CP45 – Review of the Minimum Competency Requirements

The Central Bank of Ireland (the “Bank”), to use the name of the regulatory body that has succeeded the Financial Regulator, is conducting a review of the Minimum Competency Requirements (“MCR”) that have been in force since 1 January 2007. The primary aim of the MCR is to ensure that those in the Irish financial services sector that deal with consumers in Ireland are competent to do so, particularly those involved in advising consumers on the purchase of financial products.  Some of the main changes proposed or raised for discussion in CP45 are:

• the definition of advice will be altered to be brought in line with the definition of advice currently contained in the MiFID Regulations. The proposed definition of advice is “the provision of a personal recommendation to a consumer, either at the consumer’s request or at the initiative of the firm, to enter into or to become entitled to benefit under, terminate, exercise any right or option under, or take any benefit from one or more financial products”
• the CPD cycle will change to an annual cycle rather than the current three year cycle;
• the ‘grandfathered’ status afforded to some individuals will be phased out by 1 January 2015;
• that services not currently covered by the MCR, such as services provided over the internet or companies that manage insurance claims, be brought within the MCR remit; and
• where a ‘grandfathered’ individual ceases employment with a regulated firm, that firm will be obliged to produce a Certificate of Compliance in respect of that individual.

CP41: Corporate Governance Requirements

A previous article written on the proposed changes contained in CP41 can be found here.

In addition to the considering the submissions received in respect of CP41, the Bank has organised a number of meetings with various industry bodies in order to discuss the areas of key concern. The aim of these meetings is to allow the Bank to take a considered approach to implementing a robust corporate governance policy applicable to all financial institutions on a proportionate basis.

In terms of timing, it is our understanding that a revised proposal would be considered by the Bank’s Policy Committee in September with a view to it being considered by the Central Bank Commission in October. The requirements falling from CP41 are expected to be binding six months from publication unless a change of a company’s Board of Directors is required, in which case implementation of the measures relating to Board composition may take up to twelve months. As this paper is still at a discussion stage these timelines are subject to change.

CP42: Investment Guarantees – Guidance on Reserving and Risk Governance

A previous article written on the proposed changes contained in CP42 can be found here. Since CP42 closed, the Bank has written to companies writing variable annuity business in order to obtain further information on the impact of the potential regulatory change. Companies were asked to illustrate aspects of strategy and governance, at both local and group level, as well as risk management techniques. In addition, the Bank reiterated the need to provide data on CP42’s capital and reserve tests by 20 August 2010. The Bank has said that the data is currently being assessed and that no further guidance can be given for the time being.

The Bank is also participating in the CIEOPS Task Force in relation to variable annuities.  However, the Bank has not indicated whether it will delay its own CP42 initiative until the CIEOPS Task Force has concluded its work. It is certainly hoped that the two initiatives will be dove-tailed so as to facilitate a glide path for variable annuity insurers into Solvency II. 

For further information, please contact John Larkin or Grant Murtagh.