11 01 2022 Insights Regulatory

2021 – A Bumper Year for Central Bank Enforcement

Reading time: 3 mins

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In spite of the limitations imposed as a result of the Covid-era, 2021 was another busy year for the Enforcement Division of the Central Bank of Ireland (“CBI”).

Total Level of Fines

During 2021 the CBI concluded 5 Settlement Agreements with regulated firms resulting in fines totalling €66.8m – representing a vast increase on the €24.5m imposed in 2020 or the €28.1 in 2019.

Average Fine

The average level of fine imposed during 2021 was €13.3m, an increase on the 2020 average of €8.1m and the €4.3 average fine of 2019. (As the number of settlements reached in a given year is relatively low, caution is advised when considering the average level of fines imposed.)

CBI’s Largest Fines

Two of the largest penalties ever handed down by the CBI were imposed during 2021, both on banks – a fine of €37.7m on Ulster Bank and a fine of €24.5m on Bank of Ireland.

The largest fine – that imposed on Ulster Bank – arose from CBI’s long-running Tracker Mortgage Examination. It follows on from a series of other fines that have been imposed on other lenders as a result of that scandal, including:

  • €18.3m fine imposed on KBC in 2020 in respect of its failings that were exposed in the context of the Tracker Mortgage Examination
  • €21m fine imposed on Permanent TSB plc in 2019 for its failings in respect of tracker mortgage customers;
  • €4.5m fine imposed on Springboard Mortgages in 2016 for serious failings in its obligations to tracker mortgage customers.

CBI’s second largest fine ever imposed was directed at Bank of Ireland in respect of its failure to have a robust framework in place to ensure continuity of service for the firm and its customers in the event of a significant IT disruption.

Types of Firms Targeted

The CBI fines were directed at a fairly wide range of firm types – 2 banks, 1 fund management company, 1 investment firm and 1 insurance intermediary.

Importance of Compliance with Regulatory Requirements

When imposing the record-level fine on Ulster Bank in March 2021, the CBI’s Director of Enforcement and Anti-Money Laundering, Seána Cunningham, said “The fine imposed by the Central Bank today should serve as a clear message to the wider market of the importance of compliance with the fundamental requirements of the Central Bank’s Consumer Protection Codes and of taking prompt action to address issues comprehensively and fully when they are identified. It is the responsibility of each firm to ensure that in all its dealings with customers it acts honestly, fairly and professionally in the best interests of its customers. Firms must take this responsibility seriously and put it at the heart of their actions and decision making.”

The CBI’s sanctioning powers were increased in 2013, so the maximum penalty which the CBI may now impose is €10,000,000, or an amount equal to 10% of the annual turnover of a regulated financial service provider, whichever is the greater.

The Year Ahead

The information that we can glean from Settlement Agreements that are published by the CBI each year provide only a partial insight into the work of the Enforcement Division. We can expect that a number of investigations into contraventions by firms are underway and we also know that the CBI is now also focused on pursuing individuals who participated in wrongdoing by firms.

The focus on individuals will become more intense as we move closer to the enactment of the Central Bank (Individual Accountability Framework) Bill which will pave the way for the introduction of the Individual Accountability Framework and the Senior Executive Accountability Regime.

AUTHOR: Brian Hunt

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