Central Bank of Ireland publishes 2021 Annual Report and Annual Performance Statement
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The Central Bank of Ireland has recently issued its 2021 Annual Report and Annual Performance Statement.
The Annual Report provides an overview of the significant developments undertaken by the Central Bank in 2021. As acknowledged in the Annual Report, “[t]he pandemic served to illustrate, once again, that uncertainty will always be a central feature of the economy and financial system”. During 2021, the Central Bank worked to strengthen resilience and mitigate risks in the financial system so that it can be better equipped to withstand future shocks and crises following the impact of events such as the Covid-19 pandemic.
Some of the key activities of the Central Bank as detailed in the Annual Report are considered below:
Consumer Protection
The Central Bank made significant progress to strengthen protection for consumers and investors by enhancing regulatory frameworks and continuing to deliver risk-based supervision underpinned by a credible threat of enforcement.
The Annual Report outlines the steps taken by the Central Bank in respect of differential pricing in the home and motor insurance markets, by deciding to ban price walking, while ensuring customers retain the opportunity to shop around for better priced premiums. The Central Bank has introduced new measures to strengthen the consumer protection framework which will be effective from 1 July 2022. (see our recent blog in relation to the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Insurance Requirements) Regulations 2022 here for more information).
The Central Bank also engaged with the insurance sector on the issue of business interruption insurance, to ensure that insurance providers adopt a customer-focused approach. The Central Bank conducted a system-wide supervisory examination, with a multi-disciplinary team dedicated to deploying the supervisory framework through rigorous challenge of firms. The Annual Report outlines that this intervention has resulted in more than €163 million being paid to 5,128 policyholders through settled claims and interim payments to the end of December 2021.
Anti-Money Laundering (AML) and Countering of Financing Terrorism (CFT)
The Central Bank’s supervision in 2021 in respect of AML/CFT included 34 inspections, 87 review meetings and the issuance of 630 Risk Evaluation Questionnaires to firms. On foot of the inspections and review meetings, 131 findings were issued to firms. These findings resulted in 340 actions being issued to the firms, which will be pursued until completion.
The fifth Anti-Money Laundering Directive was transposed into Irish law by way of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 and the provisions that relate to Virtual Asset Service Providers commenced on 23 April 2021.
Regulatory Policy Development
The Central Bank supported the Department of Finance in developing an enhanced framework for individual accountability in financial services. The General Scheme of the Central Bank (Individual Accountability Framework Bill 2021 was published in July 2021. The final legislation is expected to be published this year (2022). The Individual Accountability Framework aims to improve governance in both the banking and wider financial services sector.
The Central Bank also contributed to key aspects of regulatory development at EU and international level, details of which are listed below:
- Advising the Department of Finance on key EU financial services proposals, revisions to the Capital Requirements Directive and Regulation, review of Solvency II, the Markets in Crypto Assets Regulation and the Digital Operational Resilience Act.
- Continued its role in the European Supervisory Authorities in relation to regulatory developments in the areas of consumer protection and banking, insurance and markets sectors.
- Contributed to shaping the European Supervisory Authorities’ responses to COVID-19, sustainable finance and climate risk, digital finance, securitisation, review of Solvency II, market infrastructure and sustainable investments in the fund sector.
Supervision and Enforcement
The focus on resilience remained a supervisory priority for the Central Bank in 2021. The ‘Guidance on Operational Resilience’ issued in December 2021, which provided cross-industry guidance on how to prepare, respond and recover from an operational disruption that affects the delivery of critical or important business services in the financial services sector. The guidance intends to enhance operational resilience under three pillars (Identify and Prepare, Respond and Adapt, Recover and Learn), in order to highlight the importance of identifying disruptive events and how to manage those events effectively.
During 2021, the Central Bank delivered significant enforcement outcomes, including notable fines, which reflect the targeted and proportionate application of enforcement tools to address serious breaches of regulatory requirements and misconduct by firms or individuals. A total of more than €67 million in fines were imposed in 2021, being the highest amount imposed in a single year to date.
A significant enforcement action was the imposition of a fine of €37.8 million on Ulster Bank Ireland DAC pursuant to the Central Bank’s Administrative Sanctions Procedure, in respect of 49 separate regulatory breaches affecting 5,940 tracker mortgage loan accounts. This significant fine reflects the gravity of the failings on the part of the lender.
The Central Credit Register
The Central Credit Register is a database that stores personal and credit information on loans of €500 or more. It is operated by the Central Bank of Ireland under the Credit Reporting Act 2013. It provides important information to the Central Bank which supports financial stability, supervision, statistical and other activities. It also provides reliable credit information to lenders for creditworthiness assessments. Lenders requested 1.8 million credit reports in 2021 and 22,315 credit reports were provided to borrowers. On foot of a statutory request from the Central Statistics Office, the transfer of the Central Credit Register data commenced in 2021, supporting their work in collecting, analysing and making available statistics about Ireland’s people, society and economy.
Climate Change
The Central Bank established a Climate Change Unit to take a strategic overview of the work on climate change and integrate climate risk considerations into its supervisory and financial stability assessments. The Central Bank wrote to firms in November 2021 to set out the supervisory expectations of regulated firms in respect of climate change and to highlight their statutory obligations and related supervisory expectations relating to climate and sustainability issues.
The Annual Report 2021 & Annual Performance Statement 2021 – 2022 can be viewed here.
