Ireland: Proposed Changes To Corporate Governance Code

Last Updated: 28 August 2013
Article by Darren Maher


The Corporate Governance Code for Credit Institutions and Insurance Undertakings was originally published by the Central Bank of Ireland in November 2010 and became effective on January 1 2011. It imposed minimum core governance standards and requirements on all credit institutions and insurance undertakings, including reinsurers, which are licensed or authorised by the Central Bank.

On August 2 2012, the Central Bank published a Consultation on the Review of the Corporate Governance Code for Credit Institutions and Insurance Undertakings. The purpose of the consultation paper is to obtain feedback from institutions and industry bodies on the operation of the code to date, and to identify any necessary amendments to strengthen and improve it.


Since the introduction of the code in 2011, the Central Bank has introduced the Probability Risk Impact System (PRISM) for allocating risk. The consultation paper proposes to introduce the PRISM designations of risk (high, medium-high, medium-low and low) to the code in order to maintain consistency within the Central Bank's supervisory regime. For example, the term 'major institution' will be substituted with the term 'high impact institution'.

Significant proposed amendments

Risk committee (Section 23)

The existing code requires that a risk committee be represented by both non-executive and executive directors. The Central Bank intends to amend this provision by requiring that the risk committee is composed of a majority of non-executive directors and for the committee to be chaired by a non-executive director. International best practice suggests that the risk committee will be more effective if non-executive directors take lead roles.

Chief risk officer (Section 12)

It has become generally accepted best practice for institutions to have a chief risk officer (CRO) specifically responsible for managing the risk control function. The consultation paper proposes to introduce a new mandatory requirement for all institutions to appoint a CRO. In the case of non-high impact institutions, it is proposed to permit the CRO role to be shared with another pre-approved control function role.

The Central Bank proposes to introduce a new section to the code which will outline the specific responsibilities of the CRO, including:

  • maintaining effective processes to identify, manage and monitor risks;
  • risk reporting in a timely manner to the risk committee; and
  • facilitating the setting of the risk appetite by the board.

Chairman (Section 8)

The code prohibits the chairman from holding the position of chairman or chief executive officer (CEO) of another credit institution or insurance undertaking. However, the Central Bank acknowledges that the appointment of a group chairman to the board of a subsidiary can bring a valuable group perspective to the board, as well as the ability to influence key decisions at group level.

It is proposed to permit the chairman of group subsidiaries, which are non-high impact institutions, to hold more than one chairman position in another institution, provided that the institution resides within the same group and the chairman has sufficient time to fulfil his or her role. Although the existing requirement will remain in place for high impact designated institutions, derogation requests will be considered by the Central Bank.

Chief executive officer (Section 9)

The code prohibits the CEO from holding more than one CEO position in another credit institution or insurance undertaking at any one time. It is proposed to amend this requirement for smaller-sized institutions where a full-time CEO role may not be justified. It is also proposed to permit the CEO of a medium-low or low impact designated institution to hold up to two additional CEO roles in other medium-low or low impact credit institutions or insurance undertakings.

Committees (Section 19 and Appendix 1)

It is proposed to include a requirement for the chairman of the audit committee to be a member of the risk committee and vice versa. The Central Bank recognises that cross-committee membership can broaden and deepen understanding of key board committees. It is also a planned requirement for high impact institutions that the chairman of the remuneration committee can be a member of the risk committee and vice versa. However, the Central Bank is seeking to avoid a situation where one individual exerts too much influence and no single individual shall therefore be permitted to chair two such committees simultaneously.

Board responsibilities (Section 13)

The Central Bank has proposed a number of amendments to enhance the detail included in the section of the code outlining the board's duties. Board responsibilities will include:

  • facilitating a remuneration framework in line with the institution's risk strategies; and
  • facilitating a robust and transparent organisational structure.

Board meetings (Section 16)

The Central Bank notes that the majority of the 24 high impact institutions currently hold 11 board meetings a year, as is required under the code. The Central Bank is inviting comment on the operation of this requirement in practice.

All non-high impact designated institutions are required to hold four board meetings a year, each of which must be held in a separate calendar quarter. It is proposed to amend this requirement to permit institutions to hold one board meeting per half year, with the balance of meetings to be scheduled as the board deems appropriate. This is in recognition of the fact that some businesses may be busier at certain times of the year.

Annual compliance statement (Section 26)

The code requires the annual compliance statement to be submitted on the basis of a 12-month calendar year. However, some institutions have a financial reporting period which is different to the calendar year. It is therefore proposed to amend this requirement to permit institutions with a non-calendar year to change the submission basis of the annual compliance statement to that of the institution's financial year.

Specific areas for comment

Composition of board – gender diversity (Section 7)

The Central Bank is considering the introduction of a provision promoting board gender diversity. It is generally agreed that diversity in board composition can bring benefits to corporate governance and varying approaches have been taken internationally to promote board gender diversity. The European Commission is considering proposed legislation with the aim of attaining a 40% objective of the under-represented gender in non-executive board-member positions in publicly listed companies (save for small and medium-sized businesses) by 2020. If introduced, such measures would require the taking of significant steps by institutions and insurance companies to ensure compliance.

Directorship limits (Section 7 and Appendix 1)

The Central Bank currently limits the number of directorships of credit institutions and insurance undertakings held by a director to five and the number of directorships of other entities to eight. In the case of high impact institutions, the Central Bank requires that the number of directorships of credit institutions and insurance undertakings held by a director must not exceed three and the number of directorships of other entities must not exceed five. The Central Bank is seeking feedback as to the operation of these requirements in practice.(1)


1. Comments on the consultation paper are invited from interested parties before October 1 2013. Submissions should made to

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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