Central Bank to review enforcement regime after scathing High Court judgment

Central Bank governor Gabriel Makhlouf has pledged to "fully" implement the findings of a scathing High Court judgment that criticized the bank's handling of a fitness and probity investigation into a fund manager. Makhlouf described the judgment as "very serious" and announced an external review of the bank's broader enforcement activities, which will incorporate the High Court's findings.

The High Court president, Judge David Barniville, ruled that the investigation into the fund industry executive was "irretrievably tainted" by errors. The court refused to confirm the Central Bank's plan to prohibit the individual for a year, a decision that came four years after the initial application. The ruling highlighted that the individual's entitlement to natural and constitutional justice and basic fairness of procedures was not observed.

Makhlouf acknowledged the serious implications of investigations and prohibitions for individuals. He noted that the Central Bank has already made procedural changes since February 2022, including ensuring a ban does not take effect until agreed upon or confirmed by the High Court. The bank has also adopted recommendations for fairness, efficiency, and transparency from the European Central Bank's former supervisory chairman, Andrea Enria.

Furthermore, the Central Bank plans to publish new guidance on its approach to prohibition decisions later this year. Makhlouf also addressed questions about the bank's handling of Israeli bonds, insisting it acted lawfully and that authority for approving a prospectus for Israeli bonds was transferred to Luxembourg in September.

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The High Court found that the individual’s entitlement to natural and constitutional justice and basic fairness of procedures was not observed by the Central Bank in this case. I acknowledge that investigations and prohibitions carry serious implications for individuals and take the High Court’s judgment very seriously.