Irish regulator acts to address emerging product risks and failures in standards
Irish regulator warns firms on product risks and takes action on failure to meet competency and consumer protection standards
Following an on-site inspection made in late 2014, the Central Bank of Ireland (CBI) has taken enforcement action against a major non-life insurance business for failures in its competency and consumer protection standards, with shortfalls identified as occurring over a number of years. In its first action against a firm since introducing a newly updated Minimum Competency Code (MCC) in 2011, it fined the firm EUR675k for failing to ensure that advice and information requests were handled by the relevant accredited individuals and also ensure that individuals undertaking certain prescribed functions were suitably being supervised and monitored by accredited individuals. The firm has also failed to maintain adequate related records, or comply with the applicable requirements concerning its handling and resolution of complaints.
The regulator has underlined the importance and responsibility on firms to ensure personal providing and supporting consumer advice on retail financial products are properly qualified. But they also need to be capable of demonstrating that they also maintain the necessary levels of competence to reasonably mitigate against unacceptable risks to the quality and delivery of service to consumers.
More recently in September, and in a separate announcement, the CBI has acted to warn and discourage firms who may be shifting their business emphasis away from protected capital and deposit-based products towards riskier and complex forms of capital and forms of deposit investment. It has also raised concerns over weak and inadequate standards of governance and product oversight and control. This step has followed recent thematic review covering some 20 firms followed-up by 5 on-site inspections, during which the CBI has identified this issue as an emerging risk and concern. In particular, it has flagged that Structured Retail Products (SRP’s) may be advised or offered to consumers as an alternative from of deposit or investment, when their obvious risks and complexity e.g. in respect of Credit Linked Notes, may not make them suitable or meet the needs of consumers with lower risk appetites.
The CBI has written to all relevant firms outlining its findings and views, and recommending firms act to ensure their own compliance arrangements and practices remain correct and robust.