22 October 2019 Press Release
- The Central Bank has proposed reforms to financial services regulations, including a new Senior Executive Accountability Regime (SEAR) to ensure clearer accountability.
- The Central Bank considers these proposed reforms to be necessary enhancements to its supervisory and enforcement toolkit.
- All participants in the financial services industry, including key legal and accountancy advisors, must play their part in transforming the culture of the financial services sector.
Speaking today at the Matheson Conference on Culture and Governance in Financial Services in UCD, the Central Bank’s Director General Financial Conduct, Derville Rowland, made the case for bringing a Senior Executive Accountability Regime (SEAR) into force in Ireland.
She said: “In our 2017 submission to the Law Reform Commission, we recommended that reforms enhancing the accountability of senior people in regulated entities be adopted here.
“We proposed that senior managers would submit a statement of responsibilities that makes clear the matters for which they are responsible and accountable. This would help assign responsibility to individuals in a regulatory context and decrease their ability to claim that the culpability for wrongdoing lay outside their sphere of responsibility.
She added that the Central Bank had set out further detailed proposals for reform in its 2018 report into the Behaviour and Culture of the Irish Retail Banks requested by the Minister for Finance amid public concern that banks were dragging their heels when it came to redressing and compensating consumers they had wrongly overcharged in the context of the Tracker Mortgage Examination.
“We proposed a unified enforcement process, which would apply to all breaches by firms or individuals of financial services legislation. We also recommended that the hurdle of participation be removed such that the Central Bank could pursue individuals directly, rather than only where they are proven to have participated in a firm’s wrongdoing. At present, we can only impose sanctions on individuals where they have participated in a firm’s breach. In our view, this is unduly restrictive and it is not compatible with delivering the necessary reforms and enhanced accountability.
“The Central Bank considers these proposed reforms to be necessary enhancements to its supervisory and enforcement toolkit which supports an effective and ethical culture in regulated firms.
“What we would like to see is that the tone for a positive culture is set from the top at the firms, cascaded throughout the entire organisation – and echoed from the bottom up. We believe that these proposals to strengthen individual accountability are an important step in that direction.”
Speaking on the role of professional advisers, she said:
“It isn’t just about the firms. All participants in the financial services industry, including key legal and accountancy advisors, must play their part in the cultural transformation. Given that the purpose of regulation is to safeguard stability and protect consumers, the Central Bank expects the conscientious professional to advise firms to comply not only with the letter of the rules, but also with the spirit.”