New governance rules, which would see individuals being held accountable for willful wrongdoing in the financial sector, could stymie recruitment to senior executive positions within organisations, a survey of firms has found.
The Individual Accountability Framework rules are being rolled out by the Central Bank and are due to come into operation over the coming months.
The aim of the process is to underpin sound governance across the financial sector.
However, a survey carried out by the Compliance Institute and Mazars concluded that nine out of ten firms believe that it could make it more difficult to recruit individuals to top positions within their organsations.
A similar proportion believe the IAF will result in increased personal risk for individuals appointed as PCFs (Pre-Approval Controlled Functions).
“While the new rules will give individuals working in financial services better guidance around what they are responsible for and should underpin sound governance across the financial services sector which ultimately, consumers should benefit from, it is understandable that there is concern about the impact of this huge and complex piece of regulation,” Michael Kavanagh, CEO of the Compliance Institute said.
“The new rules will clearly set out the good practices expected of regulated firms and the senior individuals running these firms. The Central Bank will also have more powers to hold individuals in key roles, such as PCFs, to account. While the legislation will drive positive changes to the wider banking culture, it is important that a balance is struck and that employees, regardless of seniority, are entitled to the same level of protection as consumers.”
According to the survey findings, around half of firms have made significant progress in the last six months in their preparations for implementing the IAF requirements – up from just over a quarter this time last year.
“Given that the IAF regulations were signed into law earlier this year and that the latter part of this year has become a crucial period for the financial services sector as it prepares to implement the rules, it is encouraging that significant progress has been made by firms in preparing for the new requirements,” Mr Kavanagh added.
Nine in ten respondents said they believed that their firm’s readiness for IAF had improved compared to the same time last year.
However, there was a fall in the number of firms who believe the implementation of the IAF would bring about meaningful positive change in culture and behaviours in the financial services industry.
Mr Kavanagh said the fall in positive sentiment could be an indicator that the industry is somewhat overwhelmed by the various regulations it has had to implement in recent years.
“However, we realise this a lengthy and complex piece of legislation which will take time for firms to implement and we believe our survey does show that the financial services sector is heading in the right direction in this regard,” he added.