Central Bank of Ireland publishes 2022 Annual Report and Annual Performance Statement
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The Central Bank of Ireland has recently issued its 2022 Annual Report and Annual Performance Statements.
The Annual Report provides an overview of the key activities and work undertaken by the Central Bank of Ireland in 2022 including its review of the Consumer Protection Code and concluding tracker-related firm investigations.
In a difficult year with Russia’s invasion of Ukraine, the energy crisis and rising inflation, the Central Bank of Ireland played a vital role acting in the public interest to foster and develop trust and confidence in the financial system.
Some of the areas of interest of the Central Bank of Ireland’s Annual Report are detailed below:
Consumer Protection Code Review
The Central Bank of Ireland launched its comprehensive review of the Consumer Protection Code in 2022, which serves as the fundamental framework for safeguarding customers in financial services. This review aims to ensure that the Consumer Protection Code remains relevant in light of evolving consumer needs and the advancement of technology-driven products and services. A Discussion Paper was published in October 2022, inviting input from key stakeholders. Feedback is expected shortly following a comprehensive engagement period and a Consultation Paper will then issue which will propose specific amendments to the Consumer Protection Code.
Digital Euro
The Central Bank of Ireland is working with the European Central Bank (“ECB”) and national central banks in the euro area in respect of the central bank digital currency. The investigation phase of the digital euro initiative commenced in October 2021, which aims to explore technical and policy options that could serve as the foundation for designing a digital euro and is expected to conclude in the latter part of 2023.
The Central Bank of Ireland indicates that a subsequent phase will involve further exploration into the development and testing of technical solutions of a digital euro, as well as the necessary business arrangements to facilitate its implementation. However, the decision to commence this next phase will be determined by the ECB Governing Council in autumn 2023.
International Monetary Fund’s Financial Sector Assessment Programme
The International Monetary Fund (“IMF”) conducted a comprehensive assessment of the Ireland’s financial sector under the Financial Sector Assessment Program (“FSAP”). The assessment for Ireland commenced in 2021 and was concluded in 2022 with the release of the Financial System Stability Assessment for Ireland in July 2022. The Annual Report notes that the IMF concluded that “Ireland has considerably strengthened its financial sector regulation and supervision since the previous 2016 FSAP, and this is evidenced by a successful navigation through the challenges of Brexit, the pandemic and now the war in Ukraine.” The next FSAP in Ireland is due to take place in 2027-2028.
Climate Change
The Central Bank of Ireland confirmed its commitment to addressing the challenges posed by climate change within the scope of its mandate and in accordance with the Irish Government’s Climate Action Plan. The Central Bank of Ireland acknowledges that the transition to a carbon-neutral economy will impact macroeconomic and financial outcomes, altering the current structure of economies, and exposing financial firms and the financial system to prudential risks.
A Climate Risk and Sustainable Finance Forum was established in 2022, which aims to facilitate knowledge sharing and enhance understanding of the implications of climate change for the Irish financial system by bringing together cross-industry representatives, climate experts, and the Central Bank itself.
Financial Regulation & Supervision
The Central Bank of Ireland notes that it fulfilled its regulatory and supervisory duties in a time of significant change and challenges affecting consumers and regulated firms, including the following:
- In 2022, the Central Bank maintained its adoption of a risk-based approach to supervisory activities. Risks were evaluated at both the sector and firm levels, considering various aspects such as solvency, liquidity, operational practices, and retail conduct.
- The rising cost of living was of particular concern to consumers in 2022. In response, the Central Bank issued Dear CEO Letters to regulated firms in March 2022 and November 2022 to ensure priority and focus was placed on protecting customers in the midst of challenging economic times.
- Regarding the consolidation of the retail banking sector, the Central Bank emphasises that this area received significant attention as a key supervisory focus and a strategic priority for the entire institution throughout 2022. The Central Bank established clear expectations for the sector to ensure the orderly exit of Ulster Bank and KBC Bank Ireland. It emphasised the importance of prudent management throughout the process and ensuring the protection of consumers, particularly vulnerable customers.
- In response to new high-risk entity types, an increase in the number of firms and high-risk profiles, the Central Bank has continued its work to combat anti-money laundering and countering the financing of terrorism to include transaction monitoring, customer due diligence, risk assessment frameworks and suspicious transaction reporting.
- The Central Bank registered its first virtual asset service provider (“VASP”) in Ireland, with a further three firms subsequently registered. The Central Bank also issued an Anti-Money Laundering Bulletin on Virtual Assets Service Providers which set out issues identified by the Central Bank in its assessment of registration applications and provided information on its expectations in these areas.
Enforcement Actions
The Central Bank of Ireland delivered a number of notable enforcement actions including nine actions under the Administrative Sanctions Procedure in 2022. The fines exceeded €213.7 million, representing the highest amount imposed in a single year thus far. Some of these enforcement actions are outlined below.
- Allied Irish Banks plc was fined €83,300,000.00 and EBS DAC was fined €13,400,000.00 for regulatory breaches affecting tracker mortgage customers.
- Fitness and Probity notices were issued to two individuals along with three individuals being refused approval as pre-approval controlled function role holders.
- The Central Bank issued its first Assessment decision in accordance with market abuse legislation, imposing both a monetary penalty and a professional disqualification. This decision was subsequently affirmed by the High Court.
- In respect of unauthorised firms, the Central Bank published 112 warning notices in 2022, marking a 24% increase from the previous year.
- The Central Bank received 245 protected disclosures during 2022, an increase of 14 from 2021.
- The Central Bank as the competent authority supported the administration of EU sanctions arising from the Russian war in Ukraine. The Central Bank received 94 derogation applications, which allow individuals/entities to conduct certain activities that would otherwise be prohibited under the sanction. The Central Bank completed an assessment of 68 of the derogation applications and authorised 41.
These enforcement actions highlight the range of tools available to the Central Bank to address regulatory breaches committed by both regulated firms and individuals.
The Annual Report 2022 can be viewed here.
Written by Clodagh Morrissey and Andre Donnelly.