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Individual Accountability

Individual Accountability

In recent months the Central Bank has referred to the need for a new Individual Accountability Framework in Ireland. A Consultation Paper in this regard is expected imminently. A reasonable point of reference for such a Framework is in place internationally, the UK in particular. 

Globally regulated firms are being required to identify senior managers, allocate responsibilities to these senior managers, draw together responsibility maps for the firm and ensure that senior managers (and in some cases a wider range of staff) are fit and proper for their roles and meet conduct rules established by the regulator.

Individual accountability is now a global concept and is becoming a regulatory focus area around the world – as, for example, in the UK (the Senior Managers and Certification Regime, which is being rolled out to all regulated firms), in Australia (the Banking Executive Accountability Regime), Hong Kong (the Manager-in-Charge regime), Singapore (proposed guidelines on individual accountability and conduct), the US (the latest guidance on the management of business lines and risk management), and in the Financial Stability Board's work on governance and misconduct. More countries are likely to follow suit over the coming years.

This increasing focus on individual accountability has been driven by three mainfactors. First, to constrain excessive credit and market risk taking, in particular by banks, through a focus on both heads of business lines and heads of control functionssuch as Compliance, Risk Management and Internal Audit.

Second, together with the greater emphasis on culture, to mitigate retail andwholesale misconduct risks through a focus on conduct standards and on senior managers taking reasonable steps to prevent regulatory breaches in the areas forwhich they are responsible. This is also part of a wider focus of both regulators and financial institutions to restore trust in the financial sector.

Third, to hold individual senior managers to account (including through lowerremuneration and disciplinary actions) when regulatory breaches and other failures do occur.

Internationally, firms have taken the shift to greater individual accountability seriously,perhaps not least because of the potential consequences on individual seniormanagers of a failure to do so. In Ireland firms will need to undertake large-scalereviews and updates of governance structures, management reporting structures, individual responsibilities, governance maps, and management information. 

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