Irish Central Bank Splits Oversight as ECB Takes New RoleJoe Brennan and Rebecca Christie
Ireland’s central bank is reorganizing its oversight arm to prepare for European Central Bank supervision of euro-area lenders, which begins Nov. 4.
The Dublin-based central bank will create a department to perform inspections of lenders across the entire range of risk areas, according to a note obtained by Bloomberg News. A separate team will handle “off-site” supervision, working with the ECB’s Single Supervisory Mechanism on capital, liquidity and risk-management decisions.
“The decision was taken in light of the changes brought about by SSM, most notably the need for on-site inspection work to be independent of day-to-day supervision of credit institutions,” according to the note, which was sent to banks yesterday. Katie Philpott, a spokeswoman for the bank, confirmed the contents of the note and its distribution to interested stakeholders.
The internal units will take a “coordinated approach” and will work with all banks, regardless of size or whether banks are considered “significant institutions,” according to the note.
Ireland’s staffing reorganization shows the effect that centralized supervision will have on national authorities. Even if bank supervisors remain locally appointed and held accountable, the ECB link will improve their ability to talk tough to the banks in their care, said Nicolas Veron of the Bruegel research organization in Brussels.
“The fact of being part of this European network will allow them to become much more independent in their respective national environments and also become stronger, more authoritative institutions,” Veron said in an interview. “The SSM will drive national supervisors upward in terms of supervision quality and independence just because they have now this lever vis-a-vis their national constituencies.”
The ECB confirmed yesterday that that four Irish lenders, Allied Irish Banks Plc, Bank of Ireland Plc, Permanent TSB Group Holdings Plc and Royal Bank of Scotland Group Plc’s Ulster Bank unit will be among 120 large banks that it will directly supervise. These banks will be overseen by joint teams of ECB and national authorities, while smaller euro-area lenders remain with local regulators.
The Irish central bank is also setting up a “horizontal functions division” under banking supervision, which will be closely aligned to the SSM’s Directorate General Micro-Prudential Supervision IV division.
“The DG Micro-Prudential Supervision IV has a range of responsibilities including authorization, crisis management, enforcement and sanctions,” according to the note.