Key Considerations that Form Part of an F&P Assessment
4.1 In addition to requirements outlined in other chapters of this guidance, the Central Bank has set out below its high-level expectations, which are relevant both for firms when performing F&P assessments and for PCF assessments performed by the Central Bank, with regard to:
- Capacity to perform a role
- Time commitments
- Individuals Holding Multiple PCF Roles
- Availability and accessibility of a PCF to the Central Bank,
- Conflicts of interest,
- Independence of mind and independence,
- Inherent responsibilities of PCFs,
- Level of experience required for certain PCFs,
- Level of knowledge/qualifications required for certain PCFs, and
- Collective suitability, including diversity.
4.2. Noting the range of sectors supervised by the Central Bank and the number and variety of PCF roles assessed, it is not possible to provide an exhaustive list of objective criteria for use in fitness and probity assessments. Any criteria to be used in assessments carried out by the Central Bank will be applied in a proportionate manner, given the varying nature, scale and complexity of firms.
Capacity to perform a role
Time Commitments
4.3. The standard of fitness includes a requirement that individuals have sufficient time to carry out the functions of the CF and PCF roles they occupy. It is important to consider the appropriateness of time commitment in proportion to the specific CF role. Firms should set out all relevant and necessary details to show that the individual has sufficient time to commit to the role.
4.4. Time commitments must form part of the assessment of an individual’s suitability for a PCF role. In this regard, a number of factors should be taken into account including the nature, scale and complexity of the firm, other mandates requiring time commitment such as other directorships, other CF/PCF roles held by the individual and the responsibilities attached to those mandates.
4.5. Existing Central Bank Corporate Governance Requirements and certain legislation set out requirements and expectations in relation to time commitments. Where specific requirements, guidance or legislation, on time commitments do not exist for a given sector, firms should consider best practice in line with the requirements and guidance set out below.
4.6. Corporate Governance Requirements for Credit Institutions
In accordance with the Corporate Governance Requirements for Credit Institutions, credit institutions should consider an individual’s time commitment in the context of the following requirements:
- Credit institutions must consider whether individuals proposed as board/committee members have the ability to commit sufficient time to the role;
- Directorship limits based on the number of financial directorships and non-financial directorships and the risk profile of the credit institution;
- Restriction on the Chair of the Board and the CEO in taking up other Chair/CEO roles; and
- Certain credit institutions, based on their risk profile, are required to have a dedicated CRO.
4.7. Corporate Governance Requirements for Insurance Undertakings
In accordance with the Corporate Governance Requirements for Insurance Undertakings, insurance undertakings should consider an individual’s time commitment in the context of the following requirements:
- Insurance undertakings must consider whether individuals proposed as board/committee members have the ability to commit sufficient time to the role;
- Directorship limits based on the number of financial directorships and non-financial directorships and the risk profile of the insurance undertaking;
- Restriction on the Chair of the Board and the CEO in taking up other Chair/CEO roles; and
- Certain insurance undertakings, based on their risk profile, are required to have a dedicated CRO.
4.8. Corporate Governance Requirements for Investment Firms and Market Operators
The Corporate Governance Requirements for Investment Firms and Market Operators require investment firms and market operators to assess whether individuals proposed as board/committee members have the ability to commit sufficient time to the role.
4.9. Corporate Governance Requirements for Captive Insurance and Captive Reinsurance Undertakings (Captives)
In accordance with the Corporate Governance Requirements for captives, board members are required to:
- Have sufficient time to devote to the role of director and associated responsibilities, and
- Indicate a time commitment expected from non-group directors in letter of appointment and on an annual basis.
The Corporate Governance Requirements for captives also set out directorship limits.
4.10. Fund Management Companies – Guidance
The Central Bank has set a risk indicator in terms of time commitment of fund management companies in the form of a joint test of:
- having more than 20 directorships; and
- having an aggregate professional time commitment in excess of 2000 hours.
The Fund Management Companies - Guidance also sets out useful information on what individuals should take into account when considering their time commitments.
4.11. Credit Union Act
Pursuant to Section 53(5) of the Credit Union Act, 1997 a director of a credit union is required to ensure that they have sufficient time to devote to the role and responsibilities of a director.
4.12. European Legislation and Guidance
Certain firms are also required to comply with European legislation and guidance that address time commitments of members of the management body and impose limits on the number of directorships that individuals may occupy.
For example, ESA Guidelines (PDF 814.75KB) set a framework for assessing time commitments. Firms in scope of the EBA and ESMA Guidelines should take into consideration the expectations set out therein. The ESA Guidelines require firms to set out all relevant and necessary details to show that the applicant has sufficient time to commit to the role.
Individuals Holding Multiple PCF Roles
4.13. Notwithstanding that there may be sectoral legislation which prohibits one individual from holding certain roles concurrently, it is possible that an individual can hold more than one PCF role. However, where approval is sought for an individual to perform more than one PCF role it should be noted that the individual must display competency for each role. Specifically, it must be demonstrated that the individual is fit for the role from a time commitment perspective and that the holding of such roles does not provide for conflict of interest. The individual must be approved by the Central Bank in respect of the performance of each PCF role.
Availability and accessibility of a PCF to the Central Bank
4.14. Requests for persons performing PCF roles to reside outside the State will be assessed on a case-by-case basis taking into consideration the nature, scale and complexity both of the firm and of the PCF role in question. In the overall assessment of fitness of a proposed PCF role-holder, the capacity of an individual to meet the Central Bank’s expectations while residing outside the State will be taken into account, as will the residence of other PCF role holders in the firm.
Sharing of PCF roles
4.15. The Central Bank acknowledges that the title of certain PCF roles by their nature can be held by several individuals, for example: directors, branch managers and Heads of Material Business Lines given that each individual would be holding a distinct role.
4.16. However, otherwise, in the Central Bank’s view, the sharing of a single PCF role in any form amongst several individuals is not permitted other than:
- In a job-sharing arrangement, or
- Where the role consists of more than one distinct business line, i.e. PCF-18 Head of Underwriting taking into consideration retail and corporate business lines; and PCF-19 Chief Investment Officer and PCF-29 Head of Trading taking into consideration different investment types i.e. equity and bonds.
4.17. In such cases, in determining if the situation is permissible, the arrangements should be assessed on a case-by-case basis by the firm taking into consideration the type of PCF role, the business model of the firm, common business practice in the industry, the rationale and the details of the role shared.
4.18. The sharing of PCF roles in firms is not permitted in any other cases and it is expected that there will be an individual PCF role holder for each respective PCF role in existence in the firm.
Conflicts of Interest
4.19. Conflicts of interest may affect an individual’s ability and suitability to carry out the functions of the CF & PCF roles in the best interests of the firm and its customers. Accordingly, it is necessary to identify, disclose, and manage or mitigate all existing and potential conflicts of interest.
4.20. When assessing the existence of conflicts of interest, firms should identify actual or potential conflicts of interest in accordance with the firm’s conflict of interest policy and assess their materiality. The firm should ensure that any existing or potential conflicts of interest are adequately mitigated or managed and will not adversely affect on the individual’s ability to perform the CF.
4.21. All actual and potential conflicts of interest have to be considered, including but not limited to, conflicts arising due to other roles, personal and professional relationships, remuneration structure, and other responsibilities within the organisational structure. For example, an individual who has been the CEO, executive director or a member of senior management of a firm during the previous 5 years should not advance to the role of Chairperson of that firm.
4.22. The Credit Union Act, 1997 also contains requirements on managing conflicts of interest and sets out certain circumstances where individuals are excluded from membership of the board of directors.
4.23. The firm is responsible for identification and assessment of existing and potential conflicts of interest as part of the due diligence. In assessing conflicts of interest, the Central Bank expects firms to take into account at least the following:
- Any personal relationship with the firm
- Any professional relationship with the firm
- Any financial interest in the firm
- Any affiliations to other firms
- Any political influence that may affect the firm
4.24. The existence of a conflict of interest does not mean that an applicant is not suitable for the role. It will depend on the materiality of the conflict and whether the conflict of interest can be adequately mitigated or managed.
Independence of Mind and Independence
4.25. The assessment of independence of members of the board, should differentiate between the notion of “independence of mind”, applicable to all members of a firms’ board, and the principle of “being independent”, required for certain members of the board. Both concepts are relevant to the assessment of the individual’s ability to act with integrity and competence, capacity and conduct of concurrent responsibilities.
Independence of Mind
4.26. Independence of mind ensures that independent judgement is exercised. All members of the board should have independence of mind regardless of the firm’s size, internal organisation and the nature, scale and complexity of its activities, and the duties and responsibilities of the specific position.
4.27. In considering the independence of mind of members of the board, firms should take into account whether board members have the necessary behavioural skills, including: (a) strength, judgement and resilience to effectively assess and challenge the proposed decisions of other members of the board; (b) being able to ask questions of members of the board; and (c) being able to resist “group-think”, to be able to effectively assess, challenge, oversee and monitor management decision-making.
4.28. Acting with independence of mind is a pattern of behaviour, shown in particular during discussions and decision-making at the board. When considering the required behavioural skills of a member of the board, or of a proposed member of the board, past and ongoing behaviour, in particular within the firm itself, should be taken into account. To act with independence of mind in a position becomes more evident once a board member has assumed their role.
4.29. For example, as outlined by the ECB, a person’s inaction with regard to supervisory findings “may indicate a pattern of behaviour of failing to engage actively in their duties, failing to assess and actively challenge proposed decisions or an inability to take sound, objective and independent decisions and display judgement when performing functions and tasks”. This can raise concerns as to a person’s ability to demonstrate courage, conviction and the ability to resist and question groupthink.
Independence
4.30. The independence of individuals applying for the role of PCF-2B – Independent Non-Executive Director shall form part of the assessment for that role.
4.31. Independence is defined in the Central Bank’s Corporate Governance Requirements. Independence is also defined in sectoral Codes and European legislation.
4.32. The fact that a member is considered as “being independent” does not mean that the member of the board should automatically be deemed to be “independent of mind” as the member might lack the required character and behavioural skills mentioned above.
The Central Bank’s Corporate Governance Requirements
4.33. The Central Bank’s Corporate Governance Requirements for Credit Institutions, Insurance Undertakings, Investment Firms and Market Operators respectively define independence as the ability to exercise sound judgement and decision making independent of the views of management, political interests or inappropriate outside interests.
4.34. The following criteria shall be considered and given reasonable weight when determining if a director is independent:
- Any financial or other obligation the individual may have to the relevant firm or its directors,
- Whether the individual is or has been employed by the relevant firm or a group entity in the past and the post(s) so held,
- Whether the individual is or has been a provider of professional services to the relevant firm in the recent past,
- Whether the individual represents a significant shareholder
- Circumstances where the individual has acted as an independent non-executive director of the relevant firm for extended periods,
- Any additional remuneration received in addition to the director’s fee, related directorships or shareholdings in the relevant firm, and
- Any close business or personal relationship with any of the relevant firm’s directors or senior employees.
4.35. Where corporate governance requirements do not exist for a particular sector, the definition of independence as set out in the Central Bank’s Corporate Governance Requirements above in assessing the independence of individuals proposed for PCF-2B should be applied.
4.36. In addition, other relevant requirements and guidance on independence issued by European legislators or European Supervisory Authorities should be taken into consideration.
Requirements of a Role/Inherent Responsibilities
4.37. In the first instance, the assessment of whether or not an individual is competent and capable to carry out a particular PCF role will be focused on the requirements of the role. In this regard, the inherent responsibilities of specific PCF roles, predominantly board members and the heads of control functions, have been defined in Table 3 to Table 8 (below).
Responsibilities Prescribed in the Credit Union Act, 1997
4.38. For certain CUPCF roles in credit unions, further detailed responsibilities are prescribed in the Credit Union Act, 1997. Detail on these specific CUPCF roles is set out below, and credit unions should refer also to the Credit Union Act, 1997 in this regard.
4.39. Chair of the Board: Section 55A of the Credit Union Act, 1997 Act refers to the Chair of the board of directors and prescribes certain functions for which the Chair is responsible, such as: ensuring that meetings of the board of directors operate in an efficient and effective manner, encouraging constructive discussions and debate, promoting effective communication between members of the board of directors and between the board of directors and the executive, and ensuring that conflicts of interest are appropriately managed by the board of directors.
4.40. Manager: Section 63A of the Credit Union Act, 1997 refers to the Manager and prescribes that the Manager of a credit union has responsibility for the day-to-day management of the credit union’s operations, compliance and performance of the credit union. Section 63A (4) of the Credit Union Act, 1997 prescribes some of the functions for which a Manager of a credit union is responsible. In addition, the manager serves as the main link between the board of directors and the executive.
4.41. Risk Management Officer: Section 76C of the Credit Union Act, 1997 refers to the Risk Management Officer (RMO). The board of directors is required to appoint a person with the necessary authority and resources to manage the risk management function within the credit union. The RMO is responsible for identifying, assessing, reporting and monitoring all internal and external risks that could affect the credit union including risks to its employees, members, reputation and assets, and assisting the Manager with managing and mitigating those risks.
4.42. Head of Internal Audit: Section 76K of the Credit Union Act, 1997 Act requires that the board of directors of a credit union appoints a person to provide independent internal oversight, and to evaluate and improve the effectiveness of the credit union’s risk management, internal controls and governance processes. The internal audit function is required to report the results of its evaluations and recommendations to the board of directors (or the audit committee, where one exists).
Level of Knowledge and Experience
4.43. The assessment of whether or not an individual is competent and capable to carry out a particular PCF role will also focus on the individual’s level of knowledge and experience.
4.44. It is the Central Bank’s expectation that individuals should possess sufficient knowledge and experience commensurate with the requirements of the role and the nature, scale and complexity of the firm.
4.45. The focus is on whether the individual has appropriate financial services expertise and relevant experience of the specific sector, as well as an appropriate qualification where relevant.
4.46. There are a number of factors which are relevant in an assessment as to whether an individual has an appropriate level of experience for a role. For example, in addition to length of service, there are a number of considerations to be taken into account including, in relation to the individual’s previous roles:
- The nature, scale and complexity of the firm(s) in which the individual held the role(s);
- Their actual responsibilities;
- The span of their control/number of subordinates;
- The nature of activities of the firm; and
- The actual relevance of the recent experience gained to the role being applied for.
4.47. Given there are numerous factors to be considered as set out above, it is not possible to be definitive regarding minimum years of experience required for all specific roles. However, there are some high-level expectations which will be taken into account in this regard. For example, the ECB have set thresholds for the presumption of sufficient experience for the CEO, Chair and board members (executive and non-executive) which have been set out in Table 3 to Table 8.
4.48. These thresholds for the presumption of sufficient experience currently apply to credit institutions for which the ECB is the competent authority and can be considered a benchmark for other Central Bank regulated firms which could be deemed to have a similar risk profile or are similar in terms of their nature, scale and complexity.
4.49. For smaller, less complex firms shorter timeframes may be considered appropriate. In this regard, high-level expectations which will be taken into account are set out in Table 3 to Table 8.
4.50. In assessing an individual’s level of experience, the general approach is that where the individual’s level of experience is in line with or in excess of the number of years set out above, the individual is generally deemed to have sufficient experience, except in situations where there are concerns regarding same.
4.51. It is also acknowledged that there may be sectoral or firm specific circumstances where an individual does not hold the years of experience set out in Table 3 to Table 8 below, but may be considered suitable for the role due to, for example, firm or role specific factors that should be taken into account. Accordingly, an individual who does not hold the years of experience set out could still be considered fit and proper where there is an appropriate justification.
Board Members
4.52. Noting the importance of the roles played by board members, and that the majority of PCF approvals relates to director roles, the Central Bank considers it appropriate to provide additional clarity with regard to its minimum expectations of these roles.
Table 3 - Executive Director
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Directing the business of the firm | Propose strategies to the board and, following challenging board scrutiny, to execute the agreed strategies to the highest possible standards. | For firms subject to ECB assessment/ firms (other than credit unions) which are similar in terms of their nature, scale and complexity: Five years of recent practical experience in areas related to banking or financial services at senior level managerial positions.
For smaller, less complex firms (other than credit unions): Four years of recent practical experience in areas related to financial services that are relevant to the role and proportionate to nature, scale and complexity of the [proposed] regulated entity. | Knowledge and understanding of relevant financial services legislation, as well as of the business, risks and material activities of the relevant firm to enable them to contribute effectively, and that they should have relevant skills, experience and knowledge (such as accounting, auditing, risk management knowledge and/or specialist business knowledge that complements the firm’s strategy where appropriate). |
Table 4 - Non-executive Director
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Overseeing and monitoring the strategy and management of the firm | - To ensure that there is an effective executive team in place;
- To participate actively in constructively challenging and developing strategies proposed by the executive team;
- To participate actively in the board’s decision-making process;
- To participate actively in board committees (where established); and
- To exercise appropriate oversight over execution by the executive team of the agreed strategies, goals and objectives and to monitor reporting of performance.
| Three years of (recent) relevant practical experience. Such experience could be gained at, for example, high-level managerial positions ( or in administrative or academic positions, amongst others, depending on the position held. | Knowledge and understanding of the business, risks, material activities and/or specialist knowledge that complements the firm’s strategy, to enable them to contribute effectively.
Knowledge and understanding of relevant financial services legislation.
Capabilities and knowledge to provide an independent challenge to the executive directors of the board.
|
Table 5 - Independent Non-executive Director
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Overseeing and monitoring the strategy and management of the firm | - To ensure that there is an effective executive team in place;
- To participate actively in constructively challenging and developing strategies proposed by the executive team;
- To participate actively in the board’s decision-making process;
- To participate actively in board committees (where established); and
- To exercise appropriate oversight over execution by the executive team of the agreed strategies, goals and objectives and to monitor reporting of performance;
- Bring an independent viewpoint to the deliberations of the board that is objective and independent of the activities of the management and of the firm.
| Three years of (recent) relevant practical experience. Such experience could be gained at, for example, high-level managerial positions or in administrative or academic positions, amongst others, depending on the position held. | Knowledge and understanding of the business, risks, material activities and/or specialist knowledge that complements the firm’s strategy, to enable them to contribute effectively.
Knowledge and understanding of relevant financial services legislation.
Capabilities and knowledge to provide an independent challenge to the executive directors of the board. |
Table 6 - Chair of the Board
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Overseeing meetings of the Board, leading and overseeing its performance | - Attend and chair board meetings;
- Lead the board, encourage critical discussions and challenge mind-sets;
- Promote effective communication between executive and non-executive directors.
| For firms subject to the ECB assessment/ firms (other than credit unions) which are or similar in terms of their nature, scale and complexity: Ten years of (recent) relevant practical experience. Such experience could be gained at, for example, at senior level managerial positions or in administrative or academic positions, amongst others, depending on the position held.
For smaller, less complex firms other than credit unions: Eight years of (recent) relevant practical experience. Such experience could be gained at, for example, at senior level managerial positions or in administrative or academic positions, amongst others, depending on the position held.
For credit unions: A minimum of two years’ experience as a director of the credit union along with experience gained from sitting on the various Credit Union committees. | Relevant financial services expertise, qualifications and experience to ensure that the Chair has the necessary knowledge, skills and experience to comprehend each of the following: - The nature of the firm’s business, activities and related risks;
- Their individual direct and indirect responsibilities and the board’s responsibilities; and
- The firm’s financial statements.
In addition for credit unions: A qualification as a Credit Union Advisor or an Advanced Certificate in Credit Union Practice (ACCUP) would be very beneficial |
Table 7 - Chief Executive Officer/Credit Union Manager
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Overall responsibility for managing and steering the business activities of the firm | - Top executive responsible for the firm with ultimate executive responsibility for the firm’s operations, compliance and performance;
- Serve as the main link between the board and the executive.
- The Credit Union Manager is responsible for the administration and efficient daily operation of the Credit Union office, including operations, lending, product sales, customer service, security and safety in accordance with the CU's objectives.
| For firms subject to the ECB assessment/ firms (other than credit unions) which are or similar in terms of their nature, scale and complexity: Ten years of recent practical experience in areas related to banking or financial services. This should include a significant proportion at senior level managerial positions.
For smaller, less complex firms (other than credit unions): Eight years of recent relevant practical experience in areas related to financial services and the specific sector, as appropriate. This should include a significant proportion at senior level managerial positions.
For credit unions: At least five years’ experience in a similar role. | Relevant financial services expertise and relevant experience of the specific sector, as well as appropriate, qualifications, transferable skills and experience to ensure that the CEO/Credit Union Manager has the necessary knowledge, skills and experience to comprehend fully each of the following: - The nature of the firm’s business, activities and related risks;
- Their individual direct and indirect responsibilities and the board’s responsibilities; and
- The firm’s financial statements.
Personal qualities, professionalism and integrity to carry out their obligations. |
Table 8 - Sole Trader/Single Director
| Inherent Responsibility | Summary of role | Level of experience | Level of knowledge |
|---|
| Overall responsibility for managing and steering the business activities of the firm/ Directing the business of the firm | - Executive responsible for the firm with ultimate responsibility for the firm’s operations, compliance and performance.
| Sole traders and executive directors within a single director company seeking PCF approval need to possess sufficient practical experience commensurate to perform the role. Applicants should have four years of recent practical experience, in areas related to the relevant financial services, as is proportionate to the nature, scale and complexity of the entity, and be able to demonstrate the skills and ability to run the regulated entity appropriately. | Individuals seeking approval as PCF-9, Sole Traders or as PCF-1, Executive Director in a single director firm need to possess the necessary:
Qualifications commensurate to perform the role.
Knowledge and understanding of relevant financial services legislation.
Knowledge of the regulatory requirements, risks, business strategy and material activities of the firm; of the services and/or products provided by the firm.
Knowledge of the consumer protection risks and necessary mitigants related to those services and/or products, to enable them to run the regulated entity effectively. |
Heads of Control Functions
4.53. In addition, noting the significance of the roles of the heads of the control functions, the Central Bank also considers it important to set out its expectations in the context of this cohort of PCF roles.
Table 9 - Head of Control Functions
| Inherent Responsibility | Summary of role | Level of knowledge |
|---|
| Chief Risk Officer/Risk Management Officer | Overall responsibility for managing the firm’s risk function and reporting directly to the Board or relevant subcommittee, or both, on risk management matters. | - Ensuring that the firm has effective processes in place to identify and manage the risks to which the firm is or might be exposed;
- Maintaining effective processes to monitor and report the risks to which the firm is or might be exposed;
- Promoting sound and effective risk management both on a solo and consolidated basis;
- Ensuring the system of risk management shall promote an appropriate risk culture at all levels of the firm and shall be subject to regular internal review;
- Facilitating the setting of the risk appetite by the board; and
- Providing comprehensive and timely information on firm’s material risks which enables the board to understand the overall risk profile of the insurance undertaking.
- The risk management officer in a credit union is responsible for identifying, assessing, reporting and monitoring all internal and external risks that could affect the credit union. They assist the manager with managing and mitigating identified risks and have a reporting line to the board of directors.
| Relevant expertise, qualifications and experience. |
| Head of Compliance | Overall responsibility for managing the operation of the compliance function and reporting directly to the Board or relevant subcommittee, or both, on compliance matters. | - Advising the board on measures to be taken to ensure compliance with applicable laws, rules, regulations and standards, and assessing the possible impact of any changes in the legal or regulatory environment on the institution’s activities and compliance framework;
- Ensuring that compliance monitoring is carried out through a structured and well-defined compliance monitoring programme and that the compliance policy is observed;
- Ensuring that the compliance function verifies, in close cooperation with the risk management function and the legal unit, that new products and new procedures comply with the current legal framework and, where appropriate, with any known forthcoming changes to legislation, regulations and supervisory requirements; and
- Reporting to the board/relevant sub-committee and communicating as appropriate with the risk management function on the firm’s compliance risk and its management, to ensure that the findings of the compliance function are taken into account by the board and the risk management function in decision-making processes.
| Sufficient knowledge, skills and experience in relation to compliance and relevant procedures, and should have access to regular training. |
| Head of Anti-Money Laundering and Countering the Financing of Terrorism Compliance | Overall responsibility for managing the firm’s anti-money laundering and countering the financing of terrorism compliance functions, and reporting directly to the board on anti-money laundering and countering the financing of terrorism compliance matters. | - Advising the board on measures to be taken to ensure compliance with applicable laws, rules, regulations and standards, and assessing the possible impact of any changes in the legal or regulatory environment on the institution’s activities and AML/CFT compliance framework;
- Oversight of the firms AML/CFT business wide risk assessment and customer risk assessment and development of the AML/CFT framework to mitigate those risks identified;
- Ensuring that AML/CFT compliance monitoring is carried out through a structured and well-defined monitoring programme and that the AML/CFT compliance policy is observed;
- Ensuring that the AML/CFT compliance function verifies, in close cooperation with the risk management function and the legal unit, that new products and new procedures comply with the current legal framework and, where appropriate, with any known forthcoming changes to legislation, regulations and supervisory requirements; and
- Reporting to the board/relevant sub-committee and communicating as appropriate with the risk management function on the firm’s AML/CFT compliance risk and its management, to ensure that relevant findings are taken into account by the board and the risk management function in decision-making processes.
| Sufficient knowledge, skills and experience in relation to AML/ CFT compliance and relevant policies, controls and procedures; and should have access to regular training.
Knowledge and understanding of the firm’s business model and the sector in which the firm is operating, and the extent to which this business model exposes the firm to ML/TF risks. |
| Head of Internal Audit | Overall responsibility for managing the operation of the firm’s internal audit function and reporting directly to the Board or relevant subcommittee, or both, on internal audit matters. | Responsible for assessing: - The appropriateness of the firm’s governance framework;
- Whether existing policies and procedures remain adequate and comply with legal and regulatory requirements and with the risk strategy and risk appetite of the institution;
- The compliance of the procedures with the applicable laws and regulations and with decisions of the board;
- Whether the procedures are correctly and effectively implemented (e.g. compliance of transactions, the level of risk effectively incurred, etc.); and
- The adequacy, quality and effectiveness of the controls performed and the reporting done by the defence business units and the risk management and compliance functions.
For credit unions: The internal audit function has a responsibility to provide internal oversight and to evaluate and improve the effectiveness of the credit union’s risk management, internal controls and governance processes. The internal audit function is required to be capable of operating independently to management and without undue influence over its activities. | Relevant expertise, qualifications and experience. |
| Head of Actuarial Function (HoAF) | Overall responsibility for managing the operation of the firm’s actuarial function. | Responsible for: - The tasks of the actuarial function under Regulation 50 of Solvency II S.I. No. 485 of 2015. The tasks of the actuarial function are further expanded in Article 272 of Commission Delegated Regulation 2015/35 and various guidelines published by the European Insurance and Occupational Pensions Authority.
- The tasks of the Head of Actuarial Function outlined in the Central Bank’s Domestic Actuarial Regime and Related Governance Requirements under Solvency II. These tasks (and how the Central Bank expect HoAFs to meet them) are further expanded upon in the Central Bank’s Guidance for (Re)insurance undertakings on the Head of Actuarial Function Role.
| Prerequisite level of experience commensurate with the requirements of the HoAF role with a minimum of: - Five years (within the last ten years) relevant actuarial experience.
- One year’s recent experience of reserving relevant to the market in which the majority of business is written.
- One year’s experience of any exotic or specialised type of business written.
The HoAF must be a member of a recognised actuarial association. The Central Bank’s expectation is that the role should be carried out by a qualified actuary. In exceptional circumstances a non-qualified actuary may be considered.
The HoAF should be capable of influencing Board decisions in key areas of actuarial expertise and of contributing to the effective implementation of the Risk Management System. |
| Head of Finance | Overall responsibility for managing the financial resources, financial planning and financial reporting of the firm and reporting directly to the Board or relevant subcommittee, or both, on financial affairs | - Overseeing the financial activities of an entire firm;
- Financial planning and monitoring cash flow;
- Analysing the firm's financial strengths and weaknesses and suggests plans for improvement; and
- Overseeing the accounting and finance departments and for ensuring that the firm's financial reports are accurate and completed on time.
- The Head of Finance within a credit union has overall responsibility for compilation, analysis and presentation to the board/management team of the credit union's financial position. This would include analysis of past financial performance including completion of Central Bank required financial returns (e.g. Prudential Return, Annual Financial Statements) and financial assessment of the credit union's future business plans as reflected in the strategic plan. The Head of Finance is also likely to be the key liaison in the credit union with the external audit function.
| Sufficient level of experience commensurate with the requirements of the role. The Central Bank’s expectation is that the Head of Finance of a firm (other than credit unions) must have an appropriate accounting qualification however it is acknowledged that in some circumstances (e.g. where an individual has an appropriate alternative qualification, such as an actuarial qualification) a non-qualified accountant may be considered.
For credit unions: Whilst this will be considered on a case by case basis – the Central Bank’s expectation is that the Head of Finance of a credit union would have an appropriate financial qualification and / or previous relevant experience in a similar role. |
Collective Suitability, Diversity and Inclusion
Collective Suitability of the Board
4.54. In order to provide efficient and effective oversight, the board needs to possess adequate collective knowledge, and diversity of skills and experiences to be able to understand the firm’s activities, including the main risks and the broader financial context. Where European and domestic legislation imposes a requirement for a firm to ensure that the board is collectively suitable, the Central Bank has the following expectations in line with the Corporate Governance Requirements for relevant firms and relevant ESA Guidelines.
4.55. The Corporate Governance Requirements set out detailed provisions on the role of the board as well as the role of individual directors including that both the role and the responsibilities of the board must be clearly documented and directors must have “a full understanding of their individual direct and indirect responsibilities and collective responsibilities”.
4.56. Boards need to have the right composition of members, having regard to the need for diverse perspectives, experience and knowledge. The composition of the board should reflect the knowledge, skills and experience necessary to fulfil its responsibilities. The completion of a board skills matrix is required under Appendix 1 of the Central Bank’s Corporate Governance Requirements for some credit institutions and insurance undertakings. However, all firms may consider using this tool as good practice to help assess the initial and ongoing suitability of the board, and to identify any skills gaps at present or in the future.
4.57. The members of the board should be able to take appropriate decisions collectively.
4.58. All areas of knowledge required for the firm’s business activities should be covered by the board collectively with sufficient expertise among members of the board. The board should have sufficient knowledge in each area to allow a discussion of decisions to be made. The members of the board should collectively have the skills to present their views and to influence the decision-making process within the board.
4.59. Members of the board must have sufficient knowledge, skills and experience to fulfil their functions and should ensure that they are up-to-date. This also includes an appropriate understanding of those areas for which an individual member is not directly responsible but still is collectively accountable together with the other members of the board. This requires understanding the firm’s governance arrangements and structure which may require the member to commit time to undertake continuous learning and development. Firms should have in place internal policies that ensure that these requirements are met.
4.60. The relevant collective knowledge, skills and experience of the board will depend on the key characteristics of the firm.
4.61. The assessment of the initial and ongoing collective suitability of the board is the responsibility of the firm. While the assessment of the collective suitability of the board is also carried out by the Central Bank for supervisory purposes, the responsibility to assess and ensure the ongoing collective suitability of the board continues to remain with the firm.
Diversity and Inclusion
4.62. The Central Bank considers that diversity and inclusion in all their forms are important components of well-managed, financially resilient, strategically-minded firms.
4.63. Diversity means the situation whereby the characteristics of the members of the board, including their age, gender, geographical provenance and educational and professional backgrounds, that allow a variety of views. This is not an exhaustive list of all types of diversity.
4.64. Diversity and inclusion in all their forms, are core to fostering an effective culture in a firm. To facilitate independent opinions and critical challenge, the members of the board should be sufficiently diverse.
4.65. Diversity must be supported by an inclusive culture, which facilitates and supports members of the board contributing so that diverse views are shared.
4.66. In order to achieve diversity, firms should respect the principle of equity and equality of opportunities. This would assist firms in taking measures to ensure a more diverse pool of candidates for positions within the board. In this respect a gender-balanced composition of the board is also of particular importance. While data limitations can mean that there is a particular focus on diversity from a gender perspective, the Central Bank does not see this as the only element of diversity.
4.67. While the diversity of the board is not a criterion for the assessment of the members’ individual suitability, diversity should be taken into account by firms when selecting and assessing members of the board in the context of collective suitability.
4.68. The Central Bank’s Corporate Governance Requirements for credit institutions and insurance undertakings and certain sector specific legislation require firms to establish a written policy on diversity with regard to selection of individuals for nomination to become members of the board. The Central Bank supports establishment of a diversity policy in all firms as good practice.
4.69. In the case of sectors where there are no formal diversity requirements, firms are encouraged, as good practice, to have diversity and inclusion internal policies in place for the board of the firm.