The Government has approved the drafting of a bill that Minister for Finance Paschal Donohoe (pictured) says will put individual accountability “at the centre of decision-making” in financial-services organisations.
The Central Bank (Individual Accountability Framework) Bill will give the Central Bank extra powers to enforce a new Senior Executive Accountability Regime (SEAR) system.
The Department of Finance says that the SEAR’s focus will be on preventing misbehaviour or mismanagement by senior management in financial firms.
The SEAR will place obligations on firms, and senior individuals within them, to set out clearly where responsibility and decision-making lie. It will apply to banks, insurers and investment firms, but not credit unions.
The bill will also set standards of business conduct for all regulated financial firms, as well as individual standards of conduct for those in certain key roles and senior positions.
The Government says that the bill will also include enhancements to the ‘fitness and probity‘ system that was introduced by the Central Bank in 2010 to ensure that individuals in important positions in regulated firms are “competent and capable, honest, ethical and of integrity”.
The bill addresses a deficiency in the current legislation, under which the Central Bank must first prove a contravention of financial-services legislation against a regulated provider before it can take action against an individual.
The Government says that the new regime will make financial firms accountable to customers, while also giving firms’ employees greater clarity on their exact roles and responsibilities.
Minister Donohoe says that the proposed changes will be supported by “an appropriate sanctions regime” to ensure compliance, and deal with potential misbehaviour.
Law firm Eversheds Sutherland LLP said that industry feedback from similar regimes in the UK and Australia suggested that the SEAR should result in improvements in governance and risk management.
"This is not only because it serves to clarify individual responsibilities within firms; it is also because it focuses the minds of senior individuals, in particular, on the risks to them as individuals of engaging in, tolerating or turning a blind eye to misconduct," said Ciaran Walker (consultant in the firm's financial services regulation and governance group).