Animated Explainers

This is a transcript of our animated explainer video: "How does the Central Bank of Ireland fund itself?"

The video was first published 9 December 2019.

Alex: Hey Tony. Lunch in the sun, aw, there's nothing like it.

Tony: Yeah. Just a quick sandwich before I get back to the grindstone.

Alex: Or before those seagulls get it first!

Tony: Well I suppose we all have to make a crust somehow.

Alex: Very true.

Tony: Speaking of making a crust, how do you guys in the Central Bank pay for all of the work you do?

Alex: Well Tony, the Central Bank of Ireland is independent and we fund our work in a number of ways. Here, let me show you.

Firstly, just like other central banks, we hold a large investment portfolio of assets, including government bonds, deposits, gold and other financial assets.

We manage this portfolio carefully to help maximise returns whilst minimising risk.

Traditionally, most of the money to invest in the portfolio comes from something called "seigniorage".

Tony: Seigniorage. What's that?

Alex: Aw, I know it sounds funny but it comes from an old French word, which relates to the banknotes in your pocket.

Basically, seigniorage is investment income we make from the difference between the cost of issuing banknotes, and how much the notes are actually worth.

We also carry out other activities that give us an income.

For example, we act as a bank for the Government and other banks, and we invest in assets with the other central banks of the countries that use the euro as their currency.

We also collect money annually from banks and other regulated financial firms through a "funding levy".

Now, this levy exists to make sure that the financial industry pays most of the costs associated with regulating and supervising it.

At the end of every year, we calculate how much profit or loss we make from our investment portfolio and from our other activities.

By law, we can retain up to 20% of the profit we make, which we use to pay for our work and add to our financial reserve.

Tony: And what happens to the other 80%?

Alex: Ah, we pay this money directly to the Government so it can be used to benefit the people of Ireland.

So in a way Tony, it goes straight back to you.

Tony: Well that's certainly an interesting way to make a crust!

This is a transcript of our animated explainer video: "What is the Central Bank of Ireland's role in Europe?"

The video was first published 14 January 2020.

Alex: Good morning, you're through to Alex.

How can I help you today?

Nessa: Morning Alex.

My name is Nessa and I'm a student down here in Cork.

I was wondering if you can explain something for me?

Alex: Sure Nessa. Go ahead.

I'm writing a paper on European integration and I'm keen to learn more about the specific role the Central Bank of Ireland plays in Europe.

Alex: Sounds interesting!

Well Nessa, the Central Bank of Ireland works closely with our partners in Europe to help look after the European financial system.

Let me explain.

Firstly, the Central Bank of Ireland is part of something called the Eurosystem.

The Eurosystem is made up of the European Central Bank, or ECB for short, and all the other central banks that use the euro as their currency.

Because we're all part of the same team, so to speak, we all use the same money.

So, we need to have the same monetary policy.

This means that key interest rates, which influence the cost and availability of money in the economy, are the same across the euro area.

Every six weeks our governor meets with all the other governors of the central banks in the euro area and members of the ECB.

At the meeting, they decide whether to increase key interest rates, decrease them or leave them unchanged.

Their goal is to keep prices stable across the euro area.

Nessa: Ah, OK!

But like, why are stable prices so important?

Alex: Stable prices are important because it means that the cost of the things you need to buy shouldn't change much from one month to the next.

This protects the value of the euro in your pocket and helps to maintain your purchasing power.

Nessa: Well I'm glad someone is doing something to keep the prices in check!

Alex: Another big part of the Central Bank's role in Europe is to help monitor the safety and soundness of Europe's largest banks.

We do this through our membership of something called the Single Supervisory Mechanism.

Just like the Eurosystem, the Single Supervisory Mechanism is made up of national supervisors of the other countries in the euro area and the European Central Bank.

Together, we supervise Europe's banks to check that they are financially healthy so that your savings are safe.

Nessa: So kind of like a referee?

Alex: Exactly!

Nessa: And what else do you do in Europe?

Alex: We also contribute to what's known as the European System of Financial Supervision.

This is a group of European organisations that span the worlds of banking, finance and insurance.

They share the common goal of ensuring that the same, high-quality financial rules and standards are applied across Europe.

Nessa: Well that's really good to know because I suppose we should all be playing by the same rules after all.

Alex: I know!

It's all about teamwork, working together to help keep the European financial system strong and stable, which in turn helps to keep Ireland's financial system stable.

Nessa: Thanks so much for that Alex.

[Banging on door] Come on Nessa!

Nessa: And speaking of teamwork, I have to run.

I've to go play a match.

Alex: OK, good luck Nessa!

Thanks for your call.

This is a transcript of our animated explainer video: "How does the Central Bank of Ireland protect consumers?"

The video was first published 14 February 2020.

Alex: Thanks Mrs. McGuinness for inviting me down here to Kilkenny today to talk your class.

It's a pleasure to meet you all.

Now, I know Mrs. McGuinness has given you an overview of the role of the Central Bank of Ireland, so let's start with any questions you may have.

Pupil: Hello Miss.

If money doesn't grow on trees, why do banks have branches?

Alex: I haven't heard that one before!

Mrs. McGuinness: Okay. So who's got a real question? Michelle?

Michelle: Hello Alex. I know that the Central Bank has many different roles, but could you please tell us how it protects people in general?

Alex: Of course. I'm glad you brought that up because protecting consumers, or the public, is a core part of our mandate.

In fact, it's at the heart of everything we do.

So, let's start with the financial system.

Whether it's for saving, borrowing or day-to-day banking, all of us depend on the financial system in one way or another.

One of the ways the Central Bank protects consumers is by helping to keep the financial system stable and resilient.

You see, a resilient financial system is one that is able to absorb economic shocks that can sometimes come our way.

Our work aims to stop these shocks from causing major disruption or turning into an economic downturn which could hurt people.

Michelle: So what kind of things do you do to keep the financial system stable?

Alex: Well, one of the tools we use to keep the financial system stable is something called "macroprudential policy".

Now, an example would be our mortgage measures which set limits on how much people can borrow to buy property.

On the one hand, these measures protect people from borrowing more than they can afford.

And on the other hand, they help to ensure banks lend money sensibly.

So people are protected from taking on too much debt, whilst the banking and financial system is more stable and resilient.

Another way we protect consumers is by regulating and supervising the financial firms that operate inside the financial system.

So, we have important rules and standards to make sure firms are financially sound and that the people running them are properly qualified to do so.

Our aim is to only allow firms to operate in the financial system that have met these standards.

And of course, we then supervise them on an ongoing basis to make sure they abide by the rules of regulation.

We also enforce consumer protection rules that protect you directly when you buy a financial product or service.

The rules are there to make sure you are treated fairly whenever you interact with a financial firm.

The rules govern how financial products are sold, what information you are given when you buy them, and how your complaints are dealt with – all with the aim of making sure you are treated fairly.

Pupil: And what about people who have savings? How do you protect them?

Alex: Good question!

We oversee a number of important compensation schemes which act as a safety net to protect consumers.

These are schemes that pay you some, or all, of the money that you might otherwise lose if a financial institution fails.

Like the Deposit Guarantee Scheme which protects your savings if a bank or credit union is unable to pay you back your money.

So you can see our work is actually all about serving the public and protecting you.

Mrs McGuinness: Thanks for your time Alex. We learned a lot from your visit today.

Alex: You're welcome.

This is a transcript of our animated explainer video: "How does the Central Bank of Ireland supervise firms and investigate potential wrongdoing?"

The video was first published 31 March 2020.

Alex: Hi there, I'm Alex.

Can I help you with anything?

Ned: Oh, hello Alex!

Ned is my name.

I must say, you have a great exhibition here.

I'm after learning a lot about what you do.

Alex: Thanks Ned. I'm glad you found it useful.

Ned: Tell me this now. One thing I don't understand is: how do you supervise firms and investigate any potential misbehaviour?

Alex: Ah, no problem Ned. I can clear things up for you.

We regulate Ireland's financial industry, including banks, credit unions, insurance companies, investment firms, financial brokers and payment companies.

As regulator we need to supervise these firms to check that they follow the rules and standards set by us, our parliament and the European Union.

To do this, we use a strategy known as "risk-based supervision".

This means, we spend more time supervising firms or industries that would pose the greatest potential harm to consumers and the wider potential financial system if they were to fail.

Ned: Ah right. Interesting.

But how does this work in practice?

Alex: Well Ned, firstly we review detailed applications from financial services firms before deciding whether or not to grant them a licence to operate.

We review the level of capital, or financial resources, the firm plans to inject into the business.

What its proposed business model is as well as its policies and procedures.

We also check that individuals in senior roles within the firm are properly qualified and that the firm ensures that its staff have the right skills and experience to do their job properly.

Think of us as a gatekeeper where we control which firms enter and also stay in the market.

Secondly, we conduct ongoing supervisory work where we monitor and engage with the firms that are operating in the market.

As part of this we require firms to submit lots of information to us.

We then check this to ensure they are abiding by the rules, are run well and are financially sound.

We also have a wide range of monitoring tools at our disposal which we use to monitor firms' behaviour.

For example, we conduct mystery shopping exercises to check that firms are treating you fairly when you buy a financial product or service.

We carry out general reviews of particular topics and sectors within the financial industry.

We monitor financial advertisements to check that they're fair and don't mislead you.

We carry out onsite inspections to investigate particular topics or specific matters.

Ned: Well, I have to say, it all sounds very thorough.

But what happens if you suspect wrongdoing?

Alex: Well Ned, if we have reason to believe a firm, or an individual managing a firm, is failing to comply with their legal obligations, we will address the issue.

Sometimes, this will be a matter of instructing the firm to change its behaviour.

Other times, it will mean reporting our suspicions to the Gardaí, the Revenue Commissioners or other relevant authorities.

Often however, it will require a more in-depth investigation by us.

For this, we have teams of lawyers, accountants and investigative specialists trained to gather evidence of potential wrongdoing.

Among their investigative powers, they can require a firm to hand over documents, compel individuals to attend interviews if we think they may have knowledge of wrongdoing, conduct inspections in a firm's premises or hold inquiry hearings in public.

Ned: Ah right.

But what action can you take against a company or person that is guilty of wrongdoing?

Alex: Ah, that's where our enforcement powers come in.

These powers allow us to issue a reprimand or fine against a firm or individual that has failed to comply with their requirements.

In the most serious cases we can withdraw a firm's licence to operate or ban an individual from working in the financial industry.

Ned: Oh, sounds like that'll do the job.

Alex: It's all about upholding high standards in Ireland's financial industry Ned so you are protected when you buy a financial product or service.

Ned: Ah, thanks for the detailed explanation Alex.

It's good to know someone is keeping a watchful eye over the financial industry.

Alex: You're very welcome Ned.

Ned [as a cow suddenly pokes its head into the exhibition tent]: Oh! Begod you have another customer, look!

Alex: Oh, hello there! Is there anything I can do for you?

Ned: Alex you're some craic!