Regulation of financial services
When you buy a financial product or service you are protected by legislation. The Central Bank of Ireland is the statutory body responsible for regulating financial services in Ireland.
The Central Bank has the following main functions:
- Financial stability: This means ensuring the safety and soundness of the financial system to prevent major ups and downs in the economy. To do this the Central Bank looks out for risks and threats to financial stability and puts policies in place to protect against them. The Central Bank has an infographic on safeguarding stability in the financial system.
- Financial regulation: This means applying a wide range of rules and standards that financial services firms must follow. As a regulator, the Central Bank has to supervise firms to make sure they comply with these rules and if they don’t the Central Bank can use its enforcement powers – see more below.
You can watch this video on what does the Central Bank of Ireland do? to learn more about all of its functions.
You can also watch this video if you want to learn more about the Central Bank’s response to COVID-19.
How does the Central Bank regulate firms?
The Central Bank has the following roles when it comes to regulating financial services firms:
- Authorisation requirements: Firms must have the proper authorisation (also known as a licence) to provide financial services in Ireland. The Central Bank monitors which firms and individuals are able to enter the financial markets, making sure they meet certain standards before they are authorised to provide products or services to consumers.
- Prudential requirements: the Central Bank imposes rules on financial services firms called prudential requirements or prudential regulation. These rules are designed to make sure firms are financially sound and safely managed. Prudential regulation requires firms to manage risk and hold sufficient capital (or cash reserves) for its business needs. This is a basic level of protection for consumers.
- Conduct of business requirements: the Central Bank supervises firms to make sure that they follow conduct of business rules that make sure you are treated fairly when you buy a financial product or service – read more below.
Who does the Central Bank regulate?
The Central Bank makes sure that only regulated financial service providers can provide financial products and services to consumers. Regulated financial service providers are firms or individuals who are either authorised by the Central Bank or authorised in another EU member state to provide products and services to consumers in Ireland – see ‘How are firms supervised?’ below.
The Central Bank regulates the activities of financial service providers across a range of financial sectors including:
- Insurance companies
- Investment management firms
- Insurance and investment intermediaries (brokers and agents)
- Mortgage intermediaries (brokers)
- Collective investment schemes
- Credit unions
- Bureaux de change
- Other retail credit firms
- Home reversion firms
- Debt management firms
- Credit servicing firms
To make sure the company you are dealing with is authorised by the Central Bank, you should check the Central Bank’s register of authorised firms.
You can read more in this explainer on what is financial regulation and why does it matter? The Central Bank has a video explainer on what does the phrase "regulated by the Central Bank of Ireland" mean?.
What are conduct of business rules?
Conduct of business rules are there to protect you when you buy a financial product or service. In general, conduct of business rules require firms to:
- Act honestly, fairly and professionally
- Act in your best interest when providing products or services
- Give you the information you need to make informed decisions
- Correct errors and address any complaint you have speedily, efficiently and fairly
The Central Bank imposes conduct of business rules through a number of consumer protection codes. They are the:
- Consumer Protection Code (and associated addenda): A set of rules that firms must follow when they provide financial products and services to you, give you financial advice, advertise products and services and handle your complaints. The Central Bank has published a consumer guide to the Consumer Protection Code (pdf).
- Code of Conduct on Mortgage Arrears (CCMA): Rules that lenders must follow if you are in mortgage arrears and financial difficulty. Lenders must follow procedures aimed at helping you as much as possible. The Central Bank has information explaining the CCMA and how it works. You can read more in our document on consumer protection codes and mortgages.
- Consumer Protection Code for Licensed Moneylenders Code: A specific set of rules that moneylenders must follow. The Central Bank has information explaining its role in protecting people who use moneylenders
- Code of Conduct on Switching: A set of rules that all banks, payment institutions and e-money institutions must follow, designed to make switching accounts quick and easy. You can read more on opening and switching a bank account.
How are firms supervised?
The Central Bank is responsible for checking that firms follow rules and regulations.
Firms authorised by the Central Bank: the Central Bank supervises these firms for compliance with both prudential requirement and conduct of business rules.
Firms authorised by a Central Bank in another EU member state: A firm can be authorised in another EU member state and provide their services into Ireland under what is known as an EU passport or passporting. The Central Bank still makes sure these firms follow conduct of business rules but supervision for prudential regulation stays with their home country.
The Central Bank checks for compliance by supervising firms and individuals. Supervision is tailored to the firm or industry sector but can include:
- On-site inspections of firms
- Assessing if people are fit and proper to take on senior roles in firms
- Reviewing firms’ policies to see if they are appropriate
- Analysing financial statements and returns
- Desk-based research and reviews
You can read more about how the Central Bank’s supervises firms and what its current supervisory priorities are.
How are the rules enforced?
The Central Bank can take action against firms that do not follow its rules. There are 2 parts to the Central Bank’s enforcement work:
Administrative Sanctions Procedure: This is how the Central Bank investigates and sanctions breaches of financial services law by regulated firms and individuals. A sanction is the measure imposed on the firm to hold them to account for their breach of law.
For regulated firms, the sanctions can include:
- A caution or reprimand
- Having their licence suspended or revoked
- A fine of up to €10 million or 10% of firm’s turnover
An individual may be subject to:
- A caution or reprimand
- A disqualification from managing a regulated firm for a certain time
- A fine of up to €1 million
Fitness and Probity regime: This requires people in certain positions within regulated firms to be competent and capable, honest, ethical and of integrity, and financially sound. The Central Bank can also suspend people or ban them from working in financial services.
The Central Bank has an explainer on its enforcement powers.
The Central Bank does not investigate individual consumer complaints but it can use information it receives from consumers as part of its supervision of firms.
You can read more about your rights when you buy a financial product or service and how to complain about a financial services firm.
You can get more detailed information on the Central Bank’s role and work in its consumer hub.