As the Central Bank begins reviewing the thousands of pages submitted to it for the desk-based review phase of its CP86 thematic review, we gaze a little down the road at what the possible outcomes of the CP86 thematic review might be.
In Part 1 of this blog mini-series, we look at why it is unlikely no ManCo or SMIC is getting out of this unscathed. My thoughts as to why this is a possible outcome are as follows:
Useful Links:
The Regulator will find risks that need addressing
Has any inspector ever carried out an inspection and found nothing? No. Inspectors are paid to investigate and find problems ('risks' in regulatory speak) and ManCos and SMICs can be sure they will. Nobody's perfect, after all.
The best they can realistically hope for is a ‘mild’ Risk Mitigation Programme.
By ‘mild’, I mean that the risks identified are not critical and the actions required to mitigate them are manageable without too much cost. It is highly advisable to manage expectations internally in and outside of Ireland, that some form of RMP is likely!
A severe Risk Mitigation Programme that identifies critical risks and requires immediate (and costly!) action to mitigate those risks is a definite possibility for any firm subjected to an on-site review like this. Getting a mild RMP is best case outcome.
I expect ManCos or SMICs that have made a genuine, reasonable and demonstrable effort to comply with CP86 to have a decent chance of falling into the 'mild' RMP category. ManCos or SMICs that have adopted (and continue to persist with) a 'wait and see' approach - 15 months after CP86 came into full effect - run the risk of 'severe' RMPs.
Of course...
The Central Bank will follow up directly with any ManCo and/or SMIC that receives an RMP.
This means additional inspections could well be on the cards for many firms. My advice: (1) Fix it - take action to address the risks identified in the RMP; and (2) Keep It Fixed - make sure there is no slippage. Nothing will annoy the Regulator more than a firm putting in place a short-term solution simply to 'keep the Regulator happy'!
In its desk-based review letter...
...the Central Bank flagged that the powers available to the authorised officers in the course of a review are set out in Chapter 3 of Part 3 of The Central Bank (Supervision and Enforcement) Act 2013 (the “Act”).
This includes the power to require the production of information, records, forecasts and plans.
While this form of legal language is normal for these types of letters, it does emphasise that on-site inspections are serious affairs that could result in enforcement proceedings where regulatory breaches warrant this.
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If turning an on-site CP86 inspection into an opportunity to improve your relationship with the Financial Regulator is of interest to your ManCo and/or SMIC...
...we are holding an invite-only (your name has to be on the list to get in on the day) Breakfast Briefing, 9 October 2019 at Maples Law Firm in St. Stephen's Green. ManCos and SMICs are welcome to attend this complimentary session.
Full details and To register your attendance please go here.
