EN ECB -PUBLIC 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 16 Ju ly 2012  
on new measures strengthening supervision and enforcement in financial regulation  
(CON/ 2012/ 52) 
 
Introduction and legal basis  
On 18 May 2012, the E uropean Central Bank (ECB)  received a request from the Irish Department of 
Finance for an opinion on the proposed parliamentary committee stage amendm ents to the Central Bank 
(Supervision and Enforcement ) Bill 201 1 (hereinafter the ‘draft law’ ) on which the ECB had adopted 
Opinion CON/2011/69 on 9 September 20111. 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indent s 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 of Ireland ( CBI) and 
contains rules applicable to financial institutions insofar as they materially influence the sta bility of 
financial institutions and markets . In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 
1. Purpose of the draft law  
1.1 This opinion concerns  certain amendments  and supplements (hereinafter the ‘draft amendments’) 
to the draft law. The draft law is intended to  provide the CBI  with enhanced powers for  the 
supervision of regulated financial service providers and the enforcement of financial servi ces 
legislation.  The publication of the draft law by the end of July 2011 was a structural benchmark of 
the EU -IMF Financial Support Programme for Ireland . 
1.2 First, the draft amendments set out a regulatory regime for the services of debt management f irms 
and bill payment firms which currently fall outside existing regulatory regimes, making these firms 
subject to the existing regulatory regime applicable  to financial service providers . 
1.3 Furthermore, t he draft  amendments will allow  the CBI to obtain any information necessary for the 
performance of  its du ties relating to the proper and effective regulation of financial service 
                                                      
1  All ECB opinions are available on the ECB’s website at www.ecb.europa.eu . 
2  OJ L 189, 3.7.1998, p. 42.   
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2 providers , by requiring all regulated financial service providers to provide information if asked to 
do so.  
1.4 Moreover, t he draft amendments will provide for changes  to the rules relating to the hearing of 
evidence, legal presumptions, legal professional privilege and the admissibility of expert evidence  
in the context of financial services legislation . 
1.5 The draft  amendments will also introduce a requirement that auditors of regulated financial service 
providers should give reasonable assurance s that the firms in question are compliant with certain 
regulatory requirements relating to  administrative or accounting procedures , internal control 
mechanisms and risk management , organisational structure, governance and oversight functions.  
1.6 The CBI  will also have the power  to direct regulated firms to give compensation to  customers. The  
purpose of this power is  to ensure  that custome rs are compensated quickly and with minimum 
inconvenience.  
1.7 Finally,  the draft  amendments will further extend and enhance the  CBI’s  powers to give  directions 
and make regulations , including, significantly, to enable  the CBI to adopt  regulations discharg ing 
its European S ystem of C entral B anks (ESCB) obligations . 
 
2. General observations  
2.1 The ECB welcomes that the draft  amendments address several specific issues raised by the ECB in 
Opinion CON/2011/693 on the draft law . Any other issues in that Opinio n not addressed  by the 
draft amendments  still remain valid.  
2.2 It is not yet clear how certain draft  amendments  will be incorporated into existing legislation , such 
as the provision giving the CBI the ability to apply for court orders to take action against persons or 
entities outside the CBI’s current  regulatory competence . The form of the draft law  has also still 
not been finalised. The ECB notes in this respect that the draft amendments remain subject to  
further review , including  by the Irish Attorney G eneral , meaning  that the y may be subject to further 
revision . 
2.3 This draft law is the second step in the legislative reform of the Irish central banking and financial 
regulatory regim e4. The ECB notes the robust  nature of the new measures and welcomes th e draft 
law as substantially  enhancing the supervisory and enforcement tools available to the CBI5. As 
regards the financing of the se enhanced CBI powers, the ECB refers to the principle of financial 
independence under which a national central bank (NCB) m ust have sufficient means to perform its 
                                                      
3  See, for example , the proposed amendment to section 53(1) of the draft law  to replace the expression ‘over seas regulator ’ 
with ‘Member State and third county authorities ’. 
4  The first  step was the Central Bank Reform Act 2010 which  renam ed the Central Bank and Financial Services Authority 
of Ireland , that became a single fully -integrated structure with a unitary board to replace the two -pillar structure of the 
previous Central Bank and Financial Services Authority of Ireland.  
5  See also paragraph 2.1 of Opinion CON/2009/50.  
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3 tasks related to the ESCB and its national tasks6. As pointed out in previous ECB opinions, when 
allocatin g specific non- ESCB related tasks to the NCBs , e.g. tasks  in the area of financial 
supervision or consumer pr otection, an adequate amount  of human  and financial  resources  must 
also be allocated in order for these  tasks to be carried out in a manner which will not affect the 
NCBs’ operational capacity to perform  their ESCB -related tasks7. The CBI should therefore 
possess sufficient human and financial resources to efficiently perform any additional tasks 
introduced by the draft law in addition to  its current tasks, and should not be adversely affected in 
carrying out its ESCB -related tasks, from an operational or f inancial point of view, due to any 
additional tasks introduced by the draft law.  
2.4 In particular, the ECB notes the expansion of the CBI ’s prerogatives in the area of consumer 
protection. Although consumer protection is not included in the NCB tasks spec ified in the Statue 
of the European System of Central Banks and of the European Central Bank , as pointed out on 
previous occasions, the ECB does not consider this task as interfer ing with the ESCB’s objectives 
and tasks. In addition, measures designed to enhanc e investor and consumer protection contribute 
to safeguarding the soundness of the financial market and preserv ing confidence in the 
marketplace.  
2.5  The ECB notes that various provisions of Union law  relating to supervision and enforcement in 
financ ial regulation  will shortly be introduced. As a general matter, the ECB underlines  the 
importance of ensuring that the draft law fully complies and is consistent with the relevant 
provisions of Union law. 
 
3. Legal instruments  
Part 6 of the draft law will be amended to em power the CBI to adopt  regulations  enabl ing it to discharge 
its ESCB obligations and transpose into  Irish law any ECB legal instrument that does not have direct 
effect but which is required to bind third parties , including ECB Guidelines . The ECB welcomes this 
provision as at present the method  for implementing these types of legal instruments is through contracts.  
By giving the CBI the  power to adopt regulations to discharge its ESCB obligations, in addition to the 
contractual approach, the enforceability of these legal instruments is reinforced . 
 4. Judicial and procedural amendments  
The draft amendments provide for changes to the rules relating to the hearing of evidence, legal 
presumptions, legal professional privilege, the  admissibility  of expert evidence  and statements and copies 
of documents for jurors. These rules will apply to the CBI’s performance of its dutie s under f inancial 
services legislation and to proceedings under financial services legislation.  The ECB understands that 
                                                      
6  See the ECB’s Convergence Report, May 2010, p. 21, paragraph 3.1.5 of Opinion CON/2 009/93, paragraph 3.2.1 of 
Opinion CON/2011/46 and paragraph 3 of Opinion CON/2011/69.  
7  See, for example,  paragraph 3 of Opinion CON/2007/8 and paragraph 3.3 of Opinion CON/2011/76.  
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4 these provisions will assist the CBI in enforcing financial services legislation and will contribute to more 
effective application of the legislation.  
 
5. Winding -Up Directives  
The ECB would welcome a  clarification of the draft amen dmen t to Part 5 of the draft  law8 which 
introduce s additional wording after section 39 of the draft law . This wording  provides  that if the CBI 
gives a direction in relation to a credit institution or insurance undertaking9 with the intention  of restoring 
or preserving the financial p osition of such  institution  or undertaking , the CBI will declare in the directio n 
that it i s made with that intention , in accordance with  the Winding -Up Directives10. 
In the ECB’s view , if the direction is to qualify as a ‘ reorganisation measure’  in accorda nce with the 
Winding -Up Directives, the direction  would not only have to be intended to preserve or restore the 
financial  situation of the institution but it would also have t o satisfy the second part  of the definition of  a 
reorganisation measure set out i n those Directi ves, as it could affect the pre -existing rig hts of third 
parties11. It would be helpful  if the draft amendments to this part of the draft law and the corresponding 
amendments to the implementing regulations for the Winding -Up Directives12 clarified this point in more 
detail. The ECB understands that not all directions the CBI may give to an institution would impact on its 
shareholders or creditors.  
 
6. CBI governance  
The draft law will be amended to provide  that a high -level official or significant shareholder of a 
regulated financial service provider cannot be a member of the Commission  of the CBI . Further , 
individuals  will be ineligible to be member s of the Commission where  (a) they have been  adjudged 
bankrupt , or (b) have enter ed into a composition  with their creditors , or (c) have been convicted of an 
offence for which they have been sentenced to a term of imprisonment. Lastly, the Commission may 
appoint an Audit Committee from among its appointed members that includ es at least one expert mem ber 
of the Committee who is not a member of the Commission. The ECB understands that these amendments 
aim to ensure that  the CBI’s auditing, financial reporting, control systems, legal structure and 
independence are adequate to ensure the integrity of oper ations and minimise the risk of misuse of 
resources or misreporting of data.  The ECB welcomes these amendments as they will help to ensure good 
corporate governance in the CBI.  
                                                      
8  Part 5 of the draft law ‘Bank’s power to give directions’.  
9  Section  37 of the draft law . 
10  Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding 
up of credit institutions (OJ L 125, 5.5.2001 , p. 15 ) and Directive 2001/17/EC of the European Parliament and of t he 
Council of 19 March 2001 on the reorganisation and winding up of insurance undertakings (OJ L 110, 20.4.2001 , p. 28 ). 
11  See Article 2  of Directive 2001/24/EC  and Article 2(c) of Directive 2001/17/EC.  In the case of the latter definition, the 
reorganisation measure would have to affect the pre -existing rights of parties other than the insurance undertaking itself.  
12  The draft amendments also include a corresponding amendment to the European Communities ( reorganisation and 
winding up of credit institutions) Regulations 2011 to add directions given by the CBI under Part V of the draft law to the list of reorganisation measures defined  in those regulations.
 
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7. Customer r edress  
The draft law will also be amended to provide for a procedure  for customer redress including  a provision 
allowing  the CBI to direct a firm to review transactions and to issue a further direction to make redress to 
consumers affected by errors identified . The ECB understands that the power to allow the CBI to direct 
regulated firms to redress customer s will be a means of ensuring that customers are compensated quickly 
and with minimum inconvenience , and that it would be used where the loss or damage as a result of an 
occurrence is widespread within a particular firm o r across a particular industry.  The ECB welcomes this 
provision insofar as the adoption of measures aimed to  strengthen investor and consumer protection 
would contribute to safeguarding the stability of the financial system . However , the ECB would welcome 
clarification in the draft law to address how such a provision is to interact with other provisions of 
national and Union law relating to customer redress.  
 
This opinion will be published on the ECB’s website.  
 
 Done at Frankfurt am Main , 16 July 2012.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI