Central Bank publishes Report on Retail Intermediary Sector in Ireland 

Press Release 28 February 2013

The Central Bank of Ireland today published a report on the Retail Intermediary sector in Ireland. The report highlights key issues and risks for the sector and consumers, and outlines the Central Bank’s regulatory approach to reducing risk and ensuring consumers are protected.

The Retail Intermediary sector in Ireland plays an important role in ensuring that consumers can access financial products that meet their needs, and the information they need to make well informed decisions. The reports shows that although many individual firms are small in size and provide a variety of financial services, cumulatively the sector is significant, with firms reporting over 5 million policies/financial products held by their clients.

Director of Consumer Protection, Bernard Sheridan, said, “The Central Bank has a strong consumer protection framework in place to ensure the customers of retail intermediaries are protected. Although individually many of these firms are small and are categorised as low impact under the Central Bank’s risk assessment framework, we have a clear strategy in place to regulate these firms. This involves regular thematic inspections of the sector whereby we assess compliance with consumer and prudential requirements and provide guidance to promote compliance, backed up by our enforcement capabilities.

“Based on information provided by retail intermediaries to the Central Bank, there appears to be some financial strain in the sector, with 17 per cent of firms reporting losses. I would urge firms to ensure that while working to return to profitability, no actions are taken which could lead to additional risks for consumers. In particular where firms grow due to acquisition they must ensure that they adapt their systems and controls to reflect the demands of a larger business and ensure compliance with consumer protection regulations.”

Key findings:

  • The Central Bank is responsible for supervising 3,238[1] Retail Intermediaries, which vary in size and activity.
  • Retail Intermediaries employ over 30,000 employees[2], with firms reporting over 5 million policies/financial products held by their clients. 
  • Gross income/turnover (from regulated and unregulated activities) ranges from less than €10,000 to more than €1 million, with more than half of the firms reporting income levels below €60,000.
  • Income from regulated activities ranges from €0 to over €7.5 million, with over 4 per cent earning in excess of €1 million.
  • 17 per cent of firms have reported a loss in the previous financial year, with over 3 per cent reporting a loss in excess of €100,000.

The Central Bank has also published tips for consumers when engaging with Retail Intermediaries (including investment, insurance and mortgage intermediaries):

  • An insurance intermediary must transfer a rebate in full to the consumer.  The firm must get the written permission of the consumer in advance of any fee being deducted from an insurance rebate.  Where the consumer has agreed to the deduction of any charges, these must be clearly outlined in the document notifying the consumer of the rebate.
  • Consumers should ask the intermediary if the activities and services they wish to engage the firm in are regulated by the Central Bank, as some intermediary firms engage in other business activities that do not require our authorisation and are therefore not regulated by the Central Bank. Consumers are reminded that fewer protections exist for business activities that do not require authorisation.
  • Consumers are encouraged to check the Central Bank’s public registers to see if a firm is regulated.
  • Where an intermediary charges a fee and also receives commission in respect of a product or service provided to a consumer, the intermediary must explain to the consumer whether or not the commission will be offset against the fee, in part or in full.  Consumers should request a Statement of Charges from the intermediary.
  • Consumers must be told if the intermediary is tied to a single Insurance Company for a particular product or service and this fact must be disclosed in all communications with the consumer.
  • All sales staff must meet specified minimum competency standards and we would encourage consumers to ask them about their qualifications. Consumers can request a copy of the qualifications and Certificate of Competency from the intermediary.

Notes to editors

Central Bank’s Supervisory Approach

  • In 2011, the Central Bank introduced a formal risk assessment framework, known as the Probability Risk and Impact System (PRISM).  This system is designed to facilitate a more structured and systematic approach to assessing all regulated firms, based on the impact they have on the economy - or on consumers if things go wrong - and the probability that problems will arise. 
  • Retail Intermediaries are ranked as low impact firms.  They are not authorised to hold client money and individually their failure would not cause economic or systemic problems, nor would they require taxpayer support.
  • The Central Bank has a “lifecycle” approach within the Consumer Protection Directorate, which means that authorisation, prudential supervision, conduct-of-business supervision, revocations and general policy matters are all dealt with under one roof.
  • In line with the Central Bank’s Strategic Plan for 2013 - 2015, a key focus will be on improved operational efficiency and cost effectiveness, involving a range of measures including process automation.
  • The Central Bank provides compliance assistance to Retail Intermediaries through a series of regional road shows and the publication of regular compliance newsletters.
  • Supervisory teams focus on thematic work, carefully targeting higher risk areas, and taking credible action when regulatory breaches are identified. 
  • The Central Bank continuously monitors the sector through desk-based analysis of financial returns, thematic reviews, reactive supervision and spot-check inspections.
  • Our overall objective is to strengthen the gatekeeper and supervisory frameworks for this sector, with the ultimate goals of improving regulatory compliance and protecting consumers.

[1] This figure excludes firms such as credit institutions, credit unions etc. which also hold a Retail Intermediary authorisation.  In total, there are 3,552 Retail Intermediaries on our statutory registers.

[2] This figure includes employees engaged in both the regulated and unregulated activities.