The Central Bank has issued a consultation paper on "Process Improvements and Service Standards for Authorisation of Regulated Firms" outlining proposed changes to the authorisation process applied to regulated firms, funds and intermediaries.
On 26 July 2013, the Central Bank of Ireland (the “Central Bank”) issued a Consultation Paper entitled “Authorisation of Regulated Firms, Funds and Intermediaries - Process Improvements and Service Standards” (the “Consultation Paper”).
The Consultation Paper outlines the Central Bank’s proposed changes to the authorisation process applied to regulated firms, funds and intermediaries. The Consultation Paper also sets out the draft authorisation service standards.
The Authorisation Process
The Consultation Paper summarises the criteria used when assessing applications for authorisation as follows:
- acceptability and transparency of financial service provider (the “FSP”) ownership;
- the fitness and probity of directors and senior management;
- the adequacy of proposed capital to be invested;
- the adequacy of internal controls;
- the level of resources and the expertise of staff;
- constitutional documents;
- legal agreements; and
- the business plan which sets out how the firm intends to operate and comply with its regulatory obligations.
The criteria above varies depending on the sector in which the FSP is seeking authorisation.
The authorisation decision process utilises a risk-based approach and a three tier framework is followed. The more complex the applicant’s business, the more senior the level of assessment applied.
An example of a Tier 1 applicant is a bank and insurance undertaking. Applicants for authorisation under this tier are examined by an authorisation committee made up of a panel including the Deputy Governor of Financial Regulation, directors and risk advisors.
Applications under Tier 2 will be determined by the Head of Division of the relevant supervisory department.
Examples of Tier 2 applicants are credit unions, fund service providers, investment funds, investment firms and moneylenders.
This is the tier in which applicants attracting the lowest level of risk will be considered. Authorisations are examined at divisional management level.
Example of Tier 3 applicants are retail intermediaries and bureaux de change businesses.
Process Improvements Strategy
The Central Bank has developed a Regulatory Transactions Strategy (the “RTS”) in order to improve processes by making them more efficient. Additionally, the Central Bank endeavours to improve the quality of the information and services available to applicants and stakeholders alike.
The RTS seeks to:
- improve the consistency of decision making and turnaround times;
- improve the quality of regulatory information; and
- reduce administrative work, which will allow for increased focus on the authorisation and supervision processes.
The Central Bank has developed a number of strategic organisational principles in order to further the aim of an improved authorisation process. Some of these include:
- accepting applications and supporting documentation only in an electronic format in order to create a paperless environment;
- the issuance of authorisation letters and relevant certificates of authorisations online; and
- online validation of initial submissions.
Fund and Fund Service Providers Authorisation
The Consultation Paper examines the proposed RTS in the context of the authorisation of funds and fund service providers.
The review of the current authorisation process in relation to this sector has highlighted a number of improvements to be made. At the moment, paper volume is substantial and the flow of communication is not automated.
The Central Bank endeavours to re-engineer the process of authorisation and create a paperless workflow.
The Consultation Paper also examines the proposed RTS for the following:
- Credit Institutions and Insurance Undertakings Authorisation;
- Retail Intermediary Authorisation;
- Payment Firms (which include Payment Institutions, Electronic Money Institutions and Money transmission Business) and Bureaux de Change Business Authorisations;
- Moneylenders Authorisation; and
- Investment Firms Authorisation.
The Central Bank may update the draft RTS following the consultation and prior to the launch of the new process systems in 2014.
The Central Bank will publish:
- guidance on what constitutes an application; and
- authorisation service standards in the quarter prior to the RTS commencing.
The Central Bank is also encouraging firms to contact them before submitting an application form where the applications may be considered to be complex.
The Consultation Paper also outlines two options for the authorisation of funds:
Service Standard Measure- Option 1
This consists of the overall time the fund application is under review with the Central Bank. The time in which the fund takes to review the matters raised or queried by the Central Bank is not included in this timeline.
Service Standard Measure- Option 2
This consists of the total time taken to issue a fund authorisation, which includes the review time of the Central Bank and the response time by the fund.
In the case of a clone umbrella/sub-fund application, the Central Bank must receive a response to queries raised within 2 weeks or the application will be deemed to have lapsed. A time frame of 4 weeks applies for all other fund applications.
The Central Bank will publish:
- guidance on what constitutes a complex application; and
- authorisation service standards by 31 March 2014.
In addition, performance reports will be issued on a half yearly basis. The first performance report will be issued for Q3-Q4 2014. A Q2 2014 performance report will be issued on an exceptional basis.
The Consultation Paper confirms the Central Bank’s intention to apply application fees going forward. Such fees will be non-refundable if an authorisation application is withdrawn or refused. The Central Bank has deferred the introduction of the proposed fees until 2014.
In light of the impending imposition of application fees the Central Bank is proposing the introduction of service standards, as discussed above, due to apply from Q2 2014.
Comments on the Consultation Paper are to be provided to the Central Bank by 28 October 2013.