Central Bank of Ireland provides remarks on perspectives and priorities in the payments and e-money sector

At a payments and electronic money institutions event held by the Central Bank of Ireland (the “CBI”) on 29^th February 2024, Mary-Elizabeth McMunn (Director of Banking, Payments and Credit Union Supervision) delivered insights on CBI’s regulatory priorities in respect of payments and e-money.

Referring to the CBI’s 2024 Regulatory and Supervisory Outlook Report (available here), the remarks noted that there has been material levels of growth in the payments and e-money sector, highlighting that the number of payment and electronic money firms regulated in Ireland has tripled in the last 6 years, with 51 firms operating under CBI licences at the end of December 2023 and approximately €8bn in safeguarded funds.

The remarks stated that the CBI has four key regulatory priorities in 2024, namely:

1. Safeguarding;
2. Operational Resilience and Outsourcing;
3. Governance, Risk Management, and Anti-Money Laundering and Countering the Financing of Terrorism; and
4. Business Model and Financial Resilience (this was also highlighted in the Dear CEO letter published on 20 January 2023 – for further information, see our Hogan Lovells Engage article here).

The remarks also noted the importance of strong cross-jurisdictional engagement and collaboration with other regulatory bodies. This is of key importance for firms regulated in the UK by the FCA and in Ireland by the CBI, where channels of communication between these two regulators are open and engaged. Further, this is also important for firms which are passporting into other EU jurisdictions and the CBI recognises the interconnectedness between EU regulators. In terms of key messaging to sector participants, the remarks indicated that safeguarding and wind-down planning remain focal points for the CBI and flagged the importance of seeking clarification with CBI supervisors where there is ambiguity on any CBI communications. Similarly, the FCA flagged wind-down planning as a regulatory priority in their thematic review published in April 2022, available here.

Areas of Focus

The remarks also specified areas upon which firms should execute effectively to align with the CBI’s aforementioned overarching strategic objectives:

Substance

While recognising that many firms are part of international groups, the CBI requires boards and executive teams to demonstrate that:

• They can make strategic decisions and maintain responsibility for core activities;
• They have oversight and ownership of the firm’s material risks;
• They have the financial and operational resources to deliver the firm’s strategy in a sustainable and customer centric way;
• They act in a manner compliant with its regulatory and legislative obligations as an Irish authorised firm. 

Governance & Risk Management

The CBI views firms with strong governance and risk management foundations as being well placed for growth and expansion and has identified shortcomings in the understanding of money laundering and terrorist financing in the sector.

Resilience

The remarks stress the importance of operational resilience to the sector, given the reliance of the payments and e-money sectors on technology. In terms of financial resilience, the remarks noted that while fintechs were able to raise financing during a period of zero interest rates, such firms may now be subject to more intense scrutiny.

Authorisation and Resolution

The remarks also highlight that firms should ensure entry and exit should involves deliberate thought and detailed planning. 

Governance Diversity

While recognising that firms set their own culture, the CBI wants firms to be sufficiently diverse and inclusive, particularly at management level, to avoid group-think, manage culture risk and encourage sufficient internal challenge.

Next Steps

Payments and e-money institutions should ensure that they are taking the necessary steps to meet the expectations of the CBI, both to ensure that they are meeting their regulatory obligations, as well as to ensure their growth and expansion through robust governance and resilience, suitable anti-money laundering controls, and the adoption of enhanced technology solutions, such as instant payments. The Hogan Lovells Dublin team is available to assist you in respect of all the topics raised above.

In other payments news, at the Banking and Payments Federation Ireland (“BPFI”) National Payments Conference, held on 4 March 2024, the Deputy Governor of the CBI, Vesileios Madouros commented that "despite the instant payments infrastructure being available since 2017, material providers of payment accounts in Ireland have not implemented it" and consider this an unsatisfactory outcome for consumers and businesses. The Deputy Governor encouraged the adoption of technology in the payments sector which currently remains untapped.

If you would like to discuss any of the above developments with us, please get in touch with Eimear O’Brien, Eoin O’Connor, Bill Laffan, Hannah Vero or your usual Hogan Lovells contact.

Authored by Hannah Vero, Bill Laffan, and Eimear O'Brien.