Consultation paper on proposed revisions to the
Corporate Governance Code for Credit Institutions and Insurance
Undertakings
On 1 August 2013, the Central Bank published a
consultation paper (CP69) on proposed changes to the Corporate
Governance Code for Credit Institutions and Insurance Undertakings
(the 'Code').
The consultation paper sets out a series of proposed amendments in
areas such as the composition of the risk committee and the board
sub-committees. More generally, it sets out requirements
regarding the Chairman and the Chief Executive Officer. Among other
proposed changes, the consultation paper sets out a proposed new
section on the role and responsibilities of the Chief Risk Officer.
The paper also seeks comments on issues including board
composition, board meeting requirements and the current limits on
the number of directorships permitted for directors of
institutions.
Comments on CP69 are invited from interested parties before 1
October 2013. Submissions should made to codereview@centralbank.ie
Please click here to view the consultation paper in
full.
National Report on Long-Term Guarantee Income
Assessment
The Central Bank published a National Report on the Long-Term
Guarantee Impact Assessment (the "National
Report") which provides key messages from the Central
Bank in relation to its impact assessment (carried out between late
January and late March 2013) of the long-term guarantee measures
proposed under Solvency II.
Key areas of the National Report are as follows:
(a) Matching Adjustment - The matching adjustment, within the
draft proposals, is restricted to both domestic business and direct
insurers. The non-applicability of the measures to cross-border
business represents a clear disadvantage for undertakings selling
cross-border business. The non-applicability of the measures to
reinsurers places them at an economic disadvantage to direct
writers. This is not consistent with maximum harmonisation and the
freedom of establishment or freedom of services.
(b) Ring Fenced Funds - Under the draft proposals, the matching
adjustment can only be applied within ring fenced funds. The
Central Bank notes that there may be an unintended consequence of
requiring the use of ring fenced funds in this instance through a
loss of diversification benefit between mortality and longevity
risk. It takes the view that this diversification benefit should be
preserved and this can be achieved by establishing requirements for
asset liability matching that do not require legal ring
fencing.
(c) Transitional Measures - Under the draft proposals, the
transitional measures are restricted to both domestic business and
direct insurers. This raises the same concerns as the matching
adjustment.
(d) Extrapolation - A discount rate yield curve which is not
market consistent may cause a problem for insurers/reinsurers who
hedge their liabilities. The measures contained in the
proposals represent a move away from market consistency and may
mean reduced transparency around the costs of guarantees provided
over the longer term. The Central Bank favours a longer
extrapolation period.
(e) Member State Options - Measures that are subject to Member
State option may mean they are not permitted by all Member States,
therefore creating an arbitrage potential within the sector. Again
this is not consistent with maximum harmonisation.
Please click here to view the full text of the National
Report.
Intermediary Times
The Central Bank has published a third edition and a special
edition of the Intermediary Times. The purpose of the special
edition is to provide advance notice to all registered insurance /
reinsurance intermediaries of forthcoming changes to the
professional indemnity insurance ("PII") levels and
clarification in relation to the inclusion of a specified
retroactive date.
From 1 August 2013, all PII policies incepted or renewed by
insurance or reinsurance intermediaries must provide cover for at
least €1.25m per claim and €1.85m in aggregate per annum.
From 1 August 2014, all registered insurance and/or reinsurance
intermediaries must hold PII at these revised
levels.
The Central Bank considers that all insurance / reinsurance
intermediaries should hold continuous PII cover from the date of
their registration, as the European Communities (Insurance
Mediation) Regulations 2005
("IMR"). Therefore, where a firm
holds a policy which includes a specified retroactive date, it
should ensure that:
1. Any specified retroactive date is:
- the date that the firm was registered as an insurance / reinsurance intermediary under the IMR; or
- any date prior to the date that the firm was registered as an insurance / reinsurance intermediary under the IMR.
2. If a PII policy with a specified retroactive date does not
comply with (i) or (ii) above the intermediary must hold another
PII policy or a comparable guarantee which provides satisfactory
cover for the relevant period prior to the retroactive date
specified on the current PII policy. All documentary evidence
should be retained on a firm's PII file as evidence of
compliance with Regulation 17 of the IMR.
The Central Bank intends to commence a further thematic review of
PII cover prior to the end of 2013.
Please click here to view the special edition of the
Intermediary Times.
Issue 3 of the Intermediary Times covers matters including the
following:
(a) Changes to the Annual Return:
A new Annual Return will be made available through the Central
Bank's web-based Online Reporting System
("ONR") for firms due to submit Returns
from June 2013 onwards. These changes are the result of a
review of the format and ease of use of the Annual Return system
that was introduced by the Central Bank in July 2011. The
changes made to the Annual Return are minor and should not pose any
difficulty for firms. Firms will be able to submit Returns
using the new version from 17 June 2013. This will allow
firms with a December 2012 financial year-end only two weeks to
complete and sign off their Annual Return. The Central Bank has
expressed regret in relation to the shortened timeframe, which it
explains is due to IT requirements.
(b) Revision of the Handbook of the Prudential Requirements for
Authorised Advisors and Restricted Intermediaries:
The Central Bank is revising the Prudential Handbook which has
been in effect since July 2006. The revision is intended to
reflect changes in the regulatory environment and to strengthen the
prudential supervisory framework for investment
intermediaries.
There will be a three month public consultation as part of the
process. The consultation paper is due to be issued and will
be available in the Consultation Papers section of the Central Bank
website.
Please click here to view this section of the
website.
(c) Report on the Retail Intermediary Sector:
A Report on the Retail Intermediary Sector was published by the
Central Bank on 28 February 2013. This highlighted key issues
and risks for the sector and consumers and outlined the Central
Bank's regulatory approach to reducing risk and ensuring that
consumers are protected.
Please click here to view the report.
(d) Roadshows:
A series of regional roadshows will be held by the Central Bank in
the second half of 2013. These roadshows will provide updates
on topical regulatory issues and give attendees the opportunity to
speak with the Central Bank in person. It is intended that
the roadshows will take place in the South East and in the Midlands
of the country in September. Suggestions for other
locations should be sent by email.
Please click here to view the full text of the third issue
of the Intermediary Times.
Payment Protection Insurance Review
The Central Bank issued an update in relation to its on-going
investigation into the sales of payment protection insurance
("PPI").
Ten firms are currently conducting a review of their PPI sales
since July 2007. At the request of the Central Bank,
customers that are included in the PPI sales review have been
previously notified. The firms have now commenced writing to
their customers who purchased PPI in July 2007 in order to inform
them of the outcome of the on-going review, as it relates to their
situation. Throughout 2013, the firms will continue to
conduct the review and contact all other customers in relation to
the outcome. The Central Bank is advising customers who
receive a letter and have any questions to contact their bank or
credit institution directly.
The Central Bank will monitor progress on an on-going basis with
both the firms and the independent third party overseers who were
appointed at the request of the Central Bank.
The Central Bank will make a comprehensive statement at the
conclusion of the overall process.
Consultation Paper on Authorisation Service
Standards
The Central Bank has published a Consultation on
Authorisation of Regulated Firms, Funds and Intermediaries: Process
Improvements and Service Standards ("CP
67"). The purpose of CP 67 is to seek feedback on
proposed target turnaround times for processing applications from
firms who wish to become authorised to provide financial services.
The paper describes the programme of work conducted by the Central
Bank to improve the authorisation process applied to firms, funds
and intermediaries in order to improve efficiency and timeliness of
response, while maintaining rigorous assessment of new applicants.
The paper also outlines the proposed new service standards for
authorisation activities across a variety of sectors and the
proposed dates for their introduction.
Comments on CP 67 are invited from interested parties before 28
October 2013.
Please click here to view the consultation paper in
full.
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