The recently enacted Central Bank (Supervision and Enforcement)
Act 2013 ("2013 Act")
will fundamentally change the regulatory landscape in banking and
financial services. It greatly enhances the powers of the
Central Bank of Ireland ("CBI") in a
number of respects. These include the following:
It gives the CBI the power to write rules in a broad range of areas
including conduct of business, financial regulation systems and
procedures and dealing with client assets. The CBI is not obliged
to consult with persons other than the Minister for Finance before
making these rules. Notwithstanding it is hoped that the CBI will
engage in a robust consultation exercise with industry in advance
of finalising these rules.
If a regulated entity breaches any of these new rules, and this
causes loss to a customer, the customer can sue for damages on foot
of a statutory right of action. This right is not confined to
private customers. However it probably does not apply to
counterparties.
Where a regulated entity has engaged in "widespread or
regular" breaches of rules causing customer loss, the CBI can
direct the entity to provide for a scheme of redress. This is, in
effect, a form of "classaction" relief.
The CBI can direct a regulated entity to provide a report to the
CBI (at the entity's cost), or an auditor's report, with
regard to certain regulatory matters specified by the CBI.
Legal protections are provided for "whistleblowers."
These do not extend, however, to anonymous disclosures.
The CBI's information-gathering and inspection powers are
bolstered. Further these provisions impact significantly on the
manner by which the privilege against self-incrimination and the
entitlement to legal professional privilege may be claimed.
The CBI's powers to give directions to a regulated entity to
restrict its business or cease to carry on business, and to obtain
injunctions and restitution orders in support of its regulatory
enforcement powers are strengthened and extended.
The powers of the Financial Services Ombudsman
("FSO") have been extended to include a
power to "name and shame" regulated entities against whom
three complaints have been substantiated in whole or in part by the
FSO.
There are important new provisions dealing with the prosecution of
criminal offences and the manner by which evidence (including
expert evidence by an accountant or other industry expert) can be
presented to a jury.
In summary, the 2013 Act represents a sea-change in the approach to
banking and financial services regulation in Ireland. This seems
clearly to be a response to the perceived (and now much criticised)
"light-touch" style of regulation in place before the
credit crunch. The new legislative framework envisages a pro-active
approach by the CBI. Its arsenal of enforcement powers has been
greatly strengthened and extended. It remains to be seen whether
the CBI has the resources to employ these powers on the scale
envisaged by the 2013 Act. What is clear, however, is the need for
regulated entities actively to engage in any consultation exercise
conducted by the CBI in advance of exercising its rule making
powers. The introduction of a statutory right of action creates a
significant area of regulatory exposure independent of the
CBI's ability or inclination to exercise its new enforcement
powers. It is vital that the industry embraces any opportunity
presented to influence the content of the new regime.
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.