Independent Review of the Fitness and Probity Regime - 12 Recommendations

The Independent Review of the Fitness and Probity Regime by Mr Andrea Enria, the former Chair of ECB Supervisory Board has been published by the Central Bank of Ireland. 
 
Speaking for the Central Bank of Ireland, its Governor (Gabriel Makhlouf) has confirmed that all of the recommendations in the review are accepted by the regulator. One of the immediate actions arising from the recommendations is the creation of a new unit to bring together F&P activities that are currently dispersed across the Central Bank.

Those who called for an external decision making process should note the following view of Andrea Enria: "To externalise the decision making process would therefore likely not serve the objective of ensuring decisions are made in a more timely manner. This suggests that an appropriate balance is found, including elements of independent challenge within the structures of the Central Bank" at page 50.

Copy of the Review here
Extract of the Recommendations here

Summary of the 12 Recommendations

A summary of the 12 Recommendations appearing at Appendix 1, page 79 onwards, are as follows: 

Recommendation 1 – Fostering industry role in gatekeeping
- guidance should clearly outline the key, proportionate expectations of the Central Bank as regards the process that a regulated entity engages in prior to submitting an application for a PCF approval 
a) due diligence/screening
b) background checks
c) documentation and record keeping  
d) on-going monitoring


Recommendation 2 – Clear fitness and probity standards
-  recommendations made in following areas to further enhance the effectiveness of the fitness and probity standards and guidance issued by the Central Bank 
a) accessibility of the F&P standards 
b) enhance the F&P Standards
c) regularly review and update standards: establish a process for regularly reviewing and updating F&P standards
d) holistic consideration of complementary powers 


Recommendation 3 - Governance 
a) establishment of an F&P gatekeeping unit with responsibility for the entire gatekeeping process
b) enhanced implementation of a risk-based approach for F&P gatekeeping, with a reconsideration of the overall number of PCF roles and a possible adjustment in the approach to different sectors including to the funds sector, which is the largest contributor in terms of applications


Recommendation 4 – Decision making 
a) legal advice on any PCF Gatekeeper applications should only be provided by the in-house Legal Division. 
b) Minded to Refuse Letters to include a draft decision including and address all relevant concerns, relevant law and issues along with written responses to any arguments raised by the applicant 
c) a significant decisions committee would be established within the Central Bank
d) the Chair of the committee should have authority to decide upon composition based on the features of the underlying case  
e) legal advice at the decision making stage should only be provided by the General Counsel to the Central Bank


Recommendation 5 – Communication and IT platform 
a) the Central Bank should organise an annual information session open to both firms and potential candidates
b) ad hoc workshops should be organised to obtain feedback from firms on the functioning of the Online Portal for applications and other possible improvements


Recommendation 6 – Interview stage
a) interview notification 
b) duration of the interview
c) setting of interviews and comments on minutes (further, the setting for the interviews should remain conversational, rather than adversarial)
d) the Central Bank should adopt as a principle that it will provide feedback in all cases where an interview has been conducted


Recommendation 7 – Efficiency of interview process 
- two recommendations (a) recommended that “meet and greet” type interviews should not form part of the F&P gatekeeping process; and (b) the Central Bank should aim to conduct a single comprehensive interview to reduces potential for unnecessary duplication, such as conducting an initial assessment interview followed by a specific interview, particularly when a specific issue is known in advance 

Recommendation 8 – Withdrawals/feedback
 - Central Bank should adopt as a principle that it will always provide feedback to both the regulated entity and the individual after an interview. It is further recommended that such feedback be provided also in cases where a withdrawal occurs 

Recommendation 9 – Management information
a) clear and comprehensive service standards - to promote transparency and avoid confusion, service standards should be clear, comprehensive and cover all relevant aspects of the process
b) time limits - the Central Bank should commit to a set timeframe within which it will have processed to conclusion all F&P applications
c) reporting - the Central Bank should enhance transparency by publishing standardised information, with appropriate breakdowns, on at least an annual basis
d) reporting - Data Points
e) reporting - Qualitative points: In providing the above information the Central Bank should have regard to the following qualitative points


Recommendation 10 – Quality assurance
- a robust quality assurance mechanisms should be set in place.  This work should be conducted by staff of the Central Bank with the oversight of an externally appointed risk advisor to the Central Bank 

Recommendation 11 – Complaints procedure 
-  complaints process should be established specifically for the F&P gatekeeping process

Recommendation 12 - Training 
- develop a comprehensive training programme for the F&P gatekeeping process; the process to be adopted including any risk framework overlay, conduct of interviews and provision of feedback 

Copy of the Review here
Extract of the Recommendations here