Progress on Individual Accountability Framework - SEAR
As highlighted in our recent briefing here, the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 (the “Bill”) is progressing through the Oireachtas. This week an important milestone was reached with the publication of the report on pre-legislative scrutiny of the Bill (the “Report”) by the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach (the “Committee”) here.
The Committee undertook pre-legislative scrutiny of the Bill by holding meetings with the Central Bank of Ireland (the “CBI”) and the Minister for Finance. The Committee also sought and received written submissions from the Banking & Payments Federation Ireland (“BPFI”) here and the Irish Banking Culture Board (“IBCB”) here.
While the Report confirms that the Committee is supportive of the Bill, the Report makes four key recommendations which we have highlighted below:
- Scope of the Senior Executive Accountability Regime (“SEAR”)
The Committee has requested clarity regarding the scope of the entities covered by SEAR. The Committee recommends that the CBI report on the possible inclusion in SEAR of the entities currently proposed to be excluded (credit unions, reinsurance/captive reinsurance undertakings and insurance special purpose vehicles) within one year of commencement of the legislation.
- Consultation Process
The CBI has indicated that it will enter into consultation with stakeholders upon enactment of the Bill. The Committee fully endorses the views of the BPFI and the IBCB that the consultation process is essential to implementation of the framework. The Committee strongly recommends that the CBI reports to the Committee within one year of commencement of the legislation on both the scope and effects of the consultation process.
- Third Country Branches
The Committee also recommends that the Department of Finance clarify the intended meaning of ‘third country branches’ of regulated firms included in SEAR. In particular, the Committee notes that clarification is required on whether the intention is to include Irish firms operating in other jurisdictions or firms from outside of Ireland operating with branches in the country.
- Payment Gateways
The Committee recommends that the Department of Finance clarify if certain payment gateways are to be excluded from SEAR. The Committee explains that this recommendation relates to financial technology firms, specifically payment gateway services and their potential inclusion in SEAR.
The recommendations of the Committee and the detailed submissions provided by the BPFI and the IBCB provide a useful reminder of the key areas of the Bill which regulated firms are seeking further guidance on. In particular, the Committee notes that the BPFI submission requests further clarification around ‘reasonable steps’, ‘responsibility maps’ and ‘conduct standards’.
The Committee states that while further guidance would be welcome, the Committee accepts that there will be significant engagement and consultation with stakeholders following the commencement of the legislation. It is clear that the consultation process will be crucial to achieve an effective implementation of the framework. As the CBI recently noted “this consultation will include draft regulations and accompanying guidance on these key components to ensure the proposed policy measures and guidance are clear, consistent, and pragmatic and to support firms in achieving an effective and consistent implementation of what is a significant step forward1”.
The next step is for the Bill to continue through the legislative process. Once enacted, consultation with stakeholders will begin.
Our Employment, Pensions & Incentives and Financial Services Regulation Groups have significant experience in advising on the employment of senior executives and individuals in controlled functions and would be happy to assist with any queries you may have.
Alternatively, your usual contact in McCann FitzGerald would be pleased to provide further information.
- 'Changing individual behaviour and culture in financial services' - Speech by Director General, Financial Conduct Derville Rowland, 9 March 2022 here.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.
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