A look at the regulation of banking and credit institutions
Banking and Credit Institutions
Banking Supervision relates to the prudential supervision of banks and building societies (together referred to as "credit institutions"). The objectives of supervising credit institutions are:
- To foster a stable banking system and
- To provide a degree of protection to depositors with individual credit institutions
Banking Supervision encompasses the authorisation of banks and building societies, their prudential supervision on an ongoing basis and the development of supervisory guidance and requirements for their operation. Prudential supervision involves monitoring the business of banks and building societies and how it is planned, managed, and controlled and checking compliance with statutory and non-statutory requirements.
Who the Irish Financial Services Regulatory Authority Supervises
The Financial Services Regulator is responsible for the authorisation and prudential supervision of all credit institutions banks and building societies incorporated in the State, as well as the Irish branches of banks located outside the European Economic Area (EEA).
It is illegal to take deposits in Ireland without being authorised to do so by - the Irish Financial Services Regulatory Authority or another EEA competent authority.
In accordance with EU legislation, EEA credit institutions are entitled to establish in Ireland on a branch basis or to provide services on a cross-border basis (i.e. without having a physical presence in Ireland). "Passporting" of services in this way is subject to a notification procedure through the home country regulator to the Financial Services Regulator. The home country regulator is largely responsible for the prudential supervision of these institutions.
What the Irish Financial Services Regulatory Authority Does
The authorisation function is a key element in meeting the objectives of banking supervision. Criteria for the authorisation of banks and building societies are set out in legislation, as augmented by non-statutory conditions and standards set out in the Financial Services Regulator's Licensing and Supervision Requirements and Standards for Credit Institutions. In considering applications for authorisation, particular focus is placed on ownership, management competence, corporate structure and controls, business plans and financial backing.
On-going prudential supervision involves monitoring the business of banks and building societies and how it is planned, managed, and controlled and checking compliance with statutory and non-statutory requirements. This process is interactive in nature and entails frequent dialogue with the banks and building societies, as well as the submission of extensive financial data by the supervised entities. As such, the process involves both qualitative and quantitative activities, including;
- Analysis of regularly collected financial data
- Regular meetings with management
- Review of internal audit, risk management and compliance reports
- On-site visits
- Meetings with other supervisors
- Meetings with external auditors
In the case of Irish branches of EEA banks and building societies, responsibility for the supervision of liquidity is shared between Financial Services Regulator and the home country regulator. The Financial Services Regulator is also responsible for ensuring that EEA branches are in compliance with Irish anti-money laundering procedures. Statistics are collected from the Irish branches of EEA credit institutions on a monthly basis and the Financial Services Regulator holds review meetings with branch management.