Regulator to look at senior bankers' fitness to practise

THE FITNESS of senior executives and board members at the banks to perform their jobs will be reviewed by the Central Bank as part of sweeping changes to the vetting of bankers at Irish lenders.

The head of financial regulation at the Central Bank, Matthew Elderfield, said the review would examine the fitness and probity of all executive and non-executive directors at banks which have received Government support.

Particular attention will be paid to the actions of individuals who may have contributed to an institution being forced to seek Government financial support, he said.

“It is only right that this is something we will consider carefully in assessing the competence of senior mangers or board members from banks which required government assistance who wish to re-enter or remain in the industry – and that we send a clear signal on this point,” said Mr Elderfield.

The Central Bank will assess their “competence and track record in the period leading up to the financial crisis,” he said. “We will be writing to all bank directors to advise them that this process will apply to anyone that plans to be in office as of January 1st, 2012 to allow them the opportunity to make their plans accordingly.”

A spokeswoman for the Central Bank said this would also apply to bankers holding the title of director. She could not say how many bankers would be affected.

Four executive directors at Bank of Ireland, including chief executive Richie Boucher, have sat on its board since before the crisis.

Under the new rules proposed by the Central Bank, senior bankers who the regulator does not consider fit for a particular job can be suspended, sacked, banned or blocked from certain positions.

The roles include executive and non-executive directors, chief executive, chairman of the board and chairman of audit, risk, remuneration and nomination committees.

Other jobs that will be scrutinised include the heads of finance, compliance, internal audit, risk and retail sales as well as managers of European branches of any banks established in Ireland.

Submissions have been invited on the proposals by May 20th. The regulations are expected to come into force on September 1st.

Mr Elderfield will receive wide-ranging new powers under the Central Bank Reform Act 2010.

“Once the new powers are in place, we will be able both to act as gatekeepers for individuals entering the industry and to remove individuals from their posts,” he said.

“Where an issue arises, we will have the power to carry out a full investigation. And now, with our new powers, we will be able, where appropriate, to suspend or remove and individual from a senior position.”

The Central Bank will expect a banker to act honestly, ethically and with integrity and must show they can manage their affairs “in a sound and prudent manner”.

Mr Elderfield said he wanted corporate governance to be of a higher standard in Ireland.

“Ireland has suffered more than most countries in the financial crisis and needs to get to grips with the homegrown elements of that crisis,” said Mr Elderfield.