Central Bank warns of early scalp for conduct breaches
Regulator seeks additional powers from Government
Derville Rowland, head of financial conduct at the Central Bank: “Our hope is that enforcement action following a breach of one of the standards would send a strong message.”
Central Bank head of financial conduct Derville Rowland has signalled she will look for an early scalp for a breach of conduct standards if she is given additional powers being sought from the Government.
The regulatory authority has been seeking for at least two years to have a number of conduct standards enforceable by law for financial firms – including individuals behaving with honesty and integrity, and acting with due skill, care and diligence.
“From an enforcement perspective, our hope is that enforcement action following a breach of one of the standards would send a strong message about the kind of behaviour we expect and the kind of behaviour we refuse to tolerate,” Ms Rowland said in a speech at an event in Dublin on Tuesday.
“We reckon people will readily understand what is meant by a lack of integrity compared to, say, a breach in Solvency II [insurance rules] – or some other relatively obscure piece of sectoral legislation.”
Minister for Finance Paschal Donohoe said in June that conduct standards would be included in a planned Central Bank (Amendment) Bill, which is being used primarily to make it easier to fine and ban senior bankers and financial sector executives for failings under their watch. However, the publication of outline of the outline – or heads – of the Bill has been dragging on.
A spokesman for the Department of Finance said it was currently envisaged that heads of the Bill would be laid out before the end of December. It is likely that it will be next year before the Bill passes through the Oireachtas. A period of consultation by the Central Bank would also be required after the planned legislation is enacted.
“Driving a positive, consumer-focused culture is the responsibility of firms in the first instance and we expect boards to ensure they have fully-embedded risk frameworks to manage conduct risk and drive positive behaviour at the firms they lead.” Ms Rowland said.
“The Central Bank considers these proposed reforms to be necessary enhancements to its supervisory and enforcement toolkit which supports an effective and ethical culture in regulated firms.”
Meanwhile, Ms Rowland said that professional advisers to financial firms, including legal and accountancy firms, also had a role to play to transform the culture of banks, insurers and investment companies.
“Given that the purpose of regulation is to safeguard stability and protect consumers, the Central Bank expects the conscientious professional to advise firms to comply not only with the letter of the rules, but also with the spirit,” she said.