A senior Central Bank representative will tell an Oireachtas Committee today that the regulatory framework requires further strengthening when it comes to holding individuals to account for breaches.
The comments, contained in an opening statement for this afternoon’s session before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach, follow the handing down of fine of €4.1m by the Central Bank to Davy last week.
The regulator concluded the stockbroker had breached several regulations around a deal in 2014 where a client sold a bond to a buyer and was not told the purchaser was a consortium made up of 16 Davy staff.
Three senior figures at Davy resigned on foot of the findings last weekend, while the National Treasury Management Agency yesterday withdrew the firm’s authority to act as a primary dealer in Irish Government bonds.
“The reprimand and fine imposed on Davy reflects the serious regulatory breaches and aggravating factors in the investigation, including the firm’s lack of candour when first reporting the matter to the Central Bank,” says Derville Rowland, Director General of Financial Conduct at the bank, in her opening statement.
Ms Rowland, who will attend along with Deputy Governor, Ed Sibley, will tell the committee that robust enforcement action is a critical component of the Central Bank’s work to protect consumers and investors.
“It is a key part of the regulatory and supervisory toolkit,” she says in her statement.
“Enforcement action supports and runs alongside other supervisory interventions to help drive the remediation of risks and issues in the governance, risk management and control frameworks of the firms we supervise.”
She will also say that when it concludes enforcement actions, the bank publishes detailed statements on the breaches, sanctions and reasons as it believes “sunlight is the best disinfectant”.
“Publicised enforcement outcomes send a wider message to firms and individuals to drive improvements in compliance, behaviour and culture across the financial system,” she says in her statement.
Ms Rowland will also tell the committee that the bank has concluded 141 enforcement actions, resulting in monetary penalties of over €128m, and has also issued a number of individual disqualifications and prohibitions.
She will also outline how the bank is currently conducting enforcement investigations against firms and individuals under the Administrative Sanctions Procedure and Fitness and Probity regime, and has and will continue to use its full toolkit in appropriate cases.
But the statement says that notwithstanding the strong suite of existing enforcement powers the bank has, it does believe that the regulatory framework requires “further strengthening with regard to individual accountability”.
“We regard the Individual Accountability Framework, including the introduction of conduct standards for individuals and the Senior Executive Accountability Regime (SEAR), as necessary enhancements to our supervisory and enforcement toolkit to support effective culture in regulated firms,” the representative will tell TDs and Senators.
On the topic of Ulster Bank’s plans to wind down operations in the Republic of Ireland and Bank of Ireland’s plans to close a third of its branches, Ms Rowland’s statement says such decisions are matters for the boards of those firms.
“The Central Bank cannot require firms to keep operating in the State if it wishes to stop, nor can it force banks to keep branches open,” she says.
“We can ensure that changes are done in an orderly manner; that the impact of such decisions has been carefully considered across the full customer base and at the appropriate levels; and that firms adhere to regulatory requirements, including the Consumer Protection Code 20123.”
Regarding the payment of business interruption insurance by insurers, the Central Bank representative says that as a result of their supervisory interventions, a number of insurers have already accepted and commenced settling claims.
The statement also says the judgment in the case taken by four pubs against FBD is welcome and significant, and reinforces the bank’s system-wide supervisory action.
“I can confirm to you that all firms in scope have accepted the outcome of the judgment and we therefore expect that all valid claims will be handled and paid by the firms in accordance with their claims handling processes and in compliance with their legal and regulatory obligations,” Ms Rowland says.
In relation to Covid-19, the bank representative will tell the committee that dealing with distressed debt remains a key priority for the regulator.
Her statement says that of the 172,000 borrowers who received payment breaks, 90% have returned to full payment on either existing or extended terms, while the remaining 10% have indicated they require further support.
“Support to borrowers continues now on a case-by-case basis and through more regular forbearance measures,” Ms Rowland says.