Following the publication of its enforcement priorities for 2012 at the start of the year, the Central Bank of Ireland (CBI) has proceeded to follow through on its commitment to continue its tougher stance on inspections and enforcement.

The CBI’s published aims, which range across transaction reporting, client assessment requirements and accuracy of information, also include details of a new risk-based regulatory framework, known as the Probability Risk and Impact System (PRISM), which is intended to promote compliance through tougher enforcement and a “name and shame” policy.

In addition, the major changes within the CBI itself, outlined previously in our December 2011 e-zine, are continuing. Governor Patrick Honahan said in a recent speech that a “further rapid expansion in Central Bank staff has come about since the financial crisis, reflecting in large part a re-think of the degree of intrusiveness and detailed supervision that is seen to be necessary for prudential purposes.”

As of the end of Q2 2012, the tougher regime is already in evidence, with six administrative sanction settlements entered into by the CBI, compared to just three during the first six months of 2011. Also, as part of its programme of themed reviews and inspections for 2012, the CBI undertook a series of themed inspections of investment firms during Q1 of 2012.

Following the review, the CBI issued a letter to investment and stock-broking firms on 22 May 2012 informing them that the CBI’s analysis of the findings of the Themed Inspection Series revealed that “while many firms have adopted some of the principles of good corporate governance, there are still areas which would benefit from further development.”

The CBI therefore called on investment firms to review their corporate governance structures in light of certain recommendations set out in a schedule to the letter. These include recommendations on the appointment of independent non-executive directors, keeping separate the roles of the Chairman and CEO and the necessity of clearly documenting corporate governance structures.

In a recent speech, Governor Honohan brought home the importance to all businesses of ensuring full regulatory compliance, when he said “the threat of enforcement is there for all, big and small, and this is evidenced by those cases taken to date.”