The Corporate Governance Code for Credit Institutions and Insurance Undertakings was originally published by the Central Bank of Ireland in November 2010 and became effective on January 1 2011. It imposed minimum core governance standards and requirements on all credit institutions and insurance undertakings, including reinsurers, which are licensed or authorised by the Central Bank.
On August 2 2012, the Central Bank published a Consultation on the Review of the Corporate Governance Code for Credit Institutions and Insurance Undertakings. The purpose of the consultation paper is to obtain feedback from institutions and industry bodies on the operation of the code to date, and to identify any necessary amendments to strengthen and improve it.
Since the introduction of the code in 2011, the Central Bank has introduced the Probability Risk Impact System (PRISM) for allocating risk. The consultation paper proposes to introduce the PRISM designations of risk (high, medium-high, medium-low and low) to the code in order to maintain consistency within the Central Bank's supervisory regime. For example, the term 'major institution' will be substituted with the term 'high impact institution'.
Significant proposed amendments
Risk committee (Section 23)
The existing code requires that a risk committee be represented by both non-executive and executive directors. The Central Bank intends to amend this provision by requiring that the risk committee is composed of a majority of non-executive directors and for the committee to be chaired by a non-executive director. International best practice suggests that the risk committee will be more effective if non-executive directors take lead roles.
Chief risk officer (Section 12)
It has become generally accepted best practice for institutions to have a chief risk officer (CRO) specifically responsible for managing the risk control function. The consultation paper proposes to introduce a new mandatory requirement for all institutions to appoint a CRO. In the case of non-high impact institutions, it is proposed to permit the CRO role to be shared with another pre-approved control function role.
The Central Bank proposes to introduce a new section to the code which will outline the specific responsibilities of the CRO, including:
maintaining effective processes to identify, manage and monitor risks; risk reporting in a timely manner to the risk committee; and facilitating the setting of...