Recognising the challenges faced by firms and market participants as a result of the COVID-19 pandemic, in March/April 2020, the Central Bank communicated that it would allow a level of flexibility in certain specified areas.

The Central Bank has determined that measures previously communicated will not be extended. This includes announcements made by the European Central Bank, the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority that are no longer relevant or in application.

Details of the Central Bank’s previous expectations are made available below for reference purposes only.

• Credit Institutions
• Credit Unions
• Insurance and Reinsurance Firms
• Securities markets, investment management, investment firms and fund service providers

The Central Bank of Ireland has robust, tested, operational arrangements which will allow it to continue to perform its supervisory functions in this time of stress. This may mean reprioritisation, in line with our risk-based approach.

Resources will continue to be devoted to those areas where there is greatest risk, including emerging risk. It also remains in regular contact with its colleagues in Europe, leveraging that collaboration for mutual benefit across jurisdictions.

The Central Bank has made clear its position to insurers that where there is a doubt about the meaning of a term, the interpretation most favourable to the customer should prevail.

As set out in the Central Bank’s COVID-19 and Business Interruption Insurance Supervisory Framework, the Central Bank expects firms to adopt a customer first approach to the resolution of issues identified in the context of BI insurance policies. First and foremost, firms must assess these issues in line with their obligations to act honestly, fairly and professionally in the best interests of customers and with due skill care and diligence. Firms must, at all times, assess their actions and decisions in relation to their treatment of customers in line with their obligations under the Consumer Protection Code 2012 (the Code), the Insurance Distribution Regulations 2018 (IDR), the Consumer Insurance Contracts Act 2019 (CICA) and other regulatory requirements. Where the Central Bank identifies issues of concern in relation to the treatment of customers and/or issues of interpretation of BI insurance policies, we expect firms to take immediate remedial action in line with our communicated expectations.

As outlined in our letter to industry of 27 March 2020, both the Board of Directors and senior management within a firm have a responsibility for ensuring that issues related to BI insurance policies and COVID-19 related claims are handled in line with the firm’s legal and regulatory obligations. In particular, co-operation is expected by the Central Bank in relation to the certification of required information and in the consideration and implementation of the communicated views and expectations of the Central Bank.

Where BI insurance policy wording provides that cover is dependent on there being an imposed closure of a business by reason of an order (or other similar language) of a Government or other public authority, it is the Central Bank’s firm view that the Government’s communication to the country in March 2020 to close businesses as a result of the outbreak of COVID-19 in Ireland should be treated as an order and/or direction and/or mandate (or other similar language) for the purposes of determining the issue of cover.

The Minister for Finance, by letter dated 27 March 2020, clarified that the Government’s communication to close businesses was a direction and/or mandate and that no attempt should be made by firms to equivocate on this issue to avoid an obligation under a BI insurance policy. We reiterated this view in our letter to industry of 27 March 2020.

Arising from the above, any attempt by a firm to deal with the issue of cover in a BI insurance policy in a manner that disregards the Minister for Finance’s clarification and our clear expectations in relation to this issue will be a matter of serious and immediate concern to the Central Bank.

Firms must ensure that they handle claims effectively and properly and, where appropriate to do so, they must offer assistance to their customers in the process of making a claim, including, where relevant, alerting their customer to policy terms and conditions that may be of benefit to the customer. Any claim settlement offer made to a claimant must be fair, must take into account all relevant factors having regard to the terms of the policy and any representations made to the policyholder and must represent the firm’s best estimate of the claimant’s reasonable entitlement under the policy.

Where policyholders have commenced litigation against a firm, and it is agreed between the parties that the case has the potential to act as a “test case” for the determination of issues in relation to BI insurance policies for wider groups of customers, the Central Bank has the following expectations:

(i) Firms should be cognisant of the significant costs burden faced by such plaintiff policyholders and should consider how the issues in dispute can be narrowed to ensure that the litigation can proceed in the least costly and most expeditious manner possible, reflecting the firm’s obligation to act fairly, honestly and professionally in the best interests of its customers;

(ii) In circumstances where the firm obtains the benefit of a court’s interpretation of the relevant policy wording in its determination, and in consideration of the financial burden placed on the customer plaintiffs to mount the litigation to have their claims under the policy determined, a firm should agree:

(a) to pay the reasonable costs of such customer plaintiffs in agreed test case litigation, to be assessed in default of agreement; and

(b) should not seek its costs against these plaintiffs.

Finally, it is the Central Bank’s clear expectation that where a legal action has been concluded and the final outcome/s may have a wider beneficial impact for similar groups of customers, then firms should carry out an impact assessment to ascertain whether there is such a wider beneficial impact and take remedial action to ensure that those customers obtain the benefit of the final outcome/s.

In certain BI insurance policies, the policy wording will be clear and in favour of the customer, subject to certain factual matters being established, in relation to the issue of cover and the satisfaction in principle of causation. In these circumstances, the Central Bank shall endeavour to ensure that all customer claims are accepted and processed in accordance with our expectations and in line with the relevant firm’s legal and regulatory obligations.

Once cover and causation are established under a BI insurance policy, the Central Bank expects firms to ensure that any customer claims are processed and handled without delay, and that losses are calculated in line with the firm’s legal and regulatory obligations.

The Central Bank will continue to monitor any ongoing litigation, arbitrations, FSPO complaints and settlements in relation to BI insurance policies concerning COVID-19 related claims. The Central Bank requires that, where individual outcomes arise that have the potential to beneficially impact customers more widely, that firms will apply the outcome to those customers. The Central Bank will monitor firms to ensure that firms address any broader beneficial impact arising.

The Central Bank continues to focus on the response and approach of lenders to the economic effects of the COVID-19 pandemic. Our focus includes ensuring that the interests of borrowers affected by COVID-19 are appropriately protected. The Central Bank has written to lenders to lay out its expectations.

• Dear CEO Letter - Expectations for lenders in supporting borrowers affected by the COVID-19 Pandemic

The Central Bank is focused on ensuring the interests of borrowers affected by COVID-19 are appropriately protected. Where a borrower is unable to repay their loan due to short-term financial difficulties caused by COVID-19, we have worked with lenders to make payment breaks available.

A payment break is where a lender agrees to postpone or reduce the borrower’s loan repayments for a set period of time. This can give the borrower breathing space in these difficult times.

We have recently written to credit unions, banks and other lenders setting out our expectations on how COVID-19 payment breaks should operate.

• Dear Chair Letter - Central Bank Expectations for Payment Breaks in Credit Unions.
• Dear CEO Letter - Central Bank's Expectations for Payment Breaks in Banks and Other Lenders.

PCF vacancies because of COVID-19

If a PCF role holder is unable to perform their role due to illness or if a firm cannot fill a permanent PCF role vacancy due to COVID-19, the firm can seek to have another suitable individual perform that role for a limited period. This requires prior agreement of the Central Bank pursuant to Regulation 11 of the Central Bank Reform Act, 2010 (Sections 20 and 22) Regulations, 2011 [S.I. No. 437 of 2011]. The steps that the firm must take are as follows:

• The firm should refer to its succession and contingency plan in the first instance and identify a suitable individual to perform the PCF role which has become temporarily vacant.
• The firm should contact the Central Bank to state that they wish to make a temporary appointment. In their contact, firms should:
  • Outline the circumstances that have given rise to the need for the temporary appointment.
  • Provide confirmation that the firm is satisfied on reasonable grounds that the person complies with the Fitness and Probity (F&P) Standards. In providing this confirmation, the firm should consider time commitments and other roles that the proposed temporary officer may already be performing.
  • Provide confirmation that the person has agreed to abide by the F&P Standards and will continue to do so whilst performing the PCF role.
  • Outline the period of time for which the appointment is requested (which should normally not extend past three months).
• No Individual Questionnaire is required to be submitted in respect of an application for the appointment of a temporary officer.
• If the Central Bank agrees to the request in light of the exceptional circumstances, a letter will issue to the firm regarding the appointment.
• The firm should keep the situation under review and inform the Central Bank of any changes in respect of the appointment.

Other PCF vacancies

A firm must not appoint a person to perform a PCF role on an ongoing basis unless the Central Bank has approved the appointment of the person to perform the function in accordance with its pre-approval process.

The Central Bank expects that firms will continue to comply with their F&P statutory obligations and ensure that individuals performing Controlled Functions, including PCF, roles comply with the F&P Standards. Read further details regarding the Fitness and Probity Regime.

PCF interviews

The use of interviews is one tool the Central Bank may employ as part of the approval process. In light of COVID-19, alternative means to existing interview formats such as video conferencing and phone interviews are being explored. It is expected that assessments will continue using all tools necessary.

The availability of timely, high quality statistical data is crucial to inform decision making that will support the economy throughout the economic shock of COVID-19. Reliable and timely data are crucial in times when the economy faces turbulence caused by extraordinary situations.

For this reason, the ECB have issued a communication stating that they are committed to the continued collection of statistical information through national central banks. The work of reporting agents to maintain their statistical reporting to the Central Bank is essential to ensure that we can continue to assess developments in all sectors of the Irish economy.

At the European level, this statistical information will contribute to the ECB’s policy measures for the provision of supportive financing conditions and stability of the financial system.

However, both the Central Bank and ECB are aware that the current environment provides considerable challenges to reporting agents. The reporting of statistical information may be adversely impacted as reporting agents manage staff availability and transition to large-scale remote working.

Therefore, the Central Bank will engage with reporting agents to see if pragmatic solutions can be found with respect to the challenges they are facing in meeting these requirements. Any solutions must operate within the existing European legal framework and at all times maintain the priority and quality of statistical information at a level that is fit for purpose.

Any reporting agent experiencing difficulties in meeting their statistical reporting requirements should immediately get in touch with their point of contact in the Central Bank.

Due to the increased instance of remote working arising from the COVID-19 pandemic, the Central Bank of Ireland has received queries from regulated firms regarding the admissibility of electronic signatures as opposed to 'wet ink' signatures (i.e. signing a document by hand using a pen) in relation to regulatory documents and forms submitted to us.

The Central Bank confirms its Policy regarding the use of electronic signatures is that, in the absence of any specific legal provisions to the contrary, regulated firms may use electronic signatures in submitting regulatory documents and forms to the Central Bank. Individuals are reminded that those signing regulatory documents and forms in electronic form will be accountable for the content of the document in the same way as if they had signed the document in 'wet ink'.

The Central Bank reserves the right to request a 'wet ink' signature where the Central Bank deems it appropriate in all the circumstances of the case.

We may review this Policy as practices continue to evolve and change, while recognising that many regulatory documents and forms are currently processed electronically.

We do not propose to comment on the use of electronic signatures more generally, and advise regulated firms to seek their own legal advice on the appropriateness of electronic signatures in specific circumstances. The Central Bank expects firms to continue to meet their regulatory and statutory obligations on an ongoing basis including the requirement to have adequate internal systems and controls.

See Also:

• Download this statement from the COVID-19 Statements and Press Releases page.

The Central Bank recognises that the level of uncertainty arising from the impact of COVID-19 on MiFID investment firms and market operators has reduced.

Therefore the Central Bank is setting out its supervisory expectations with regard to the payment of dividend distributions, share buy-backs and variable remuneration in respect of material risk-takers from 1 October 2021 by MiFID investment firms and market operators:

• All MiFID investment firms and market operators should continue to exercise prudence if considering making any distributions, share buy-backs or creating an obligation to pay variable remuneration in respect of material risk-takers;
• Any MiFID investment firms which  are designated as “Medium-High” impact or above under the Central Bank's Probability Risk Impact System (PRISM) should engage with their supervision team in advance of proceeding with any distribution, share buy-back or any proposal to create an obligation to pay variable remuneration to a material risk-taker; and
• Market operators designated as “Medium-High” or above under PRISM should also engage with their supervision team, in advance of proceeding with any dividend distribution or share buy-back.  

The Recommendation of the European Central Bank (ECB) of 15 December 2020 on dividend distributions during the COVID-19 pandemic (ECB/2020/62) will expire after 30 September 2021.

On the basis of more reliable capital trajectories for credit institutions in the context of an improved macro-economy, the ECB is reinstating its previous supervisory practices of discussing capital trajectories and dividend or share buy-back plans with each credit institution and assessing each credit institution’s remuneration policies in the context of the normal supervisory cycle. National competent authorities are expected to follow the same approach with the credit institutions they directly supervise.

Accordingly, from 1 October 2021, the Central Bank advises that credit institutions under its direct supervision should adopt a prudent and forward-looking approach when deciding on dividends, share buy-backs and remuneration policy, carefully considering the sustainability of their business model and the risk that additional losses may in due course have an impact on their capital trajectory, including as support measures expire. The Central Bank expects credit institutions to communicate early with their supervisors about their distribution plans, including before announcing them to the markets.

Credit institutions should also take note that in assessing a credit institution’s capital trajectory and its distribution plans, the Central Bank will take a forward-looking view duly informed by the results of relevant supervisory stress tests and credit institution’s credit risk practices, which may affect the credibility of its capital trajectory.

More details on the approach may be found in the ECB 23 July press release and related FAQs. 

We are closely monitoring developments related to COVID-19 and continue to assess their impact on securities markets, including the impact on funds. We have enhanced our monitoring of daily liquidity reporting of funds domiciled in Ireland and we are engaging with fund management companies to ensure that they are responding effectively to the evolving situation. Together with other EU national competent authorities we are also scrutinising trading activity on the securities market venues for which we are the competent authority. This includes our scrutiny of short selling.

On 7 August 2019, we issued an industry letter regarding the importance of ongoing, effective liquidity management and ensuring compliance with relevant legislation and regulatory obligations for UCITS and AIFs. The letter highlighted the importance of the execution of an appropriately calibrated liquidity risk management framework for each fund under management, taking into account on an ongoing basis: (i) dealing frequency of the fund; (ii) the fund’s investment strategy; and (iii) the fund’s portfolio composition and investor profile.

See also: 11 March 2020 - ESMA recommends action by financial market participants for COVID-19 impact

It is critical that our securities markets continue to be transparent, and issuers of securities have important obligations in this regard which continue to apply. Issuers and other market participants are reminded therefore of their ongoing monitoring, disclosure and reporting obligations.

In the context of the possible impact of COVID-19, issuers of financial instruments are reminded in particular of their obligation under Article 17 of the Market Abuse Regulation to disclose inside information to the market as soon as possible, e.g. in circumstances where there is a material change to financial expectations for the issuer.

See also: 11 March 2020 - ESMA recommends action by financial market participants for COVID-19 impact

Our securities markets play a critical role in providing finance to governments and the real economy. This role is ever more important at this critical time. This means that securities market venues and other market participants need to be ever more vigilant in the discharge of their monitoring, disclosure and reporting obligations. This includes obligations under MiFIR, EMIR and the Market Abuse Regulation as well as other provisions of securities markets legislation.

The Central Bank recognises that the impact of the COVID-19 includes the necessity for many employees to work offsite. Relevant regulated financial service providers must however continue to employ appropriate trade surveillance, including to detect potential market abuse and breach of position limits. They must also apply the necessary focus on operational risks and the importance of our securities markets continuing to function effectively and in line with the regulatory requirements on which market participants rely. We see and acknowledge the hard work being done by firms to manage these risks in challenging circumstances.

See also: 11 March 2020 - ESMA recommends action by financial market participants for COVID-19 impact

Significant progress has been made in Ireland in AML/CFT in recent years. However COVID-19 has plunged the financial system into both unknown territory and ways of working that were likely not fully envisaged in any Business Continuity Plan.

The Central Bank is acutely aware, and in agreement with the views of organisations such as the Financial Action Task Force (FATF), Europol and Interpol, that the current disruption to the financial system is being exploited by criminals to mask money-laundering and terrorist financing.

Financial crime is unacceptable and remains so even in the face of the current crisis. In order to maintain and continue the progress made in recent years, it is vitally important that all those involved in AML/CFT continue to focus on their roles and remain on guard for suspicious activity throughout the disruption caused by COVID-19.

Recognising the increased risk presented by COVID-19, the Central Bank, as the National Competent Authority for the supervision of credit and financial institutions for AML/CFT purposes, is ensuring that it delivers on its mandate through:

• Continuing to undertake supervisory engagements with firms, albeit remotely as opposed to on-site for certain engagement types, as determined by applying its risk-based approach to supervision.
• Increased, frequent and ongoing bilateral interactions with firms to assess changing risks, new information/typologies arising in the market and activities being undertaken by institutions to mitigate these risks.
• Ongoing interaction with other parties involved in the oversight of AML/CFT in Ireland e.g. An Garda Síochána.
• Where relevant adopting advice issued by European and Global standard setters in the areas of AML/CFT i.e. the EBA and FATF statements.

As set out above, the Central Bank has intensified its engagement across the financial services system. During this and any period, we expect institutions to continue to meet their regulatory and statutory obligations on an ongoing basis. However we recognise that regulated institutions are under significant organisational stress and that some limited and time-bound regulatory flexibility may allow firms to better serve consumers, investors and the wider economy. In this regard, from an AML/CFT perspective, where required we will engage directly with institutions that are having COVID-19-related difficulties in meeting specific risk mitigation programme submission dates.

During COVID-19, it is more important than ever that credit and financial institutions continue to protect the financial system and consumers at large by ensuring that their systems and controls for preventing money laundering and terrorist financing. In upholding high AML/CFT standards we expect firms to:

• Continue to be effective in identifying suspicious or potentially suspicious transactions.
• Adjust their AML/CFT systems and controls as necessary to reflect any new risks or potential new risks arising from the disruption caused to the financial system and more widely e.g. transaction monitoring levels may need to be recalibrated to reflect the stalled nature of the economy and changes to patterns of customer behaviour brought about by the pandemic.
• Continue to be supported by the necessary resources even in the situation where there are pressures on the availability of resources across the institution.

Additionally all institutions should proactively review their AML/CFT risk assessments in light of the current situation and where required make any necessary adjustments to reflect the changed risk landscape.

The Central Bank expects firms to continue to meet their AML/CFT compliance obligations and that senior leadership participate actively in instilling the right culture. Firms with a good AML/CFT compliance culture are those that engage with the Central Bank in a positive, transparent way and are proactive in bringing matters to our attention. This is particularly important given the challenges firms are now facing.

While recognising that the current situation is likely to give rise to operational challenges for institutions, the Central Bank's position is that any such challenges should not be met by a lowering of an institution's AML/CFT standards.

In this regard, the Central Bank expects firms to:

• Continue to undertake transaction monitoring, Politically Exposed Persons (PEP) and Financial Sanctions (FS) screening, and suspicious transaction reporting in a manner that is consistent with their risk appetite and in line with the institution's most up to date risk assessment.
• Closely monitor and assess the impact of COVID-19 on any AML/CFT outsourcing arrangement. Where the outsource service provider is experiencing temporary difficulties in undertaking the AML/CFT activities, institutions must take timely and necessary measures to ensure that critical AML/CFT activities continue to be undertaken.

The Central Bank is cognisant that Sections 30A and 30B of Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended) require firms to apply a risk-based approach when applying AML/CFT compliance measures. The Central Bank requires that where an institution takes a decision, under the risk-based approach, to apply a lower but still CJA compliant level of control or oversight to an aspect of its AML/CFT framework, that the rationale for this decision is documented, approved by senior management and made available for review by the Central Bank in the future. Where institutions apply temporary measures to adjust their AML/CFT framework institutions should reinstate the original measures when it is safe and feasible to do so.

Additionally, where required, the Central Bank will engage directly with institutions that are having COVID-19-related difficulties in meeting specific risk mitigation programme submission dates.