Central Bank Corporate Governance Requirements: Boards, Committees and Director Training

Ireland’s Corporate Governance Requirements are unusually prescriptive. Where many governance codes set principles and expect firms to explain how they comply, the Central Bank sets numbers — how many directors, how many independent ones, how many meetings a year, how many other directorships a person may hold before the regulator presumes they have insufficient time.

They also operate at two levels, and the gap between them is wide.

Two tiers: core and High Impact

The Requirements set minimum core standards for all credit institutions licensed or authorised by the Central Bank (s.1.1). Institutions designated High Impact under the Central Bank’s PRISM supervisory framework must additionally meet Appendix 1, which replaces several core provisions with stricter ones.

Institutions must disclose in their annual report that they are subject to the Requirements, and whether they are also required to meet the High Impact provisions (s.1.3). Foreign-incorporated subsidiaries of Irish credit institutions are outside scope, though the Central Bank encourages equivalent practices (s.1.2).

Board composition is a count, not a judgement

The roles of Chairman and Chief Executive “shall be separate” (s.8.6), and the Chairman must be an independent non-executive director — except in a subsidiary, where a group director may serve (s.8.7).

The directorship limits are a rebuttable presumption

This is the provision that catches experienced non-executives. Holding more than five financial directorships creates a rebuttable presumption that the director has insufficient time to meet their responsibilities (s.7.8). More than eight non-financial directorships raises the same presumption (s.7.9).

For High Impact institutions the limits tighten considerably: no more than three financial directorships where one is in a High Impact financial institution, and no more than five non-financial directorships (Appendix 1, ss.7.8–7.9).

“Rebuttable” matters. The limit is not an absolute bar, but the burden sits with the individual and the institution to demonstrate sufficient time — which in practice means documented evidence rather than assertion.

Committees, and who may not sit on them

At core level an audit committee and a risk committee are both required, and they must share at least one member (ss.19.1, 19.7).

Audit committee: at least three members, a majority independent, chaired by an independent non-executive director (ss.22.1–22.3). Neither the chair of the board nor the chief executive may be a member (s.22.5).

Risk committee: at least three members, with a majority of non-executive or independent non-executive directors, chaired by a non-executive or independent non-executive director (ss.23.2–23.4).

Remuneration committee, where established: a majority must be independent non-executive directors, ideally all, and the board chair may not chair it (ss.24.2–24.3). Nomination committee, where established: a majority independent non-executive directors (s.25.1).

High Impact institutions must establish all four committees. No single person may chair both the audit and risk committees, and the remuneration and risk committees must share at least one member (Appendix 1).

The Chief Risk Officer

A Chief Risk Officer must be appointed with distinct responsibility for the risk management function (s.12.1). Institutions that are not High Impact may use another pre-approval controlled function instead — but only where scale and complexity do not justify a dedicated CRO, and the Central Bank’s prior approval is obtained. It is a permission, not an option.

The CRO reports to the board, has direct access to the Chairman, and reports regularly to the risk committee (s.12.8).

Director training is a requirement, not a courtesy

Three provisions put training obligations directly on the board.

New non-executive directors must receive adequate induction training on the institution’s operations and performance, and ongoing training must be provided and kept up to date (s.14.4). The Chairman and the Chief Executive must each have relevant financial expertise or undertake relevant, timely training (ss.8.3, 9.3).

High Impact institutions go further: a formal skills matrix must be maintained, and external board evaluations must take place every three years (Appendix 1, ss.14.6, 14.10).

A skills matrix is a competence artefact, and maintaining one means identifying gaps at board level and evidencing that they were addressed — the same discipline the Central Bank applies to staff competence under the Minimum Competency Code, applied to directors.

How it fits with the rest of the Irish framework

These Requirements sit alongside the pre-approval controlled function regime: the roles they mandate, including the Chief Risk Officer, are appointments the Central Bank must approve in advance and which carry ongoing Fitness and Probity obligations — covered in our guide to the Fitness and Probity regime. Firms holding client assets carry the parallel accountable-individual structure set out in our guide to the Client Asset Requirements.

Separate Requirements apply to insurance undertakings and to captive insurance and captive reinsurance undertakings, with their own 2015 instruments. The structure is recognisably the same; the numbers differ, so read the instrument that applies rather than generalising from the credit institution version.

Frequently asked questions

How many directors must an Irish credit institution have?

At least five under the core Requirements, and at least seven if designated High Impact. A majority must be independent non-executive directors, and a group subsidiary needs at least two independent non-executive directors, rising to three for High Impact institutions.

Is there a hard limit on how many directorships someone can hold?

Not an absolute bar. More than five financial or eight non-financial directorships creates a rebuttable presumption of insufficient time. For High Impact institutions the thresholds are three financial directorships where one is in a High Impact institution, and five non-financial.

Can the chair of the board sit on the audit committee?

No. Section 22.5 provides that neither the chair of the board nor the chief executive may be a member of the audit committee. The board chair also may not chair the remuneration committee.

Must every credit institution appoint a Chief Risk Officer?

Effectively yes, though institutions that are not High Impact may assign the responsibility to another pre-approval controlled function where scale and complexity do not justify a dedicated appointment and the Central Bank gives prior approval.

What training must directors receive?

New non-executive directors must receive adequate induction training on operations and performance, with ongoing training kept up to date. The Chairman and Chief Executive must hold relevant financial expertise or undertake timely training. High Impact institutions must also maintain a formal skills matrix and commission external board evaluations every three years.