Regulator will 'force out bosses who defy new rules'
Elderfield warns companies that watchdog is ready to take action
THE Financial Regulator yesterday vowed to force out directors who fall short of new corporate governance rules and pursue "enforcement actions" against institutions that don't implement the new standards.
Matthew Elderfield was speaking as he unveiled the final version of the controversial Corporate Governance Code, more than six months after a draft version was published in April.
"This is a statutory code, we will be able to take enforcement action and we are prepared to take enforcement action," Mr Elderfield said, stressing that the code would be vigorously enforced.
The Central Bank's head of financial supervision added that while removing directors already in place was a lot harder than blocking the appointment of unsuitable directors, the Central Bank would "pursue those cases" where necessary. "We have to be willing to lose some cases," he said.
The draft triggered a fierce reaction from IFSC insurers and banks that baulked at measures to compel them to make subsidiary boards more independent and restrict individual directors to three financial boards.
Yesterday's publication shows that almost all of the IFSC companies concerns have been addressed, but Mr Elderfield yesterday insisted the corporate crackdown hadn't been "watered down".
Rather than using 'a one suits all' approach, the Central Bank has carved out separate rules for "major" institutions and others in the interests of "proportionality".
Major institutions, defined as those that have a "significantly large presence in the local market", "carry on significant international activities outside the state" and/or "are significant" in terms of size or reputation, are to be subjected to almost all the rules originally proposed.
While "non majors" will now only have to hold quarterly board meetings against the "once every calendar month" originally proposed, "majors" must still hold one meeting for 11 calendar months.
Directors of "majors" are also only allowed to sit on three financial boards, as originally proposed, while directors of "non-majors" can serve on up to five.
Institutions will be advised of their "major" status over the coming weeks, but Mr Elderfield said all Irish retail banks would be included, along with major retail insurers and major IFSC players.
The final rules include some concessions across the board. The Central Bank initially wanted all suspicions of corporate governance issues to be notified to the regulator within five days.
Directors are now allowed to bring suspect issues to the board's attention and must only report to the regulator if the issues are not addressed.
The final code also revokes a clause that would have seen an independent chairman appointed to boards of wholly owned subsidiaries and releases those subsidiaries from having a "majority" of independent directors.
"The code, in its final form, combines the best of what was in the consultation paper and the responses to the consultation," said Mr Elderfield, pointing to the "unprecedented" 130 plus submissions received.
"I know that it will not please everyone," he added. "But I believe that it represents a balance and proportionate strengthening of the corporate governance regime."
Institutions are expected to implement the code by January 1, but can appeal to the Central Bank for an extension until June 30. Those who have to find change their board composition have been given until December 11.
The final version of the code was last night welcomed by the Irish Bankers' Federation, the Institute of Directors in Ireland and Grant Thornton.