Changes to the methodology for calculating the industry funding levy proposed

The Central Bank of Ireland (CBI) recently launched a consultation on proposals to amend the methodologies used to allocate the annual industry funding levy across certain types of regulated firms.

Overview

The changes concern how regulatory costs are distributed between firms within an industry category, rather than how much is collected from that category. The CBI states that these proposals would result in more proportionate contributions. The consultation paper also outlines proposed enhancements to the annual levy process. The consultation period will close on 8 January 2027.

Summary of proposals for the industry funding levy

A brief summary of the proposals to amend methodologies used to allocate the annual industry funding levy for certain firms is as follows:

1) A move from a ‘PRISM Impact-based’ levy to an ad valorem methodology for:

• investment firms (Category D)
• investment fund service providers (Category E2)
• insurance undertakings (Category B)

2) A move from a flat-rate levy to an ad valorem methodology for retail credit firms and credit servicing firms (Category M).

3) Amendments to the existing ad valorem methodology for payment and e-money institutions (Category N).

An ad valorem methodology is based on a pre-defined set of metrics and results in individual firms' levies being more directly related to their scale. Under the methodology, the amount payable by an individual firm is calculated using one or more financial metrics, for example, assets or income. The larger the firm, as measured by the applicable metrics, the greater the levy payable by that firm relative to smaller firms in the same industry category. Therefore, the financial regulation costs to be recovered from an industry category are weighted towards the larger firms that would be expected to have the capacity to contribute a higher amount given their scale. The ad valorem methodology ultimately provides greater transparency and should mean firms are better able to estimate their future levy amounts.

No methodology changes are proposed for credit institutions (Category A), intermediaries (Category C), investment funds (Category E1), credit unions (Category F), high-cost credit providers (Category G) (which are subject to ad valorem methodologies) or Bureaux de Change (Category J), crypto asset service providers (Category Q) crowdfunding service providers (Category S) or approved professional bodies (Category H) (which are subject to a flat levy).

While crypto asset service providers remain subject to a flat levy for now, the CBI intends to consult separately on moving the sector to an ad valorem methodology as the sector grows and regulatory returns mature.

Implementation of the proposals for the industry funding levy

To give firms time to plan for the changes, the CBI proposes that the new methodologies are implemented over a four-year transition period. This will mean that PRISM Impact categorisation will continue for levy purposes during the transition. Under the phased approach, the amounts payable by a firm in an industry category where the methodology is changed would be calculated as follows:

• Levy 2026 (payable in summer 2027) would be 25% new basis amount plus 75% previous basis amount.
• Levy 2027 (payable in summer 2028) would be 50 % new basis amount plus 50% previous basis amount.
• Levy 2028 (payable in summer 2029) would be 75 % new basis amount plus 25% previous basis amount.
• Levy 2029 (payable in summer 2030) would be 100% new basis amount.

Other industry funding updates

The consultation paper outlines the following industry funding-related updates:

• Transaction fees and authorisation fees: The CBI currently applies once off fees for some activities, for example the additional supervisory levy payable by MiFID investment firms, fund service providers, investment funds and sub-funds following authorisation/approval by the CBI, and prospectus approval and filing fees. The CBI will investigate widening the use of fees for activities initiated by firms (for example, in respect of authorisation applications) and intends to progress this in the context of the planned reorganisation of its gatekeeping activities.
• Approach to firms authorised in another EEA Member State: The CBI is not at this time proposing changes to the current methodologies applicable to firms’ providing services in Ireland through branches under the freedom of establishment regime or cross-border on a freedom of services basis. However, the CBI will undertake work in this area to consider if amendments should be made. Once this work is complete, the CBI will consult on any proposals for change.
• Treatment of fines: The CBI reviewed its approach of fully remitting fines to the Exchequer and believes it remains appropriate. The CBI states that the approach avoids the perception that enforcement activity is influenced by financial incentives rather than public interest objectives, or that industry is benefiting from reduced levies due to the misdemeanours of others.

Proposed enhancements to the annual levy process

In advance of the finalisation of the levy rates relating to the previous year’s costs and the issuing of invoices during summer, the CBI proposes to publish guidance in Q1 each year to support firms in estimating their levy amounts. This is in acknowledgement that, while an ad valorem approach should make future levies more transparent and predictable, the levy amount is affected by many variables. The guidance would be published in Q1 each year and outline:

• the expected total financial regulation costs upon which the levy rates will be determined and their expected allocation to the different industry categories
• forward-guidance in respect of the expected current year costs that will determine the levy rates payable in the following year

However, the actual costs and allocations to industry categories will be finalised after the approval of the CBI’s accounts for the year in question and, therefore, may vary from the guidance provided.

The CBI will continue to streamline its financial and operational levy processes with the aim of issuing levy invoices earlier in summer. This year, levy 2025 invoices were issued in August, compared to September or October in previous years.

For more information on the proposals under consultation, please contact Eoin O’Connor, Partner (Financial Regulation Advisory), James Grennan, Partner (Insurance & Reinsurance), Stephen Carson, Partner (Asset Management & Investment Funds), or Sarah Lee, Senior Practice Development Lawyer. 

Date published: 13 October 2026