In November 2024, The Central Bank of Ireland (Central Bank) published Guidance on its expectations for applicants seeking authorisation from the Central Bank to operate as a regulated firm (Cross Sectoral Guidance).
The Cross Sectoral Guidance seeks to increase the transparency of the authorisation process for firms seeking to be authorised and regulated by the Central Bank and to support firms in understanding the Central Bank's high-level requirements and expectations of applicants across all financial services sectors.
Central Bank Engagement Principles
The Central Bank's engagement principles are set out in the Cross Sectoral Guidance and can be summarised as follows:
- Applications should contain up-to-date, accurate and complete information.
- Applicant firms should make clear statements about the required information. This includes clarifying when information is not available, or the applicant does not know the answer.
- Applicant firms should be well informed of current sectoral and legal requirements.
- The Central Bank expects applicant firms to be open and cooperative in all dealings with it.
- Applicant firms should include all relevant information about their plans, including projections and plans to add to or alter authorisations or permissions.
Central Bank Authorisation / Supervisory Expectations
The Cross Sectoral Guidance sets out the Central Bank's general expectations of all applicant firms. Applicant firms should read and understand this guidance. The expectations can be summarised as follows:
- Customer interests are placed at the heart of business models. Securing customer interests, particularly in retail-facing business models, needs to be at the centre of a firm's application.
- Business models should be viable and sustainable.
- Applicant firms should demonstrate that they have sufficient substance in the State.
- Applicant firms should demonstrate that they have adequate resources commensurate with the nature, scale, and complexity of their business activities and the risks involved.
- Applicant firms should evidence governance arrangements commensurate with the nature, scale and complexity of proposed operations.
- Applicant firms should demonstrate that they have the capability to fully manage any outsourced activities and ensure that they are compliant with the Central Bank's Cross Industry Guidance on Outsourcing.
- Where applicable, applicant firms should evidence suitable arrangements to safeguard customers' funds, which is of paramount importance to the Central Bank.
- Applicant firms must have robust capital, governance and planning systems in place, in accordance with their individual sectoral requirements, and, therefore, be able to demonstrate and substantiate that they will have adequate and timely sources of funding (including under a plausible but severe stress scenario).
- Applicant firms must have adequate and sufficient frameworks in place to assess the applicant's compliance risks and to monitor the adequacy and effectiveness of its compliance monitoring processes and its ongoing compliance with its legal and regulatory obligations.
- Applicant firms must be able to demonstrate a clear ownership structure, up to, and including ultimate beneficial owners.
- Applicant firms must have a robust framework in place to effectively identify and manage Environmental, Social and Governance (ESG) risks and to ensure that the disclosure made to investors is clear and not misleading in terms of sustainability credentials.
- Applicant firms should demonstrate the ability to recover critical or important business services from a significant unplanned disruption while minimising impact and protecting their customers and the integrity of the financial system. They should also ensure they are compliant with the Central Bank's Cross Industry Guidance on Operational Resilience.
- Applicants should have plans in place to ensure that the firm can exit the market in a safe and orderly manner.
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.