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New Financial Services Regulations Aim to Boost Transparency and Accountability

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The Irish Government has introduced a new set of regulations aimed at promoting transparency and accountability in the financial services sector. The Individual Accountability Framework (IAF) is designed to hold firms and individuals accountable for their actions and decisions, with the ultimate goal of reducing risky decision-making and increasing stability in the financial markets.

Key Features of the IAF

The IAF introduces a number of key features aimed at promoting transparency and accountability, including:

  • Conduct Standards: The IAF sets out clear standards for conduct, which are designed to ensure that firms and individuals act with integrity and honesty.
  • Senior Executive Accountability: The IAF requires senior executives to be accountable for their decisions and actions, both to their firms and to shareholders.
  • Transparent Duties and Responsibilities: The IAF ensures that employees working in the financial services sector have clear duties and responsibilities, providing greater clarity on what is expected of them.

Remuneration Requirements

The IAF also introduces new remuneration requirements aimed at promoting responsible compensation practices. For example:

  • Remuneration Policies: Firms must establish remuneration policies that are designed to promote sound risk management and are aligned with their business strategy.
  • Material Risk-Takers: Staff who receive high levels of remuneration, such as bonuses or stock options, must be identified and their remuneration must be aligned with the firm’s overall risk appetite.

Prudential Requirements

In addition to the IAF, the Central Bank has set out a number of prudential requirements aimed at promoting financial stability. These include:

  • Capital Requirements: Banks must maintain initial capital of at least €5 million and meet ongoing risk-based capital requirements.
  • Risk-Weighted Assets: Banks must maintain financial resources equal to or greater than a percentage of their risk-weighted assets.
  • Countercyclical Capital Buffer: The Central Bank has set a countercyclical capital buffer requirement aimed at promoting a sustainable provision of credit to the economy.

Conclusion

The introduction of the IAF and the prudential requirements is designed to promote transparency, accountability, and financial stability in the Irish financial services sector. By holding firms and individuals accountable for their actions and decisions, these regulations aim to reduce risky decision-making and increase stability in the financial markets.