Financial Regulation: Minister for Finance Announces Financial Services Reforms
03 July 2019
The Department of Finance received approval from the Irish Government to begin drafting the heads for a Central Bank (Amendment) Bill 2019 (Bill) on 18 June 2019. The Bill follows a 2018 report from the Central Bank of Ireland (CBI) on the Behaviour and Culture of the Irish Retail Banks. Proposals by the CBI on an Individual Accountability Framework stand to be included in the Bill.
The main goal of the Bill is to improve transparency and accountability in the financial sector in Ireland and to address ‘serious cultural failings’ which came to light in recent years. The Bill will increase and enhance the powers of the CBI to regulate and hold individuals accountable for failings within regulated financial services providers.
It is expected that the heads of Bill will provide for the following:
Senior Executive Accountability Regime (SEAR)
The Bill will seek to impose obligations on firms and senior individuals to clearly identify where responsibility and decision-making lies within their firm.
It is expected that SEAR will initially apply to banks as well as insurance and asset management companies, and that the maximum fine of up to €1 million under the CBI’s administrative sanctions procedure for individuals will continue to apply.
The introduction of conduct standards will provide for statutory powers to set and impose binding and enforceable obligations on regulated financial services providers and the individuals working within them on expected standards of conduct.
Enhanced Fitness & Probity Regime
An enhanced Fitness & Probity regime will seek to ensure the effective operation of the regime and its ability to support the CBI’s proposed individual accountability framework, as well as the conduct standards for individuals and firms.
Breaking the ‘Participation Link’
The current law requires that the CBI must prove a contravention of financial services legislation against a regulated financial services provider before taking action against an individual. This is expected to be amended in the Bill so that the CBI will be able to pursue individuals on a stand-alone basis for failings.
Other technical amendments will also be made to improve existing legislation and to clarify certain statutory processes.
The Minister for Finance, Paschal Donohoe, intends to publish draft heads of Bill towards the end of the year and it is expected that the CBI will also hold a consultation process on the new regime.
Regulated financial services providers should be aware of the focus that both the government and CBI are putting on transparency and accountability, and we will continue to monitor progress in this area.
If you have any queries on how the proposed regime may impact your organisation, please contact a member of our Financial Regulation team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.