place on the 30 April, 2014 where a liquidator, Mr Paul Mercieca, was appointed. The Liquidator has written to all policyholders in the last week informing them that their policies would be cancelled, in accordance with the terms of the policy of insurance with the Company.
The Central Bank has been engaging with the liquidator and with brokers who sold the policies to ensure all policyholders that hold a current Setanta motor insurance policy urgently make alternative motor insurance arrangements. The Central Bank as well as the Department of Finance have also liaised with the relevant industry representative bodies.