Financial Crime World

Enforcement Process for Financial Services Legislation in Ireland: A Media Article

The Irish Government has introduced the Individual Accountability Framework (IAF) to strengthen financial regulations and ensure stability in the sector.

Background

The IAF draws inspiration from the Senior Manager and Certification Regime (SMCR) implemented in the UK in 2016, with both schemes sharing broad similarities. The Conduct Standards under the IAF are identical to those in the UK, while the requirements underlying the Single-Employer Approach (SEAR) mirror those of SMCR.

Goals of the IAF

The introduction of the IAF aims to positively impact the financial services sector by:

  • Holding financial service providers accountable to their customers for the services and advice they offer
  • Providing greater transparency around the duties and responsibilities of employees working in the sector, giving them clearer obligations
  • Making senior executives accountable to both firms and shareholders for their decisions and actions
  • Reducing risky decision-making, leading to increased stability in the financial services market

Remuneration Requirements

Banks must establish remuneration policies at group, parent company, and subsidiary levels, including those established in offshore financial centers. The total remuneration policy must be set out for categories of staff whose professional activities have a material impact on the risk profile of the bank.

Specifically, banks must comply with requirements around:

  • Gender-Neutral Remuneration: Remuneration policies must not discriminate against individuals based on gender.
  • Limits on Remuneration Paid to Certain Individuals: There are limits on remuneration paid to certain individuals, such as those in senior management positions.
  • Alignment of Remuneration Policy with Business Strategy and Long-Term Interests of the Bank: Banks must establish a remuneration policy that aligns with their business strategy and long-term interests.

Prudential Requirements

The Central Bank has set prudential requirements for banks, including:

  • Initial Capital: At least EUR5 million
  • Ongoing Risk-Based Capital Requirements: Ongoing capital requirements based on the bank’s risk profile
  • Financial Resources: Financial resources equal to or greater than a percentage of risk-weighted assets (RWA)

Significant Irish banks are also required to maintain additional capital buffers and meet countercyclical capital buffer requirements. The Central Bank has set a buffer requirement ranging from 0.5 to 1.5% for the six significant Irish banks, which will be reviewed annually.

Conclusion

The article highlights the importance of the IAF in promoting accountability and stability in Ireland’s financial services sector. With its comprehensive enforcement process and prudential requirements, the country is well-positioned to maintain a robust regulatory framework that safeguards the interests of both consumers and investors.