The Central Bank has issued a Dear CEO letter to the management of all regulated financial services providers (“firms”) setting out its expectations for firms to take appropriate action to address the significant issues identified by thematic inspections concerning their legal obligations under the Fitness and Probity (F&P) regime.
The F&P Regime was introduced by the Central Bank under the Central Bank Reform Act 2010. In line with the Central Bank’s role to safeguard financial stability and protect consumers, the granting of any new authorisation is a key element of the Central Bank’s “gatekeeper function” to permit or refuse an applicant to provide financial services to the public. The F&P Regime protects consumers by requiring that persons in senior functions within regulated firms meet the Central Bank’s Fitness and Probity Standards. Under the F&P Standards, people in senior positions are required to be competent and capable; to be honest, ethical and act with integrity; and to be financially sound.
Recent Central Bank inspections evaluating the processes in place within firms to manage compliance with the requirements of the F&P Regime highlight a number of common issues and shortcomings, as well as a wide divergence of standards, in the implementation of the F&P Regime.
In many of the firms, the level of awareness by Board members of their fitness and probity obligations was poor. This was evident in particular in relation to the process for appointing members to the Board. More broadly, the area which was most consistently weak across the majority of firms was due diligence. Issues identified included a lack of evidence of qualifications, reference checks and suitability searches.