Planned Irish laws to make it easier for regulators to hold senior managers in banks and other financial firms accountable for failings under their watch will make it difficult for companies to recruit senior executives, according to a survey of compliance officers.
Some 84 per cent of 160 compliance officers that took part in the Compliance Institute/Mazars survey said the incoming regime would make it hard for regulated firms to hire people into senior roles that fall under the scope of the rules.
The rules are coming in at a time when the remaining three domestic banks in the market remain subject to crisis-era pay caps and bonus restrictions, which industry representatives say make it difficult for the banks to attract and retain staff.
However, 89 per cent of respondents to the survey said the introduction of the senior executive accountability regime would “bring about meaningful change” in the culture and behaviour of financial firms and 76 per cent it would result in “better outcomes” for consumers.
The so-called Central Bank (Individual Accountability Framework) Bill to give rise to the regime was published in July and is currently in committee stage in the Oireachtas.
The Bill proposes that executives “shall take any step that is reasonable in the circumstances” to avoid breaches of financial services rules in their areas of responsibility.
‘Reasonable steps’
This marks a tightening of language from the original outline of the planned laws, published in July last year, which stated individuals should “take reasonable steps”. However, it does not go as far as a Central Bank proposal four years ago that executives should be required to take “all reasonable steps”.
The Bill also gives greater clarity on how firms should engage with customers and how they must be able to demonstrate that customers are being provided with products and services that reflect their “needs and circumstances”.
“Among the tsunami of forthcoming regulations that the compliance professional will have to deal with, the proposed [individual accountability framework] regime is one of the most significant,” said Kian Caulwell, a partner in Mazars.
The Central Bank called more than four years ago – in the wake of the State’s tracker-mortgage scandal – for extra powers to sanction individuals for failings under their watch, in the wake of the State’s tracker-mortgage scandal.
It will be late next year, after legislation has gone through the Oireachtas and the Central Bank has put its draft regulations and guidelines out to consultation, before the new regime is up and running.
‘Imbalance of information’
The planned framework will initially require 150 banks and lenders, insurance companies and larger investment firms to develop and maintain responsibility maps detailing what areas each of its senior executives are accountable for, as well as where oversight rests among non-executive directors at board level.
President of the Compliance Institute Diarmuid Whyte said at the organisation’s annual conference last week that the “application of these new rules needs to be both workable and proportionate”.
“The imbalance of information between a customer buying a financial product versus the organisation selling it is a well-known dichotomy. While it is imperative to protect consumers and the financial services sector, employees, regardless of seniority, are also entitled to the same level of protection – something which can sometimes be forgotten when this topic is debated.”
He added: “There is a clear need to hold directors and officials to a higher standard and ensure customer outcome focus is key. It is also a necessity that we do not lose high-calibre individuals for fear of the personal liability associated with a senior executive position. This would not only be a detriment to the financial services sector, but also those customers who we all strive to protect.”
