At a speech delivered earlier today to the Association of Compliance Officers in Ireland, Derville Rowland, Director General, Financial Conduct at the Central Bank of Ireland shared the regulator’s priorities for the year ahead. Set out below are the key priorities identified across a number of areas.
The Central Bank will shortly publish its Consumer Protection Outlook Report detailing the key risks to consumers the Central Bank has identified. Reflecting the risks identified, the key focus areas for the Central Bank in 2020 include:
• holding the boards and senior management of the five retail banks to account for their delivery of behaviour and culture action plans;
• completing Consumer Protection Risk Assessments on product oversight and governance at the main retail banks;
• examining price differentiation in the motor and home insurance markets and publishing an interim report at the end of the year – in the meantime the Central Bank expects the boards of insurance companies to ensure their pricing practices comply with the Consumer Protection Code and to be able to stand over their underwriting strategies;
• assessing whether EU (MiFID) appropriateness and suitability requirements are being met in the sale of investment products; and
• examining the sale of structured products by retail intermediaries.
The protection of borrowers in mortgage arrears remains a key priority of the Central Bank. In 2020 the Bank will:
• monitor compliance and continue to push all loan owners to put in place long-term sustainable arrangements where possible;
• subject new non-bank loan owners to robust supervision; and
• challenge the pipeline of 34 firms applying for full authorisation under the Credit Servicing Act about their plans for the fair treatment of borrowers in arrears.
Investment funds – investor protection
The effective supervision of investment funds was said by Ms Rowland to be of “critical importance” to the Central Bank. The Bank’s 2020 priorities include:
• working with ESMA to drive EU supervisory convergence and raise supervisory standards;
• developing a more systematic risk-based approach to supervision, having regard to international standards;
• enhancing the Bank’s gatekeeper role so that it is more risk-based with more scrutiny of applications of particular concern;
• concluding the review of fund management company effectiveness (CP86);
• working with ESMA to complete a common supervisory action on liquidity management in UCITS;
• commencing a review of UCITS’ use of securities lending; and
• conducting a deep dive on property funds to assess their resilience.
Preventing Money Laundering and Terrorist Financing
Areas of focus for the Central Bank in preventing money laundering and terrorist financing in the year ahead are:
• ensuring the effectiveness of transaction monitoring with a particular focus on the IT systems used by higher risk firms across various sectors;
• the design and operation by firms of money laundering and terrorist financing risk assessments;
• the obligation of certain firms not otherwise regulated by the Central Bank to register with the Central Bank (“Section 2 firms”) – Ms Rowland reminded the audience that failure to register is a criminal offence;
• devising a program to subject virtual asset service providers (e.g. cryptocurrency exchanges) to “intense supervision” upon the implementation of the EU’s 5th Anti-Money Laundering Directive.
Central Bank enforcement
Enforcement priorities for the Central Bank in 2020 include:
• ensuring only people who are fit and proper occupy senior roles at regulated firms; and
• ongoing enforcement investigations in respect of tracker mortgage related issues, including the actions of individuals.
Central Bank policy
Ms Rowland concluded by outlining the Central Bank’s policy priorities for 2020 which include:
• updating the Consumer Protection Code (a project which will require extensive consultation and will not be completed in 2020);
• working with the Department of Finance on the development of an enhanced individual accountability framework (SEAR); and
• ensuring that financial products sold as sustainable are defined in an accurate and transparent manner and not mis-sold (“greenwashing”) taking into account forthcoming EU taxonomy and sustainability disclosure regulations.