Hot on the heels of the Central Bank's ‘Dear CEO Letter’ to Regulated Financial Service Providers (RFSPs) on compliance with their obligations under the Fitness and Probity Regime, comes a Government announcement that it is to begin drafting the Central Bank (Amendment) Bill 2019.
The aim of the proposed legislation will be to enable the Central Bank of Ireland to introduce an enhanced Fitness and Probity Regime that will increase the levels of responsibility and accountability of senior individuals working in RFSPs.
Who will this affect?
Anyone subject to the Fitness and Probity Regime will be affected but the most significant changes will affect RFSPs and their senior staff. RFSPs include: AIFMs, UCITS Mancos, MIFID Firms, Credit Institutions, Fund Service Providers and others.
A press release from the Department of Finance stated that the Heads of Bill will be drafted in order to provide for the following:
- A Senior Executive Accountability Regime, which will place obligations on RFSPs and their senior staff to identify where responsibility for decision-making lies. We have yet to see what this will look like in the Heads of Bill but it is likely that the Central Bank's paper on “Behaviour and Culture of the Irish Retail Banks” will inform the drafting. This paper proposed that RFSPs would be required to prepare “Statements of Responsibilities” for each senior staff member falling within the regime’s scope and to produce a “Responsibility Map” documenting key management and governance arrangements.
- Conduct Standards for RFSPs and their senior staff, which will be binding and enforceable under the Central Bank's Administrative Sanctions Procedure (ASP),if breached.
- An enhanced Fitness and Probity Regime to support the Central Bank’s proposed individual accountability framework which, among other things, will result in RFSPs being required to annually certify that all individuals who are performing controlled functions are fit and proper.
- Breaking the “participation link” in the current Fitness and Probity Regime: it is a current requirement that there has to be a breach by an RFSP in which an individual has “participated”, before the individual can be pursued by the Central Bank under its ASP. This change will persuade affected individuals to pause for thought ...
- Technical amendments which are described as to improvements to the existing Fitness and Probity Regime legislation and clarifications to certain statutory processes.
We will only be able to ‘get into the weeds’ of these proposals once the Heads of Bill are published. We will update you when we know more.
The full text of the Government’s press release can be read here.