Seán Fleming (Laois-Offaly, Fianna Fail)
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I move: "That the Bill be now read a Second Time."

We have seen the fallout when firms and industries ignore the impact on consumers of the decisions they make and the actions they take. This was evident in the stress suffered by individuals and families during the tracker mortgage scandal, caused by a toxic culture in our banks and financial services sector. There has been intensive work at EU and national levels in recent years to make our financial system stronger and more stable. The Central Bank Reform Act 2010 and Central Bank (Supervision and Enforcement) Act 2013 gave extensive regulatory powers to the Central Bank to protect customers and ensure we have a financial services sector that supports a modern economy. This has borne fruit in making the sector more resilient and capable of withstanding future challenges.

This Bill is a further step in enhancing existing regulatory powers. However, the Central Bank (Individual Accountability Framework) Bill 2022 will also play a key role in driving the positive cultural change in financial services organisations that we need to see for the benefit of consumers, employees and wider society. The legislation that the Minister, Deputy Donohoe, is bringing before the House is designed to ensure that this cultural change happens, is real and that it endures.

This legislation will make individuals in financial services firms more responsive and responsible by enhancing individual accountability in decision-making at all levels, particularly at senior levels in financial institutions. The Central Bank (Individual Accountability Framework) Bill 2022 introduces the individual accountability framework, comprising the senior executive accountability regime, SEAR, conduct standards for firms and for individuals performing controlled functions and the duty of responsibility. By ensuring that there is clarity about who is responsible for what, the senior executive accountability regime will ensure that, in the event that there is wrongdoing in a firm regulated by the Central Bank, the resulting investigation can be focused and effective.

The Bill serves as a clear declaration of the standards of behaviour expected of those working in the financial services industry, providing conduct standards for regulated financial services providers, RFSPs, and individuals performing related functions and providing for the sanctioning of individuals who breach these responsibilities. The conduct standards are, in and of themselves, unremarkable. They outline the expectations of financial sector executives to act with honesty and integrity, due skill, care and diligence, to co-operate with the regulator, to treat customers fairly and to comply with standards of market conduct.

The Bill's provisions also serve as an additional enforcement tool for the Central Bank of Ireland. While the enforcement and penalty decisions of the bank will continue to be guided by considerations of fairness and proportionality, the Bill will introduce enhancements to the Central Bank's existing supervisory and enforcement frameworks. There will be changes to the administrative sanctions procedure under Part IIIC of the Central Bank Act 1942 and to the fitness and probity regime under Part 3 of the Central Bank Reform Act 2010. The fitness and probity regime will be extended to cover various categories of financial holding companies. To facilitate holding individuals accountable for their actions, the Bill will break the existing participation link which requires wrongdoing by a firm to be demonstrated before enforcement action can be taken against an individual person in the management of that particular firm.

In addition to the elements of the individual accountability framework, the Bill also provides an opportunity to review the Central Bank's processes in light of the Supreme Court's decision in the case of Zalewski v. Adjudication Officers and others. The changes included in the Bill will ensure these processes conform to the standards of fairness required by the Constitution in the administration of justice and provide for enhanced oversight by the High Court. Given that the Central Bank's enforcement powers will be extended to a wider cohort, including more junior members of staff, due regard has to be given to the constitutional rights of all concerned in preparing the Bill for publication. The complexity of certain elements of the Bill is necessary to achieve this important objective and to include appropriate safeguards.

Much of the detail of the individual accountability framework, including the initial scope of the SEAR, will be included in the Central Bank regulations. Ahead of making these regulations, the Central Bank intends to conduct a comprehensive consultation exercise. I strongly urge all industry participants to engage constructively with this consultation process. Before the main provisions of the Bill are outlined, I will take this opportunity to flag the Minister's intention to propose a number of minor amendments on Committee Stage.

Under the relevant European treaty provisions, the European Central Bank, ECB, must be consulted on proposed legislative changes affecting national central banks. The ECB published a positive opinion on the Bill on 13 September in which it stated that it "strongly welcomes the measures envisaged by the draft law regarding the individual responsibilities of senior persons, including management board members and key function holders." The ECB observed that in its opinion, "cultural failings within the banking sector were considered to be a significant contributory factor in Ireland's financial crisis" and "weaknesses in risk culture are often considered a root cause of the global financial crisis." In addition to strongly welcoming the Bill, the ECB made a number of suggestions on how it believes the Bill might be improved. Where a change to the text of the Bill is necessary, the Minister intends to address this on Committee Stage.