It has been announced that the Central Bank of Ireland will publish its guidelines on corporate governance on 8 November. These guidelines will apply to both credit institutions, as well as all insurance and reinsurance companies, excluding captives. It is understood that these guidelines will be binding from 1 January 2011. A six month implementation period will begin to run from that date, with a further six month implementation period afforded for any change to an undertakings board of directors where such a change is necessary.
These guidelines follow the publication of the Central Bank’s Consultation Paper 41, entitled “Corporate Governance Requirements for Credit Institutions and Insurance Undertakings”, in April and the ensuing submissions of various stakeholders. There was also extensive interaction between the Central Bank and a variety of industry bodies and representative organisations.
The Central Bank has considered the 133 submissions that were made in relation to CP41 and it is believed that some meaningful amendments have been made in the final guidelines. In particular, it is hoped that there will be recognition of the fact that undertakings regulated by the Central Bank, such as IFSC-type companies, that are themselves subsidiaries within international groups should be allowed to recognise the vital role played by the shareholder (i.e. the parent) when constituting its board of directors. These types of groups also have sophisticated corporate governance structures and it was argued by many commentators that CP41 should not be so prescriptive as to preclude the continued use of such corporate governance structures by Irish subsidiaries.
The above should be weighed against comments to the banking industry on the importance of the role played by non-executive directors. It was made clear that it is expected that there will be more resources invested in non-executive directors and that these resources may involve up to three different expense types, namely:
- increased pay for non-executive directors;
- increased resources being made available to non-executive directors; and
- higher levels of investment in sourcing high quality non-executive directors.
This article has been authored by Grant Murtagh.
