One in four financial services firms (25%) are yet to fully grasp the legal implications of the impending Central Bank accountability rules, according to a recent Mason Hayes & Curran survey. 

The survey, which highlights significant gaps in readiness and understanding, comes ahead of the new regulations coming into force on 1 July.

The legislation increases personal exposure and liability of executives in financial companies.

The Dublin 4 business law firm polled more than 230 senior banking and financial services professionals at its recent webinar.

Readiness issue

The findings indicate that readiness for the new regime remains an issue. As many as 42% of firms said they require more training and development ahead of the deadline, and 26% are yet to finalise their internal compliance systems.

Liam Flynn (MHC financial services sector lead partner) said: “These figures suggest that a significant effort is required in the coming months for a smooth transition to the new standards. The lack of full legal understanding amongst a significant portion of the sector poses a serious challenge and highlights an immediate area for focus and action."

Misconduct

A full 74% of respondents said that the Central Bank should (34%) or should sometimes (40%) use the Individual Accountability Framework/Senior Executive Accountability Regime (IAF/SEAR) for investigating non-financial misconduct. 

Responses also revealed a divided view on the impact of the new framework. 42% of respondents anticipate an increase in operational complexity, while 38% anticipate enhanced decision-making within their organisations.

Rowena Fitzgerald (partner and co-head of financial regulation) commented: "The split in opinions is quite telling and reflects the uncertainty in the market. This underscores the complexity of the new legal landscape firms must navigate as they prepare for the IAF/SEAR implementation."

Another concern is the adequacy of insurance coverage for personal liability exposures. Over half of the respondents (56%) were unsure if their firm’s directors and officers (D&O) insurance policies would cover them for claims related to professional decision-making. 

Survey results

How will IAF/SEAR impact day-to-day operations of Irish firms (choose one)?   

• More complexity – 42%,
• Better decision-making – 38%,
• Slower decision-making – 11%,
• Difficulty recruiting/retaining talent – 9%.

What does your firm still need to do before the IAF/SEAR deadline (choose one)?

• Fully understand legal implications – 25%,
• More training and development – 42%,
• Finalise internal compliance systems – 26%,
• Obtain more internal/external resources – 7%.

Do you expect your firm’s D&O insurance policy to cover you if there is an IAF/SEAR enforcement?

• Yes – 36%,
• No – 8%,
• Don’t know – 56%.

Do you think that the Central Bank should use IAF/SEAR to investigate non-financial misconduct?

• Yes – 34%,
• No – 26%,
• Sometimes – 40%.