The Central Bank of Ireland has recently engaged Andrea Enria, the former Chair of the European Central Bank’s (ECB) banking supervisory board, to conduct an investigation into its approval system for critical finance roles. This follows serious criticism from an appeals body regarding the Central Bank’s denial of a board nominee for a fund.
The independent appeals institution, Irish Financial Appeals Tribunal (Ifsat), chaired by ex-Supreme Court justice John MacMenamin, highlighted last month that the regulator’s decision-making process in this case was faulty. They argued that the appellant was wrongly deprived of a fair process at every step of the way.
Notwithstanding, Ifsat couldn’t definitively say if the Central Bank’s refusal to grant fitness and probity approval to the appellant – an executive in the funds industry poised to join a fund’s board – was justified.
Andrea Enria, an Italian economist, held the position of the Single Supervisory Board’s chair at the ECB, responsible for overseeing euro-zone banks, from 2019 till the end of the last year. Before that, he chaired the European Banking Authority (EBA).
According to the Central Bank’s Friday announcement, the review will assess the transparency, efficiency, and effectiveness of its fitness and probity approval process. It will reflect upon how this contributes to the stability and security of firms, consumer and investor protection, and overall system resilience. The review’s scope will focus more on the bank’s operational practices, systems and structures rather than the legislative framework.
Results of the review are expected to be available in the third quarter of this year.
The verdict given by Ifsat has resulted in considerable embarrassment for the Central Bank’s fitness and probity assessment method, vital to supervisory reforms implemented post the 2008 financial crisis. It screens the aptitude of candidates vying for significant roles in the financial sector.
Typically, executives who face difficulties in securing approval pull out before a decision is reached. However, the case evaluated by Ifsat is unique one where an individual challenged the regulator’s decision.
The rulings of the tribunal have indicated that whether analysed holistically or individually, the Central Bank’s various protocols did not fulfill the demands of constitutional and natural justice. This includes the obligation to provide fair warning, the responsibility to offer justifications, and the adherence to ‘audi alterem partem’ – a Latin phrase denoting the principle of allowing the opposing party to have their say, as specified in Ifsat’s judgement from the previous month.
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