Ireland’s three biggest banks will answer directly to the European Central Bank as early as next year, reports this mornings Independent.
Bank of Ireland, AIB and Permanent TSB will be regulated directly by the ECB from October 2014, under theEU’s new banking union proposals.
This was confirmed yesterday by the Central Bank’s Fiona McGahon. “Regardless of the size of individual institutions, in the case of each participating member state the ECB will normally carry out direct supervision of at least the three most significant credit institutions,” she said. Other sources confirmed that in Ireland’s case, this referred to Bank of Ireland, AIB and Permanent TSB.
Just 130 European lenders have been selected for direct ECB regulation. The regime change has sweeping implications for Ireland’s banks.
It will impose another rule change on the country’s biggest lenders – despite the fact that the dust has only just settled on PRISM, the system of sweeping reforms enacted by the Central Bank in the aftermath of the financial crisis.
Ms McGahon said the new rulebook was under construction – but said she thought it unlikely that it would be “radically different” to the existing rules in place for Irish banks.
The new regime could also mean a new charge for the country’s biggest banks – which already pay an existing levy to the Irish Central Bank – to cover the cost of ECB supervision.
Banks’ governance and decision-making processes will also change. The ECB now has a role in approving major purchases or sales of bank shares.
Ireland’s domestic Central Bank, however, will still play a major role in regulating Bank of Ireland, AIB and Permanent TSB. It will be solely responsible for issues like consumer protection and will share other regulatory tasks too.
These banks will still see some of their supervisory staff replaced with ECB employees. The new teams, made up of a mix of ECB and Irish Central Bank staff, will be known as joint supervision teams (JSTs). Ms McGahon said this will help to “enhance the independence of supervisors”.
Other Central Bank staff will be exchanged and seconded to other member states, to help create a “common supervisory culture”.
Ms McGahon added yesterday that other “less significant” institutions could also come under direct ECB supervision. This will depend on the size of their balance sheet and whether they are of strategic national importance. Banks whose balance sheet is more than €30bn, or exceed’s 20pc of its home country’s GDP, will be eligible. The Irish Independent.