Financial Crime World

Financial Services Sector in Ireland Faces Stricter Regulations

The Irish Government has introduced a new regulatory framework aimed at enhancing financial stability and reducing risks within the financial services sector. The Individual Accountability Framework (IAF) is modeled after the UK’s Senior Manager and Certification Regime (SMCR) and aims to promote greater accountability among senior executives and employees.

Overview of the IAF

The IAF introduces a new culture of accountability, where financial service providers will be held fully accountable for their services and advice. Employees will have clearer duties and responsibilities, while senior executives will be held accountable for their decisions and actions by both firms and shareholders. The framework aims to reduce risky decision-making, leading to increased stability in the financial markets.

Remuneration Requirements

Under the IAF, banks operating in Ireland must establish remuneration policies that comply with specific requirements:

  • Setting Total Remuneration Policies: Banks must set total remuneration policies at group, parent company, and subsidiary levels.
  • Material Risk-Takers: Categories of staff whose professional activities have a material impact on the risk profile of the bank must be defined. Material risk-takers are those who receive remuneration above EUR 500,000 or higher than the average awarded to senior management.
  • Gender-Neutral Remuneration Policies: Banks must implement gender-neutral remuneration policies and limit remuneration for certain individuals.

Prudential Requirements

The Central Bank has set additional capital buffers for significant Irish banks, which must maintain financial resources equal to or greater than a percentage of their risk-weighted assets. The bank must also have initial capital of at least EUR 5 million and meet ongoing risk-based capital requirements.

  • Countercyclical Capital Buffer (CCyB): The Central Bank has implemented the CCyB to promote short-term resilience and reduce risks in the banking system.
  • Quantitative Liquidity Requirements: The bank must also comply with quantitative liquidity requirements, including the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

Key Takeaways

  • The Individual Accountability Framework aims to enhance financial stability and reduce risks within the financial services sector.
  • Remuneration policies must be gender-neutral, limit remuneration for certain individuals, and comply with specific requirements.
  • Banks operating in Ireland must maintain financial resources equal to or greater than a percentage of their risk-weighted assets.
  • The Central Bank has implemented additional capital buffers, countercyclical capital buffer, and quantitative liquidity requirements to promote short-term resilience and reduce risks in the banking system.

This article highlights the key changes introduced by the Irish Government aimed at strengthening the financial services sector. As the financial landscape continues to evolve, it is essential for firms and individuals operating within this sector to remain aware of these regulations and ensure compliance to avoid any contraventions that may result in severe penalties.