The Individual Accountability Framework, Financial Regulation and the Central Bank – consultation and next steps

Following enactment of the Central Bank (Individual Accountability Framework) Bill 2022 on 9 March, the Central Bank of Ireland has today (13 March) launched a three month consultation on key aspects of the implementation of the Individual Accountability Framework (IAF), including the publication of draft Regulations and guidance.

The draft regulations and guidance seek to provide clarity in terms of the Central Bank’s expectations for the implementation of three aspects of the framework: the Senior Executive Accountability Regime (SEAR), the Conduct Standards and certain aspects of the enhancements to the Fitness & Probity regime.

Speaking today, Deputy Governor Derville Rowland said: “At its core, financial regulation is about supporting positive outcomes, the interests of consumers and, ultimately, the economic well-being of the community as a whole. The new framework will underpin sound governance across the financial sector. It will achieve this by setting out clearly the good practices expected of firms and role-holders and their accountability.

“The framework provides clarity as to standards that must be met by firms and individuals. These are the right standards to underpin the provision of financial services. As regulators, our approach to implementation of the framework will be founded on the principles of proportionality, predictability and reasonable expectations, underpinned by effective enforcement.

“We would like to hear from interested stakeholders, including the public, regulated firms, staff, representative bodies, consultancies, and service providers, and you can participate by visiting www.centralbank.ie/IAF.

“The framework also introduces changes to the Central Bank’s enforcement processes. The enhancements to our Fitness and Probity investigation, suspension and prohibition processes will be the subject of separate regulations and guidance which will be published once the underlying legal provisions have been brought into effect. As part of our phased plan, we will launch a second consultation in respect of changes to our Administrative Sanctions procedure later this year.”

To ensure a focus by firms on high quality implementation of the framework, the following implementation period is proposed:

• Conduct Standards including accountability of  senior individuals for running  their parts of the business effectively to apply from 31 December 2023;
• Fitness & Probity Regime - Certification and inclusion of Holding Companies to apply from 31 December 2023;
• Regulations prescribing responsibilities of different roles and requirements on firms to clearly set out allocation of those responsibilities and decision making to apply to in-scope firms from 1 July 2024.

Further Information

The full consultation paper, draft Regulations and guidance are available on our website.

The IAF includes the following key elements:

• Senior Executive Accountability Regime (SEAR): This will require in-scope firms to set out clearly and fully where responsibility and decision-making lie within the firm’s senior management.
• Conduct Standards: Common Conduct Standards are basic standards such as acting with honesty and integrity, with due skill, care and diligence, and in the best interest of customers, and will apply to individuals in all regulated firms. Senior executives will also have Additional Conduct Standards related to running the part of the business for which they are responsible.
• Enhancements to the current Fitness & Probity (F&P) Regime: This will include clarifying firms’ obligations to proactively certify that individuals carrying out certain specified functions are fit and proper.
• Amendments to the Administrative Sanctions Procedure (ASP): A key change will be the Central Bank’s ability to take enforcement action under the ASP directly against individuals for breaches of their obligations rather than only for their participation in breaches committed by a firm.