Section 22 of the Central Bank Reform Act 2010 enables the Central Bank of Ireland (Central Bank) to prescribe by regulation certain pre-approval controlled functions (PCFs) as part of its fitness and probity regime. On 22 September, 2021, the Central Bank issued a notice of intention (the Notice) to amend the list of PCFs applicable to all Irish Regulated Financial Service Providers (RFSPs), other than credit unions, in light of its recent supervisory experience of the use of a number of current PCF roles and in view of the changing structure of, and landscape surrounding, the Irish financial services industry.
In particular, the Central Bank proposes to:
- Expand the existing PCF-16 role to include branch managers in non-EEA countries. The Central Bank acknowledges in its Notice that these individuals are also currently subject to the fit and proper requirements of the host regulator responsible for the supervision of the relevant branches, but considers this amendment warranted on the basis of the level of control and autonomy that such individuals may have in relation to non-EEA branches of an Irish RFSP.
Action Required: The Notice states that no action will be required from RFSPs within which an individual holds an existing PCF-16 designation. However, RFSPs now captured by the expansion of PCF-16 (i.e. branches outside of the EEA) will be required to review their fitness and probity assessment in respect of individuals in situ and submit confirmation of such an assessment to the Central Bank.
- Introduce stand-alone PCFs in respect of independent Non-Executive Directors. The Notice proposes that independent Non-Executive Directors will be classified as PCF-2B, whilst non-executive directors (which are not independent) will be classified as PCF-2A. The Central Bank proposes this change in classification to distinguish the role of the independent Non-Executive Directors from other Non-Executive Directors, given that the role is an integral component of the board of an RFSP and a fundamental safeguard within an RFSP’s governance framework.
Action Required: The Notice states that all PCF-2s will be re-designated as PCF-2A. RFSPs will be required to notify the Central Bank which individuals should be designated as PCF-2B, and that they have confirmed that they have undertaken the relevant due diligence to assess independence.
- Introduce a new PCF-52 dedicated to the role of the Head of Anti-Money Laundering and Counter-Terrorist Financing. The new PCF-52 role will replace the PCF-15 role of Head of Compliance With responsibility for Anti Money Laundering and Counter Terrorist Financing Legislation. The Central Bank views this as an important change in light of the increasing importance of the role of individuals with responsibility for Anti-Money Laundering and Counter Terrorist Financing, and the number of appointments of individuals to carry out this role in its own right (as opposed to within the remit of the role of Head of Compliance).
Action Required: All PCF-15 role holders will have this designation end-dated by the Central Bank. RFSPs will be obliged to notify the Central Bank of the appropriate PCF designation(s) of the individual i.e. PCF-12 and/or PCF-52. No action is required by exiting PCF-12 role holders.
Where an RFSP determined by an RFSP that it is appropriate for PCF-15 role-holder to be re-designated as a PCF-52, the RFSP must inform the Central Bank of this change. In all other cases, an RFSP should review its functions and determine whether any would meet the Head of Anti-Money Laundering and Counter Terrorist Financing role. Where it is determined by the RFSP that this role does exist, the RFSP will be required to review their fitness and probity assessment in respect of individuals in situ and submit confirmation of such an assessment to the Central Bank.
- Remove PCF-31 Head of Investment. The removal of the PCF-31 designation, which is only relevant to investment firms, is proposed by the Central Bank in light of the duplication of roles with that of the PCF-30 Chief Investment Officer position.
Action Required: No specific action required. All individuals who are designated as PCF-31 will automatically be redesignated by the Central Bank as a PCF-30 (Chief Investment Officer).
A consultation process will now commence in relation to the proposed changes, with responses required to be submitted by the 20 October, 2021.
The in-situ process will commence after the amended regulations come into effect and a period of 6 weeks will be provided to submit any required in-situ confirmation. The full application process will apply to any new appointment to the amended PCFs after the proposed changes come into effect.