BUSINESS OPINION:IT MAY have passed you by, but the hour of reckoning for Ireland's top bankers has been nigh. More to the point, they seem to have survived.

At the end of March all the banks were required to submit documentation regarding the fitness and probity of their senior management as part of the Central Bank Reform Act which came into effect last year.

The banks had to submit the information in respect of anyone who holds what is considered a Pre-Approval Controlled Function (PACF), of which there are some 41.

These people include the chief executive and the heads of a number of other functions which include compliance, risk and internal audit.

The documents are meant to confirm the bank has established that the executives tick the following boxes – that they are competent and capable; honest, ethical and act with integrity; and that they are financially sound.

The Central Bank is a little bit coy about what happened once it received the documentation last month. Not much, one suspects, as the process is essentially an exercise in self-certification.

According to the Central Bank, “a financial service provider must not permit a person to perform a Pre-Approval Controlled Function or Controlled Function unless it is satisfied on reasonable grounds that the person complies with the Fitness and Probity Standards and has obtained confirmation that the person has agreed to abide by those standards”.

Making sure banks comply is part of the ongoing supervision of the banks, which has intensified greatly since the Central Bank was overhauled post the banking collapse. But what remains unclear is what happens if the regulator disagrees with a bank in its assessment of whether or not someone passes the test.

It is less of a problem in the case of new appointees as they cannot be appointed without the Central Bank’s approval and it reserves the right to interview them .

But the situation regarding the incumbents, who all had to be certified by the end of last month, is much more complicated.

There is a real issue around saying someone who has been doing a job is no longer considered to be meeting the standards of fitness and probity needed to do it.

An insight into this was offered last week when a senior executive in Ulster Bank, John McGrane, obtained an injunction to stop the bank removing him from his position.

McGrane is a former head of business and commercial banking between 2006 and 2008, and his case is somewhat different because the bank said it would not even submit the documentation regarding his fitness and probity to the Central Bank.

Although McGrane has moved to a different role, he still fell into the PACF net because he was the chairman and director of a subsidiary that fell under the PACF umbrella.

According to his affidavit – to which Ulster Bank has not yet had a chance to respond – his boss David Thomas, the managing director of Ulster bank Corporate Markets, told him days before the deadline that the bank would not be submitting his papers because he was part of the pre-crash leadership team and also because of his personal indebtedness.

McGrane makes a number of points in his affidavit, including that he had recently received assurances that he had an ongoing role in the bank and that “my appraisals were exemplary throughout my almost 38-year career with Ulster Bank and no issues have been brought to my attention . . .”

He made various other points and also listed numerous measures he had proposed to reduce the risk to the bank which were not implemented.

While McGrane’s dispute is with his employer and not the regulator, it seems reasonable to conclude that the sort of arguments the court will hear around Ulster Bank’s view of his fitness and probity will be very similar to those that would be advanced if the Central Bank was to challenge any of the banks’ certification that the holder of a PACF did not pass the fitness and probity tests.

The case will no doubt be closely watched both by the Central Bank and by the banking fraternity.

The chief executive of Bank of Ireland, Richie Boucher, and his counterpart at Irish Life, Kevin Murphy, will take a particular interest as they are involved in a separate but similar process under which any director of a covered bank who was in situ pre the crash and now wants to stay on has to submit to a fitness and probity test.

Boucher’s interest will no doubt be piqued by the fact he was a colleague of McGrane’s at Ulster Bank before moving to Bank of Ireland in 2003, including during a stint as head of business and commercial banking.