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Financial Services Regulation

Dáil Éireann Debate, Thursday - 26 November 2020

Thursday, 26 November 2020

Questions (95)

Pearse Doherty

Question:

95. Deputy Pearse Doherty asked the Minister for Finance his response to a letter written by the Central Bank on 17 November 2020 regarding thematic inspections of compliance by regulated financial service providers with their obligations under the fitness and probity regime; when he will publish legislation to implement the senior executive accountability regime; and if he will make a statement on the matter. [39227/20]

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Written answers (Question to Finance)

I am aware of the letter issued by the Central Bank on 17 November setting out expectations for action by regulated firms to address their legal obligations under the Fitness and Probity (F&P) regime. This letter was issued by the Bank in the performance of its regulatory functions under current legislation. That letter was preceded by a letter issued by the Bank in 2019 on F&P issues which was followed by inspections across a sample of financial services firms.

The Fitness & Probity Regime was introduced under the Central Bank Reform Act 2010. It is a key part of the Central Bank’s regulatory powers to ensure that senior personnel in regulated financial service providers are competent, suitably qualified, financially sound and, most importantly, honest and ethical in their behaviour.

Inspections by the Central Bank found, in many cases, a number of issues, including a poor level of awareness by Board members of their fitness and probity obligations, and consistently weak due diligence. Where roles were outsourced, there was a failure to ensure that F&P standards were properly applied. Thus while the majority of firms had compliance frameworks, policies and procedures in place, given the findings of the inspections, it was clear that many firms were not undertaking robust compliance testing of their fitness and probity processes and procedures.

It is essential that financial services providers are compliant with all aspects of the F&P regime. I understand the Central Bank will continue to assess the robustness of firms’ application of the F&P Regime and will initiate supervisory responses to any weaknesses identified.

The Programme for Government includes a Senior Executive Accountability Regime (SEAR), which will be the centrepiece of the forthcoming Central Bank (Amendment) Bill.

The Bill will also contain a range of measures to strengthen and enhance the Fitness and Probity Regime, which will add to the Central Bank’s abilities to ensure effective compliance by regulated firms. These will include a requirement that firms certify annually that all staff performing Controlled Functions meet the required F&P standards. This will help address the issues of non-compliance that the Central Bank has highlighted.

Officials in my Department are currently engaging with the Attorney General's Office in advance of submitting draft heads of Bill to Government so as to ensure that the correct balance is struck between appropriate additional powers for the Central Bank and the protection of individuals' constitutional rights.

It is my intention that draft heads of Bill will be presented to Government for approval in the near future.

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