SEAR And The Individual Accountability Landscape: The Central Bank (Individual Accountability Framework) Bill 2022

• Published date: 21 September 2022
• Subject Matter: Finance and Banking, Employment and HR, Financial Services, Contract of Employment
• Law Firm: Walkers
• Author: Mr Niall Esler, Shane Martin, Conor Daly, Nicholas Blake-Knox, Eimear Keane, Damien Barnaville and Susan Battye

Executive Summary

The Central Bank (Individual Accountability Framework) Bill 2022 (the "IAF Bill") was published on 28 July 2022 by the Department of Finance, following the publication of the General Scheme of the IAF Bill ("General Scheme") in July 2021.

The main purpose of the IAF Bill is to improve accountability and trust in the financial sector by creating a framework which contributes to bringing about cultural and practical change in the banking sector and throughout the financial services industry at large.

The IAF Bill mirrors to a great extent the content of the General Scheme although it includes important changes to the scope of the conduct standards and the Central Bank of Ireland's ("CBI") investigative powers.

The IAF Bill can be divided into four key pillars which we will address in turn in this briefing note:

Once enacted, which might be as soon as Q4 2022, the IAF Bill will introduce significant changes to the regulation and supervision of regulated financial service providers ("RSFP") and persons performing controlled functions ("CF") and pre-approval controlled functions ("PCF"), through, inter alia, the introduction of the Senior Executive Accountability Regime ("SEAR"), business and conduct standards, and an enhanced fitness and probity ("F&P") regime. The CBI's administrative sanctions regime will also be adjusted, removing some of the difficulties that currently exist for enforcement in respect of individuals.

The CBI has issued a statement accompanying the publication of the IAF Bill, confirming that it will launch a public consultation on the implementation of the Individual Accountability Framework once the legislation has been passed. Firms will have an additional opportunity at that stage to feed in to the development of the relevant regulations and guidelines which will be necessary to implement the regime.

The IAF Bill will amend three main pieces of legislation:

• The Central Bank (Supervision and Enforcement) Act 2013 (the "2013 Act");
• The Central Bank Reform Act 2010 (the "2010 Act"); and
• The Central Bank Act 1942 (the "1942 Act").

"controlled function" means-

(a) in relation to a RFSP, a function prescribed in regulations made under section 20 of the Central Bank Reform Act 2010, as a controlled function in relation to a RFSP, and

(b) in relation to a holding company, means a function prescribed in regulations made under section 20 of the Central Bank Reform Act 2010, as a controlled function in relation to a holding company

"pre-approval controlled function" shall be construed-

(a) in relation to a RFSP in accordance with section 22(1) of the Central Bank Reform Act 2010, and

(b) in relation to a holding company, in accordance with section 22(1A) of the Central Bank Reform Act 2010.

1. SEAR

SEAR is to be implemented by way of amendments to the 2013 Act by granting the CBI "regulation-making powers" to impose obligations on in-scope RFSPs regarding their governance and management arrangements.

The IAF Bill does not specify the sectors to be included in SEAR as this will be provided for by CBI's implementing regulations, however, the General Scheme noted that it is intended for SEAR to initially apply to the following sectors:

• Credit institutions (excluding credit unions);
• Insurance undertakings (excluding reinsurance undertakings captive (re)insurance undertakings and Insurance Special Purpose Vehicles);
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