On 28 July 2022, the Central Bank (Individual Accountability Framework) Bill 2022 (the Bill) was published; the main purpose of which is to confer powers on the Central Bank to improve accountability in regulated financial services providers (RFSP). We will provide a more detailed analysis of the Bill shortly, but in the meantime below are the key highlights.
What changes are incoming?
There are four main areas of change namely:
The SEAR
The Bill gives the Central Bank the power to introduce its long-awaited Senior Executive Accountability (SEAR) regime. SEAR imposes a legal 'duty of responsibility' on individuals performing senior executive functions (i.e. PCFs) to take reasonable steps to ensure that their firm does not breach its obligations in relation to the areas of the business for which they are individually responsible.
Under the new regime, the Central Bank can impose obligations on the RFSP to set out clearly where the decision making lies within the RFSP. This will require the RFSP to prepare statements of responsibility for each senior executive and produce a management responsibility map documenting key management and government arrangements.
New Conduct Standards
The Bill will introduce three new types of conduct standards applicable to RFSPs:
- Common Conduct Standards to apply to all persons performing controlled functions in relation to RFSPs. RFSPs will be required to establish and maintain policies setting out how they will implement the common conduct standards.
- Additional Conduct Standards will apply to more senior persons, those performing pre-approved controlled functions and others who perform any other function by which the person may exercise a significant influence on the conduct of the RFSP’s affairs; and
- Conduct Standards for Businesses which will apply to all RFSPs themselves, regardless of sector. The details of the business conduct standards will be contained in new Central Bank regulations.
Fitness and Probity Regime (F&P)
The Bill extends some of the existing F&P requirements to certain categories of holding companies and persons performing controlled functions within them. RFSP’s and holding companies will be required to certify that they are satisfied that each person performing a controlled function in relation to them is fit and proper.
The CBI’s power to conduct investigations in relation to a person’s fitness and probity will be extended to apply to any person who performed a control function up to 6 years before the commencement of an investigation.
The Bill also introduces procedural changes to the process of investigation by the CBI into a person’s fitness and probity, to ensure it conforms to the principles of fairness in the administration of justice. For example, the requirement for the individual to be kept informed of the progress of the investigation and the introduction of safeguards to ensure independent of decision-makers in relation to the F&P process.
Administrative Sanctions Procedure (ASP)
The Central Bank’s ASP will be amended to break the ‘participation link’ (whereby an RFSP must first be found to have breached financial services legislation before relevant individuals can be pursued by the Central Bank). This will facilitate individual accountability.
It is also proposed that for the most part, the High Court will have to confirm any sanction imposed by the CBI or, where the sanction is appealed, the decision of the Irish Financial Services Appeals Tribunal (IFSAT), before it can take effect.
The Bill also provides a list of considerations which the CBI must consider when determining the appropriate penalty as part of an investigation outcome.
Next Steps
We will be publishing a detailed analysis on the Bill shortly.
More to explore
