The Central Bank on Monday launched an initial three-month consultation on the incoming rules to make it easier for regulators to hold senior individuals in banks and other financial firms to account for failings under their watch.
The publication of draft regulations and guidelines came after enabling legislation, the so-called Central Bank (Individual Accountability Framework) Act, was signed into law last week.
Consultation documents go into detail of what will be expected of executives – or what are called holders of controlled functions (CF) – to meet the legal requirement to “take any step that is reasonable in the circumstances” to avoid breaches of financial services rules in their areas of responsibility.
“The concept of reasonable steps should be already embedded in CF role holders’ day-to-day actions in managing their areas of responsibility,” it said.
“It is acknowledged that human error can occur and that perfection is not the required standard. Rather, in assessing the steps that an individual took the Central Bank will consider what steps an individual, in that position, could reasonably have been expected to take at that point in time.”
The Central Bank called almost five years ago – in the wake of the State’s tracker-mortgage scandal – for extra powers to sanction individuals for failings under their watch, in the wake of the State’s tracker-mortgage scandal.
[ Central Bank’s Donnery defends plans to hold individual executives accountableOpens in new window ]
The senior executive accountability regime (SEAR) will initially require about 150 banks and lenders, insurance companies and larger investment firms to develop and maintain responsibility maps detailing what areas each of its senior executives are accountable for, as well as where oversight rests among non-executive directors at board level.
Why are Irish companies shifting their stock listings to the United States?
Conduct standards for senior finance sector individuals to act with honesty and integrity, due skill, care and diligence, and in the best interest of customers, will apply from the end of this year. A requirement that firms proactively certify that individuals carrying out certain specified functions are fit and proper will also take effect from the year end.
However, firms are being given until July next year to clearly set allocation of prescribed responsibilities of different roles.
“At its core, financial regulation is about supporting positive outcomes, the interests of consumers and, ultimately, the economic wellbeing of the community as a whole,” said Derville Rowland, a deputy governor at the Central Bank.
“The new framework will underpin sound governance across the financial sector. It will achieve this by setting out clearly the good practices expected of firms and role-holders and their accountability.”
The Central Bank’s current penalties tool kit, including its powers to bar executives from senior financial roles and fines of up to €1 million, will apply to the new accountability regime.
