Central Bank flags risk issues at brokers

The Central Bank has issued a stinging criticism of the way risk is managed in some Irish stockbrokers, investment firms, and fund service providers.

The bank said it had found “notable inconsistencies and deficiencies” in the way firms managed risk.
It did not name individual firms but said it was following up with companies where issues had been identified. Problems in the areas of identifying, documenting, quantifying and mitigating risk were identified, as well as problems with the way risk was communicated within firms.

“The Central Bank found a divergence in the quality and effectiveness of risk frameworks,” reads a letter signed by Des Ritchie, deputy head of investment firms and fund services at the bank’s market supervision directorate.
The letter said on-site inspections had revealed many good practices identified in firms’ documentation “are not always evident in the operations of the business”.

A Central Bank spokeswoman told the Irish Independent that individual firms were not named as it was “bound by strict confidentiality in relation to supervisory information from firms”.
“In general, in the interests of transparency where the Central Bank conducts themed inspections, the overall/general findings are published. However, specific issues relating to individual firms are not published.

“Themed reviews and inspections are a very important part of the supervisory framework as they allow the Central Bank to monitor compliance with the relevant rules and requirements, [and] can form the basis for the Central Bank taking regulatory or enforcement action where breaches are identified,” the spokeswoman added.

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