Address by Director of Consumer Protection Bernard Sheridan to the Board of Directors of the European Banking & Financial Services Training Association (EBTN)

25 April 2014 Speech


Ladies and gentlemen,

I’m pleased to have the opportunity today to meet and speak to the members of the Board of Directors of EBTN. Through my discussions with Michael Feeney, I am familiar with your work, especially the promotion of common frameworks and standards in financial services education across Europe. You are most welcome to Dublin and I hope you have an enjoyable and productive visit.

The mission of the Consumer Protection Directorate of the Central Bank is to work together with others to strengthen and maintain protection for consumers so that financial services work in the best interests of all consumers, now and in the future.

In order to support this mission, our Consumer Protection Strategy is based on the ‘5 Cs’ framework:

  • Consumer - is at the centre of the Bank’s focus
  • Confidence – working to help consumers have confidence in financial services, products and regulation
  • Compliance – monitoring and enforcing compliance with consumer protection rules
  • Challenge – being prepared to challenge firms and ourselves to get a better outcome for consumers and
  • Culture – promoting a consumer focused approach to the provision of financial services

Our strategic priorities for 2014 include continuing our work on mortgage arrears, enhancing the consumer protection framework, ensuring consumers are treated fairly, developing a strategy for low impact firms and engaging with stakeholders. I will focus today on our consumer protection framework. This aspect of our work includes the development and imposition of a number of codes of conduct, influencing the EU and international agenda and continuing to develop the empirical basis for our work. This year, we will continue to focus on monitoring the implementation of the Code of Conduct on Mortgage Arrears, we will implement a regulatory regime for debt management firms, which will include conduct of business rules and minimum competency standards, and we will commence a review of the Code of Conduct on Lending to Small and Medium Enterprises SMEs in order to better

  • facilitate access to credit for sustainable and productive business propositions,
  • promote fairness and transparency in the treatment of SMEs by regulated entities, and
  • ensure that when dealing with financial difficulties cases, the aim of a regulated entity will be to assist borrowers to meet their obligations, or otherwise deal with the situation in an orderly and appropriate manner.

On the international front, we have contributed to the development of a number of EU initiatives which have recently been finalised or are close to finalisation, including the Mortgage Credit Directive, the Payments Accounts Directive and the Regulation on key information documents for packaged retail and insurance based investment products (PRIIPs). We will continue to contribute to the ongoing work on these initiatives through our membership on ESA task forces and committees.

An exciting development last year was the establishment of a new international organisation of financial consumer protection supervisory authorities, known as FinCoNet, which I have the honour of chairing. FinCoNet will focus on banking and credit consumer protection issues, and aims to enhance the protection of consumers of financial services, strengthen consumer confidence and reduce systemic consumer risk by promoting strong and effective supervisory practices, sharing best practice and promoting fair and transparent market practices. FinCoNet also intends to collaborate with other international bodies and contribute to advancing the G20’s financial consumer protection agenda.

One of our key consumer protection measures is the Minimum Competency Code which established minimum professional standards for financial services providers, with particular emphasis on areas dealing with consumers. The Minimum Competency Code is closely linked to our Fitness and Probity regime which aims to ensure that persons providing financial services

  • are competent and capable;
  • act honestly, ethically and with integrity; and
  • are financially sound.

The Fitness and Probity regime is issued under the Central Bank Reform Act 2010 which gives the Central Bank wide ranging powers across the financial services industry to:

  • approve or veto the appointment of people to certain positions;
  • investigate and where appropriate remove or prohibit certain position holders; and
  • set statutory standards of fitness and probity across the financial services industry.

Under the Fitness and Probity regime, a number of functions are prescribed as ‘controlled functions’ or CFs and ‘pre-approval controlled functions’ or PCFs. The regime identifies 41 PCFs – these are senior positions which require the Central Bank’s prior approval before a person can be appointed to them. The regime also prescribes specific categories of staff as CFs, which are positions from which individuals can be temporarily or permanently removed or indeed prohibited from taking up in the future. A number of the controlled functions are aligned with the scope of the Minimum Competency Code, specifically those that relate to customer facing roles (CF3 to 9). Under the Code, responsibility is placed on all persons carrying out these controlled functions as well as on regulated firms to ensure they meet the standards set out, both on entry to the financial services industry and throughout their careers.

Within the European Union, Ireland was one of the first countries to introduce a mandatory Minimum Competency Code for Financial Advisers. Indeed, even today, very few EU states have implemented such a Code. So I thought you might like to know a little more about the key features of our minimum competency regime, how it evolved and how it operates.

The objective of the Code is to strengthen consumer protection by requiring financial advisers to achieve minimum professional standards of knowledge and competence. This increases the confidence of the Central Bank in the quality of the financial advice being provided to consumers.

Origins and Overview of the Minimum Competency Code

The origins of the Code lie in the Central Bank’s long standing desire to enhance the education and training of those who work in financial services in Ireland and, in particular, those who advise consumers. Well before the introduction of mandatory minimum competencies, professional bodies in the banking, insurance and broker sectors offered qualification programmes for financial advisers. The Central Bank saw great value in these programmes but was keenly aware that only a small minority of those providing financial advice to consumers undertook them.

So, in 2004 to address this issue, we began to consider the merits and feasibility of a mandatory minimum competency regime. We entered into a consultation process and began informal discussions with all the bodies that already provided professional qualifications for financial advisers.

Later that year, we published a formal consultation paper on minimum competencies and engaged with key industry and consumer stakeholders as well as the Department of Education and the National Qualifications Authority of Ireland. There was broad, but by no means universal, support from stakeholders for the proposed initiative. Much of the debate focussed on the future of advisers and salespeople who had long experience in the industry but no qualifications.

The first Minimum Competency Code came into force on 1 January 2007. It has been in force now for 7 years and has been refined progressively during that time. We undertook a major revision in 2011, reflecting the additional powers granted to the Bank under the Central Bank Reform Act 2010.

The current version of the Code runs to almost 70 pages and what I’d like to do now is give you a brief insight into its key provisions and principles:

  • Essentially, all those who advise on or sell retail financial products to consumers must satisfy the Minimum Competency Code irrespective of the sector in which they operate. It is the responsibility of both the firm and the individual adviser to ensure compliance with the Code.
  • Under the Code, retail financial products are organised into 8 categories and include virtually all products commonly available to consumers. The 8 categories are:

    1. Life Assurance,
    2. Pensions,
    3. Savings and Investments
    4. Personal General Insurance
    5. Commercial General Insurance
    6. Private Medical insurance
    7. Housing Loans, Home Reversion Agreements and Associated Insurances, and
    8. Consumer Credit and Associated Insurances

  • The Code sets out in detail the specific competencies which individuals must attain to advise on each of the 8 categories of retail financial products. These competencies guide the Central Bank when deciding whether or not to recognise a professional educational programme.
  • To comply with the Code, an individual must:   

    1. Attain a qualification which is recognised under the Code and undertake annual Continuing Professional Development, or

    2. Be grandfathered – grandfathering applies to those advisers with significant experience who were working in the industry in January 2007 and who were exempted from the requirement to attain a recognised qualification. They were required, however, to undertake annual CPD. The grandfathering arrangement was not ideal but the industry argued, and we accepted, that it was necessary for the smooth introduction of the minimum competency requirements.

  • In addition to financial advisers and salespersons, the Code also applies to those who carry out certain ‘specified functions’ which have a potentially high impact on consumers. Examples of specified functions are assisting consumers in making insurance claims or adjudicating on complaints about financial advice.
  • The Code also addresses many other practical implementation issues, for example:

    1. Initial training and supervision of new entrants to the industry who fall within the scope of the Code

    2. Record keeping, certification of experience and monitoring of compliance.

Professional Bodies and Qualifications

I would like to spend a few minutes now on the role of the professional bodies in the provision of qualifications recognised under the Code and acknowledge their valuable advice and guidance in the design and implementation of the minimum competency regime. I mentioned earlier that, at an early stage in the 2004 consultation process, we held informal discussions with the educational bodies, (including the Institute of Banking) which already provided professional qualifications for financial advisers - albeit on a non-mandatory basis.

Following those discussions and with our encouragement, the 3 main competitor bodies in the field came together to rationalise their programmes and jointly offer a single new professional qualification called Qualified Financial Adviser (or QFA). Creating one new programme incorporating the best of the educational offerings of all the professional bodies had many benefits for all stakeholders. In particular, it avoided unnecessary confusion for both students and the consumer. From the perspective of the Central Bank, this new 6 module QFA programme has a number of particularly attractive features:

  • It is aimed at financial advisers in all sectors of the financial services industry, including insurance, banking and brokers
  • It leads to both a university award and the professional designation, QFA. This is possible because of the status of the Institute of Banking as both a professional body and a recognised college of University College Dublin
  • To maintain the designation QFA, an individual must undertake annual CPD which is aligned with the CPD requirement of the Code – currently a minimum of 15 hours per annum. We have been particularly impressed over the years with the rigour, efficiency and effectiveness of the e-learning and on-line administration system developed by the professional bodies to support annual CPD for QFAs
  • The qualification is bench-marked nationally by its inclusion in the Irish National Framework of Qualifications as a 30 ECTS (European Credit Transfer and Accumulation System) credit award at level 7 and internationally by being referenced to Level 6 on the European Qualifications Framework

As a result of the pro-active approach of the professional bodies, the QFA was recognised under the Code when it first came into force in 2007. Since then, it has gone from strength to strength and been embraced enthusiastically by both firms and individual advisers across all sectors of the retail financial services industry. The QFA is now the predominant qualification for financial advisers in Ireland.


Overall, the Central Bank of Ireland is very pleased with the operation of minimum competencies since their introduction in 2007. Through on-going fine-tuning and a major review in 2011, we have kept the Code up to date with a changing industry and economy as well as the evolving needs of consumers. For example:

We restructured and expanded the categories of retail financial products – increasing them to 8, from the original 6

  • We clarified the activities falling within the scope of the Code, including the restructuring and rescheduling of loans, home reversion agreements and services provided over the internet.
  • We specified ethics as a mandatory component of annual CPD
  • We required all qualifications recognised under the Code to be at level 7 or above on the National Framework of Qualifications
  • We recognised a range of shorter 10 ECTS level 7 qualifications for advisers who worked within a single product category such as Life Assurance or Consumer Credit. Essentially, these qualifications are sub-sets of the QFA and lead to the designation Accredited Product Adviser (or APA).

More recently, we have expanded the scope of the Code to include debt management services. We have worked closely with the Institute of Banking and other professional educational bodies to develop appropriate qualifications based on the competencies deemed necessary for those providing debt management services.

The number of advisers who hold recognised qualification has grown dramatically since 2006. For example, there are now some 10,000 QFAs and 7,000 APAs in the banking sector alone. Advisers in the same sector relying solely on grandfathering for their compliance with the Code has now declined to just over 1700 – less than 10% of the total. This is a massive change compared to the era before the implementation of minimum competencies. So it is clear that the skill and knowledge of those advising consumers has been greatly enhanced as a result of the Code.

And, interestingly, although the Code only requires them to attain a level 7 qualification, growing numbers of advisers are continuing their studies to post-graduate level and earning level 9 qualifications such as the Graduate Diploma in Financial Planning and the Certified Financial Planner (or CFP) designation.

The greatly increased breadth and depth of expertise in financial planning and advice which is now available to Irish consumers is a most valuable outcome of the Code in its own right. However, my own view, based on our experience to date, is that the effectiveness of a Minimum Competency Code for advisers is greatly enhanced when it is part of a wider integrated strategy of consumer protection and financial regulation. In Ireland, other elements of the Central Bank’s wider strategy include the imposition of conduct of business rules such as the Consumer Protection Code, the Code of Conduct on Mortgage Arrears and the Code of Conduct for Lending to SMEs,. These regulations are designed to make firms and their individual employees act honestly, fairly, professionally, openly and ethically in the best interest of their customers. They ensure that consumers receive all the information they need for effective decision-making and have errors and complaints dealt with efficiently and fairly.

Consumers need to have confidence that they are receiving the best possible financial advice and services at all times. The Minimum Competency Code requires minimum professional standards of all persons providing advice and services to consumers. The Fitness and Probity regime mentioned earlier has raised the importance of the Minimum Competency standards as it is a key part of that regime and, under that regime, we have stronger powers to remove a person from a position temporarily or permanently or prohibit a person from taking up a position in the future if they do not meet the standards set out.

The ongoing requirement to complete Continuing Professional Development or CPD helps to keep the knowledge and expertise of persons in the industry up to date and complements our thematic and monitoring work, and our ongoing enforcement actions for breaches of requirements, to help ensure that there is an increased level of awareness among firms of the requirements they must comply with and the consequences of non-compliance.

Through our continuing supervisory and stakeholder engagement and our ongoing work in the European and international arena we are working to increase standards of consumer protection by ensuring appropriate regulatory requirements are in place, raising awareness of consumer protection among the public and in the industry, and encouraging best practice and good governance in the industry.

When taken together, I believe that all these measures, including the Minimum Competency Code, are laying a firm foundation for the restoration of consumer confidence in the financial services industry after the financial and economic crisis we have been through.