The Banking Regulation Review Fifth Edition (Ireland Chapter), May 2014


Author: William Johnston, Robert Cain, Eoin O’Connor and Niall Esler

Banking Regulation Review

The Banking Regulation Review is reproduced with the kind permission of its publisher Law Business Research Ltd. This article was first published in The Banking Regulation Review, 5th edition (published in May 2014 – editor Jan Putnis).

Ireland took a series of exceptional steps to contain the crisis in the banking sector that emerged in 2008. Its strategy was to provide liability guarantees, transfer non-performing eligible assets to a government backed entity (the National Asset Management Agency or ‘NAMA’), established by legislation enacted in 2009, and to provide capital and liquidity to weakened and distressed banks and building societies.

The strain on the state’s resources ultimately led to the intervention of the EU and the IMF in November 2010. The EU/IMF Programme of National Support for Ireland (the Programme of Support) necessitated a restructuring and downsizing of the banking sector. Legislation to facilitate the immediate stabilisation of the domestic banking sector was passed in December 2010, in the form of the Credit Institutions (Stabilisation) Act 2010 (the Stabilisation Act). A permanent resolution regime has been introduced under the Central Bank and Credit Institutions (Resolution) Act 2011 (the Resolution Act), which aims to provide an effective and expeditious regime for dealing with failing credit institutions. Details of both the Stabilisation Act and the Resolution Act are set out in Section III, infra.

Ireland exited the Programme of Support in December 2013 with a restructured banking system. Bank of Ireland and Allied Irish Banks, plc (AIB) in particular now act as ‘pillar banks’ in the Irish retail banking system and it is envisaged that additional competition in the sector will be provided by subsidiaries of foreign-owned banking groups including the Royal Bank of Scotland and KBC groups, and Permanent TSB. Recently, competition in the Irish retail banking market has lessened with Danske Bank and ACC Bank announcing the withdrawal of certain services. In a further significant development, in February 2013 Irish Bank Resolution Corporation Limited (IBRC) was placed into special liquidation by the Irish government and the process of selling its assets commenced. IBRC’s mandate had been to act, in effect, as a bad bank to wind down the operations of the former Anglo Irish Bank and Irish Nationwide Building Society. Combined, Anglo Irish Bank and Irish Nationwide Building Society received over €30 billion in capital support from the Irish state. Banking regulation has undergone considerable change since the start of the crisis. Institutionally there has been a reconstitution of the regulator, the Central Bank of Ireland (the Central Bank), while regulatory policy and objectives have also been refocused.

Domestically, the largest retail banks are AIB, Bank of Ireland, Permanent TSB, KBC and Ulster Bank. There are also a number of large international financial institutions with branches or licensed banks in Ireland.

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