Chief executives of the two bodies representing 90% of the country’s insurance brokers have said plans by the Central Bank to hike levies on intermediaries by 45% are “unacceptable”.
Irish Brokers Association CEO Ciaran Phelan and head of the Professional Irish Brokers Association Diarmuid Kelly have told the Minister for Finance Michael Noonan that members are already struggling after incurring significant increases in Central Bank levies in recent years.
As part of its proposed 2015 increase, the Central Bank is proposing to increase levies from €515 to €750. Levies in 2011 were pitched at €145.
The two organisations say that, if the plan goes ahead, levies will have soared 515% since 2011.
They say that they have been told that funding of the Central Bank’s pension scheme, which amounts to a cost of €29m, is contributing to the increases in the levies.
In their joint letter, the bodies have asked Mr Noonan to explore alternative options for funding the pension cost “rather than passing this cost to the industry who are already struggling to survive”.
In August, Mr Kelly wrote a letter to Central Bank governor Patrick Honohan to say that “the level of increase is neither acceptable to our members nor sustainable for our sector.”
The proposed increases require ministerial approval. In a written Dáil reply to Fianna Fáil finance spokesman Michael McGrath and others, Mr Noonan confirmed that he has not made any decision concerning the proposed levy increases and is aware of the issues raised by the brokers.
Mr Noonan admitted that, in some cases, the increase in levies is “significant”, stating that the Central Bank “has attributed the proposed increase to both a proliferation of legislative regulation/regulatory activity and an increase in staff pension costs”.
“The Government priority is to ensure that the regulator is sufficiently resourced to fulfil its important role and staff costs, including pension costs, are a key component of this effective regulatory regime,” said Mr Noonan.
“It is important to note that a robust regulatory environment benefits the financial services industry by promoting stability, a level playing field and facilitating prudent development and innovation.
"A well regulated financial services sector also benefits consumers, industry, and the economy at large.”
Mr McGrath yesterday described the Central Bank planned levy increases as “a potentially serious drain on the viability of independent financial advisors and brokers”.
The Central Bank said that, under current funding arrangements, which need to be approved annually by the Minister for Finance, industry is levied for 50% of the costs incurred for regulation.
The Central Bank has recommended to the Government a move to 100% funding by industry.
It said the cost of regulation has grown over recent years, particularly due to the Central Bank’s increased regulatory mandate following the financial crisis.
For 2015, these costs are budgeted at €137.7m, an increase of some €14.4m on the previous year, it said.
The most significant component of the cost of the regulatory activity relates to the staff costs required to carry out the Central Bank’s regulatory mandate. Staff costs include the pension provision costs, it said.
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