Michael Noonan (Limerick City, Fine Gael)

As the Deputy will be aware, under the terms of the Credit Institutions (Financial Support) Scheme 2008, domestic credit institutions benefiting from the State guarantee were required at the direction of the Minister for Finance to appoint up to two non-executive directors to promote the public interest. The legal position is that any director appointed to the board of the covered institutions, whether under the CIFS scheme or otherwise, is subject to the requirements of company law in the discharge of his or her responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the director's so-called fiduciary responsibilities.

I understand that in addition to their other experiences, the public interest directors currently on the boards of the covered institutions were nominated by my predecessor on the basis of the Minister's assessment of their civic mindedness and sense of where the public interest lies to inform their view of what was in the institution's interest. I am advised that the Department of Finance held generic briefing sessions on the CIFS scheme in general and on the fiduciary duties of non-executive directors for individuals on the panel from which the covered institutions appointed public interest directors but that there was no job description or scope of work set out for them as this, as I have outlined, was determined under company law. In addition, for this reason public interest directors did not have a formal reporting relationship to the Minister or to the Department of Finance.

In light of the foregoing and the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances that those institutions have received huge financial support from the State, it is essential to bring legal clarity not just to the role of the public interest directors but to that of the entire boards of those institutions. Section 48 of the Credit Institutions (Stabilisation) Act, therefore, provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act. As Minister for Finance, I am strongly committed to ensuring that the boards of the covered institutions act at all times in a manner fully consistent with key public interest objectives for the banking sector. This will be a major element of my assessment of the board renewal programme that I have recently sought from the covered institutions.

See this speech in context