The Central Bank (Individual Accountability Framework) Act 2023 introduces an Individual Accountability Framework (IAF) that strengthens the responsibility of senior managers in financial services firms for corporate breaches. Effective from December 29, 2023, the IAF will mandate conduct standards and tighter restrictions to the Fitness and Probity Regime. Key points include a deferral of the Senior Executive Accountability Framework (SEAR) for Non-Executive Directors until July 2025, introducing a materiality threshold for outgoing branches, addressing concerns about proportional responsibilities, clarifying sharing/splitting roles of a Pre-Approval Controlled Function (PCF) holder, and limiting the scope of enhanced due diligence in certification. Disciplinary reporting obligations have also been adjusted. The Central Bank aims to publish a report on the operation of the IAF in three years' time.
Further changes made to individual accountability framework as its commencement looms large
Senior managers will have increased personal responsibility for corporate breaches under a new regime introduced under the Central Bank (Individual Accountability Framework) Act 2023. The Act introduces an Individual Accountability Framework (IAF) which is intended to improve governance and accountability in firms providing financial services to individuals and businesses.
Conduct standards, including accountability of senior individuals for running their parts of the business effectively, will apply from 29 December 2023 as will the enhancement to the Fitness and Probity Regime. In-scope firms have until 1 July 2024 to allocate responsibilities and decision-making roles to relevant personnel
Following the introduction of the Act in March 2023, a three-month consultation process took place during which the Central Bank engaged with the financial industry and interested stakeholders about mobilising the provisions of the Act.
In November the Central Bank published updated draft Regulations and Guidance as well as a Feedback Statement. This revealed the responses that the Central Bank received during the consultation process from interested stakeholders to the initial draft Regulations and Guidance.
Those stakeholders consisted of representative bodies, financial services providers, legal firms or bodies. They were asked to respond to 18 questions relating to how the Central Bank proposes to implement the new IAF as set out in its consultation paper. The questions also sought the stakeholders' views on the draft Regulations and Guidance on the IAF. The key areas of the IAF are the Senior Executive Accountability Framework (SEAR), the Conduct Standards, and the enhancements to the current Fitness and Probity Regime.
The main responses received from participating stakeholders and the Central Bank's reaction were as follows.
The Central Bank intends to publish a report in three years' time in relation to the operation of the IAF which may bring about further regulatory changes. While regulatory bodies do tend to periodically take stock of how new legislative measures are affecting an industry, the collaborative and transparent attitude of the Central Bank during the consultation process and since its conclusion in June 2023 may signal a positive shift away from the culture that existed within the financial industry and which contributed to the most recent banking crisis.
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