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Major Overhaul of Financial Regulation Introduced in Ireland

Dublin, Ireland - A significant update to the regulation and supervision of financial institutions has been introduced in Ireland, aimed at improving accountability and trust in the sector. The Individual Accountability Framework (IAF) Act, which came into effect on December 29, 2023, brings about substantial changes to the regulatory landscape.

Senior Executive Accountability Regime

One of the key features of the IAF is the Senior Executive Accountability Regime (SEAR), designed to improve governance and accountability within regulated financial service providers (RFSPs). SEAR places obligations on RFSPs and senior individuals to clearly define responsibility and decision-making, ensuring that individuals are accountable for their actions.

  • Individuals holding a Precarious Conduct Function (PCF) role at in-scope firms must prepare a Statement of Responsibility outlining their specific responsibilities.
  • Firms will also be required to create a Management Responsibilities Map detailing key management and governance arrangements.

Conduct Standards

The IAF Act introduces Common Conduct Standards for all individuals performing Controlled Functions (CFs), which include basic standards such as:

  • Acting with honesty
  • Integrity
  • Due skill and care

Senior executives will have additional conduct standards related to running their respective businesses.

Fitness and Probity Regime Update

As part of the new framework, enhancements are being made to the Fitness and Probity Regime (F&P Regime). RFSPs must now proactively certify that staff performing CF or PCF roles comply with the Standards. This includes documenting the steps taken by the firm to conclude that each individual meets the Standards.

Administrative Sanctions Procedure

The IAF Act also updates the Central Bank of Ireland’s Administrative Sanctions Procedure (ASP), enabling the regulator to take direct enforcement action against individuals for breach of their obligations, rather than just breaches committed by their employer. The ASP now extends to in-scope holding companies and includes revised principles of proportionality and reasonableness.

Implementation Timeline

The IAF Act commenced on April 19, 2023, with certain provisions taking effect immediately. The remaining provisions became effective on December 29, 2023. Regulations implementing SEAR are expected to be published soon, while guidance on the Individual Accountability Framework was released in November 2023.

Industry Impact

The changes brought about by the IAF Act aim to improve accountability and trust in the financial sector, ultimately contributing to cultural and practical change within the industry. The new framework is expected to have a significant impact on RFSPs, holding companies, and individuals performing CF and PCF roles.