This chapter introduces the review of the financial consumer protection supervisory functions of the Central Bank of Ireland. After providing the background of the review, the chapter presents the purpose and the scope of the review, a brief overview of the G20/OECD High-Level Principles on Financial Consumer Protection, the methodology used and the structure of the report.
Financial Consumer Protection in Ireland
A Review of the Central Bank of Ireland's Supervisory Functions
Abstract
OECD Financial Consumer Protection Assessments (FCP Assessment) offers countries and/or public authorities a comprehensive and objective assessment of their financial consumer protection framework based on original analysis, along with policy recommendations tailored to a country’s specific situation and needs. The purpose of an FCP Assessment is to conduct an evidence-based review and comparative analysis against the G20/OECD High-Level Principles on Financial Consumer Protection (FCP Principles) and international practices and effective approaches in order to identify potential gaps and recommendations for areas for improvement. The recommendations may also include suggestions on how to improve FCP policies and practices based on successful measures taken in other countries.
The focus of this FCP Assessment is to review the financial consumer protection supervisory functions of the Central Bank of Ireland (Central Bank). The Central Bank’s Strategy comprises four connected themes (Future-Focused, Open & Engaged, Transforming and Safeguarding) (Central Bank of Ireland, 2021[1]). These themes acknowledge that, in a rapidly changing world, the Central Bank must transform the way that it operates in order to succeed, including looking for continuous improvement in its ways of working. In line with this strategy, the Central Bank and the OECD agreed that the OECD would undertake an FCP Assessment by reviewing the financial consumer protection supervisory functions of the Central Bank of Ireland against the FCP Principles.1
The purpose of this report is to set out the results of the review of the financial consumer protection supervisory functions of the Central Bank (review) by the OECD.
The review consists of a mapping of the financial consumer protection supervisory functions of the Central Bank with respect to its alignment with the FCP Principles (Chapter 2). The mapping is based on desk research including relevant legislation, regulation, institutional arrangements and data, the responses to a detailed questionnaire completed by the Central Bank and other national authorities to understand the current FCP policies and practices in Ireland, as well as fact-finding meetings between the OECD and various teams of the Central Bank, relevant national authorities and other public and private stakeholders. Chapter 3 provides an assessment of the financial consumer protection supervisory functions of the Central Bank, identifies areas for improvement and formulates recommendations. The assessment is informed by the mapping, discussions with relevant stakeholders, the FCP Principles, other relevant OECD Recommendations and other instruments and, where appropriate, international best practices and effective approaches.
As described in more detail in section 2.2.2, the mandate of the Central Bank encompasses financial stability and prudential supervision as well as consumer protection. While the scope of the review is the Central Bank’s financial consumer protection supervisory functions, as an integrated central bank and financial services regulator, the Central Bank’s assessment of risks at system level, firm level and consumer level are also relevant. Therefore, this report also refers, where relevant, to broader aspects of the mandate of the Central Bank to understand its consumer protection supervisory functions.
For completeness and context, and where relevant, the review also considers the broader landscape of financial consumer protection policy and institutional arrangements in Ireland, even though such arrangements do not fall within the scope of the review and are not the subject of recommendations.
The paragraphs below provide a brief description of the financial services sectors that are outside the remit of the Central Bank as well the FCP Principles that are not directly applicable to the financial consumer protection supervisory functions of the Central Bank for the purpose of this review.
Firstly, the Central Bank does not have responsibility for financial consumer protection supervision of all sectors of the financial services industry. As set out in section 2.1.5, certain products that can be used for financial and investment purposes do not fall within the regulatory remit of the Central Bank. Moreover, the Central Bank does not have a central role relating to the pension markets. Occupational pension schemes and personal retirement savings accounts (which are, together with the state-supported public pension system, the three main pillars of Ireland’s pensions system) are regulated by the Pensions Authority through its supervision of compliance with the Pensions Act 1990. The Central Bank authorises and supervises financial services firms who sell pension products or manage pension assets, but it does not have responsibilities relating to the supervision of the business conduct of occupational pensions schemes. These financial services firms include credit institutions, investment firms and insurance companies providing personal pension products, investment and insurance intermediaries providing advice relating to retirement savings products (including retirement phase arrangements), and investment management firms providing services relating to the assets in occupational schemes. Finally, the Central Bank is responsible for the collection of data on occupational pension schemes.
Moreover, the Health Insurance Authority is the statutory regulator of the private health insurance market under the Health Insurance Acts 1994-2015 which address access to health insurance coverage (for example through open enrolment and lifetime cover) and specify minimum levels of coverage that health insurance contracts must include. Finally, the Competition and Consumer Protection Commission is responsible for the authorisation of credit intermediaries.
Secondly, not all aspects of the FCP Principles are directly applicable to the financial consumer protection supervisory functions of the Central Bank. The Central Bank does not have a statutory function in respect of financial literacy and awareness (Principle 4) and the Competition and Consumer Protection Commission promotes compliance with and enforces competition law in Ireland (Principle 5). However, the Central Bank undertakes a number of consumer awareness initiatives, and it has an objective to ensure that financial markets function in an orderly and proper manner, and it is the competent authority for the supervision and enforcement of compliance with provisions to support consumers when switching between financial services products and firms. In addition, Principle 11 on the protection of consumer data and privacy is not directly applicable to the financial consumer protection supervisory functions of the Central Bank for the purpose of this review as the Central Bank does not have a role in supervising compliance with the Data Protection Legislation (compliance with the Data Protection Legislation is supervised and enforced by the Data Protection Commission). As a data controller, however, the Central Bank is subject to compliance with the Data Protection Legislation, and it has policies, procedures and controls in place for this purpose. Moreover, relating to Principle 12 on complaints handling and redress, the Central Bank is the competent authority for supervising that regulated firms have complaints handling procedures in place, while the Financial Services and Pensions Ombudsman holds the statutory function of independently and impartially resolving consumer complaints about the conduct of financial services providers regulated by the Central Bank and pension providers regulated by the Pensions Authority.
Furthermore, several other public authorities play an important role in Ireland’s financial consumer protection landscape, such as the Department of Finance, the Insolvency Service of Ireland and An Garda Síochána (the national police and security service of the Republic of Ireland). Where appropriate and to ensure completeness, the review includes information about the broader financial consumer protection landscape and provides a brief description of the role of other relevant public authorities in Ireland in relation to the financial consumer protection supervisory functions of the Central Bank.
Effective financial consumer protection is an important part of well-functioning financial markets, as it promotes responsible and fair treatment of consumers, increases trust and confidence in the financial system, and supports meaningful financial inclusion, increasing participation in financial activities, such as savings, borrowing and investing. Financial consumer protection also fosters healthy competition between financial institutions by allowing consumers to make informed decisions and choose the best products for their needs.
The FCP Principles are the international standard for comprehensive and effective financial consumer protection frameworks. Governments, oversight bodies (i.e. financial regulators and supervisors), and other relevant institutions are recommended to implement the FCP Principles at the national level.
The FCP Principles were developed by the G20/OECD Task Force on Financial Consumer Protection (Task Force) and first endorsed by G20 Leaders in November 2011 (G20 Leaders, 2011[2]) and adopted by OECD Members in the form of a Recommendation in July 2012 (OECD, 2022[3]). The FCP Principles are included in the Financial Stability Board (FSB) Compendium of Standards and referenced in the G20 Financial Inclusion Action Plan.
Over the course of 2021-22, the Task Force conducted a comprehensive review and update of the FCP Principles. The updated FCP Principles were endorsed by G20 Leaders on 15-16 November 2022 (G20 Leaders, 2022[4]) and adopted by OECD Members via a revised Recommendation on 12 December 2022.
The 2022 review of the Principles introduced three main updates: i) the addition of two new principles (“Access and Inclusion” and “Quality Financial Products”); ii) the inclusion of three cross-cutting themes relevant to the consideration and implementation of each and all of the FCP Principles (“digitalisation”, “financial well-being” and “sustainable finance”); and iii) the incorporation of lessons from the response to the COVID-19 pandemic such as enhanced protections for consumers who may be vulnerable and a greater focus on tackling financial scams.
The FCP Principles underscore the importance of consumer trust and confidence in the financial system and emphasise the need for consumers to be treated fairly and responsibly in their dealings with financial service providers. Integrating consumer protection policies into regulatory frameworks strengthens financial stability and ensures fair treatment for consumers. The FCP Principles recognise the importance of financial innovation and digitalisation, enabling consumers to benefit from new opportunities while managing associated risks. Additionally, the FCP Principles address vulnerabilities that some consumers may face due to personal characteristics, behavioural biases and market conditions. Infographic 1.1. provides an overview of the FCP Principles.
Note: Text in green colour denotes revisions made through the 2021-2022 review and update of the High-Level Principles on Financial Consumer Protection.
Source: OECD (2022[3]), G20/OECD High-Level Principles on Financial Consumer Protection, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0394.
The Methodology for the review consisted of:
desk research of relevant documents, reports and information published by the Central Bank and stakeholders,
analysis of information provided by the Central Bank in response to a detailed questionnaire,
information and perception gathered during and provided subsequently to a fact-finding mission carried out in Dublin, Ireland, on 22-26 January 2024 to meet with various teams of the Central Bank and a wide range of stakeholders. The stakeholders consulted by the OECD included:
Department of Finance
Financial Services and Pensions Ombudsman (FSPO)
Competition and Consumer Protection Commission (CCPC)
Insolvency Service of Ireland (ISI)
Money Advice and Budgeting Service (MABS)
Free Legal Advice Centres (FLAC)
Consumer Advisory Group (CAG)
Banking and Payments Federation Ireland (BPFI)
Brokers Ireland
Insurance Ireland
the Irish Banking Culture Board (IBCB).
written submissions from stakeholders provided in response to the OECD’s Discussion Guide for External Stakeholders developed to provide guidance for discussions with, and inputs from, external stakeholders about the review,
desk research on relevant aspects of the financial consumer protection framework of other selected jurisdictions to provide points of comparison.
The review concludes that the Central Bank’s financial consumer protection supervisory functions are well aligned with the FCP Principles. The Central Bank is a mature and sophisticated oversight body and has appropriate policies and practices in place to effectively monitor financial markets, identify risks to consumers and improve outcomes for consumers.
The review also identifies areas where the Central Bank could further strengthen its financial consumer protection supervisory functions. The recommendations of the review are intended to support the Central Bank’s transformation and they touch on some of the areas of strategic focus for the Central Bank, including accelerating the evolution of its risk-based supervisory approach. Delivered in conjunction with an integrated supervisory approach, the recommendations represent an opportunity for the Central Bank to drive ever better outcomes for consumers. Drawing on the mapping set out in Chapter 2 as well as international experience and interviews with representatives of the Central Bank and other relevant Irish institutions, Chapter 3 presents the assessment of the financial consumer protection supervisory functions of the Central Bank and identifies areas for improvements. This section lists the recommendations for each of these areas.
1.6.1. Theme 1 - Ensuring consumers continue to be protected as part of the Central Bank’s integrated supervisory approach
In evolving its framework to deliver a more integrated supervisory approach, the Central Bank should:
Ensure that its governance and supervisory structures retain explicit consumer and investor protection objectives, to make retail financial markets deliver good outcomes for consumers.
1.6.2. Theme 2 - Measuring and demonstrating the effectiveness of the financial consumer protection supervisory functions of the Central Bank
The Central Bank should:
Build on existing initiatives to embed the evaluation of the effectiveness of its financial consumer protection supervisory activities on consumer outcomes in its supervisory framework.
Assess and review the effectiveness of “Dear CEO” letters as a supervisory tool.
1.6.3. Theme 3 – Engaging with consumers and consumer groups
The Central Bank should:
Enhance the Consumer Advisory Group (CAG) to ensure that it includes the consumer perspective on the broad range of financial consumer protection matters within the remit of the Central Bank. This could be done, for example, by reserving some space on the CAG for representatives of consumers or consumer associations. This would build on the valuable role that the CAG already plays in advising the Central Bank and would help the CAG to provide a broader view of the Irish consumer experience.
Conduct periodic surveys of Ireland’s adult population to evaluate and track consumer behaviours and attitudes towards financial products and services and to build consumer segmentation models.
Conduct more regular engagement with small businesses in their capacity as consumers of financial services. This could be done, for example, by including representatives of small businesses in the current structure for consumer engagement.
1.6.4. Theme 4 – Informing and educating financial consumers
Recognising that the Central Bank does not have an explicit statutory function relating to financial literacy and awareness, and in line with its mandate to ensure the proper and effective regulation of financial service providers and markets while ensuring that consumers of financial services are protected, the Central Bank should:
Continue to collaborate and co-ordinate with other stakeholders on the development and implementation of the forthcoming National Strategy for Financial Literacy. This is important to share information and best practices across stakeholders, avoid duplication and use resources efficiently.
Consider the use of financial literacy as a supervisory tool and conduct initiatives aimed at increasing consumers’ awareness about their rights when dealing with financial services providers, for example by enhancing the Central Bank’s Consumer Hub.
Ensure that communication to consumers about financial scams and frauds remains a priority, given the increasing prevalence of scams and frauds in Ireland (as in many other jurisdictions).
Continue to identify and seek to address impediments to consumers switching financial products (taking into account the potential benefits for consumers).
1.6.5. Theme 5 – Protecting consumers experiencing vulnerability
Given new requirements proposed as part of the review of the Consumer Protection Code (Code), the Central Bank should:
Focus on the implementation of the new provisions of the Code by
developing a supervisory approach to ensure that financial services providers adapt to the new requirements and that consumers in vulnerable circumstances are treated fairly, and
clarifying to financial services providers how the Central Bank views their treatment of consumers in vulnerable circumstances from a risk tolerance perspective.
Develop an evidence-based understanding of consumer vulnerability by undertaking research to identify the main drivers of vulnerability for Irish financial consumers and their prevalence. This could be done, for example, by including relevant questions in the survey about consumer behaviour and attitudes towards financial products and services of Ireland’s adult population.
Ensure regulated financial services providers continue to support consumers, especially those in vulnerable circumstances, during the digital transformation to make sure that digital tools and practices are designed and implemented with a consumer focus.
1.6.6. Theme 6 – Using data in financial consumer protection supervision
The Central Bank should:
Continue to ensure that all information collected for financial consumer protection supervisory purposes adheres to data and governance standards in line with the wider Central Bank Data Strategy. This information should be used alongside data more broadly already available to the Central Bank and assessed to be relevant to identifying and articulating consumer protection risks. The combined sources should be presented in an easily accessible, consistent, usable, and digestible manner for relevant supervisory teams so that it can support the Central Bank’s consumer protection supervisory functions in an efficient manner on an ongoing basis.
Ensure that the functionality necessary to support the Central Bank’s financial consumer protection supervisory functions is identified and incorporated in the single supervisory workbench throughout all stages of its evolution.
Where necessary, continue to make targeted additions and refinements to the data that the Central Bank collects from financial services providers on an ongoing basis, in order to inform the Central Bank’s financial consumer protection supervisory functions on a firm-specific, sectoral or cross sectoral basis.
Continue to invest in staff training so that supervisory teams with responsibility for financial consumer protection supervision evolve their knowledge and abilities in order to support their use of the enhanced tools and increased data available to them.
Continue to enhance the way in which data from the Central Credit Register (CCR) is used. CCR data could provide insights on risks to consumers, enhancing the Central Bank’s risk identification capabilities and complement consumer research, subject to compliance with the requirements of the Credit Reporting Act and data protection legislation.
The report is structured as follows:
Chapter 2 provides the mapping of the financial consumer protection supervisory functions of the Central Bank as of the beginning of November 2024
Chapter 3 presents the assessment of the financial consumer protection supervisory functions of the Central Bank and the recommendations.
References
[1] Central Bank of Ireland (2021), Our Strategy.
[4] G20 Leaders (2022), 2022 Leaders’ Declaration.
[2] G20 Leaders (2011), G20 Leaders Summit.
[3] OECD (2022), G20/OECD High-Level Principles on Financial Consumer Protection, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0394 (accessed on 10 March 2024).
[5] OECD (2022), Recommendation of the Council on High-Level Principles on Financial Consumer Protection, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0394.
← 1. The Central Bank is also required to make arrangements for a review of the performance of its regulatory functions at least every four years and the review is intended to meet this requirement in respect of the Central Bank’s consumer protection supervisory functions.