On 5 May 2015, the Central Bank of Ireland (the "Central Bank") published Consultation Paper 94 on Corporate Governance Requirements for Investment Firms (the "Consultation Paper"). The Consultation Paper represents continuous work by the Central Bank to develop and strengthen corporate governance standards and practices for investment firms.

Previously, in 2012, the Central Bank attempted to alleviate certain deficiencies by issuing nine recommendations based upon findings from a thematic review of corporate governance in investment firms, however the Central Bank believes that weaknesses continue to exist. Subsequent to the 2012 recommendations and supervisory engagement regarding corporate governance matters, and in line with developments relating to corporate governance in other sectors, the Consultation Paper proposes statutory corporate governance requirements for investment firms.


The Consultation Paper proposes introducing a number of statutory corporate governance requirements (the "Requirements") for investment firms that will apply to all Markets in Financial Instruments Directive ("MiFID") firms as well as non-retail investment intermediaries licensed or authorised by the Central Bank1 that are designated as High, Medium High or Medium Low impact under the Central Bank's Probability Risk Impact System ("PRISM"). It is intended that these requirements will supplement other corporate governance requirements in MiFID or CRD IV.

Notwithstanding that the Requirements are stated not to apply to firms designated as Low Risk by the Central Bank, such firms will be encouraged to adopt the Requirements. Equally, the Requirements will not apply to foreign incorporated subsidiaries of an Irish firm, however such firms are encouraged to adopt equivalent corporate governance practices. Furthermore, a firm that falls within the scope of both the Requirements and the Corporate Governance Code for Credit Institutions and Insurance Undertakings 2013 will be obliged to comply with the latter.

Certain additional requirements, outlined in Appendix 1 of the Consultation Paper, are imposed on firms designated as High or Medium High Impact under the Central Bank's PRISM which are not detailed below.

Proposed Requirements

An outline of some of the key requirements is provided below.

  • Size and Composition of the Board: The firm shall ensure that the board is of sufficient size and expertise to oversee operations. The board must have a minimum board size of at least three directors (five in the case of firms designated as High and Medium High by the Central Bank). The board must consist of a majority of independent non-executive directors, however, in the case of groups, the majority of the board may be composed of a combination of group directors and independent nonexecutive directors provided that in all cases the subsidiary must have at least one independent non-executive director (two in the case of firms designated as High or Medium High by the Central Bank) or such greater number as is required by the Central Bank.
  • The role and responsibilities of the Chairman: The Chairman must possess the ability to fulfil their role in leading the board, encouraging critical decisions, challenging mind-sets and ensuring effective communication between the executive and nonexecutive directors. A firm must ensure that the Chairman has the relevant financial services expertise, qualifications and experience or be required to undertake relevant and timely comprehensive training. The Chairman must be an independent nonexecutive director except in the case of a firm which is a subsidiary, the Chairman may be a group director. The Chairman must be proposed for election or re-appointment on an annual basis. The firm must ensure the prior approval of the Central Bank is obtained prior to the Chairman taking on any other directorships outside the group. No individual who has been CEO, an executive director or a member of senior management of the firm during the previous 5 years shall advance to the role of Chairman.
  • The role and responsibilities of the CEO: A firm must ensure that the CEO has the relevant financial services expertise, qualifications and background or be required to undertake relevant and timely comprehensive training. The CEO's contract must be reviewed by the board on renewal and at least once every five years.
  • The frequency of board meetings: The board must meet as often as appropriate to fulfil its responsibilities effectively and prudently, reflective of the nature, scale and complexity of the firm, and in any event at least four times per calendar year and at least once in every six month period.
  • The role and composition of the risk and audit committees: Firms must have at a minimum, both an Audit and a Risk Committee (except in the case of credit institutions and insurance undertakings where there is no legal requirement for a chief risk officer). The Audit and Risk Committees must have at least one shared member. The Audit Committee must be composed of non-executive directors including a least one independent non-executive director. The number of members of the Risk Committee must be sufficient to handle the nature, scale and complexity of the business conducted by it and must be composed of a majority of non-executive directors or independent non-executive directors or a combination of both. The Chairman for both Committees must be an independent non-executive director.
  • Compliance Statement: The firm must submit a compliance statement to the Central Bank (specifying whether it has complied with the requirements during the period to which the statement relates) on an annual basis or with such other frequency that the Central Bank may specify from time to time. In the event of the firm deviating materially from the Requirements, the report shall include a report on any material deviations, advising of the background to the breach and the actual or proposed remedial action.
  • Executive, Non-Executive and Independent Directors: Definitions and clarification is provided throughout the Requirements in relation to the different categories of Directors and their roles.

Submission of Responses

The Central Bank welcomes responses from all stakeholders, particularly in relation to the appropriateness and the scope of the proposed requirements as well as the application of the principle of proportionality. The Central Bank has also requested that where a respondent agrees or disagrees with a proposal, they explain the reason as to why the proposal is appropriate or inappropriate. Responses to the consultation paper should be submitted to the Central Bank by email (to, '') or in writing (to, 'Consultation on Corporate Governance Requirements for Investment Firms (CP94), Risk, Governance, Accounting and Auditing Policy Division, Central Bank of Ireland, Dublin 2').

Responses should be submitted no later than 5 August 2015.


1 This excludes Trustees and Administrators covered by the Corporate Governance Code for Fund Service Providers published by the IFIA and retail investment intermediaries.

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.