Ireland: Under The Spotlight Of The Central Bank

Muireann Reedy examines the potential implications of the Central Bank's powers for those involved in the management of regulated entities.

Regulated entities and those involved in their management need to be aware of the potential consequences of not running a tight ship. Professional advisors to regulated firms, or even to entities related to such undertakings, should also be aware that the Central Bank can also come knocking at their door, using its compulsory information-gathering powers.

The Administrative Sanctions Procedure

The Central Bank's enforcement regime, the Administrative Sanctions Procedure (ASP), was introduced in 2004 by amendment to the Central Bank Act 1942. It has evolved since then, most significantly since the introduction of the Central Bank (Supervision and Enforcement) Act 2013, which gave the Central Bank wide-ranging compulsory powers. These powers are frequently used in ASP investigations.

Under the ASP, the Central Bank can sanction regulated entities and individuals who are or were involved in the management of these entities where a regulatory breach, described as a "prescribed contravention", has been or is being committed. The definition of a "prescribed contravention" includes contraventions of over 100 pieces of legislation and any code or direction or condition imposed under them. A person who is or was involved in the management of the regulated firm can only be sanctioned where it is shown that they are "participating" or have "participated" in the breach.

The Central Bank can impose sanctions either following a settlement agreement with the relevant entity or individual or at the conclusion of an investigation under the ASP, or after a negative finding is made at inquiry (a formal mechanism used where an inquiry member or members decide if a "prescribed contravention" has occurred). While a settlement can be agreed on any terms, the Central Bank tends to use the sanctions available at inquiry as a benchmark. These include fines of up to €10 million or 10% of turnover (whichever is greater) on a regulated entity and fines of up to €1 million on an individual. An individual can also be disqualified from being involved in the management of a regulated entity for a certain period. Firms need to understand that to date, apart from any financial penalty or fine, the Central Bank has only been willing to conclude a settlement agreement where the firm admits the contravention and agrees to the content of the Central Bank's publicity statement on the case. Both admission and publicity can have far-reaching implications for a firm, both domestically and further afield.

Since 2006, the Central Bank has entered into over 100 settlements with firms and individuals, and imposed fines of over €56.5 million. Fines have generally been increasing – 2016 saw the biggest annual figure to date of €12.05 million. The largest fine on an individual to date is the €200,000 fine imposed on Seán Quinn Senior in 2008 in relation to an ASP concerning Quinn Insurance Limited (now under administration). A total of 11 individuals have also been disqualified from being involved in the management of regulated entities for periods of between one and 10 years. Dealing with the enforcement process can be a significant emotional and financial burden for executives. In terms of the financial burden, checks should be made of directors' and officers' insurance cover to see what it provides for in terms of defence costs and fines under a regulatory enforcement regime. Executives also face other knock-on effects, particularly if they are seeking a position in another regulated firm in the future given disclosure obligations in the individual questionnaire.

Fitness and Probity Regime

The Central Bank Reform Act 2010 introduced the Fitness and Probity Regime. It is applicable to those performing certain senior roles in regulated entities described as controlled functions (CFs) and pre-approval controlled functions (PCFs). Under this regime, regulated entities must seek the prior written approval of the Central Bank before appointing individuals to perform a PCF (these are a subset of the individuals who perform CFs) and in all cases, must carry out their own due diligence.

The Central Bank has prescribed 11 functions as CFs and 46 functions as PCFs. Some of the listed PCFs include head of finance, head of internal audit, head of treasury and head of accounting valuations.

As part of its gatekeeper role in approving the appointment of individuals to perform PCFs, executives should be aware that the Central Bank may decide to call them in for interview to assist in its decision as to whether they have the requisite fitness and probity. The Central Bank has stated that it will routinely interview applicants for the roles of chairman, CEO, finance director or chief risk officer at any high impact firm as well as applicants for the role of chairman and CEO at any medium-high impact firm. The Central Bank can decide to interview any individual for a PCF role at its discretion, however.

Where the Central Bank is minded to refuse the appointment of an individual to perform a PCF, it will usually conduct a "specific interview" with the person. According to the Central Bank, these are very detailed and enforcementled interviews. In November 2016, the Director of Enforcement at the Central Bank advised that approximately 31 specific interviews to challenge candidates had been conducted with 18 candidates withdrawing before the fitness and probity process reached conclusion. This likely reflects the reluctance of individuals to have a formal negative decision recorded against their name by a national regulator.

The Central Bank may also – at any time – investigate the fitness and probity of individuals who are performing CFs, or who it believes are about to be appointed to perform a CF, to determine if they are of appropriate fitness and probity. This can, in a worst case scenario, end with the Central Bank deciding that the individual is not of appropriate fitness and probity, in which case it may issue a prohibition notice prohibiting the individual from performing the relevant CF, part of a CF or any CF for either a defined period or indefinitely, or alternatively from carrying out all or part of the CF without adhering to certain conditions.

To date the Central Bank has published details of two prohibition notices, one concerning an individual who was prohibited from performing certain PCFs for a two-year period and another where an individual was prohibited from performing any CF indefinitely. The Central Bank has also advised that a suspension notice has been issued, which prohibits an individual from performing a CF pending the outcome of an investigation, in respect of a former manager at a credit union concerning the alleged misappropriation of funds. This investigation is ongoing.

Compulsory information gathering Powers

Part 3 of the Central Bank (Supervision and Enforcement) Act 2013 (the 2013 Act) gives the Central Bank extensive information-gathering powers, which can be used on an extremely broad range of entities and individuals including regulated entities, related undertakings of regulated entities and a person who is or was an officer, employee or agent of such entities.

Accountants, auditors and financial or other advisors to regulated firms or related undertakings of regulated firms (whether they are presently in that position or whether they previously advised them) are explicitly brought into the net of individuals in respect of whom the Central Bank can use its compulsory powers. The only pre-requisite for the use of these powers by the Central Bank is that it is "necessary to do so for the purpose of the performance of the Bank's functions under financial services legislation relating to the proper and effective regulation of financial service providers".

Although the Central Bank's compulsory information-gathering powers can be used in a variety of circumstances, they are frequently exercised in the conduct of investigations under the ASP. Individuals may be surprised to receive a notice from the Central Bank requiring them to provide it with certain information or to attend the Central Bank for interview in their position as a former advisor to a regulated undertaking, or indeed where they are asked in their position as an employee of a regulated entity or a related undertaking of a regulated entity to provide information to the Central Bank. The Central Bank can use its compulsory powers to:

  • Inspect premises and take copies of records found at the premises;
  • Require individuals to answer questions and provide a declaration of truth in relation to the answers to those questions;
  • Compel individuals/entities to provide it with certain information; and
  • Operate computers found at a premises, among other matters.

It is a criminal offence not to comply with a requirement imposed under Part 3 "without reasonable excuse". The 2013 Act does not specify what might constitute a "reasonable excuse" for non-compliance with Part 3 but – given that the 2013 Act makes provision for the Central Bank to apply to the High Court for a determination as to whether documents contain privileged legal material – where access to information is refused, it would appear that non-disclosure on those grounds would amount to a reasonable excuse for non-compliance.

What to do?

Individuals should ensure that they are aware of the scope of the Central Bank's powers, and any limitations to them, when providing information or evidence to the Central Bank. For example, can they refuse to give access to particular documents on the basis that they contain privileged legal material? Or can they refuse to answer a question on the basis that it might incriminate them? There are nuances in the breadth of these powers, depending on the legislation in question. Given the implications, legal advice should really be considered.

Previously published in Accountancy Ireland

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions