Regulator Announces New Rules For Banks

The Central Bank and Financial Regulator have today announced a public consultation on new corporate governance standards for banks and insurance companies.

The consultation paper will set out minimum requirements as to how banks and insurance companies should organise the governance of their institutions including membership of the Board of Directors, the role of the Chairman and the operation of various board committees.

It is proposed that the requirements will apply to all credit institutions and insurers licensed or authorised by the Financial Regulator including Irish subsidiaries of international financial groups.

The consultation paper sets out the minimum standards and expectations that will apply to the boards of directors of banks and insurers such as:

• A minimum of five directors on the Board



• Requirements regarding the role and number of the independent non-executive directors



• Limits on the number of directorships which directors may hold to ensure they can comply with the expected demands of Board membership of a credit institution or insurance company



• Clear separation of the roles of Chairman and CEO



• A prohibition on an individual who has been a CEO, director or senior manager during the previous five years from becoming Chairman of that institution



• Criteria for director independence and consideration of conflicts of interest



• A requirement that Board membership is reviewed at a minimum every three years



• A requirement that Boards set the risk appetite for the institution and monitor adherence to this on an ongoing basis



• Minimum requirements for Board committees



• The establishment of a remuneration committee comprising a majority of independent non executive directors

The regulator said the consultation paper is part of a wider strategy to update the regulatory framework applying to banks and insurers.

A spokesman said: "Corporate governance frameworks for other industry sectors are also planned. The Financial Regulator has invited funds industry representatives to work on an appropriate corporate governance code for the funds industry and corporate governance for credit unions will be dealt with as part of the forthcoming Strategic Review of the Credit Union Sector."

The spokesman added that the enhancement of corporate governance together with more intrusive supervision and a credible threat of enforcement will contribute to the improvement of the resilience of the Irish financial sector.

(DW/GK)