Bankers to be held personally accountable for failings

Central Bank could levy fines and disqualify employees under proposed new laws

The Central Bank will be able to fine and disqualify senior bankers for failings under their watch without first proving wrongdoing by their employers under planned new laws being drawn up in the wake of the tracker-mortgage scandal.

More than a decade after the financial crash and three years after Britain introduced a senior manager regime, Minister for Finance Paschal Donohoe received the go-ahead from Cabinet on Tuesday to push through similar measures in the Republic. It is expected to come into force from next year.


The senior executive accountability regime (Sear), to be introduced under the Central Bank (Amendment) Bill 2019, will make it easier for regulators to fine, reprimand or disqualify top bankers as well as executives of insurance and asset management companies for failings.

Firms will have to outline clearly where senior individuals’ responsibilities lie.


“We will be breaking the so-called participation link,” said Mr Donohoe, referring to a current hurdle that the Central Bank must find that a financial company has breached rules before taking action against individuals suspected of participating in the contravention.

The Minister committed last November to setting up an accountability regime after the Central Bank published a report highlighting shortcomings in the culture of the State’s banks in light of the tracker mortgage debacle. Almost 40,000 mortgage holders were denied their right to a cheap loan linked to the European Central Bank’s main rate as far back as 2008, or put on wrong rates, according to the latest figures.

While the Central Bank has previously called for laws to make “egregious recklessness” by senior executives in financial firms that run into trouble, Mr Donohoe said that the regulator is “best placed” to deal with sanctioning wrongdoing on a civil basis.

The Minister said the current maximum fine of up to €1 million for individuals under the Central Bank’s administrative sanctions procedure will also apply under the planned new legislation.


The planned legislation will also see the introduction of conduct standards for individuals and firms in the financial sector and enhance the Central Bank’s existing fitness and probity regime that assesses the suitability and standing of senior staff in regulated firms.

The rules will require firms to set out clearly where responsibility and decision-making lie. They will impose a requirement that senior executives "take all reasonable steps to ensure the area of the business for which they are responsible is controlled effectively and complies with any regulatory requirements," Gerry Cross, director of financial regulation, policy and risk, told the Oireachtas finance committee in April.

The new rules will only come into force after the Central Bank holds a consultation process, which is expected to start later this year.

Meanwhile, Mr Donohoe confirmed that he has received of a report into remuneration across bailed-out banks, carried out by executive search firm Korn Ferry, and that he will be bringing the document to Cabinet in the coming weeks.

The report is said to advocate for a relaxing of pay restrictions and a bonus ban stretching the past decade.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times