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Irish banks urged to begin preparations for personal accountability regime

  • Ireland
  • Financial services and markets regulation - Briefings and articles
  • Financial services


The Central Bank (Individual Accountability Framework) Bill 2022 was finally introduced to the Irish parliament at the end of July. It has been four years since plans to introduce personal accountability for Irish bankers were first mooted. Despite past delays, firms are being advised not to wait for the bill to become law — which is expected to happen by the end of the year — before they start planning for its requirements.

Based on experience with firms in the UK's Senior Managers and Certification Regime (SMCR), it may take firms in the region of a year or longer (depending on their size and scope of business) to implement the new regime requirements fully, said Ciaran Walker, a consultant in the financial regulation and governance team at law firm Eversheds Sutherland in Dublin.

The bill does not stipulate which firms will be caught by the regime. The Central Bank of Ireland (CBI) will set this out once the bill becomes law. A general scheme published in 2021 said that it would initially apply to banks, insurance undertakings and certain investment firms, as well as third-country branches.

Among other things, the regime will require financial firms to create responsibility maps and statements of responsibilities for each senior manager.

"What I picked up from the UK experience is that, in retrospect, quite a few firms said, 'We should have started the implementation process earlier'," Walker said.

"What firms should be doing now, in anticipation of the new regime, is an internal engagement process so that relevant people are fully aware of what will be required in order to ensure a successful implementation of the new requirements within their firm. Firms should ensure that all board members are up-to-speed on what is involved and look at what type of preparation they need to consider in the near future," he said.

At this provisional stage, firms need to consider assigning a project sponsor and team, and setting a budget. Human resourcing and legal implications as well as internal communications and training should also be considered, Walker said.

"Any steps"

The UK regime affords senior managers protection if they can demonstrate that they have taken "reasonable steps to satisfy themselves" that the areas for which they are responsible are working well.

The wording in the Irish bill goes further than this in requiring senior managers to take "any reasonable steps".

The formulation of the proposed conduct standards under the proposed Irish regime has changed over time in a number of respects, including in relation to the "reasonable steps" requirement, Walker said.

When the CBI first set out its proposals for the individual accountability framework in a July 2018 report, " Behaviour and culture of the Irish retail banks", it required senior managers to take "all reasonable steps" comply with the proposed conduct standards.

By July 2021, when the general scheme of the bill was published, that wording had been softened to require senior managers simply to show that they had "acted reasonably in all the circumstances of the case". A non-exhaustive list of matters that may be relevant to assessing whether a person acted reasonably was also included.

By July 2022, however, the wording had changed again to require all persons who are within scope of the common conduct standards and additional conduct standards (as well as those within scope of the duty of responsibility) to take "any steps that it is reasonable in

the circumstances for the person to take".

"The standards with respect to the duty of responsibility set out in the bill appear to be higher than those provided for in the general scheme," law firm Arthur Cox said in note to clients earlier this month.

Only time will tell if the Irish wording will impose a greater burden on senior managers than the UK's regime.

"The 'any steps' formulation in the bill is different to the 'reasonable steps' formulation under the SMCR senior manager conduct rules. We will have to await guidance from the CBI (and, possibly, eventual judicial interpretation) in due course after enactment of the bill to get further clarity on the 'any steps' requirement and whether it may differ from, and be any more onerous than, a 'reasonable steps' requirement," Walker said.

Original article written by Lindsey Rogerson and published in Thomson Reuters: Regulatory Intelligence on the 25 Aug 2022.

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