Banks, insurance companies and investment funds in Ireland will have to pay an extra €15 million this year to help cover the running costs of their regulator, the Central Bank of Ireland.
This represents a 29 per cent rise in the industry’s contribution to the Central Bank’s running costs, which will increase to €66 million from €51.1 million in 2014.
This raises the prospect of banks and insurance companies passing on the cost to their customers by way of higher fees or premiums.
A spokewoman for the Central Bank said the increase was necessary to fund costs associated with its pension scheme and also reflected the fact that industry groups were under levied in previous years. The levy is applied on a retrospective basis, she added.
The sharp increase in the levy has been a matter of contention with industry arguing during the summer that it should not have to pick up the bill for funding the Central Bank’s defined benefit pension scheme.
These representations have resulted in the Central Bank reducing the increase it was originally going to impose by 8 per cent.
Under the current funding arrangements, industry is levied for 50 per cent of the costs incurred on financial regulation activities, with certain exceptions.
These are levied on various sectors of industry on a proportionate basis, depending on the level of regulatory input and oversight required.
In a statement issued today, the Central Bank noted that representatives of the key industry groups were briefed in August on the proposed 2015 levies applicable to their sectors.
“Concerns were expressed in relation to the increasing costs of financial regulation with particular emphasis on the sharp increase in costs associated with the bank’s pension scheme,” it said.
The regulator said staff costs, which include pensions, are a “significant component” of its overall costs.
“The bank’s pension scheme mirrors public service pension arrangements, both in terms of contribution and benefits. Whereas the public service covers the cost of pensions from current funds, the bank funds pensions through a dedicated pension fund which is accounted for in accordance with Financial Reporting Standards (FRS17 Retirement Benefits).
“This leads to higher pension charges in the current low bond yield environment and annual volatility in the bank’s staff costs and the associated levy calculations. This impact was particularly significant on the proposed levy calculations for 2015.”
In response to industry concerns, the regulator said the impact of pension volatility would be spread over a rolling 10-year period. “As a consequence, this will partially mitigate the increases from the previously advised 2015 levy amounts which should now be circa 8 per cent lower than originally communicated,” the Central Bank added.
The revised funding regulations will be sent to the department of finance for ministerial approval in the coming days.
