Opinion of the European Central Bank of 9 July 2013 on branches of non-EEA credit institutions (CON/2013/49)
Date: 2013-07-09
Institutions: European Central Bank
Subjects: Ireland, banking supervision, central bank, credit institution, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 July 2013 

on branches of non-EEA credit institutions 

(CON/2013/49) 

Introduction and legal basis 

On  24  June  2013,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Irish  Minister  for 

Finance for an opinion on an amendment to the Central Bank (Supervision and Enforcement) Bill 2011 

(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  and  the  third  and  sixth  indents  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 of Ireland (CBI) and to 

the rules applicable to financial institutions insofar as they materially influence the stability 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  The draft law amends the Central Bank Act 1971, which provides for the licensing and supervision 

of banks by the CBI, by introducing a new section 9A, pursuant to which the CBI may authorise a 

branch  of  a  credit  institution  located  outside  the  European  Economic  Area  (EEA)  (hereinafter  a 

‘section 9A branch’) to carry on banking business in Ireland. Such authorisation is to be provided 

on condition that the CBI is satisfied that the credit institution in question is subject to authorisation 

and  supervisory  rules  in  the  country  in  which  its  head  office  is  located,  which  are  broadly 

equivalent to those applicable in Ireland. In addition, the CBI is to be satisfied that depositors with 

a section 9A  branch will be able to  avail of protection broadly equivalent to that provided under 

Irish law. 

1.2  A  section  9A  branch  is  not  to  be  treated  in  any  respect  more  favourably  than  branches  of  credit 

institutions whose head offices are located within the EEA. Furthermore, a section 9A branch will 

continue  to  be  subject  to  prudential  regulation  in  the  country  in  which  its  head  office  is  located, 

while the CBI will be responsible for regulating its conduct of business in Ireland. 

1  

OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                 
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2. 

Non-compliance with the consultation obligation 

Scope of the consultation 

2.1  The  ECB  received  the  consultation  request  on  24  June  2013.  The  consultation  request  indicated 

that the draft law was to have reached committee stage and been discussed in Seanad Éireann, the 

upper  house  of  the  Irish  Parliament,  on  27  June.  The  ECB  understands  that  the  final  stages  in 

Seanad Éireann of the 2011 Bill took place on 2 July and that, on that occasion, the draft law was 

amended  and  further  related  amendments  were  made  to  the  Central  Bank  (Supervision  and 

Enforcement) Bill 2011. This opinion is limited to the version of the draft law which was sent for 

consultation.  

2.2  Article 2(1) of Decision 98/415/EC provides that national authorities shall consult the ECB on any 

draft  legislative  provision  within  its  field  of  competence  pursuant  to  the  Treaty.  Article  2(1)  of 

Decision 98/415/EC contains a non-exhaustive list of matters which fall within the ECB’s field of 

competence, and on which the ECB must be consulted by national authorities. In the event that a 

provision which has been submitted to the ECB for its opinion is substantively amended prior to 

the adoption by the ECB of its opinion, or where further draft legislative provisions are proposed, 

an updated version of all legislative provisions in question should be submitted to the ECB for its 

opinion. 

Appropriate time to consult the ECB 

2.3  Article 4 of Decision 98/415/EC provides that the ECB must be consulted ‘at an appropriate stage’ 

in the legislative process. It follows from this that the consultation should take place at a point in 

the  legislative  process  that  affords  the  ECB  sufficient  time  to  examine  the  draft  legislative 

provisions  in  question  and  adopt  its  opinion.  Following  from  the  wording  of  Article  3(4)  of 

Decision  98/415/EC,  Member  States  are  obliged  to  suspend  the  process  for  adoption  of the  draft 

legislative provisions pending receipt of the ECB’s opinion in order to allow the relevant national 

authorities  to  meaningfully  deliberate  the  ECB’s  opinion  prior  to  adoption  of  the  provisions  in 

question. In this respect, the ECB stresses that the fact that the enactment of a particular draft law is 

urgent  does  not  relieve  national  authorities  of  their  obligation  to  consult  the  ECB  and  to  allow 

sufficient time for its views to be taken into account in accordance with Decision 98/415/EC. The 

Irish Government should have postponed adoption of the draft law until such time as would have 

allowed for a proper consultation with the ECB, as well as due consideration of the ECB’s Opinion. 

The ECB would appreciate it if the consulting authority would honour its obligation to consult the 

ECB in a timely manner in the future. 

3.  General observations 

Union law 

3.1  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013  

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on  prudential  requirements  for  credit  institutions  and  investment  firms2  (hereinafter  ‘CRR’)  and 

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to 

the activity of credit institutions and the prudential supervision of credit institutions and investment 
firms3  (hereinafter  ‘CRDIV’)  do  not  directly  govern  access  to  the  market  by  branches  of  credit 

institutions  having  their  head  offices  in  third  countries;  this  is  consistent  with  the  legal  basis  of 
CRR and CRDIV, i.e. Article 53 of the Treaty, relating to the freedom of establishment4. CRR and 

CRDIV provide only for safeguards; Article 47 of CRDIV provides that ‘Member States shall not 

apply  to  branches  of  credit  institutions  having  their  head  office  in  a  third  country  …  provisions 

which  result  in  more  favourable  treatment  than  that  accorded  to  branches  of  credit  institutions 

having their head office in the Union’. Recital 23 of CRDIV provides that rules governing branches 

of  third-country  credit  institutions  should  be  analogous  in  all  Member  States.  Subject  to  these 

safeguards, the power to authorise branches of third-country credit institutions to operate within the 

Union, and the specific conditions under which they are to operate, are left to the Member States. 

Under the draft law, Ireland uses this power and sets outs such conditions. 

Irish law 

3.2  Section 7(1) of the Central Bank Act 1971, as amended, provides that a licence is required for the 

purposes of carrying on banking business in Ireland. Under Irish law, such licences are currently 

only granted where the registered office and the head office of a credit institution are both located 

in Ireland. 

3.3  Under the draft law, section 9A branches will be exempt from the requirement to hold a licence. 

4. 

Specific observations 

4.1  Under the draft law, the CBI is to be satisfied that a section 9A branch is subject to authorisation 

and supervisory rules broadly equivalent to those in force in Ireland. Furthermore, the CBI is to be 

satisfied  that  depositors  with  the branch  are  able  to  avail  of protection broadly equivalent  to  that 

provided under Irish law. The ECB notes that the use of the word ‘broadly’ in each case leaves a 

margin of discretion to the CBI and introduces, therefore, a possible lack of certainty under the law. 

In  addition,  the  authorisation  and  supervisory  rules  in  respect  of  section  9A  branches,  and  the 

protection of their depositors as referred to above, could be slightly more or less favourable than 

the  rules  applied  to  other,  i.e.  EEA,  credit  institutions.  This  would  seem  to  be  incompatible  with 

Article 47 of CRDIV, which provides that Member States are not to apply provisions that result in 

more favourable treatment for branches of third-country credit institutions compared with branches 

of credit institutions having their head office in the Union. This provision is also reflected in the 

draft law. 

2  
3  
4  

OJ L 176, 27.6.2013, p. 1. 
OJ L 176, 27.6.2006, p. 338. 
Union legal acts in the financial services sector, including CRR and CRDIV, apply throughout the EEA on the basis of 
the Agreement on the European Economic Area (OJ L 1, 3.1.1994, p. 3). 

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4.2 

It  is  not  clear  from  the  draft  law  how  the  CBI  is  to  establish  what  protection  is  available  to 

depositors of section 9A branches in the third country in which the institution concerned is located. 

Furthermore, the draft law does not indicate how or whether the existence of protection in a third-

country  jurisdiction  is  to  be  monitored.  If,  for  example,  the  protection  granted  to  depositors  of  a 

section  9A  branch  were  to  fall  below  the  requisite  level,  it  is  not  clear  how  this  would  be 

ascertained, and whether the authorisation granted to the branch of the institution concerned would 

be withdrawn by the CBI in that event. 

4.3  For the purposes of legal certainty and clarity, the ECB also recommends substituting references to 

the country in which the credit institution is ‘located’ with references to the country in which the 

credit institution is ‘established’. 

4.4  The  establishment  of  branches  of  third  country  credit  institutions  might  create  financial  stability 

implications.  The  ECB  understands  that  further  amendments  to  the  draft  law  and  to  the  Central 

Bank  (Supervision  and  Enforcement)  Bill  2011  have  been  made,  which  are  intended  to  underpin 

the  power  of  the  CBI  to  withdraw  the  authorisation  of  branches  operating  in  Ireland  of  credit 

institutions established in non-EEA countries in certain circumstances. 

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

Done at Frankfurt am Main, 9 July 2013. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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