IAF/SEAR One Year On

It has been almost a year since the Central Bank of Ireland's Individual Accountability Framework and Senior Executive Accountability Regime came into effect. It is therefore worthwhile taking stock of how in-scope firms have been getting to grips with the new regime.

We did not observe a one-size-fits-all approach to implementation amongst our clients.

Firms started the process with different internal organisation models, different employment contract formats, and different structures for their internal policies and procedures.

The common theme was that firms built on what they already had in place. Regarding the technical aspects of implementation, the single biggest challenge we encountered was ensuring that clients had systems in place to ensure that PCFs can evidence that they have taken "reasonable measures" to discharge their responsibilities or to meet a conduct standard. In terms of horizon gazing, July 1st will see IAF come into force for non-executive directors and independent non-executive directors.

While firms should already have factored these directors into their existing Statements of Responsibilities and Management Responsibility Maps, NEDs, and INEDs will also be subject to the statutory Duty of Responsibility, introduced as part of SEAR, given that they are individuals holding PCF roles.

This duty will oblige NEDS and INEDS to take reasonable steps to avoid a regulatory breach by their firm, and in doing so, foster a culture of personal responsibility at the top levels of an organisation. With this greater level of accountability for NEDs and INEDs, there is a greater focus on identifying, managing, and mitigating risks within their remit; leading, in theory, to more robust risk management practices across firms.

IAF/SEAR also amended the Central Bank's Administrative Sanctions Procedure with a focus on enhanced fair procedures, in light of the Zelewski decision. Whilst we have seen the Central Bank take enforcement action against firms under the new regime in the last 12 months, we still await the first enforcement action against an individual.

Only then will we see the real impact of IAF/SEAR.

Contact our Financial Regulation team

The content of this article is provided for information purposes only and does not constitute legal or other advice.