Responses to Discussion Paper on the Payment of Commission to Intermediaries
07 February 2017
Press Release
The Central Bank of Ireland has published responses received to its recent Discussion Paper on the Payment of Commission to Intermediaries, which was issued in July 2016. The purpose of that paper was to stimulate discussion and to obtain feedback from interested parties on the risks and benefits to consumers of the practice of insurance companies, banks and other financial firms paying commissions to intermediaries that distribute their financial products. The Central Bank has also engaged further with a number of consumer bodies to seek their views on the issues raised.
The responses to the Discussion Paper and the stakeholder engagement will inform the Central Bank’s ongoing consideration of its policy position in relation to the practice of paying commission to intermediaries, as well as our engagement on this topic in domestic, EU and international fora. It also assists in providing any technical advice to Government on the legislative framework for the regulation of financial services particularly in the implementation of the Markets in Financial Instruments Directive II [1]and the Insurance Distribution Directive[2]. In this context, it is planned that a Consultation Paper will be published in Q3 2017, outlining proposed measures to strengthen protections for consumers in the area of commission payments to intermediaries.
Based on our analysis of this topic, including the responses to this Discussion Paper, the Central Bank will now examine proposing additional measures to strengthen protections for consumers under the following headings:
- the acceptance and retention of commissions by intermediaries describing themselves as ‘independent’;
- ways to mitigate product and producer bias where commission is paid; and
- where commission amounts are based on the volume of the product sold, including override commissions[3].
Director of Consumer Protection, Bernard Sheridan, said “Remuneration structures, by their very nature and intent seek to drive the behaviour of those engaging with consumers and reflect the inherent culture within a firm or industry. It is important therefore that firms ensure that their remuneration structures are designed to encourage responsible business conduct, fair treatment of consumers and to avoid conflicts of interest, and that the consumer protection framework protects the best interests of consumers in this regard. The Central Bank will be considering what additional protections need to be put in place to support this and plans to publish a consultation paper later in 2017.”
The responses to the Discussion Paper are available here.
[1] Directive 2014/65/EC
[2] Directive 2016/97/EC
[3] Override is an additional commission payment or benefit to the intermediary for meeting or exceeding agreed targets. It is generally an increased percentage of commission per unit or it can be a percentage uplift of the commission amount earned. It may also be referred to as accelerated commission.