Navigating A Successful Central Bank Authorisation Application

What You Need to Know

The Central Bank of Ireland ("CBI") has issued comprehensive, cross-industry guidance that crystallises the standards it expects every applicant to meet when seeking authorisation to carry on regulated financial services in the State.

Below is a snapshot of the key take-aways and some practical tips to ensure a smooth passage through the CBI's gatekeeping process.

Rules for High-Quality Applications

• Accurate and complete – supply up-to-date and fully reconciled data, avoid incomplete information and plug any gaps before submission.
• Clear – explain the business model in plain English and flag any evolving information.
• Well-informed – reference the latest legislative, regulatory and sectoral legal Put in place the necessary arrangements and documentation to comply with regulations post-approval.
• Open and cooperative – be transparent, respond promptly, avoid legalese and volunteer any information the CBI might reasonably expect.
• Forward-looking – address credible forecasts, stress scenarios and any future permission changes. Ensure that adequate time and resources are available to provide supporting information throughout the application.
• Application Mindset – approach authorisation as proof you can remain compliant post-approval, not just a hurdle to clear.

Expectations

The CBI has set out the following as a non-exhaustive guide to consider when making applications. Additionally, the CBI has outlined challenges it has faced in this regard and has stressed that depending on the nature, scale and complexity of proposals, additional information may be requested during the authorisation process which is commensurate with the nature and scale of business activities.

• Customer Focus – clearly demonstrate that the proposed product / service genuinely serves a defined target market, and that customer documentation complies with legislative and regulatory requirements.
• Business Model Viability – present a clear strategy (typically, of 3 years) showing sustainability to generate credible returns, including under base and stressed scenarios, accounting for all relevant risk areas. Provide sufficient granularity and evidence – the CBI has noted the inability by firms to describe their proposed model and provide clarity on customer offering and prolonged assessments as a challenge.
• Substantive Irish Presence – demonstrate an appropriate level of substance in Ireland, being a meaningful and substantive presence. Evidence that management of key risks and key decision-making sits in Ireland rather than elsewhere in the group.
• Resourcing – prove that headcount, expertise and systems are proportionate to nature, scale and complexity of the relevant business activities. Show the capability to control any outsourced tasks and ensure appropriate compliance expertise are in place to review and assess risk.
• Governance – adopt effective governance arrangements, including: (a) appropriate and resourced compliance and internal control arrangements (which for most firms will be a "three-lines-of-defence" model which is to be regularly tested); (b) a risk identification framework (including measures which enable local management of material risks); and (c) an appropriate
• Outsourcing – retain ultimate responsibility for the management and operation of key functions, comply with CBI cross-industry outsourcing guidance and show contingency plans for service disruptions.
• Safeguarding & Payments – evidence suitable arrangements to safeguard customer funds, noting that the CBI has zero tolerance for weaknesses in this regard.
• Capital – maintain robust capital, governance and planning systems, in accordance with relevant sectoral requirements. Substantiate adequate and timely sources of funding and demonstrate reliable access to sufficient capital under a plausible but severe stress scenario.
• Compliance – embed a forward-looking compliance monitoring programme which assesses risks and compliance with legal and regulatory obligations.
• Ownership Transparency – chart the full ownership structure, up to, and including ultimate beneficial owners.
• ESG – install an ESG framework to identify and manage risks and ensure sustainability disclosures made to investors are accurate, not merely aspirational marketing.
• Recovery – ensure compliance with the CBI's cross-industry operation resilience guidance, display credible plans to recover critical business services after disruption (with a focus on minimising impact and protecting customers) and, if irrecoverable, plans for exiting the market in an orderly fashion.
• Wind-down – prepare a detailed wind-down plan to exit the market (for both normal and stressed events), which minimises client detriment and details the safe return of relevant assets.
• AML / CFT – demonstrate strong risk management practices and internal controls which ensure compliance with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 and applicable guidance. Conduct a business-wide risk assessment, implement risk-based customer due diligence and ongoing monitoring of customers and transactions, provide AML/CFT training, maintain record-keeping and file suspicious transaction reports where required.

Practical Tips

• Engage early – a pre-application meeting can reduce later information requests and shorten overall timelines. The CBI has flagged this as a challenge which can lead to long delays.
• Build an "authorisation pack" – consolidate board minutes, policies, financial models and group service agreements so they are ready on day one.
• Resource now, not later – hire Irish-based control-function heads before filing and note that the CBI has little patience for "to-be-hired" placeholders. The CBI has noted the lack of substantive presence and adequate staffing for both PCF and non-PCF roles in the jurisdiction has been a challenge for applicants.
• Stress-test the model – the CBI will do this and it is better to identify pressure points internally at the outset.
• Keep it live – treat the submission as a living document and update forecasts and governance artefacts if circumstances change during the process.
• Expect appropriate levels of challenge – the CBI's risk-based approach means deeper dives for novel or higher-impact propositions so budget time for granular follow-up.

Conclusion

The new guidance reinforces the CBI's determination to admit only firms that can demonstrate robust consumer focus, sustainable economics, strong local substance and forward-looking risk management from day one.

Authorisation timelines remain dependant on (a) the nature, scale and complexity of the firm's proposals; (b) the completeness and quality of the application; and (c) the responsiveness of the firm to comments and questions during the assessment process and the quality of those responses.

Firms that invest early in detailed, well-thought out applications, supported by appropriately resourced Irish operations, are most likely to achieve a swift and successful authorisation outcome.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.