The Central Bank has recently released the findings on its latest inspection of the sale of payment protection insurance ("PPI") to Irish consumers. 

The Central Bank recently carried out a review of sales files for PPI policies sold to Irish consumers, focusing on instances where the consumer had made a claim under their policy for reasons of unemployment or redundancy and where that claim was declined.  On 27 June 2012, the Central Bank issued a letter to each of the firms which it had reviewed outlining the areas of concern and the actions that the Central Bank required those firms to take in light of its findings.

When reviewing the sales files, the Central Bank sought to determine the level of compliance with the Consumer Protection Code 2006 (the "2006 Code").  The Central Bank's letter also outlines the relevant equivalent provisions of Consumer Protection Code 2012 (the "2012 Code") with which firms are now required to comply.  On identifying the various areas of concern, the Central Bank reminded firms of the following specific obligations: 

  • Provisions 5.16 and 5.17 of the 2012 Code require firms to ensure that a product or service offered to a consumer is suitable for that consumer based on facts about the consumer of which the firm is aware.  Firms are also required to seek such facts and information from customers.  If PPI is being sold in conjunction with another product, the firm must determine the suitability of both the PPI policy and the primary product being sold for that customer;
  • Provision 5.19 of the 2012 Code requires firms to prepare a written statement setting out why the product is suitable, to provide a copy of this statement to the consumer and to retain a copy of the statement;
  • Provision 5.24 of the 2012 Code states that, in order for sales to be made on an execution only basis, the consumer must have specified the product and the product provider and the consumer must not have received any advice;
  • In accordance with general principle 2.6 of the 2012 Code, firms should ensure that all relevant material information, including the terms and conditions of PPI policies, is provided to customers prior to the sale of the PPI policy;
  • Provision 4.1 of the 2012 Code requires firms to bring key information to the attention of the consumer, including exclusions and / or limitations on policies, costs and benefits and also the fact that any changes to a consumer's employment status during the lifetime of the policy may impact on their ability to make a claim under the policy;
  • Provisions 11.5 and 11.6 of the 2012 Code require firms to ensure that any records, including documents, files or information, are maintained for the required period; and
  • Firms are obliged to comply with the provisions of the general principles set out in chapter 2 of the 2012 Code, including the obligation to act with due skill, care and diligence in the best interests of customers and the obligation not to exert undue pressure or undue influence on a customer.

The Central Bank has now met with, and written to, the inspected firms requiring them to carry out a detailed review of all of their PPI sales since August 2007.  Further, the Central Bank has stated that it is also considering possible enforcement actions in respect of a number of firms and will be contacting firms directly in due course.

A copy of the letter issued to the inspected firms is available here.

Central Bank of Ireland Publishes FAQs on Fitness and Probity 

The Central Bank has recently published updated frequently asked questions and answers ("FAQs") on the fitness and probity regime. 

In July 2012, the Central Bank published updated FAQs to address the commonly asked questions in relation to the operation of the fitness and probity regime under Part 3 of the Central Bank Reform Act 2010.

The full text of the FAQs is available here.

Central Bank of Ireland Publishes Fitness and Probity Service Standards 

On 29 June 2012, the Central Bank published new Fitness and Probity Service Standards (the "Standards") outlining the Central Bank's target turnaround times for processing individual questionnaires ("IQ"). 

The Standards provide guidance on the time period in which the Central Bank aims to complete its assessment of IQs submitted by persons who are proposed for roles in pre-approval controlled functions ("PCFs") in accordance with the requirements of the Central Bank's fitness and probity regime.

The Standards emphasise the importance of the proposed person submitting a fully and accurately completed IQ with appropriate documentation attached.  Further, the IQ must be endorsed by the firm to which the proposed person is to be appointed in a PCF role.  If an incomplete IQ is submitted, the application for approval will be returned to the proposing entity, together with reasons, within 5 business days.  Where the Central Bank requires a proposed person to attend for an interview, this will be communicated to that person within 15 business days.

The Standards set down the following target turnaround times for the completion by the Central Bank of its assessment of an IQ, with the period commencing on the receipt of a complete IQ:

  • 5 business days for persons who are proposed as PCFs for qualifying investor funds;
  • 12 business days for persons who are currently approved for a PCF role in Ireland and who wish to take up a similar role within the same sector in Ireland;
  • 12 business days for persons who are currently approved for a PCF role within a specific sector in the EEA and who wish to take up a similar role within the same sector in Ireland; and
  • 15 business days in all other cases where a complete application has been received.

However, the Standards provide that where approvals are sought as part of the authorisation of a new entity or where approvals are sought as a qualifying shareholder or as part of an acquiring transaction, the above time targets do not apply and the approval will be part of the normal authorisation or approval process.  Further, the Standards provide that where the Central Bank is waiting on responses from third parties (eg, foreign regulators), it may not be possible to meet the above targets.  In this regard, the Central Bank recommends that the proposed person notify their home regulator of the application for approval by the Central Bank.

Finally, the Standards provide that the interests of stakeholders and the importance of making the right regulatory decision may require the Central Bank to take longer than the target timescales listed above.  The Standards set out that the Central Bank aims to meet its targets 85% of the time and that the Central Bank will publish metrics on a half yearly basis.  

The full text of the Standards is available here.

Central Bank of Ireland Updates Regulatory Requirements for Reinsurance Undertakings 

The Central Bank has recently published updated regulatory requirements for life reinsurance undertakings, non-life reinsurance undertakings and composite reinsurance undertakings.  

In July 2012, the Central Bank published updated regulatory requirements for life reinsurance undertakings, non-life reinsurance undertakings and composite reinsurance undertakings.  These requirements are stated to replace and update the requirements published by the Central Bank in July 2011 and have been introduced to clarify and amend the previous requirements.

The requirements for life reinsurance undertakings is available here, the requirements for non-life reinsurance undertakings is available here and the requirements for composite reinsurance undertakings is available here.

Updated Guidance on the Corporate Governance Code for Credit Institutions and Insurance Undertakings 

The Central Bank recently published updated guidance on the Corporate Governance Code for Credit Institutions and Insurance Undertakings (the "Code"). 

On 20 June 2012, the Central Bank of Ireland (the "Central Bank") issued updated guidance on the Corporate Governance Code for Credit Institutions and Insurance Undertakings – Frequently Asked Questions (the "Guidance").  The Guidance has been updated to reflect questions raised in relation to the Code and provides further clarification on (i) Board Majority (Q.15 - J), (ii) Role of the Board (Q.34) and (iii) Annual Compliance Statement (Q.53).

The full text of the Guidance is available here.

Central Bank Report on the Implementation of the Revised Customer Protection Code 2012 

The Central Bank recently published a report on the implementation of the Revised Customer Protection Code 2012 (the "Revised Code"). 

On 19 June 2012, the Central Bank published findings of its review and inspection of banks and insurance companies preparation to implement the Revised Code which was introduced in January 2012.  The Central Bank reported that most firms had prioritised the full and effective implementation of the Revised Code and were satisfied that they would have all provisions of the Revised Code in place by the 30 June 2012 deadline date.

However, areas for improvement were identified and include the following:

  • Providing clear, accurate and up to date information to consumers in plain English;
  • Indentifying the needs of vulnerable consumers and providing of reasonable arrangements and assistance to vulnerable consumers.

The Central Bank will continue to monitor compliance by undertakings of the Revised Code through its 2012 programme and future programmes of themed reviews and inspections.

The full text of the information release is available here.

Central Bank of Ireland Publishes Issue 3 of the Intermediary Times

The Central Bank has recently published its third issue of the Intermediary Times, a newsletter for brokers and retail intermediaries.

Issue 3 of the Intermediary Times, dated July 2012, contains information on the outcome of the Central Bank's recent professional indemnity insurance ("PII") inspections and on the requirement to submit annual returns.

Professional Indemnity Insurance Themed Review

In early 2012, the Central Bank carried out a PII themed inspection across a range of full-time and part-time insurance intermediaries registered under the European Communities (Insurance Mediation) Regulations 2005 (the "Regulations").  The Central Bank found that only 64% of the firms inspected complied with the requirements of the Regulations.  For this reason, the Central Bank will conduct a second review of PII cover later in the year to assess wider compliance by the insurance intermediary sector.  The Intermediary Times also sets out the findings of the Central Bank's inspection and highlights some of the key obligations on insurance intermediaries under the Regulations.

Annual Returns

The Central Bank has confirmed that it has received a high submission rate for firms which were due to submit an annual return by 30 June 2012 and reminds firms that have yet to do so to submit their return without further delay.  The Central Bank also reminded firms whose year-end is in January to submit an annual return by 31 July 2012.

The Intermediary Times also contains general guidance on the requirement to submit an annual return, including, advice for firms no longer trading or no longer carrying on regulated business, advice for those having difficulty submitting an annual return, details on the three step process for submitting an annual return and information on the requirement to submit audited financial accounts.  Further, the Intermediary Times contains a table setting out the specific obligations for a firm depending on the legal provisions under which it is authorised, ie, whether authorised under the Regulations, the Investment Intermediaries Act 1995 or the Consumer Credit Act 1995.

The full text of Issue 3 of the Intermediary Times is available here.

Central Bank of Ireland Publishes FAQs on Online Reporting by Retail Intermediaries

The Central Bank has recently published answers to various frequently asked questions ("FAQs") on the requirement for all retail intermediaries to submit a return to the Central Bank.
On 26 June 2012, the Central Bank published FAQs on the reporting requirement imposed on all intermediaries authorised by or registered with the Central Bank under the Investment Intermediaries Act 1995 (the "1995 Act"), the Insurance Mediation Regulations 2005 or the Consumer Credit Act 1995.

The FAQs provide that all retail intermediaries authorised under the above statutes, including tied intermediaries, loss assessors and non-trading firms, must submit a return six months after their financial year-end.  However, where a firm already reports to the Central Bank under an additional authorisation it does not need to submit such a return, for example, credit institutions, credit unions, MiFID firms and moneylenders are not required to submit a return.

The FAQs emphasise that while firms authorised under the 1995 Act are not required to submit hard copy audited accounts to the Central Bank, such firms must still have audited accounts prepared.  Further, the FAQs set out that auditors of all firms authorised under the 1995 Act are required to complete a Statutory Duty Confirmation report which must be submitted by email to the Central Bank within one month of signing the audit report.

Finally, the FAQs provide specific guidance on the completion of the "General Information Form", the "Financial Information Form" and the "Conduct of Business Form".

The full text of the FAQs is available here.

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