The Act introduces changes to the functions and operation of the Central Bank of Ireland ("the Bank"). In particular it extends the functions and supervisory and enforcement powers of the Bank and also contains new provisions concerning payment systems and cross-border credit transfers.
REGULATION OF PAYMENT SYSTEMS
All payment systems must be approved by the Bank. Approval may be given subject to conditions and approval may be revoked. An appeal lies from a refusal or revocation to the Minister for Finance. In approving the rules of a payment system or in imposing terms and conditions for its operation, the Bank may in the interests of the proper and ordinary regulation of a system, impose conditions relating to:
- the requirements for membership and rules of operation of the system;
- the code of conduct to be followed by the members of the system;
- the apportionment of costs as between the members themselves or between the members and the system.
Payment systems in operation before the passing of the Act must submit their rules for approval within three months of the passing of the Act or else cease to operate.
CROSS BORDER TRANSFERS
The Minister for Finance may make regulations concerning cross-border credit transfers. These regulations should contain provisions providing for transparency; periods of time within which establishments may be bound to make a payment; an obligation to execute transfers in accordance with instructions in payment orders and dispute resolution procedures.
"Cross-Border Credit Transfer" is defined as a transaction carried out on the initiative of an originator via an institution or its branch in one Member State of the EU with a view to making available an amount of money to a beneficiary at an institution or its branch in another Member State.
SUBSIDIARY BODIES
The Act makes provision for the formation or acquisition of subsidiary bodies by the Central Bank subject to the consent of the Minister for Finance.
FUNCTIONS AND DUTIES OF THE GOVERNOR OF THE CENTRAL BANK
The Governor of the Central Bank is required to attend before the Finance and General Affairs Committee of the Dail and furnish that Committee with any information requested. The prohibition on the Governor from being a director of a licensed bank is extended to all commercial credit institutions, financial institutions and insurance undertakings.
SUPERVISION OF BUREAUX DE CHANGE
Bureaux de change must be authorised by the Bank. The Act sets out the procedure concerning the grant of refusal of an authorisation. Existing operations will have a period of six months after the section becomes operative to obtain authorisation.
The provisions of the Central Bank Act, 1971 concerning the keeping of books and records are applied to Bureaux de Change. The Central Bank is required to publish a list of Bureaux de Change once a year and to publish notice of any revocation of an authorisation as soon as possible.
REGULATOR OF INVESTMENT BUSINESS FIRMS
At Committee Stage of this legislation key changes were introduced in Part VI of the Bill, the effect of which is to appoint the Bank as sole regulator of all investment business firms pursuant to the Investment Intermediaries Act, 1995 (This Act gives effect to the provisions of the Investment Services Directive.) That Act had originally split the regulatory functions of investment business firms between the Central Bank and the Department of Enterprise and Employment. When the Central Bank Act, 1997 becomes operative the Bank will be the sole regulator of investment business firms.
AMENDMENTS TO CENTRAL BANK ACTS, 1942 - 1989
The Act introduces a number of amendments to the Central Bank Acts, 1942 - 1989.
SECURITIES TRANSACTIONS
The Bank is empowered to: buy or sell coin or gold or silver bullion; receive deposits; open accounts in other countries or act as agent, depository, or correspondent of any credit institution in carrying on business on or outside the State; to acquire, hold or dispose of shares in a bank or other institution formed wholly or mainly by banks with other principal currency authority in their respective countries; buy, hold or sell securities; operate or participate in any depositary of securities or other instruments; become a member of or operate or establish a payment system.
TENURE OF OFFICE
A uniform term of office of 5 years from a date of appointment will apply to all directors of the Central Bank, other than the service directors.
EXEMPTIONS FROM SUPERVISION BY THE CENTRAL BANK
The Minister for Finance may by order exempt certain firms or services in the Irish Financial Services Centre from Central Bank supervision.
DISCHARGE OF LIABILITIES
A financial institution which has its certificate revoked by the Minister, or has surrendered a certificate will be subject to supervision by the Central Bank, until such time as the liabilities of the institution, in whole or in part, have been discharged to the satisfaction of the Bank.
PROSPECTUS
Section 104 of the 1989 Act is amended. This section relates to the publication of certain prospectuses. The change means that the Central Bank is empowered to require any promoters of prospectuses by any of the new financial futures or option exchanges in the State to put a "health warning" on a prospectus to the effect that, if such be the case, the exchange has not been approved by the Central Bank and that such approval should not be taken for granted.
ELECTRONIC TRANSFER OF SECURITIES
Section 139 of the Central Bank Act, 1989, which deals with the electronic transfer of certain securities, is amended so as to enable the Central Bank to engage in the provision of settlement facilities for the buying and selling of securities and other instruments by financial institutions and to act as a depository or custodian of such securities and instruments.
LIABILITY OF MEMBERS
The Central Bank Act, 1989 is also amended so as to ensure that no employee or member of the board of the Central Bank would be liable for damages for anything done or omitted in the discharge of duty unless it was shown that the omission or act was in bad faith.
REVOCATION OF BANKER'S LICENCE
Section 11 of the Central Bank Act, 1971 is amended so as to allow the Central Bank to revoke a banker's licence where the bank organises its business or corporate structure in such a way as to avoid or escape effective supervision by the Central Bank.
BOND ISSUES
Section 48 of the Central Bank Act, 1971 which allows the Central Bank to issue bonds to licence holders is extended by allowing the issue of bonds to all credit institutions.
INJUNCTIONS
The Central Bank is given the power to apply to the civil courts for an injunction in respect of the taking of, or advertising for deposits by a person not licensed or authorised to do so under the Central Bank, Building Societies, TSB, ACC or ICC Acts.
CHANGES TO BUILDING SOCIETIES LEGISLATION
The Act amends Section 101(a) of the Building Societies Act, 1989 so as to provide for more equitable treatment of certain joint account holders in respect of voting rights and the issue of free shares in the context of future conversions of building societies.
Note: (At the time of writing this legislation in its final form had not been published and so reliance is placed on an earlier version of the legislation at Bill stage.)
Paula Reid,
A & L Goodbody,
Solicitors,
Dublin.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.