The Central Bank of Ireland (CBI) has published an independent review of its Fitness and Probity (F&P) regime. The review, conducted by Andrea Enria, former Chair of the ECB Supervisory Board, aimed to ensure the regime’s effectiveness and identify areas for improvement.

The F&P regime is a key reform introduced after the 2008 financial crisis to ensure individuals in important financial positions are qualified, ethical, and financially sound. The review identified areas for improvement in process consistency, governance, and fairness.

In commenting on the publication of the report, Enria said: “Through extensive consultation with all parties engaged in the fitness and probity regime operated by the Central Bank of Ireland, I have noted the strong recognition that the system has driven higher standards in regulated firms and provided an important contribution to improving governance standards after the great financial crisis. Robust supervisory judgement is critical for the effectiveness of the framework and needs to be exercised within a fair, efficient and transparent process.

“In light of the input received I am recommending a number of enhancements to how the system is operated by the Central Bank of Ireland to clarify supervisory expectations, strengthen internal processes and ensure fair and transparent procedures are strongly embedded in supervisory culture.”

The Central Bank intends to implement the recommendations to strengthen the regime and maintain public trust in the financial system. “We are immediately looking to our implementation approach, including the creation of a new unit to bring together F&P activities that are currently dispersed across the Central Bank,” said Gabriel Makhlouf, Governor of the CBI.

Key findings

The CBI’s F&P regime review was introduced in March 2024 to assess the effectiveness of the regime implemented in 2010 following the 2008 financial crisis. The aim was to consider how transparently, efficiently and effectively the Central Bank operates the F&P regime, taking into account the regime’s purpose and objectives.

The review found that the core aspects of the regime are aligned with international standards. However, it also identified areas for improvement, including:

• consistency of process across firms of varying sizes and sectors;
• strengthening governance around the application of the regime;
• enhancing fairness and transparency in the F&P approval process.

Report recommendations

The report from the review made 12 recommendations, including establishing clarity of supervisory expectations, a centralized unit to oversee F&P applications and ensuring clear timelines for the process. These recommendations aim to improve consistency, fairness, and transparency within the regime.

CBI Governor Makhlouf said he welcomed Enria’s strong endorsement of the importance of the F&P regime and confirmation that the standards operated by the Central Bank of Ireland “broadly align with international good practice.”

“Maintaining trust in the financial sector hinges on having individuals in key roles within regulated entities who are fit and proper to carry out their responsibilities. It is important to emphasize, as the report does, that industry has the primary responsibility to ensure the appointment of competent and suitable candidates,” he said

On accepting the report’s recommendations, Makhouf said: “They will help us to ensure that the F&P regime continues to perform its key role into the future. In particular, I very much welcome the emphasis on the critical role of supervisory judgement in promoting good governance within the financial sector and the necessity to uphold procedural fairness as its foundation.

“In this respect there are clearly improvements we can make in the way we manage applications and come to a judgment on them. As we introduce these improvements, it is paramount that our supervisory judgment is consistently grounded in a fair and impartial evaluation process, ensuring equity and transparency for all parties involved.”