Speech by BPFI CEO Brian Hayes at IBEC SEAR Conference

BPFI recognises that trust in the Irish retail banking sector has been damaged in recent years.  We fully recognise that the reputation of banks has been badly affected by what has happened. Reputation can only be restored by hard work, accountability and by rebuilding on a step by step approach. There is no quick fix to this. Repairing reputations requires not just words or speeches – it requires tangible actions in the here and now. For the Irish banks much work needs to be done.

A trustworthy, efficient and sustainable banking industry is essential for the functions of our society and for the wider economy. But it’s also essential for the 28,000 people who work in the domestic banking sector – which represents about 40% of the entire Financial Services industry in Ireland.

People who work in banking, have a legitimate expectation that their job and their work is recognised as being important to Ireland and its economy.

We welcome the CBI’s proposal to introduce a new Individual Accountability Framework, which arose from recommendations contained in its report on “Behaviour and Culture of the Irish Retails Banks” (published in July 2018).

A robust corporate governance framework enhanced by the introduction of the Individual Accountability Regime – is something that will be good for Ireland and good for the banking industry here. We as in industry want to make it work.

The Individual Accountability Framework contains four elements:

  1. New Conduct Standards for individuals, senior managers and businesses.
  2. Enhancement to current fitness and probity regime “ to strengthen the onus on firms to proactively assess individuals in controlled functions on an on-going basis”.
  3. A unified enforcement process that will apply to all contraventions by firms or individuals of financial services legislation.
  4. A Senior Executive Accountability (SEAR).

The initial introduction of SEAR will focus on a sub-set of financial services being – Credit institutions, Insurance undertakings and Investment firms.

BPFI made a submission to the Department of Finance (October 2018) and again at our appearance before the Oireachtas Committee on Finance, Public Expenditure and Reform (March 2019).  On each occasion, we welcomed the CBI’s report and its proposals.

New SEAR regime – some questions/ observations

  1. In introducing an enhanced accountability regime, we have to be careful not to instil a culture of blame, a balance must be achieved.
  2. Proportionality is essential in financial regulation ( it is a key feature of all EU financial regulation). We shouldn’t lose sight of proportionality in the introduction of SEAR.
  3. As always, it is worth stating that culture is about people and we want to attract the right calibre of people with integrity and talent. We do not want to lose good senior people, but should rather reassure them that engaging in positive and appropriate behaviours will result in compliance with SEAR.
  4. Clarification around how executive versus non-executive roles will be essential.
  5. Financial institutions will need to have a sufficient amount of time to implement the proposed changes and senior-level officers will need to be able to address some key questions, including:
  • What does the CBI expect of me?
  • What is the scope of my regulatory responsibilities? How do I best fulfil my regulatory duties?
  • To what extent can I be held accountable for the actions/ failures of others?
  • How will the CBI ensure that there is a common approach to SEAR?

These are the types of questions which senior-level officers are likely to raise, and we hope will be clarified by the CBI, in the draft regulations.

BPFI hopes to engage in a meaningful, practical way with the CBI to ensure that SEAR works well in practice and can be effectively implemented.

UK’s Senior Managers’ Regime – “lessons learned”

When it was introduced in 2016, UK firms were concerned about increased bureaucracy and a fear/ failure of senior managers to make decision, without documenting every step involved in making the decision.

It is generally acknowledged, that most firms recognise the benefits of the regime and that many of its elements codify good governance structures that a well-run firm should have in place as a starting point.

It is also apparent that there was and continues to be good and meaningful engagement between UK firms and the UK regulator.  This engagement means that firms and the UK regulator are very proactive in dealing with any issues or in providing guidance to make sure that the accountability regime is fit for purpose. In our view that example of engagement between regulator and industry is crucial in understanding how the new accountability regime works.

Statements & Management Responsibility Maps

The requirement to produce Statements of Responsibilities and Management Responsibility Maps identified areas where there was a lack of clarity around who was responsible/ accountable.

I think it would be useful for the CBI to provide guidelines and examples of what it considers to be an appropriately detailed Management Responsibility Map.  In the UK, at times, there was a significant variation from firm to firm as to what was considered to constitute a Responsibility Map. We believe that a consistent approach across the industry is crucial for the success of SEAR.

Shared Responsibilities

In the UK, where responsibilities are shared or divided, it must be clearly explained in the relevant Statement of Responsibilities (and Responsibilities Map, where relevant). In general, where responsibilities are shared, each Senior Manager will be jointly accountable for those responsibilities, in the UK.

The UK regulator refers to responsibilities which can be “shared but not split”. This means both senior managers are equally responsible for the Senior Management Function they share – and firms cannot allocate individual responsibility for particular tasks. This situation could arise where a job-share arrangement exists or where there are “co-heads” of the same function. For example, some investment firms have co-Chief Investment Officers and if sufficiently senior within the firm, they could both hold SMF 6 (Head of Key Business Area).

In Ireland, certain decision making is the shared responsibility of a governance forum/ committee.  Subject to there being clarity around an individual’s responsibilities as to what he/she is accountable for, clarity should be sought that this current practice will continue to be acceptable, provided that robust governance and management oversight is in place.

The importance of explaining what is involved in a role, its responsibilities and the accountability arising for the role is crucial. An individual must be clear on both of these elements and consent, in a meaningful manner.

UK’s Reasonable Steps Defence

BPFI’s members have expressed concerns about the reference to “all reasonable steps” in the CBI’s report.

In the UK the standard is one of “reasonable steps” and has worked well in the UK.

Considerations to which the UK Regulator is likely to have regard to include:

  • the role and responsibilities of the senior manager ( primarily by reference to her/ his Statement of Responsibilities);
  • whether the Senior Manager exercised reasonable care when considering available information;
  • whether the senior manager reached a reasonable conclusion on which to act;
  • the nature, scale and complexity of the firm’s business, and
  • the knowledge the senior manager had, or should have had (considering, among other factors, the length of time she/ he has been in the role and handover arrangements to those new in the role), of regulatory concerns, if any, relating to their role and responsibilities.

It is not clear why the CBI has proposed that the standard of “all reasonable steps” rather than “reasonable steps” be adopted.   This standard  of “all reasonable steps” may have unintended consequences, given that it could create an impossible burden of proof on an individual.

We make these initial points as a means of being helpful to the ongoing debate on SEAR.

First Time Buyers the main driver of mortgage drawdown and approvals activity – BPFI data

Banking & Payments Federation Ireland (BPFI) has today published the latest figures from the BPFI Mortgage Drawdowns Report for Q3 2019 and BPFI Mortgage Approvals Report for September 2019.

The following are the key figures from the Mortgage Drawdowns Report for Q3 2019:

  • 11,794 new mortgages to the value of €2,639 million were drawn down by borrowers during the third quarter of 2019
  • This represents an increase of 8.5% in volume and 11.4% in value on the corresponding third quarter of 2018.  A comparison with the previous quarter (Q2 2019) also shows an increase of 16.1% in volume and 17.3% and in value terms.
  • First-time buyers (FTBs) remain the single largest segment by volume (50.9%) and by value (51.9%).

In addition, BPFI also published today the latest figures from the BPFI Mortgage Approvals Report for September 2019. The following are the key elements:

  • A total of 3,824 mortgages were approved in September 2019 – some 1,972 were for FTBs (51.6% of total volume) while mover purchasers accounted for 1,001 (26.2%).
  • The number of mortgages approved remained virtually unchanged year-on-year but fell by 12.2% compared to the previous month.
  • Mortgages approved in September 2019 were valued at €833 million – of which FTBs accounted for €438 million (52.6%) and €256 million by mover purchasers (30.7%).
  • The value of mortgage approvals rose by 1.2% year-on-year but fell by 14.0% month-on-month.

Commenting on these latest figures, BPFI’s Chief Executive, Brian Hayes stated:

“It is clear from these latest figures for mortgage drawdowns, as well as mortgage approvals, that First Time Buyers (FTBs) are the main drivers of activity – a trend which has been evident for some time.  The continued growth in the number of mortgages drawn down during Q3 reflects the uplift in approvals activity generally through much of the earlier part of the year.  Within this the FTB numbers are particularly strong showing a 14.3% increase in volume; and in accounting for more than 50% of total drawdowns they remain the single largest segment of the market.

While the overall picture for mortgage approvals in September is flat, the FTB category alone shows growth of 10.7%.  Our analysis earlier this year of the Government’s Help to Buy Scheme showed that between 84% and 92% of FTBs buying a new property utilised the Scheme during the period 2018-2019.  The decision to extend the scheme for two years to end-2021 is welcome.”

The BPFI Mortgage Drawdowns and Mortgage Approvals reports can be viewed on the BPFI website here.

 

Note: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: Jillian Heffernan, Head of Communications, jillian.heffernan@bpfi.ie 087 9016880

Banking Sector calls for public-private coalition to accelerate green finance agenda

Banking & Payment Federation Ireland (BPFI) has today called for the immediate establishment of a public-private coalition on green finance to accelerate the delivery by banks of sustainable banking products and encourage market demand.

Speaking at BPFI’s Banking on Sustainability conference Brian Hayes, CEO, BPFI outlined where the banking industry is currently at on the sustainability agenda and the collaborative action that is required both within the sector and by Government to ensure banks can deliver fully and quickly on their role in the Government’s Climate Action Plan.

“Banks in Ireland are very quickly coming to grips with understanding and managing climate risk on their books, looking at green finance products such as green mortgages, meeting investor demands and complying with new EU legislation in this area. The simple reality is that sustainability is not only central to business strategy but will increasingly become a critical driver of business growth.

However, in order to deliver on green finance on the scale and level required to make an impact, the sector is calling for a more collaborative approach in the form of a public-private coalition similar to the approach taken in the UK where the government has facilitated the bringing together of private finance, government departments, NGOs and academics to test and launch demonstratable green finance products.

Banks have a crucial role to play in the transition to a more sustainable future, acting as investors, capital providers and capital intermediaries. Government equally has an ambitious climate action plan to de-carbonise the economy. Working more collaboratively will enable us to fully understand what customers need in terms of sustainable finance and enable the delivery of competitively-priced and easy-to-use financial products and to promote market demand.”

Today’s conference focused on the implications of climate change for banking in Ireland and focused on three key areas including the incorporation of climate risk into banks’ risk management strategies, the government’s Climate Action Plan and best practice in how banks can integrate climate sustainability into their core business.

 

Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has over 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: Jillian Heffernan, Head of Communications, 087 9016880 or jillian.heffernan@bpfi.ie

National Banking Conference 2019 – Delivering for the Customer

Banking and Payments Federation Ireland will host its flagship Annual Retail Banking Conference 2019 – Delivering for the Customer, on Tuesday 12 November 2019 at The Marker Hotel, Dublin from 9.00am – 1.00pm. This year’s flagship event will bring together key senior bankers, policy makers and other key stakeholders to explore how banks can best continue to meet the needs of their customers in light of the rapid changes underway in the financial industry ecosystem.

Through a series of keynote speeches and panel discussions the conference will address three core topics including the current geopolitical and socioeconomic backdrop for banking, unlocking the potential of Open Banking as well as the future of digital and branch banking.

Key speakers on the day will include Anne Boden, CEO Starling Bank; Michael O’Sullivan, Former Chief Investment Officer and Managing Director International Wealth Management Division, Credit Suisse, Ed Sibley, Deputy Governor – Prudential Regulation, Central Bank of Ireland, Jean Allix, Senior Adviser BEUC, Wim Mijs, CEO, European Banking Federation (EBF), among others. As always, the conference will also afford participants a valuable opportunity to network with peers from across the banking and wider financial services industry.

View the full programme here.

Group Bookings
For organisations wishing to send several of their team, we are pleased to offer further discounts for group bookings (applicable where all attendees are employed by the same organisation and are registered under one booking):

4 for the price of 3
7 for the price of 5
10 for the price of 7

FIBI Annual Lunch – William De Vijlder, Group Chief Economist, BNP Paribas addresses Federation of International Banks

The Federation of International Banks in Ireland (FIBI) held its annual lunch today in the Westin Hotel, Dublin. Speaking at today’s event, William De Vijlder, Group Chief Economist, BNP Paribas gave his assessment of current geopolitical and socioeconomic factors currently at play and how these will likely impact on international banking.

Also speaking at the event FIBI Chairman, Derek Kehoe, reiterated FIBI’s commitment to the government’s Ireland for Finance strategy. In particular he highlighted the importance to international banks here of engagement with officials at senior level and outlined FIBI’s recommendations in relation to the formation of a Central Bank Stakeholder Engagement Group, a key action point within the strategy:

“We firmly believe that regular, constructive engagement with senior-level regulators and policy makers is in everyone’s interests.  Which is why the Strategy’s recommendation on the establishment of a Central Bank Stakeholder Engagement Group is so very welcome.  Based on our own research of international best practice in this area across a range of EU Member States, we have identified key features for this Stakeholder Engagement Group as follows:

  • It should be established on a statutory basis and overseen by the Central Bank of Ireland
  • It should provide a cross-sectoral strategic engagement structure which is two-way in nature and is supported by independent external surveying
  • It should provide advice and feedback to assist the Central Bank in fulfilling its obligations, consistent with the Bank’s own strategic plan
  • Comprising the CEOs or Chairs of the main industry representative bodies, it should meet quarterly.

We have tabled these proposals for careful consideration and hope that they can be adopted and acted upon in the foreseeable future.” 

 

 

Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has over 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: Jillian Heffernan, Head of Communications, 087 9016880 or jillian.heffernan@bpfi.ie

FIBI Chairman Derek Kehoe’s remarks at the 2019 annual FIBI lunch

Good afternoon Ladies and Gentlemen,

As Chairman of the Federation of International Banks in Ireland (FIBI), I’m very pleased to welcome you all to our annual lunch.  We are honoured to have as our guest speaker William De Vijlder, Group Chief Economist with BNP Paribas Bank.  We are also very pleased to have among our invited guests, Minister Michael D’Arcy, Minister of State at the Department of Finance; and Deputy Michael McGrath, Fianna Fáil Spokesperson on Finance.

We are living and operating in very challenging times.  Many of the factors which could impact on our financial, economic and social welfare are, worryingly, quite negative and beyond our control.  These include international trade wars, negative interest rates, Brexit, political uncertainty and questions around the effectiveness of monetary and fiscal policies.  I know that William will touch on these matters in his address later; and while we can’t expect him to have any ‘magic wand’ solutions to offer, I’m confident that we will benefit from his insights.

Over the next few minutes I would like to focus briefly on two important drivers that are within our control and which the Ireland for Finance strategy has identified as priorities in the promotion of Ireland as a world-leading location for international financial services.  Let me at the outset commend the Minister and his officials for the very valuable work undertaken in producing this strategy; and to reassure him as to our commitment and support in helping to deliver on its recommendations.

We firmly believe that regular, constructive engagement with senior-level regulators and policy makers is in everyone’s interests.  Which is why the Strategy’s recommendation on the establishment of a Central Bank Stakeholder Engagement Group is so very welcome.  Based on our own research of international best practice in this area across a range of EU Member States, we have identified key features for this Stakeholder Engagement Group as follows:

  • It should be established on a statutory basis and overseen by the Central Bank of Ireland
  • It should provide a cross-sectoral strategic engagement structure which is two-way in nature and is supported by independent external surveying
  • It should provide advice and feedback to assist the Central Bank in fulfilling its obligations, consistent with the Bank’s own strategic plan
  • Comprising the CEOs or Chairs of the main industry representative bodies, it should meet quarterly.

We have tabled these proposals for careful consideration and hope that they can be adopted and acted upon in the foreseeable future.

On another front, we were tasked under the Ireland for Finance strategy to lead on the establishment of a Fintech Foresight Group. I’m pleased to report that we have already facilitated a series of stakeholder workshops.  These have brought together interests from international and domestic banking, global technology companies, indigenous fintechs, third-level institutions as well as public sector representatives.  By common consent the workshops have proved very useful in assessing current global trends that influence financial services – including machine learning, big data analytics, blockchain, regtech and mobile payments; and in  evaluating how well Ireland is positioned to exploit these trends and what future opportunities Ireland should pursue by leveraging these technologies.  We plan to shortly deliver a report on our findings to the Minister for consideration in the context of future policy.

I will leave my remarks at that and invite you to sit back and enjoy your lunch.  I wish to express a sincere word of thanks to Matheson for their continued support for this event.  I will be back to you straight after the main course to introduce William De Vijlder to you.  Thank you for your kind attention.

Environment for SMEs showing signs of strain, exacerbated by Brexit – BPFI SME Market Monitor

Challenges emerging in key SME sectors of tourism and construction

Employment and tax revenues shows signs of vulnerabilities

Consumer sentiment decreases to its lowest level in six years

The latest BPFI SME Market Monitor, prepared by EY-DKM Economic Advisory Services and published today by Banking & Payments Federation Ireland (BPFI), cautions that there are a number of issues, which are indicating an increasingly challenging environment for SMEs, notwithstanding the outcome of Brexit.

Tracking trends across 15 different indicators, which are important for the performance of the SME sector, the latest SME Market Monitor highlights some of these key challenges:

  • In the key SME sectors of tourism and construction:
    • overseas trips to Ireland in Q2’19 were 1.8% down on Q2’18 with more recent monthly data showing that numbers continued to decline during July and August
    • the latest Ulster Bank Construction Purchasing Managers’ Index (PMI) reported a further slight loss in momentum in construction activity growth in June’19, with the headline PMI easing by 1.8 points compared with May’19.
  • Employment and tax revenues also showed some vulnerabilities:
    • the first quarterly decline in employment in 26 quarters (-20,900) was reported in Q2’19;
    • the reliance on income tax as a significant contributor to the overall tax base may come under pressure in the event of a No-Deal Brexit.
  • The KBC Consumer Sentiment Index decreased to its lowest level in six years in September, as consumers became more nervous about the outlook for the Irish economy in general and their personal finances in particular

Providing her assessment of the current SME environment, Annette Hughes, Director, EY-DKM Economic Advisory, explains that in spite of the major challenges, which Brexit and a deteriorating global economy present for SMEs at a macro level, trends evident in some of the key domestic indicators do not augur well for SMEs:

“With or without a deal, the expectation is that the impact will be serious for the Irish economy and especially under a disorderly Brexit scenario. Reports of significant job losses, interrupted supply chains, higher prices for some products and increased administration for those firms trading with the UK are some of the consequences expected for businesses and consumers… However, regardless of Brexit, there are a number of issues which are indicating an increasingly challenging environment for SMEs.”

“As the Brexit deadline approaches, the expectation is that there will be a deterioration in economic conditions. While the economy will still grow by a respectable 3.7% this year (EY GDP forecast), the SME environment is already seeing some negative movements in key economic indicators. Some SME sectors, notably, tourism, are expected to be increasingly challenged over the coming weeks and months.”

The BPFI SME Market Monitor is available on the BPFI website here.

 

Notes: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has some 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: Jillian Heffernan, Head of Communications, BPFI, Ph: 01 4748835 / 087 9016880
Orla Grant, Communications Manager, EY Ireland, Ph: 086 36565005