Corporate Leaders Challenge Central Bank’s Crackdown on Financial Misconduct


Proposed measures by the Central Bank to aggressively enforce stringent punitive measures for malpractice in the financial sector has led to a backlash from attorneys and company directors. High-ranking corporate officials are expressing apprehension towards the Central Bank’s plans of initiating direct disciplinary actions against individuals implicated in alleged financial misconduct.

The Law Society and the Institute of Directors (IoD), bodies that oversee solicitors and directors respectively, have initiated a dialogue questioning the central threads of the directive. The Law Society indicates that the new protocol dabbles with “rule of law” concerns. Similarly, the IoD perceives it as a potential risk for “good faith actors” who could confront significant risks, irrespective of the fact that their actions were the best possible under the existing circumstances.

These changes fall under the ambit of the Central Bank (Individual Accountability Framework) Act which was enacted in March. Detailed guidelines for a new administrative sanctions procedure were propounded by the Central Bank in June. This move could translate into stringent penalties, including substantial fines going up to €1 million and permanent professional prohibitions.

A decade and a half since the financial crash, which resulted in a substantial portion of the banking system being endowed to the state, the intent is to discourage impropriety by tightening the reigns on individual accountability for executives’ actions. The bank’s proposals are tethered to principles of proportionality, predictability, and reasonable expectations.

However, as the window closes for the public to weigh in on the modalities for the sanctions procedure, both aforementioned professional factions have expressed grave reservations on the proposals.

A member of the Law Society’s business law committee and contributor to its Central Bank submission, Philip Andrews, questioned the viability of the criminal enforcement regime for white-collar crimes.

This new directive seeks to address this issue, but Andrews raised concerns as to whether it might overstep its boundaries. Andrews raises the legal question concerning whether a governmental body has the authorisation to impose punitive sanctions on individuals, thereby causing them reputational harm, by using aggressive enforcement policies that lean towards plea bargaining or settlements.

Andrews added that his worries significantly accentuated when unequal processes are employed against individuals. He cited the Central Bank’s past of imposing €400 million in enforcement fines via settlements involving 154 companies. Andrews underscored the issue of basic legal rights and questioned the extent to which state agencies can take actions against individuals.

The IoD echoed these concerns, pointing out a significant paradigm shift. While they did not oppose Central Bank’s objectives, they highlighted the concern that draft guidelines scarcely differentiate enforcement procedures against companies and individuals. The IoD opines that the policy does not sufficiently acknowledge the psychological damage and the potential detriment to their reputation individuals could face.

They noted the Central Bank’s newfound capacity to enforce direct action against individuals for alleged misdeeds versus only for their involvement in organizational discrepancies. The IoD expressed concern for “good faith actors” who could be shouldered with personal, professional, and financial burdens without any backing from their organization or no entitlement to support from a previous employer.


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