My officials meet with officials from the Central Bank on a regular basis to discuss the funding of financial services regulation by industry, while also ensuring that the commitment to transparency on the cost of regulation is met. Agreed recommendations from these meetings are submitted to me as Minister for my review and agreement.
In 2015, a joint Department of Finance Central Bank public consultation ‘Funding the cost of Financial Regulation’ put industry representatives on notice that it was the Central Bank’s and my predecessor's intention to move towards full industry funding on a phased basis.
Against a backdrop of a significant increase in the cost of Financial Regulation and increases in recovery rates, certain industry bodies set out a number of concerns in relation to the increased costs they would have to bear, in particular the continually increasing cost, the performance of and the accountability of the Central Bank. Overall, industry were not supportive of the proposal but set out that a phased movement would be preferable.
To answer the concerns of industry, the Central Bank and the Department of Finance issued a joint Feedback Statement. This feedback statement set out that the Central Bank would bring greater clarity and transparency to the levy model through the Bank’s Annual Performance Statement and that there would be greater targeting of resources at the areas of highest priority.
These commitments have been addressed by the Central Bank publishing its Annual Performance Statement which provides an evaluation of the Bank’s performance under a number of key areas such as Regulatory Performance, Financial Institutions Supervision, Markets Supervision, Consumer Protection and Enforcement. The statement also includes detailed information on the levy process and its cost control and budgetary processes, including Commission approval of annual budgets, and oversight of quarterly outturns against those budgets.
Each phased increase required my or my predecessor's approval of the annual industry funding regulations. In 2017, the then Minister for Finance approved a phased increase to 100% industry funding commencing with an increase from 50% to 65% in 2017 (S.I. No. 442/2017 - The Central Bank Act 1942 (Section 32D) Regulations 2017). In 2018, I agreed to an increase in recovery rates from 65% to 80% (in certain categories) with corresponding increases in other categories (S.I. No. 445 of 2018 - The Central Bank Act 1942 (Section 32D) Regulations 2018).
At the time of this increase, the Central Bank issued a Funding Strategy and Guide to the 2018 Industry Funding Levy. This guide provides significant detail on the levy strategy and the plans to 2021. The move towards full funding is part of a wider levy strategy, which includes moving to levying in arrears in the next levy cycle. This will eliminate significant prior year shortfalls and surpluses which resulted in volatility in the past. No levies will issue in 2019 as actual costs will be levied on an arrears basis in mid-2020.
Earlier this year, I agreed to the phased increase of all financial sectors to 100% funding by 2024. However, I specifically provided for an exception for Credit Unions so they will only reach 50% funding by 2021. This has been well flagged to the sector and I have also agreed to not increase credit union regulatory funding beyond 50% until the impact of the move to 50% is reviewed and a further public consultation is undertaken.