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Ireland has two very distinct banking sectors. The domestic banking sector was extensively restructured following Ireland's EU/International Monetary Fund (IMF) bailout in 2010 and has a substantial, but reducing, state shareholding. Meanwhile, the international banking sector has grown significantly post-Brexit. Dublin is now considered a European banking hub, hosting the EU/European Economic Area (EEA) headquarters of several major international banking groups. Ireland also has a well-developed credit union sector, holding substantial retail deposits and providing some retail banking services.2

The domestic banking sector comprises the 'pillar banks': Allied Irish Bank (AIB), Bank of Ireland (BOI) and Permanent TSB (PTSB); and, for the time being, two significant foreign-owned and domestically-focused banks, KBC Bank Ireland and Ulster Bank (part of the NatWest Group). Both KBC and Ulster Bank have announced plans to withdraw from the Irish domestic market and a series of disposals of parts of their banking books is in progress. When these two banks exit the domestic market, Irish domestic banking needs will be almost exclusively serviced by the three pillar banks, two of which currently remain controlled by the state. This situation is generally recognised as unsatisfactory, and the Department of Finance will conduct a wide-ranging strategic review of the retail banking market in 2022, which is expected to lead to government initiatives to promote competition in the sector. In the meantime, competition is provided mainly by fintechs and e-money digital challengers, with Revolut alone having over one million customers in Ireland (within a population of only five million).

Together with Frankfurt and Paris, Ireland has been an attractive destination for international banks seeking to relocate EU/EEA operations from London post-Brexit. Dublin now hosts three pan-European banks (Barclays, Citibank and Bank of America) with activities primarily focused on the wider European market. All three are significant institutions directly supervised by the European Central Bank (ECB) under the European Single Supervisory Mechanism (SSM). In relation to Ireland's domestic economy, these EU/EEA hubs are very large indeed – Barclays' EU subsidiary is now the largest Irish bank by assets. Other international banks, such as Wells Fargo and Bank of Montreal, have established smaller EU/EEA headquarters in Dublin, and the sector has continued to grow since Brexit.

The regulatory regime applicable to banks

The Central Bank of Ireland (CBI) is the national monetary authority and national central bank member of the eurosystem. Unlike the UK and some other European nations, Ireland operates a 'single peak' approach to monetary policy and financial supervision, with the CBI also being responsible for prudential regulation and conduct supervision of financial institutions in Ireland. The CBI was initially established under the Central Bank Act 1942, which has since been substantially amended and updated to reflect the CBI's structural evolution.

Prior to Ireland's membership of the eurosystem, the CBI had full responsibility for authorisation and supervision of the Irish banking sector. That changed in 2014 with the establishment of the SSM, which made the ECB the competent authority for banking supervision in the euro area. Banks designated as significant institutions (SIs) for the purposes of the SSM (the pillar banks, BOI, AIB and PTSB; the EU/EEA hubs – Barclays, Citibank and BAME; and the Irish subsidiaries of other EU SIs – KBC, Intesa and, until recently, UniCredit) are supervised by joint supervisory teams (JSTs). The remaining banks are designated as 'less significant institutions' (LSIs) and are supervised directly by the CBI within parameters set by the SSM.

The CBI's stated mission is to ensure there is ongoing oversight of financial service providers and markets, to ensure that the interests of consumers are protected and to ensure the wider economy is protected in the long term. The CBI also has statutory objectives, which include:

  1. maintaining stability of the financial system;
  2. ensuring proper and effective regulation of financial service providers and markets, ensuring customer protection;
  3. safeguarding the efficient and effective operation of payment and settlement systems; and
  4. monitoring the resolution of financial difficulties in banks and other regulated entities.

Until 2010, promoting development of the financial services industry within Ireland was an explicit part of the CBI's mandate, but following Ireland's EU/IMF bailout, the mandate was amended to remove promotion as one of the CBI's stated objectives. The CBI has to date been keen to maintain its focus on financial stability and robust supervision and to resist suggestions that it should play a part in attracting business to Ireland, publicly stating that this is the responsibility of other state agencies.

The bulk of Irish legislation applicable to the regulation of banks in Ireland can be found in the Central Bank Acts 1942–2018, in statutory instruments made under the Central Bank Acts and statutory instruments made under the European Communities Act 1972, and in binding regulatory codes issued by the CBI.