OPINION OF THE EUROPEAN CENTRAL BANK
of 19 November 2003
at the request of the Irish Department of Finance on a draft Central Bank and Financial
Services Authority of Ireland Bill (No. 2) 2003
(CON/2003/24)
1. On 24 September 2003 the European Central Bank (ECB) received a request from the Irish
Department of Finance for an opinion on the draft Central Bank and Financial Services Authority of
Ireland Bill (No. 2) 2003 (the ‘No. 2 Bill’).
2. The ECB’s competence to deliver an opinion is based on the second indent of Article  105(4) of the
Treaty, the second indent of Article 4(a) of the Statute and Article  2 of Council Decision  98/415/EC
of 29 June 1998 on consultation of the ECB by national authorities regarding draft legislative
provisions 1. The ECB is competent to deliver an opinion as the No. 2 Bill contains provisions
concerning a national central bank and rules which materially influence the stability of financial
institutions . In accordance with the first sentence of Article 17.5 of the ECB’s Rules of Procedure,
this opinion has been adopted by the ECB’s Governing Council.
3. The No. 2 Bill is to a large extent follows on from issues arising as a result of the first Central Bank
and Financial Services Authority of Ireland Act 2003, enacted earlier this year (the ‘No. 1 Act’),
which established a new Irish Financial Services Regulatory Authority (IFSRA) as a constituent, but
autonomous, part of the newly restructured Central Bank and Financial Services Authority of
Ireland. Specifically the No. 2 Bill contains seven main elements. First, the establishment of a
Financial Services Ombudsman to deal with consumer complaints about financial institutions.
Second, the establishment of consumer and industry panels for the IFRSA to consult with interested
parties. Third, new reporting and auditing obligations for financial institutions. Fourth, IFRSA powers
to impose penalties on financial institutions. Fifth, regulatory requirements for informal money
transmission services. Sixth, regulatory requirements for certain firms providing home loans.
Seventh, miscellaneous amendments to financial services legislation. The ECB would like to confine
its comments on the No. 2 Bill to a number of discrete points, as set out in this opinion.
4. As part of the follow-up to the No. 1 Act, the ECB would like to highlight a technical, drafting point
in connection with one specific provision which the ECB considers to be important. It is recalled
that in the ECB’s Opinion of 5 June 2002 at the request of the Department of Finance on a draft
Central Bank and Financial Services Authority of Ireland Bill, 2002 (CON/2002/16), the ECB noted
                                                                
1 OJ L 189, 3.7.1998, p. 42.
2that the IFSRA  is under an obligation to consult and obtain the approval of the Governor of the
Central Bank and Financial Services Authority of Ireland (the ‘Governor’) over matters relating to
the stability of the financial system, including the issue, revocation and suspension of a licence or
authorisation. As noted in the ECB Opinion, this provision is fundamental in the ECB’s view and
should be made the most of in practice to allow for the continued close involvement of central
banking functions in supervision matters, as was previously the case within the Central Bank of
Ireland. Indeed, this involvement is seen as a necessary condition to allow the Eurosystem to
contribute adequately to monitoring the risks to financial stability in the euro area. In addition, this
provision also safeguards smooth coordination between the central banking functions exercised at a
Eurosystem level and the supervisory functions carried out at national level.
5. The ECB notes, however, that the final wording of the new Section 33C(9) of the Central Bank
Act, 1942 (as introduced by the No. 1 Act) now provides that where the IFSRA  considers it
prudent in the circumstances, it may send a report to the Irish Minister for Finance on any matter
relating to the financial stability of the Irish State’s financial system, and that the IFSRA  may
‘otherwise’ act on such a matter only with the agreement of the Governor. This minor change in the
wording may inadvertently infer that the IFSRA  is only under an obligation to obtain the Governor’s
approval on matters relating to the stability of the financial system in circumstances where it has not
reported on such matters to the Minister for Finance. The ECB understands that this interpretation
does not represent the intention of the drafters, as it was intended to ensure that the IFSRA  may
only act on any matter relating to the financial stability of the Irish State’s financial system with the
agreement of the Governor. The ECB would therefore appreciate it if, as part of the current
opportunity to ‘tidy up’ afforded by the No. 2 Bill, this provision could be re-drafted to reflect the
true underlying intention in a clearer manner.
6. Another related issue concerns the potential jurisdiction of the new Financial Services Appeals
Tribunal (the ‘Appeals Tribunal’) over IFSRA decisions taken with the agreement of the Governor
and relating to the financial stability of the Irish State’s financial system (e.g. decisions to revoke or
suspend a license). Under the No. 1 Act the Appeals Tribunal has jurisdiction to, inter alia,  hear
and determine appeals made by affected persons against ‘ appealable decisions’ of the IFSRA.
After finishing the hearing of an appeal the Appeals Tribunal may affirm, vary or set aside an
appealable decision, or alternatively substitute any appropriate decision that the IFSRA could have
lawfully made in relation to the matter concerned. The No. 2 Bill defines an ‘ appealable decision’ as
a decision of the IFSRA that a provision of a designated enactment or designated statutory
instrument declares to be an appealable decision. As noted in the footnotes to the explanatory
memorandum accompanying the No. 2 Bill, separate legislation is being prepared to substitute the
Appeals Tribunal for the courts in relation to appeals against supervisory decisions of the IFSRA,
including notably decisions to refuse, withdraw or restrict a license or authorisation, with a full right
of appeal from the Appeals Tribunal’s decision to the courts. The ECB considers that a non-judicial
administrative review of any such IFSRA decision taken with the Governor’s agreement would be
3inconsistent with the independent discharge of the Governor’s ESCB-related task of contributing to
the stability of the Irish State’s financial system.
7. The ECB welcomes the proposed amendment to Section 103 of the Irish Companies Act 1963
requiring the Irish Registrar of Companies to enter in the companies register particulars of any
provision of a floating charge that has the effect of prohibiting or restricting a company from issuing
further securities that rank equally with that charge. Mortgage-backed promissory notes secured by
floating charges over pools of mortgage assets held by a number of Irish counterparties to ESCB
credit operations are currently eligible as ‘tier two’ assets for the collateralisation of ESCB credit
operations. During the subsistence of the security, a negative pledge prohibits these counterparties
from creating or permitting any encumbrance whatsoever over the charged property. Consistent
with standard market practices, this negative pledge is registered with the Registrar of Companies in
the case of companies, or in the public file maintained by the Central Bank and Financial Services
Authority of Ireland in the case of building societies. The legal security of the floating charge should
be further enhanced by making the standard market practice of registering negative pledges
contained in floating charges mandatory. In particular, this reform should reinforce the view that
registration constitutes notice of the negative pledge restriction contained in the floating charge, and
that a fixed charge granted to a party which had notice of the existence of the negative pledge
would not therefore have priority over that floating charge.
8. The ECB notes the extension in the No. 2 Bill of the authorisation currently applying to bureaux de
change to persons engaged in money transmission business, defined to include the service of
transmitting money by means of a clearing network from persons within the Irish State to other
persons (whether such persons are within the State or elsewhere) . The ECB understands that such
money transmission businesses may resemble features of payment and settlement arrangements
which should fall within the oversight competence attributed to the Governor, who is responsible for
promoting the efficient and effective operation of payment and settlement systems. The ECB would
welcome a legislative clarification of this point.
9. Finally, as also noted in the abovementioned ECB Opinion of 5 June 2002, the ECB notes that the
No. 2 Bill restates and reorders existing Irish legislation relating to the Irish central bank’s functions
and powers. While the ECB welcomes the partial consolidation of Ireland’s central bank statutes,
and most particularly the Central Bank Act, 1942, the ECB notes that the provisions of Irish law
relating to the basic structure of Ireland’s central bank and the performance of its ESCB-related
tasks is still contained in a number of different laws including the surviving provisions of the original
Central Bank Act, 1942, a number of provisions in the Central Bank Acts, 1971 and 1989, the
surviving provisions of the Central Bank Act, 1998, a number of provisions of the Economic and
Monetary Union Act, 1998 (as amended by the Finance Act, 2002), the No. 1 Act, as well as a
number of additional laws concerning currency matters. The lack of a consolidated central bank
statute creates a structure for Ireland’s central bank that is somewhat lacking in transparency. The
twin goals of clarity and transparency would suggest that at the first suitable opportunity the Irish
4Government should undertake a consolidation exercise. In addition, a full consolidation of Ireland’s
central bank statutes would greatly assist the ECB in fulfilling its ongoing task of responding to
consultations from the Irish authorities on draft legislation within the ECB’s field of competence. In
this context it is noted that Ireland’s central bank statutes are the only central bank statutes in the
Eurosystem which have not been consolidated.
10. The ECB confirms that it has no objection to the competent national authorities making this opinion
publicly available at their discretion. This opinion will be published on the ECB’s website six months
after the date of its adoption.
Done at Frankfurt am Main on 19 November 2003.
The President of the ECB
[signed]
Jean-Claude TRICHET