The Central Bank of Ireland (the "Central Bank") has published its Enforcement Priorities for 2012 which identifies ten priority areas for enforcement activity in the year ahead. These areas have been classified as a priority in light of the fact that they are currently the areas of greatest concern to the supervisory divisions within the Central Bank. As a result, robust enforcement action can be expected where breaches in these areas are identified by the Central Bank. The ten areas which have been earmarked as a priority for 2012 are as follows:
- Mortgage Arrears;
- Retail Intermediaries;
- Payment Protection Insurance;
- Client Asset Requirements;
- Prudential Requirements;
- Anti-Money Laundering and Counter Terrorist Financing;
- Transaction Reporting;
- Systems and Controls;
- Timeliness and Accuracy of Information submitted to the Central Bank; and
- Dissemination of inaccurate / incorrect information in the market (Transparency and Prospectus Directives).
However, it should be noted that the Central Bank is not restricted to pursuing enforcement objectives in the above areas only. The Central Bank has highlighted that resources have also been set aside for the purposes of "reactive" enforcement, allowing it to respond to issues identified by it in its general supervisory capacity or to issues brought to its attention through other sources.
The Central Bank has pursued an aggressive enforcement strategy
of late and this looks set to continue.
Fitness and Probity Update
Central Bank issues FAQ document
The Central Bank has issued a 'Frequently Asked Questions' document on the Fitness and Probity Regime to address commonly asked questions which have been raised in relation to the operation of the Fitness and Probity Regime.
The FAQ will serves as a useful guide for companies working towards compliance with the new regime. A copy of the FAQ is available HERE.
Increased Fitness and Probity enforcement powers
The Central Bank has also enhanced its enforcement powers in the area of fitness and probity by publishing the Central Bank Reform Act 2010 (Procedures Governing the Conduct of Investigations) Regulations 2012. The 2012 Regulations empower the Central Bank to issue prohibition notices when considering the fitness and probity of individuals.
This is a further development of the enforcement powers of the Central Bank. Under the 2012 Regulations the Central Bank can impose prohibition notices on individuals when enforcing the fitness and probity standards. This power is in addition to the enforcement powers already in place under the administrative sanctions regime set out in the Central Bank Act 1942 (as amended).
Fitness and Probity Handbook
MOP has published a "Fitness and Probity
Handbook" which is intended to be a resource for human
resources and compliance professionals who are required to deal
with the new regime. This handbook brings together in a
single easy-to-use volume, all the relevant legal instruments and
Central Bank documents which make up the fitness and probity
regime.
To order your copy of the handbook please contact Joe Beashel at joe.beashel@mop.ie or your
usual contact at Matheson Ormsby Prentice.
Central Bank guidelines on Life Assurance, Non-Life
Insurance and Reinsurance Applications
The Central Bank has recently published updated guidelines on
completing and submitting Life Assurance, Non-Life Insurance and
Reinsurance Authorisation applications (the
"Guidelines"), the key points of which are set out
below.
Efficient and manageable process
In order to obtain authorisation as an insurance or reinsurance undertaking in Ireland, an undertaking must make an application to the Central Bank, who must be satisfied that the applicant complies with the appropriate Insurance Acts and legislation. The Guidelines set out that the Central Bank aims to make the application process efficient and manageable, however, they stress that the process is not a one-step mechanism. The application process is an iterative process involving contact and consultation with personnel from the Central Bank prior to and after an application is formally submitted.
Pre-assessment
The Guidelines set out that in advance of contacting the Central Bank, an undertaking should first assess what type of licence its business model requires, whether it is capable of complying with the Central Bank's requirements for authorisation and whether it will be capable of meeting the regulatory requirements on an ongoing basis once authorised. Only on satisfactorily completing this assessment is an undertaking then advised to contact the General Insurance Authorisation Team of the Central Bank to arrange a preliminary meeting.
Complete the checklist
According to the Guidelines, after the preliminary meeting has been held, an undertaking should then submit the information required under the relevant Central Bank checklist in support of its application. Undertakings are advised to expand on the information required by the checklist, where necessary. An application should include all locations, activities (eg, branches and products) that are expected to feature during the first three years of business. Additionally, an undertaking must provide a full list of regulated entities within its group so that the Central Bank can make appropriate enquiries from overseas supervisory authorities where necessary.
Fully complete application
The Guidelines provide that the Central Bank will only begin reviewing an application when it receives a complete application and it will inform an undertaking of any outstanding information / documentation it requires for completeness. If an applicant makes material changes to its application, it should submit a revised application incorporating all changes. The Central Bank will then review the quality of the complete application and will issue comments advising the undertaking of any further information / documentation required on any aspect of the proposal.
Authorisation in principle
When an application has been fully examined, reviewed and approved by the Central Bank, an undertaking will receive an "authorisation in principle". This authorisation in principle does not, in any circumstances, permit the undertaking to write any business but provides the undertaking with time to, among other things, introduce capital, appoint directors and finalise the company's name and objects. A formal physical certificate of authorisation will be granted when all pre-licensing requirements are met. The newly authorised entity then has 21 days to agree to its conditions of authorisation.
Proposed three month turn-around
The Guidelines state that the expected timeline for the authorisation process is three months from receipt of a complete application. However, timing will vary depending on factors such as the quality and complexity of the proposal, the response time of the undertaking or third parties, the quality of responses and any changes during the authorisation process. There is no fee for an application for authorisation, however, authorised firms are subject ongoing prudential and consumer levies.
Central Bank warns on PII insurance for insurance intermediaries
The Central Bank has confirmed that it will begin a themed review of retail intermediaries' professional indemnity insurance (PII) cover and that it will specifically target for inspection, those firms which are non-compliant in terms of submitting annual returns and / or payment of levies and / or based on other concerns.
Under the EC (Insurance Mediation) Regulations 2005 (the "Regulations"), all insurance or reinsurance intermediaries which are registered under the Regulations are required to hold a valid policy of PII of:
- not less than €1,000,000 for each claim received within each calendar year and;
- not less than €1,500,000 for all claims received within that year.
This level of cover is required unless the insurance, or other guarantee, is already provided by:
- an insurance undertaking;
- a reinsurance undertaking; or
- another undertaking,
- on whose behalf the insurance or reinsurance intermediary is acting, or for which it is empowered to act, or the undertaking has taken full responsibility for the intermediary's actions.
According to the Central Bank, the requirement for PII cover under the Regulations provides protection against professional negligence of a regulated firm and the absence of appropriate PII cover is a risk to consumers.
Requesting all intermediaries to have their PII Schedule and contact details for their insurer and/or broker available at their premises for review, the Central Bank has highlighted the potential consequences of the failure to have appropriate PII cover in place, which include possible criminal sanctions and cancellation of the firm's registration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.