Opinion of the European Monetary Institute on a consultation from the Irish Department of Finance under Article 109f (6) of the Treaty establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the EMI as elaborated in the Council Decision of 22nd November 1993 (93/717/EC) (the “Decision”) on a proposal for legislation entitled the Central Bank Bill (the “Bill”) and, specifically, for provisions within the Bill to amend various sections of the Investment Intermediaries Act, 1995 (the “Intermediaries Act”) (CON/97/02)
Date: 1997-02-12
Institutions: European Monetary Institute
Subjects: Ireland, financial stability, financial supervision, investment company, national law, securities, stock exchange

OPINION OF THE EUROPEAN MONETARY INSTITUTE

on  a  consultation  from  the  Irish  Department  of  Finance  under  Article  109f  (6)  of  the  Treaty

establishing  the  European  Community  (the  “Treaty”)  and  Article  5.3  of  the  Statute  of  the  EMI  as

elaborated in the Council Decision of 22nd November 1993 (93/717/EC) (the “Decision”) on a proposal

for legislation entitled the Central Bank Bill (the “Bill”) and, specifically, for provisions within the Bill to

amend various sections of the Investment Intermediaries Act, 1995 (the “Intermediaries Act”).

CON/97/02

1.

The above consultation was initiated on 10th January 1997 by the Irish Department of Finance,

which  requested  an  opinion  of  the  EMI  within  one  month  of  receipt  of  the  consultation,  i.e.  by

20th February 1997.  For this purpose, the Department of Finance submitted relevant provisions

of  the  Bill,  being  in  the  form  of  Committee  Stage  Amendments  to  the  text  of  the  Bill,  together

with explanatory notes and a copy of the Intermediaries Act.

2.

The EMI’s competence to deliver an opinion is based on Article 1, section 1 of the Decision, as

the Bill relates, inter alia, to the following: the status and powers of the Central Bank of Ireland

(second  indent  of  section  1);  and,  rules  which  are  applicable  to  the  regulation  by  the  Central

Bank  of  Ireland  of  financial  institutions  and  which  may  have  an  impact  upon  the  stability  of

financial institutions and markets (fifth indent of section 1).

3.

The  EMI  was  consulted  on  a  previous  draft  of  the  Bill,  as  a  whole,  in  March  1996  (and

subsequently issued an opinion relating to that consultation - Reference 96/04 - dated 28th May

1996).    The  present  consultation  is  confined  to  certain  new  provisions  of  the  Bill,  proceeding

from  the  Committee  stages  of  the  Bill,  and  which  concern  proposed  amendments  to  the

Intermediaries Act.

4.

The proposed amendments to the Intermediaries Act are intended to provide that responsibility

for  the  regulation  of  investment  business  firms,  as  defined  in  the  Intermediaries  Act,  shall  rest

solely with the Central Bank of Ireland.  The Intermediaries Act presently provides for a split in

competence concerning the regulation of investment business firms.  The Minister for Enterprise

and  Employment  is  the  regulatory  authority  for  investment  business  firms  which  only  provide

services concerning limited categories of investment instruments - particularly Undertakings for

Collective  Investment  in  Transferable  Securities  and  other  collective  investment  scheme

arrangements  -  and  only  where  such  investment  business  firms  have  no  discretionary  control

over  client  funds  or  investment  instruments.    The  Central  Bank  is  currently  the  regulatory

authority for all other types of investment business firms.

- 2 -

5.

The  EMI  considers  that  the  proposed  amendments  to  the  Intermediaries  Act  whereby  the

Central Bank of Ireland will become the sole regulatory authority for investment business firms

will not adversely affect the stability of financial institutions or financial markets.

6.

The EMI also confirms that these proposed amendments  to  the  Intermediaries  Act  are  not,  in

principle,  inconsistent  with  the  requirement  for  independence  of  central  banks,  imposed  by

Article  107  of  the  Treaty  as  reflected  in  Article  7  of  the  Statute  of  the  ESCB,  nor  are  they

incompatible  with  either  the  Treaty  or  the  Statute  of  the  ESCB  (so  as  to  be  contrary  to  the

requirements  of  Article  108  of  the  Treaty  as  reflected  in  Article  14.1  of  the  Statute  of  the

ESCB).  This opinion does not prejudge the rights of the ECB under Article 14.4 of the Statute

of the ESCB.

7

The EMI confirms that it has no objection to this opinion being made public.

12 February 1997