Central Bank Reform Act 2010

Author:Ms Tracy Gilvarry and Ronan Cremin
Profession:LK Shields

The Central Bank of Ireland

With effect from 1 October 2010, the Central Bank Reform Act (the "Act") has created a new fully integrated Central Bank of Ireland (the "Central Bank") with a unitary board called the Central Bank Commission (the "Commission"). The intention being that by uniting the Central Bank and the Financial Regulator, the Central Bank will now be in a better position to monitor and react to potential risks. The Commission's mandate includes, inter alia, three primary responsibilities:

to ensure the stability of the financial system overall; to ensure the prudential regulation of financial institutions; and to ensure the protection of consumer interests. Although these responsibilities are primarily the responsibility of the Central Bank, the Head of Financial Regulation, Matthew Elderfield and the Head of Central Banking, Tony Grimes will assume responsibility for their respective departments and will report to the Commission and the Governor of the Central Bank, Dr Patrick Honohan.

Importantly, the Central Bank has advised that the institution previously known as "Irish Financial Services Regulatory Authority" or the "Financial Regulator" is now referred to as the "Central Bank of Ireland".

Fitness and Probity

A very important aspect of the Central Bank and Reform Act 2010 is the new powers to ensure fitness and probity of nominees to key positions within financial service providers and of key-office holders within these financial service providers. The Act provides the Central Bank with statutory powers to regulate sensitive or influential appointments in regulated financial service providers.

Whereas the old regime placed obligations on financial service providers with regard to "senior management", this Act goes further and places obligations on staff that carry out a "controlled function" within a financial service provider.

The Act provides a very useful, albeit broad, definition of the term "controlled function". A controlled function is now defined as, inter alia, a function in relation to the provision of a financial service that:

is likely to enable a person to exercise a significant influence on the conduct of the affairs of a regulated financial service provider; is related to ensuring, controlling or monitoring compliance by a regulated financial service provider; involves the giving of advice to a customer, dealing with or having control over property of a customer; or dealing with property on behalf...

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