Minister for Finance Michael Noonan is to establish a special working group to examine the costs to the State of financial regulation.
This comes in the wake of revelations that the Irish taxpayer is being forced to plug a €58 million hole in the State’s annual regulatory bill.
Sinn Féin finance spokesman Pearse Doherty said the Central Bank confirmed to him that €57.9 million of the State's €136 million bill for overseeing the sector in 2013 went "unrecovered".
Mr Doherty had raised the question of regulatory costs with Central Bank governor Patrick Honohan at a recent finance committee meeting.
In a written reply to the Donegal TD, Prof Honohan confirmed that just under 50 per cent of the regulatory costs were still being funded by the State.
“This effectively means the taxpayer is picking up the tab for regulating the financial industry. That is an unacceptable way for such an important and profitable industry to be regulated,” Mr Doherty said.
“The time has come for Minister for Finance Michael Noonan to tell the financial services industry that it must pay for its upkeep,” he said.
In a statement, the Department of Finance said Mr Noonan planned to establish a working group in the new year to examine the issue on foot of a request from the Central Bank.
The group is to be made up of personnel from the department and the Central Bank and would feed into a consultation process aimed at shifting the entire cost of regulation onto the industry itself, the department said.
Currently, banks and other financial institutions pay only half the costs of the State’s financial regulatory budget, albeit with some sectoral variations, an arrangement that was agreed back in 2010.
Most of the regulation costs stem from the introduction of new EU banking rules imposed on the sector after the financial crash.
Prof Honohan is, however, keen to move to 100 per cent funding by the industry prior to the introduction of new rules connected with the Single Supervisory Mechanism (SSM), which will increase the costs of the regulation further.
The department said: “The [proposed consultation] process would also take into consideration issues such as; the fee model proposed under the SSM; the use of 100 per cent industry funding by Irish regulators in other sectors; the disparate sectoral complexities within the financial services industry; affordability; and the impact on Ireland’s competitiveness vis-à-vis competing jurisdictions in the area of financial services.”
In his letter to Mr Doherty, Prof Honohan listed the sectors that only contributed 50 per cent of their regulatory costs. These included insurance undertakings, securities and investment firms, investment funds and investment fund service providers and moneylenders.
“We are talking about some businesses with turnovers in the millions if not billions,” Mr Doherty said.
In 2010, the Government established an annual industry funding levy to fund approximately 50 per cent of the cost of the annual budget for financial regulation.
Following a consultation process last year, the Central Bank introduced a revised approach to the levy calculation process designed to more closely align the funding of the costs of financial regulation with its supervisory resources.
