Conduct, culture and trust – priorities for 2021 - Speech by the Director General, Financial Conduct to the BPFI Membership Forum

16 March 2021 Speech

Derville Rowland

Good afternoon. I welcome the opportunity to speak to you virtually today and outline some of the Central Bank’s financial conduct priorities for 2021.

There is a famous prediction in the technology sector with which many of you will be familiar. Known as “Moore’s Law”, it was named after Gordon Moore, the engineer who co-founded Intel. In 1965, he predicted that the number of transistors on a microchip would likely double every year.1 This would lead to rapid advances in computer capacity and speed, to the increasing benefit of users and society as a whole.

The financial services landscape feels like it is operating under its own version of Moore’s Law in recent years, as technological advances upend traditional ways of doing business and bring significant and rapid change. Many of these changes are positive for consumers; some are not. From an industry perspective, they present both challenges and opportunities, something to which many of you can no doubt testify. I have no doubt that for compliance officers, the job gets ever more complex rather than less so, with a broader range of risks to be factored into your thinking.

From the Central Bank’s perspective, our mission is to serve the public interest by safeguarding monetary and financial stability and by working to ensure that the financial system operates in the best interests of consumers and the wider economy. So our challenge is to evolve similarly at pace, adapting our regulatory frameworks and systems of supervision to ensure we deliver on our mission in an increasingly complex landscape – while recognising that some of the issues we address, such as the potential for misconduct, are as old as the hills, dating back to the origins of money and exchange.

Our 2021 priorities are rooted in this twin reality.

An interconnected mandate:

As the Governor of the Central Bank has noted, our work is wide and varied, fundamentally interconnected and important for the wellbeing of the community.2 This ranges from monetary and macro-prudential policy, to firm-level supervision and consumer and investor protection. Our broad mandate allows us to take a comprehensive view and tackle challenges across the entire system, including as an integral part of the European Union and its institutions and frameworks.

Covid has been a demonstration of this. The pandemic has had a devastating effect on many families and individuals. The Government, frontline health staff and other key essential workers have led the primary response to the crisis, and the vaccination programme offers us all welcome hope.

The necessary measures to address the health emergency have had a negative effect on many businesses and household incomes, due to the associated economic disruption.

The Central Bank’s work to minimise the effects of that disruption can be seen across our mandate. At national and European level, as part of the Eurosystem and Single Supervisory Mechanism, the Central Bank has taken action seeking to ensure that the financial system absorbs the shock and is better placed to support households and businesses through the crisis.

The work over the last decade to ensure banks and other firms are financially and operationally resilient has also been important, allowing those firms to extend financial support and continue to lend when the shock hit.

Finally, we have worked assertively to protect consumers and investors through the crisis in line with our mandate, on issues such as distressed debt, business interruption insurance and much more besides.

Central Bank 2021 priorities:

Needless to say, a lot of our work this year will be pandemic-related, as we continue to deepen our understanding of its impacts and take necessary steps to enable the financial system to support the recovery.

But as Covid demonstrated, we need to remember that the next crisis will not necessarily mirror the last one. To the best of our ability, we need to look around corners, improve our understanding of longer-term risks, and manage and mitigate those within our power to do so. Therefore, in line with our current Strategic Plan, work will continue this year on strengthening resilience both within the system and at firm-level, addressing vulnerabilities and risks that give rise to potential stability concerns, and enhancing our organisational capability to deal with systemic threats such as climate change, cyber-security, and more.

Strengthening consumer and investor protection – the core work of financial conduct regulation - is another of our strategic priorities, and I will focus on this area in detail today. We deliver this task across the entirety of the Central Bank. For example, the stability of the system, and the resilience of firms within it, are as essential in protecting consumers and investors as our statutory codes of conduct, assertive supervision and robust enforcement powers.

Consumer protection:

Our Consumer Protection Outlook Report for 2021 will be published shortly and it sets out the risks and priorities to which we will be paying particular attention.

Our priorities are informed by our sectoral risk analysis along with our assessment, in any given year, of where our interventions have the greatest potential to minimise risks and ensure better outcomes for consumers.

This year we prioritise our focus on:

  • Continuing to drive firms to address Covid-19 system-wide issues impacting on consumers;
  • Delivering an intrusive, risk based approach to supervision;
  • Enhancing the consumer protection framework;
  • Driving firms to embed effective consumer focused cultures;
  • Influencing and developing appropriate regulation;
  • Ensuring the fair treatment of borrowers in financial distress; and
  • Continuing to act as a robust gatekeeper by rigorously assessing applications from firms and individuals.

This is not an exhaustive list. Nor is it intended as a tick-box exercise for firms. These are areas where firms can expect we will be paying close attention, but firms must not leave aside the identification and management of other potential risks that could lead to consumer and investor detriment.

While the Outlook Report will outline the risks and priorities in detail, there are some that I would like to touch upon briefly now.

Code Review:

The Consumer Protection Code is the cornerstone of our consumer protection framework. We are working to finalise our plans for a broad consultation on a substantial update of the Consumer Protection Code. The update will address emerging trends and risks across the rapidly changing financial services landscape, to ensure that it continues to deliver strong protections for consumers into the future. We expect to commence the public consultation on our proposals later this year.

Distressed debt and SFS consultation:

Distressed debt remains a key priority for the Central Bank and we continue to work with a wide range of organisations and stakeholders involved in supporting households and business borrowers.

Our focus is to ensure lenders have suitable supports in place to help borrowers in arrears. We are supervising lenders to ensure they have appropriate strategies, the necessary financial and operational resources, and a suite of appropriate and sustainable solutions to resolve distressed debt, whether it arose before or as a result of the pandemic.

Effective engagement between lenders and distressed borrowers is critical to preventing the build-up of arrears and successful restructuring of loans where debt-servicing capability has been reduced.

Our frameworks are designed to protect the interests of borrowers, particularly in times where they are experiencing financial difficulties because of illness or loss of income. The frameworks require all lenders to engage sympathetically and positively with the customers, with the objective at all times of supporting them through their difficulties.

Central to our approach on distressed debt is working with and listening closely to borrower representatives to ensure that our supervisory and policy responses continue to evolve. From their experience and feedback, it is clear that borrowers sometimes find the Standard Financial Statement (SFS), used to gather financial information from those experiencing financial distress, to be a challenging document to complete. We brought together a working group of stakeholders with experience in assisting borrowers in distress to listen and address these challenges.

The outcome of this work is that today we will launch a public consultation on changes to the SFS. The proposed enhancements aim to improve borrower understanding and facilitate completion of the SFS, as well as to reduce the information a borrower is required to provide in certain sections, while still ensuring that the SFS continues to fulfil its primary purpose of providing a comprehensive basis for a firm to undertake an assessment of the borrower’s individual circumstances.

We welcome any feedback on our proposals for the SFS and we will also be setting out other topics in the consultation paper on which we would welcome additional views.

Insurance – Business interruption and differential pricing:

From the moment the pandemic struck, we have prioritised business interruption issues, launching a system-wide supervisory examination, with a multi-disciplinary team dedicated to deploying the supervisory framework through rigorous challenge of firms. This work has delivered results. A number of firms accepted cover was provided and began processing valid claims last year – before either the UK or Irish court judgments on this issue. Following the recent High Court judgment, we reinforced our expectations to firms in respect of responsive policies. Where they have not already done so, they must take a proactive approach to communications with customers in respect of cover and the swift resolution of all valid claims.

We are monitoring compliance by the relevant firms with these expectations. We expect that all valid claims will be handled and paid by the firms in accordance with their claims handling processes and in compliance with their legal and regulatory obligations.

We will continue to closely challenge insurers to ensure all valid claims are paid and on how those claims are being managed and processed.

Our work on differential pricing is also continuing. We concluded our initial phase of this work with the publication of our interim report in December, which confirmed that the majority of personal insurance providers apply some form of differential pricing.

We are now working to complete our detailed analysis, which is essential to ensure a full market perspective and evidence-based conclusions. We will also conclude our consumer insights survey of approximately 5,500 insurance consumers. As differential pricing can be associated with some benefits for consumers, as well as costs, these insights will be essential to our overall conclusions.

In the meantime, our supervision of insurance providers will continue to ensure they implement the necessary requirements to address the concerns we set out in our recent industry letter. We expect to conclude our review and publish our findings, together with a potential consultation on proposals to further protect consumers, in July.

Investor protection:

Turning to investor protection, one area where our mandate continues to grow is of course the field of securities markets, including funds. Here, the events of 2020 are a sober reminder of the responsibility that firms bear to act in a manner that preserves the integrity of the market and protects the best interests of investors.

This includes firms’ responsibility to ensure effective management of liquidity risk in funds, where the Central Bank is involved in work at EU and international level to consider and apply the lessons of last year’s market volatility and to follow through on the findings of our various supervisory initiatives in this field.

Firms also bear the responsibility to observe the highest standards of conduct on our securities markets, and our recent findings in respect of J&E Davy illustrate just how severely misconduct can damage investor trust. I’ll return to this issue shortly.

Last month, we took the step of issuing a specific publication on the responsibility of firms for their conduct on securities markets. Our Securities Markets Risk Outlook Report3 detailed what we see as the key conduct risks to securities markets and set out our high-level expectations of what all firms involved in securities markets should do to identify, mitigate and manage those risks.

We also identified a number of areas where we will be focusing our supervisory attention in 2021. These include following through on the findings from our review of the ‘CP86’ framework for fund management companies’ governance, management and effectiveness, where the Q1 deadline for firms to put action plans in place to implement the findings of our 2020 thematic review is fast approaching.

It also includes completing our ongoing industry-wide review of compliance with the Market Abuse Regulation and commencing an ESMA Common Supervisory Action on costs and fees in UCITS funds. We work with fellow regulators and ESMA colleagues to enhance the level of EU supervisory convergence, as befits our shared ambition for more integrated capital markets that serve the best interests of investors across the EU.

Increasing our supervisory effectiveness:

The changes that have taken place in the nature, scale and complexity of securities markets activity conducted in and from Ireland, and the legislation governing that activity, has also prompted us to reorganise ourselves internally.

To better support this important work we have brought a number of key supervisory activities together to increase our effectiveness. Specifically:

  • Consistent with our strategic aim to enhance consumer protection, the supervision and authorisation of investment firms with a predominantly retail focus or with a traditional profile, including stockbrokers, is now located in our Consumer Protection Directorate, along with the Client Asset Supervision Team.
  • We have combined the prudential supervision of investment banks and wholesale-focused investment firms with our prudential supervision of other banks, all now located in our Credit Institution Directorate.
  • Earlier this year we combined the supervision of firms that operate trading venues with our other supervisory mandates that relate to those venues such as the Market Abuse Regulation, Short Selling Regulation, etc., all of which is now located in our Securities and Markets Supervision Directorate.
  • We are also in the process of establishing a new Funds Supervision Division, also located in our Securities and Markets Supervision Directorate. This will bring the authorisation and supervision of funds and fund service providers together into one combined team.
  • Finally, to ensure a holistic and further impactful approach to consumer and investor protection policy, Consumer Protection Policy will now be located in the Financial Regulation Policy and Risk Directorate (FRPRD).

These changes position us to deliver our mandate in this rapidly evolving field by combining to further build expertise and supervisory effectiveness in these specialist locations. It will simplify engagement between firms and their supervisors.

Policy priorities:

Capital Markets Union:

The pandemic has put a focus on the need for economic growth and recovery in the EU. Stronger and deeper capital markets can play a key role in supporting this recovery.

In September 2020, the European Commission published a revised Capital Markets Union Action Plan, which sets out 16 actions including legislative proposals and other initiatives to strengthen capital markets in Europe.

Within this action plan, our areas of particular focus in 2021 will be the proposed amendments in the areas of distribution, advice and disclosure to encourage greater retail participation; the proposed amendments to Solvency II to encourage greater long-term investment by insurance firms; and the proposed measures to strengthen supervisory coordination and convergence between national regulators. 

While the details of these proposals are still being developed, our focus will be to ensure that there continues to be proper and effective regulation of capital markets; that capital markets are trustworthy and resilient; and that EU capital markets sustainably serve the needs of investors and the wider economy.

Financing a sustainable economy:

This brings me to climate risk and sustainable finance. From the conduct perspective, 2021 will be a significant year for the rollout of the sustainable finance agenda.

Just last week the Sustainable Finance Disclosures Regulation (SFDR) came into effect. One part of a broader package, the purpose of the Disclosures Regulation is to ensure that firms and advisors provide appropriate information and transparency to investors on the sustainability of the financial products they are offering or advising upon.

Work on the Taxonomy – or classification system - continues. The Taxonomy will provide appropriate definitions to companies, investors and policymakers on which economic activities can be considered environmentally sustainable. To be included in the Taxonomy, activities will have to meet relevant environmental criteria. Both the SFDR and the Taxonomy should significantly reduce the risk of greenwashing, which is a key consumer and investor protection concern for the Bank.

More generally, we expect the European Commission to shortly publish the Renewed Sustainable Finance Strategy, and that it will include proposals regarding ecolabels for retail clients, green bonds, and green mortgages to mention a few. In short, the regulatory landscape, now and over the next few years, will see the embedding of sustainability into large swathes of financial services regulation. We intend to play our part in that journey and we expect that regulated entities will treat their sustainable finance obligations as matters of priority.


Done well, financial conduct regulation is a trinity. The regulatory framework – the rules we set to protect consumers and investors – is the first interlocking part. Supervision – monitoring firms’ compliance with those rules – is the second. The third is enforcement – holding regulated firms and the people who run them accountable where there are serious or significant breaches of regulatory requirements and standards.

I will come to our 2021 enforcement priorities in a moment. But first I want to say a few words about one of our recent enforcement outcomes, and the clear message for the wider regulated sector.

Our exhaustive enforcement investigation, reprimand and fine of J&E Davy has sparked very serious consequences for the firm. When the firm asks itself how things went so catastrophically wrong, it need only look in the mirror. I am mindful that our investigation was into a transaction carried out by a small number of individuals within the firm, not all staff.

But time and time again, I and colleagues in the Bank have repeatedly told senior leaders in firms: consumer and investor protection begins with the firms themselves. Firms are responsible for selling their customers products that meet their needs both now and into the future. Firms must have effective cultures and set the right standards.

Many firms meet those standards and put their expertise to good use for their customers. But others, of course, don’t.

And where misconduct arises, the Central Bank will take action with the aim of ensuring that the best interests of consumers and investors are protected and that markets operate in a fair, orderly and transparent manner.

2021 priorities:

Looking ahead, we will continue to prioritise enforcement action where we see serious instances of consumer or investor harm arising from the behaviour or failings of firms and individuals. As I have previously stated4, the enforcement investigations we are currently progressing encompass cases against firms and individuals under both the Administrative Sanctions Procedure and the Fitness and Probity regime – the Central Bank has and will continue to use its full toolkit in appropriate cases.

Our approach to enforcement also seeks to prevent misconduct through, amongst other things, effective operation of our fitness and probity regime. This includes a ‘gatekeeper’ role which aims to ensure that only people who are fit and proper occupy the most senior roles at the financial firms we regulate and supervise. In 2020, 19 PCF applications were withdrawn where the Central Bank challenged the applicant.

We have a very powerful suite of enforcement tools, and our track record demonstrates a commitment to using them punish wrongdoing, act as a signal to others and to build public trust. The Central Bank has concluded 141 enforcement actions, resulting in monetary penalties of over €128m, and has also issued 25 individual disqualifications and prohibitions.

As with all areas of the Bank’s regulatory framework, we will continue to enhance it where necessary, working at national and international level as appropriate.

Therefore we continue our focus on the introduction of enhancements to our individual accountability framework through a senior executive accountability regime (‘SEAR’), conduct standards for individuals and firms, and enhancements to the existing fitness and probity regime, as well as to our enforcement framework more broadly. We are working closely with the Department of Finance to progress these proposals.


Finally, let me say a few words about the area of AML/CFT. 2021 will be a significant year in this area with the completion of the transposition of the 5th Anti-Money Laundering Directive and the finalisation of the European Commission’s Action Plan following the public consultation last year.

With regard to 5AMLD, the most significant change is the introduction of Virtual Asset Service Providers (VASPs) as designated persons for AML/CFT purposes. The Bank has developed a registration and supervisory framework for this cohort of firms. In 2021, we will focus on assessing the AML/CFT frameworks of these firms to ensure that they are minimising their ML/TF risk.

Additionally, to reflect the changes arising from 5AMLD the Bank will, where relevant, update its Anti-Money Laundering and Countering the Financing of Terrorism Guidelines for the Financial Sector5 this year.

We believe that the EC Action Plan will be a game changer with respect to AML/CFT oversight across Europe. With respect to your firms, the implementation of the Plan will have a direct effect on how your firm is supervised and your obligations in relation to AML/CFT as a single supervisor and single rulebook in the form of an AML Regulation emerge.

The Central Bank will play its role in developing and implementing the Action Plan and in particular will prioritise ensuring that the European AML/CFT Framework results in a stronger, more cohesive and robust framework that also ensures a level playing field for firms that operate on a cross-border basis.

While the transposition of 5AMLD and the Action Plan will be areas of focus for the Bank, our main priority, as always, is to rigorously and effectively apply our risk-based supervisory framework, in order to identify and eliminate AML/CFT weaknesses in the financial sector.

It is only through increased focus by all of us, not just the Bank, on the ongoing appropriateness and effective implementation of AML/CFT frameworks that Ireland can reduce the use of the financial system by criminals and protect society.

I would strongly urge you to proactively assess your frameworks and implementation on an ongoing basis rather than waiting for our supervisory engagements to highlight weaknesses in your frameworks.


To conclude, I want to say a word about trust.

The philosopher Onora O’Neill, known for her contribution to the UK Banking Standards Board, relays the story of Confucius teaching his disciple about government and saying it needs three things: weapons, food and trust6. If forced to abandon something, a government should first abandon its weapons, then its food, but guard trust to the end, because “without trust, we cannot stand”.

Onora O’Neill emphasises that it isn’t only rulers and governments who need trust – but every one of us as individuals, every institution, and every profession.

The Central Bank’s vision is for a trustworthy financial system supporting the wider economy, where firms and individuals adhere to a culture of fairness and high standards.

This vision is backed up by comprehensive and enforceable legislation, rigorous supervision, and robust enforcement including powers of redress when consumers have suffered detriment.

But the first step in achieving this vision rests not with us, but with you.

The origins of the word “comply” lie in the Latin verb complēre, whose original meanings included to fulfil or to accomplish7.

Accomplishing the vision of a trustworthy financial system is something I believe we share a goal of achieving. It requires a strong culture of compliance, with firms and the people working in those firms acting in the best interests of their customers. Your work could not be more critical in this regard and I wish you well with it.

Thank you for your attention, and I look forward to your engagement and questions.

1In 1975 he revised this prediction to every two years. See MIT Technology Review, ‘We’re not prepared for the end of Moore’s Law’, 24 February 2020

2See: ‘The Year Ahead’, speech by Governor Makhlouf, 25 January 2021 -

3See: Securities Markets Risk Outlook Report 2021


5As there are no significant changes to the guidelines from 5AMLD, we will not be going to public consultation

6See: the 2002 BBC Reith Lectures, Lecture 1:

7Oxford English Dictionary.