Opening Statement by Gerry Cross Director of Financial Regulation - Policy & Risk at Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach

03 November 2021 Speech

Gerry Cross

Chair, Committee Members,

We welcome the opportunity to discuss the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 as published by the Minister for Finance in July. I am joined by my colleague Seána Cunningham, Director of Enforcement and Anti-Money Laundering.


The Central Bank is responsible for maintaining monetary and financial stability and ensuring the financial system works in the interests of the community. The proper and effective regulation of financial services providers is an essential component of that mission. Households and businesses reliant on financial services require a resilient and trustworthy sector, in which firms and individuals adhere to a culture of fairness and high standards.

Experience has shown that in order for a regulatory framework to work well, it should stimulate high quality governance and behaviours within firms. Firms need to be effectively managed and organised, individuals need to be clear what they are responsible for, and both need to be accountable if they fall short of expected standards.

The Central Bank’s Behaviour and Culture Report into Irish Retail Banks recommended the introduction of an enhanced Individual Accountability Framework for individuals working in regulated firms.

Our recommendations are reflected in the four key components of the General Scheme.These are:

  • Conduct Standards which set out the standards of behaviour the Central Bank expects of regulated firms and individuals working in financial services, with additional standards for senior executives;
  • Senior Executive Accountability which requires clarity as to where responsibility and decision-making lie for different aspects of a firm’s business, and accountability in discharging those responsibilities;
  • Enhancements to the current Fitness & Probity (F&P) Regime1 to strengthen the onus on firms to proactively assess individuals in controlled functions on an ongoing basis; an
  • An improved enforcement process, to ensure that we can pursue individuals for misconduct without first having to demonstrate a breach of regulation by the firm itself.2

These components complement each other to incentivise positive behaviours and promote improved governance and culture within firms. They will provide a proportionate and predictable framework to help the financial sector fulfil its role of supporting the economy and serving the best interests of consumers and other users of financial services.

Existing Approach

The Central Bank operates a framework of assertive risk-based supervision underpinned by the credible threat of enforcement. As at the end of September 2021, the Central Bank has concluded 144 enforcement actions, imposing fines amounting to more than €166.5 million under the Administrative Sanctions Procedure (ASP). Individual accountability is already a core focus of our work. We have pursued and sanctioned individual wrongdoing by way of monetary penalty and disqualification. In our gatekeeper role we have prevented unfit individuals being appointed to senior positions in the financial services industry. The proposed new framework will enhance the effectiveness of our processes for holding firms and individuals to account.

General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021

Turning now to the key aspects of the General Scheme:

The proposed conduct standards will apply to all regulated firms, irrespective of sector, comprising Common Conduct Standards for individuals carrying out Controlled Functions (CFs), Additional Conduct Standards for senior executives, and the important general standards for businesses themselves.

The conduct standards set out the behaviour expected of firms and their staff, including obligations to conduct themselves with honesty and integrity, to act with due skill, care and diligence, and in the interest of consumers. We consider these to be the basic standards that should underpin the provision of financial services and the relationships of trust that are central in this area. We also believe they are the standards to which most firms and individuals already hold themselves. The additional conduct standards will be applied to senior executives and require them to meet a standard of reasonable care in how they manage their respective areas of the business.

Effective culture requires both firms and the individuals within them to adhere to high standards. The proposed framework therefore retains the existing accountability requirements for the collective actions of firms and adds effective participation in collective decision-making as a component of individual accountability. We believe this represents an important integration of the two components.

The Senior Executive Accountability element of the framework requires in-scope firms to set out clearly and comprehensively where responsibility and decision-making lie in order to ensure transparency. Firms will be required to provide a Statement of Responsibilities for each Senior Executive Function which clearly sets out their role and responsibilities, in addition to a Management Responsibilities Map for the firm documenting key management and governance arrangements.

We expect that implementation of the SEAR will support senior management in implementing an effective governance framework by identifying how risks are being managed and any gaps which may arise. This has been the experience in the UK whereby the Senior Manager and Certification Regime has been credited by firms as providing a sound framework for enhancing governance.

The Fitness and Probity framework will be enhanced by including a requirement for firms to certify on an annual basis that individuals exercising a controlled function remain fit and proper. The introduction of a positive duty on firms to certify each CF strengthens the focus on the responsibility of firms for the conduct of their staff and their corporate culture.

Finally, the Central Bank’s primary enforcement process, the ASP, will be enhanced to enable us to take enforcement action against individuals without first needing to establish wrongdoing by their firm.

The General Scheme provides the Central Bank with regulation-making and guidance powers. Once the Bill has been enacted, we will move quickly to consult on these. 


In conclusion, the objective of the IAF proposals is to ensure good standards of governance and behaviour amongst financial firms to the ultimate benefit of consumers and investors while respecting the key principles of proportionality and predictability. It will help firms identify risks before they crystallise, facilitate greater internal challenge, and ultimately should result in fewer serious issues in the sector. Where serious issues do arise, however, we will not hesitate to take enforcement action, using the enhanced toolkit of the framework to ensure individual as well as firm-level accountability.

We welcome the publication of the General Scheme and will continue to work with the Department, the Oireachtas and this Committee to progress this important legislation. We look forward to your questions.

[1] The Fitness and Probity Regime applies to persons in key positions within regulated financial services providers (referred to in the legislation as controlled functions (‘CFs’) and pre-approval controlled functions (‘PCFs’)). The core function of the Fitness and Probity Regime is to ensure that persons in senior positions are competent and capable, honest, ethical and of integrity and financially sound.

[2] Under the Administrative Sanctions Procedure, the Central Bank may only pursue a ‘person concerned in the management’ of a firm where (1) a case has first been proven against the firm, and (2) the Central Bank can then prove that the individual participated in a breach by the firm. This is often referred to as the “hurdle of participation”, which would be removed under the proposals in the Bill.