The Central Bank of Ireland Publishes Programme of Themed Reviews for 2013

19-2-2013 — /europawire.eu/ — The Central Bank of Ireland today published its planned series of themed reviews and inspections for 2013.

The main themes include examinations of the following areas:

• Code of Conduct on Mortgage Arrears – Review of various elements of the mortgage arrears process to inform our upcoming review of the CCMA.   This is in line with the Central Bank’s strategic focus on this area.
• Sales incentives in the banking, insurance, investment and stockbroking sectors – Assessment of how firms have structured staff remuneration and sales incentives to ensure they meet the Consumer Protection Code and other relevant regulatory requirements.
• Provision of information to consumers by investment and stockbroking firms – Review to determine if information is provided to consumers in an accurate and clear manner on investment products, fees and charges, and other issues.
• Property insurance claims handling – Examination of how insurance companies handle the settling and processing of property claims to ensure compliance with the Consumer Protection Code.
• Retail intermediaries compliance (insurance, investment and mortgage intermediaries

– Review of retail intermediaries’ compliance with financial position requirements.

– Review of insurance intermediaries’ compliance with professional indemnity insurance requirements.

– Review of the sale of pension policies by intermediaries.

• Moneylenders – Review of moneylending firms with a focus on the maximum APR[1] and maximum cost of credit that such firms are permitted to charge.
• Outsourcing[2] – Assessment of MiFID[3] firms and fund custodians’ compliance with requirements on outsourcing.
• Post-authorisation application of business plans to delegating UCITS[4] and non-UCITS managers – Assessing firms business models for compliance with the requirements set out in the UCITS and non-UCITS notices.
• Client assets[5] – Review of MiFID firms to assess compliance with client asset requirements.
• Review of governance on pricing procedures – Review of arrangements on the pricing of certain hard-to-value assets within fund and investment manager client portfolios.
• Data integrity of regulatory returns – Examination of data contained in regulatory returns submitted by funds and MiFID firms.
• Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions – Programme of desktop inspections in 2013 and firms will be expected to co-operate in the provision of requested information to fulfil this activity. As in prior years a number of on-site inspections will also be conducted.

Themed reviews and inspections are an important part of the Central Bank’s supervisory framework allowing for review, assessment and mitigation of risks which have emerged in various industry sectors and across individual firms. The publication of planned themed inspections enables the relevant sectors to prepare and raise standards across the firms in each sector.

Themed reviews and inspections:

• allow the Central Bank to monitor compliance with the relevant rules and requirements;
• may form the basis for the Central Bank taking regulatory or enforcement action where breaches are identified;
• help to raise industry standards by identifying and highlighting both good and poor practices;
• ensure transparency to a risk as well as the Central Bank’s expectations of how it should be dealt with, and
• help to build awareness of and confidence in our regulatory role through publication of the main findings and related actions.

In addition to the planned series of inspections, the Central Bank will also continue to conduct additional reactive inspections on key issues and themes as they arise throughout the year.

Notes for editors

The main themes for 2013 include:

Code of Conduct on Mortgage Arrears (CCMA)

During 2012, the Central Bank conducted a review of the CCMA in respect of the appeals provisions of the Mortgage Arrears Resolution Process (MARP) in some of the smaller lenders in the market. In 2013 as part of our ongoing prioritisation of this issue, we will carry out a themed inspection on various elements of the mortgage arrears process, among a number of lenders.   The results of this inspection will be used to inform our review of the CCMA.

Sales incentives in the banking, insurance and investment & stockbroking sectors

It is intended to examine the manner in which firms structure the remuneration and sales incentives paid to their employees.   Firms are obliged to always act in the best interests of consumers.  Remuneration and sales incentives schemes must not impair a firms ability to comply with that obligation under MiFID Regulations and/or the Consumer Protection Code.

Provision of information to consumers

It is intended to examine the compliance by investment and stockbroking firms with the provisions of the MiFID (Markets in Financial Instruments Directive) Regulations and/or the Consumer Protection Code as applicable in relation to the provision of information to consumers. The theme will seek to ensure that consumers are provided, on an ongoing basis, with accurate and clear information on investment services and products, fees and charges.

Property insurance claims handling

This themed inspection will involve reviewing property claims handling for compliance with the Consumer Protection Code.  The settling and processing of claims is an important consumer facing function of an insurance company. This review will include looking at issues such as the information being provided to consumers in the course of the claim and the timelines surrounding the settlement of property claims.

Retail intermediaries/brokers – Review of insurance intermediary firms in relation to their compliance with financial position requirements, professional indemnity insurance and sale of pension policies

The Central Bank will conduct a series of themed reviews of the retail intermediary sector throughout 2013 to monitor compliance with Prudential and Conduct of Business Rules.

• We will continue to target firms for inspections, which are non-compliant in terms of submitting annual returns and/or payment of levies and/or based on complaints levels or other regulatory concerns.
• We will also assess compliance with key prudential requirements such as Professional Indemnity Insurance and financial position requirements.
• We also plan to review the sale of pension products for compliance with specific requirements of the Consumer Protection Code.

The findings from these themed reviews will feed into, and inform, our on-going supervision of retail intermediaries.

Themed inspection of moneylenders APRs and costs of credit (2012/2013)

Moneylending firms are restricted to a maximum APR and a maximum permitted cost of credit per term of loan, as set out in their licences. This theme is nearing completion and was selected to ensure that consumers are being charged in accordance with moneylenders authorised APRs and costs of credit.

Outsourcing – MiFID firms and fund custodians

The purpose of this review will be to assess MiFID firms and fund custodians’ compliance with the applicable requirements relating to the outsourcing of activities. We will assess whether best practice industry principles are being implemented by these firms.

Post-authorisation application of business plans to delegating UCITS and non-UCITS managers

Firms business models will be assessed for compliance with the requirements set out in the UCITS and Non-UCITS Notices.  We will also assess whether firms are following best industry practices.

Client assets – investment firms and stock brokers

The safe-guarding of client assets remains a high priority for the Central Bank. Firms will be examined to assess their compliance with the client asset requirements.

Review of Governance surrounding pricing procedures – investment funds and MiFID firms

The purpose of this review is to examine the governance arrangements around the pricing of certain ‘hard to value assets’ within fund and MiFID firm client portfolios.  We will look to ensure that all regulatory requirements and industry best practice principles are being implemented.

Data integrity of regulatory returns – investment firms, stock brokers and investment funds

This review will assess data contained in regulatory returns submitted by firms, particularly in the context of the low impact firms PRISM engagement model.  We will assess the accuracy and consistency of the data supplied, particularly in critical areas such as financial positions and client assets.

Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions

The Central Bank will conduct a programme of desktop inspections in 2013 and firms will be expected to co-operate in the provision of requested information to fulfil this activity. This review will focus on the risk mitigation framework that firms have put in place to manage their AML and related risks. As in prior years a number of on-site inspections will also be conducted. The Central Bank will communicate any resulting themes to the affected parties and/or sectors.  The Central Bank performs its role in a manner that gives due regard to Ireland’s membership of the Financial Actions Task Force and its Mutual Evaluation Review process and it expects that compliance with the CJA 2010[i] should be viewed by firms in that wider context.