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The Minister for Finance, Michael Noonan, TD, today announced the publication of the Central Bank (Supervision and Enforcement) Bill 2011.

The bill responds to the regulatory failures of the financial crisis. It enhances the Central Bank’s regulatory powers, drawing on the lessons of the recent past in Ireland and abroad. The bill strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. The bill will provide the Central Bank with greater access to information and analysis and will underpin the credible enforcement of Irish financial services legislation in line with international best practice.

The Minister said:

"The publication of the Central Bank (Supervision and Enforcement) Bill 2011 represents a significant further step in the reform of financial regulation in Ireland. The changes introduced by the bill will underpin an assertive, risk-based model of regulation supported by a credible threat of enforcement."

The publication of the bill marks the delivery of a further requirement under the EU-IMF programme of support for Ireland by introducing legislation to strengthen the supervision and enforcement powers of the Central Bank by the end of July 2011.

The bill is expected to progress to second stage in Dáil Éireann in the autumn session.

Skilled person reports: This is modelled on a similar UK provision which allows the Central Bank to require a financial service provider (or related undertaking) to prepare an independent expert report on a regulatory matter, rather than relying on information submitted by the financial service provider alone. The reports could be used for diagnostic, monitoring and compliance purposes, including stress tests for example. There are safeguards to ensure that the provision is used in a balanced and proportionate way, with due regard to the cost burden on firms.

Authorised officers: The bill provides for a consolidated authorised officer regime to replace some 20 existing regimes. This brings greater clarity and certainty – for the Central Bank and financial service providers – regarding the ability of the Central Bank to access premises and records and seek regulatory information. The key new provision is the ability of the Central Bank to attend financial service provider meetings, with a safeguard to prevent this compromising the Central Bank’s ability to take action afterwards.

Whistle-blowing protections: The bill provides protection from civil liability and victimisation for whistleblowers. The provisions are flexible enough to provide for protections outside the strict employer/employee context. The bill also provides a mandatory disclosure regime for those performing pre-approval controlled functions (senior or influential positions within financial service providers); failure to disclose could be grounds for an investigation and action under the fitness and probity regime.

Directions: The power to issue regulatory directions is a central provision in the bill and allows for prudential regulatory interventions by the Central Bank across the range of its responsibilities in specified serious circumstances. The direction may require the entity to take certain actions or suspend certain activities.

Power to make regulations: The bill provides extensive regulation-making powers for the Central Bank. Though the provisions are expansive, in fact they relate in many cases to matters which are already Central Bank requirements under codes, for example consumer protections, related party lending and minimum competency requirements.

Fines: The bill increases the maximum penalties under the administrative sanction regime: from €5m to €10m (or 10% of turnover) for firms, and from €0.5m to €1m for natural persons. A person found guilty of an offence may be required by the Court to pay to the Central Bank the costs of the investigation. This will mitigate a situation where compliant firms are bearing the costs of enforcement against non-compliant firms.

Sanctions: The bill provides that a regulated financial service provider may have its authorisation suspended or revoked as an administrative sanction.

Restitution orders: Where a regulated financial service provider is guilty of an offence or contravention under financial services legislation, and where they have been enriched unjustly in doing so, the Central Bank will have the facility to apply to the Court for a restitution order. This will require the guilty party to pay a specified sum to the Central Bank for disbursement to those who have been identified by the Court as entitled to restitution.

Co-operation with overseas regulators

The bill provides that the Central Bank may use its information-gathering and authorised officer powers to collect information in co-operation with overseas regulators. This provision is necessary to allow the Central Bank to become a signatory to the Multilateral Memorandum of Understanding of the International organisation of Securities Commissions (IOSCO)