Senior executive accountability regime for bankers is welcome

The sundering of trust between banks and their customers over the past two decades is a well-established and recognised fact. From the financial crisis to the tracker mortgage scandal real damage was done to the reputation of banking in Ireland. Those working in banking are acutely conscious of what happened, but equally conscious of their responsibility in helping to restore trust.

More than 15 years later the banking industry of today stands out for its resilience, with strong levels of capital, liquidity, and dramatically improved balance sheet performance.

Whatever people think of “banking” from an industry perspective, there is a high level of trust in local banking services and increasingly an acknowledgment of the investment that banks have made to keep their customers safe from financial fraud. I also think that the commitment that bank staff made in responding to Covid-19 and to the unprecedented migration of accounts due to the exits of Ulster Bank and KBC from the Irish market is recognised.

The world of banking from a regulatory and supervisory perspective has radically altered in the past decade. Banking is now a highly regulated industry. Those who work at executive or board level are subjected to rigorous standards of fitness and probity. We operate in the euro zone area against the backdrop of a banking union that increasingly applies common standards and rules for all banks in the EU. And existing corporate law already sets a high standard for those in senior roles.

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BPFI very much welcomes the recent publication of the Central Bank of Ireland’s (CBI) feedback statement on its individual accountability framework (IAF) consultation, which includes the Senior Executive Accountability Regime (SEAR). Over the past four years firms have spent a considerable amount of time and resources on training in preparation for the full implementation of the IAF in the absence of knowing the final position until now.

As the voice of banking in Ireland, BPFI and our members want the IAF to succeed and we hope that it builds on the efforts made by firms to achieve the highest standards in conduct and governance. We have worked with all our international and domestic members in developing the most comprehensive submission to the Central Bank’s IAF.

The CBI has responded to many of our points in their recent feedback statement and we hope that this has helped to give greater clarity to the operation of the IAF across firms that operate in financial services in Ireland. We also welcome comments from both the governor and his senior team around implementing the IAF, which will be based on the principles of “proportionality, predictability and reasonable expectations”.

A lot has happened in this space in recent years. The retail banking sector established the Irish Banking and Culture Board (IBCB) to help improve standards across the industry. The publication of the annual éist surveys by the IBCB has helped to track the views of the public and staff in the banks. Members have also developed “speak up” policies and procedures to encourage a culture of openness and to provide channels where employees can speak freely about suspected wrongdoing. And of course, the banks invest significantly in training their staff via ongoing continuous career development opportunities.

The idea of taking personal responsibility for decisions we take linked to clear roles and responsibilities should not be solely the preserve of financial services. It’s a concept that would have significant effect and benefits in, for instance, public authorities. And in the same way that firms have been preparing for the IAF with training modules for those that fall under the new regime – many thousands of bank staff have been trained and work around implementation is ongoing – equally the CBI needs to train its staff on what a fair and proportionate implementation of the IAF looks like.

It is encouraging that the CBI has amended the guidance and regulations to take into account several of the points we made in our submission on the IAF, in particular around the splitting and sharing of roles and responsibilities, clarifying the position around responsibilities for senior role holders and those in scope for certification under the fitness and probity rules.

In addition, the CBI has agreed to change the application of the IAF to outgoing branches, which is welcome and important in terms of making sure that the IAF does not have an adverse impact on doing business in Ireland.

Ireland has now gone ahead of its EU partners in developing the IAF to include a new senior executive accountability regime. However, a similar regime has applied in the UK and in Australia for some years. As a guiding principle our preference as an industry, given the significant harmonisation across the EU, is to advance together with other member states otherwise the perception of an unfair or indeed an unlevel playing field could be used against Ireland. We compete for new entrants and for new jobs daily, with other jurisdictions in the euro zone. We should not or cannot be perceived as an outlier to other jurisdictions in the EU.

Finally, I know there is some lingering concern about how the new regime is to be rolled out and a belief, however misplaced, that the primary objective of the IAF is all about making an example of individuals. I would remind all that we still have a written Constitution and people individually have fundamental rights to work and to earn an income and to protect their good name. It is critical that everyone – regulators, firms, executives, board members and the industry alike, understand fully what IAF is and what it is not.

Brian Hayes is chief executive of the Banking & Payments Federation Ireland