Proposed legislation seeks to achieve better outcomes for consumers and improve the sustainability of the financial system
The Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, this morning (Tuesday) received agreement from his colleagues in Government to begin the process of drafting heads of a Central Bank (Amendment) Bill 2019 to address the serious cultural failings in the banks, which were brought to light by the Tracker Mortgage Examination. The Minister’s request to the Central Bank for the report on behaviour and culture in the five main retail banks in Ireland has sparked an ongoing, national discussion on culture in the sector.
On foot of a request made by Minister Donohoe in November 2017, the Behaviour and Culture of the Irish Retail Banks Report was drafted by the Central Bank and published in July 2018.
Since the publication of the report, officials in Department of Finance have been working closely with the Central Bank on the recommendations for legislative change.
Procedures to address individual accountability, such as the Senior Executive Accountability Regime (SEAR) and certain broad principles intended to improve the transparency and governance structures of the Central Bank will be focused on in forthcoming legislation.
The proposed legislation will seek to address proposals put forward by the Central Bank arising from the recommendations in its Section 6A Culture Report, intended to drive greater accountability in the financial sector, raising the standards of expected behaviour for individuals and firms, in order to achieve better outcomes for consumers and improve the sustainability of the financial system.
Following this morning’s approval by Government, the Department will begin further engagement with the Attorney General’s Office in order to draft Heads of Bill to be brought to Government, to provide for:
- Introduction of a Senior Executive Accountability Regime (SEAR) which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies;
- Introduction of Conduct Standards for individuals and firms to provide for statutory powers to set and impose binding and enforceable obligations on all Regulated Financial Service Providers (RFSPs) and individuals working within them with respect to expected standards of conduct;
- An enhanced Fitness & Probity Regime which includes provisions to enhance the Fitness & Probity regime to ensure the effective operation of the regime and the ability of the regime to support the Central Bank’s proposed individual accountability framework and the conduct standards for individuals and firms;
- Breaking the “Participation Link” which addresses the known deficiency in the legislation which requires the Central Bank to first prove a contravention of financial services legislation against a RFSP before it can take an action against an individual;
- Technical amendments to improve existing legislation and clarify certain statutory processes.
Any new regulatory regime must be practicable and proportionate, and the issues being addressed by this legislation are complex and required to be constitutionally sound in the event of legal challenge.
The Attorney General and his office has reviewed the proposals and given thorough and excellent advice to ensure that any legislation brought forward will be robust and sound.
The proposed legislation is necessary and timely and will drive positive changes in terms of wider banking culture, greater delegation of responsibilities, and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles.
Welcoming the approval of his Cabinet colleagues, Minister Donohoe said: ‘This is an opportunity to bring about real change in the financial services industry – changes that are not reactionary, but proactive and carefully considered’.
“The message is clear; leading change in cultural attitudes starts from the top down but we need to start talking to each other and learning from each other at all levels to achieve the goal of cultural change that we are striving for.
“I am determined to adopt a strategic approach in proposing and bringing through legislation that allows the Central Bank and firms within the financial sector to drive the necessary changes needed in culture. Following engagement with the Office of the Parliamentary Counsel it my intention to bring forward draft heads of Bill towards the end of the year.”
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