The Financial Regulator (FR) has published a Consultation Paper which proposes a new corporate governance regime for credit institutions and insurance undertakings. It deals with a range of matters including composition, function and role of boards; the role of the Chair and CEO; and restrictions on the number of directorships an individual can hold so as to ensure that directors have sufficient time to devote their role. In the case of banks and insurance companies this is limited to three directorships. This restriction does not apply to multiple directorships within a financial services group. For directorships outside of banks and insurance undertakings the consultation paper states that an individual holding more than five directorships creates a rebuttable presumption that the director has insufficient time to discharge his function as a director.
There is a requirement for boards to establish the risk appetite of the institution which will be subject to annual review. Internal systems and controls must reflect this risk appetite and there must be regular reporting to the Board on compliance with this. Each institution will be required to send a compliance statement to the FR annually confirming whether or not the institution has complied with the requirements. The Consultation runs until 30 June 2010. It is envisaged that once the requirements are finalised, industry will have a six month lead-in to introduce the necessary systems and changes to ensure compliance.