The Central Bank of Ireland delivered an address on 15 January 2020 outlining the supervisory and enforcement priorities for 2020.
This provides firms with an important indication of the Central Bank's focus. This is particularly the case given the link between supervisory engagement through thematic reviews, 'risk mitigation programmes' and 'skilled persons' reviews and ultimately enforcement action through the Administrative Sanctions Procedure.
The priorities identified by Derville Rowland, Director General, Financial Conduct cover multiple sectors of the financial services industry and are detailed below. Although the Director General indicated that supervision would be cross-sectoral, particular mention was given to culture in retail banks, pricing of motor and home policies, funds management and the protection of borrowers in mortgage arrears.
Strengthening consumer protection
A focus of the address was consumer protection. Consumer protection will drive supervision of both financial service providers' engagement with consumers and throughout product life cycles. Some key topics mentioned include:
- The importance of a consumer focused culture and the implementation of the 'culture action plans' by retail banks
- The Central Bank will be assessing how financial service providers design and sell products, particularly retail banking products
- Differential Pricing in the motor and home insurance sectors will be a particular focus with a view to ensuring that insurers can demonstrate that their underwriting and pricing strategies are compliant with the Consumer Protection Code
- The Central Bank will begin a process of substantially reviewing the Consumer Protection Code which is anticipated to involve extensive consultation
- The protection of borrowers in mortgage arrears is a priority, including long term sustainability and the appropriateness of alternative repayment arrangements for consumers with a particular focus on Credit Servicing Firms
- An emphasis on supervising how firms manage technological risks, the use of technology and the information imbalance between consumers and firms
- Assessments of how firms are meeting appropriateness and suitability requirements under MiFID and the sale of structured products by retail intermediaries
The Central Bank's scrutiny of the funds sector aligns with the significance of the sector for the Irish economy and increasing numbers of firms being regulated by the CBI in anticipation of Brexit. The Central Bank's focus will include the implementation of CP86 on effectiveness and delegate oversight, liquidity management in UCITs, securities lending and liquidity risk and resilience in property funds.
Anti-money laundering and counter-terrorist financing
Anti-money laundering and counter-terrorist financing continue to be key supervisory priorities. These priorities include:
- Assessing transaction monitoring, particularly the use of IT systems by higher risk firms
- Scrutinising Risk Assessments with a particular focus on how firms are designing and operating these assessments. Firms should note the publication of updated Guidelines for the Financial Sector published by the Central Bank in September 2019
- Continued focus on firms not separately regulated by, but required to register with, the Central Bank under Schedule 2 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 because they operate in financial leasing or the safe custody of valuable assets
- Intense supervision of Virtual Asset Service Providers due to the anonymous nature of the offering and the difficulty that poses for transaction monitoring
The Central Bank continues to focus on the new proposed Individual Accountability Framework, including the proposed Senior Executive Accountability Regime for which draft legislation is expected this year. Ongoing investigations will be progressed against firms and individuals under the current Administrative Sanctions Procedure. The Central Bank also continues to focus on Fitness and Probity, with a particular mention given to the importance of accuracy and honesty in the completion of applications relating to pre-approved controlled functions.
These supervisory and enforcement priorities strike a balance between covering a range of issues across the financial services sector and focusing on specific consumer, governance and compliance issues on which more intrusive supervision or enforcement action may be expected.