knowledge 21 April 2023 |

Partial Commencement of Central Bank (Individual Accountability Framework) Act 2023

Background

Once fully commenced, the Individual Accountability Framework (“IAF”) is intended to confer powers on the Central Bank of Ireland (“CBI”) to strengthen and enhance individual accountability in the management and operation of regulated financial service providers (“RFSP”). The IAF comprises four key components:

• a senior executive accountability regime (“SEAR”) which will require in-scope firms to determine where responsibility and decision-making lie within the firm’s senior management structure, and which imposes a “duty of responsibility” on senior executives;

• common conduct standards which apply to persons in controlled functions (“CFs”), additional conduct standards which apply to individuals in pre-approval controlled functions (“PCFs”) (together, the “Conduct Standards”) and business standards which apply to regulated firms;

• enhancements to the CBI’s existing fitness and probity (“F&P”) regime; and

• amendments to the CBI’s administrative sanctions procedure (“ASP”).

Our briefing (here) provides further detail on the Act and the CBI’s recent consultation on the IAF framework.

Summary of the Commenced Provisions

A statutory order (here) commenced Parts 1, 3 (other than section 10), 4, 5, 6 and 7 of the Act, with effect from 19 April 2023.

Part 1 concerns standard preliminary matters, including definitions and commencement arrangements.

Part 3 extends the CBI’s F&P regime to certain categories of holding companies.

Part 4 concerns the ASP, enabling the CBI to bring enforcement actions directly against individuals for breaches of their obligations rather than only for their participation in breaches by the firm.

Additionally, Parts 3 and 4 of the Act amend preceding legislation, to ensure conformity with standards of fair procedure, as outlined by the Supreme Court in the Zalewski case¹ (see our briefing here).

Part 5 provides for a process of limited disclosure whereby privileged material can be provided to the CBI, without waiving the privilege associated with that material, for other purposes.

Finally, Parts 6 and 7 address miscellaneous and transitional matters.

Next Steps

Minister McGrath has confirmed that commencement of the Act’s remaining provisions, concerning SEAR (Part 2), the conduct standards and the F&P certification requirement, will occur later in the year, following the CBI’s public consultation (here), which runs until 13 June 2023.

In the meantime, firms should prepare for the full commencement of the IAF. Our IAF hub (here) provides in-depth guidance, with further briefings and commentary available.

Also contributed by David O’Keeffe Ioiart