Opinion of the European Central Bank of 7 April 2010 on the restructuring of the Central Bank and Financial Services Authority of Ireland (CON/2010/30)

Date: 2010-04-07
Institutions: European Central Bank
Subjects: Ireland, banking supervision, central bank, institutional reform, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 April 2010 

on the restructuring of the Central Bank and Financial Services Authority of Ireland 

(CON/2010/30) 

Introduction and legal basis 

On  22  February  2010  the  European  Central  Bank  (ECB)  received  a  request  from  the  Irish  Minister  for 

Finance (hereinafter the ‘Minister’) for an opinion on draft heads (hereinafter the ‘draft heads’) relating to 

a proposed draft law entitled ‘the Central Bank of Ireland Bill 2010’ (hereinafter the ‘draft law’).   

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  (TFEU)  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 provisions1, as the draft law relates to the Central Bank and Financial Services 

Authority  of  Ireland  (CBFSAI).  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 heads  

The purpose of the draft heads is to provide a framework pursuant to which the draft law will be prepared. 

The draft heads implement a decision of the Irish Government of 16 June 2009 approving the reform of 
the internal structures of the CBFSAI2.  

The draft law will amend certain provisions of the Central Bank Act 1942 (CBA) to provide, among other 

things, that: (a) the CBFSAI will be renamed the Central Bank of Ireland (hereinafter the ‘Bank’); (b) the 

Bank will be a single fully-integrated structure, replacing the two-pillar structure of the existing CBFSAI 

with a unitary board called the Central Bank Commission (hereinafter the ‘Commission’), which will be 

chaired  by  the  Governor;  (c)  the  Irish  Financial  Services  Regulatory  Authority  (IFSRA)  which  is  a 

constituent part of the CBFSAI and responsible at present for the regulation of financial institutions, will 

be  dissolved;  (d)  the  posts  of  Chief  Executive  of  the  IFSRA  and  Consumer  Director  will  be  abolished; 

and  (e)  two  new  posts,  Head  of  Financial  Regulation,  responsible  for  the  regulatory  and  supervisory 

functions and objectives of the Bank, and Head of Central Banking, responsible for the performance of 

1  
2  

OJ L 189, 3.7.1998, p. 42. 
See Opinion CON/2009/89, paragraph 2.1.1, which specifically anticipated the present proposed reform of the internal 
structures of the CBSFAI. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 

 
 
 
 
                                                      
central  banking  functions,  will  be  established  and  there  will  be  new  enhanced  accountability  and 

oversight mechanisms. The Commission is to consist of a minimum of 10 and maximum of 12 members. 

4 members are to be ex-officio members: (i) the Governor of the Bank; (ii) the Head of Central Banking 

(who  is  to  be  appointed  by  the  Commission  with  consent  of  the  Minister);  (iii)  the  Head  of  Financial 

Regulation  (who  is  to  be  appointed  by  the  Commission  with  consent  of  the  Minister);  and  (iv)  the 

Secretary  General  of  the  Irish  Department  of  Finance.  The  other  members  (at  least  6  and  up  to  8  in 

number) are to be appointed by the Irish Minister of Finance from amongst people who, in his opinion, 

have relevant knowledge of accountancy, banking, consumer interests, corporate governance, economics, 

financial regulation, financial services, law, and social policy.  

According  to  the  draft  heads,  sections  19,  20,  21  and  22  of  the  CBA,  as  regards  the  Governor's 

appointment  and  tenure  of  office,  prohibition  on  shareholding  and  removal  from  office,  continue  to 
apply3. The current Chief Executive of the Office of the Financial Regulator is specifically stated to be the 

first Head of Financial Regulation. As regards the current Head of Central Banking, the draft heads state 

that there should be a transition arrangement for the present Director General. 

The  procedures  of  the  Commission  (relating  to  meetings  and  procedural  issues)  are  to  be  the  same  as 

currently apply to the Board of the CBFSAI. The Governor remains solely responsible for the functions 

related to the European System of Central Banks (ESCB). The Bank will be responsible for the prudential 

supervision of credit institutions and the stability of the financial system. Moreover, Head 8 of the draft 

heads states that the Bank will ‘assume the functions and powers of the Consumer Director’, so the Bank 

will be responsible for the protection of consumer interests, noting that such powers are already contained 

in the CBA.   

2. 

General observations  

2.1  Consolidation of Ireland’s central bank statutes 

As stated in previous opinions4, without a consolidated central bank statute the legal structure for 

Ireland’s  central  bank  is  lacking  in  transparency.  The  requirements  for  legal  clarity  and 

transparency  suggest  that  the  Irish  Government  should  take  the  first  suitable  opportunity  for  a 

consolidation  exercise,  and  the  ECB  welcomes  the  indication  from  the  consulting  authority  that 

such an exercise is envisaged. Consolidation of Ireland’s central bank statutes would greatly assist 

the  ECB  in  responding  to  consultations  from  the  Irish  authorities  on  draft  legislative  provisions 

within  the  ECB’s  field  of  competence  as  well  as  ensuring  that  Irish  legislation,  including  the 

statutes of Ireland’s central bank, is compatible with the Treaty on European Union (TEU) and the 

TFEU (hereinafter together the ‘Treaties’), as well as the Statute of the European System of Central 

Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’).  

3  

4  

With  one  small  amendment,  however,  to  section  21(2)  of  the  CBA,  involving  the  deletion  of  the  words  ‘if  the  other 
members have passed a unanimous resolution requesting the President to remove the Governor from office’. The effect is 
that the Government may ask the President to remove the Governor for stated serious misconduct on its own initiative.   
See, for example, paragraph 17 of Opinion CON/2002/16 and paragraph 9 of Opinion CON/2003/24. 

2 

 
 
 
                                                      
2.2  Reform of supervision in Ireland  

2.2.1  The ECB understands that the draft law is the first step in the legislative reform of the Irish central 

banking  and  financial  regulatory  regime,  and  that  further  legislation  will  be  introduced  to: 

(a) enhance  the  regulatory  powers  and  functions  of  the  Bank,  and  (b)  consolidate  all  legislation 

relating to the Bank. The ECB notes that the draft law and such further legislation should be the 

subject of separate consultations. 

2.2.2  The  ECB  welcomes  the  purpose  of  the  draft  heads.  The  ECB  has  consistently  favoured  the 

involvement  of  central  banks  in  prudential  supervision.  Previous  ECB  opinions  on  draft  national 

legislation to reform the institutional framework for prudential supervision in Member States have 

noted  that  central  banks  have  been  closely  involved  in  the  prudential  supervision  of  credit 

institutions,  due  to  their  pivotal  role  in  the  financial  system,  in  particular  regarding  the 
implementation  of  monetary  policy  and  ensuring  the  proper  functioning  of  payment  systems5. 

Previous ECB opinions have also noted that maintaining the close involvement of national central 

banks (NCBs) in prudential supervision is an important condition for allowing the Eurosystem to 

contribute adequately to monitoring the risks to financial stability in the euro area, in accordance 

with  Article  127(5)  of  the  TFEU,  and  to  safeguard  smooth  cooperation  between  the  central bank 
functions exercised at Eurosystem level and the supervisory functions carried out at national level6. 

Such involvement should not prejudice the primary objective of the ESCB of price stability. 

2.2.3  The ECB welcomes the establishment of institutional frameworks in Member States that recognise 

the  essential  role  of  NCBs  in  promoting  the  soundness  and  security  of  credit  and  financial 

institutions  and  the  stability  of  the  financial  system  as  a  whole.  Thus,  the  ECB  welcomes  the 

proposed restructuring of the CBFSAI so as to make the Bank fully and directly responsible for the 

supervision of credit and financial institutions. 

3. 

Specific observations  

3.1  Central bank independence  

The  new  framework  should  ensure  that  the  central  bank  will  be  a  fully  independent  institution 

functioning  in  compliance  with  the  central  bank  independence  principle  and  with  the  role  of  the 

central bank as part of the ESCB. The draft heads are not sufficiently clear as to whether Ireland’s 

central  bank  will  be  a  fully  independent  institution  entrusted  with  ESCB-related  tasks  as  well  as 

with other tasks that should not interfere with the ESCB’s objectives and tasks. Therefore, the ECB 

has concerns as regards the new design of the Irish central bank which should be clarified once the 

proposed  bill  has  been  published.  As  stated  in  the  ECB’s  convergence  reports,  the  central  bank 

must be a fully independent institution with a precisely defined mandate. In particular, the central 

5  
6 

See Opinion CON/2003/23, paragraph 6. 
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 

 
 
                                                      
bank, its decision-making bodies and their members must be independent and must not seek or take 
instructions from the Government as far as the ESCB-related tasks and objectives are concerned7. 

More  specifically,  for  ESCB-related  tasks  not  only  the  Governor,  but  Ireland’s  central  bank  as  a 

whole  as  an  institution,  and  the  Commission  which  will  be  responsible  and  accountable  for  the 

Bank  in  the  achievement  of  its  primary  objective  of  price  stability,  and  for  managing  and 

controlling  the  Bank,  must  be  independent  and  not  take  instructions  from  the  Government.  Any 

other member of the central bank’s decision-making bodies involved in the performance of ESCB-

tasks should also enjoy the same personal independence safeguards as the Governor. Although the 

draft heads provide for an independent governor solely responsible for the ESCB-related tasks, the 

Governor may not be seen in isolation from the central banking structure. Therefore, the new setup 

must  ensure  respect  of  the  central  bank’s  independence  and  must  clarify  the  roles  of  the 

Commission and the Governor.  

Assuming  that  the  above  interpretation  will  be  clarified  in  the  proposed  bill  and  expecting  to  be 

consulted thereon, in the interim the ECB has a number of reservations regarding the draft heads.  

3.1.1  Head 7 of the draft heads proposes the replacement of Section 6A(1) and (2) of the CBA as regards 

the objectives of the Bank. The draft law should expressly provide that the secondary objectives of 

the  Bank  set  out  in  the  new  Section  6A(2)  (hereinafter  the  'secondary  objectives'),  including  the 

new objective to support national economic policy development, should be without prejudice to the 

primary objective of maintaining price stability set out in Articles 127(1) and 282(2) of the Treaty 

and Article 2 of the Statute of the ESCB. Furthermore, the draft bill should expressly provide that 

the secondary objectives must be consistent and not interfere with the Bank’s obligation to support 

the  general  economic  policies  of  the  European  Union  with  a  view  to  contributing  to  the 

achievement of the objectives of that Union as laid down in Article 3 of the Treaty on European 

Union  (TEU),  which  is  itself  an  objective  expressed  to  be  without  prejudice  to  the  objective  of 

maintaining price stability.   

3.1.2  According to Head 7, the new Section 6A(2)(e) will provide that one of the other objectives of the 

Bank will be ‘the discharge of such other functions and powers as are conferred on it by law’. The 

ECB reminds the consulting authority that functions of the Bank must be performed in a manner 

that is fully compatible with the Treaties and the Statute of the ESCB. The ECB recommends that 

the draft law should clarify that the Bank’s objective to discharge ‘such other functions and powers 

as are conferred on it by law’ is subject to the requirements of the Treaties and the Statute of the 

ESCB.  

3.1.3  The new Section 6A(2) will state that ‘the Commission is to be responsible and accountable for the 

performance of the Bank in the achievement of its objectives’. In order to eliminate any legal risks 

associated  with  the  independent  discharge  of  the  Bank’s  ESCB-related  tasks,  the  Commission’s 

responsibility and accountability should be specified to be without prejudice to the Governor’s sole 

7  

See ECB Convergence Report of May 2008, pp. 17-18. 

4 

 
                                                      
responsibility  for  the  performance  of  the  Bank’s  objectives  relating  to  ESCB-related  obligations 

and  functions  and  should  not  compromise  the  ability  to  fulfil  those  obligations  and  functions 

independently.  The  draft  law  should  expressly  clarify  that  no  member  of  the  Commission,  other 

than the Governor, has decision-making powers on ESCB-related matters. 

3.1.4  Head  8  states  that  ‘subject  to  certain  exceptions,  the  functions  and  powers  …  of  the  Governor 

(excluding  ESCB  functions)  …  are  to  be  transferred  to  the  Bank’.  While  the  ECB  welcomes  the 

clarification  that  the  Governor’s  ESCB-related  functions  will  not  be  transferred  to  the  Bank  (as 

further  clarified  by  the  statement  in  Head  14  that  ‘the  Governor  will  continue  to  be  solely 

responsible  for  all  ESCB-related  functions’),  it  is  unclear  which  of  the  Governor’s  functions  and 
powers8 (albeit outside of his ESCB-related functions) are intended to be transferred to the Bank. 

Therefore, at this stage, the ECB is not able to properly assess the full impact of this draft head. 

Moreover,  this  provision  should  be  amended  as  it  might  give  the  impression  that  the  Bank  is  a 

dependent supervisory authority entrusted with ESCB-related tasks and objectives. 

3.1.5  Head 8 contains a further statement that ‘the Commission is to ensure that the existing powers and 

functions of the Bank under Section 5A and Section 5B (the core functions of the Bank under the 

existing provisions) are properly discharged by the Bank’. As stated above at paragraph 3.1.2, and 

according to Section 5A(4) of the CBA, ‘the Bank is required to perform its functions and exercise 

its powers in a manner consistent with the [Treaties] and the ESCB Statute’. The ECB trusts that 

Section  5A(4)  of  the  CBA  will  continue  to  apply.  Also,  the  ECB  recommends  that  it  should  be 

clarified that the Commission’s responsibility for ensuring the proper discharge by the Bank of its 

ESCB-related  functions  is  without  prejudice  to  the  Governor’s  sole  responsibility  for  the 

performance of the functions imposed, and the exercise of powers conferred, on the Bank under the 

Treaties or the Statute of the ESCB and should not compromise the ability to fulfil those functions 

and  the  obligations  under  the  Treaties  or  the  Statute  of  the  ESCB  independently.  For  reasons  of 

legal  certainty,  the  last  sentence  should  be  clarified  with  regard  to  the  scope  of  the  functions 

covered by it, and its reference to ESCB-related tasks. 

3.1.6  Head  11  proposes  that  only  a  minority  of  the  members  of  the  Commission  will  exercise  their 

function ex officio, the remaining (at least six) members being appointed by the Minister. Head 13 

states  that  the  current  provisions  of  the  CBA  regarding  removal  from  membership  are  to  be  the 

same as currently apply to the Board of the CBFSAI. According to Section 25(4) of the CBA, the 

Minister  of  Finance  may  remove  from  office  a  director  (being  any  of  the  (at  least  6)  directors 

appointed  by  him  as  above)  for  proven  misconduct  or  incompetence,  or  in  order  to  enable  the 

Board to function effectively, or in order to facilitate a restructuring of the Board and IFSRA so as 

to  enable  a  closer  working  relationship  between  them.  Of  the  ex  officio  members  of  the 

Commission,  one  will  be the  Secretary  General  of  the  Department  of  Finance,  and  the other  two 

will be the Head of Central Banking and the Head of Financial Regulation, both to be appointed by 

the  Commission  with  the  consent  of  the  Minister.  As  a  result  the  Minister’s  influence  over  the 

8  

The legislative provision which specifies the Governor’s functions and powers are set out in Section 19A of the CBA. 

5 

 
                                                      
central bank’s supervisory role will be greatly increased and the operational independence of such 

supervisory role will be endangered. The legislative framework must be redrafted so as to ensure 

the  operational  independence  of  the  central  bank’s  supervisory  role,  in  line  with  international 

standards  for  the  operational  independence  of  financial  supervisors.  In  particular,  the  legislative 

framework should provide that the members of the Commission have appropriate qualifications and 

technical  expertise,  and  provide  for  the  avoidance  of  conflicts  of  interests.  The  legislative 

framework  must  provide  for  autonomous  decision-making  of  the  Commission’s  members  in 

fulfilment  of  the  supervisory  mandate.  Moreover,  the  nomination  of  persons  implementing  the 

policies of the Commission (Head of Financial Regulation and Head of Central Banking) should be 

within the autonomous judgement of the Commission. 

3.1.7  Head  12  proposes  that  ‘The  Commission  is  to  manage  and  control  the  Bank’.  As  stated  at 

paragraph  3.1.3  above,  the  ECB  recommends  the  draft  law  should  clarify  that  the  Commission’s 

obligation  to  manage  and  control  the  Bank  is  without  prejudice  to  the  exclusive  authority  of  the 

Governor  in  relation  to  ESCB-related  matters  and  should  not  compromise  the  ability  to  fulfil 

obligations in that field independently. Furthermore, it is important that the other members of the 

Commission do not seek to influence or to give instructions to the Governor in his capacity as the 

sole member responsible for the performance of Bank’s ESCB-related tasks. 

3.1.8  Head 13 states that certain provisions relating to membership of the Commission are to be the same 

as those that currently apply to the board of the CBSFAI. To the extent that any provisions in the 

draft law relating to the Governor differ from those relating to the other Commission members, the 

ECB  recommends  that  the  draft  law  should  clarify  that,  in  the  event  of  any  conflict  between  the 

conditions applicable to all members of the Commission and those applying to the Governor, the 

Governor should be bound by the provisions applying specifically to him or her. Moreover, to the 

extent that the other members of the Commission other than the Governor would be involved in the 

achievement  of  the  ESCB-related  tasks  and  the  primary  objective  of  price  stability,  the  draft  bill 

should  provide  safeguards  for  their  personal  independence  similar  to  those  provided  for  the 

Governor. 

3.1.9  Head 14 proposes that ‘The Commission will delegate to the Governor such functions and powers 

relating to the day-to-day management of the Bank, the Heads of Function and staff of the Bank as 

the Commission deems appropriate to ensure the efficient and effective management of the Bank 

and the exercise of its powers, functions and obligations’. As stated above at paragraphs 3.1.3 and 

3.1.6,  the  ECB  recommends  that  the  draft  law  should  clarify  that  the  Commission’s  authority  to 

delegate to the Governor is without prejudice to the Governor’s exclusive authority in relation to 

ESCB-related  matters  and  should  not  compromise  the  ability  to  fulfil  obligations  in  that  field 

independently. 

6 

 
3.1.10 Head  15  states  that  Section  19  of  the  CBA  will  continue  to  apply.  Section  19(6)  and  (7)  of  the 

CBA  provide  for  the  automatic  termination  of  office  of  the  Governor  for  reasons  such  as 

bankruptcy,  imprisonment  or  holding  shares  in  a  financial  institution.  Head  15  also  states  that 

Section  21  of  the  CBA  (regarding  removal  of  the  Governor  from  office)  will  continue  to  apply. 

This Section allows for the Governor’s removal from office on grounds of permanent incapacity 

due  to  ill-health  and  for  one  or  more  specified  grounds  of  serious  misconduct.  To  ensure 

compliance  with  the  conditions  for  dismissal  of  a  Governor  in  Article  14.2  of  the  Statute  of  the 

ESCB,  Sections  19  and  21  need  to  reflect  the  language  used  in  Article  14.2  which  states  that  a 

Governor ‘may be relieved from office only if he no longer fulfils the conditions required for the 

performance of his duties or if he has been guilty of serious misconduct’. 

3.1.11 Head 18 relates to the Head of Central Banking and the Head of Financial Regulation. Although it 

is clear from this head that the current Chief Executive of the Office of the Financial Regulator is 

to be the first Head of Financial Regulation and that his first term is to run for the remainder of his 

contract  with  IFSRA,  the  ECB  recommends  that  the  draft  law  should  have  similar  clarity  as 

regards the position of Head of Central Banking, as Head 18(3) simply states that ‘there should be 

a transition arrangement for the present Director General of the Bank’. According to Section 22A 

of the CBA (relating to the Director General of the Bank carrying out certain responsibilities of the 

Bank), the Director General is required to carry out the Governor’s ESCB-related responsibilities 

whenever: (a) the Governor is unable to carry out those responsibilities because of absence because 

of  ill-health  or  any  other  reason,  or  (b)  the  office  of  Governor  is  vacant.  The  ECB  reminds  the 

consulting authority that, in the context of personal independence, the rules on security of tenure of 

office of the Governor apply equally to other members of NCB decision-making bodies who are 
involved  in  the  performance  of  ESCB-related  tasks9,  so  the  Director  General  has  the  same 

independence  as  the  Governor  in  the  performance  of  ESCB-related  tasks.  The  ECB  therefore 

emphasises that the present Director General must remain and must be able to see out his full term 

of office. In order to safeguard the independent exercise of the Bank’s ESCB-related functions, the 

ECB recommends that the draft law retains Section 22A of the CBA, so that the Head of Central 

Banking  will  continue  to  carry  out  the  Governor’s  ESCB-related  responsibilities  when  the 

Governor is unable to do so or when the Governor’s office is vacant.  

Head  18(7)  also  proposes  that  the  Governor  should  be  able  to  engage  in  other  remunerative 

employment  with  the  consent  of  the  Commission.  The  draft  law  should  provide  for  safeguards 

against conflicts of interest that could jeopardise the personal independence of the Governor. As 

stated in the ECB Convergence Report of May 2008,  ‘as a  matter of principle,  membership of a 

decision-making body involved in the performance of ESCB-related tasks is incompatible with the 

exercise of other functions that might create a conflict of interest. In particular, members of such 

decision-making  bodies  may  not  hold  an  office  or  have  an  interest  that  may  influence  their 

9  

See Opinions CON/2006/44, CON/2004/16, CON/2006/32, CON/2004/35 and CON/2007/6. 

7 

 
 
                                                      
activities, whether through office in the executive or legislative branches of the state or in regional 
or local administrations, or through involvement in a business organisation’10. 

3.1.12 Head  22  states  that  the  Bank  prepares  annual  accounts  in  accordance  with  Section  6H,  which 

stipulates that the form of statement of accounts must be approved by the Minister after consulting 

the Bank. Head 22, and consequently Section 6H, should reflect the Bank’s obligation to comply 

with the Eurosystem’s regime for financial reporting of the Bank operations pursuant to Article 26 

of the Statute of the ESCB. Moreover, under Section 6H, the Comptroller and the Auditor General 

will have the power to audit the Bank’s accounts. Such powers should be without prejudice to the 

audit by the Bank’s external auditors. 

3.1.13 Head 23 states that ‘The Bank is to prepare an annual estimate of income from levies, subvention 

from the Bank and any other income and expenditure in relation financial regulation. This is to be 

submitted  to  the  Minister  not  later  than  2  months  before  the  end  of  the  preceding  year.  The 

Minister  is  to  approve  these’.  As  noted  in  the  1998  European  Monetary  Institute  (EMI) 

Convergence Report, and reiterated in paragraph 8 of Opinion CON/2002/16, where third parties, 

and particularly the government, are in a position, directly or indirectly, to exercise influence on 

the determination of an NCB’s budget, the relevant statutory provisions should contain a safeguard 

clause  to  ensure  that  this  does  not  impede  the  proper  performance  of  the  NCB’s  ESCB-related 

tasks.  More  specifically,  in  order  to  eliminate  the  potential  exposure  of  the  Bank  to  liabilities 

resulting  from  funding  and  budgetary  decisions  in  respect  of  financial  regulation  (including  in 
respect of the Registrar of Credit Unions11), the ECB recommends that the draft law should clarify 

that the Governor has the sole right to determine any funding and budgetary decisions pertaining 

not  only  to  the  Bank’s  ESCB-related  tasks  and  their  implementation,  but  also  to  financial 

regulation (including in respect of the Registrar of Credit Unions), which may have implications 

for  the  Bank’s  independence,  in  particular  its  institutional  and  financial  independence,  or  which 

may be deemed otherwise incompatible  with the exercise by the Governor of the Bank’s ESCB-

related  functions.  The  Governor  could  be  granted  an  explicit  right  to  oppose  any  funding, 

budgetary  and  staffing  decisions  in  respect  of  financial  regulation  (including  in  respect  of  the 

Registrar of Credit Unions) which might have such implications.  

3.1.14 Head 24 states that ‘The Bank is to have the power to impose levies and fees for the purpose of 

funding  the  regulation  of  financial  service  providers  as  set  out  in  Sections  33J  and  33K.  The 

proceeds  of  the  levies  and  fees  are  to  be  applied  to  the  associated  costs  and  overheads  of  those 

functions set out in Schedule 2 of the Central Bank Act 1942 and functions previously carried out 

by the Consumer Director and currently carried out by the Registrar of Credit Unions’. The ECB 

recommends that the draft law should clarify that proceeds from such levies and fees raised will 

not be applied so as to apply central bank funding to non-central banking functions, thereby having 

a negative impact on the performance of ESCB-related obligations and functions. 

10 
11  

CR 2008 p. 20. 
See head 33 of the draft heads. 

8 

 
                                                      
3.1.15 Head 26 states that ‘where the proceeds of the levies and fees are likely to be insufficient to meet 

the  total  costs  of  the  financial  regulation  functions,  then  the  Bank  may  provide  additional  funds 

from  the  general  fund  to  subsidise  the  funding  of  the  financial  regulation  functions.  The  same 

safeguards  are  to  apply  as  do  currently,  i.e.  approval  of  the  Minister  and  confirmation  by  the 

Governor that such subsidisation will not affect the exercise of his ESCB functions’. In addition, as 

stated in Section 5A(4) of the CBA, the Bank is required to perform its functions and exercise its 

powers in a manner consistent with [the Treaties] and the ESCB Statute. Although it is proposed 

that  the  draft  law  will  contain  these  safeguards,  the  ECB  reiterates  the  concerns  expressed  in 

paragraph  7  of  ECB  Opinion  CON/2002/16  as  regards  central  bank  independence  and  the 

uncertainty  as  to  whether  the  Governor  would  enjoy  a  sufficient  degree  of  control  over  any 

decisions by the Bank to provide funding for the financial regulation functions, and whether this 

would  affect  the  performance  of  the  ESCB-related  tasks.  The  ECB  therefore  repeats  its 

recommendation  under  paragraph  3.1.13  of  this  opinion  that  the  Governor  should  be  granted  an 

explicit  right  to  oppose  any  funding,  budgetary  and  staffing  decisions  in  respect  of  financial 

regulation  (including  in  respect  of  the  Registrar  of  Credit  Unions)  which  might  have  such 

implications. 

3.1.16 Head  27  (dealing  with  Co-operation  in  the  Collection  of  Levies)  states  that  ‘the  Bank  may  co-

operate with a list [of] persons to be prescribed by the Minister (including the Pensions Board, The 

Financial  Services  Ombudsman  and  the  National  Consumer  Agency)  for  the  collection  of  levies 

under the Central Bank Acts, the Pensions Board legislation and any other legislation. This means 

that  the  Bank  or  a  prescribed  body  may  collect  the  various  industry  levies  as  the  agent  of  the 

others. The purpose of this is to encourage administrative efficiencies for both the regulators and 

the industry. Costs associated with the collection of levies on behalf of other bodies are to be met 

by the Principal.’ The ECB recommends that the draft law should clarify that proceeds from such 

levies  and  fees  raised  will  not  be  applied  in  such  a  way  as  could  result  in  applying  central bank 

funding to non-central banking functions, thereby having a negative impact on the performance of 

ESCB-related obligations and functions. 

3.2  Monetary financing  

3.2.1  As set out in paragraph 3.1.14, Head 24 states that ‘the Bank is to have the power to impose levies 

and  fees  for  the  purpose  of  funding  the  regulation  of  financial  service  providers  as  set  out  in 

Sections 33J and 33K. The proceeds of the levies and fees are to be applied to those functions set 

out  in  Schedule  2  of  the  Central  Bank  Act  1942  and  functions  previously  carried  out  by  the 

Consumer  Director  and  currently  carried  out  by  the  Registrar  of  Credit  Unions,  and  associated 

costs. This is to include overheads and other associated costs’. The ECB understands that the draft 

head proposes that the Bank may impose such levies and fees for funding its regulatory activities. 

In this regard, the ECB reminds the consulting authority that the tasks performed by the Bank must 

comply  with  the  monetary  financing  prohibition  in  Article 123(1)  of  the  TFEU  which  prohibits, 

among other things, overdraft facilities or any other type of credit facility with the national central 

9 

 
banks in favour of ‘bodies, offices or agencies, central governments, regional, local or other public 

authorities, other bodies governed by public law, or public undertakings of Member States’. The 

ECB recommends that the draft law should clarify that proceeds from such levies and fees will not 

be applied in such a way as might constitute monetary financing as prohibited under Article 123(1) 

of the TFEU.  

3.2.2  As set out in paragraph 3.1.16, Head 27 provides for cooperation in the collection of levies, with 

the Bank acting as the agent for the collection of levies on behalf of other public bodies, with the 

costs associated with the collection of levies on behalf of other bodies to be met by the principal. 

Under Article 21.2 of the Statute of the ESCB, the ECB and the national central banks may act as 
fiscal  agents  for  public  sector  bodies.12    The  Bank  may  therefore  act  as  fiscal  agent  through 

cooperation  with  public  sector  bodies  in  the  collection  of  levies,  on  an  agency,  but  not  on  a 

principal basis. Taking the above into account, the ECB has two comments. First, the Bank may 

only act as fiscal agent for public sector bodies. The ECB therefore recommends that the draft law 

should clarify that the Minister may only prescribe parties who fall within the definition of ‘public 

sector bodies’ as persons for whom the Bank, as fiscal agent, may cooperate in the collection of 

levies. Second, the ECB notes that Head 27 also refers to the cooperation by the Bank with persons 

for  ‘the  collection  of  levies  under  the  Central  Bank  Acts’.  The  ECB  understands  that  levies  and 

fees  collected  under  the  CBAs  will  be  collected  in  connection  with  the  performance  of  central 

banking tasks only, and not in connection with the performance of the tasks of other public bodies. 

The  monetary  financing  prohibition  in  Article  123  TFEU  applies  to  Head  27  in  this  respect.  As 

supplemented,  in  particular,  by  Article  1(b)(ii)  of  Council  Regulation  (EC)  No  3603/93  of  13 

December 1993 specifying definitions for the application of the prohibitions referred to in Articles 
104 and 104b (1) of the Treaty13, the financing by an NCB of (a) the performance of functions by 

other  public  sector  bodies,  or  (b)  the  public  sector’s  obligations  vis-à-vis  third  parties,  is 

prohibited. Therefore, national legislation authorising or requiring NCBs to finance such functions, 

without any corresponding activity or function on the part of the NCB, would not be compatible 
with  the  prohibition  on  monetary  financing.14  Moreover,  under  Article  271(d)  TFEU  the  ECB  is 

responsible for ensuring the compliance by NCBs with their obligations under the Treaties, which 

includes  compliance  with  the  prohibition  of  monetary  financing.  For  these  reasons,  in  order  to 

avoid any risk of a breach of the prohibition of monetary financing by the Bank, the draft law will 

need  to  clarify  that  any  levies  collected  by  the  Bank  for  other  public  bodies,  whether  under  the 

CBAs or otherwise, are collected by the Bank as agent for and on behalf of such other bodies. In 

particular,  Irish  law  needs  to  clarify  that  such  other  public  bodies,  acting  as  principals,  have  the 

12  

13  
14  

Public sector bodies are to be understood within the meaning of Article 21.1 of the Statute of the ESCB which reads as 
follows: ‘In accordance with Article 123 of the Treaty on the Functioning of the European Union, overdraft facilities and 
any other type of credit facility with the European Central Bank or with the national central banks of the Member States 
(hereinafter  referred  to  as  ‘national  central  banks’)  in  favour  of  Union  institutions,  bodies,  offices  or  agencies,  central 
governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of 
Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national 
central banks of debt instruments’.  
OJ L 332, 31.12.1993, p. 1. 
See Opinions CON/2005/50 and CON/2005/1. 

10 

 
                                                      
necessary power to impose levies and fees for the purpose of performing their respective tasks, to 

avoid any possible ambiguity as to whether funds belonging to the Bank are used to finance other 

public sector bodies and/or their obligations vis-à-vis third parties.  

3.2.3  Head 28 relates to the transfer to the National Consumer Agency (NCA) of the specific function of 

the  Consumer  Director  to  give  information  to  consumers  relating  to  financial  services.  Head  30 

proposes  for  the  secondment  and  potential  transfer  of  IFSRA  staff  to  the  NCA  in  order  to 

implement the transfer of that function. Head 30 further provides that ‘the seconded staff currently 

contribute  to  a  Central  Bank  superannuation  scheme  and  provision  is  to  be  made  for  the 

preservation of the rights of staff transferring to the employment of the Agency’. In order to ensure 

full  compliance  with  the  prohibition  of  monetary  financing,  the  ECB  recommends  that  the  draft 

law should clarify that no resources of the Bank will be applied towards the payment of pensions in 

respect  of  Bank  staff  seconded  or  transferred  to  the  NCA  pursuant  to  Head  30  following  such 

secondment  or  transfer,  other  than  solely  in  respect  of  ensuring  rights  and  entitlements  already 

accrued by those Bank staff up to the time of secondment or transfer.  

4. 

Final observations  

The  ECB  notes  that  the  publication  of  the  draft  law  would  require  a  further  ECB  consultation  by  the 

consulting authority under Article 2(1) of Council Decision 98/415/EC. The ECB reserves its position to 

further opine on the draft legislative provisions of the proposed bill when it is published.  

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 7 April 2010. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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