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Ireland: Central Bank of Ireland’s annual report

The Central Bank of Ireland (CBI) recently published its 2017 annual report. It is essential reading for Irish finance services regulatory advisers, and for any entity with a business presence in Ireland in the banking and financial services sector.

Three developments are worthy of note: first, CBI's focus on regulatory issues arising from Brexit; second, the importance of an appropriate regulatory culture in banks and financial services providers; and third, an enhanced approach to enforcement and supervision focusing on senior management responsibility.

Brexit poses important challenges for CBI and for the financial services sector in Ireland in general. It is expected that there will be a substantial influx of institutions looking to use Ireland as a passporting hub for Irish and EU/European Economic Area business when the UK leaves the EU in March 2019. CBI's key objective is to strike the appropriate balance between maintaining an appropriate level of supervision, and not unduly inhibiting sectoral growth and expansion. Staffing is also an issue discussed in the annual report: the CBI has substantially increased its workforce, but indicates that there is scope for attracting further talent.

Following on from public statements by the Financial Stability Board, the CBI has signalled that the critical review and assessment of the regulatory culture in banks and other financial service providers is at the top of its agenda. Culture in this context is difficult to define precisely: it clearly encompasses the business' approach to risk, compliance and governance in general. Key indicators here include formal arrangements and policies. However, the CBI will also be vigilant for soft indicators such as the business' overall approach to risk assessment and pre-empting regulatory crises. The CBI will expect firms to be proactive in anticipating problems before they arise.

Finally, it seems clear that the CBI will focus on senior management responsibility for regulatory compliance. Although Ireland does not (yet) have an equivalent to the UK senior managers' regime, the CBI has responded positively to law reform proposals in this area. It is engaged in a long-running and continuing inquiry into the management of a failed building society. The conduct of senior managers and personal responsibility for regulatory breaches will be key themes of the CBI's regulatory and enforcement approach from now on.

John Breslin

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