Under the Central Bank (Individual Accountability Framework) Act 2023, the Central Bank was empowered to prescribe Business Standards for all or specific classes of regulated financial service providers (RFSPs).

The Business Standards are in addition to the Common Conduct Standards (which apply to those who perform controlled functions in RFSPs) and the Additional Conduct Standards (which apply to those who perform either pre-approval controlled functions in an RFSP or any other function by which the person may exercise a significant influence on the conduct of that RFSP’s affairs).  The Common Conduct Standards and Additional Conduct Standards have applied since 29 December 2023.

As expected, the Business Standards form part of the Central Bank’s 3-month consultation (CP158) on reforms to its Consumer Protection Code (CPC), launched on 7 March 2024.

Contained in a draft ‘Standards for Business’ Regulations, the Business Standards are divided into ‘Standards for Business’ and ‘Supporting Standards for Business’.  The ‘Standards for Business’ require a regulated firm, at all times, to:

• secure its customers’ interests;
• act with honesty and integrity;
• act with due skill, care and diligence;
• act in the best interests of customers and treat them fairly and professionally;
• ensure that all information it provides to customers is presented in a way that seeks to effectively inform the customer;
• control and manage its affairs and systems sustainably, responsibly and in a sound and prudent manner;
• maintain adequate financial resources;
• control and manage its affairs and systems to counter the risks to customers of financial abuse; and
• engage and cooperate with the Bank and comparable competent authorities in good faith and without delay.

The ‘Supporting Standards’ provide more granular detail under each heading.

The Business Standards (comprising the ‘Standards for Business’ and ‘Supporting Standards’) will replace the current ‘General Principles’ in Chapter 2 of the CPC.

KEY POINTS ON SCOPE:

MiFID Services/Crowdfunding Services/Credit Union Activities

• All RFSPs will be subject to the Business Standards, except those providing MiFID services and crowdfunding services, and credit union savings and lending activities.
• However, note the point below regarding the Central Bank’s expectations in respect of its Guidance on Securing Customers’ Interests.

Securing Customers’ Interests: Consumers Only

• The first Business Standard (the obligation to “at all times…secure its customers’ interests”) will only apply to an RFSP’s dealings with customers in Ireland who are consumers. Note that this is the CPC definition of “consumer”, which includes not only individuals and groups of individuals, but also small corporates.  As mentioned in our initial insights on CP158, the Central Bank plans to increase the annual turnover threshold for a small corporate to be brought into scope from €3m to €5m.
• The Central Bank has published draft Guidance on Securing Customers’ Interests as part its CPC consultation, which aims to give more specific guidance on the practices and actions that firms should adopt and take to meet this particular standard (with examples and case studies). Notably, while MiFID services and crowdfunding services are out of scope for the purposes of the Business Standards, the Central Bank expects firms providing those services to take the guidance into account in the context of their obligations to “act honestly, fairly and professionally in accordance with the best interests of its clients” under the Irish MiFID Regulations and the EU Crowdfunding Regulation.

Application of other Business Standards

All other Business Standards will apply to an RFSP’s dealings with (current and potential) customers more broadly (including SMEs).

Please get in touch with your usual contact in our Individual Accountability and SEAR Group or our Financial Regulation Group to discuss any aspect of CP158 and the Business Standards in more detail.