You will be aware that the Central Bank has recently introduced a new fitness and probity regime which consists of the following:

  • The Central Bank Reform Act 2010 (Section 20 and 22) Regulations 2011 (SI 437 of 2011) (the "Regulations")
  • The Fitness and Probity Standards (the "Standards"); and
  • Draft Guidance on the Fitness and Probity Standards (the "Guidance").

Following much discussion in the market, on 23 November 2011 the Central Bank published final guidance to assist entities in meeting the requirements of the new regime. The final Guidance replaces and supersedes the initial draft guidance issued by the Central Bank and addresses various issues raised during the consultation process, with a particular focus on the area of outsourcing. The following important changes to the draft Guidance were noted:

  • Where outsourcing is to a regulated financial services provider, the requirements of the outsourcing firm in relation to "Pre-Approval Controlled Functions" ("PCFs") will not apply;
  • Where outsourcing is to an unregulated entity, the service level agreement ("SLA") must address issues of compliance with the requirements relating to both "Controlled Functions" ("CFs") and PCFs. If an SLA is already in place, the SLA must be updated to reflect the above requirements when it is next updated or within the next 12 months;
  • The company secretary function will no longer be classified as a PCF, however, if an individual in the position of company secretary exercises significant influence, he or she will be classified as a CF1; and
  • Branches of European Economic Area institutions operating in the State now fall outside the regime.

Reminder in relation to end March deadline

The Fitness and Probity Standards became effective on 1 December 2011 in respect of PCFs and firms were required to notify the Central Bank of each individual in the organisation in a PCF before 31 December 2011. From 1 March 2012, the Standards will apply to persons who have been newly-appointed to CFs, including new offers of appointment and internal transfers or promotions to CF roles. The application of the Standards will extend to all persons performing CFs on 1 December 2012.

Firms also have until 31 March 2012 to fulfil their due diligence obligations under the regime in respect of PCFs. The deadline for compliance with due diligence obligations in relation to CFs is 31 December 2012.

Procedures governing fitness and probity investigations

On the 2 March 2012, the Central Bank issued the Central Bank Reform Act 2010 (Procedures Governing the Conduct of Investigations) Regulations 2012, under Section 53(2) of the Central Bank Reform Act 2010. The Regulations set out procedures to be followed in the exercise of the powers of the Central Bank under Part 3 of the 2010 Act which deals with fitness and probity.

This is a further development of the enforcement powers of the Central Bank. Under the 2012 Regulations the Central Bank can impose prohibition notices on individuals when enforcing the fitness and probity standards. This power is in addition to the enforcement powers already in place under the administrative sanctions regime set out in the Central Bank Act 1942 (as amended).

Publication of Fitness and Probity Handbook

MOP will shortly publish a "Fitness and Probity Handbook" which is intended to be a resource for human resources and compliance professionals who are required to deal with the new regime. The Handbook brings together in a single easy-to-use volume, all the relevant legal instruments and Central Bank documents which make up the fitness and probity regime.

To order your copy of the Handbook please contact Joe Beashel at joe.beashel@mop.ie

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.