1. INTRODUCTION
It is time for the regulated financial services industry to accelerate their preparations for implementation of the Central Bank individual accountability framework (IAF) following publication by the Central Bank of a feedback statement on Consultation Paper 153 (CP153) and final form Regulations and Guidance on IAF on 16 November 2023.
The Central Bank (Individual Accountability Framework) Act 2023 (the Act) enacted on 9 March 2023 lays the foundations of the IAF comprising of four pillars:
- Conduct standards.
- Enhanced fitness and probity (F&P) regime.
- Reforms to simplify regulatory enforcement against individuals.
- The senior executive accountability regime (SEAR).
While CP153 provided regulated firms (firms) with considerable additional detail about the Central Bank's proposals, it did not cover the following key aspects of the IAF:
- Business conduct standards under the conduct standards pillar - these are being developed as part of a separate consultation on proposed updates to the Consumer Protection Code.
- Changes to fitness and probity investigations - updates to the Central Bank's investigations regulations and guidance reflecting the individual accountability legislation followed separately and were not subject to a consultation process.
- Changes to the administrative sanctions procedure (ASP) - a separate consultation (CP154) was launched in mid-2023 on updates to the Central Bank's core ASP documents.
In this context, we examine the Central Bank's updated expectations for the implementation of three aspects of the IAF in detail. We also recommend practical actions which firms can take now.
2. IMPLEMENTATION TIMEFRAME
The following implementation timelines apply:
- Conduct Standards (applicable from 29 December 2023) (except for the Business Standards, which will not be effective until the revised Consumer Protection Code is implemented);
- Enhancements to the Fitness & Probity regime (applicable from 29 December 2023); and
- SEAR (applicable to in-scope firms from 1 July 2024 (with a 12-month deferral for (Independent) Non-Executive Directors to 1 July 2025)
3. INDIVIDUAL ACCOUNTABILITY FRAMEWORK
The Act is the primary legislation for the IAF and it confers broad powers on the Central Bank to prescribe, through implementing regulations or guidance, measures to strengthen and enhance individual accountability in the financial services sector. The Act provides for amendments to existing Central Bank Acts, as amended from time to time, including:
- The Central Bank Act 1942 (1942 Act);
- The Central Bank Reform Act 2010 (2010 Act);
- The Central Bank (Supervision and Enforcement) Act 2013 (2013 Act).
We have been helping many of our clients for some time to prepare for the individual accountability regime.
In this client briefing, taking account of the enactment of the primary legislation on 9 March 2023 and the publication by the Central Bank on 16 November 2023 of its Feedback Statement on CP153 and appended final form IAF Regulations and Guidance, we set out key actions to benchmark your firm's implementation action plan under each of the four pillars of the individual accountability framework.
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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.