Press release
Minister McGrath signs order to commence large part of Central Bank (Individual Accountability Framework) Act 2023
Published on
Last updated on
Published on
Last updated on
The Minister for Finance Michael McGrath has signed an Order to commence a large part of the Central Bank (Individual Accountability Framework) Act 2023 with effect from today (19 April 2023).
The sections commenced will, among other things, provide for:
Enhancements to the operation of the Central Bank’s Fitness & Probity (F&P) regime, in particular to the Central Bank’s enforcement powers, making it more efficient, more effective, and ensuring it continues to conform to the required standards of fairness.
Extension of the F&P regime to certain categories of holding companies thus making it available to the Central Bank as a supervisory and enforcement tool in relation to them.
Amendments to the Central Bank Act 1942, in particular Part IIIC of that Act, which deals with the Central Bank's Administrative Sanctions Procedure. These amendments will make changes to the operation of the Administrative Sanctions Procedure (ASP) to clarify the processes involved, to ensure it continues to conform to the required standards of fairness in its procedures, and to adapt the ASP to provide for enhanced individual accountability.
Enhancements to the ASP will give the Central Bank power to take enforcement action directly against individuals for breaches of their obligations rather than only for their participation in breaches committed by a firm.
The additional powers that will be provided to the Central Bank are significant and care has been taken to adopt the correct balance between these powers and the protection of individuals’ constitutional rights.
Speaking today, Minister McGrath described the new legislation as a significant enhancement of the powers of the Central Bank:
“Today, as a large part of the Central Bank (Individual Accountability Framework) Act comes into operation, marks an important further step in work to transform the culture of the financial services industry in Ireland.”
Minister McGrath said:
“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. I would ask the financial services sector to engage with the consultation process put in place by the Central Bank so that their views can be taken into account by the Central Bank as it progresses work on the Senior Executive Accountability Regime, the certification of individuals’ fitness and probity, and the various guidance documents covering the Individual Accountability Framework, including the guidance on the Conduct Standards.
"Ultimately a key challenge is to continue to rebuild trust in the financial sector following the Global Financial Crisis. This will require ongoing cultural and practical change in the banking sector and throughout the financial services industry building on the progress that has been made to date.
"The Central Bank (Individual Accountability Framework) Act 2023 should make a significant contribution to bringing about this needed cultural change. This is the ultimate aim of this legislation.”
The Central Bank (Individual Accountability Framework) Act 2023 was signed into law by President Michael D. Higgins on 9 March 2023.
The Central Bank is currently undertaking a public consultation in relation to the Senior Executive Accountability Regime, Conduct Standards, and Certification of persons for the purposes of Fitness and Probity.
The Minister for Finance intends that the remainder of the Act will be commenced following the completion of the Central Bank’s public consultation and before the end of 2023.
The IAF has its roots in the Central Bank’s report, Behaviour and Culture of the Irish Retail Banks (2018). The report was produced at the request of the then Minister for Finance, Paschal Donohoe, under section 6A of the Central Bank Act 1942, to examine the culture, behaviours, and associated risk in Ireland’s retail banks.
It is intended that the remaining parts of the Central Bank (Individual Accountability Framework) Act 2023 Act will be commenced following the completion of the Central Bank public consultation, CP153 - Enhanced governance, performance and accountability in financial services Regulation and Guidance under the Central Bank (Individual Accountability Framework) Act 2023, being undertaken by the Central Bank at present to inform the regulations and guidance required to underpin the legislation.
Commencing the remaining parts will provide for the introduction of the Senior Executive Accountability Regime (SEAR), Conduct Standards and Fitness and Probity Certification and will drive greater levels of accountability in the financial services sector and clarify the standards of behaviour expected of individuals and firms to help raise standards of behaviour in practice.
SEAR 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 within:
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. SEAR also fulfils the purpose of incentivising and assisting regulated firms in strengthening their internal processes through management responsibility maps and clarification of senior management responsibilities.
a. Common conduct standards to apply to all persons in controlled function roles;
b. Additional conduct standards for individuals in senior positions; and
c. Business conduct standards for all regulated firms in the financial sector.
The introduction of these conduct standards will give the Central Bank powers to set and impose binding and enforceable obligations on all Regulated Financial Service Providers (RFSPs) and individuals working within them with respect to expected standards of conduct.
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.
Clarifying firms’ obligations to proactively certify that individuals carrying out certain specified functions are fit and proper to do so.