Feedback on Funding Levy Consultations Published

• Industry funding levy moves to 65 per cent for most regulated firms in 2017
• Levying process for credit institutions, EEA investment firms and EEA fund service providers will change in 2017
• Changes to levies for branches of EEA insurance companies to be phased in over two years

The Central Bank of Ireland has published the feedback to consultation papers CP 95 Consultation Paper on Funding the Cost of Financial Regulation and CP 108 New Methodology to Calculate Funding Levies: Credit Institutions, Investment Firms, Fund Services Providers and EEA insurers.

Under existing arrangements, 50 per cent of the costs of financial regulation are recouped from regulated entities, with some exceptions. The aim of CP 95, a joint consultation by the Central Bank and Department of Finance, was to elicit views on a move from the current approach of partial industry funding of the costs of financial regulation towards full industry funding.

The arguments in favour of a move to full industry funding were outlined in CP 95 which included the scale of resources devoted to regulation and the escalating costs that are borne by the taxpayer. The feedback statement to CP 95 confirms that the Minister for Finance has approved a phased increase in the industry funding levy beginning with an increase from 50 per cent to 65 per cent in 2017 for most industry categories.

CP 108 was published to elicit views on revised methodologies for calculating the industry funding levy for credit institutions, investment firms, fund service providers, EEA insurance companies, EEA investment firms and EEA fund service providers. Following the consultation the following changes will be introduced:

• Credit institutions – the Central Bank will proceed with the adapted ECB Methodology for calculating the industry funding levies and this will commence in 2017.
• Investment firms and fund service providers – the proposed new levy methodology will be applied once MiFID II implementation is complete and to facilitate changes to PRISM impact scores in light of the new regulations.
• EEA insurance companies – for category 1 branches, the levy amount will be aligned to half of the medium high insurers’ levy and it will be phased in over 2 years, commencing in 2017; for category 2 branches, the levy amount will be half of the medium low insurers’ levy and this will commence from 2017 onwards; and category 3 branches will continue to be levied as before.
• EEA investment firms and fund service providers – the Central Bank will proceed with introducing a fixed levy equal to the flat levy component of Irish investment firms and Irish fund service providers.

Deputy Governor, Prudential Regulation, Ed Sibley said: “The Central Bank is committed to delivering intrusive and effective financial services regulation and supervision. Our vision is to oversee a functioning, well-managed and well-regulated financial system that serves the needs of the economy and consumers over the long term.

"I welcome the Minister of Finance’s approval to increase the industry funding of the cost of financial regulation to 65 per cent for most sectors. This is an important step in the phased move to a full funding model, under which those who operate in the financial services arena will bear the full cost of financial regulation and the delivery of our mandate to safeguard financial stability and protect consumers.

"The changes to calculating the industry-funding levy are designed to improve the allocation of costs to those sectors and firms that have the greatest potential impact and risk in the financial services sector, and consequently where we expend more supervisory effort. We will keep this allocation under review. 

"The cost of regulation has necessarily increased in recent years against a backdrop of significant regulatory change, an expanded mandate for the Central Bank and growth in the financial services sector, for example, as a result of Brexit.”