The Central Bank of Ireland has said it needs more extensive powers to pursue "individual accountability" as controversy continues over its record €4.1 million fine handed down to Davy Stockbrokers.
Senior officials from the Central Bank will on Tuesday tell the Oireachtas finance committee that Ireland's regulatory framework "requires further strengthening with regard to individual accountability".
The Central Bank’s findings kickstarted a firestorm of controversy, leading to resignations and redundancies at the broker.
However, the Central Bank will tell politicians that new powers are now needed, including an "individual accountability framework" and the introduction of conduct standards for individuals. It will also press for progress on the introduction of a Senior Executive Accountability Regime (SEAR), which the Department of Finance has been working on since 2019.
The reforms, the Central Bank will say, are “necessary enhancements to our supervisory and enforcement toolkit to support effective culture in regulated firms”.
Sinn Féin finance spokesman Pearse Doherty called on the Government to bring forward the legislation underpinning the new SEAR "as a matter of urgency," pointing out that the "Central Bank called for (it) more than three years ago".
It is understood that Minister for Finance Paschal Donohoe will publish the heads of a Bill supporting the introduction of a SEAR before the Dáil rises for the summer recess. Mr Donohoe will bring a memorandum updating his Cabinet colleagues on the scandal at Davy and the associated fallout to Cabinet on Tuesday.
The SEAR legislation was originally due to be published at the end of 2019 but had been held back by the general election, the government formation process and the Covid-19 pandemic. It may need some adaptation to ensure all financial services firms, including stockbrokers like Davy, are covered by the new regime, which was originally conceived as being targeted solely at so-called “full service” banks, sources said.
There is deep concern in Government over the fallout from the Davy controversy. On Monday, Government sources said the issue of those involved still holding significant shareholdings in Davy may have to be addressed. The role of the board in the management of the firm’s response to the Central Bank’s fine and findings also needs explanation, sources said.
Government sources also questioned whether the board was aware of the risk arising from the Central Bank investigation over the five years since it was launched, and what steps had been taken to control for that risk.
Senior Central Bank officials will tell the committee that it publishes statements outlining regulatory breaches "because we believe sunlight is the best disinfectant". In a separate letter to the committee, acting Davy chief executive Bernard Byrne wrote that the firm "recognises the seriousness of these matters and also the requirement for near term answers and action".
He wrote that Davy will “exit this period more humble but stronger and more resilient” and that “should we make mistakes we will resolve them with client interest to the fore”. He said he echoed the board “unreserved and unequivocal apology and regret for what has occurred”.