Central Bank of Ireland Annual Report 2016 Annual Report 2016 Central Bank of Ireland 10 April 2017 Dear Minister Under the Central Bank Act 1942 (amended), the Central Bank of Ireland is required to prepare a report on its activities during the year and to present this document to you within six months after the end of each financial year. I have the honour to enclose herewith the Activities and Annual Accounts of the Central Bank of Ireland for the year ended 31 December 2016. Yours faithfully Philip R. Lane Governor Annual Report 2016 Contents Part 1 The Central Bank Commission 4 Organisation 5 Senior Management 6 Management 7 Governor’s Foreword 8 2016: The Bank at a Glance 10 2016: The Irish Economy at a Glance 11 Chapter 1: Strategic Plan 2016-2018: Review of Implementation in 2016 12 – Introduction 13 – Strategic Responsibilities 14 – Strategic Enablers 20 Chapter 2: Key Activities and Developments in 2016 22 – Price Stability 23 • Chart 1: APP Monthly Purchases in 2016 24 – Financial Stability 27 • Box 1: Review of Macroprudential Mortgage Measures on Loan-to-Value and Loan-to-Income 28 • Box 2: Central Bank Brexit Task Force 29 – Consumer Protection 31 – Supervision and Enforcement 34 • Chart 2: Regulated Firms 34 – Regulatory Policy Development 38 • Chart 3: The Bank’s Policy Network 39 – Payments, Settlements and Currency 41 • Table 1 – Banknote Issues 42 • Box 3: The Europa Banknote Series 43 • Table 2: Coin Issues 44 • Box 4: 1916 Proclamation Coins 44 – Economic Advice and Statistics 46 – Recovery and Resolution 51 • Box 5: Liquidation of Rush Credit Union 52 – People and Knowledge 53 • Box 6: Diversity and Inclusion in the Bank 54 – Information and Resources 56 • Box 7: Significant IT- Related Projects Delivered in 2016 56 • Box 8: Implementation of an Additional Risk Provision in the 2016 Annual Accounts 58 • Table 3 Components of the Bank’s Net Financial Assets Position 61 • Box 9: The Bank’s Fusion Programme 62 • Box 10: Energy, Safety and Environmental Performance – Bank Initiatives 65 – Communication and Accountability 66 • Box 11 : Corporate Social Responsibility 67 Chapter 3: Governance and Internal Audit 69 – Governance 69 – Legal Framework and Statutory Objectives 70 – The Central Bank Commission 70 – Members of the Commission 71 • Table 4– Meetings attended by Commission members during 2016 74 • Table 5 – Audit Committee Meetings 2016 75 • Table 6 – Budget and Remuneration Committee Meetings 2016 76 • Table 7 – Risk Committee Meetings 2016 77 – Accountability 80 • Table 8 – Appearances before Joint Oireachtas Committees in 2016 81 – Internal Audit 82 Appendix 1: Statements and Published Papers by the Bank in 2016 83 Glossary 91 Part 2 Financial Operations 98 Statement of Accounts for year ended 31 December 2016 103 Part 1 4 Annual Report 2016 The Central Bank Commission as at 31 March 2017 Philip R. Lane, Governor Sharon Donnery, Cyril Roux, Derek Moran, Deputy Governor Deputy Governor Secretary General of (Central Banking) (Financial Regulation) the Department of Finance Alan Ahearne Patricia Byron Blanaid Clarke John FitzGerald Des Geraghty Michael Soden Neil Whoriskey, Secretary Annual Report 2016 5 Organisation as at 31 March 2017 CENTRAL BANK COMMISSION Philip R. Lane* (Chairman), Alan Ahearne, Patricia Byron, Blanaid Clarke, Sharon Donnery *, John FitzGerald, Des Geraghty, Derek Moran*, Cyril Roux*, Michael Soden, Neil Whoriskey (Secretary) GOVERNOR Philip R. Lane DEPUTY GOVERNOR CHIEF OPERATIONS DEPUTY GOVERNOR (CENTRAL BANKING) OFFICER (FINANCIAL REGULATION) Sharon Donnery Gerry Quinn Cyril Roux Resolution Chief Currency and Asset Securities Financial Chief Credit Consumer and Information Human Facilities Insurance Management and Markets Policy and Enforcement Operations Economist Institutions Protection Corporate Officer Resources Management Supervision Supervision Supervision Risk Supervision Derville Affairs Maurice Gabriel Bernard Kevin Liz Joyce Paul Sylvia Cronin Michael Grainne Gerry Cross Rowland McGuire Fagan Ed Sibley Sheridan John Coyle Garland Molumby Hodson McEvoy# General Banking Secretariat Supervision Irish Financial – Supervi- Asset Communi- Economic IT Delivery Control sion Manage- Enforcement Currency Insurance – Prudential cations Financial Analysis ment: CP – Investiga- Issue Supervision Policy and Markets IT Strategy, Human Procurement Banking Supervision Supervision tions Governance Internal Financial Planning and Resources Supervision Securities Currency Insurance – Audit^ Payment Stability Architecture Regulatory – Inspections Asset and Markets CP – Policy Enforcement Production Advisory, Risk and Organisation Transactions Manage- Supervision and - Advisory Analytics & Legal Securities Monetary Technology Development Banking ment: Authorisa- Facilities Actuarial Markets Settlement Policy Delivery and Project Supervision Authorisa- tions Anti-Money Management Services Policy Organisa- Operations Management – Analysis tions & Laundering tional Risk Statistics Office Inspections Registry of Resolution Credit Unions * Ex-officio. ^ Internal Audit Division reports directly to the Governor and only reports to the Director of Resolution and Corporate Affairs for matters of an administrative or budgetary nature. # Mary O'Dea will take up the position in early September 2017. Until that time, Grainne McEvoy, Head of Securities and Markets Supervision Division, will be Acting Director. 6 Annual Report 2016 Senior Management as at 31 March 2017 Philip R. Lane, Governor Sharon Donnery, Cyril Roux, Gerry Quinn, Deputy Governor Deputy Governor Chief Operations (Central Banking) (Financial Regulation) Officer John Coyle, Sylvia Cronin, Gerry Cross, Gabriel Fagan, Kevin Garland, Director Director Director Chief Economist Chief Information Resolution and Insurance Supervision Policy & Risk Officer Corporate Affairs Liz Joyce, Gráinne McEvoy, Maurice McGuire, Paul Molumby, Derville Rowland Director Acting Director Director Director Director Human Resources Securities and Financial Operations Currency & Facilities Enforcement Markets Supervision Management Michael Hodson, Bernard Sheridan, Ed Sibley, Director Director Director Asset Management Consumer Protection Credit Institutions Supervision Annual Report 2016 7 Directorate Division Head of Division Resolution and General Secretariat Neil Whoriskey Corporate Affairs Internal Audit Joe Foy Communications Jill Forde Legal Eadaoin Rock Organisational Risk Glenn Calverley Resolution Patrick Casey Financial Operations Financial Markets Peter Sinnott Payment and Securities Settlement Daragh Cronin Economics Irish Economic Analysis John Flynn Financial Stability Mark Cassidy Monetary Policy Gillian Phelan Statistics Joe McNeill Research and Cross-Directorate Projects Gerard O’Reilly Information Management IT Delivery Louise Dennehy* and Technology IT Strategy, Planning and Architecture Karina McArdle Technology Delivery and Operations Eoin McDermott Currency and Facilities Currency Issue Lucy O’Donoghue Management Currency Production Tony Duffy Facilities Management Michael Enright Human Resources Human Resources Derval McDonagh Organisational Development Karen A O'Leary* Operations Regulatory Transactions Alan Briscoe Financial Control Fergal Power Procurement Michael Power Project Management Office John Thompson Credit Institutions Banking Supervision – Analysis Adrian Varley Supervision Banking Supervision – Supervision Fiona McMahon Banking Supervision – Inspections Vacancy Registry of Credit Unions Anne Marie McKiernan Insurance Supervision Insurance – Supervision Nuala Crimmins Insurance – Advisory, Analytics & Actuarial Services David Cobley Asset Management Asset Management-Supervision Vacancy Supervision Asset Management-Authorisations and Inspections Vacancy Securities and Markets Securities and Markets Supervision Gráinne McEvoy Supervision Policy & Risk Prudential Policy and Governance Mary Burke Supervisory Risk Mary Elizabeth McMunn Markets Policy Martin Moloney Consumer Protection Consumer Protection – Policy and Authorisations Colm Kincaid Consumer Protection – Supervision Helena Mitchell Enforcement Enforcement – Investigations Brenda O’Neill Enforcement – Advisory Seana Cunningham Anti-Money Laundering Domhnall Cullinan * Louise Dennehy will take up the position on 10 April 2017. * Karen A O'Leary will take up the position on 24 April 2017. Governor’s Annual Report 2016 8 Foreword Governor’s Foreword The Irish economy continued to grow at a robust pace in 2016, supported by strong domestic demand. Growth in employment picked up considerably and there has been a broadening of recovery on the domestic side of the economy. The overall outlook remains relatively positive. However, this outlook is subject to uncertainty about the external environment, including Brexit and risks to the global trading environment. A Brexit Taskforce was established in the Bank prior to the UK referendum and it continues to assess and analyse the implications, including the potential for a more diverse range of entity types and business models that would require the Bank’s supervision. In the euro area, economic conditions also improved during 2016. While the annual headline inflation rate remained subdued during the past year, the Governing Council of the European Central Bank (ECB) took a number of non-standard measures aimed at bringing inflation back to a level close to but below 2 percent over the medium term. In order to fulfil the Bank’s mission of ‘Safeguarding Stability, Protecting Consumers’, there was good progress in implementing