Central Bank of Ireland rebukes firms on governance failings

Ireland mapA “significant number” of fund managers in Ireland have been criticised by the Central Bank of Ireland (CBI) for failing to fully implement safeguards designed to protect investors.

The rebuke comes after the CBI published the outcome of its thematic review of fund management companies.

While the regulator found that its governance framework, known as CP86, provided robust governance and oversight arrangements when applied correctly, its review found that a significant number of the 358 fund managers licensed in Ireland have failed to implement the framework in full and could only evidence limited changes.

In its review, the CBI identified a number of deficiencies in resourcing, risk management and oversight. More specifically, it found shortcomings in how some designated persons discharged their roles; a lack of evidence in how boards approved new sub-funds or carried out due diligence on their delegates; and a failure to provide the resources needed to properly implement the framework.

The review also highlighted deficiencies beyond the CP86 requirements. For example, it found that the vast majority of fund managers companies had not appointed a chief executive, meaning it was “unclear how larger firms can be considered to have appropriate demonstrable substance while lacking a senior executive with responsibility for the day to day running of the business”.

In addition, the central bank’s investigations found a clear gender imbalance on fund managers’ boards with just 16% of the 1,654 directorships across all the firms held by women.

The framework took effect in 2017 for new firms while existing companies were given a year’s grace. The CBI said two years after coming into force, every fund manager is expected to have made the necessary changes to ensure compliance.

“The lack of attention to issues that affect good governance is unacceptable and raises serious concern for the Central Bank,” said Derville Rowland, director general of financial conduct. “It is particularly concerning in light of the increasingly complex landscape in which firms operate.”

Rowland said that the CBI will be following up with firms where it found specific shortcomings and will be expecting all other firms to consider the findings of the review “a matter of priority”.

She also warned: “Assessing the implementation of this framework will form part of our ongoing regulatory and supervisory engagement and we will continue to challenge firms where we see weaknesses.”

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