Tuesday, May 28, 2024

Central Bank’s ‘fitness and probity’ regime to be reviewed after highly critical tribunal ruling

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Process run by regulator ‘fell below the standard of constitutional fairness’

The tribunal, chaired by former Supreme Court judge John MacMenamin, is a Government-appointed body that can hear and determine appeals against certain decisions taken by the Central Bank.

In its judgment, published yesterday, the tribunal ordered the Central Bank to re-open a ‘fitness and probity’ assessment of an unnamed finance executive whose application to be approved for a senior role had been rejected by the bank.

The executive, an experienced finance executive whose appointment to a new job depended on the authorisation, had appealed the original decision.

The original application was rejected on the basis the individual seeking authorisation did not meet the requirement of having a clear and comprehensive understanding of the regulatory and legal environment.

However, the tribunal found for him and in its written judgment raised significant questions over the Central Bank’s process, describing “fundamental procedural flaws” and asserting that the original process “fell below the standard of constitutional fairness”.

The tribunal noted that the stakes for the individual whose application had been rejected were extremely high, ­amounting in reality to his “right to earn a living”, given his professional background.

The judgment raised significant questions over the fairness of specific elements of the approval process as evidenced in the case under review, including calling a candidate to interviews without fully informing them of the agenda.

The core function of the fitness and probity regime is to ensure people in senior and key roles at regulated entities such as banks, financial funds or insurance companies are competent and capable, honest and financially sound.

The regime was introduced after the financial crisis, when many directors and executives were seen to have failed to operate at a level needed to protect either their own firms or the wider economy.

It its judgment the tribunal noted that in the case under appeal the rejection, known as an “impugned decision”, was one which had serious legal consequences “where the fundamental legal and constitutional principles had to be applied”.

In a statement, the Central Bank said that it has decided to commission an independent review of the fitness and probity approval process “to ensure that it remains effective into the future”.

The outcome of this review will be published in due course. Meanwhile, all of the Central Bank’s gatekeeping functions, including the F&P approval process, will continue to operate in accordance with agreed service standards.

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