Central Bank of Ireland’s Authorisations Report: Key Takeaways for Applicants

The Central Bank of Ireland (the “CBI”) recently published the first edition of its “Authorisations and Gatekeeping Report” (the “Report”) (here).  The aim of the Report, which will be an annual publication, is to provide increased clarity as regards supervisory expectations for firms seeking authorisation.  In publishing this Report, the CBI hopes to  improve the efficiency of the “gate”, whilst maintaining the robustness of the authorisation process.

This briefing sets out some key takeaways for applicants seeking to increase the efficiency of the authorisation process.

A breakdown of CBI authorisation activity in 2023, outlined in the Report, is available in our related briefing here.

1. What is the CBI’s overall approach to authorisation?

Throughout the Report, the CBI places significant emphasis on its role as a “gatekeeper”, highlighting that CBI authorisation should be seen as a mark of quality and trust.

The CBI’s primary supervisory goals are to maintain Ireland’s stable, resilient and trustworthy financial system, and ensure that the financial sector operates in the best interests of consumers and the wider economy.  To this end, the CBI employs an approach to authorisation that is “risk-based”, and informed by legislative requirements, guidelines and best practice.  It adopts a proportionate approach, tailored to the nature, scale and complexity of applicants’ activities.

2. What are the CBI’s authorisation priorities?

The Report sets out the CBI authorisation priorities, which are as follows:

• to conduct robust and proportionate authorisation assessments, ensuring that applicants meet CBI pre- and post-authorisation expectations;
• to provide additional guidance to applicants on CBI expectations and, ultimately, to drive better quality applications;
• to refine and benchmark authorisation processes, ensuring they evolve to meet the changing needs of the financial services sector;
• to continuously develop its knowledge base, to effectively respond to the evolution of the sectors it regulates; and
• to effectively integrate new regulatory developments and the expansion of the CBI’s mandate.

3. What factors impact authorisation timeframes?

According to the CBI, a number of factors can hold up a timely authorisation assessments.  Applicants should be mindful of common areas of difficulty when preparing their applications.

Examples of factors identified in the CBI’s Report include:

• applicants being inadequately prepared for the authorisation process;
• the quality and timeliness of application submissions; and
• incomplete information in application submissions.

Authorisation timelines also remain dependent on:

• the nature, scale and complexity of an entity’s proposals;
• the completeness and quality of an application; and
• an entity’s responsiveness throughout the assessment process (along with the quality of responses).

4. What challenges do applicants experience during the authorisation process?

The CBI identifies the following challenges experienced by some applicants during the authorisation process:

• Business Models:  According to the CBI, an inability by an applicant to describe their proposed business model may result in a prolonged assessment.  Substantial changes made by applicants to a business model over the course of the assessment process may also prolong the assessment.
• Delays in Responding:  The CBI identifies instances of delays by applicants in responding to queries, or providing clarifications to questions posed during the authorisation process.
• Governance:  In some cases, a lack of a substantive presence and adequate staffing for both pre-approval controlled function (“PCF”) and non-PCF roles in the jurisdiction may impede the process.
• Inadequate Preparation and Application Completeness:  According to the CBI, applicants that have made necessary senior appointments at the application stage generally submit more comprehensive applications.  Those applicants, therefore, tend to progress through the authorisation process in a more timely manner.
• Localised Risk Frameworks:  In the case of international applicants, the CBI expects local risk frameworks, tailored to the entity that is seeking authorisation, to be in place to ensure that all risks are managed.  The Report states that there are many cases where applicants have not given this expectation appropriate consideration, and have placed overreliance on group risk frameworks.

5. What can applicants do to expedite the authorisation process?

In the Report, the CBI sets out clearer expectations for applications, which aim to facilitate better and more complete applications, to the benefit of both the CBI and applicant firms.

• Early Engagement:  The CBI recommends that applicants engage with the Central Bank at an early stage, to clarify supervisory expectations and support their application.  Applicants with new and innovative business models should consider engaging with the CBI’s Innovation Hub.
• Regulatory Knowledge and Preparedness: In the CBI’s experience, the authorisation process is more productive and efficient where applicants have fully considered their regulatory obligations in their applications.  Applicants should be well-organised and prepared to comply with the current regulations and guidance for their sector on an ongoing basis, in addition to being prepared for any upcoming rule changes.
• Risk Awareness:  Applicants should fully understand the risks arising from their business models and operations, and how to mitigate those risks.
• Tailored Applications:  Applications should not be generic; rather, they should be tailored and specific to the authorisation sought, and to the firm’s business model, and its enterprise risks and risk frameworks.
• Awareness of Post-Authorisation Expectations:  Applicant firms are not only expected to meet the minimum authorisation standards, but are also expected to be aware of the CBI’s broader expectations post-authorisation.

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