The banking industry is calling for regulatory requirements in the sector to be simplified to address issues of competitiveness and investment.
Banking and Payments Federation Ireland (BPFI) said the current system of regulation is confusing and costly for financial institutions.
BPFI has warned that Ireland is at risk of losing out on investments as a result of what it describes as the “increased regulatory burden”.
The federation wants a rebalancing of banking regulation both at a domestic and wider EU level.
BPFI has submitted a report to the Central Bank and the Department of Finance, outlining 52 recommendations aimed at achieving what it described as “more effective and more efficient” regulation.
It has insisted the proposals in the report are not aimed at deregulation or a diminishing of the capital and liquidity requirements for financial institutions.
The “Regulating for Growth – A Roadmap for Simplification” report sets out a range of proposals to “protect Ireland’s status as a leading global financial hub”.
The measures are aimed at “improving the regulatory environment, cutting costs for businesses, and positioning the banking sector to deliver on investment gaps,” BPFI said.
The federation has drawn up a list of recommendations on issues it wants to be addressed such as the “gold-plating of EU rules”.
BPFI said the Irish regulations “go above and beyond the requirements of European standards,” which it said can “deter international investment and places Irish based firms at a competitive disadvantage” and “can deter new entrants or encourage existing firms to relocate”.
It has also called for a “local single rulebook” to bring greater clarity to supervisory expectations for firms operating in Ireland.
The banking body said the current approach can be “inconsistent, unpredictable, and create an unnecessary administrative burden for both firms and the regulator”.
It has also recommended what it described as “a more transparent and consistent approach to ‘proportionality’, or how rules are applied depending on a firm’s size and risk profile”.
BPFI said the “one-size-fits-all approach” applies complex regulations to all firms not taking account of size, complexity, and risk profile, which it said leads to “an unduly burdensome and inefficient outcome for smaller institutions”.
Regulatory code must be ‘more simplified’
The chief executive of BPFI, Brian Hayes, said the proposals in the report are “not about deregulation.”
He said the recommendations are aimed at “making the regulatory code in Ireland and across Europe, more simplified, more efficient and more cost effective”.
He added that it is not just for industry, but for the public authorities who have to implement the regulations as well.
“We’ve set out 52 separate opportunities to simplify the regulatory code for financial services here in Ireland, and we think that could make a big difference in making regulation simpler to understand and to operate from everyone’s perspective.”
Mr Hayes said BPFI believes there are “opportunities specifically on things like a local rule book, which brings together all of those regulations”.
He added that there should be a harmonised approach across all EU regulation.
“We think there’s opportunities not to go over, above and beyond what we call gold-plating, where other regulators are across the European Union.
“So, if you’re in Luxembourg or if you’re in the Netherlands or you’re in Belgium or Ireland, it’s the same rule book applies. And there are examples where that’s not the case in Ireland, and it’s something we’d like, obviously, our regulator, our Central Bank to work on.”
Mr Hayes said having two or three sets of rules creates “huge financial burdens for firms”.
“It’s really important that we create this single approach across the European Union, and I know this is an issue that from a regulatory and supervisory perspective at home here in Ireland and across the European Union that all supervisors are looking at right now.”
BPFI said the 52 recommendations in the report are focused on efforts to improve the regulatory environment.
“Not to diminish standards, not to deregulate, not to reduce, ostensibly capital or liquidity requirements. They’re part of the resilience argument, which makes our banking sector strong and resilient in Ireland and across Europe. But how do we reduce the regulatory burden that exists in other areas, and I think that would help from a cost-effective perspective,” it said.
The federation said there are 35 banks operating in Ireland, including the three domestic retail banks – AIB, Bank of Ireland and PTSB, along with many smaller entities, operating in the wholesale market.
Earlier this year, the Central Bank said it will be “proactively engaging on the regulatory simplification agenda this year”.
However, it noted that “simplification cannot compromise the core objectives of financial stability, resilience and protecting consumers.”
Commenting on today’s report, the Central Bank’s Deputy Governor for Financial Regulation said the simplification agenda is “important to us and we have asked for and are openly listening to stakeholders’ views on areas where there may be unnecessary rules or complexity – or where the same outcomes could be achieved in simpler ways”.
In a statement, Mary-Elizabeth McMunn also said it is “important to remember as we work to simplify that one person’s unnecessary burden can often be another’s important protections”.
“As with all of our work, in our approach to simplification we will be guided by our mandate and mission, which includes ensuring the financial sector is operating in the best interest of consumers and the wider economy.
“While our mandate is ultimately a matter for the Oireachtas, we should not forget the lessons of the crisis – where a mandate to promote the development of the financial services sector was clearly not in the best interests of consumers, the economy or indeed the country,” she added.
Article Source – Rebalancing of banking regulation needed at domestic and EU level – BPFI
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