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 80% 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. This means that the subvention from the Central Bank amounts to approximately 20% of the total cost. What this translates to in monetary terms will be determined by the resources required by the Bank to discharge its legal responsibilities during a given year.
In 2017, the full cost of financial regulation activities amounted to €184.9 million (2017: €155.0 million) funded by income of €107.9 million (2017: €77.8 million) and subvention of €76.9 million (2017: €77.3 million).
If industry was fully charged, there would be no subvention, however, there are certain costs (e.g. markets supervision) which it may be appropriate to continue to subvent on an ongoing basis where the costs cannot be attributed to specific firms but do relate to the orderly function of markets and the financial stability agenda.
My officials are liaising with the Central Bank in pursuing a strategy of moving towards full industry funding where appropriate. Further information on timeframes and implications for each industry category will be published in the coming weeks with the release of 2018 Annual Report and Annual Performance Statement.
The 2018 financial statements will also show a reduction in subvention year on year attributable to increases in recovery rates in the 2018 billing cycle.
Further information on the Industry Funding Levy is available on the Central Bank's website as follows: