Central Bank Of Ireland -Enhanced governance, performance and accountability in financial services: the Individual Accountability Framework - address by Deputy Governor Derville Rowland.
ENPNewswire-April 19, 2023--Central Bank Of Ireland -Enhanced governance, performance and accountability in financial services: the Individual Accountability Framework - address by Deputy Governor Derville Rowland
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Release date- 18042023 - The following address was delivered by Deputy Governor Derville Rowland at a joint Central Bank of Ireland / Law Society breakfast seminar, in Blackhall Place, Dublin, on 17 April 2023.
It is a pleasure to be with you this morning to discuss the Central Bank consultation on key aspects of the Individual Accountability Framework (IAF), and I'm grateful to the Law Society and its members for kindly hosting us.
At its core, financial regulation is about supporting positive outcomes, protecting consumers and investors, and, ultimately, contributing to the economic well-being of the community as a whole.
The regulatory expert Malcom Sparrow, Professor of the Practice of Public Management at the Harvard Kennedy School, notes the challenge for all regulators of 'reducing harms on the one hand, and respecting the traditional regulatory values of fairness, consistency, proportionality and predictability on the other'.1
Since day one in framing the IAF, this is a challenge we have been acutely conscious of.
The purpose of the IAF is to promote sound governance throughout the regulated financial services sector. The framework is very much in keeping with the key themes of the Central Bank's strategy, namely: (i) safeguarding; (ii) future-focused; (iii) transforming; and (iv) open and engaged.
Safeguarding reflects our commitment to strengthen the design, implementation and operation of our core policy and supervisory frameworks.
By being future-focused, we are regulating for a rapidly evolving financial system - ensuring that the opportunities presented by change and innovation can be realised for citizens and the economy while the risks are managed.
Through transforming, we aim to be a more agile, resilient, diverse and intelligence-led organisation.
The IAF embodies these themes. Where firms and individuals take and demonstrate enhanced responsibility for customer and client outcomes, we can focus more on outcomes-based supervisory engagement, underpinned by clarity as to accountabilities.
The fourth theme of our strategy is being an open and engaged regulator. Which brings me to this event, and our desire to engage on as wide a basis as possible with interested stakeholders, including the public, regulated firms, financial services staff and industry representatives, members of the legal and compliance professions, members of professional services firms, and beyond.
I'm delighted to see so many of you here this morning, and I emphasise the Central Bank's desire to hear your views.
Both in this consultation exercise, and on an ongoing basis, we want to hear from stakeholders on how the IAF is working and how it might be improved.
To help that discussion, I will briefly outline our proposed approach to implementation as set out in the Consultation Paper, including the rationale for key aspects of the IAF, and next steps - which I know is a major focus for firms and professional advisors in the period ahead.
Background
The IAF had its genesis in our Report on the Behaviour and Culture of the Irish Retail Banks, which identified poor governance, lack of consumer-focused cultures, and weak structures of accountability within firms.2 Those findings were consistent with issues we had seen in the wider financial services sector.
These issues were not unique to Ireland. As noted by the Bank of International Settlements, 'two lasting imprints of the Great Financial Crisis were widespread failures in corporate governance and systemic breakdowns in corporate accountability and ethics'.3
It is important to acknowledge here that most firms and individuals aspire to high standards. That is why we have said that the majority of firms and staff will see nothing to fear in the IAF - because its principles are ones to which they already adhere. Nevertheless, the minority who do not aspire to such high standards cause reputational issues for the sector as a whole, and pose a risk to consumers, investors and wider society.
Hence, we proposed the IAF with a view to driving improved governance and accountability across the sector. In doing so, we emphasised from the outset that effective culture is, in the first instance, a matter for each individual firm to define, embed and own. As a regulator, we work to monitor, assess and influence culture within firms to guard against risk and drive better outcomes for consumers, investors and the system as a whole.
We worked closely with the Department of Finance to progress the proposals, and on 9 March, the Central Bank (Individual Accountability Framework) Bill 2023 was enacted. Shortly after enactment, we launched a three-month consultation on implementation of the IAF, including the publication of draft Regulations and guidance.
The Act provides for the introduction of the IAF, which is designed to improve governance...
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