Statement - Industry Funding Levies 2015

Under the current funding arrangements, which need to be approved annually by the Minister for Finance, industry is levied for 50 per cent of the costs incurred on financial regulation activities, with certain exceptions. In general, these costs are levied on various sectors of industry on a proportionate basis, depending on the level of regulatory input and oversight required.

In August, representatives of the key industry groups were briefed by the Central Bank of Ireland (the Bank) on the proposed 2015 levies applicable to their sectors. Concerns were expressed in relation to the increasing costs of financial regulation with particular emphasis on the sharp increase in costs associated with the Bank’s Pension Scheme.
Staff costs, which include pension costs, are a significant component of overall costs.  The Bank’s pension scheme mirrors public service pension arrangements, both in terms of contribution and benefits. Whereas the public service covers the cost of pensions from current funds, the Bank funds pensions through a dedicated pension fund which is accounted for in accordance with Financial Reporting Standards (FRS17 Retirement Benefits). This leads to higher pension charges in the current low bond yield environment and annual volatility in the Bank’s staff costs and the associated levy calculations. This impact was particularly significant on the proposed levy calculations for 2015.

The Bank acknowledges the impact that this volatility has on individual levies and for this reason has proposed a change in the method of levying current service pension costs. Under the revised approach, the impact of pension volatility will be spread over a rolling ten year period. As a consequence, this will partially mitigate the increases from the previously advised 2015 levy amounts which should now be circa 8% lower than originally communicated.

The revised Funding Regulations will be sent to the Department of Finance for Ministerial approval in the coming days.

In planning the approach to the 2016 levy year the Bank will consider:

(i) the views expressed by Industry bodies over recent weeks; and

(ii) the responses to the consultation paper on the review of funding arrangements.