Committee Reports > List of Committees > Joint > 1986 > Committee on the Secondary Legislation of the European Communities (4th Committee) > Report No. 32 - Statutory Instruments [21]

APPENDIX 3

EUROPEAN COMMUNITIES (CONSOLIDATED SUPERVISION OF BANKS) REGULATIONS, 1985.

[S.I. NO. 302 OF 1985]

Ref: EC4/112

Secretary

Department of Finance

I am directed by Mr. Gerard Collins, T.D., Chairman of the Joint Committee on the Secondary Legislation of the European Communities to refer to the European Communities (Consolidation Supervision of Banks) Regulations, 1985 [S.I. No. 302 of 1985] which were made by your Minister on 9 September, 1985 to give effect to Council Directive No. 83/350/EEC.

I am to request you for the purpose of assisting the Joint Committee in its examination of the Regulations to be good enough to furnish replies on the following questions:-

(1)It would appear from Articles 3 and 4 of the Regulations that it is considered that independently of the Regulations the Central Bank derive functions in relation to the credit institutions in the State from the Directive. If this is a correct interpretation what are those functions and what is the basis for the opinion that the Directive has this effect ?

(2)Is it intended that the Central Bank will exercise the discretionary powers referred to in Articles 3 and 4 of the Directive ? If so whence does the Bank derive its authority so to act ?

(3)Why in order to give effect to the Directive is it necessary to empower the Governor of the Central Bank to authorise persons to verify returns who are neither officers of the Bank nor holders of recognised qualifications in accountancy ?

Seamus Phelan

Principal Committee Clerk

8 January, 1986.

28 January, 1986.

Principal Committee Clerk

Joint Committee on the Secondary
Legislation of the European Communities

I am directed by the Minister for Finance to refer to your minute of 8 January (EC4/112) about the European Communities (Consolidated Supervision of Banks) Regulations (S.I. No. 302 of 1985).

I am to say that the answers to the questions you pose are:

(1)The Central Bank derives its functions relating to licence holders i.e. banks from the Currency and Central Bank Acts 1927-71. It has no function in relation to other credit institutions such as building societies, TSB’s, or friendly societies. These Regulations do not place an obligation on credit or financial institutions which are not Central Bank licence holders but do place an obligation on the licence holders to ensure that its subsidiaries comply. Regulations 3 and 4 are intended to extend the scope of Section 17 and 18 of the Central Bank Act, 1971 (which requires banks to make returns to the Central Bank and to keep certain books and records) to include consolidated returns and the books and records of credit and financial institutions which are owned by banks. We understand that the Central Bank received such returns by agreement with the banks before the implementation of this Directive.

(2)It is envisaged that the Central Bank will examine the use of the exemptions set out in Articles 3 and 4 of the Directive on a ‘case by case’ basis depending on the size of the institution and its business. Under S. 18 of the Central Bank Act, 1971 the Bank has the power to specify what returns, in what form and at what times, shall be supplied to it by holders of banking licences ‘for the due performance of its statutory functions’ which by Regulation 3 includes a function imposed on the Bank by the Directive. Thus the Bank has the power to decide whether or not returns, including those for the purposes of consolidated supervision, should be made to it.

(3)It is necessary to empower the Governor of the Bank to authorise persons who are neither officers of the Bank nor holders of a recognised qualification in accountancy to verify consolidated returns to fulfil Article 5(4) of the Directive. This article relates to the verification of consolidated returns made by subsidiaries of EEC banks established here. Should another EEC supervisory authority wish to verify such returns it must ask the Central Bank, which could either carry out the verification itself; authorise an auditor or expert to carry it out or allow the authorities who made the request to carry it out.

Under S. 17 (3a) of the Central Bank Act, 1971 officers of the Bank or holders of accountancy qualifications, authorised by the Governor, have the power to verify such returns. Should another EEC supervisory authority wishto verify the returns itself the Bank are bound by the Directive to assist in such a verification. Since an official of the other supervisory authority may not hold a recognised qualification in accountancy and would not be an officer of the Central Bank of Ireland, Regulation 5 is intended to allow the Governor to authorise such a person to carry out such a verification.

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Patrick A. Ring