30th May 2024

Better business. Better community

Business Industry and Financial

McGrath signs order for new Central Bank enforcement framework

Finance Minister Michael McGrath has signed an order for the commencement of sections of the Central Bank (Individual Accountability Framework) Act 2023, with effect from 19 April.

The commencement expands the Central Bank’s Fitness and Probity (F&P) administration, with focus on the Central Bank’s enforcement powers.

This includes increasing the scope of the F&P powers to certain areas of holding companies, which will expand the supervisory and regulatory range of the regime.

These changes are said to make the F&P system more “efficient, more effective, and ensuring it continues to conform to the required standards of fairness”.

Also being reformed is the CBI‘s Administrative Sanctions Procedure (ASP). An amendment to the initial 1942 Central Bank Act aims to shed more light on the ASP procedure and harness greater regulatory powers for personal accountability.

With the amendment, the CBI can take enforcement action against individuals for breaches of their obligations, as opposed to their participation as part of an action against a firm.

Minister McGrath commented: “I look forward to commencing the remainder of the Act later this year, giving the Central Bank of Ireland the regulatory tools necessary to ensure that consumers dealing with financial service providers in this country can be confident that their best interests will be protected.”

The Central Bank is currently in the process of an overhaul of its processes in relation to Senior Executive Accountability Regime (SEAR), Conduct Standards, and Certification of persons for the purposes of Fitness and Probity.

Central Bank
McGrath
The commencement expands the Central Bank’s Fitness and Probity powers

A three-month public consultation commenced in March.

“I look forward to commencing the remainder of the Act later this year, giving the Central Bank of Ireland the regulatory tools necessary to ensure that consumers dealing with financial service providers in this country can be confident that their best interests will be protected,” the minister added.

“I would ask the financial services sector to engage with the consultation process so that their views can be taken into account by the Central Bank as it progresses work on SEAR.”

The Senior Executive Accountability Regime places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies and conduct standards for individuals and firms, and will apply initially to those in management roles in credit institutions (excluding credit unions), insurance companies, and investment firms.

According to the Central Bank, SEAR’s focus is on “discouraging misbehaviour or mismanagement by senior management”.

“By requiring individual accountability from senior management, supported by enforcement powers, there is an incentive for senior management to engage with and comply with financial services law,” the regulator explains.

“The adoption of conduct standards across all regulated financial service providers sets out the standards expected of relevant individuals who work in such firms. Given that more junior staff will be in scope of the common conduct standards being introduced, there is a range of safeguards included, so that staff are aware of what is expected of them.

Ger Connolly, partner in law firm Mason Hayes & Curran, commented that It will be necessary for financial institutions which fall within the scope of SEAR to review and allocate inherent responsibilities, prescribed responsibilities, and other responsibilities.

“It will also be necessary for financial institutions to begin preparations for completion of their Management Responsibilities Map and Statements of Responsibilities for each PCF-holder,” Connolly added.

“From an employment law perspective, firms will need to think about updating their employment contracts on an ongoing basis to reflect responsibility allocation and Management Responsibilities Maps. Firms will need to update their policies and procedures in line with SEAR and maintain accurate records going forward.”

link