Central Bank finds litany of shortcomings in fund firms

Regulator is demanding immediate action

The Central Bank has issued letters to the chairmen of Irish-based FMCs, asking them to review specific shortcomings identified and take immediate action.

The Central Bank said it has found a series of management and control shortcomings in companies involved in Ireland's €3 trillion international asset management industry.

Asset managers seeking to market their funds in the European Union usually set up their investment funds as legal entities known as Undertakings for Collective Investment in Transferable Securities (UCITS) or Alternative Investment Funds (AIF). These entities are controlled by Ucits and AIF management companies.

The Central Bank set out tight standards in 2017 to prevent UK-based firms setting up brace-plate operations in Ireland to maintain access to the EU market following Brexit. It demanded that fund management companies seeking authorisation in the State have certain governance, management, control and resourcing in place.


The framework was extended in 2018 to include existing firms based in the Republic.


The banks said on Tuesday that an 18-month review of 358 active fund management companies (FMCs) in the State found that a “significant number” of firms authorised before the surge in Brexit applications do not meet the required standards.

It said a “large number” have not increased employee levels to meet the beefed-up requirements.

“The Central Bank’s expectation is that all FMCs should have a minimum of three FTE [full-time equivalents], each of whom should be suitably qualified and of appropriate seniority to fulfil the role. This number is of course a minimum expectation and only relevant to the smallest and simplest of entities,” it said.

“Other firms will be expected to have a level and quality of resourcing determined by the nature, scale and complexity of its operations.”

The review also found shortcomings in how large overseas asset management companies selected people to be involved in the management of Irish-based FMCs, and how these individuals carried out their duties.

In addition, it said deficiencies were identified for a significant number of FMCs, with many firms “not having an entity-specific risk management framework, no entity-specific risk register, and/or no defined risk appetite in place” for investments.


Some FMCs couldn’t provide evidence that a board approved the launch of sub-funds, while in other cases companies were unable to show that meetings took place. The review also found a significant gender imbalance on the boards of FMCs, with only 16 per cent of directorships held by women.

"The lack of attention to issues that affect good governance is unacceptable and raises serious concern for the Central Bank," said Derville Rowland, director general of financial conduct at the bank. "It is particularly concerning in light of the increasingly complex landscape in which firms operate."

The bank has issued letters to the chairmen of Irish-based FMCs, asking them to review specific shortcomings identified and take immediate action.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times