Under the changes the existing non-executive director PCF role (PCF-2) has been split in two to create a stand-alone independent non-executive director role (PCF 2-B).
All existing PCFs classified as PCF-2 will automatically be classified as PCF-2A, ‘non-executive director’, unless a firm notifies the CBI that they should be an independent non-executive director.
Insurance law expert Niall Campbell of Pinsent Masons said insurance and reinsurance firms should continue to have regard for the director independence 'test' under section 2 of the Corporate Governance Requirements for Insurance Undertakings 2015 when assessing their compliance with the amended PCF rules (11 page / 195KB PDF).
“The requirement under section 7.2 of the Corporate Governance Requirements for Insurance Undertakings 2015 regarding the minimum number of independent non-executive directors on the board is unaffected by the introduction of the regulations,” Campbell said.
Financial services regulation expert Ruth Hennessy of Pinsent Masons said that attention should be paid to the definition of independence under the Irish Funds Corporate Governance Code in relation to funds and fund management companies. The requirement under section 4.1 of the Irish Funds Corporate Governance Code regarding the minimum number of independent non-executive directors similarly remains unaffected.
The CBI has also created another new standalone role, that of head of anti-money laundering and counter terrorist financing compliance (PCF-52). This is in addition to the existing role of head of compliance (PCF-15).
“In practice, a person could perform both the PCF-12 and PCF-52 roles,” Campbell said, noting that the change was particularly relevant to life insurance companies within the insurance sector. With respect to fund management companies, very often the head of compliance performs the role of anti-money laundering and counter terrorist financing compliance and in these circumstances, those people will be required to notify the Central Bank of the appropriate PCF designations of the individual, meaning either or both PCF-12 and PCF-52.
The role of branch manager in other countries (PCF-16) has been expanded from ‘other European Economic Area’ (EEA) countries to include non-EEA countries. Firms must notify the CBI if they are affected by this amendment by 3 June 2022.
Campbell said for insurance and reinsurance companies and intermediaries with UK branches, this would mean the role of branch manager of the UK branch is now subject to Ireland’s fitness and probity regime.This is also the case for fund management companies.
He said affected firms should note the CBI’s feedback statement on the amendments (12 page / 761KB PDF) regarding the change to the branch manager role.
The CBI said the change meant it would not be permissible for a branch manager outside the EEA to be appointed without its approval, but it did not anticipate the amendment having any other impact on the role of the CBI when it came to supervising non-EEA branches. It will also operate in line with any memoranda of understanding in existence with other jurisdictions.
In the investment firms category, the role of head of investment (PCF-31) has been removed, leaving only chief investment officer (PCF-30), as the CBI had found most regulated financial services providers (RFSPs) only used the former PCF.
Following feedback from providers and in response to a focus on diversity and inclusion in financial services firms, the titles of five roles previously described as ‘chairman’ have been amended to ‘chair’. The CBI said firms did not need to take any action with regard to these roles – PCF-3 to PCF-7 – as individuals’ titles would automatically be amended. With this amendment, the Central Bank has clearly flagged the importance of, and focus on, diversity and inclusion at RFSPs.
The amendments were signalled in September 2021 and will come into force for individuals already in place on 25 April 2022, with notifications needing to be made by 3 June 2022.