EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 4 November 2009 
on the composition of the Board of the Central Bank and Financial Services Authority of Ireland 
and the membership of the Irish Fina ncial Services Regulatory Authority 
(CON/2009/89) 
 
Introduction and legal basis  
On 20 October 2009 the European Central Bank (ECB) received a request from the Irish Minister for 
Finance (hereinafter the ‘Minister’) for an opinion on  draft amendments to the Central Bank Act 1942, to 
be included in the draft National Asset Management Agency Bill 20091 (hereinafter the ‘draft law’). 
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 
on the consultation of the European Central Bank by  national authorities regarding draft legislative 
provisions2, as the draft law relates to the Central Bank and Financial Services Authority of Ireland 
(hereinafter the ‘Central Bank’). In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, th e Governing Council has adopted this opinion. 
 1.  Purpose of the draft law  
1.1 The purpose of the draft law is to amend certain provisions of the Central Bank Act 1942, as 
amended, to allow for the restructuring and creation of a common membership of the board (hereinafter the ‘Board’) of the Central Bank and of the Irish Financial Services Regulatory Authority (hereinafter the ‘Regulatory Authority’).  
1.2 The purpose of the proposed inclusions at Section 18BA(1) and Section 33E(1A) is to ensure that 
the Act will not prevent a member of the Board from being a member of the Regulatory Authority and vice versa. Section 18B(2), which states that four members of the Regulatory Authority must be members of the Board, and Section 25(2) and pa rt of Section 25(3), which refer to the vacation 
of office of those appointed directors who are memb ers of the Board by virtue of being a member 
of the Regulatory Authority, are to be deleted in light of the fact that the boards will now be combined. The rationale for the inclusion of Section 18BA(2) is to simplify the quorum requirements, given that the Board of the Cent ral Bank and the membership of the Regulatory 
Authority will be the same.   
                                                 
1  The ECB was previously consulted on other, unrelate d provisions of this Bill; see Opinion CON/2009/68. All ECB 
opinions are published on  the ECB’s website at www.ecb.europa.eu.  
2  OJ L 189, 3.7.1998, p. 42.  
2 1.3 The substitutions in Section 33E(1) and Sec tion 33E(1)(c) increase the minimum and maximum 
membership of the Regulatory Authority (and t hose members that can be appointed by the 
Minister) so that the number will correspond with that of the Board. The inclusion at Section 33I(1A) allows the Minister to appoint th e Governor of the Central Bank as Chairperson of 
the Regulatory Authority. The purpose of the ame ndments to Section 25(4)(b) (and inclusion of a 
new Section 25(4)(c)) and to paragraph 5(3)(b ) of Schedule 3 (and the inclusion of a new 
paragraph 5(3)(c) in Schedule 3)  is to add additional grounds on which the Minister can remove an 
appointed director of the Board or an appointed member of the Regulatory Authority.  
 2. General observations  2.1 Reform of supervision in Ireland  
2.1.1 The ECB notes that the essential purpose of the dr aft law is to enable a common membership of the 
Central Bank’s Board and the membership of the Regulatory Authority in the transitional phase 
before the dissolution of the Regulatory Author ity. The ECB understands from the consulting 
authority that the intention is that the functions of the Regulatory Authority – other than in respect 
of consumer information, which are intended to  be transferred to another agency – will be 
performed by a single unitary Central Bank of Ire land. The ECB further understands that the new 
structure, which will establish a single fully inte grated institution in a reformed Central Bank of 
Ireland, will be accomplished by way of separate legi slation yet to be published, which will be the 
subject of a separate opinion request.  
2.1.2 The ECB welcomes the purpose of the draft law. In  general, the ECB has consistently favoured the 
involvement of central banks in prudential supe rvision. Previous ECB opinions on draft national 
legislation reforming the institutional framework fo r prudential supervision in Member States have 
noted that central banks have traditionally been closely involved in the prudential supervision of 
credit institutions due to their pivotal role in the financial system, in particular regarding 
implementing monetary policy and ensuring the proper functioning of payment systems
3. 
Furthermore, previous ECB opinions have noted that maintaining close involvement of national 
central banks (NCBs) in prudential supervision is an important condition for allowing the 
Eurosystem to contribute adequately to monitoring th e risks to financial stability in the euro area, in 
accordance with Article 105(5) of the Treaty, and to safeguard smooth cooperation between the 
central bank functions exercised at Eurosystem le vel and the supervisory functions carried out at 
national level4. 
2.1.3 The ECB welcomes institutional frameworks in Member States that recognise the essential role of 
central banks in promoting the soundness and secur ity of credit and financial institutions and the 
stability of the financial system as a whole. As  such, the ECB welcomes the proposed restructuring 
                                                 
3  See Opinion CON/2003/23, paragraph 6. 
4  See Opinion CON/2006/39, paragraph 2. 3; Opinion CON/2006/15, paragraph 2.1. 2; Opinion CON/2001/10, paragraph 4; 
and Opinion CON/2001/35, paragraph 5. 
3 of the Central Bank in such a manner that the Central Bank will become fully and directly 
responsible for the supervision of  credit and financial institutions. 
 2.2 Central bank independence  
2.2.1  The ECB would point out that even during this transitional phase, the duration of which is not clear 
from the draft law, the Central Bank should continue  to perform its tasks in a manner consistent 
with the Treaty and the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’ ). In particular, under Article 108 of the Treaty, 
when exercising the powers and carrying out the t asks and duties conferred on it by the Treaty and 
the Statute of the ESCB, neither an NCB nor any member of its decision-making bodies may seek or take instructions from, inter alia , any government of a Member State or from any other body, 
which would include a statutory body such as the Regulatory Authority. Having particular regard to the unique structure of the Regulatory Authority as a constituent part of the Central Bank, the ECB 
considers that it is of critical importance, as required by Article 108 of the Treaty, that the Regulatory Authority should not seek  to influence the Governor, in his capacity as the sole member 
of the Central Bank’s decision-making body respons ible for the performance of the Central Bank’s 
ESCB-related tasks, during the transitional phase
5. 
2.2.2 In this regard, the ECB was consulted and issued an opinion in 2002 on the establishment of the 
Regulatory Authority as a constituent part of the Central Bank6. On that occasion, the ECB raised 
certain concerns regarding the Central Bank’s i ndependence and made suggestions designed to 
eliminate any legal risks associated with the independent discharge of the Central Bank’s ESCB-related tasks. 
2.2.3 In particular, it was considered that one safegua rd to ensure that supervisory tasks did not prevail 
over the central banking perspective would be to en sure that the composition of the Central Bank’s 
Board was not such that as many as half of the Bo ard’s directors hold their positions by virtue of 
being members of the Regulatory Authority. Given the new provisions in Section 18B of the draft law, the ECB would once again raise the concern th at the pursuit of supervisory tasks might prevail 
over the central banking perspective during the transitional phase
7.  
2.2.4 In its 2002 opinion, the ECB expressed concern that the potential exposure of the Central Bank to 
liabilities resulting from funding and budgetary deci sions for the Regulatory Authority could also 
be seen as a threat to the Central Bank’s financ ial independence. Moreover,  in order to eliminate 
any legal risks associated with the independent di scharge of the Central Bank’s ESCB-related tasks, 
one of the solutions suggested by the ECB was that  the Governor could be granted an explicit right 
to oppose any funding, budgetary and staffing d ecisions which might have implications for the 
Central Bank’s independence or which might be d eemed otherwise incompatible with the exercise 
                                                 
5  See Opinion CON/2002/16, paragraph 6. 
6  Opinion CON/2002/16. 
7  See Opinion CON/2002/16, paragraph 5. 
4 by the Governor of the Central Bank’s ESCB-re lated functions. The ECB’s 2002 opinion also noted 
that there might be potential for a conflict of in terest within the Central Bank’s Board between the 
financial interests of the Regulatory Authority and the independence of the Central Bank in view of 
the particular composition of the Board. It rema ined unclear from a legal perspective whether the 
Governor would enjoy a sufficient degree of control over any decision by the Central Bank to fund the Regulatory Authority so as to be able to fu lly protect the Central Bank’s institutional and 
financial independence
8.  
2.2.5 The concerns expressed in the ECB’s 2002 op inion were addressed by a number of additional 
statutory safeguards regarding funding, budgetary an d staffing matters, which were not present in 
the draft legislation on which the ECB was consulted9. While these additional statutory safeguards 
undoubtedly represented an improvement as compared  to the safeguards contained in the draft 
legislation on which the ECB was consulted, so far as funding and budgetary matters were 
concerned, these additional safeguards fell short of the solutions suggested by the ECB in order to 
eliminate any legal risks associated with the i ndependent discharge of the Central Bank’s ESCB-
related tasks10.  
2.2.6 The ECB would again raise the concerns expressed  in its 2002 opinion in view of the provisions 
proposed during the transitional phase now being envisag ed under the draft law. In this context, the 
ECB recommends clarifying in the draft law that the Governor has the sole right to determine any 
funding and budgetary decisions pertaining not onl y to the Central Bank’s ESCB-related tasks and 
their implementation, but also to the Regulatory Authority, which may have implications for the 
Central Bank’s independence or whic h may be deemed otherwise incompatible with the exercise by 
the Governor of the Central Bank’s ESCB-related functions. 
2.2.7 The ECB notes that the draft law will remove th e category of directors appointed to the Board of 
the Central Bank by virtue of their membership of  the Regulatory Authority. However to reduce the 
legal risks to the independence of the Central Bank, it  is important that the intent of the draft law to 
provide for full common membership of the Regulat ory Authority and of the Board is implemented 
in full. 
2.2.8 As regards personal independence, the same rule s for security of tenure of office of the Governor 
apply to other members of NCB decision-making bodies who are involved in the performance of 
ESCB-related tasks11. Nevertheless, the ECB notes that the amendments proposed to 
                                                 
8  See Opinion CON/2002/16, paragraphs 7-8. 
9  See Sections 6D(3)(a), 33L(3)(b), 33L(4) and 33N(4) and pa ragraphs 2(2) and 3(3) of Schedule 1 of the Central Bank Act 
1942, as amended. These safeguards are in addition to a num ber of statutory safeguards already reflected in the draft 
legislation on which the ECB was consulted and/or othe rwise reflected in the fina l legislation adopted. See 
Sections 5A(4), 18B(5), 33C(1)(b), 33C(7)-(8), 33D(1)-(2 ), 33N(3) and 33N(5) of the Central Bank Act 1942, as 
amended. 
10  Moreover, one of the additional statutory safeguards introdu ced at that time would now be removed under the draft law, 
namely that where the Board is considering budgetary, fundi ng or staffing issues relating to the Regulatory Authority, 
there is no quorum unless there are present sufficient members of the Board to ensure that: (a) if there is an even number 
of members present, at least half of them are not members of the Regulatory Authority; and (b) if there is an uneven 
number of members present, the majority of them  are not members of the Regulatory Authority. 
11  See Opinions CON/2006/44, CON/2004/16,  CON/2006/32, CON/2004/35 and CON/2007/6.  
5 Section 25(4)(b) (and inclusion of a new Section 25( 4)(c)) and to paragraph 5(3)(b) of Schedule 3 
(and the inclusion of a new paragraph 5(3)(c) in  Schedule 3), which provi de two additional grounds 
on which the Minister can remove an appointed di rector from the Board or an appointed member 
from the Regulatory Authority, do not affect th e Governor, who is sole ly responsible for the 
performance of ESCB-related tasks, or the Director  General when carrying out the Governor’s sole 
responsibility in this respect. Those two Board memb ers are official directors of the Board rather 
than appointed directors, and accordingly the additi onal grounds for removal of appointed directors 
do not apply to them. 
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 4 November 2009. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET