Pearse Doherty (Donegal, Sinn Fein)
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140. To ask the Minister for Finance the number of directorships a person may hold in different financial institutions; the safeguards in place to ensure there are no conflicts of interest such as holding a directorship in competing companies; and if he will make a statement on the matter. [8075/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am informed by the Central Bank of Ireland that it imposes corporate governance requirements for financial institutions at a domestic level and there are also European level requirements. The European requirements may supersede the Irish requirements in certain circumstances, such as for significant institutions as outlined in 1.1 below.

The Central Bank of Ireland operates a risk-based framework for the supervision of regulated firms. Institutions are categorised based on the greatest impact on financial stability and the consumer as follows: high impact, medium-high impact, medium-low impact and low impact.

The Central Bank of Ireland has issued sector specific corporate governance requirements, which vary dependent on the impact of the institution.

1. Directorship Limits

All Central Bank of Ireland corporate governance requirements require firms to ensure that each member of the board has sufficient time to devote to the role of director and associated responsibilities. The board shall indicate a time commitment expected from directors in letters of appointment.

1.1  Credit Institutions

The Central Bank of Ireland’s corporate governance requirements for credit institutions limits the number of directorships held by directors of credit institutions as follows:

For high impact designated credit institutions and insurance undertakings, a director can hold the following directorships:

- up to three financial directorships (i.e. directorships in companies or groups of companies which are credit institutions or insurance undertakings); and

- up to five non-financial directorships (i.e. any other type of company, which is not a credit institution or an insurance undertaking).

For non-high Impact designated credit institutions, a director can hold the following directorships:

- up to five financial directorships; and

- up to eight non-financial directorships.

Significant Credit Institutions

In a European context, credit institutions designated as ‘significant’ for the purposes of the Capital Requirements Directive(‘CRD IV’) [S.I. 158/2014] must ensure that members of the management body shall not hold more than one of the following combinations of directorships at the same time:

- one executive directorship with two non-executive directorships;

- four non-executive directorships.

The following shall count as a single directorship:

- executive or non-executive directorships held within the same group;

- executive or non-executive directorships held within -

- institutions which are members of the same institutional protection scheme provided that the conditions set out in Article 113(7) of the Capital Requirements Regulation are fulfilled, or

- undertakings, including non-financial entities, in which the institution holds a qualifying holding.

In considering and/or proposing director appointments, the board shall assess and document its consideration of possible conflicts of interest among its members, including, but not limited to personal relationships, business relationships and common directorships among its members or proposed members.

Appointments shall not proceed where possible conflicts of interest may emerge which are significant to the overall work of the board. Directors shall not participate in any decision making/discussion where a reasonably perceived potential conflict of interest exists.

Directorships in organisations which do not pursue predominantly commercial objectives shall not count.

Article 91(6) of CRD IV [Regulation 79(10) and 79(11) of S.I. 158/2014] permits the Central Bank to authorise directors of significant institutions to hold one additional non-executive directorship.

1.2  Insurance Undertakings

The Central Bank of Ireland’s corporate governance requirements for insurance undertakings impose the same directorship limits as those outlined for credit institutions at 1.1 above.

1.3  Captive insurance and captive reinsurance undertakings

The Central Bank of Ireland’s corporate Governance requirements for captive insurance and captive reinsurance undertaking limits the number of directorships held by directors as follows:

(a) Limited by the amount of time required to properly carry out the role and functions of a director in that particular captive; and

(b) Subject to an overall limit of 25 directorships, regardless of whether the directorship is held in a captive company or a company which is not a captive.

1.4  Fund Management Companies

The Central Bank of Ireland fund management companies guidance addresses director time commitments and sets a risk indicator in terms of a joint test of (a) having more than 20 directorships and (b) having an aggregate professional time commitment in excess of 2000 hours.

2. Conflicts of Interest 

2.1  Credit Institutions

Chapter 7 of the Central Bank of Ireland’s corporate governance requirements for credit institutions, requires the following:

It also requires the board to establish a documented ‘conflict of interest’ policy for its members and where conflict of interests arise the board shall ensure that they are noted in the minutes. In addition, if on-going conflicts of interest arise, consideration shall be given to changing the membership of the board.

2.2  Insurance Undertakings

The Central Bank of Ireland’s corporate governance requirements for insurance undertakings impose the same conflicts of interest requirements as those outlined for credit institutions at 2.1 above.

2.3  Captive Insurance and Captive Reinsurance Undertakings

The Central Bank of Ireland’s corporate governance requirements for captive insurance and captive reinsurance undertakings impose the same conflicts of interest requirements as those outlined for credit institutions at 2.1 above.

2.4  Fund Management Companies

The Central Bank of Ireland fund management companies guidance states that individuals with multiple directorships should consider the conflicts which may arise when sitting on a number of boards and the corporate interconnectivity that is created. Conflicts which may occur between individuals with full-time positions in a service provider to the board should also be considered and the most appropriate action taken.

The Deputy may wish to give additional consideration to company law requirements with regard to directorships of financial institutions, which are a matter for my colleague, the Minister for Business, Enterprise and Innovation.

The Deputy may also wish to note that the Irish Funds Industry Association issued a corporate governance code for collective investment schemes and management companies in 2012: .

In calculating the number of directorships held, the Central Bank excludes directorships held in the public interest on a voluntary and pro bonobasis provided that such directorships shall not interfere with the director’s ability to fulfil properly his or her role and functions as a director of an insurance undertaking. At the time of appointment, any such directorships shall be notified to the Central Bank. All directorships held within the group regardless of whether they are financial or non-financial companies shall be counted as one directorship.

Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.