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Central Bank sets out banker-accountability rules

The Central Bank has issued regulations and guidance for firms on new measures setting out standards of conduct for top financial executives.

After a three-month consultation process, the regulator has also published a feedback statement on the Individual Accountability Framework (IAF).

The Central Bank says that its guidance provides clarity on its expectations for the implementation of three aspects of the framework:

• The Senior Executive Accountability Regime (SEAR),
• Conduct standards, and
• Certain aspects of the enhancements to the fitness-and-probity regime.

Decision-making

The SEAR will require firms to set out “clearly and fully” where responsibility and decision-making lie within the firm’s senior management.

The conduct standards – which include acting with honesty and integrity, with due skill, care and diligence, and in the best interest of customers – will apply to individuals in all regulated firms. Senior executives will have additional standards.

Changes to the rules on fitness and probity will clarify firms’ obligations to proactively certify that individuals carrying out certain specified functions are fit and proper.

Administrative burden

As a result of the consultation, the bank has decided to defer the introduction of the SEAR for independent non-executive directors until 1 July 2025, a year later than it will apply to other executives.

It has also made a number of changes designed to reduce the administrative burden of the measures on firms.

Derville Rowland (Deputy Governor of the Central Bank) said: “This piece of regulation is first and foremost about enhancing governance, performance, and accountability in financial services.”

She added that the publications being released today (16 November) set out the “good practices” expected of firms and role-holders, and their accountabilities.

“At its core, financial regulation is about supporting positive outcomes, protecting consumers and investors, and, ultimately, contributing to the economic well-being of the community as a whole. These regulations support this objective,” Rowland stated.

Timelines

She added that the Central Bank’s approach to implementing the framework would be founded on the principles of “proportionality, predictability and reasonable expectations, underpinned by effective enforcement”.

The conduct standards and changes to the fitness-and-probity regime are set out in legislation, and will apply on 29 December this year.

SEAR regulations that describe responsibilities of specific roles and requirements of firms will apply to 'in-scope' firms from 1 July 2024, and to independent, non-executive directors at 'in-scope' firms from 1 July 2025.