EN ECB -PUBLIC  
OPINION OF THE EUROPEAN CENTRAL BANK  
of 13 September  2022  
on the enhancement of individual accountability and governance relating to senior executives in 
the Irish financial services industry 
(CON/2022/3 2) 
Introduction a nd legal b asis 
On 15 J uly 2022 the E uropean C entral B ank ( ECB) r eceiv ed a request f rom th e Irish Minister f or Finance 
for an opini on on the C entral Bank (Individual Accountability Framework) Bill 2022 (hereinafter t he ‘draft 
law’). 
The ECB’s competence t o deliver an opini on is based on Articles 127(4) and 282(5) of the Treaty o n the 
Functioning of t he European Union and the third and sixth indent s of Article 2(1) of C ouncil D ecision 
98/415/EC1, as t he dr aft law relates t o the C entral B ank of I reland (CBI), r ules ap plicable to financial 
institutions insofar as they materially influenc e the stability of financial institutions and markets, an d the 
ECB’s tasks concerni ng th e prudential supervision of credit institutions pursuant to Article 127(6) of the 
Treaty . In accordance with t he first sentenc e of Article 17. 5 of t he Rules o f Procedure of t he European 
Central B ank, t he Governing Council has a dopted t his opi nion. 
1. Purpose o f the d raft law
1.1 T he purpos e of t he dra ft law is t o confer powers on t he CBI t o strength en and enhanc e individual
accountability a nd responsibility of s enior ex ecutives i n the Irish financial s ervices i ndustry .  
1.2 The draft law aris es out of r ecommendations mad e in a r eport by the C BI2 to the Minister for F inance 
on the behaviour and c ulture of the Irish r etail banks . The recommendations in the CBI’s report 
include that it be given the power under legislation to introduce an enhanced individual accountability 
framework,  that would apply to credit institutions and other regulated financial service providers3 
(hereinafter  ‘firms’) , and would include: ( 1) a ‘s enior executive accountability regime’ which would 
ensure clearer accountability by placing obligations on firms  and senior individuals within them to set 
out clearly where responsibility and decision- making lies for their business, (2) standards of 
behaviour for firms and individuals working for those firms, and ( 3) an enhanceme nt of the existing 
legislative framework in relation to fit and proper matters, and administrative sanctions . 
1 Council Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
2 See Central Bank of Ireland, Behaviour and Culture of the Irish Retail Banks  (July 2018) available on the Central Bank 
of Ireland’s website at centralbank.ie. The report was prepared by the CBI in collaboration with De Nederlandsche 
Bank .       
3 ‘ Reg
ulated financial service provider’ is defined in Section 2(1) of the Central Bank Act 1942.  
ECB -PUBLIC  
2 1.3 The draft law introduces a comprehensive set of amendment s to three pieces of Irish legislation4. In 
particular , the draft law proposes  that the C BI be granted the power to prescribe the senior executive 
accountability regime by way of regulation. It is intended that the senior executive accountability 
regime would apply  to credit institutions , including  significant credit institutions  subject to prud ential 
supervision by the ECB within the framework of the Single Supervisory Mechanism (SSM) , as well 
as certain insurance undertakings  and investment firms , and incoming third country branches of all 
three  types of entities.  The senior executive accountability regime would allow the CBI  to prescribe 
inherent  responsibilities which are inseparable from and inherent to the functions of a  senior function 
holder5. The CBI would have the power to prescribe ‘ allocated responsibilities ’ that the firm must 
allocate to its  senior function  holders . Firms would have obligations to prepare and maintain 
statements of responsibilities for each  senior function holder , and to establish and maintain a 
‘management responsibilit ies map’ documenting key management and governance arrangements  in 
the firm6. 
1.4 The draft law introduces a legal duty for individuals performing senior functions in firms that are with in 
the scope of the senior executive accountability regime to take any steps  that are reasonable in the 
circumstances  to avoid the firm committing or continuing to commit contraventions of laws , including 
any regulations that may be made by the CBI, in relation to the areas of the business for which they 
are individually responsible.  
1.5 Apart from the senior executive accountability regime, the draft law  also provides  for a regulation-
making power that allow s the CBI to impose conduct standards for businesses that would apply to 
all firms7. The draft law also provides the CBI with the power to set  individual  common conduct 
standards  and additional conduct standards  of behaviour for certain individuals8 and senior 
executives in firms . Furthermore, the draft law  introduces a legal duty requiring that the relevant  
individuals and senior executives take any steps that are reasonable in the circumstances to ensure 
that these  standards are met.  
1.6 To ensure individuals are held accountable for their actions, the draft law9 breaks  the existing 
‘participation link ’ requiring wrongdoing by a firm  to be demonstrated before enforcement action can 
be taken against those persons involve d in the management of the firm  who participated in that 
wrongdoing.  In this respect, the draft law10 proposes a series of amendments, in particular regarding 
the CBI’s administrative sanctions procedure, to make the changes necessary to break the 
participation link, and therefore facilitate enhanced individual accountability. The effect of the draft 
law is that the CBI can pursue individuals directly for their misconduct rather than only where they 
have participated in a firm’s wrongdoing.  
 
4  See Central Bank Act 1942, Central Bank Reform Act 2010 and Central Bank (Supervision and Enforcement) Act 
2013.  
5  Persons performing a ‘pre-controlled function’ within the meaning of Section 18 of the Central Bank Reform Act 2010.   
6  Part 2, Chapter 1 of the draft law . 
7  Part 3 of the draft law. 
8  Persons performing a ‘controlled function’ within the meaning of Section 18 of the Central Bank Reform Act 2010.  
9  Part 2 of the draft law. 
10  Part 4 of the draft law. 
ECB -PUBLIC  
3 1.7 The draft law includes  a significant number of amendments to investigation and enforcement 
processes relating to the administrative sanctions procedure and the fitness and probity regime11. 
The draft law extends the CBI’s fit and proper regime to holding companies and individuals in those 
holding companies  to which it did not previously apply . The draft law also includes new requirements 
in respect of certification by a firm so that it  shall not permit a person to perform a controlled function 
in relation to it unless a certificate of compliance with standards of fitness and probity is in force in 
relation to the person12. The draft law also amends existing powers in respect of persons carrying 
out controlled functi ons13. Additionally, the draft law incorporates amendments relating to fair 
procedures and the administration of justice more generally.  
1.8 The draft law provides that a significant institution within the meaning of the SSM Regulation14 shall 
not appoint a person: (a) to its management body , or (b) to perform a prescribed ‘ pre-approval 
controlled function ’ in relation to it, unless the CBI has notified the significant institution in writing that 
the ECB has approved the appointment15. A pre -approval controlled function is a feature of the 
national regulatory regime whereby the CBI has a power to prescribe functions as a pre- approval 
controlled function if the function may allow a person to exercise a “ significant influence on the 
conduc t of a regulated financial service provider's affairs ”16. The full list of pre-approval controlled 
functions in the domestic regime is not limited to members of the management body and key function 
holders; these functions can be regarded as a subset of the overall list of pre-approval controlled 
functions17. Depending on whether a firm is  a significant institution or not, either the CBI or ECB may 
be competent for the purposes of providing prior approval in writing for the appointment of a person to perform a pre-approval controlled function in that  firm. 
The draft law provides an additional regulation- making power for the CBI which would allow it to 
prescribe a pre-approval controlled function if it appear s to the CBI that the approval for  the 
appointment s to that function is subject to the exclusive competence of the ECB pursuant to 
Article  4(1)(e) of the SSM Regulation
18.  
2. O
bservation s
2.
1 The ECB strongly welcomes the measures envisaged by the draft law regarding the individual responsibilities of senior persons, including management board members and key function holders. Cultural failings within the banking sector were considered to be a significant contributory factor in 
11 Parts 4 and 5 of the draft law. 
12 Section 10 of the draft law replacing Section 21 of the Central Bank Reform Act 2010.  
13 Section 16 and 27 of the draft law amending Section 26 and 43 of the Central Bank Reform Act 2010.  
14 Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63) .  
15 Section 13 of the draft law replacing section 23A of the Central Bank Reform Act 2010. 
16 See Section 22(2) of the Central Bank Reform Act 2010. 
17 See the CBI’s website for a full list of PCFs: https://www.centralbank.ie/docs/default -source/regulation/how -we-
regulate/fitness- probity/regulated- financial -service -providers/list -of-54-pre-approval -controlled -
functions.pdf?sfvrsn=6.  
18 Section 13 of the draft law. 
ECB -PUBLIC  
4 Ireland’s financial crisis19. Weaknesses in risk culture are often considered a root cause of the global 
financial crisis20. Weaknesses in corporate governance in a number of institutions have contributed 
to excessive and imprudent risk -taking in the banking sector which has led to the failure of individual 
institutions and systemic problems in Member States and globally21. 
2.2 Within the SSM, the draft law’s measures will support suitability assessments and enable a better 
and more accurate grounding when material concerns lead to the need for ancillary provisions, 
negative outcomes or reassessments , in line with the ECB Guide to fit and proper assessments22. 
The draft law’s measures will reinforce the governance framework of credit institutions. The 
behavioural patterns exhibited by management, as well as the drivers that underpin that behaviour, 
are elements that determine how robust a credit institution’s governance framework is.  It is imperative 
to adequately address unwarranted behaviour by individual senior managers at a credit institution 
who decide to take on too much risk, put ting the immediate interests of a credit institution before its 
longer -term int erests, or even break ing the law. If such acts have no apparent consequence, that will 
be noticed by staff in the credit institution, leading to the development of a new group norm. The 
overriding behaviour and culture within a credit institution are thus the product of both individual 
behaviour and the underlying culture that acts as a breeding ground for that behaviour. It is important 
for a credit institution to identify and be aware of the structures, beliefs and group dynamics which echo throughout the entire institution and which may pose a risk to its performance and stability. 
Credit institutions’ management bodies should be attentive to these intangible but real underlying drivers of behaviour and, if warranted, acknowledge the need to shift the paradigm before it is too late and negative practices become the norm
23.  
2.3 Regarding the proposed power to be granted to the CBI  to prescribe by regulations a pre- approval 
controlled function, it is re called that, in the case of significant credit institutions,  the approval of 
appointments to that function is subject to the exclusive competence of the ECB under Articles 4(1)(e) 
and 9 of the SSM  Regulation. T he prudential power to grant and notify the supervisory approval to 
carry out pre- approval  functions  is an exclusive competence of the ECB under Articles 4(1)(e)  and 9 
of the SSM Regulatio n. The consulting authority is invited to refrain from conferring regulatory 
authority and tasks on  the CBI under Irish law  which  may impinge upon this exclusive competence. 
In this respect , Section 23A of the Central Bank Reform Act 2010 should be clarified so that the role 
of the ECB in respect of the supervision of significant supervised entities is maintained in line with 
the SSM Re gulation.    
19 See Commission of Investigation into the Banking Sector in Ireland, Misjudging Risk: Causes of the Systemic Banking 
Crisis in Ireland (2011), as referred to in the Central Bank of Ireland’s report, Behaviour and Culture of the Irish Retail Banks ( July 2018), p. 3.       
20
 See Financial Stability Board (FSB), Guidance on Supervisory Interaction with Financial Institutions on Risk Culture  
(7 April 2014), p.1, available on the FSB’s website at www.fsb.org .       
21 See recital 53 of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to 
the activity of credit institutions and the prudential supervision of credit institutio ns and investment firms, amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC Text with EEA relevance (OJ L 176, 27.6.2013, p. 338).  
22 Available on the ECB’s website at www.bankingsupervision.europa.eu 
23 See Frank Elderson, Member of the Executive Board and Vice -Chair of the Supervisory Board of the ECB, Supervising 
banks’ governance: structure, behaviour and culture (11 June 2022), available on the ECB’s website at www.ecb.europa.eu
; see also FSB, Guidance on Supervisory Interaction with Financial Institutions on Risk Culture  
(7 April 2014), pp. 3- 4; De Nederlandsche Bank (DNB), Behaviour  and culture in the financial sector, available on 
DNB’s website at www.dnb.nl .       
ECB -PUBLIC  
5 2.4 In line with Articles 4 and 9 of the SSM Regulation, where there is a power of the CBI in Irish  
legislation  falling within the tasks conferred on the ECB and underpinning supervisory functions , the 
ECB would be the authority responsible for the exercise of that power in respect of a significant 
supervised entity.  Consistent with this, the Irish regulations  adapting Irish law to the SSM 
Regulation24 provide that the functions (other than a power to bring and prosecute proceedings for 
an offence) of the CBI under Irish financial services legislation shall, in addition to being performable 
by the CBI, be performable by the ECB to the extent only that their performance is necessary for the 
performance of functions conferred on the ECB by the SSM Regulation and, accordingly,  references 
to the CBI shall, insofar as they relate to a function so conferred, be construed as including references 
to the ECB.  In addition, the ECB understands  that the process  for making applications to the Ir ish 
High Court to, inter alia, confirm, vary or revoke prohibition notices under the applicable legislation25 
operates without prejudice to the jurisdiction of the Court of Justice of the European Union so far as 
concerns the tasks conferred on the ECB and underpinning supervisory functions . It might be useful, 
for the avoidance of doubt, that this jurisdictional point be explicitly clarified in the Irish regulations 
adapting Irish law to the SSM Regulation.  
2.5 Insofar as the draft law aims at implementing Directive 2013/36/EU of the European Parliament and of the Council, it is recalled that, when Member States implement this Directive, the implementing provisions sh ould contain or be accompanied by a reference to this Directive
26.  
T
his opinion will b e published on EUR -Lex. 
D
one at Frankfurt am Main, 13 September 2022. 
[
signed]  
T
he President of the ECB  
Christine  LAGARDE  
24  See Article 3(1) of the European Union (Single Supervisory Mechanism) Regulations 2014 (S.I. No. 495 of 2014).  
25 See sections 45, 45A and 46 of the Central Bank Reform Act 2010, as amended by sections 29 -31 of the draft law. 
26 See Article 162(4) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access 
to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p.  338).