Blog: Donohoe tightens banker accountability rules in Bill – The Irish Times – The Irish Times

Minister for Finance Paschal Donohoe has upped the onus on senior finance executives to ensure their business areas are well run, under long-awaited draft laws to make it easier for regulators to hold individuals to account for failings under their watch.

The Central Bank (Individual Accountability Framework) Bill 2022, published late last week after Mr Donohoe secured Cabinet approval earlier in the month, proposes that executives “shall take any step that is reasonable in the circumstances” to avoid breaches of financial services rules in their areas of responsibility.

This marks a tightening of language from the original outline of the planned laws, published in July last year, which stated individuals should “take reasonable steps”. However, it does not go as far as a Central Bank proposal four years ago that executives should be required to take “all reasonable steps”.

The new wording may cause concern for those who will fall under the scope of the incoming rules, as it may feel like an impossible standard to achieve, said Kian Caulwell, a partner and head of financial services consulting with Mazars Ireland.

“To address this, firms and individuals will need to invest significant time on developing their culture that captures the importance of doing the right thing instinctively as individuals and the collective rather than solely relying on well documented roles, responsibilities and corporate documentation,” he said.

The Bill also gives greater clarity on how firms should engage with customers and how they must be able to demonstrate that customers are being provided with products and services that reflect their “needs and circumstances”.

“There is an increased focus on ensuring firms are fully transparent in how they communicate with customers. Gone is reference to the [previously proposed] requirement to share ‘material’ information and replaced with ‘relevant’ information,” Mr Caulwell said.

High Court role

Shane Kelleher, head of financial regulation at law firm William Fry, said another important development is that the Bill provides that any sanction imposed on an individual by the Central Bank under the planned laws must be confirmed by the High Court. “This is designed to ensure compliance with constitutional standards,” he said.

The publication of the Bill comes four years after the Central Bank called — 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.

It will be late next year, after legislation has gone through the Oireachtas and the Central Bank has put its draft regulations and guidelines out to consultation, before the new regime is up and running.

The planned framework will initially require 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.

“The publication of the Bill is welcome progress towards the implementation in Ireland of the long-anticipated, more comprehensive individual accountability regime,” said Ciaran Walker, a financial services regulation consultant with law firm Eversheds Sutherland.

Mr Walker said survey evidence from the UK and Australia, which have introduced similar regimes within the past six years, would suggest that an Irish framework will give rise to “improvements in internal governance and help to concentrate the minds of senior individuals on the standards of conduct expected of them”.

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