DublinHead54
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This is rubbing it in the faces of the Irish Regulator as they've essentially gone over their heads to the European Central Bank.
Why did Revolut get ECB licensing and not Central Bank licensing
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This is rubbing it in the faces of the Irish Regulator as they've essentially gone over their heads to the European Central Bank.
Brendan Burgess
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Hi DublinBay
Are you sure? Would they have had to get a license in every country or did they get one license which allows them to operate in every country?
Brendan
Are you sure? Would they have had to get a license in every country or did they get one license which allows them to operate in every country?
Brendan
Nothing so dramatic, the ECB always had ultimate say... Or so says the CBI.
No doubt it's the same in Lithuania.
Makes sense to centralise it given the nature of the European single market.
DublinHead54
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Hi Brendan,
Revolut opened up Irish Operations a few years back in Dublin and got the e-money license. They were applying for the banking license and announced they were abandoning that plan late last year to pursue it out of Lithuania. The reason being essentially the time and approach by the Irish regulators. The Irish Times article today mentions more on this point, that its a general market feeling but nobody wants to say. Based on the announcement today there will be some job losses in Ireland apparently.
Now when it comes to how they are regulated, the lead regulator will be Lithuania working with the European Banking Authority, and the CBI playing second fiddle.
NoRegretsCoyote
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All credit institutions in the euro area since 2014 have to be authorised by the ECB.
On the CBI website there is no mention of an Irish-registered credit institution, just Revolut Bank UAB authorised in Lithuania which would take deposits (no mention of lending):
That's also my understanding of the situation, having heard a number of things "on the jungle drums", and I think, having also raised the question about why the CBI was taking so long, here on the site.
Were the CBI right to be dragging their heels, or has the CBI just cost Ireland even more jobs (having been a significant contributor to both KBC and UB deciding to leave the country) ?
Someone once told me to be very concerned, when a financial services' business can't hire or retain risk personnel. I saw a lot of adverts for Revolut looking to hire risk type personnel in Ireland, primarily on LinkedIn, over the last couple of years. However, I can't say why that might have been...
In the (very near) future, I expect to see Revolut Bank "passport" into Ireland.
The IT articles linked below, refer:
Revolut to use ECB banking licence to offer personal loans to Irish customers
Digital bank denies rumours move is linked to frustration over regulator’s approach
Was Revolut’s e-money decision prompted by an unfriendly environment?
Fintechs are frustrated at the time it takes to get authorisation from the Central Bank
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DublinHead54
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MrEarl summarized it in the post above. In my experience in Europe you have your 'home country' and once you are authorized by the local regulator in your home country and the ECB you can passport into other European countries. Hence why post Brexit, financial companies picked an EU country for their European base to keep access to passporting.
So yes the EBA has to approve but the approval is a join approval by both the local regulator and the ECB. You are then regulated by both the ECB and your home country regulator.
In this case Revolut initially chose Ireland hence they opened an office, hired a CEO, head of finance etc all out of Ireland. But they faced delays with regulators so they abandoned and have gone via Lithuania. So its a bit of a fingers up to the Irish regulator because they can now offer the same service without being directly regulated by the CBI.
My comment wasn't directly aimed at the authorization process but rather the business environment and the message this has sent. As MrEarl pointed out it has caused job losses.
If memory serves, revolut set up offices in Ireland in 2019.
NoRegretsCoyote
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The EBA has no role in authorising individual institutions. It is mainly a standard setter.
Joint supervision by ECB and home supervisor is only if you are over a certain size. The list is here. Revolut Bank UAB is a "less significant institution" and is supervised directly by the Bank of Lithuania, not the ECB.
To get a banking license in the first place (an "authorisation") the ECB must approve. This might be where your confusion is.
I have no inside information here but I am old enough to remember the era of light-touch supervision by the Central Bank (pre-2008) and it didn't end well!
DublinHead54
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Ok I am speaking from experience of an Institution who is jointly supervised. I've also gone through a Bank License application, and that was dealt both with the local regulator and the ECB, perhaps this was because of their size, but I had assumed was the process for all bank license. I don't think the slowness is because of light touch supervision, I think it is because of the volume of applications and understaffing of the CBI. In my recent experience the expertise at the CBI is pretty junior.
Regardless, the comment I made was based on the below comment in the article. Revoluts decision is clearly based on this.
"A spokesman for Revolut denied rumours that the move was linked to reports of frustration by the fintech over the Central Bank’s approach to regulation. A number of other fintechs have also expressed concern over the regulator’s approach, which sees it taking considerably longer than its European counterparts to approve licences. Few have commented publicly, however, for fear of displeasing the Central Bank."
NoRegretsCoyote
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No it's because of a default of heavy-touch supervision these days
My guess (and it's only a guess) is that if there are staff shortages you go the back of the queue.
In the early 2000s the Central Bank allowed a load of new entrants to the Irish market with very little ex ante scrutiny.
It's it such a bad thing that it is regulated in Lithuania and not here?
Ok we might have lost a few jobs but it's business model is not built around a large workforce.
However, if it had established here would it not be the Irish deposit guarantee scheme (let's call it the State) who would have to foot the bill if they failed. I wonder if this was the thinking in the central bank.
As it stands we have access to the bank without the potential large contingent liability. Ok a few jobs won't be coming here but overall is this not a good result?
Ok we might have lost a few jobs but it's business model is not built around a large workforce.
However, if it had established here would it not be the Irish deposit guarantee scheme (let's call it the State) who would have to foot the bill if they failed. I wonder if this was the thinking in the central bank.
As it stands we have access to the bank without the potential large contingent liability. Ok a few jobs won't be coming here but overall is this not a good result?
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DublinHead54
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I don't think so, the CBI aren't assessing them any differently to how LT have, the issue is the timelines. Theres an article on the IT today stating that the CBI aren't meeting any new applicants for an e-money license before September this year. That screams of a system that is understaffed or actively slowing down the process.
On paper I'm sure the process is the same but after the influx of Brexit business they might be happy to drag their heels.
I don't pretended to know anything of LTs banking sector but perhaps they value the business more than we do.
Perhaps we should outsource our bank licencing to the passport office
According to the CBI website, the application process for an e-money institution:
1) does not require a pre-application meeting
2) has a statutory timeline of 90 days to complete the application
This seems to contradict 1) the IT article, which states that a pre-application meeting is required and 2) that the only way to slow down an application is to refuse it.
I think you'll find that the CBI could look for half a dozen pre-application meetings, if they wanted to (regardless of what they call them).
There's no doubt in my mind, that the CBI need to be held to account for what's happened with Revolut - regardless of the decision, they should have made one, within a reasonable timeframe.
IMHO, the CBI has a number of issues to resolve these days, but that's probably best left for another thread.
There's no doubt in my mind, that the CBI need to be held to account for what's happened with Revolut - regardless of the decision, they should have made one, within a reasonable timeframe.
IMHO, the CBI has a number of issues to resolve these days, but that's probably best left for another thread.
NoRegretsCoyote
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TBH we are all speculating in the absence of facts. I would need a lot more information to conclude either way about the efficiency and effectiveness of the process here.
In any case there are conflicting consumer protection and prudential imperatives here (the Central Bank has to wear both hats).
On the one hand it's a consumer protection mess if something happens to millions of Irish consumers and the entity is headquartered abroad. This is what happened with Setanta insurance in 2014 which was HQ'd in Malta. On the other hand it's a prudential delight if something happens and a foreign supervisor has to deal with the consequences including deposit insurance.
The Central Bank is also a money laundering supervisor. The whole exercise is a lot more than just a few boxes to be ticked!
@NoRegretsCoyote , could not have said it better myself.
A couple of points on CBI applications...
There is a definite timeline for certain applications like MB, branch openings or extension of services such as the 90 day timeframe above. The question is when does that clock start - if you are applying for a license, you will of course have a conversation with the CBI in advance. They will also suggest you submit a draft. They'll have questions or comments, you respond, they come back with more and so on. It's only with the submission of the final agreed submission that the clock starts. So if the CBI want to slow things down, they can. And if you submit without prior consultation, they will issue comments anyway and the clock restarts at zero when you submit responses.
Also - in each EU country the local central bank is the regulator for all applications. You don't submit to the CBI and ECB separately. However, for structurally significant banks (as linked above), there is a joint supervision mechanism where any application is reviewed by both. But it's all part of the same process. I think technically the various central banks now operate as branches of the ECB
Revolut aren't applying to the ECB - their Lithuanian license will allow them to offer services across the EU (with notification to the relevant local regulators). Similar to Danske when they operated here - or one of the Dutch banks (Rabo?). I think Avant card operate under a Spanish banking license IIRC