9 February 2015
The Central Bank of Ireland today (9 February 2015) published its statement of enforcement priorities for 2015. This builds on the Central Bank’s work to date, including 11 enforcement settlements with regulated financial service providers in 2014 resulting in the imposition of overall fines in excess of €5 million.
The Central Bank’s enforcement strategy is focused on deterring breaches of requirements, securing compliance and promoting the behaviours and high standards expected from regulated firms, in order to protect consumers and safeguard the stability of the wider financial system and the economy.
Director of Enforcement, Derville Rowland, said: “The Central Bank’s statement of enforcement priorities focuses on areas of particular importance in support of our overarching objective of safeguarding stability and protecting consumers. In addition, the publication of this statement reflects our commitment to being open and transparent in the work we do.
These priorities build on our enforcement work and experience to date and that of our supervisory colleagues. They enable us to target our resources in the right places to help deliver the best regulatory outcomes across all sectors of the Irish financial system and within the prudential, conduct of business and consumer protection areas of the Central Bank’s work.
The publication of our enforcement priorities highlights for firms the need for them to review their business practices and to ensure that they can at all times demonstrate the highest standards of compliance.
While we have identified our planned priorities it should be noted that our enforcement activity will not be confined solely to these pre-defined areas. We will continue to review our enforcement work in the context of the changing regulatory environment throughout the year. Our priorities will be delivered alongside our reactive enforcement activity when serious issues emerge as a result of the Central Bank’s supervisory work or other sources such as through whistleblowers.”
1. Cross-sector enforcement priority areas
The Central Bank continues to put the adherence to prudential requirements as a cornerstone of its enforcement strategy and priorities for all sectors. We will focus on in particular, while not being limited to, prudential requirements for credit unions, large exposure rules for credit institutions and markets, those applying to retail intermediaries, reserving and capital adequacy and insurance.
Systems and controls
The Central Bank views the existence and proper functioning of a firm’s systems and controls as being fundamental to ensuring its compliance with its regulatory requirements. Robust systems and controls are essential safeguards to ensure compliance and protect and reinforce a firm’s culture of compliance with regulatory requirements. Strong systems and controls and risk management systems also prevent inadvertent harm to consumers as well as defend against deliberate acts of misconduct.
Provision of timely, complete and accurate information to the Central Bank
A number of enforcement cases in 2014 concerned the provision of incomplete/inaccurate regulatory information to the Central Bank by firms. The Central Bank considers this a very serious issue, as the effective prudential supervision of firms is contingent upon the accuracy and completeness of the information available to the Central Bank. The submission of timely and accurate information to the Central Bank will remain a cross sector focus area for 2015.
Appropriate governance and oversight of outsourced activities
In 2014, governance failures relating in particular to outsourcing featured in two significant enforcement cases taken by the Central Bank. These cases related to firms from different industry sectors thereby highlight that governance arrangements with regard to outsourcing are an issue across the regulated sectors. As firms continue to outsource functions to reduce costs and focus on core business, the Central Bank reminds firms that outsourcing is no defence to regulatory failings. The Central Bank expects full compliance with all applicable regulatory requirements and appropriate oversight and supervision by firms of the outsourced activity.
Anti-Money Laundering /Counter Terrorism Financing compliance.
The Central Bank has, in recent years, taken enforcement cases in relation to breaches of the anti-money laundering requirements. The Central Bank expects compliance by all credit and financial firms with the regulatory requirements in order to ensure that effective procedures are in place to counter the threats of money laundering and financing of terrorism.
Fitness and probity obligations.
2. Sector-specific enforcement priority areas:
- MiFID conduct of business rules
- Client Asset Requirements
- Code of Conduct on Mortgage Arrears
- Suitability of sales
- Fair treatment of customers
Low impact firms
The Central Bank has specifically allocated resources for enforcement actions against firms with a low impact PRISM rating on the Bank’s risk assessment framework. On the basis that low impact firms have lesser engagement with the Central Bank, where breaches by low impact firms are discovered, the Central Bank will utilise its enforcement powers to remind all firms irrespective of their nature, scale or complexity that the regulatory requirements must be complied with and non-compliance is regarded as serious. This approach promotes compliance through deterrence and complements the PRISM framework.