Chapter 9

Outline of Legislation Required and Timeframe for Establishment of SRA

Introduction

The Group recognises that the establishment will involve complex and comprehensive legislation. Nevertheless, it is anxious that the SRA should be established as a matter of urgency. The Group is also of the strong opinion that the SRA should not begin its operations without the necessary statutory powers to effectively fulfil its remit being in place. In order to meet these objectives, the Group recommends that the new entity be established on a statutory basis through the minimum legislation necessary to achieve that objective. In this way the existing statutory basis for regulation would be maintained and amending legislation would transfer responsibility for its execution to the SRA. The Group considers that, by adopting such an approach, the establishment of an SRA along the lines that it has recommended could be realistically achieved within one year of a Government decision to proceed. It would not be inconsistent with this approach for the Government to consider the appointment of an interim Board of the SRA in advance of the enactment of the necessary legislation.

Existing Legislative Framework

The current body of financial services legislation is made up of a multiplicity of primary Acts of the Oireachtas and various EU framework Directives that have been transposed into Irish law by statutory instrument through enabling legislation, notably the European Communities Act, 1972. The principal pieces of national primary legislation in the area are the Central Bank Acts, 1942 to 1998, the Insurance Acts, 1909 to 1990, the Building Societies Act, 1989, the Trustee Savings Bank Act, 1989, the ACC Bank Act, 1992, the ICC Bank Act, 1992, the Investment Intermediaries Act, 1995, the Stock Exchange Act, 1995, the Consumer Credit Act, 1995, the Credit Union Act, 1997, and the Investor Compensation Act, 1998.

Legislation Required

In considering the type of legislative framework that will be required, the Group noted, in the first instance, that the Department of Enterprise, Trade and Employment is currently well advanced in the process of bringing forward legislation in relation to the regulation of insurance intermediaries (see paragraphs 2.38 - 2.40) and recommended that this legislation should be enacted urgently so that it will be in place before the establishment of the SRA.

In addition, the Group identified four distinct areas that the legislation establishing the SRA must address. These are:

(i) Organisational Structures;

(ii) Assignment of Functions to the SRA;

(iii) Ancillary Structures; and

(iv) Consolidation of Legislation.

Based on the foregoing, the Group recommends that the legislation to provide for the establishment of the SRA should include the following elements:

(i) Organisational Structures

The establishment of a Single Regulatory Authority to undertake specific prudential and consumer regulation functions, in accordance with the model outlined in Chapter 6.

Establishment of a new high-level Standing Committee to be assigned specific responsibilities in relation to co-ordinating exchange of information between the Central Bank and the SRA in accordance with the recommendations set out in Chapter 6. This Committee would be made up of representatives of the SRA and the Central Bank and be chaired by the Department of Finance.

The establishment of a statutory position of Chief Executive Officer of the SRA in accordance with the recommendations set out in Chapter 6.

The establishment of a statutory position of Customer Protection Director in accordance with the recommendations set out in Chapters 4 and 6.

The establishment of a statutory position of Registrar of Credit Unions to undertake the current functions of the Registrar of Friendly Societies in relation to Credit Unions in accordance with the recommendations set out in Chapter 3.

Provision for the appropriate accountability of the Chairman, the CEO and the Customer Protection Director of the Single Regulatory Authority to a relevant joint-committee of the Oireachtas. Provision should also be made for accountability to the Minister for Finance.

Provisions to ensure that the activities of the SRA are self-financing in the sense that regulated entities should defray the cost of providing regulation.

(ii) Assignment of Functions to the SRA

The Group recommends that, as a priority, the legislation under which current regulators undertake their supervisory functions should be amended to assign all the prudential supervision functions, including decisions concerning licensing and authorisation, to the SRA.

The amending legislation should provide that the responsibility for policy in these areas be assigned to the Minister for Finance, who may, as appropriate, consult with other Ministers.

The legislation should also allow the remit of the SRA to be extended by way of regulations to be made by the Minister for Finance to cover any analogous financial service providers that might not be covered by this Report.

(iii) Ancillary Structures

The Group recommends that a single statutory Ombudsman scheme for financial services, independent of the Central Bank, be established in accordance with the recommendations set out in Chapter 4.

The establishment of a Tribunal to adjudicate upon allegations of breaches by regulated entities of the terms of licences, regulations or codes of conduct in accordance with the recommendations set out in Chapter 7.

The establishment of two representative panels, including sub-panels, of consumer and industry interests, respectively, in accordance with the recommendations set out in Chapter 4.

(iv) Consolidation of Legislation

The Group recognises that the legislation proposed above would, by its nature, primarily involve amending provisions. In order to provide legislative clarity, the Group recommends that, as soon as possible after the establishment of the SRA, legislation should be enacted to consolidate all the statutory provisions related to the SRA.

At the same time, consideration can be given to a review of the remaining roles and powers of the statutory officers from which powers were transferred to the SRA, i.e. the Director of Consumer Affairs and the Registrar of Friendly Societies.