The Central Bank of Ireland has tapped the recently-departed European Central Bank (ECB) banking supervisory chairman, Andrea Enria, to lead a review of its vetting regime for key finance positions, after an appeals body made a highly critical judgment about its refusal to approve a board nominee for a fund.
The Irish Financial Services Appeals Tribunal (Ifsat), an independent body that hears appeals from aggrieved parties against certain central bank decisions, chaired by former Supreme Court justice John MacMenamin, said last month that the regulator’s decision-making process in the case was “flawed” and the appellant was “denied fair procedures at every stage”.
Still, Ifsat was unable to conclude whether the central bank decision to refuse fitness and probity approval for the individual — a funds industry executive who was being lined up to join the board of a fund — was correct.
Mr Enria, an Italian economist, has served as chairman of the ECB’s Single Supervisory Board, which is in charge of supervision of euro-zone banks, between 2019 and the end of last year. He was previously chair of the European Banking Authority.
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“The review will consider the transparency, efficiency and effectiveness of the central bank’s operation of the fitness and probity regime, considering the purpose and objectives of this regime to support the safety and soundness of firms, threats to consumer and investor protection and the stability of the system overall,” said the central bank on Friday evening.
“The focus of the review should be on the processes, systems and structures used by the Central Bank to exercise its functions … but the reviewer is welcome to make any other observations to improve the overall operation of the regime. The review is to be on the implementation of the framework, rather than the legislative framework itself.”
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The review will be published in the third quarter of this year.
The Ifsat detailed decision has become a source of embarrassment for the central bank’s fitness and probity regime, a key pillar of supervisory reforms introduced in the wake of the 2008 financial crisis that assesses the suitability of individuals seeking to take up important financial sector positions.
In practice, many executives facing difficulty securing approval withdraw from the process before an actual decision is made.
The case that came before Ifsat was a rare one where an individual pushed back against the regulator.
“The tribunal is satisfied that taken cumulatively — or even individually — the various procedures adopted by the Central Bank did not comply with the requirements of Constitutional and natural justice; including the necessity for fair notice; the duty to give reasons; and the observance of the principle of audi alterem partem,” noted the Ifsat judgment last month.
Audi alterem partem is a Latin phrase for the concept of allowing the other side to be heard as well.
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