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Personal-liability risk worries finance chiefs

A full 57% of Ireland’s financial services sector is worried about personal exposure to liability arising from the Central Bank Individual Accountability Framework Bill 2022.

That’s according to a survey by business law firm Mason Hayes & Curran (MH&C) on the potential impacts of the legislation, which will create Ireland’s first comprehensive senior executive accountability regime (SEAR).

This will see the scope for personal exposure and director or manager liability within Irish regulated financial firms expand dramatically.

The survey took place at a recent webinar entitled ‘Financial Regulation: Prepare for the SEARing Heat’, attended by 200 senior banking and financial services professionals.

The webinar heard discussion of the personal impacts of the bill on individual directors and managers in financial services firms, and explored the knock-on effects this could have on Ireland’s economy.

MH&C partner Liam Flynn said: “One issue that's certainly going to be front of mind for foreign firms who are considering Ireland as a location for setting up or expanding is going to be the potential exposure of their senior executives to personal fines and personal sanctions as a result of issues within the firm.”

The majority of survey respondents (51%) said they were concerned about the impact of the regime on their future career prospects (35% were concerned, 16% very or extremely concerned).

The new legislation is likely to require substantial changes to recruitment and employment practices within the sector due to the introduction of mandatory regulatory references.

Guest speaker Chris Finney (Fox Williams Financial Services, London) said that since similar legislation was introduced in Britain in 2016, some firms have got into difficulty with courts because of concern about “what the regulator might do if they weren't aggressive enough that they've terminated appointments”.

“Those terminations have turned out to be unlawful. So there's been some significant damages to pay,” he told the seminar (13 October).

Careers trashed

At an individual level, he said “a decent number of individuals have had their careers trashed by regulators taking action against them, where the regulators eventually lost. 

“But in the meantime, of course, the names of those individuals and the regulator’s allegations are well known in the market, so that must have been quite devastating for those individuals and very difficult for them to fund their own defence,” he added.

A full 65% of respondents said they feared future talent shortages for the industry as a result of the new regime.

Finney said the regime had not had the devastating impact on recruitment and retention that the markets feared. 

“I do really believe that talent growing through an organisation gets used to whatever the new regime is … ti's all about trying to use it to bring some added value to the organisation.”

Sarah Cloonan (MH&C) said: “Firms’ resources will be focused on the initial papering exercise, getting policies and procedures in place and adapting governance frameworks for day-one compliance.

“Although this is important, firms mustn’t forget that IAF/SEAR isn't going to be a once-off -'tick-box' exercise.

“There will need to be ongoing commitment of resources, for example to new processes for monitoring responsibility maps and making sure that they're still fit for purpose. Firms need to find a way to leverage all these new processes to extract added business value.”