The Financial Regulator has introduced new obligations with regard to the disclosure of information regarding directors' loans in the annual accounts of Irish banks and buildings societies.

The Financial Regulator announced on 27 February that it has written to all banks incorporated in Ireland and building societies established in Ireland informing them of the requirements. The following are the requirements: All banks incorporated in Ireland and building societies established in Ireland will be required to disclose in their audited annual financial statements, with respect to loans to directors and loans to connected persons of directors (presumably within the meaning of section 26 of the Companies Act 1990):

  • the amount owed by the person to whom the loan or agreement was made in respect of principal and interest at the beginning and end of the period covered by the financial statements;
  • the maximum amount of the liability during the period;
  • the amount of any unpaid interest; and
  • the amount of any provision that has been made in respect of any failure, or anticipated failure, to repay all or part of the loan.

The institutions are also required to maintain a register of all such loans at their registered offices for review by shareholders.

These obligations are in addition to all existing disclosure obligations, set out in the Companies Acts and elsewhere, to which such institutions are subject.

The Financial Regulator's office have today confirmed to us that the new requirements will take the form of a condition to be imposed on each individual credit institution licence and building society. In the case of banks, the condition can be imposed under Section 10 of the Central Bank Act 1971. This provides that when the Financial Regulator proposes to impose a condition in relation to a licence, or to amend, or add to the conditions, that it shall send a written notification to the relevant institution advising them of this. The institution then has a period of 21 days within which to respond and make representations. The corresponding procedure for building societies, which is a little different, is covered by Part 8 of the Building Societies Act 1989, Section 77(8).

As regards the timing of when these requirements will come into effect, the Financial Regulator's office have confirmed to us that their understanding is that any conditions which are agreed following dialogue with the institutions will be prospective in their effect and will not apply retrospectively. There will also be scope, within the dialogue between each institution and the Financial Regulator, to agree, having regard to each institution's year end, when the disclosure requirements will come into effect. (Please note that the press releases issued by the Financial Regulator on this issue do not explain the timing aspects of these requirements in any detail.)