Brokers Ireland submission on the Central Bank of Ireland Strategic Plan 2019 - 2021 June 2018

Brokers Ireland submission on the Central
Bank of Ireland Strategic Plan 2019 - 2021

               June 2018

Brokers Ireland is the leading representative body for brokers with a membership of 1,300 firms
representing both general insurance and financial brokers throughout Ireland. Brokers Ireland welcome
the opportunity to contribute to the Central Bank of Ireland Strategic Plan 2019 – 2021 and outlined
below is the response to the three questions posed by the Central Bank.

1. What should be considered by the Central Bank in responding to the current and emerging risks in the
   economy and the wider financial system?

Good regulation is for the benefit of both the consumer and the industry. Consumers benefit from the
existence of the Intermediary Sector at both an individual and market level, as competition between
product providers to distribute through the Intermediary sector results in greater product innovation and
price benefits which are to the benefit to consumers. The existence of the Intermediary sector also
allows consumers access to financial advice. However, after a period of ten years of continuous
enhanced regulatory requirements imposed on the industry, member feedback has indicated that much
of the regulatory enhances have led to additional costs and more paperwork, with no tangible benefit to
the consumer. Consumers are overwhelmed with paperwork and there is a real concern that important
information about the product/service are being lost.

Brokers Ireland believe that there needs to be a cost benefits analysis of regulation – i.e. the cost this
supplementary regulation to firm v the actual benefit to consumers.

Intermediaries do not hold client monies and all premiums received by Intermediaries are indemnified by
the insurer so the risk of loss of client monies is minimal. Brokers are community-based entities
facilitating choice and access to advice by consumers and enhancing competition between financial
service providers. The risks associated with Intermediary Sector are limited – this should be reflected in
the level of supervision that the sector undergoes by the Central Bank - a one size fits all approach is not
appropriate.

2. What should the Central Bank focus on in terms of the regulation of firms and markets?

Brokers Ireland believe that the Central Bank should focus on unregulated products which are similar in
structure and characteristics as regulated products but which fall outside the current regulatory regime.
We believe measures should be taken to extend regulatory requirements to those products in order to
protect consumers who invest in such products and are unaware that they do not fall under the
protections of the Central Bank. This is important in order to create a level and fair playing field for all
providers in market.

                                                      2

3. What should be considered by the Central Bank in respect of its financial conduct and consumer
   protection role?

In other jurisdictions such as the UK, the FCA provide active programs/guidance documents to assist
regulated entities in complying with regulatory requirements. Given the imminent move to 100%
funding, Brokers Ireland believe that if the Central Bank were to introduce similar assistance it would be
very beneficial to the industry and create a more positive interaction between the Central Bank and
regulated entities.

A review needs to take place in respect of the authorisation application process for intermediaries. Since
the introduction of an enhanced process in March 2016, it has had a significant impact on the number of
new entrants seeking authorisations and also to existing authorised firms who wish to restructure or to
add an additional authorisation. This authorisation process is not reflective of the nature and scale of the
majority of intermediary firms and disproportionate to the process in other EU countries. A continued
decline in intermediary numbers will have long term long term effects on competition and ultimately
access to advice and value for clients.

The authorisation/reauthorisation process coupled with the recent alarming increases in intermediaries
funding levies has already caused intermediary numbers to shrink significantly. We understand that a
large proportion of regulatory costs are fixed overhead costs (IT, HR and other central services) and that
the direct or marginal costs of regulating a particular sector may be substantially lower than the total
assigned cost. Assurances are required that the cost of the regulation of the intermediary sector will be
scaled to the numbers of Intermediaries in the industry as it is unfair for the remaining intermediaries to
have to pay increased levies. The costs imposed on the industry inevitably have to passed on to the
consumer which has implications for consumer service/competition in the market.

Given the move to 100% funding, we believe an independent examination should take place on the
Central Bank to examine the effectiveness and efficiency of existing structures and costs of the regulatory
system. We also believe that it is incumbent on the Central Bank to revive the Industry Panel made up of
interested stakeholders to examine all the issues associated with the industry levy.

                                                      3

4