In July, the Central Bank of Ireland (CBI) published the final report for the review into its Fitness and Probity (F&P) Regime, conducted by Andrea Enria, past-Chair of the Supervisory Board at the European Central Bank. Enria's report provided a range of recommendations for the CBI to make its F&P process more fair, efficient, and proportionate.
The review was launched earlier this year after an appeals body issued a highly critical judgment regarding the CBI’s rejection of a finance executive for a board position on an Irish fund. The Irish Financial Appeals Tribunal, an independent body that hears appeals against CBI decisions, said that the central bank's decision-making process was “flawed” and that the executive who had been rejected was “denied fair procedures at every stage of the process.”
Among Enria's recommendations was that the CBI should ensure its culture supports supervisors in exercising judgment when assessing fitness, probity, and character. Otherwise, the F&P regime may devolve into "a tick-the-box exercise," he warned. "[S]upervisors should feel comfortable to make difficult calls, when they perceive that an appointment could be detrimental to the safe and prudent management of the firm and to the pursuit of conducts in line with regulatory framework and the interest of the customers," Enria wrote.
However, exercising supervisory judgment requires that there is clarity around the standards against which these matters will be assessed, Enria stressed. "It is in the interest of supervisors that regulated firms understand what is expected of them, as they have to conduct thorough due diligence and make informed decisions when appointing individuals to key positions," he wrote.
Clear expectations also promote fairness, consistency, and transparency, Enria wrote, emphasizing consistency and proportionality as other key aspects of a fair regime. "This approach ensures not only fairness in the treatment of individuals but also helps to uphold public trust in the decisions of the regulator," Enria argued.
In an interview for Starling's 2024 Compendium, Enria discussed how he sought to establish a sound supervisory culture throughout his tenure at the European Central Bank. "The first and most important ingredient is creating safety for supervisors: they need to know that the leadership of the authority is empowering them to make difficult choices and will not blame them if mistakes are made," Enria said. "This should be made clear in words and deeds, otherwise supervisors will grow very cautious in exercising their responsibilities and they will therefore be less demanding on firms." ▸ Read More
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