Individual Accountability/SEAR Update: Pre-Legislative Scrutiny Report published
A further step has been taken towards finalising the draft Central Bank (Individual Accountability Framework) Bill 2021 with the publication, by the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach, of the Report on its pre-legislative scrutiny of the General Scheme of the Bill.
The Committee confirmed its support for the General Scheme, in particular the expected “…shift towards more responsible practices for firms and individuals…”, and made four recommendations:
- Central Bank report on consultations: that the Central Bank report to the Committee, within one year of the legislation’s commencement, on the outcome of its planned consultations with the financial services sector. The Central Bank plans to begin those consultations when the Bill is finalised this summer. In its submission to the Committee, the Banking and Payments Federation of Ireland (BPFI) asked that the Central Bank be tasked with providing guidance on “reasonable steps”, responsibility maps and conduct standards, and we would expect those topics to feature prominently in the financial services sector’s response to the Central Bank’s consultations. Similar comments were made by the Irish Banking Culture Board in its submission to the Committee, with both industry bodies emphasising the need for some flexibility within the planned individual accountability framework as to how in-scope firms structure their management/governance arrangements. For more information on those topics, read our earlier briefings here.
- Out-of-scope entities: that the Central Bank report to the Committee, again within one year of the legislation’s commencement, on the possible inclusion of credit unions, reinsurance/captive reinsurance undertakings and insurance special purpose vehicles within the scope of the senior executive accountability regime (SEAR) component of the individual accountability framework. For the time being, those entities are out of SEAR’s scope (but within the scope of the other aspects of the framework).
- Payment gateways: that the Department of Finance clarify whether payment gateways are to be excluded from the SEAR. This point was discussed at a meeting of the Committee, attended by the Central Bank, on 3 November 2021, and again at a meeting of the Committee attended by the Minister for Finance on 10 November 2021 where he confirmed that those entities “… will be excluded in the first and probably lengthy phase of the application of this legislation. It will be open to the Central Bank to decide what sectors it wants to include in the future.”
- Third-country branches: that the Department of Finance clarify the intended meaning of “third country branches” of firms that are within SEAR’s scope. This point was raised by the BPFI in its submission to the Committee, where it asked for clarification as to whether this is intended to capture a third country-based branch of an in-scope Irish firm, or an Irish-based branch of a third country firm.
In a response to a written parliamentary question on 29 March 2022, the Minister for Finance confirmed that publication of the Bill was subject to:
- the publication of the Committee’s Report, and
- final agreement on changes needed to take account of the Supreme Court’s decision in Zalewski v Adjudication Officer and Others. For further information on that decision, read our Employment Group’s briefing: Permanent changes for the WRC and the wider implications of the recent Supreme Court decision in Zalewski.
It is hoped that the Bill will be published in the coming weeks, so that it can complete its passage through the Houses of the Oireachtas before the summer recess.
In the meantime, please get in touch with any member of our market-leading Financial Regulation: Investigation and Enforcement team if you wish to discuss the potential impact of the proposed individual accountability framework on your business.