Central Bank plans increased scrutiny and enforcement to restore credibility

FINANCIAL INSTITUTIONS are facing greater scrutiny under a new enforcement strategy published by the Central Bank yesterday.

The plan sets out the strategy for a newly established, dedicated enforcement directorate, with the aim of restoring credibility in the financial markets.

The Central Bank is also seeking additional powers to gather information in its investigations and increased penalties. It wants the fines that can be levied against individuals and regulated entities increased to €1 million and €10 million respectively.

Corporate bodies are facing penalties based on their turnover, while the bank is also seeking restrictions of activities, enhanced mechanisms for consumer redress and the power to suspend and revoke authorisations.

The Central Bank pledged “vigorous” enforcement, with sufficient resources to “represent a credible threat of action”.

This should act as a deterrent to others, the bank said. The strategy has a number of key objectives, including improving effective compliance through the “robust application” of Central Bank’s enforcement powers.

Those involved in managing financial institutions will find their actions come under particular focus as part of the new regime.

Enforcement activity is to be prioritised according to the risk of the financial institution, ensuring that resources will be directed to areas of greater risk.

The bank said it planned to utilise resources in two ways: through pre-defined enforcement, where cases taken will be targeted based on priority areas decided by those charged with supervisory tasks; and also through reactive enforcement, which will mean taking action arising from “serious concerns” raised through supervisory work and other sources.

Director of enforcement Peter Oakes said the body was committed to the restoration of credibility in institutions and markets.

“We will not hesitate to use the full extent of our sanctioning powers where necessary,” he said.

The Central Bank’s head of financial regulation Matthew Elderfield said the bank is determined to use enforcement action to improve standards of compliance in the industry.

“The boards of directors and senior management of financial services companies operating in Ireland need to satisfy themselves that they are operating in accordance with regulatory standards in order to avoid the reputational and financial costs of possible enforcement action,” he said.