On 18 June 2019, the Cabinet agreed to proceed with drafting the Central Bank (amendment) Bill (“the Bill”) 2019 to enact a series of recommendations made by the Central Bank to the Government. The Minister for Finance, Paschal Donohoe announced that the purpose of the Bill is to address the serious cultural failings in the banks, which were brought to light by the Tracker Mortgage Examination and the Central Bank’s report from July 2018 on behavior and culture in the five main retail banks in Ireland. The proposals to be implemented in this Bill are designed to foster the culture of accountability and responsibility within regulated institutions.

It is proposed that the Bill will provide for the following:

  • Introduction of a Senior Executive Accountability Regime (SEAR) which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies;
  • Introduction of Conduct Standards for individuals and firms – to provide for statutory powers to set and impose binding and enforceable obligations on all Regulated Financial Service Providers (RFSPs) and individuals working within them with respect to expected standards of conduct;
  • An enhanced Fitness & Probity Regime – to ensure the effective operation of the regime and the ability of the regime to support the Central Bank’s proposed individual accountability framework and the conduct standards for individuals and firms;
  • Breaking the “Participation Link” – to address the known deficiency in the legislation which requires the Central Bank to first prove a contravention of financial services legislation against a RFSP before it can take an action against an individual;
  • Technical amendments – to improve existing legislation and clarify certain statutory processes.

The Senior Executive Accountability Regime (SEAR)

The introduction of the senior executive accountability regime (SEAR) under the Bill will strengthen the regulatory powers to fine, reprimand or disqualify executives and senior bankers to whom the Bill applies.

The Bill follows recommendations published by the Central Bank in December 2017 as part of its response to the Law Reform Commission Issues Paper “Regulatory Enforcement and Corporate Offences”. Both bodies recommended in their respective papers that the introduction of a senior executive accountability regime would help to avoid excessive risk-taking by individual institutions.

In its 2017 paper, the Central Bank recommended a framework which draws on the development in the UK of the Senior Managers and Certification Regime. This regime sets out specific responsibilities that financial institutions are required to give to their senior managers, known as ‘prescribed responsibilities’. The 2017 Central Bank paper notes that these requirements would assist in assigning responsibility to individuals in a regulatory context and decrease the ability of individuals to claim that the responsibility for wrongdoing lay outside their sphere of responsibility. Following this model, it is proposed that the Bill will introduce an obligation on firms and senior individuals within them to set out clearly where responsibility and decision-making lies.

Status of the Bill

The Bill is currently being drafted by the Department for Finance and Public Expenditure & Reform with engagement from the Attorney General’s office.