The much-anticipated legislation introducing an Individual Accountability Framework in Ireland passed another important stage in the legislative process in April 2022. The Oireachtas Joint Committee on Finance, Public Expenditure and Reform and Taoiseach (Committee) published its Report on Pre-Legislative Scrutiny of the general scheme of the Central Bank (Individual Accountability Framework) Bill 2021 (the General Scheme) in April 2022. The Committee’s review of the General Scheme considered the views of the Minister for Finance and senior officials of the Central Bank of Ireland (CBI), as well as submissions from various groups in the financial services sector, such as the Irish Banking Culture Board.

These increased measures will undoubtedly lead to greater accountability and extensive compliance obligations across the regulated financial services sector.

An in-depth and comprehensive analysis on the Central Bank’s proposed Individual Accountability Framework  (IAF) is available on  William Fry’s dedicated webpage on Individual Accountability Framework & SEAR . This provides an in-depth overview of what will be required and the most effective way of implementing measures to ensure compliance. 

The Committee’s final report makes four key recommendations. These four recommendations concern the Senior Executive Accountability Regime (SEAR) and most of these recommendations focus specifically on the scope of this regime.

The Committee’s four key recommendations are that:

1. the CBI report on the possible inclusion in the 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;
2. the Department of Finance should clarify if certain payment gateways are to be excluded from the SEAR;
3. on conclusion of the proposed extensive consultation with the financial services sector, the CBI reports back to the Committee with any revisions or changes to the General Scheme arising from the results of that consultation; and
4. the Department of Finance clarifies the intended meaning of ‘third country branches’ of the regulated financial service providers included in the SEAR (i.e. whether it is intended to apply to third country branches of Irish-authorised institutions, or to Irish branches of institutions authorised in a third country).

The purpose of the legislation (when enacted) is to address the individual accountability of senior executives within Ireland’s financial services sector.  The proposed legislation also intends to remove the existing “hurdle of participation”, whereby breaches by individuals must be established against an undertaking before individuals within the organisation can be held to account for such breaches. The bill (when enacted) aims to:

• introduce new conduct standards for businesses and individuals,
• create the framework of the SEAR;
• propose a new and improved fitness and probity regime; and
• give the CBI more powers to intervene to allow individuals to be held accountable for wrongdoing.

Insurance undertakings will welcome the proposed consultation as an important opportunity to clarify the CBI’s expectations around key items in the proposed legislation (for example, “reasonable steps”, “responsibility maps”, and “conduct standards”.  All these items were highlighted by the Banking and Payments Federation of Ireland (BPFI) as requiring further clarification and guidance in its submission to the Committee). Reinsurance undertakings and captive (re)insurers should take close note of the Committee’s recommendation that their initial exclusion from SEAR should be reviewed one year after the legislation takes effect.  Experience in other jurisdictions suggests that future broadening of SEAR’s scope to other entities is to be expected, although the timing may be uncertain.

Contributed by Mike Frazer & Hannah Garvey