Financial services firms might need to take a holistic approach to acting in their customers best interests in future, rather than just simply complying with the rules according to the Central Bank.
Such businesses might have to focus on the outcomes for customers and whether those outcomes are what would be expected where firms are acting in the customers' best interests.
The suggestion about what might in future be considered to be acting in the 'best interests’ of customers are contained in a discussion paper issued by the regulator as part of its review of the Consumer Protection Code.
The paper suggests that a key determinant in deciding what it means to act in the best interest of customers is the legitimate expectations of those clients.
It says relevant factors might include the information provided and how an ordinary, time-constrained consumer would reasonably have understood it, as well as what an ordinary consumer in the relevant market would have expected.
The report says the culture, strategy and approach of each firm should centralise the interests of customers, while the firm would have to maintain an appropriate balance between the interests of shareholders and the interests of customers.
The Central Bank also suggests inducements from third parties must not be allowed to impair compliance with the regulated firm’s duty to act honestly, fairly and professionally in the best interests of the customer.
Brokers Ireland welcomed the publication of the discussion paper as it said it presents a real opportunity to introduce for the first time regulation that is proportionate to the level of risk organisations pose to consumers.
But it added that while robust regulation is important to any business it is not the same thing as proportionate regulation.
"We need better regulation, not more regulation," said Brokers Ireland chief executive, Diarmuid Kelly.
He added that overregulation is one of the motivating factors for many smaller brokers now looking to exit the market.
The Central Bank said the discussion paper is part of an extensive engagement programme with a wide range of people and organisations to hear their views and experiences.
"The Consumer Protection Code is a cornerstone of consumer protection in financial services in Ireland," said Central Bank Governor, Gabriel Makhlouf.
"The Code has served consumers well. It has established a set of rules and expectations for how firms should treat their customers and has allowed us to intervene to protect consumers"
"We are now undertaking this review to ensure that the Code remains fit for purpose and future-ready, and that consumers remain well-protected."