The report arising from the independent review into the Central Bank of Ireland’s (CBIs) fitness and probity (F&P) approval process was published yesterday, 11 July 2024.

On 14 February 2024 the CBI announced its decision to commission the independent review in light of the decision of the Irish Financial Services Appeals Tribunal in AB v The Central Bank of Ireland.  For more information on that decision and the commissioning of the independent review, read our earlier insights here.

Speaking at the publication of the report, CBI Governor Gabriel Makhlouf confirmed that the CBI accepts all of the report’s recommendations, and is “…immediately looking to [its] implementation approach, including the creation of a new unit to bring together F&P activities that are currently dispersed across the Central Bank.”

The report finds that the conduct of the CBI’s F&P process is broadly aligned with other peer jurisdictions i.e. standards are comparable; statistics on outcomes aren’t indicative of a more stringent or lenient approach; and timelines adhere to target service standards (and notably are “generally faster than in other countries”).

As part of the review, areas were identified in which the F&P process “is not always up to the requisite standards of fairness and transparency”.  The twelve sets of recommendations will either require change, or that existing practices be better clarified and embedded in the CBI’s culture.

We will be publishing more detailed insights on the report and its recommendations in the coming days.  In the meantime, key recommendations to note are:

• Gatekeeping: The CBI should provide industry guidance on the role of regulated financial services firms (RFSPs) in the pre-application process for PCF approvals (due diligence/screening, background checks, documentation and record-keeping, and ongoing monitoring). It should establish an F&P gatekeeping unit.  The overall number of PCF roles should be reconsidered and a sector-specific approach considered (in particular for the funds sector, which has the highest volume of applications – the report suggests that the number of interviews in this sector could be increased, but that the practice of being called for interviews should be de-stigmatised and that timelines should be a key focus, noting how important this is for the timely launch of funds).
• F&P Standards: The CBI should consolidate the F&P Standards in a single location to make it easier for RFSPs to access and understand them. The F&P Standards should also be improved to (among other matters) (a) include more objective measures (specific qualifications, certifications or experience requirements to reduce subjectivity in the assessment process) and outline clear expectations in terms of the number of mandates that an individual can hold; (b) include specific enhanced guidance on the role of executive and non-executive directors, and on specific expectations for independent directors; (c) address conflicts of interest; (d) clarify how collective suitability and diversity within boards and management teams will be assessed; and (e) clarify the way in which past events will be considered.
• Service Standards: There should be no exclusions from the service standards. The CBI should commit to a set timeframe within which all F&P applications will be concluded (90 days with limited opportunities to ‘stop the clock’).
• Interviews: The CBI should give at least 5 working days’ notice of an interview to the relevant individual, confirming planned CBI attendees (maximum of 3) and their roles. Interviews should be time-limited (90 minutes was suggested).  Interviews should be conversational, rather than an adversarial, and interviewees should be allowed to bring a notekeeper or lawyer as an observer.  Minutes should be given to the individual within one week, and they should have one week to provide their comments.  Feedback should be provided to the RFSP and individual by the CBI in all cases.
• Efficient Interview Process: The F&P approval process should not involve ‘meet and greet’ type interviews: the aim should be for a single comprehensive interview (rather than an initial assessment interview followed by a specific interview).
• Decision-making: Where a ‘minded to refuse’ letter issues, it must clearly outline any concerns by reference to relevant law and guidance, include a draft decision, and give a reasonable response timeframe (e.g. 10 days). The CBI should establish a significant decisions committee, but should also be able to empower a single decision maker (who must not be below CBI director grade).
• Withdrawals/feedback: The CBI should give feedback to the RFSP and individual post-interview, including where an applicant withdraws. The CBI should not engage in off-record discussions with RFSPs regarding specific applications.
• The report also recommends the implementation of robust quality assurance mechanisms, an F&P-specific complaints process (led by an externally appointed risk advisor), a comprehensive training programme for the F&P gatekeeping function, and annual information sessions and ad hoc workshops with RFSPs and individuals.