The Central Bank of Ireland (the Bank) recently published a consultation paper (CP74) on Competent Authority Discretions and Options in the Capital Requirements Directive IV (CRD IV) and Capital Requirements Regulation (CRR).
This Consultation Paper represents the Bank's proposed approach in relation to the provisions set out in CRD IV and CRR where the competent authority, the Bank, can or must exercise its discretion. CRD IV and CRR will apply from 1 January 2014 and will replace the current Capital Requirements Directives.
CRD IV contains a number of new provisions in the area of corporate governance and certain competent authority discretions arise in respect of them. They should be read with reference to the Bank's current review of the Corporate Governance Code.
The issues raised in the context of corporate governance are as follows:
- Amalgamated risk-audit committees for less-significant institutions – specifically, CRD IV contains a discretion allowing less significant institutions to establish an amalgamated risk-audit committee. In its Review of the Corporate Governance Code, the Bank proposes that if a conflict arises between the Code and another corporate governance obligation or standard, the stricter of the obligations should be met. The Bank proposes not to exercise this discretion (other than on a case-by-case basis) in order to reinforce the importance it attaches to the establishment of separate risk and audit committees;
- The role of Chairman – specifically, CRD IV prohibits the chairman of a management body from simultaneously exercising the functions of CEO within that same institution unless such arrangements can be justified and are authorised by the competent authority. The Bank views the separation of the roles of chairman and CEO as being of great importance, as set out in the Corporate Governance Code. Therefore, the Bank does not propose to exercise this discretion;
- Limitations of directorships at significant institutions – specifically, CRD IV provides that from 1 July 2014, members of the management bodies of significant institutions must not hold directorships amounting to more than (a) one executive directorship with two non-executive directorships or (b) four non-executive directorships. CRD IV permits competent authorities to authorise members of the management bodies of significant institutions to hold one additional non-executive directorship, with the EBA also being informed. The Bank is proposing to exercise this discretion on a case-by-case basis only. The Bank is currently seeking feedback on the provisions of the Corporate Governance Code which relate to directorship limits as part of its review of the Code; and
- Diversity on management bodies – specifically the CRD IV requires institutions that are significant in terms of size, internal organisation and the nature, scope and complexity of their activities to foster diversity on the management bodies, particularly in respect of gender balance. These institutions must formulate a policy promoting diversity on their management bodies. The Bank is also seeking comments on whether diversity requirements should be considered in its current review of the Corporate Governance Code.
Submissions are invited from interested parties by 1 November 2013.