The Central Bank and Credit Institutions (Resolution) Act 2011
was signed into law on 20 October 2011. The Act now requires the
making of the necessary Commencement Orders by the Minister for
Finance.
The Act provides for additional powers for the Central Bank of
Ireland. These are intended to achieve an effective and efficient
resolution regime for credit institutions including building
societies and credit unions that are failing or likely to fail and
which is effective in protecting the Exchequer and the stability of
the financial system and the economy.
The Act gives the Central Bank power to take control of banks,
appoint managers to run them and remove directors, staff and
consultants and to move their deposits and loans to other banks. It
provides for the establishment of a Credit Institution Resolution
Fund which would provide a source of funding for the resolution of
financial instability or in an imminent serious threat to the
financial stability of an authorised credit institution. Authorised
credit institutions will be obliged to contribute to the resolution
fund. An authorised credit institution for the purposes of the
legislation is a licensed bank, building society or credit
union.
The Central Bank will be given the power to establish special
purpose vehicles or "bridge-banks" which may hold assets
and liabilities on a temporary basis following the making of a
transfer order in respect of assets or liabilities. The Central
Bank will also be empowered to make special management orders in
relation to an authorised credit institution or its subsidiary or
holding company of the authorised credit institution in certain
circumstances. The Act also provides for powers of the Central Bank
regarding liquidation of authorised credit institutions. Authorised
credit institutions may also be directed to prepare a recovery plan
setting out actions that could be taken to facilitate the
continuation or secure the business or part of the business of that
institution.
The legislation will in due course replace the provisions of the
Credit Institutions (Stabilisation) Act 2010 which ceases to have
effect on 31 December 2012 or at a later date substituted by
resolution of both Houses of the Oireachtas.
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.