knowledge 11 July 2024 |

Central Bank of Ireland’s Authorisations Report: Authorisation Activity in 2023

The Central Bank of Ireland’s (the "CBI's") “Authorisations and Gatekeeping Report” (the ”Report”) (here), previously covered in our briefing (here), provides an overview of CBI authorisation activity that took place in 2023, along with detail on Fitness and Probity (“F&P”) applications.

This briefing provides a sectoral overview of CBI authorisation activity in 2023, outlining some of the factors that the CBI notes may delay processing times.

Introduction

The CBI authorises/approves a range of regulated financial service providers (“RFSPs”), prospectuses, and regulated financial products.  It also approves key personnel pre-approval controlled functions (“PCFs”), as part of the F&P regime, which was enhanced over the course of the past year with the coming into operation of the Individual Accountability Framework (the “IAF”)¹.

The Report provides a sectoral breakdown of authorisation activity for 2023, outlining: (i) authorisation activity rates by volume; (ii) average authorisation times; and (iii) an explanatory narrative for each sector.  This is the first time that the CBI has published average authorisation times indicating how long a typical authorisation can expect to take (more complex authorisations may take longer).

As noted in our related briefing (here), authorisation timelines remain dependent on a number factors, including: (i) the nature, scale and complexity of an applicant firm’s proposals; (ii) the completeness and quality of the application; and (iii) the responsiveness of the applicant to CBI queries during the assessment process, and the quality of those responses.  Our earlier briefing provides an overview of key takeaway for applicants seeking to increase the efficiency of the authorisation process.

Authorisation Information by Sector

1. Funds Authorisation

In 2023, the CBI received 676 fund authorisation applications.  75 applications were either withdrawn or closed.²

620 applications were approved in 2023.³  This includes 388 Undertakings for Collective Investment in Transferable Securities (“UCITS”), two Retail Investor Alternative Investment Funds (“RIAIFs”), and 230 Qualifying Investor Alternative Investment Funds (“QIAIFs”).

The Irish Collective Asset-management Vehicle (“ICAV”) was the preferred legal structure for 72% of QIAIFs authorised in 2023.

The average processing time for applications was 98 calendar days.  The CBI notes that certain applications received in 2023 required a more detailed review due to complex asset-classes or higher levels of leverage; this may have impacted processing times.

The CBI observed an improvement in the quality of QIAIF application documents in 2023; the extent of documentation rejected due to sub-standard disclosure was 28% lower than in 2022.  Notably, eleven QIAIF applications were rejected due to incorrect submissions, insufficient documentation or regulatory permissions.  Additionally, certain applicants did not ensure, as required, that directors had been cleared in advance.

In relation to post-authorisations, there were a total of 3,180 applications received, and 1,109 approvals, in 2023. Submissions reviewed included UCITS mergers (both domestic and cross-border), changes of service providers, changes relating to strategies, and changes to reflect regulatory developments at a European level.

The number of statutory passporting notifications (outwards and inwards) processed by the CBI for Alternative Investment Fund Managers (“AIFMs”) and UCITS Management Companies (“UCITS ManCos”) increased, from 14 in 2022, to 16 in 2023.

In 2023, a total of 177 investment manager applications were reviewed, split between authorised entities from the EU (33 submissions) and non-EU entities (144 submissions).  The average processing time for investment manager clearance was one day for EU investment managers and four days for non-EU investment managers.

2. Retail Intermediaries / Debt Management Firms

In 2023, the CBI received 263 authorisation/registration applications in respect of retail intermediaries / debt management firms.  144 applications were either withdrawn or closed.

174 retail intermediary authorisations/registrations were approved in 2023.  No debt management authorisations were issued in 2023.

The average processing time for applications was 169 calendar days.  The CBI notes that more complex applications can take more time, though where applicants submitted comprehensive applications requiring minimal follow-up engagement, turnaround times of about 70 calendar days were observed.

While an improvement in the quality of applications received was noted by the CBI, a relatively high number of applications were withdrawn or returned in both Q2 and Q4 2023.  The most common reasons for the withdrawal or return of an application were:

• applicants being unable to demonstrate that proposed appointees to PCF roles met the F&P requirements (including minimum competency requirements);
• errors or inaccuracies in Individual Questionnaire (“IQ”) submissions; and
• applicants not submitting IQs within 20 working days.

The number of applications from firms seeking approval to complete an acquiring transaction in 2023 was 61, and the number of applications from firms seeking to appoint a tied agent remained steady at 40.

There were 183 revocations in this sector in 2023, the vast majority (177) related to voluntary retail intermediary firm revocations.

3. High Cost Credit Providers (“HCCPs”)

In 2023, the CBI received 28 authorisation applications relating to HCCPs. Two applications were either withdrawn or closed.

26 applications were approved in 2023.  These applications all related to licence renewals.  Licences were previously renewed annually but due to a change in law in 2022, licences are now issued for a period of five years.

Processing times in respect of authorisation applications by HCCPs were not made available.

4. Retail Credit Firms / Credit Servicing Firms

In 2023, the CBI received two authorisation applications in respect of retail credit firms / credit servicing firms.  Four applications were either withdrawn or closed.

The majority of retail credit firm applications were received as a result of the Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Act 2022, enacted in 2022 to regulate hire purchase, personal contract purchase (“PCP”) and buy-now-pay-later (“BNPL”) firms.  For more on the 2022 Act, see our briefing here.

Two applications were approved in 2023.  There were a small number of withdrawals and rejections during the year.  Reasons cited for rejections include poor quality applications and failed key information checks.  Reasons for withdrawals include transitional firms withdrawing from the sector, and business models changing late in the application process.

The average processing time for applications was 733 calendar days, though the CBI notes that this timeline was driven by a single atypical application.

In respect of the credit servicing sector, prospective applicants should note the coming into operation of the EU regulatory regime for credit servicing, which now operates alongside Ireland’s domestic regime.  For more information, see our briefing here.

5.Trust or Company Service Providers (“TCSPs”)

TCSPs are authorised under Chapter 9 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 to 2021.  The CBI is the competent authority for the anti-money laundering and countering the financing of terrorism (“AML/CFT”) supervision of TCSPs that are subsidiaries of credit or financial institutions (accounting for approximately 10% of the total TCSP population).

In 2023, the CBI received 25 TCSP authorisation applications.  25 applications were approved in the year.  A TCSP authorisation is valid for a period of three years from the date of authorisation.

The average processing time for applications was 38 calendar days.

6. Fund Service Providers

In 2023, the CBI received 14 authorisation applications in respect of fund service providers.  10 applications were approved in 2023.

Five applications were either withdrawn or closed.  Authorisation withdrawals were more prominent in 2023 than in previous years.  Some were withdrawn at an advanced stage of the authorisation process due to a lack of adequate staffing for both PCF and non-PCF roles, and changes to business models following initiation of an application for authorisation.

The average processing time for applications was 327 calendar days.

The CBI also processed a high number of “other” applications, such as branch notifications, changes to authorisation, registration of alternative investment funds (“AIFs”), and revocations of authorisations or approvals.

In respect of post-authorisations, 63 acquiring transactions were received in 2023.

7. Insurance Undertakings

In 2023, the CBI issued authorisation in principle to two insurance/reinsurance undertakings, five Solvency II special purpose vehicles (“SPVs”), and one SPV arrangement in 2023.

The average processing time for applications was 31 calendar days.

8. MiFID Investment Firms

In 2023, the CBI received seven authorisation applications.  Five applications were either withdrawn or closed.

Eight applications were approved in 2023, of which four were for new investment firms in this jurisdiction and four were extensions to authorisation for existing regulated investment firms.

The average processing time for applications was 327 calendar days.

For a detailed overview of the regulatory landscape for MiFID investment firms, see our briefing “Ireland as a Location for MiFID Investment Firms 2024” (here).

9. Crowdfunding Service Providers

Regulation (EU) 2020/1503 established an EU regulatory regime for Crowdfunding Service Providers (“CSPs”), requiring firms providing crowdfunding services to be authorised by a national competent authority.

In 2023, the CBI received seven authorisation applications.  Two applications were either withdrawn or closed.

Five applications were approved in 2023.  Of these, one was a new entrant to the Irish market, and four were existing firms operating in the market on a transitional basis, in accordance with the regime provided for by Regulation (EU) 2020/1503.

The average processing time for applications was 273 calendar days.  According to the CBI, the main contributing factor to this was that the firms operating on a transitional basis submitted complete applications close to the deadline for the expiry of the transitional regime.  The CBI then had three months to consider those applications, in accordance with the provisions of the Regulation.

For a detailed overview of the regulatory landscape for crowdfunding service providers, see our briefing “Ireland as a Location for Crowdfunding Service Providers 2024” (here).

10. Payment and Electronic Money Institutions

In 2023, the CBI received six authorisation applications from payment institutions (“PIs”) or electronic money institutions (“EMIs”).  Twelve applications were either withdrawn or closed during the year.

Six PI/EMI authorisations were approved in 2023.

The average processing time for applications was 614 calendar days.  According to the CBI, this figure was “reflective of a lack of preparedness of some applicants, delays in responding to queries issued by the Central Bank and changes made by applicants to their proposals during the course of assessments”.

There was a significant increase in the number of application withdrawals in 2023, driven mainly by strategic commercial decisions.  As PI/EMI business models are underscored by innovation, this can lead to firms continuously evolving their strategies or readiness for authorisation.

For a detailed overview of the regulatory landscape for PIs and EMIs, see our briefings “Ireland as a Location for Payment Institutions 2024” (here) and “Ireland as a Location for Electronic Money Institutions 2024” (here).

11. Credit Unions

No credit unions were authorised in 2023.  A total of four credit unions were deregistered or revoked in the year.

12. Virtual Asset Service Providers (“VASPs”)

VASPs are registered pursuant to section 108 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.  VASPs are supervised by the CBI for AML/CFT purposes only.

In 2023, the CBI received five authorisation applications by VASPs.  Nine applications were either withdrawn or closed.

Seven applications were approved in 2023.  The average processing time for applications was 530 calendar days.  According to the CBI, this was largely driven by the time taken by applicants to respond to CBI queries during the assessment process.

The entry into application of the Markets in Crypto-Assets Regulation⁴ (“MiCA”), which will apply in the main from 30 December 2024, will significantly alter the regulatory landscape in Ireland for entities seeking to provide crypto-asset services.  In this regard, the CBI has issued guidance (here).

Our briefing on MiCA (here) provides more information on the coming regulatory regime.  Ireland’s existing domestic regime is also covered in our briefing “Ireland as a Location for Virtual Asset Service Providers 2023” (here).

13. Credit Institutions

A single application was received in 2023.  There were no approvals in the year.

14. Prospectus Approval

The CBI approves prospectuses under the Prospectus Regulation⁵ for equity securities, a variety of different debt securities, and closed-end investment funds.

In 2023, the CBI received 2,234 applications for approval.  According to the CBI, this figure includes multiple iterations of the same application.

745 applications were approved in 2023, all relating to debt securities.  There was an average processing time for applications of 15 calendar days.

Insights into the F&P Regime

The core function of the F&P regime is to ensure that individuals in key and customer facing positions (known as “CFs” and “PCFs”) within RFSPs and certain holding companies are competent, capable, honest, ethical, of integrity, and financially sound.

Over the course of 2023, the CBI received 3,359 PCF applications.  2,603 applications were approved in the year.  No applications were rejected in the year; however, 361 were returned as incomplete and 279 were withdrawn by the applicant.  619 PCF applications remained in progress at year end.

The CBI notes that the quality of submitted PCF applications has improved since the introduction of a bespoke CBI portal in April 2023, resulting in a reduction of processing timelines.  The average processing time for PCF applications in H2 2023 was 24 calendar days, and 98% of PCF applications were processed within 90 days.

As regards incomplete applications, these mostly related to errors in the initial submission (e.g. failures to upload necessary documentation, insufficient due diligence performed by the proposer, applications to the wrong PCF role, or an inability to answer queries regarding key aspects of their F&P requirements).

How Can McCann FitzGerald LLP Help?

McCann FitzGerald LLP is a premier law firm in Ireland and advises on the full range of legal, tax and compliance activities undertaken by regulated financial service providers in Ireland.  We have substantial experience in successfully guiding applicants through the regulatory authorisation process for all types of authorisations, and in helping them to comply with their legal obligations, once established.  If you are considering seeking CBI authorisation, please contact us for further information as to how we can help guide you through the process.

Also contributed to by David O’Keeffe Ioiart