Central Bank and Credit Institutions (Resolution) Act 2011

PART 1 Preliminary

1.. Short title, collective citation and commencement.

1.— (1) This Act may be cited as the Central Bank and Credit Institutions (Resolution) Act 2011.

(2) This Act and the Central Bank Acts 1942 to 2010 may be cited together as the Central Bank Acts 1942 to 2011.

(3) This Act comes into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to a particular purpose or provision and different days may be so appointed for different purposes or different provisions.

2.. Interpretation.

2.— (1) In this Act—

“Act of 1942” means the Central Bank Act 1942;

“Act of 1963” means the Companies Act 1963;

“Act of 1971” means the Central Bank Act 1971;

“Act of 2008” means the Credit Institutions (Financial Support) Act 2008;

“Act of 2010” means the Credit Institutions (Stabilisation) Act 2010;

“articles of association” includes—

(a) in the case of a credit institution that is established by charter, its bye-laws,

(b) in the case of a credit institution that is a credit union, its rules, and

(c) in the case of a credit institution that is a building society, its rules;

“Assessor” has the meaning given by section 36;

F1["authorised credit institution" means a credit union;]

“Bank” means the Central Bank of Ireland;

“bridge-bank” has the meaning given by section 17;

“building society” means a building society incorporated under the Building Societies Act 1989, or deemed pursuant to section 124(2) of that Act to be so incorporated;

“charge” includes—

(a) a mortgage, judgment mortgage, charge, lien, pledge, hypothecation or other security interest or encumbrance or collateral in or over any property,

(b) an assignment by way of security, and

(c) an undertaking or agreement by any person (including a solicitor) to give or create a security interest in property;

“CIWUD Directive” means Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 ^1;

“Court” means the High Court;

F1["credit institution" means a credit union;]

“credit union” means a society registered as such under the Credit Union Act 1997, including a society deemed to be so registered by virtue of section 5(3) of that Act;

F2["designated credit institution" means—

(a) a bank authorised (or deemed to be authorised by the European Central Bank on application therefor) under section 9 of the Act of 1971,

(b) a building society authorised (or deemed to be authorised by the European Central Bank on application therefor) under section 17 of the Building Societies Act (No. 17 of 1989), or

(c) a credit union;]

“enactment” means—

(a) an Act of the Oireachtas,

(b) a statute that was in force in Saorstát Éireann immediately before the date of the coming into operation of the Constitution and that continues in force by virtue of Article 50 of the Constitution, or

(c) an instrument made under—

(i) an Act of the Oireachtas, or

(ii) a statute referred to in paragraph (b);

“functions” includes powers, duties, rights and entitlements, and references to the performance of a function include reference to—

(a) in relation to a power, the exercise of the power,

(b) in relation to a duty, the performance of the duty, and

(c) in relation to a right or entitlement, the exercise of the right or entitlement;

“Fund” has the meaning given by section 10;

“Governor” means the Governor of the Bank;

“holding company” means a holding company (within the meaning of section 155 of the Act of 1963) or a parent undertaking (within the meaning given by the European Communities (Companies: Group Accounts) Regulations 1992 (S.I. No. 201 of 1992));

“interest”, in relation to an asset or liability, means—

(a) the whole or any part or fraction of the asset or liability,

(b) any other estate in, right or title to, or interest in the asset or liability (whether legal or beneficial), or

(c) any interest, other than a legal or beneficial interest, in the asset or liability;

“intervention conditions” shall be construed in accordance with section 9;

“memorandum of association” includes the charter of a credit institution that is established by charter;

“Minister” means the Minister for Finance;

F2["recognised credit institution" means a person authorised in the State to accept deposits or other repayable funds from the public and to grant credit on its own account;]

“regulated market” has the same meaning as in the European Communities (Markets in Financial Instruments) Regulations 2007 (S.I. No. 60 of 2007);

“Regulations of 2011” means the European Communities (Reorganisation and Winding-Up of Credit Institutions) Regulations 2011 (S.I. No. 48 of 2011);

“security” includes—

(a) a charge,

(b) a mortgage,

(c) a guarantee, indemnity or surety,

(d) a right of set-off,

(e) a debenture,

(f) a bill of exchange,

(g) a promissory note,

(h) collateral,

(i) any other means of securing—

(i) the payment of a debt, or

(ii) the discharge or performance of an obligation or liability,

and

(j) any other agreement or arrangement having a similar effect;

“special management order” has the meaning given by section 58;

“special manager” means a person appointed as such by a special management order;

“subsidiary” means a subsidiary (within the meaning given by section 155 of the Act of 1963) or a subsidiary undertaking (within the meaning given by the European Communities (Companies: Group Accounts) Regulations 1992 (S.I. No. 201 of 1992));

“transfer order” has the meaning given by section 30.

(2) A reference in this Act to an agreement is a reference to—

(a) an instrument (however described) that creates or purports to create an obligation, whether made in writing or under seal, including but not limited to an instrument described as an arrangement, undertaking, scheme, licence, security or obligation, or

(b) an oral agreement that creates or purports to create an obligation, including but not limited to an obligation of any kind referred to in paragraph (a).

(3) In this Act—

(a) a reference to an asset includes an interest in an asset, and

(b) a reference to a liability includes an interest in a liability.

(4) A reference in this Act to disposing of an asset or liability includes selling or otherwise transferring, and creating a security or equitable interest in, the asset or liability.

(5) For the purposes of subsection (4) “transfer” includes—

(a) any form of legal or beneficial transfer, including a vesting by operation of law,

(b) a synthetic transfer,

(c) a risk transfer,

(d) a novation,

(e) an assignment,

(f) an assumption,

(g) sub-participation,

(h) sub-contracting, and

(i) any other form of transfer, acquisition, assumption or vesting recognised by law.

(6) A reference in this Act to the preservation of the financial position of an authorised credit institution shall be taken to include the need for that credit institution to comply with such one or more of the following as apply to it—

(a) an order made in relation to it under this Act,

(b) a requirement imposed on it under section 22,

(c) the European Communities (Capital Adequacy of Credit Institutions) Regulations 2006 (S.I. No. 661 of 2006).

3.. References to certain credit institutions.

3.— (1) In this section “relevant institution” has the same meaning as in the Act of 2010.

(2) Subject to subsection (3), while the Act of 2010 is in operation, an authorised credit institution that is a relevant institution within the meaning of that Act shall be taken not to be an authorised credit institution.

(3) If an order under section 55 of the Act of 2010 is in operation the effect of which is that the relevant institution is taken not to be a relevant institution for the purposes of every provision of that Act, that relevant institution shall, for the purposes of subsection (2), be taken not to be a relevant institution.

4.. Purposes of Act.

4.— The purposes of this Act are—

(a) to provide an effective and efficient resolution regime for authorised credit institutions that are failing or are likely to fail,

(b) to provide for a resolution regime for such credit institutions that is effective in protecting the Exchequer, the stability of the financial system and the economy,

(c) to provide for the taking of measures to maintain public confidence in the financial system in the State, including to protect the interests of depositors in such authorised credit institutions, and depositors generally,

(d) to secure, to the extent possible in the circumstances, the continuity of banking services generally and in particular in relation to authorised credit institutions that are failing or are likely to fail,

(e) to facilitate the orderly winding-up of an authorised credit institution that is insolvent,

(f) to provide a mechanism to prevent the financial instability, or threat to the financial stability, of an authorised credit institution contributing to financial instability of any other authorised credit institution, the financial system or the economy, and to avoid creating a risk of such financial instability,

(g) to facilitate the re-organisation of, or the preservation or restoration of the financial position of, an authorised credit institution that is failing or is likely to fail, and

(h) to provide the Bank with the necessary powers for the purposes set out in paragraphs (a) to (g) and to provide a framework within which the Bank can exercise those powers consistently with its legal obligations, including the legal obligations arising pursuant to the Treaty on European Union and the Treaty on the Functioning of the European Union.

PART 2 General matters in relation to resolution powers

5.. Responsibility for exercise of functions of Bank under this Act.

5.— (1) The Governor is responsible for the exercise of the functions of the Bank under this Act.

(2) The Governor may delegate any of the functions referred to in subsection (1) to a Head of Function (within the meaning given by section 2 of the Act of 1942) or an officer or employee of the Bank.

(3) The Governor, in delegating any function referred to in subsection (1), shall endeavour to ensure that the performance of that function is operationally separate from the regulatory and supervisory responsibilities of the Bank.

6.. Independence of Bank and Governor not affected.

6.— Nothing in this Act prevents the performance by the Governor or the Bank of their functions in relation to any credit institution authorised or regulated in the State, or affects any obligation arising under the treaties governing the European Union or the European Communities (within the meaning given by section 1 of the European Communities Act 1972) or the ESCB Statute (within the meaning given by section 2 of the Act of 1942).

7.. Minister and Bank to have regard to European Union law.

7.— In performing a function or exercising a power under this Act, the Minister and the Bank shall have regard to the laws of the European Union (including those governing State aid) and any relevant guidance issued by the Commission of the European Union.

8.. Bank to cooperate with relevant authorities outside State.

8.— Before performing a function in relation to an authorised credit institution that carries on business in a jurisdiction other than that of the State, whether it carries on that business itself or through one or more subsidiaries, the Bank shall, to the extent that it can do so, having regard to the purposes of this Act, inform the authority duly authorised to perform functions similar to any one or more of the statutory functions of the Bank of its intention to exercise the power.

9.. Intervention conditions.

9.— (1) The intervention conditions are fulfilled in relation to an authorised credit institution if—

(a) either condition A or condition B is fulfilled,

(b) conditions C and D are both fulfilled, and

(c) the Bank has consulted the Minister.

(2) Condition A is that the Bank has serious concerns relating to the financial stability of the authorised credit institution concerned and—

(a) directs that credit institution to take particular action to address the Bank’s concerns, and the Bank is satisfied that—

(i) the credit institution has failed to comply fully with the direction under this paragraph, or

(ii) the credit institution is incapable of taking the necessary action to so comply within the period specified by the Bank in that direction,

or

(b) is satisfied that, having regard to the urgency of the situation or for any other reason, its serious concerns cannot be adequately addressed by such a direction.

(3) Condition B is that the Bank is satisfied that there is a present or imminent serious threat to the financial stability of the authorised credit institution concerned or the financial system in the State.

(4) Condition C is that the Bank is satisfied that the authorised credit institution concerned has failed or is likely to fail to meet a regulatory requirement imposed by law or a requirement or condition of its licence or authorisation.

(5) Condition D is that having regard to the purposes of this Act, any guidelines issued by the Bank under section 107 and such of the matters set out in subsection (6) as appear to the Bank to be relevant in the circumstances, the immediate winding-up of the authorised credit institution concerned is not in the public interest.

(6) The matters referred to in subsection (5) are the following:

(a) whether the authorised credit institution concerned is of systemic importance to the economy of the State;

(b) whether the failure of that credit institution would be likely to contribute to instability of the banking system or serious damage to the financial system in, or the economy of, the State;

(c) the importance of ensuring that the depositors of that credit institution will continue to have prompt access to their deposits (whether in that credit institution or elsewhere);

(d) the importance of maintaining public confidence in the financial system in the State;

(e) the importance of maintaining continuity of banking services to that credit institution’s customers;

(f) the terms of any resolution plan for that credit institution;

(g) any other matters that the Bank considers relevant, in the particular circumstances, having regard to its duties and obligations.

PART 3 Credit Institutions Resolution Fund

10.. Credit Institutions Resolution Fund.

10.— (1) A fund, to be known as the Credit Institutions Resolution Fund and referred to in this Act as “the Fund”, is established.

(2) The purpose of the Fund is to provide a source of funding for the resolution of financial instability in, or an imminent serious threat to the financial stability of, an authorised credit institution, and in particular—

(a) F3[…]

(b) to provide funds for any payment required pursuant to section 37(1), 42(5), F4[46,] 48 or 98,

(c) with the written consent of the Minister, to provide capital for a bridge-bank, and

(d) to meet the Bank’s expenses in discharging its functions under this Act.

(3) The Fund shall be constituted by—

(a) the contributions made by authorised credit institutions pursuant to section 13,

(b) any sums paid into it by the Minister pursuant to section 12,

(c) any assets of a bridge-bank transferred to it pursuant to section 17(6), and

(d) interest on those sums, contributions and assets.

(4) F5[Subject tosection 11(3), the Bank] shall not provide any funds to the Fund from its own resources.

11.. Management and administration of Fund.

11.— (1) The Bank shall manage and administer the Fund.

(2) The Bank shall determine the rate of interest payable from time to time on money standing to the credit of the Fund.

F6[(3) Notwithstandingsection 10(4), the Bank shall from time to time pay interest at the rate determined undersubsection (2)on monies standing to the credit of the Fund.]

11A.. F7[Accounts and audit.

11A.—(1) The Bank shall cause—

(a) to be kept for the Fund, in such form as the Minister approves, all proper and usual accounts of income and expenditure, and

(b) the transmission of those accounts not later than 3 months following the end of the financial year to which they relate to the Comptroller and Auditor General for audit.

(2) The Comptroller and Auditor General shall audit the accounts of the Fund transmitted to him or her undersubsection (1)and shall prepare a written report in relation to those accounts.

(3) Within one month of the completion of the audit referred to insubsection (2), the Bank shall present a copy of the accounts and the report of the Comptroller and Auditor General on the accounts to the Minister who shall, as soon as may be, cause copies thereof to be laid before each House of the Oireachtas.]

12.. Minister may contribute to Fund.

F8[12.—(1) The Minister, following consultation with the Bank, may contribute to the Fund such sums as the Minister considers appropriate, from the Central Fund or the growing produce of the Central Fund.

(2) The Minister is entitled to be reimbursed from the Fund for all contributions undersubsection (1)together with any interest, at the rate determined undersection 11(2), that may have accrued on those contributions at the rate determined.

(3) All sums paid out of the Fund in repayment of a contribution undersubsection (2)shall be paid into the Central Fund.]

13.. Authorised credit institutions to contribute to Fund.

13.— (1) Authorised credit institutions shall contribute to the Fund in accordance with regulations made under section 15.