Queries/Comments      should be directed to:    Director    European I Department    International Monetary Fund    700 19th Street, NW    Washington, DC 20431    202-623-7000    EU1REVIEW@imf.org REPORT ON THE OBSERVANCE OF STANDARDS AND CODES (ROSC) Ireland V. Transparency of Monetary and Financial Policies

Prepared by a staff team of the International Monetary Fund, on the basis of information provided by the Irish authorities. Review of Code of Good Practices on Transparency of Monetary and Financial Policies February 20, 2001

Contents

Executive Summary

1. Introduction
2. Review of Code of Good Practices on Transparency of Monetary and Financial Policies
   
   1. Clarity of Roles, Responsibilities and Objectives of Financial Agencies Responsible for Financial Policies
   2. Open process for Formulating and Reporting of Financial Policies
   3. Public Availability of Information on Financial Policies
   4. Accountability and Assurances of Integrity by Financial Agencies
3. Staff Commentary

Text Table

Table 1. Ireland: Observance of the Code of Transparency of Monetary and Financial Policies

I.  Introduction

1.  This report provides an assessment of Ireland’s observance of the Code of Good Practices on Transparency of Monetary and Financial Policies in the areas of banking, securities, insurance supervision and payment systems oversight. The assessment was undertaken in the context of the 2000 Article IV consultation with Ireland.¹ The conclusions of this report are based on an initial self assessment of the authorities and discussions between the team and the authorities.

2.  The CBI is a member of the ESCB/Eurosystem and no longer conducts independent monetary policy.² While the code covers monetary and financial policies, this transparency assessment, therefore, concentrates on financial policies, most notably in the areas of banking, securities, and insurance supervision that are conducted entirely at the national level. Payments system oversight is conducted within the framework of the common Eurosystem oversight policy.³
 

II.  Review of Code of Good Practices on Transparency of Monetary and Financial Policies

A.  Clarity of Roles, Responsibilities and Objectives of Financial Agencies Responsible for Financial Policies

3.  The broad objectives of banking supervision — financial stability, market and systemic stability, competitive and fair markets, client asset protection and enforcement of laws and regulations — are defined and disclosed in the Irish statutes , including Acts and Regulations, implementation of EU Directives and corresponding amendments. Policies are disclosed in official bulletins, the central bank annual report, in the media, the central bank web page and through the promulgation of domestic or international standards.

4.  The broad objectives of insurance supervision are client asset protection and enforcement of laws and regulations. The legal basis for DETE supervision is provided by Insurance Acts and Regulations. Insurance regulation and supervision is carried out by the Insurance Division of the DETE, operating under the direction of a Minister who is accountable to Parliament.

5.  The relationship between agencies is outlined in the legislature, in regulations and disclosed in the media mentioned in the paragraphs above. Formal and informal committees are used between the central bank and other agencies as required.

6.  Policies for payments systems oversight are clear and publicly disclosed through a variety of channels.

B.  Open process for Formulating and Reporting of Financial Policies

7.  Policies are set out in legislation and regulations, in public appearances of the relevant officials before the Legislature and through publication in appropriate media. Policy changes are publicly announced through appropriate channels. Depending on the relative significance of the policy change, the announcement of the change can vary from immediately after the decision to publication in the respective annual reports.

8.  Before legislation is enacted, there is generally a process of consultation with relevant parties. Where the CBI proposes substantive technical changes, it generally would consult with the relevant industry bodies and/or participants in the financial services area. For DETE, the extent of such consultation depends on the relative importance of the policy change.

C.  Public Availability of Information on Financial Policies

9.  Sectoral assessments are contained in the regular publications by the CBI and DETE (e.g., annual reports), written reports submitted to the legislature and on the respective web pages. Aggregate information on credit institutions and other financial market participants under the supervision of the CBI is published in the annual report and on its web site. The Insurance Annual Report gives detailed information on the insurance sector, both at the level of the industry and of the individual company. This information is based on returns which insurance companies are obliged to provide on an annual basis.

10.  Citing concerns about data confidentiality, the CBI has decided not to adopt a policy of publishing information on emergency financial support by financial agencies. Since the introduction of the euro, no emergency support has been provided.

11.  The CBI operates a deposit protection scheme, which provides a measure of protection for bank deposits. The scheme is administered by the central bank but funded by the banks themselves. An entity called The Investor Compensation Company Limited has overall responsibility for providing investor compensation to provide a measure of protection for investors where an investment business firm is unable to return funds or securities, which are legally due to the client.

D.  Accountability and Assurances of Integrity by Financial Agencies

12.  Section 24 of the Central Bank Act, 1997 as substituted by Section 17 of Central Bank Act, 1998 states the requirement for CBI officials to appear before designated public authorities to state and explain views on financial policies, the objectives of the institution, the performance of the agency in pursuing the objectives, and to exchange views on the state of the financial system. As to DETE there is no specific legal requirement but, in practice, officials are, on request ready to appear before the relevant public bodies to report on the conduct of financial policies, explain policy objectives of the institution and describe the institution’s performance in pursuing the se objectives.

13.  The CBI publishes annually its audited accounts in statements submitted to the legislature, in its annual report, in press releases to the media and on its web site. There are also hard copies available at the headquarters. The Insurance Division does not have separate accounts. Annual fee income and input (salaries, etc.) details are provided in the annual Appropriation Account for DETE, which is presented to parliament and published.

14.  The CBI is audited by the Comptroller and Auditor General and a government appointed private sector firm. In addition, external auditors have been appointed, in accordance with Article 27 of the Statute of the ECB. The CBI follows generally accepted accounting principles to suit the nature of central banking activity and the applicable statutory provisions. The accounts of DETE are audited by the Comptroller and Auditor General.

15.  Internal governance procedures for financial agencies are in place and publicly disclosed in written reports submitted to the Legislature. For DETE, the internal audit function is not specific to the Insurance Division but operates across the entire Department.

16.  For the CBI and DETE, ethics in public office legislation requires, inter alia, disclosure by Ministers and senior officials of private interests that might be seen as compromising impartiality in official dealing. Information about legal protection for officials and staff of financial agencies are publicly disclosed through publication in official government publications, gazettes or registers.

III.  Staff Commentary

17.  Ireland observes the Code of Good Practices on Transparency of Monetary and Financial Policies with respect to all financial policies. The broad objectives of supervision are defined and disclosed in the Irish statutes, including Acts and regulations, implementation of EU Directives and corresponding amendment. For insurance supervision, the legal basis for DETE supervision is provided by Insurance Acts and Regulations. Policies are set out in legislation and regulations, in public appearances of public officials before the Legislature and through publication in appropriate media. The CBI disseminates information through several different channels and the DETE provides corresponding information as part of the annual published Appropriation Account. Accountability and assurances of integrity by relevant financial agencies is ensured.

¹ The assessment was prepared by the International Monetary Fund as part of a Financial Sector Assessment Project (FSAP) mission. The team was led by Tomás J. T. Baliño and, for payment systems, included Anne-Marie Gulde, Angeliki Kourelis, and Armando Morales (all MAE), Natalia Koliadina (EU1), and other EU1 staff.

² The European System of Central Banks (ESCB) is composed of the ECB and the National Central Banks (NCBs) of all 15 EU Member States. The Eurosystem comprises the ECB and the NCBs of the 12 Member States which adopted the euro as their single currency in Stage Three of Economic and Monetary Union (EMU).

³ A detailed presentation of the role of the Eurosystem in the field of payments systems oversight and the practical organization of oversight activities within the Eurosystem is contained in a policy statement issued by the ECB on June 21, 2000. The statement has been posted on the ECB website at http://www.ecb.int/, under “Press Releases”.