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Financial Services Regulatory Newsletter, November 2013

  • Ireland
  • General

01-11-2013

Welcome to our Financial Services Newsletter    

We hope you find this information useful and would be grateful to hear from you with any feedback or suggestions.   

Payment Services

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Banking Inquiry

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News

Central Bank issues update on Payment Protection Insurance review

  • The Central Bank's investigation into alleged mis-selling of PPI has resulted in a determination that approximately €25 million will be refunded to consumers for breaches of the Consumer Protection Code since July 2007.
  • Of the 350,000 policies to be reviewed, over half of these have now been reviewed by the 11 firms involved in the investigation.
  • Some €12 million has already been distributed to 22,500 customers, with a further €13 million in the process of being refunded to a group of 21,500 individuals. The refunds cover premiums paid plus interest.  Please click here to view Central Bank issues update on Payment Protection Insurance review.

Central Bank publishes Quarterly Bulletin

  • This Bulletin was published on 2 October, and is the fourth such bulletin of 2013.
  • It includes articles on (i) the Enhanced Quarterly Statistics for Mortgage Arrears, and (ii) Policy Measures to Improve Access to Credit for SME's.
  • It is noted in article (i) that the Enhanced Statistics introduce a more detailed breakdown of long-term arrears cases, as well as additional information relating to the performance of restructured mortgage accounts.  The article focuses therefore on the possibility of people re-defaulting after having restructured repayment arrangements.
  • Article (ii) looks at the various options for SME's to gain credit, noting the "current reliance of Irish SMEs on banks for financing".  Various other measures, primarily governmental funding are explored by way of alternative.
  • By way of general comment, the Bulletin states that while "growth in the first half of the year was weaker than expected, the forecast is for a continuation of the gradual recovery in the overall level of economic activity, though at a slightly slower pace than previously expected".  GDP growth of 0.5 per cent is now projected for this year, with growth of 2.0 per cent forecast for 2014.  Please click here to view Central Bank Quarterly Bulletin.


Court of Appeal Referendum 

  • A referendum amending the Irish Constitution allowing for the creation of a Court of Appeal was passed on 4 October with a 64% majority.  
  • The new court is designed to alleviate the current four-year backlog of appeal cases awaiting hearing in the Supreme Court.  
  • The Supreme Court will now only hear appeals from the High Court directly in exceptional circumstances such as matters of public importance or constitutional issues.  All other appeals are to be heard by the Court of Appeal. 
  • A decision of the Court of Appeal will be final unless it can be shown that the decision involves a matter of general public importance or the interests of justice warrant an appeal to the Supreme Court. 
  • The remit and procedure of this new court will be governed by the provisions of the Thirty-Third Amendment to the Constitution (Court of Appeal) Bill 2013 (which has been passed by both Houses of the Oireachtas) once this Bill is signed into law by the President.  Please click here to view the Bill. 
  • The Referendum Commission outlined the main changes arising from this constitutional change


Central Bank publishes guide to sustainable mortgage arrears solutions

  • On 24 September 2013, the Central Bank published an Internal Guideline - Sustainable Mortgage Arrears Solutions document. 
  • It is designed for use by supervisory teams in conjunction with the principles set out in the Mortgage Arrears Resolution Targets (MART) paper. 
  • Some of the solutions suggested are: (i) extension of terms of loans, (ii) treatment of a base loan as a split mortgage and (iii) requiring an affordability assessment to be carried out on the borrower. 
  • The full text of this document can be found here.

New Role for European Banking Authority in Banking Union

  • The Chairperson of this Authority, Andrea Enria, spoke at the ESE Conference on 26 September on this point.
  • While she noted that the tasks of the Authority "remain fundamentally unchanged, the Banking Union introduces a new sense of urgency in the performance of (its) tasks". 
  • She explained that the three main areas of focus for the Authority going forward would be:

(i) introducing the Single Rulebook and giving it visibility by making it easily accessible online;
(ii) improving cross-border supervision and regulation through the introduction of a Single Supervisory Handbook; and
(iii) bolstering resources for consumer protection in relation to banking business by improving, for example, focus on complaints handling and on how banks place their instruments to retail customers.  Please click here for further information.

Home Mortgages

  • The European Parliament has provisionally approved new rules to limit risks of taking a mortgage for home buyers.
  • These rules are designed to ensure that home buyers would: (i) be better informed about the costs and risks of taking on a mortgage, (ii) partly shield them against market swings that inflate their repayments and (iii) better protect them in the event that they default on the loan. 
  • Also, mortgagors would have to be given a mandatory 7-day reflection before signing the loan, or a 7-day right of withdrawal thereafter. 
  • The legislation will cover mortgages on residential property, residential property including an office space as well as building land. Some of its requirements would be adapted to reflect differences among EU member states' national mortgage and property markets, but the information for buyers would have to be presented in a consistent format across the EU.  Please click here for further information.

EU lawyers say financial transaction tax is illegal

  • The EU Council legal service has issued an opinion on the proposed financial transaction tax proposed to be entered into by 11 eurozone states.
  • The main conclusions were:

(i) applying the tax to groups outside the tax bloc “exceeds member states’ jurisdiction for taxation under the norms of international customary law”;
(ii) the measure “is not compatible” with the EU treaties “as it infringes upon the taxing competences of non-participating member states”;
(iii) the provision was “discriminatory and likely to lead to distortion of competition to the detriment of non-participating member states”, as companies based in the 17 EU states without the tax would be disadvantaged, even more so than those outside the EU altogether.

  • It is speculated that this could lead to modification of the proposed FTT, or the end of the proposal altogether.

  • The full text of this opinion is available here.

€150m banking levy introduced in Budget 2014

  • The Minister for Finance announced on 15 October that "the banking sector should make an annual contribution of €150 million to the Exchequer for the period from 2014 to 2016". 

  • Each domestic bank is to contribute towards the satisfaction of this levy, each contribution "will be broadly based on the amount of tax paid (by that institution) on deposit interest in 2011". 

  • It was stated that this measure will be further detailed and codified in the Finance Bill, but that it would be on the same basis as the annual levy of €100m previously paid by banks in the 2003-2005 period. 

  • A link to the Minister's speech is available here.

 

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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