Amendments Nos. 1 to 4, inclusive, are related and will be discussed together.
Central Bank (Individual Accountability Framework) Bill 2022: Report and Final Stages
I move amendment No. 1:
In page 25, line 7, to delete "it," and substitute "it".
I am tabling four amendments to the Bill to address minor typographical issues that have come to light since Committee Stage. I commend these four amendments to the House.
I am pleased to be able to bring this important Bill before the House today. Passage of the Bill by Dáil Éireann will be a significant milestone in our efforts to introduce greater accountability in the financial services industry.
My predecessor, the Minister for Public Expenditure and Reform, Deputy Donohoe, brought forward a number of amendments to the Bill on Committee Stage. These addressed the concerns of the European Central Bank to ensure there is clarity as to its exclusive prerogative in the supervision of significant supervised banking entities and made other improvements in how the Bill will operate, but did not represent any substantive change in the policy objectives of the Bill, which have been settled for some time. Those policy objectives, I am pleased to note, enjoy strong support from all parts of the House and I commend and thank colleagues for that co-operation. I acknowledge the constructive approach of all Members who have engaged with the process of bringing this Bill through the legislative process, in particular, the Chair and members of the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach.
This Bill is the latest step in enhancing the Central Bank's regulatory powers. The transformation of culture in financial services organisations has been a key focus of financial regulators internationally in recent years and this Bill will place the Central Bank of Ireland among the most forward looking of these regulators.
This legislation will make individuals in financial services firms more responsive and responsible through driving individual accountability in decision-making at all levels, in particular at senior levels, in financial institutions. The repeated and very serious failures that we have seen in the leadership of financial institutions in the past are a constant reminder of how necessary it is to ensure that we have a system of regulation that is proportional, risk based and, most important, effective.
Like everyone in this House, I want to see a financial services sector that prioritises customers and in which honest, ethical and professional behaviour is second nature to everyone working in the industry. This Bill will play a key role in ensuring that this is the kind of financial services industry we have in Ireland, one that meets the needs of customers, stakeholders and the wider economy.
The Central Bank (Individual Accountability Framework) Bill 2022 will introduce the individual accountability framework which comprises the senior executive accountability regime, conduct standards for firms and individuals performing controlled functions, and the duty of responsibility. By ensuring that there is clarity as to who is responsible for what and that every key part of a firm's business has someone responsible for it, the senior executive accountability regime will ensure that, in the event that there is wrongdoing in a firm which the Central Bank needs to investigate, the investigation can be more focused and effective. By providing for conduct standards setting out standards of behaviour for regulated financial services providers and individuals performing functions in relation to them and by providing for the sanctioning of individuals who breach their responsibilities, the Bill proclaims clearly the standards of behaviour expected of those working in the financial services industry.
Many of those working in the industry are in positions of significant trust and responsibility, positions where wrongdoing can have serious consequences for customers and others, and it is right and proper that people in such roles should be expected to act with honesty and integrity, due skill, care and diligence, co-operate with the regulator, treat customers fairly and comply with standards of market conduct.
The Bill will also introduce enhancements to the Central Bank's existing supervisory and enforcement frameworks. There will be changes to the administrative sanctions procedure under Part IIIC of the Central Bank Act 1942 and the fitness and probity regime under Part 3 of the Central Bank Reform Act 2010. The fitness and probity regime will also be extended to cover various categories of financial holding companies.
To facilitate the holding of individuals accountable for their actions the Bill will also break the existing participation link so that individuals can be held accountable for their own actions, whether or not this involved a firm's wrongdoing in which they participated. The Bill has also provided a timely opportunity to ensure the Central Bank's enforcement processes meet the standards of fairness and transparency required by the Constitution, as interpreted by the Supreme Court in the decision in the case of Zalewski v. Adjudication Officer and others. In addition to ensuring these processes conform to the required standards of fairness in the administration of justice, the Bill also provides for enhanced oversight by the High Court and includes other appropriate safeguards to ensure that the constitutional rights of all concerned are adequately protected and that the Bill will be able to withstand any legal challenge. Much of the detail of the individual accountability framework, including the initial scope of the senior executive accountability regime, SEAR, will be included in regulations to be made by the Central Bank.
After the Bill is enacted, the Central Bank intends to conduct a comprehensive consultation exercise. This will present an important opportunity for all industry participants to engage with the bank on the detail of how the new regime will operate. I strongly encourage everyone concerned to engage constructively with this consultation process.
Once again, I thank Deputies for their support for the important objectives of this legislation and commend the Bill to the House.
On the four amendments, I propose to discuss amendments Nos. 1 to 4, inclusive, together as they are all very minor and technical in nature. These are technical amendments to ensure the proper operations of the provisions of the Bill, the requirement for which arose as a result of further examination of the Bill, as amended by the Select Committee on Finance, Public Expenditure and Reform, and Taoiseach.
I acknowledge that the amendments the Minister for Finance, Deputy Michael McGrath, spoke of and his Department is bringing forward are technical and seek to address drafting issues in the latest version of the Bill. As the Bill reaches its Final Stage in the Dáil, it is appropriate to briefly comment on its provisions. We have waited a very long time, far too long, for the introduction of this legislation. Every customer has the right to be treated fairly and have his or her interests upheld. At a minimum, customers should have a guarantee that they will be protected from gross misconduct, unethical behaviour and corporate mismanagement. Where such injustice or misconduct occurs, the individuals who are accountable should be held to account. This has not happened. As we know all too well, customers in banking and financial services have not been afforded the protection of being confident that individuals will be held to account when they fall victim to mistreatment, mismanagement, overcharging or any of the other scandals we have experienced relating to financial institutions.
More than a decade has passed since the Irish banking sector plunged our economy into crisis. It is truly shocking that we are only now reaching the final stages of this legislation that will allow senior bank and financial services executives to be held to account for their failures. We have witnessed the tracker mortgage scandal which left more than 40,000 customers overcharged, with many losing their family homes.
Public trust in the banking sector can only be restored when the culture at the heart of our banks changes. This can only happen by ensuring that individuals are held to account for failures when they occur. An individual accountability regime was introduced in Britain in 2016, seven years ago, in the form of the senior management and certification regime, and in Australia in 2016, six years ago, with the introduction of the banking executive accountability regime. In January 2017, six years ago, Sinn Féin successfully brought a motion before the Dáil calling for legislation that would ensure individuals in financial institutions could be held to account. The following year, in July 2018, the Central Bank published its report on the behaviour and culture of Irish retail banks on foot of the tracker mortgage scandal. Among its recommendations was for legislation to introduce a new individual accountability framework, including the new conduct standards for the senior executive accountability regime, and enhancements to the fitness and probity regime and the enforcement process. These recommendations were to ensure senior bankers would be held to account for their actions. We have been considering this legislation for four years since the Central Bank's report was published. This is an indictment of the lack of priority the Government has attached to this issue.
That the legislation is finally before us is to be welcomed and today is a welcome day. The Bill grants regulation-making powers to the Central Bank to effectively implement the individual accountability framework in respect of senior executives in regulated financial service providers. It sets out four key pillars to the individual accountability framework. These are the new senior executive accountability regime; the new conduct standards for regulated financial service providers and their management and staff; enhancements to the Central Bank's fitness and probity regime; and stronger enforcement capabilities of the Central Bank.
The senior executive accountability regime, or SEAR as it is commonly known, will be introduced mainly by amendments to the Central Bank Act of 2013. This Bill provides regulation-making power to the Central Bank, with the bank to set out the details of allocated responsibilities and requirements regarding management responsibility maps and statements of responsibility. The Bill does not set out the sectors to be included in SEAR. These will be set out in the Central Bank regulations, although it is intended that the SEAR will initially apply to banks, insurers and certain investment firms. We will await the sectors to be included under the regulations but we in Sinn Féin hope they will be expansive. We are aware that in Australia, for example, plans are under way to extend the country's banking executive accountability regime to other financial services entities following recommendations from the Hayne royal commission. Similarly, it will be important to ensure the scope of these regulations is kept under constant review.
I raised a number of issues with the former Minister for Finance, Deputy Paschal Donohoe, on Committee Stage. These include the training that will be needed by firms to ensure those responsibilities they have under this legislation can be implemented in line with the requirements. We also discussed the choice of six years as the length of time an individual can remain subject to a Central Bank investigation after leaving a role. I raised the point that many issues often do not come to light within such a timeframe and noted that this could pose a problem for ensuring accountability after the fact. I received a commitment from the former Minister for Finance that the Department would consider this issue. I ask the new Minister for Finance to do the same.
I also raised issues with section 15 and the discontinuation of an investigation for reasons of lack of resources. It would not be acceptable to have this written into legislation in relation to a Garda investigation and I see little reason for it to be acceptable in this instance. Again, I ask that the Minister consider this provision.
While the Bill is very welcome, it is long overdue. Regulators and the public have waited far too long for this legislation that will finally enable the regulator to hold senior bankers to account. Those subject to untold and significant harms at the hands of our banking sector have had to suffer, while those responsible have gone unnamed and unpunished. That should never be allowed to happen. It should not have happened in the past and it definitely should not happen in the future.
We look forward to the regulations that will flow from this legislation. We also look forward to engaging with the Central Bank of Ireland on those regulations and ensuring this legislation enables the Central Bank to deliver what is so desperately needed, namely, accountability. It is crucial that we make sure this legislation is fit for purpose, not just today but in the months and years ahead. We need to be nimble on our feet and quick to respond if there are instances in this legislation where we can see that others are able to skite around.
Amendment agreed to.
I move amendment No. 2:
In page 27, line 14, to delete “or where” and substitute “or, where”.
Amendment agreed to.
I move amendment No. 3:
In page 71, line 28, to delete “2010.”.” and substitute “2010.”, and” .
Amendment agreed to.
I move amendment No. 4:
In page 73, line 11, to delete “91. (1)” and substitute “91.”.
Amendment agreed to.
Bill, as amended, received for final consideration and passed.
Everybody is very agreeable today. I thank Members for their co-operation. The Bill will now be sent to the Seanad.