Ireland is an attractive location for banks both because of the many advantages associated with its European Union membership and because of its position as a global financial services centre.
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Banking in Ireland is regulated both by the European Central Bank ("ECB") and by the Central Bank of Ireland ("CBI"). While the CBI is the initial point of contact for applications for an Irish banking licence, or to extend an existing licence, the ECB is ultimately responsible for deciding whether or not to grant the application. The ECB must also authorise the acquisition of certain participations in an existing bank.
Irish banks are supervised by the ECB, which directly supervises significant banks, and the CBI which supervises less significant banks: both apply the same regulatory framework for supervisory purposes. EU banking law, including in particular the Capital Requirements legislation, is fully applied in Ireland without the imposition of any significant additional domestic requirements.
Passporting/Third Country Banks
An EEA authorised bank may operate in Ireland on either a branch or a cross-border services basis, without obtaining any additional authorisations, but subject to certain notification requirements.
A Third Country Bank that wishes to carry out activities specifically in Ireland, could set up a Third Country Branch: it would not be possible to passport from that branch to other EEA member states.
A Third Country Bank that wishes to passport to other EEA member states from Ireland could either establish an Irish authorised bank or acquire an existing Irish authorised bank.
The Authorisation Process
All applications for authorisation as a bank in Ireland must be submitted to the CBI. There are three principal stages to the authorisation process:
Exploratory Phase: the applicant should determine whether it needs a banking licence and whether it can fulfil the authorisation requirements. It should also arrange a preliminary meeting with the CBI to discuss its application.
Submission and Assessment: the applicant must submit the completed application to the CBI. The CBI and ECB will then review the application, focusing in particular on corporate governance and oversight arrangements, risk management, internal controls, the business plan and capital and financial projections.
Decision: the ECB will grant a banking licence once both it and the CBI are satisfied that the applicant complies with the authorisation requirements set out in Irish and EU law. While the length of time for deciding on an application varies, it usually takes six months from the applicant providing a complete application. In any event a decision must be taken within 12 months of that date.
Further information is available from the CBI's website here, including Guidelines and a Checklist for completing and submitting Bank Licence applications and a Policy Statement for applicants for authorisation as a Third Country Branch.
An entity, including a Third Country Bank that intends to acquire an existing Irish authorised bank will have to notify the CBI by completing an Acquiring Transaction Notification Form (available here). The Acquiring Transaction will then have to be approved by the ECB. The approval process takes approximately two months, although this period may be interrupted if additional information or clarification is sought from the applicant.
An entity that wishes to obtain a banking licence under Irish law must fulfil a number of requirements. For existing groups with substantial operations outside Ireland, an important requirement will be the CBI's emphasis on ensuring that the applicant's "heart and mind" will be located in Ireland. This essentially means that the CBI will need to be satisfied that the applicant bank will be properly run in Ireland and that the CBI will be able to supervise it effectively. Among other things, the CBI will expect to see present in Ireland:
- a senior management team with strength and depth overseen and directed by a strong board; and
- organisation structure and reporting lines which ensure there is appropriate separation and oversight of all activities.
There is no requirement for any specific individual to be resident in Ireland. However, ideally, the personnel who are to fulfil the applicant bank's core functions should operate out of Ireland.
There is nothing to prevent an Irish licensed bank from outsourcing/ delegating some of its activities to entities in other jurisdictions. However, overall responsibility for ensuring compliance with legislative requirements must stay in Ireland. In addition, the CBI must be notified of any material outsourcing of a bank's activities.