Category: Fitness & Probity

Central Bank of Ireland establishes dedicated Fitness and Probity Unit

19/12/2024

Repeat of News Release:

The Central Bank of Ireland has today (Thursday 19 December 2024) announced the establishment of a dedicated Fitness and Probity Unit.

The fitness and probity regime is a critical element of financial regulation; protecting the public interest by ensuring that people who work in key positions in a financial firm are competent and capable, honest, ethical and of integrity and financially sound. Since 2020 the Central Bank of Ireland has approved appointments to more than 11,000 roles under the regime.

Speaking today, Governor of the Central Bank of Ireland Gabriel Makhlouf said: “The Enria report, published in July 2024, identified several key areas for improvement in our operation of the fitness and probity regime. We accepted the findings of the report and have used them as a basis for implementing reforms to enhance the regime’s overall effectiveness. We also committed to implementing the reforms as early as possible and before end 2024.

“Today’s announcement of the establishment of our new dedicated Fitness and Probity Unit within the Bank is a key element of this programme of reform.

“However, we recognise that this is only a first step towards delivering a fitness and probity gatekeeping process aligned with the spirit and approach of the report. As such, work will continue in implementing and delivering a regime which supports supervisory judgement, while delivering robust, fair and transparent processes.

“The new unit will be staffed from within our existing complement by experienced regulators from across the Bank."

“Our strategic plan committed to transforming our approach to regulation and supervision – this process is ongoing and our new operating structure, including the dedicated fitness and probity team, will be in place from the start of the new year.”

Source: https://www.centralbank.ie/news/article/central-bank-establishes-dedicated-fitness-and-probity-unit

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Appeals Tribunal finds against Central Bank of Ireland over flawed and unfair procedures

14/2/2024

All these issues, in themselves, are sufficient for a finding that, at the assessment interview, there was an absence of fair notice sufficient to conclude that this part of the process fell below the standard of constitutional fairness.

We are unable to conclude that the decision reached was the correct and preferable decision. There were fundamental procedural flaws which were to be found at all three stages of the process. The Tribunal is satisfied that taken cumulatively – or even individually – the various procedures adopted by the Central Bank did not comply with the requirements of Constitutional and natural justice; including the necessity for fair notice; the duty to give reasons; and the observance of the principle of audi alterem partem. [Latin for "hear the other side"]

Interested in the Central Bank of Ireland's internal and often called 'opaque' fitness and probity assessment process? In which case take the time to read this decision (link below) by the Irish Financial Services Appeals Tribunal - an independent body - to which appeals lay from Central Bank decisions.

The Appeal involved a finding by the Central Bank that: "in its “opinion”, the Appellant was “unfit” to hold the two positions in question.". The Appellant, identified as AB, was applying for (as it was then) PCF2 (NED) and PCF3 (Chairman). While the identity of the Appellant is not made known, we know the person is male and he held "similar roles to those which he was applying for in Redhedge and other regulated entities in the same sector."

The crux of the order appears at para 325 on page 79 of the decision (here):

"We are unable to conclude that the decision reached was the correct and preferable decision. There were fundamental procedural flaws which were to be found at all three stages of the process. The Tribunal is satisfied that taken cumulatively – or even individually – the various procedures adopted by the Central Bank did not comply with the requirements of Constitutional and natural justice; including the necessity for fair notice; the duty to give reasons; and the observance of the principle of audi alterem partem." [[Latin for "hear the other side"]

The impugned decision was one which had serious legal consequences, where fundamental legal and constitutional principles had to be applied in the course of performing the statutory functions

The Central Bank called the Appellant to what is known as an “assessment interview” and then a “specific interview”. These made adverse findings. There followed a “minded to refuse” letter to the ultimate decision-maker. She largely confirmed these adverse findings and held the Respondent [i.e. the Central Bank] entitled to refuse the applications.

There is a lot here for the Central Bank to consider and take stock of. And hopefully it does.

While there was the appearance of fair procedure, there was an absence of its substance

Summary of certain facts

In summary (all the below are direct quotes from decision**):

the Tribunal finds that the Central Bank’s decision-making process was flawed.
the Appellant was denied fair procedures at each stage of the process.
the Appellant was not given full or fair notice of the issues which were intended to be explored.
the identities of a number of bank officials who were involved in the decision-making process are redacted, although the Tribunal may not adopt this approach in future.
the impugned decision was flawed as it was based on a flawed preliminary process, because it did not observe the principle of audi alterem partem [Latin for "hear the other side"], and because it did not give reasons, so as to comply with what was required in law.
[the Central Bank's decision maker] was reliant on the information which emerged from a previously flawed interview process. The procedural flaws identified in the first two stages of the process fed into the impugned decision.
the flaws from the Assessment interview fed into and were reflected in this [specific] interview. While there was the appearance of fair procedure, there was an absence of its substance.
this Tribunal must find that the decision was, in law, “incorrect” and remit the matter to the Central Bank for reconsideration.
at the assessment interview, there was an absence of fair notice sufficient to conclude that this part of the process fell below the standard of constitutional fairness.
it cannot be said the Central Bank’s submissions were fully correct on the powers of the Tribunal and the Central Bank’s obligations
the impugned decision was one which had serious legal consequences, where fundamental legal and constitutional principles had to be applied in the course of performing the statutory functions.

Costs:

the Appellant should be entitled to his costs; such costs including each of the days of the hearing, for the submissions, pleadings and correspondence subsequent to the impugned decision and any legal costs of the proceedings which gave rise to this Appeal. However the Appellant for reasons noted above is awarded 50% of the costs of the directions hearing.
the Appellant will be awarded one half of the costs of the directions hearings.

** to ensure that you are aware of the context from which the above quotes are extracted, do read the decision for yourself.

A copy of the decision is located here

Linkedin Post here. Do check out the Linkedin page as it contains lots of additional information.

The Central Bank of Ireland issued a statement on its website saying:

IFSAT found a number of issues in how the Central Bank handled this application [that is putting it very lightly].
Accordingly, the Tribunal has returned the application to the Central Bank for reassessment.
We will immediately conduct a reassessment of the application, in accordance with the Tribunal’s directions.
The Central Bank has therefore decided to commission an independent review of the F&P approval process

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Central Bank of Ireland establishes dedicated Fitness and Probity Unit

Appeals Tribunal finds against Central Bank of Ireland over flawed and unfair procedures