Ed Sibley: Opening statement - Joint Oireachtas Committee on
Finance, Public Expenditure and Reform, and Taoiseach
Opening statement by Mr Ed Sibley, Deputy Governor (Prudential Regulation) of the Central Bank
of Ireland, before the Joint Oireachtas (National Parliament) Committee on Finance, Public
Expenditure and Reform, and Taoiseach (Head of Parliament), Dublin, 15 December 2020.
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Good afternoon Chairman, Committee Members,
I am joined today by Gráinne McEvoy, Director of Consumer Protection.
We welcome the opportunity to appear before you today and discuss banking matters and hear
Committee members' views on the sector.
Firstly, I would like to address the Committee's invitation to discuss the NatWest strategic review
of Ulster Bank's future direction. In order for us to supervise effectively, and for connected legal
prohibition reasons, we are not able to publicly discuss our engagement with individual firms on
confidential matters. In the same vein, it would be inappropriate for us to appear at a hearing with
a regulated firm. This is why we respectfully declined the request to attend last week's meeting.
We indicated in our response that we remained available, as always, to the Committee on all
matters relating to our mandate.
We take our engagement with this Committee, and our accountability to the Oireachtas, very
seriously. Such engagement is one of several ways in which we demonstrate accountability for
the work we undertake in safeguarding monetary and financial stability and working to ensure that
the financial system operates in the best interests of consumers and the wider economy. We
would welcome the opportunity to discuss further how we can improve our engagement with the
Committee, such that we can help support you in meeting your objectives.
I will now briefly outline some of our current areas of focus in relation to the retail banks in Ireland,
with households, businesses and the wider community as a whole to the forefront of our minds.
COVID-19
Much of the Central Bank's focus this year has been on mitigating the unprecedented impact of
the COVID-19 pandemic. The Central Bank's intertwined responsibilities - consumer protection;
monetary policy; prudential regulation; payments, and so on - have strong interconnections with
each other. This positions us well to understand and mitigate the effects of the pandemic -
including through monetary policy, macro prudential tools and supervision.
Distressed debt
A key priority for us is that there are suitable supports in place to help borrowers affected by
income shocks caused by the pandemic and that lenders continue to seek to sustainably resolve
borrowers' longer term distress.
We have made our expectations clear on how borrowers should be treated and how lenders
should engage constructively with distressed borrowers to ensure appropriate and tailored
solutions to the borrower's circumstance are put in place. We expect all lenders to have
appropriate strategies, the necessary financial and operational resources, and a suite of
appropriate sustainable solutions to resolve distressed debt, whether it arose before or as a
result of the pandemic. We are also continuing to engage with a range of stakeholders on this
issue and have been listening closely to borrower representatives such that our work continues
to evolve.
Culture
The culture of firms is important in delivering our aspiration of a financial system that sustainably
serves the needs of the economy and its consumers. The failures of the last decade or so,
notably relating to the tracker mortgage scandal, demonstrate this importance and also highlight
that more progress is required.
We expect to see boards taking responsibility for the culture of their firms; overseeing product
development and usage; actively promoting diversity and inclusion at all levels to improve
decision-making; and ensuring robust internal systems are in place to drive effective cultures,
including well developed risk management frameworks. Where this does not occur, we will take
appropriate supervisory action and where serious or egregious breaches occur we take
enforcement action.
We are also seeking to strengthen the regulatory framework. We are currently working with the
Department of Finance to progress the Individual Accountability Framework. This seeks, among
other things, to enhance the accountability of senior individuals in banks.
Resilience
For the consumer and the taxpayer, safeguarding financial stability is one of the most important
ways in which the Central Bank works to protect their interests - including in seeking to ensure
that the banking system operates in a safe, sound and sustainable way. Banks need to be in a
position to absorb shocks, and have the ability to build buffers to withstand future shocks, so they
can serve the economy and consumers over the long term.
The Irish banking system entered this crisis with substantial buffers of loss-absorbing capital,
and considerably more robust business models, less risky loan books and better operational
resilience than compared with the situation before the global financial crisis. This ensured that
they have been better able to continue to support their customers and the real economy through
the pandemic.
Changing banking and consumer landscape
The shift to digitally-enabled services within the retail banks is already profound and is
accelerating, including due to the behavioural changes arising from the pandemic. As we look to
the future of the retail banking sector, we see a rapidly changing landscape. During the pandemic
we have seen changes in consumer behaviour around use of cash, including significant
increases in online transactions.
This acceleration of existing global trends is connected with consumers moving away from using
banks in a number of ways. Challenger firms, for example providing payments services, often
specialise in one service meaning they can be more agile and responsive to customer needs in
that area. This is putting increasing pressure on banks to improve their digital offerings and
changing their approach to engaging with their customers.
While there are many benefits to this development for many people, it does increase the risk of
financial exclusion, for example due to age or income factors. We recognise the importance of
the credit union sector in this regard, with its wide network of community-focussed and highly
trusted cooperatives.
Irrespective of how retail banks choose to serve their customers they must, at a minimum, meet
the standards we have in place for protecting consumers. While decisions about the provision of
services and branch networks are commercial matters for individual institutions, we have clear
expectations on the need to take a consumer-focused approach. The Consumer Protection
Code sets out the requirements on firms to ensure clear, timely communications with customers
regarding any such permanent changes to a bank's branch network and to have alternative
channels available to consumers to avail of banking services.
In the event that a regulated entity intends to withdraw from the Irish market, the withdrawal must
be undertaken in accordance with the provisions of Irish financial services legislation, including
the Central Bank's statutory codes of conduct. Where a loan is sold or transferred the
protections that were available to borrowers prior to the transaction continue to be in place with
the new loan owner. This ensures that borrowers whose loans are sold or transferred, maintain
the same regulatory protections, including under the various Central Bank's statutory codes of
conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage
Arrears 2013 (CCMA).
Other risks
There are of course many other issues relevant to the Irish banks. We have also been
continuing to work to mitigate the risks posed to the economy, consumers, and the wider
financial system of the UK's departure from the EU. Brexit has already led to a significant growth
in the size of the internationally focused banking sector in Ireland. Looking forward we will be
increasing our work on climate change, which is relevant to all banks operating in Ireland.
Thank you. I very much look forward to our discussion on these and other important issues and
developments in the banking sector.