With the European Commission having been spurred into action to enhance the competitiveness of the EU in light of the Draghi Report on the future of European competitiveness, as well as the Letta Report on the future of the Single Market, BPFI sees an opportunity for the development of a more efficient and streamlined regulatory environment across the EU, ‘These pivotal reports emphasise that an overly complex or fragmented regulatory landscape can hinder economic growth, stifle innovation, and reduce the attractiveness of the EU as a place to do business.’

The paper outlines key areas where Ireland, as a leading global and EU Financial Services hub, can contribute to EU Commission’s simplification agenda, including by addressing specific challenges within its own domestic financial regulatory framework. It proposes a comprehensive and continuous regulatory simplification agenda which it says ‘is crucial for not only safeguarding Ireland and Europe’s current position but also driving their sustained growth and competitiveness.’

The BPFI, in outlining a number of regulatory and structural changes to simplify the landscape for banks, payment firms and investment firms, says ‘resilience and competitiveness in the financial sector stems from efficient compliance with risk-based and proportionate regulation, not from deregulation.’ It adds that simplification is about ‘streamlining processes and reducing the compliance burden’ while ensuring achievement of equivalent outcomes and ‘unlocking productive capital and fostering a dynamic and competitive Single Market’.

BPFI identifies requirements to EU regulation that ‘can disproportionately increase the regulatory burden on Irish-based firms, making them less competitive than their counterparts in other EU jurisdictions’. It adds that the additional complexity and cost associated with these extra requirements can often deter new entrants or even encourage existing firms to relocate and require them to divert resources from productive investment and innovation towards compliance.

It highlights the ‘unnecessary complexities’ in Ireland’s supervisory approach to inward EEA branches as well as its restrictive governance structures and regulatory approach towards individuals holding multiple senior roles in regulated firms.

It also suggests improvements to how the regulator engages with regulated entities, focusing on the practical application of supervision, the timeliness of processes, and the overall style of engagement. BPFI adds that the supervisory approach exhibits several inconsistencies and inefficiencies that collectively create a challenging operating environment for regulated firms.

It also calls for a renewed focus on proportionality in regulation and supervision, ‘Transparency and consistency in relation to a proportionate application of rules can foster a fair and predictable regulatory environment. It can significantly reduce the compliance burden on less complex entities, allowing them to focus resources on genuine risk management rather than excessive administrative overhead.’ It adds that a significant concern for regulated entities is ‘the absence of clear evidence of proportionality in the CBI drafting and application of regulations, as well as in its supervisory practices.’ It highlights Climate Risk Expectations that were drafted for large institutions (significant institutions or SIs) being applied to smaller institutions (less significant institutions, LSIs) as one case where proportionality is not evident.

The BPFI also highlights the Central Bank of Ireland’s approach to regulating and supervising outsourcing as presenting significant challenges for regulation financial service providers. Local requirements currently go beyond European Banking Authority requirements and BPFI sees the outsourcing area as on that could be simplified to make the Irish industry more competitive without reducing regulatory standards.

Amongst the longer-term structural reforms to simplify the regulatory landscape and promote future growth opportunities BPFI calls for a rebalancing of the regulatory mandate of the Central Bank of Ireland to bring in a competitiveness and growth aspect. The CBI’s primary statutory mandates are focussed on financial stability, prudential soundness, and consumer protection which can lead to regulatory decisions and requirements that, ‘while ensuring stability, inadvertently stifle innovation, deter market entry, and hinder the industry’s ability to compete effectively on the global and EU stages.’ It suggests a secondary statutory duty for the CBI ‘to actively foster competition, competitiveness, and sustainable growth within the financial sector.’

Other long-term structural reforms it suggests include the integration of simplicity principles into future legislation and throughout the regulatory development processes on both a national and EU level including the introduction of a ‘growth and competitiveness test’ in EU regulatory development. It also calls for a regulatory pause for non critical EU financial legislation as well as more consistent timelines around the transposition of EU directives into national law.