Written Answers Nos. 82-93
82. Deputy Michael McGrath asked the Minister for Finance if there is a mechanism in place whereby the Financial Services and Pensions Ombudsman can refer issues and investigations to the Central Bank if it is of the view they are systemic issues; the number of such cases referred in each of the past four years and to date in 2018; and if he will make a statement on the matter. [18694/18]
Amharc ar fhreagraFirstly, I must point out that the Financial Services and Pensions Ombudsman is independent in the performance of his statutory functions. I have no role in the day to day workings of the office.
As the Deputy will be aware the Financial Services and Pensions Ombudsman (FSPO) was established on 1 January 2018 under the Financial Services and Pensions Ombudsman Act 2017. I have been advised by the Ombudsman that Section 18 of the Act sets out how the Ombudsman shall co-operate with the regulatory authorities with a view to ensuring that this Act operates in a way that contributes to promoting the best interests of consumers and actual or potential beneficiaries of financial or pension services and to the efficient and effective handling of complaints.
The Act provides that the Ombudsman may make recommendations to the Central Bank in relation to measures that the Bank might take in order to effectively deal with persistent patterns of complaints. A similar provision existed in the legislation which underpinned the FSPO’s precursor body, the Financial Services Ombudsman (FSO), and the FSO and the Central Bank agreed a Memorandum of Understanding (MoU) which sets out the terms under which both parties give effect to these provisions. The MoU has not yet been updated to reflect the establishment of the FSPO on 1 January 2018, however, the original MoU continues to operate and is available on the FSPO website.
While the MoU provides for regular and routine information sharing, it also provides for specific information sharing whereby the FSPO will provide the Central Bank with detailed and specific information relating to a complaint (or complaints) for its general consideration in the following instances:
1. Where the circumstances of the case appear to call into question:
- a financial service provider’s fitness and probity;
- or whether any specified person may not be a fit and proper person to carry on a relevant function;
- or if it appears that a criminal offence or a serious regulatory contravention has occurred.
2. If it appears that a complaint or a series of complaints may give rise or are giving rise to issues of regulatory relevance to the Central Bank (whether or not the financial service provider has itself drawn the issues to the attention of the Bank).
3. If it appears that it would be desirable and appropriate for the Central Bank to consider using one or more of its regulatory tools, including the exercise of its investigative and other enforcement powers, the making of rules or the giving of guidance to financial service providers.
4. In response to a request from the Central Bank where it is, or is contemplating, using any of its regulatory tools in relation to the subject matter of the request.
5. Where it appears that a regulated entity has failed to comply with an award, determination, or direction (or equivalent thereof) made by an Ombudsman, or a court order in respect thereof. 6. Where it appears that a financial service provider has, without reasonable excuse, failed to comply with a requirement to provide information or to produce documents to an Ombudsman.
7. If it appears that it may be necessary for the Central Bank to exercise its powers to address shortcomings in a financial service provider’s complaint handling procedures.
The following table outlines the number of cases in which the FSPO/FSO reported potential systemic issues to the Central Bank in each of the past four years and to date in 2018.
|
Year |
No. cases involving Potentially Systemic Issues |
|
2014 |
4 |
|
2015 |
7 |
|
2016 |
4 |
|
2017 |
5 |
|
2018 |
0 |
83. Deputy Michael McGrath asked the Minister for Finance the steps the Central Bank has taken regarding system issues whereby money has not shown up in some bank accounts (details supplied); if the attention of the Central Bank was drawn to such cases; if the Central Bank is concerned that other banks will be impacted; and if he will make a statement on the matter. [18695/18]
Amharc ar fhreagraI have been advised by the Central Bank that it is aware of an issue involving the bank accounts of certain bank customers in recent days. The Central Bank is monitoring the situation and is in contact with the institution in relation to this matter.
While the Central Bank cannot comment on individual interactions with regulated entities, Ulster Bank Ireland DAC (Ulster Bank) has been engaging with the Central Bank in relation to this matter.
Customers have a legitimate expectation of high quality, uninterrupted services, whether provided through traditional or online channels. The Central Bank expects all firms to have adequate systems and controls in place and where issues that impact customers arise they should be addressed and rectified urgently, particularly as customers are increasingly using and becoming dependent on online and mobile banking services. In this regard, the Central Bank expects firms to communicate clearly and promptly with affected customers when a technical incident occurs, including details of the impacted service, details of alternative access to services and an undertaking that identifiable loss will be remediated. Those expectations have been communicated to banks.
84. Deputy Michael McGrath asked the Minister for Finance the role the Central Bank has in ensuring that information technology systems in place in banks are adequately designed, serviced and resourced to manage the increased usage of online banking; if the Central Bank undertakes regular inspections; and if he will make a statement on the matter. [18696/18]
Amharc ar fhreagraAs the Deputy is aware the European Central Bank (ECB) is responsible for all core supervisory responsibilities as defined in the Council Regulation (EU) No. 1024/2013 (SSMR). For Significant Institutions (which includes all the large retail banks in Ireland), a Joint Supervisory Team (JST), led by the ECB, and consisting of both ECB and Central Bank supervisors directly supervise these firms. In addition, on-site inspections are a tool used by the Single Supervisory Mechanism (SSM) in the supervision of banks and such on-site inspections are used in the area of IT risk. On-site inspections are carried out in line with the SSM supervisory processes, procedures, methodologies and manuals.
In response to the establishment of the SSM which assumed supervisory responsibility for Eurozone banks in November 2014, the Central Bank created a three divisional banking supervisory function with responsibility for: Supervision; Inspections; and Analytics.
The Inspections Division is responsible for conducting in-depth investigations of risks, risk controls and governance frameworks within Credit Institutions. These inspections cover risks such as Credit, Liquidity, Capital, Operational, IT, Business Model and Internal Governance. The inspections are performed by dedicated inspection teams at the premises of the Credit Institution. It is the responsibility of individual institutions to ensure that they have the necessary resources, including information systems, to deliver on their strategy. In addition, these resources must be subject to the necessary risk controls and governance commensurate with their complexity and risk.
85. Deputy Michael McGrath asked the Minister for Finance his views on recent reports that suggest insurance companies are using management fees to inflate premiums and to prevent outsiders from entering the market; and if he will make a statement on the matter. [18697/18]
Amharc ar fhreagra86. Deputy Michael McGrath asked the Minister for Finance if the Central Bank has a role in monitoring management fees booked by insurance companies; if the Central Bank collects data on management fees booked by insurance companies; if these data were gathered as part of the Blue Book on insurance statistics that was discontinued; and if he will make a statement on the matter. [18698/18]
Amharc ar fhreagraI propose to take Questions Nos. 85 and 86 together.
As Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products.
I am aware of recent reports in the media relating to the management expenses of insurance undertakings. I understand that the coverage relates in particular to the portion of Net Premium Income which these costs represent.
The Central Bank has informed me that, audited insurance company returns to the Central Bank of Ireland show that total industry management expenses and commission have remained relatively stable over the last ten years.
Insurance Ireland has separately noted that the net premium income which has been referenced does not include the costs of reinsurance protection. In other words, it represents premium income retained by insurers following payments made for such reinsurance protection. This means that where the cost of reinsurance protection increases, net premium income by definition falls. Insurance Ireland has indicated that this is what has actually happened in some years and that a comparison is being made in such years between a reduced net premium income and a level of management expenses that have not risen in absolute terms and have remained largely the same since 2005. This they say is demonstrated by Central Bank Statistics on motor management expenses which in 2005 amounted to €224 million and in 2015 were €216 million. They say that the effect of this comparison is to create an apparent spike in management expenses in recent times, which does not reflect the reality of the situation.
Insurance Ireland has also pointed out that reinsurance is an essential risk management tool for insurers as it involves the transfer of claims risk to a reinsurer. There is a cost associated with this as such reinsurance entities must also meet their own regulatory solvency requirements and therefore they charge the appropriate reinsurance premium to cover such risks, which an insurer must pay.
In relation to the Deputy’s second query, the Central Bank has informed me, that information on management expenses was included in the Solvency I returns that were submitted to the Central Bank. These audited returns formed the basis of the blue book. Those returns were based on the insurance companies’ financial statements, which were audited, and are available from the Companies Office.
It should be noted that information on management expenses is also available in the Solvency II returns submitted to the Central Bank. Interested parties seeking data at company level can find such data in publically available reports which are required of all insurance undertakings under the Solvency II regime. These reports are known as the Solvency and Financial Condition Reports (SFCRs). The SFCRs include a detailed narrative report on the insurance undertaking coupled with key quantitative reporting templates that contain premiums, claims, expenses, technical provisions, solvency and other information. All SFCRs for 2016 are made available by the Central Bank in a dedicated SFCR repository which can be accessed at
https://www.centralbank.ie/regulation/industry-market-sectors/insurance-reinsurance/solvency-ii/solvency-and-financial-condition-report-repository.
Whilst the Central Bank monitors the levels of management expenses at a company and industry level it has no role in the control of those expenses.
It is worth noting also that one of the recommendations of the Cost of Insurance Working Group linked to increasing transparency in the insurance sector is the publication of key aggregated metrics on claims costs and trends within the market, as an interim measure prior to the establishment of the National Claims Database. In July of last year, I published the first of these reports on the Department’s website: http://www.finance.gov.ie/wp-content/uploads/2017/07/1st-Motor-Insurance-Key-Information-Report.pdf. That Report provides information on the expenditure of a large portion of the insurance industry for the years 2011 to 2016 as a percentage of gross premium income. In that regard, the data provided by insurers indicates that combined commissions and other operating expenses reduced from 18.9% to 17.4% during that time.
In conclusion, the reports in the media demonstrate the need for the National Claims Information Database. It is clear that there is a need to be able to collect data related to the income and expenditure of insurers, in addition to the data linked to the costs associated with claims. Having such information will assist policyholders and researchers to better understand the drivers of the costs of insurance. This is one of the central policy aims of the National Claims Information Database and I think the publication of such data at industry level will facilitate an understanding into how particular expenses may or may not have an impact on the overall cost of insurance.
87. Deputy Michael McGrath asked the Minister for Finance the status of the Central Bank (national claims information database) Bill; when it will be introduced and enacted; if concerns put forward by an organisation (details supplied) will delay the publishing of the Bill; the changes that will be made as a result of the submission made by the organisation; and if he will make a statement on the matter. [18700/18]
Amharc ar fhreagraOn 19 December 2017, the Government approved the General Scheme of the Central Bank (National Claims Information Database) Bill, which was prepared following extensive work on the part of the Data Sub-group of the Cost of Insurance Working Group last year.
The Office of the Parliamentary Counsel assigned a drafter to the Bill on 26 January 2017 and officials in my Department are currently working with the drafter to finalise the Bill as soon as possible.
I also submitted the Bill to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and the Taoiseach for Pre-legislative Scrutiny at the beginning of the year, and that Committee contacted me in February to indicate that it would not be conducting any further scrutiny on the Bill.
A public consultation was launched on the General Scheme which concluded in March and the responses received were published on my Departments website: http://www.finance.gov.ie/updates/responses-to-central-bank-national-claims-information-database-bill-2017-consultation/. A number of responses were received from industry and business groups. My officials have been reviewing the content of these responses as they relate to the drafting of the Bill. As part of the process of finalising the Bill, the Department is assessing the responses with regard to the validity of the concerns expressed against the overall policy aim of the legislation.
The Deputy will recall that the policy aim of the Database is to enable policymakers to better understand the factors that influence the cost of insurance. This will require the collection of information linked to other factors such as the income and costs of insurers, and the settlement channels used to settle claims and the associated costs. On the basis of its review of the responses to date, the Department does not anticipate that substantive amendments will be required at this stage and therefore it is not anticipated to give rise to any delay in the finalisation and publication of the Bill.
In that regard, the Bill is included in the Government Legislative Programme on the list of Priority Legislation for publication this session and based on drafting progress to date I anticipate being in a position to publish the Bill before the summer recess.
A consultation will also have to take place with the European Central Bank on the Bill once it is published.
As the Deputy will be aware, it will take a certain amount of time following publication of the Bill, for it to pass through the Houses of the Oireachtas however I am hopeful that with the cooperation of all parties in the Houses, the Bill can be considered and approved expeditiously.
88. Deputy Michael McGrath asked the Minister for Finance if persons' credit ratings with the central credit register will be affected if payments were rejected as a result of the information technology issue at banks (details supplied); and if he will make a statement on the matter. [18753/18]
Amharc ar fhreagraThe Central Bank has advised that the Central Credit Register is being implemented on a phased basis. Phase 1 started on 30 June 2017 and included the submission of information on consumer loans such as credit cards, personal loans, mortgages and overdrafts. The information is provided by lenders to the Central Credit Register on a monthly basis, and represents the position of a loan as at the end of a month. Lenders are obliged to submit information that is accurate, complete and up to date.
Since 20 March 2018 credit reports containing this information have been available on request. Borrowers can request their report at any time free of charge and have a right to seek an amendment for any information that they believe is inaccurate, incomplete or out of date. Although provided for in the Credit Reporting Act 2013, the Central Credit Register does not calculate a score or rating for credit reports.
Phase 1b included submission of information from moneylenders and some other lenders. This phase started on 31 March 2018. Lenders have until 30 September 2018 to complete the submission of information, backdated to 31 March 2018. Phase 2 included business loans. This phase started on 31 March 2018 and these lenders have until 30 September 2018 to complete the submission of information.
89. Deputy Michael McGrath asked the Minister for Finance the number of payments a company (details supplied) will make into the escrow account; when the entire amount will be paid into the account; and if he will make a statement on the matter. [18754/18]
Amharc ar fhreagra91. Deputy Michael McGrath asked the Minister for Finance the body that will be responsible for the costs incurred on the management of an escrow account (details supplied); the expected cost of running the escrow account; the body that will have a right to the annual yield of the fund; and if he will make a statement on the matter. [18756/18]
Amharc ar fhreagraI propose to take Questions Nos. 89 and 91 together.
The Government does not accept the Commission’s analysis in the Apple State aid Decision and has lodged an appeal in the European Courts. However, we have always been clear that we are fully committed to ensuring that recovery of the alleged Apple State aid takes place and have committed significant resources to ensuring this is achieved. Given the unprecedented scale of the recovery amount, this has been a complex technical and legal process.
As the Deputy may be aware, on 24 April the Escrow Framework Deed which sets out the detailed legal agreement regarding the recovery of the alleged State aid was signed by me on behalf of the Government and also signed by Apple. This is a significant milestone with regard to the commencement of the recovery of the alleged State aid. This followed recent announcements that the Bank of New York Mellon London Branch has been selected as the preferred tenderer for the provision of escrow agency and custodian services to the fund and Amundi, BlackRock Investment Management (UK) Limited and Goldman Sachs Asset Management International have been selected as preferred tenderers for the provision of investment management services.
The signing of the Escrow Framework Deed now allows for the final processes to be completed including the formal appointment of the Escrow Agent/Custodian and the Investment Managers which in turn activates the process for the collection of the alleged State aid.
It is anticipated that the funds will flow into the escrow account in significant tranches and I expect that the full recovery will be effected by the end of Q3 2018.
In general, I should say that the costs associated with the fund are a liability of the fund. The arrangements in the Escrow Framework Deed include the agreement that all claims of ownership and access to these vast sums of money is suspended until the European Courts have concluded proceedings that the Government and Apple have brought.
90. Deputy Michael McGrath asked the Minister for Finance if payments made by a company (details supplied) into the escrow account will be deemed to be Government revenue under European fiscal rules at the time the moneys are paid; if the escrow account will be deemed on or off-balance sheet; and if he will make a statement on the matter. [18755/18]
Amharc ar fhreagraNotwithstanding the appeal in the Apple State Aid case and the difference in view between Ireland and the Commission on the issue, the Government is committed to complying with the binding legal obligations that the Commission’s Final Decision places on Ireland. Apple therefore must be deprived of the benefit of the alleged aid, which the Commission have estimated will amount to approximately €13 billion plus interest, as set out in EU Regulations on the recovery of State Aid. These sums will be placed into an escrow fund with the proceeds being released only when there has been a final determination in the European Courts over the validity of the Commission’s Decision.
Following consultation with the Central Statistics Office and Eurostat, it has been confirmed that there will be no impact on the General Government balance and that there will be no fiscal impact for the period in which the funds are in escrow.
This is because Apple and the Government are challenging the Commission’s Decision of August 2016 before the European Courts, and it could be several years before this is ultimately resolved. The basis for this is set out in the European System of Accounts 2010 (ESA 2010), Paragraph 20.189 which states:
When a court of justice rules that compensation must be paid, or a transaction reversed, resulting from or related to past events, the time of recording of the expenditure or revenue is when the claimants have an automatic and incontrovertible right for a given amount that can be individually determined, and when it is unlikely that claimants will fail requesting their due. When a court of justice merely sets a principle of compensation, or when the claims must be reviewed for eligibility and in relation to determination of the amount by administrative services, expenditure or revenue is recorded as soon as the value of the obligation is reliably determined.
As a result, the amount and timing are not recognised until a final judgement before the European courts.
92. Deputy Pearse Doherty asked the Minister for Finance the action the Central Bank will take against a bank (details supplied) following its computer problems; the rights of the affected customers in this regard; and if he will make a statement on the matter. [18798/18]
Amharc ar fhreagraWhile the Central Bank cannot comment on individual interactions with regulated entities, Ulster Bank Ireland DAC (Ulster Bank) has been engaging with the Central Bank in relation to this matter.
Customers have a legitimate expectation of high quality, uninterrupted services, whether provided through traditional or online channels. The Central Bank expects all firms to have adequate systems and controls in place and where issues that impact customers arise they should be addressed and rectified urgently, particularly as customers are increasingly using and becoming dependent on online and mobile banking services.
In this regard, the Central Bank expects firms to communicate clearly and promptly with affected customers when a technical incident occurs, including details of the impacted service, details of alternative access to services and an undertaking that identifiable loss will be remediated. The Central Bank has communicated their expectations to the banks. All impacted customers who are dissatisfied with the service offered to them by their bank are recommended to formally register their dissatisfaction by making a complaint with the bank in question.
If a consumer is not satisfied with the outcome of their complaint lodged with the Bank they may refer the matter to the Financial Services and Pensions Ombudsman to have it independently investigated. Investigations by the Financial Services and Pensions Ombudsman are free of charge to the customer.
93. Deputy Pearse Doherty asked the Minister for Finance the exact nature of the 4,000 new cases in the Central Bank's April 2018 update on the tracker mortgage scandal; the new groups that have been included; and if he will make a statement on the matter. [18885/18]
Amharc ar fhreagraThe Central Bank has advised that, as set out in its recently published April 2018 Tracker Mortgage Examination Progress Report, the total number of impacted customers identified through the Examination to end-March 2018 is c. 30,000 (of which 1,500 remain to be verified by lenders) and that this represents an increase of 3,400 identified customer accounts since the December report. (When added to the c. 7,100 cases resolved outside of the Examination, this brings the total number of customer accounts affected by tracker mortgage-related issues at end-March 2018 to 37,100). The Central Bank also advises that this increase is principally the result of verification of total numbers reported by lenders previously (as unverified estimates), as well as a small number of customer accounts newly identified by lenders.
Intensive review and challenge by the Central Bank has continued since the December report, and this remains ongoing. It should be noted that verification work by lenders, and review and challenge by the Central Bank, may lead to some further increase in the number of affected customers before conclusion of the Examination. The Central Bank has and will continue to challenge lenders in relation to various strands of the Examination until it is satisfied that all affected customers are identified and that lenders have carried out the Examination in accordance with the Framework set down by the Central Bank.
Due to statutory confidentially requirements, the Central Bank has advised that it is not in a position to comment on its supervisory engagement with individual firms and that, generally speaking, it can only disclose supervisory information in summary or aggregate form so that individual firms cannot be identified.
