CBI Enforcement Activity in 2019

The recently published Central Bank of Ireland (“CBI”) Annual Report and Performance Statement (the “Report”) provides an overview of enforcement activity, which it carried out in 2019. In this article, I look at some of the statistics contained in the Report and reflect on some new enforcement trends.

Settlements

In 2019 the CBI entered into eight settlements to conclude investigations under its Administrative Sanctions Procedure (“ASP”), imposing fines of over €30 million. Among these was the settlement with Permanent TSB plc which was fined €21 million - the largest fine ever imposed by the CBI to date - and the first settlement to arise out issues uncovered as part the Tracker Mortgage Examination. According to the Report, enforcement investigations into five other lenders remain ongoing.

Another significant fine of €5,880,000 was imposed on Wells Fargo Bank International Unlimited Company for a failure to accurately report the firm’s capital position and to comply with a requirement relating to liquidity testing.

One of last year’s settlements was with a former director of Quinn Insurance Limited (Under Administration) (“QIL”). The CBI had referred the particular individual’s case to Inquiry but confirmed in the Report that the settlement concludes the Inquiry in respect of him. Unusually, no other details in respect of this settlement have been disclosed as yet by the CBI or published on its website.

Inquiries

The Report confirms that last year a number of public and private hearings were held in the Irish Nationwide Building Society (“INBS”) Inquiry. The INBS Inquiry has been permanently stayed in relation to one individual on the grounds of ill health and remains ongoing in respect of two other individuals. Public hearings were also held last year in relation to two individuals who were involved in the management of QIL. As mentioned above, the Inquiry in respect of one of these individuals has since settled.

Fitness and Probity

It is clear from the Report that the CBI is continuing to scrutinise applicants who are proposed to perform pre-approval controlled function roles (“PCFs”). According to the Report, 157 applicants for PCFs were subject to interviews by the CBI in 2019 and 12% withdrew their applications.

The Report also states that decision makers were appointed to consider six cases under the fitness and probity regime in 2019. In one case, an individual was prohibited from carrying out any controlled function for a period of ten years, and in another case, the person was prohibited from carrying out any controlled function for two years. No information is given as to what the decision maker appointments related to in the other four cases.

Involuntary revocations and cancellations

According to the Report the CBI revoked/cancelled the authorisation/registration of three firms on an involuntary basis, where they failed to comply with their authorisation/registration requirements.

Commentary

Last year marked the highest total level of fines arising from settlements levied by the CBI in a single year. Two of the fines imposed in 2019 were greater than any fine previously imposed by the CBI.

It is clear that where a breach is serious, and a firm is in a position to discharge a large fine, that the CBI will be looking at turnover as a potential fining benchmark. The “ASP Sanctions Guidance” which was published last November, mentions that turnover may be relevant to the deterrent effect of a fine, and states that “credible deterrence” is of paramount importance to the CBI in exercising its enforcement function.

The Report shows that the CBI’s focus on individuals continues with some PCF applicants being put through a rigorous interview process. The CBI’s decision to publish two Prohibition Notices in full (with some minor redactions) for the first time last year, also highlights its desire to put individual accountability in the spotlight.

Separately, the Report mentions that a building, which was purchased by the CBI last year to accommodate some of its staff, will be fitted-out to support Inquiry hearings. At the moment, Inquiry hearings are held at a leased premises in Blackhall Place.