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Ireland: Financial regulator restructuring

The Central Bank of Ireland (CBI) recently announced that its financial regulatory operations will be restructured to meet the new demands of the regulatory landscape. They will be restructured to comprise two 'pillars' or functions. The first will be prudential regulation covering credit institutions, insurance and reinsurance undertakings and asset management. The second will be financial conduct covering consumer protection, securities, markets supervision and enforcement. There will also be a policy and risk directorate which will support both pillars, but will be part of the financial conduct function for administrative purposes.

In announcing the restructuring, the CBI recognised the challenges posed by its extended mandate and the shift to a more intrusive supervisory culture. This has resulted in the scale of financial regulation sharply increasing in recent years. The CBI announcement also acknowledged increased engagement on a European level as a result of the single supervisory mechanism on the banking side.

All of these challenges are well known to lawyers acting for financial institutions in the banking, asset management and insurance sectors. However, those dynamics are not the only challenges that lie ahead for the CBI. Two recent court decisions highlight that regulatory action continues to be subject to close judicial scrutiny in Ireland. Neither involved the CBI but seem to signal that all regulators must ensure the integrity of investigatory functions.

The first is the decision of the trial judge in a high profile white collar crime prosecution to direct an acquittal because of egregious mistakes made by the prosecution's investigation team. The judge found that investigators had set out with a predetermined mind-set to 'get' the defendant and had made a number of astounding errors during the investigation/prosecution, including the shredding of material documents. The second is an Irish Supreme Court decision holding that an antitrust investigation was legally flawed because it involved an unfocused trawl of personal and business email accounts thereby encapsulating volumes of irrelevant material.

The CBI therefore is operating in a challenging environment where its mandate is to be performed in an ever more complex legislative context and in circumstances where the Irish courts appear unwilling to show a commensurate increase in curial deference to regulatory conduct.

BreslinJohn Breslin

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