The Central Bank of Ireland (CBI) recently published a consultation paper (CP69) on proposed changes to the Corporate Governance Code for Credit Institutions and Insurance Undertakings. The consultation period ends on 1 October 2013, following which, the CBI intends to publish the revised Code in December 2013. There will be a transitional period to allow institutions implement necessary amendments.
Notable proposed amendments to the Code include:
Chief Risk Officer (‘CRO’)
- The introduction of a new section on the role and responsibilities of the CRO. Institutions will be required to have a member of senior management with specific responsibility for managing the risk control function. Duties of the CRO will include:
- Maintaining effective processes to identify and monitor risks
- Reporting risks in a timely and comprehensive manner to the risk committee
- Facilitating the setting of the risk appetite by the board
- Where a medium and low impact institution does not require a dedicated exclusive CRO due to its nature, size and complexity, the CRO, provided there is no conflict of interest and the CBI is notified of the arrangement, may also fulfil another pre-approval control function
- Proposal to amend the prohibition on a Chairman concurrently holding the Chairmanship of another credit institution or insurance undertaking so that a Chairman of group subsidiaries which are medium or low impact can, subject to CBI pre-approval, hold the position in a sister institution if he has sufficient time to fulfil the role
Chief Executive Officer (‘CEO’)
- New requirement to appoint the CEO to the board
- Proposed proportionate approach to the prohibition on a CEO from holding the position of CEO of another credit institution or insurance undertaking simultaneously for smaller institutions where a full-time CEO might not be justified. Under the proposal, the CEO of a medium-low or low-impact institution could, with CBI pre-approval and if he has sufficient time to fulfil the roles, occupy the role for three medium-low/low-impact institutions
Role of the board
- Insertion of additional detail on the role and responsibilities of the board
Board meeting frequency
- Proposal to permit non-‘high impact’ institutions to hold one board meeting per half year and schedule the other three as the board considers appropriate e.g. in line with the institution’s business cycle, rather than the current requirement of quarterly meetings
- Risk committee – Proposed majority of non-executive directors and chaired by a non-executive director
- Cross-committee membership – Proposed requirement that the Chairman of the audit committee be a member of the risk committee and vice versa for the potential benefit from the cross-over of ideas and knowledge
- Minimum number of members – Proposed minimum of 3 members on each committee
Annual compliance statement (ACS)
- Proposal to permit institutions that do not have a financial year ending 31 December to change the submission basis of their ACS to their financial year rather than the current requirement whereby the ACS is submitted on the basis of a 12-month calendar year
The consultation also seeks comments on issues including board composition, board meeting requirements, current limits on the number of directorships and whether provisions on gender diversity should be introduced in the revised Code.
Contributed by Gillian Young.
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