The Governor and Company of the Bank of Ireland - Investor … · 2018-03-09 · 31 December 2017...

The Governor andCompany of theBank of Ireland Corporate Governance Statement2017

1Annual Report - year ended 31 December 2017 The Governor and Company of the Bank of Ireland

GovernanceCorporate Governance Statement

Index Page

Governor’s introduction 2

Corporate Governance Report 3

Report of the Court Nomination and Governance Committee 10

Report of the Court Remuneration Committee 12

Report of the Court Audit Committee 14

Report of the Court Risk Committee 18

Note: Page numbers and note references in the Corporate GovernanceStatement reference to The Governor and Company of the Bank ofIreland (the ‘Bank’) Annual Report year ended 31 December 2017.

Signed on behalf of the Court by23 February 2018

Archie G Kane

Governor

Francesca McDonagh

Group Chief Executive

2 Annual Report - year ended 31 December 2017The Governor and Company of the Bank of Ireland

Corporate Governance Statement

Governor’s introduction

Archie G Kane, Governor

Archie G KaneGovernor23 February 2018

Dear Shareholder,

I am pleased to present our CorporateGovernance Report for 2017. This reportexplains how the Group applies theprinciples of good governance.

Establishment of Bank of Ireland GroupplcThe Group was reorganised in 2017,following notification to the Group by theSingle Resolution Board that a single pointof entry bail-in at group holding companylevel was the preferred resolution strategyfor Bank of Ireland Group.

Pursuant to a Scheme of Arrangement,which was approved by shareholders inApril 2017, BOIG plc, which wasincorporated on 28 November 2016,became the holding company of the Bankon 7 July 2017. BOIG plc replaced theBank as the main listed entity of the Groupon 10 July 2017.

As part of these changes, the structure ofgovernance which was in place for theBank was replicated at BOIG plc level asfollows:

BOIG plc:• adopted a Board Governance Policy

similar to that in place for the Bank;• put in place a delegation of authority

to management, with appropriatereservations of authority;

• delegated authority to the Group CEOas CEO of BOIG plc; and

• established committees mirroringthose in place for the Bank.

The existing governance and committeestructure of the Bank has remained in

place throughout 2017, subject to suchamendments as were required by theestablishment of BOIG plc.

The Directors of the Bank, with theexception of Brad Martin, were appointedto the board of BOIG plc on 23 March2017.

As a matter of policy, the Board and mainCommittees of BOIG plc and the Court ofthe Bank comprise the same Directors,with Board and Committee meetings forthese companies being held concurrently.Agendas are split between the boards andcommittees of BOIG plc and the Bank,allowing decisions to be taken andscrutinised by the appropriate entity.

Unless a distinction is indicated, thisReport describes the activities andgovernance practices of the parent entityof the Group for the financial year ended31 December 2017 (i.e. the Bank from 1January to 7 July 2017 and the Companyfrom that date until 31 December 2017).Thus, references to attendance at, andmatters considered by, board andcommittees reflect the activities at parentlevel for the entire financial year of 2017.For ease of reference, the term ‘Board’includes ‘Court’, references to Group-levelcommittees include the equivalent entityfor the Bank, ‘Chairman’ includes‘Governor’ and so forth.

The Court is accountable to shareholdersfor the overall direction and control of theGroup. It is committed to high standardsof governance designed to protect thelong term interests of shareholders and allother stakeholders while promoting thehighest standards of integrity,transparency and accountability.

A key objective of the Group’s governanceframework is to ensure compliance withapplicable legal and regulatoryrequirements.

Central Bank of Ireland CorporateGovernance Requirements for CreditInstitutions 2015 (the ‘Irish Code’)The Irish Code imposes statutoryminimum core standards upon all creditinstitutions licenced or authorised by theCentral Bank of Ireland (CBI). TheCompany’s primary banking subsidiary,

the Bank, was subject to the Irish Code,(which is available on www.centralbank.ie)throughout 2017. The Bank is also subjectto the additional requirements of Appendix1 and Appendix 2 of the Irish Code forHigh Impact Designated Institutions, andCredit Institutions which are deemed‘Significant’ Institutions (for the purposesof the CRD IV), respectively.

UK Corporate Governance CodeThe Company is subject to the UKCorporate Governance Code 2016published by the Financial ReportingCouncil in the UK (the ‘UK Code’ which isavailable on www.frc.org.uk) and the IrishCorporate Governance Annex to theListing Rules of the Irish Stock Exchange(the ‘Irish Annex’ which is available onwww.ise.ie). The UK Code and the IrishAnnex applied to the Bank until 7 July2017. Thereafter the Irish Annex andcertain provisions of the UK Code ceasedto apply to the Bank. The Bank hasvoluntarily applied the Irish Annex andthose provisions of the UK Code whichceased to apply to the Bank.

Thank youI would like to thank each of the Directorsfor their commitment and support during2017. I would also like to express theCourt’s sincere appreciation to RichieBoucher for his contribution towards thesuccess of the Group as CEO and to TomConsidine, Pat Butler and Brad Martin fortheir contributions to the Group asNon-executive Directors over the years. Iwish them well in all their future ventures. Iwould also like to take this opportunity inwishing Francesca McDonagh well inleading the Group into the next phase ofits development.

Looking aheadI have also informed the Court of myintention to step down as Governor during2018 and, as this my last report to you inthis role, I would like to take thisopportunity to thank you for your supportover the years. The Senior IndependentDirector, Mr Patrick Haren is leading theprocess to identify my successor.



Corporate Governance Report

The Directors believe that the Bankcomplied with the provisions of the IrishCode throughout 2017. The Directors alsobelieve that the Bank and the Companycomplied with the provisions of the UKCode and the Irish Annex, during therespective periods in 2017 in which theUK Code applied to the Bank and theCompany (the ‘relevant periods’), otherthan in the following respects:

• As Tom Considine was nominated bythe Minister for Finance under theterms of the Credit Institutions(Financial Support) Scheme, 2008 andwas not required to stand for electionor regular re-election by shareholders,he was not classified as anindependent Non-executive Director.In accordance with the Bye-Laws ofthe Bank and the Constitution of theCompany, Directors nominated by theMinister for Finance may not serve asa Director of the Bank or the Companyfor a period of longer than nine yearsafter his or her date of appointment.

Tom Considine was a member of boththe Group Audit Committee and CRC,which benefited from his judgementand the quality of his contributionsduring 2017. Both Committeescomprise a minimum of threeindependent Non-executive Directorsas per provision C.3.1 of the UK Code.

• Provision B.7.1 of the UK Coderecommends annual election ofdirectors by shareholders. Inaccordance with the Bye-Laws of theBank and the Constitution of theCompany, Government nominatedDirectors are not required to putthemselves up for re-election on anannual basis and accordingly TomConsidine was not submitted forre-election at the Annual GeneralCourt (AGC) held in 2017.Government nominated Directors aresubject to an annual review of theirfitness and probity.

• Provision D.1.2 of the UK Code statesthat where a company releases anexecutive director to serve as anon-executive director elsewhere, theremuneration report should include astatement as to whether or not thedirector will retain earnings from thatposition and if so, what thatremuneration is. For part of the periodduring which he was ExecutiveDirector and Group CEO (10 January2017 to 1 October 2017), Richie

Boucher held the position ofNon-executive Director of EurobankErgasias S.A. (‘Eurobank’) andretained fees in respect of this positionin accordance with the remunerationpolicy of Eurobank. In accordancewith the applicable law governingEurobank’s remuneration disclosures,remuneration of all staff and directorsis publically disclosed on anaggregate basis only and so theindividual remuneration of directors isnot disclosed.

Details of how the Bank and the Companyapplied the main and supportingprinciples of the UK Code throughout theyear ended 31 December 2017 for therelevant periods are set out in thisCorporate Governance Report and in theRemuneration Report. These reports alsocover the disclosure requirements set outin the Irish Annex, which supplement therequirements of the UK Code withadditional corporate governanceprovisions.

The Group believes it has robustgovernance arrangements, which includea clear organisational structure with welldefined, transparent and consistent linesof responsibility, effective processes toidentify, manage, monitor and report therisks to which it is or might be exposedand appropriate internal controlmechanisms, including soundadministrative and accounting procedures,IT systems and controls. The system ofgovernance is subject to regular internalreview.

Directors of the Bank are aware that,should they have any material concernabout the overall corporate governance ofthe Group, it should be reported withoutdelay to the Court and, should theirconcerns not be satisfactorily addressedwithin five business days, the Directorsshould report the concern to the CentralBank of Ireland.

The Court’s oversight of risk and control issupported through delegation of certainresponsibilities to Committees of theCourt, the principal Committees being theCourt Audit Committee, the CRC, theCourt Nomination and GovernanceCommittee and the Court RemunerationCommittee. Details of these Committeesare set out on pages 10 to 19. TheChairman of each Committee formallyreports on key aspects of Committeeproceedings to the subsequent scheduledmeeting of the Court and minutes of

principal Committees are tabled at theCourt as soon as possible for noting and /or discussion as necessary. The terms ofreference of the Committees are reviewedannually by the relevant Committees andby the Court and are available on theGroup’s website (www.bankofireland.com)or by request to the Group Secretary. TheGroup’s position on audit tendering is setout on page 17.

The Court of DirectorsRole of the CourtThe Court’s role is to provide leadership ofthe Group within the boundaries of RiskAppetite and a framework of prudent andeffective controls which enable risk to beidentified, assessed, measured andcontrolled. The Court sets the Group’sstrategic aims and risk appetite to supportthe strategy, ensuring that the necessaryfinancial and human resources are in placefor the Group to meet its objectives. TheCourt also reviews managementperformance. The Court has a schedule ofmatters specifically reserved for itsdecision which is reviewed and updatedregularly. Matters requiring Court approvalinclude:• Determination of strategy.• Determination of risk appetite within

the parameters of the Group’s RiskAppetite Statement (RAS).

• Approval of the Group’s InternalCapital Adequacy AssessmentProcess (ICAAP).

• Promoting the appropriate culture,values and ethics of the Bank.

• Overseeing the management of thebusiness.

• Overseeing the internal control andrisk management systems of theBank.

• Approval of the Bank’s business plansand budgets.

• Overseeing corporate governance andsuccession planning.

• Acquisitions or divestments ofcompanies involving a third party ormanagement buyout except for creditmanagement purposes.

• Approval of Common equity tier 1capital investments of greater than€20 million in a regulated subsidiaryand €40 million in any othersubsidiary.

• Capital expenditure (in excess of €40million).

• Guarantees including those in respectof subsidiary companies, entered intoby the Bank, other than in the normalcourse of business.

• Pension scheme funding / benefits -all changes to the funding of pension

schemes in the Bank and / or benefitsof same.

• The approval of equity underwritingsums of greater than €20 million.

• Certain specified senior managementappointments.

The Court is responsible for endorsing theappointment of individuals who may havea material impact on the risk profile of theGroup and monitoring on an ongoingbasis their appropriateness for the role.The removal from office of the head of a‘control function’, as defined in the IrishCode, is also subject to Court approval.

The Court is responsible for determininghigh-level policy and strategic direction inrelation to the nature and scale of risk thatthe Group is prepared to assume toachieve its strategic objectives.

The Court approves the Group RiskFramework on an annual basis andreceives regular updates on the Group’srisk environment and exposure to theGroup’s material risk types through aCourt Risk Report reviewed monthly for allrisks. Further information on riskmanagement and the Court’s role in therisk governance of the Group is set out inthe Finacial risk management note onpages 79 to 108.

The work of the Court follows an agreedschedule of topics which evolves basedon business need and is formally reviewedannually by the Court. The Court monitorsand reviews the performance of the Groupthrough a series of reports, receivesupdates from the Group’s principalbusinesses on the execution of theirbusiness strategy and considers reportsfrom each of the principal CourtCommittees. The strategy of the Groupand performance against strategic goalscontinued to receive considerable focusthroughout 2017. In addition the mattersconsidered, and action taken by the Courtduring the year are set out in theaccompanying table.

Court size and compositionAt close of business on 31 December2017, the Court comprised ten Directors:the Chairman, who was independent onappointment, two Executive Directors andseven Non-executive Directors, all ofwhom have been determined by the Courtto be independent Non-executiveDirectors in accordance with therequirements of the UK Code and IrishCode. Brad Martin resigned from theCourt on 28 April 2017, Richie Boucherresigned from the Court on 1 October2017, and Pat Butler and Tom Considineresigned on 31 December 2017. RichardGoulding was appointed as Non-executiveDirector to the Court on 20 July 2017 andFrancesca McDonagh was appointed asCEO and Executive Director on 2 October2017. Biographical details, including eachDirector’s background, experience andindependence classification, are set out inthe BOIG plc Annual Report on pages 89to 92.

The composition of the Court and itsCommittees is reviewed by the CourtNomination and Governance Committee

Matters considered and action taken by the Court in 2017



Corporate Governance Report (continued)

Business • Reviewed economic, investor and stakeholder perspectives.environment • Reviewed Group communications and the external environment.

• Reviewed the macroeconomic and regulatory environment, including the implications of Brexit, and the changing international corporate tax environment.

Group strategy • Approved the Group Risk Appetite and Framework.and risk appetite • Approved capital strategy, capital optimisation and capital allocation,

and funding and liquidity strategy and policy. Approved a credit risk transfer programme.• Reviewed divisional and business unit strategies, product strategies and customer propositions.• Approved Integrated Plan and Core Banking System updates.• Reviewed and approved Group culture programme.• Reviewed leadership development and engagement including employee engagement and succession planning including the approval of the appointment of a new CEO.• Considered and approved the Group Resolution Strategy, incorporating the establishment of a group holding company and reviewed operational continuity in resolution.• Approved non-performing exposures strategy.• Approved M&A transactions including the merger of the private banking business into the main bank, the divestment of IBI Corporate Finance, the acquisition of loan portfolios and the acquisition of a motor finance business in the UK.

Business • Reviewed the performance of the Group’s business divisions, its major performance subsidiaries and business units.

• Reviewed and approved Group financial performance updates, forecasts, budgets, dividend policy, capital position, capital allocation and RAROC performance.

Risk management • Approved the Group Risk Framework and the Group Contingency Funding and Contingency Capital Plan.• Approved key group risk policies, risk mitigation plans and the Group Recovery Plan.

Governance and • Reviewed the Group tracker mortgage redress and compensation regulatory programme.

• Approved the annual Court effectiveness reviews and Court succession proposals.• Approved governance documentation for the group holding company.• Assessed the fitness and probity and approved the appointment of pre-approval controlled functions (PCF) role holders. Approved the annual PCF reconfirmation. • Approved the appointment of KPMG as external auditors from 2018 following tender process.• Approved corporate governance matters including group policies and Court / committee terms of reference.

Area of focus Role of the Court

and the Court, on an annual basis, toensure that there is an appropriate mix ofskills and experience. This includes areview of tenure, an assessment of theskills profile of the Court andconsideration of succession for key rolesto ensure the Court and committeescomprise Directors having acomprehensive understanding of theGroup’s activities and the risks associatedwith them. In addition, where anyappointment or resignation will alter theoverall size of the Court, a review isundertaken to ensure that the compositionremains appropriate. The Court regards itscurrent size and composition asappropriate to provide the broad range ofskills and experience necessary to governthe business effectively, while enabling fulland constructive participation by allDirectors.

In 2017 the Group completed a review ofthe ongoing fitness and probity of personsin PCFs whereby Directors were asked toconfirm any changes in circumstances inrespect of their compliance with theFitness and Probity Standards issued bythe Central Bank of Ireland (the‘Standards’). Directors of the Bank aresubject to the Standards. All changes incircumstances disclosed were assessedand their materiality determined. Timecommitments of Directors wereconsidered as part of this review processand Directors confirmed that theycontinue to have sufficient time to performtheir roles. The Court concluded that eachof the Directors of the Court has therequisite standard of fitness, probity andfinancial soundness to perform theirfunctions with reference to the Standardsand provided the required confirmation tothat effect to the Central Bank of Ireland.

Court meetingsThe Court held seventeen meetings duringthe year ended 31 December 2017, elevenof which were scheduled meetings. Aspart of its oversight of major subsidiaries,the Court visited the UK businessincluding holding one Court meeting in theUK. The Governor and Members of theCourt, together with their attendance atCourt meetings are shown below.

Further details on the number of meetingsof the Court, its Committees andattendance by individual Directors are setout on page 20.

Agendas and papers are circulated priorto each meeting to provide the Directorswith relevant information to enable themto discharge fully their duties.

The Group Secretary provides dedicatedsupport for Directors on any matterrelevant to the business on which theyrequire advice separately from oradditional to that available in the normalCourt process. The Company has in placeDirectors’ and Officers’ liability insurancein respect of legal actions against itsDirectors.

Term of appointment and re-election ofDirectorsNon-executive Directors are normallyappointed for an initial three year term,with an expectation of a further term ofthree years, assuming satisfactoryperformance and subject to the needs ofthe business, shareholder re-election andcontinuing fitness and probity. Onrecommendation by the then GroupNomination and Governance Committee,in order to maintain continuity andsuccession on the Court and itscommittees, the Court approved theproposal that Patrick Kennedy serve for athird term of three years, starting from theAGC held in April 2017, and that PatrickHaren and Patrick Mulvihill would berequested to serve for a third term of threeyears, starting from the AGC to be held inApril 2018. A rigorous review of their skills,experience, independence and knowledgewas carried out and the Court concludedthat they continue to be effective andmake a valuable contribution to thedeliberations of the Court.

A Non-executive Director’s term of officewill not extend beyond nine years in totalunless the Court, on the recommendationof the Court Nomination and Governance

Committee, concludes that suchextension is necessary due to exceptionalcircumstances. In respect of executiveDirectors, no service contract existsbetween the Company and any Directorwhich provides for a notice period fromthe Group of greater than one year. Noneof the Non-executive Directors has acontract of service with the Group.

It is Group practice that, followingevaluation, all Court Directors are subjectto annual re-election by shareholders. AllDirectors retired at the AGC held on 28April 2017, with the exception of TomConsidine, who was nominated as aDirector by the Minister for Finance. Therequirement to stand for election andregular re-election was dispensed with fora Government nominated Director.

The following Directors, being eligible,offered themselves for re-election andwere re-elected at the AGC in 2017: KentAtkinson, Richie Boucher, Pat Butler,Patrick Haren, Archie G Kane, AndrewKeating, Patrick Kennedy, DavidaMarston, Fiona Muldoon and PatrickMulvihill. The Directors, with the exceptionof Richie Boucher and Pat Butler willstand for re-election at the forthcomingAGC. Richard Goulding was co-opted tothe Court on 20 July 2017 and FrancescaMcDonagh was co-opted to the Court on2 October 2017, and will offer themselvesfor election at the forthcoming AGC.

Conflicts of interestThe Court has an approved Conflicts ofInterest Policy which sets out how actual,potential or perceived conflicts of interestare to be identified, reported andmanaged to ensure that Directors act at alltimes in the best interests of the Bank.This policy is reviewed on an annual basis.

The Group Code of Conduct, whichapplies to all employees and Directors ofthe Group, clarifies the duty on allemployees to avoid conflicts of interests.The Code of Conduct is reviewed on anannual basis and communicatedthroughout the Group.

Time commitmentThe Group ensures that individual CourtDirectors have sufficient time to dedicateto their duties, having regard to applicableregulatory limits on the number ofdirectorships which may be held by anyindividual Director. The Company and theBank have each been classified as‘significant institutions’ under theEuropean Union (Capital Requirements)Regulations 2014 (the ‘Regulations’).



Court attendance in 2017:

EligibleCourt meetings to attend Attended Archie G Kane* 17 17Kent Atkinson 17 14Richie Boucher 13 10Pat Butler 17 16Tom Considine 17 17Richard Goulding 7 6Patrick Haren** 17 17Andrew Keating 17 17Patrick Kennedy*** 17 17Davida Marston 17 16Francesca McDonagh 4 4Bradley Martin 7 5Fiona Muldoon 17 17Patrick Mulvihill 17 17

*Governor**Senior Independent Director ***Deputy Governor





During the year ended 31 December 2017,all Directors were within the directorshiplimits set out for significant institutionsunder the Regulations.

Governor, Deputy Governor, SeniorIndependent Director and Group ChiefExecutive OfficerThe respective roles of the Governor andthe Group CEO, which are separate, areset out in writing and have been agreed bythe Court. The Governor oversees theoperation and effectiveness of the Court,including ensuring that agendas cover thekey strategic items confronting the Groupand encouraging all Directors toparticipate fully in the discussions andactivities of the Court. He also ensuresthat there is effective communication withshareholders and promotes compliancewith corporate governance standards. TheGovernor commits a substantial amountof time to the Group and his role haspriority over any other businesscommitment. The Governor wasappointed as a Non-Executive Director toMelrose Industries plc during the yearended 31 December 2017. During theyear, the Governor and Non-executiveDirectors met without the executiveDirectors present, to discuss a range ofbusiness matters.

The Deputy Governor deputises for theGovernor as required and is a Trustee ofthe BSPF.

The ‘Senior Independent Director’ (SID)provides Court members, the GroupSecretary, shareholders and customerswith an additional channel, other than theGovernor or the Group CEO, throughwhich to convey, should the need so arise,concerns affecting the Governorship orthe Court, or any other issue.

The Group CEO is responsible forexecution of approved strategy, holdsdelegated authority from the Court for theday to day management of the businessand has ultimate executive responsibilityfor the Group’s operations, complianceand performance. Procedures are in placeto review the Group Chief Executive’scontract at least every five years.

Balance and independenceThe independence status of each Directoron appointment is considered by theCourt. In addition, the independencestatus of each Director is reviewed on anannual basis to ensure that thedetermination regarding independence

status remains appropriate. In 2017, theCourt considered the principles relating toindependence contained in the Irish Codeand the UK Code and concluded that thepreviously determined independencestatus of each Director was appropriate.Specifically, the Court concluded that theGovernor was independent, and that eachcurrent Non-executive Director, isindependent within the meaning of theIrish Code and the UK Code.

Each of the Governor, Deputy Governorand all of the Non-executive Directorsbring independent challenge andjudgement to the deliberations of theCourt through their character, objectivityand integrity.

Appointments to the CourtThe Court is committed to identifying thepeople best qualified and available toserve on the Court and is responsible forthe appointment of Directors. The Courtplans for its own renewal with theassistance of the Court Nomination andGovernance Committee which regularlyreviews Court composition tenure andsuccession planning. In accordance withthe Director Assessment Policy and CourtDiversity Policy, all appointments aremade on merit against objective criteria(including the skills and experience theCourt as a whole requires to be effective)with due regard for the benefits ofdiversity on the Court.

Prior to the appointment of a Director, theCourt Nomination and GovernanceCommittee approves a job specification,assesses the time commitment involvedand identifies the skills and experiencerequired for the role, having regard to theformal assessment of the skills profile ofthe Court and succession planning. Therecruitment process for Non-executiveDirectors is supported by an experiencedthird party professional search firm whichdevelops an appropriate pool ofcandidates and provides independentassessments of the candidates. TheGroup then works with that firm toshortlist candidates, conduct interviews /meetings (including meetings withmembers of the Court Nomination andGovernance Committee and the Court)and complete comprehensive duediligence. In accordance with the DirectorAssessment Policy of the Court, theassessment process and the due diligencecompleted is extensive and includesself-certification confirmations of probityand financial soundness and external

checks involving a review of variouspublicly available sources. The CourtNomination and Governance Committeemakes a recommendation to the Court,with the Court satisfying itself as to thecandidate’s ability to devote sufficient timeto the role, independence, fitness andprobity, and assessing and documentingits consideration of possible conflicts ofinterests. Appointments will not proceedwhere conflicts emerge which aresignificant to the overall work of the Court.

The processes described above werefollowed in the selection and appointmentof Richard Goulding and FrancescaMcDonagh to the Court in 2017. RussellReynolds and Egon Zehnder, two externalsearch consultancy firms, which alsoassist with executive searches for theGroup, were engaged, to assist with theappointments of Richard Goulding andFrancesca McDonagh respectively.

Archie G Kane has signalled his intentionto retire from the Court in 2018. The Courtis also considering the appointment of twoadditional Non-executive Directors in2018.

All newly-appointed Directors are providedwith a comprehensive letter ofappointment detailing their responsibilitiesas Directors, the terms of theirappointment and the expected timecommitment for the role. A copy of thestandard terms and conditions ofappointment of Non-executive Directorscan be inspected during normal businesshours by contacting the Group Secretary.Directors are required to devote adequatetime to the business of the Group, whichincludes attendance at regular meetingsand briefings, preparation time formeetings and visits to business units. Inaddition, Non-executive Directors arenormally required to sit on at least oneCourt Committee, which involves thecommitment of additional time. CertainNon-executive Directors, such as theDeputy Governor, Senior IndependentDirector and Committee Chairmen, arerequired to allocate additional time infulfilling those roles.

Induction and professionaldevelopmentOn appointment, all new Directors receivea comprehensive induction programmedesigned to familiarise them with theGroup’s operations, management andgovernance structures, including thefunctioning of the Court and the role of the




key committees. In addition, new Directorsundertake significant induction in relationto risk and business matters, includingvisits to or presentations by Groupbusinesses and briefings with seniormanagement. Further meetings arearranged as required based on theparticular circumstances of each Director.

On an ongoing basis, briefings appropriateto the business of the Group are providedto all Non-executive Directors. In order toensure that the Directors continue tofurther their understanding of the issuesfacing the Group, Directors are providedwith professional development sessionsand briefings on a range of technicalmatters, tailored to their particularrequirements. During the year ended 31December 2017, the modules attended byDirectors included ‘deep dives’ on specificbusiness areas; International CorporateTax Environment; Brexit; BusinessReviews on Youth markets and People;Group Communications; IFRS 9;Cybercrime; the Operational RiskManagement System; Retail Banking UK;Wealth Management; Global MarketsStrategy and Markets: Group Culture; andRoI Mortgages. Directors are also offeredthe option of attending suitable externaleducational courses, events orconferences designed to provide anoverview of current issues of relevance toDirectors.

The Directors have access to the adviceand services of the Group Secretary, whois responsible for advising the Court on allgovernance issues and for ensuring thatthe Directors are provided with relevantinformation on a timely basis to enablethem to consider issues for decision andto discharge their oversightresponsibilities. The Directors also haveaccess to the advice of the Group LegalAdviser and to independent professionaladvice, at the Group’s expense, if andwhen required. Committees of the Courthave similar access and are provided withsufficient resources to undertake theirduties.

Performance evaluationThere is a formal process in place forannual evaluation of the Court’s ownperformance, and that of its principalCommittees and of individual Directors(including the Governor). An evaluation ofthe performance of the Court and itsCommittees is conducted every year, withan externally facilitated review conductedat least every third year. The objective ofthese evaluations is to review past

performance with the aim of identifyingany opportunities for improvement,determining whether the Court /Committee as a whole is effective indischarging its responsibilities and, in thecase of individual Directors, to determinewhether each Director continues tocontribute effectively and to demonstratecommitment to the role.

Court evaluationFollowing an external evaluation in 2016by Independent Audit Ltd, internalevaluations were conducted for 2017. Thiscomprehensive self-evaluation process,which was led by the Governor andsupported by the Group Secretary,considered overall performance relative tothe role of the Court and consisted of:• completion of written evaluations by

each Director; • one to one discussions between the

Governor and each Director; and• discussion by the Court of the

assessment and recommendations forchange or improvement.

The outcome of the Court evaluation wasconsidered by the Court Nomination andGovernance Committee and collectivelydiscussed by the Court. The Courtconcluded that it continues to be effective.

Committee evaluationsThe Chairman of each principal CourtCommittee led the self-evaluation processin respect of Committee performance. Theprocess was supported by the completionof questionnaires tailored to each specificCommittee. The results of this processwere considered by each individualCommittee with conclusions and anyrelevant recommendations reported to theCourt. The Court concluded that each ofits principal Committees continues to beeffective.

Director evaluationsThe annual individual Directorperformance evaluation was led by theGovernor and involved:• the circulation of tailored

questionnaires to Directors;• one to one discussions between the

Governor and each Director;• consideration of the findings by the

Court Nomination and GovernanceCommittee; and

• presentation of the overall findings tothe Court for consideration.

The Court concluded that each individualDirector continues to make a valuablecontribution to the deliberations of the

Court, continues to be effective anddemonstrates continuing commitment tothe role.

Governor evaluationThe SID leads the process of evaluation ofthe Governor’s performance, based onwritten submissions and one to onediscussions with each Director. The SIDpresents the results of these assessmentsto the Court Nomination and GovernanceCommittee and the Court for discussion,without the Governor being present. TheSID then meets the Governor to presenthim with the Court’s conclusions on hiseffectiveness. The SID also meetsindividual Directors on such otheroccasions as are deemed appropriate.

The Court concluded that the Governorcontinues to lead the Court effectively,continues to make a valued contributionand demonstrates continuing commitmentto the role.

Directors’ loansThe Companies Act, IAS 24 ‘Related partydisclosures’ and a condition imposed onthe Bank’s licence by the Central Bank ofIreland in August 2009 require thedisclosure in the Annual Report ofinformation on transactions between theBank and its Directors and theirconnected persons. The amount ofoutstanding loans to Directors (andrelevant loans to connected persons) isset out on pages 135 to 140.

A condition imposed on the Bank’s licenceby the Central Bank of Ireland in May 2010requires the Bank to maintain a register ofloans to Directors and relevant loans totheir connected persons, which is updatedquarterly and is available for inspection byshareholders on request for a period ofone week following quarterly updates. TheGroup’s process for ensuring compliancewith the Central Bank of Ireland’s Code ofPractice on Lending to Related Parties asamended (‘Related Party Lending Code’)has been in place since 1 January 2011and is subject to regular review. A RelatedParty Lending Committee of the Court isin place which is authorised to review andapprove lending to Related Parties asmore particularly defined in the RelatedParty Lending Code.




Accountability and auditThe Report of the Directors, including agoing concern statement and a viabilitystatement, is set out on pages 16 and 17of the consolidated financial statements.This Corporate Governance Statementforms part of the Report of the Directors.

Internal controlsThe Directors acknowledge their overallresponsibility for the Group’s systems ofinternal control and for reviewing theireffectiveness. Such systems are designedto ensure that there are thorough andregular evaluations of the nature andextent of risks and the ability of the Groupto react accordingly. Such systems aredesigned to control, rather than eliminate,the risk of failure to achieve businessobjectives and can provide reasonable,but not absolute, assurance againstmaterial misstatement or loss. Suchlosses could arise because of the natureof the Group’s business in undertaking awide range of financial services thatinherently involves varying degrees of risk.

The Group’s overall control systemsinclude:• a clearly defined organisation structure

with defined authority limits andreporting mechanisms to higher levelsof management and to the Court,which support the maintenance of astrong control environment;

• a three lines of defence approach tothe management of risk across theGroup: line management in individualbusinesses and relevant Groupfunctions; central risk managementfunctions; and Group Internal Audit;

• Court and Management Committeeswith responsibility for core policyareas;

• a set of policies and processesrelating to key risks; business andstrategic risk, conduct risk, credit risk,funding and liquidity risk, lifeinsurance risk, market risk, operationalrisk, pension risk, regulatory risk andreputation risk (further details aregiven in the financial risk managementnote on pages 79 to 108);

• monthly reporting by business unitswhich enables progress againstbusiness objectives to be monitored,trends to be evaluated and variancesto be acted upon by the Court andrelevant subsidiary board’s;

• regular meetings of the seniormanagement teams, where theexecutive Directors and other seniorexecutives responsible for running the

Group’s businesses, amongst othermatters, review performance andexplore strategic and operationalissues;

• reconciliation of data consolidatedinto the Group’s financial statementsto the underlying financial systems. Areview of the consolidated data isundertaken by management to ensurethat the financial position and resultsof the Group are appropriatelyreflected, through compliance withapproved accounting policies and theappropriate accounting for non-routinetransactions; and

• a Code of Conduct setting out thestandards expected of all Directors,officers and employees in driving anappropriate, transparent risk culture.This covers arrangements, should theneed arise, for the independentinvestigation and follow up of anyconcerns raised by staff regardingmatters of financial and non-financialreporting.

The Group operates a comprehensiveinternal control framework over financialreporting with documented proceduresand guidelines to support the preparationof the consolidated financial statements.The main features are as follows:• a comprehensive set of accounting

policies relating to the preparation ofthe annual and interim financialstatements in line with InternationalFinancial Reporting Standards asadopted by the European Union;

• a Group Internal Audit function withresponsibility for providingindependent, reasonable assurance tokey internal (Court, Group &Subsidiary Audit and Risk committeesand Senior Management) and external(Regulators and External Auditors)stakeholders on the effectiveness ofthe Group’s risk management andinternal control framework;

• a compliance framework incorporatingthe design and testing of specificcontrols over key financial processesto confirm that the Group’s keycontrols are appropriate to mitigatethe financial reporting risks;

• a robust control process is followed aspart of interim and annual financialstatements preparation, involving theappropriate level of managementreview and attestation of thesignificant account line items, andwhere judgements and estimates aremade, they are independentlyreviewed to ensure that they are

reasonable and appropriate. Thisensures that the consolidated financialinformation required for the interimand annual financial statements ispresented fairly and disclosedappropriately;

• the Annual Report and Interim Reportare also subject to detailed review andapproval through a structuredgovernance process involving seniorand executive finance personnel;

• summary and detailed papers areprepared for review and approval bythe Court Audit Committee coveringall significant judgemental andtechnical accounting issues, togetherwith any significant presentation anddisclosure matters; and

• user access to the financial reportingsystem is restricted to thoseindividuals that require it for theirassigned roles and responsibilities.

The Directors confirm that the Courtthrough its Committees, has reviewed theeffectiveness of the Group’s systems ofinternal control for the year ended 31December 2017. This review involvedconsideration of the reports of the internalaudit and the risk management functions,(including regulatory compliance) andestablishing that appropriate action isbeing taken by management to addressissues highlighted. In addition, any reportsof the external auditors which containdetails of any material control issuesidentified arising from their work arereviewed by the Court Audit Committee, ifthey arise.

Following the year ended 31 December2017, the Group reviewed the Court AuditCommittee’s conclusions in relation to theGroup’s systems of internal control andthe appropriateness of the structures inplace to manage and monitor them. Thisprocess involved a confirmation that asystem of internal control in accordancewith the Financial Reporting CouncilGuidance on Risk Management, InternalControl and Related Financial andBusiness Reporting (2014) was in placethroughout the year and up to the date ofthe signing of these financial statements.It also involved an assessment of theongoing process for the identification,evaluation and management of individualrisks and of the roles of the variousCommittees and Group risk managementfunctions and the extent to which varioussignificant challenges facing the Group areunderstood and are being addressed.




Further information on the Group RiskFramework is set out in the RiskManagement Report on page 49 of theBOIG plc Group Annual Report.

Group Code of Conduct and Speak UpPolicyThe Group has a Code of Conduct inplace which is applicable to all employeesand Directors of the Group and which isreviewed annually. The Code of Conductsets out the standards that are expectedfrom all those who work for the Group andgives guidance on how these standardsshould be applied. Training on the Code ofConduct is mandatory across the Group.

The Group has a Speak Up policy in placefor all staff, including Directors, which is inaccordance with international practice.

This policy is reviewed on an annual basisin line with the Group Code of Conduct.During 2017, the Group focused onincreasing awareness efforts to improvingthe speak up culture, which included, theannual Policy Review, a module ofmandatory web based training included inthe Code of Conduct training, increasedguidance notes to cover specific scenarioevents and a formal call to action to allemployees on their Speak Up obligations.The Group will continue with a number ofinitiatives to further increase awareness in2018. The Speak Up policy gives anassurance that it is safe and acceptable toraise a concern about malpractice, risk orpotential wrongdoing and outlines how tospeak up and raise a concern. The Courtand Group Chief Executive are committedto this policy, which encourages staff to

raise concerns openly and locally. Wherethis is not possible or the problem has notbeen resolved effectively at that level,there are clear alternative senior contactswithin the Group to whom the concernmay be addressed. In the case ofconcerns regarding fraudulent financialreporting, fraudulent accounting orirregularities in audit work, these can beraised directly with the Chairman of theCourt Audit Committee. With reference tothe Protected Disclosures Act 2014, areview of the Group Speak Up policy wasconducted to ensure that the standardsset out in this Act are being met.



Dear Shareholder,

On behalf of the Court Nomination andGovernance Committee (‘N&GCommittee’), I am pleased to present ourreport on the N&G Committee’s activityduring the financial year ended 31December 2017.

Membership and meetingsAt close of business on 31 December2017, the N&G Committee comprisedthree Non-executive Directors and itscomposition is fully compliant with theIrish Code, the UK Code and CRD IV. PatButler resigned from the N&G Committeeon 31 December 2017. I chair theCommittee, as Court Governor, other thanwhen the N&G Committee is dealing withthe appointment of a successor to the roleof Court Governor.

Biographical details, including eachDirector’s background, experience andindependence classification, are set out inthe BOIG plc Annual Report on pages 89to 92.

The N&G Committee met eight times in2017, six of which were scheduledmeetings. The Chairman and Members ofthe N&G Committee, together with theirattendance at meetings, are shown below.The Group Chief Executive is invited toattend meetings. The N&G Committeemeets annually with no managementpresent.

Matters considered by the N&GCommitteeThe matters considered, and action takenby the N&G Committee during the year areset out below.

Role and responsibilitiesThe key responsibilities of the N&GCommittee are set out in its terms ofreference and include:

• leading the process for appointmentsand renewals for the Court and CourtCommittees; and

• with the support of the GroupSecretary, keeping Court governancearrangements under review andmaking appropriate recommendationsto the Court to ensure corporategovernance practices are consistentwith good practice corporategovernance standards.

Matters considered and action taken by the N&G Committee in 2017

Report of the Court Nomination and Governance Committee

Archie G Kane, Chairman

Member attendance in 2017:

N&G committee Eligiblemeetings to attend Attended Archie G Kane 8 8Pat Butler 8 7Patrick Haren 8 8Patrick Kennedy 8 8

Court and • Reviewed Court and Court Committee composition, skills and committee size succession plans including approving the appointment of the new CEOand composition and succession planning for key roles on the Court, taking into account including the skills profile of the Court.succession • Reviewed the annual effectiveness evaluation of the Court and itsplanning Committees including individual Directors and approved follow-up

actions from the externally conducted review in 2016 by Independent Audit. Reviewed the annual effectiveness evaluation of the N&G Committee. • Assessed the fitness and probity and approved the appointment of PCF role holders. Approved the annual PCF reconfirmation.

Governance • Reviewed and recommended the Group Culture Programme.• Approved and recommended to the Court for approval updated corporate governance documents, including the Bank’s Corporate Governance Statement and Annual Compliance Statement.• Reviewed and approved key governance policies including: the Code of Conduct, the Speak Up Policy, Court Conflicts of Interest Policy and reviewed the Subsidiary Governance Policy.• Reviewed developments in corporate governance, including the revised EBA Guidelines on Internal Governance.• Recommended appointments to the Group’s Pension Schemes.

Executive • Reviewed the performance of senior executives.succession • Approved the Group Executive Committee Terms of Reference.planning andperformance review

Subsidiary • Reviewed board composition and succession planning for substantial governance regulated subsidiaries and reviewed key subsidiary board

appointments.• Reviewed the effectiveness evaluations of the boards of substantial regulated subsidiaries.• Reviewed subsidiary nomination committee minutes.• Provided oversight on the Individual Accountability Regime.

Corporate • Reviewed the Corporate Responsibility Programme and Responsible responsibility Business Report.

• Reviewed the Group Modern Slavery Statement.

Corporate • Reviewed key governance documentation for the new Group holding reorganisation company, BOIG plc.

Area of focus Role of the N&G Committee



Report of the Court Nomination and Governance Committee (continued)

Archie G KaneChairman of the Court Nomination & Governance Committee23 February 2018

Court Composition and Diversity The Court benefits from the diverse rangeof skills, knowledge and experienceacquired by the Non-executive Directorsas directors of other companies, bothnational and international, or as leaders inthe public and private sectors. Theeffectiveness of the Court depends onensuring the right balance of Directorswith banking or financial servicesexperience and broader commercialexperience. Following review in 2017, theN&G Committee approved a Court skillsmatrix and determined that the skillsprofile of the Court was appropriate to thebusiness of the Group including: • Major Business Lines (including retail,

corporate & treasury and insurance).• Geographies (including Ireland, UK,

Europe and the US).• Significant Subsidiaries.• Products (including retail banking,

corporate banking, Insurance andtreasury services).

• Group wide risks (including businessand strategic, conduct, credit, lifeinsurance, funding and liquidity,market, operational, pension,regulatory and reputational risks).

• Governance.• Risk management, compliance and

audit (including strategy, capital,

funding & liquidity, regulation,whistleblowing transformation andchange, customer engagement,business environment andengagement with investors / capitalmarkets).

• Management strategy anddecision-making (including strategy,culture, management oversight, ethicsand values, business sustainability,stakeholders and corporategovernance).

Directors bring their individual knowledge,skills and experience to bear indiscussions on the major challengesfacing the Group.

The Group recognises the benefits ofhaving a diverse Court and workforce. Inreviewing Court composition andidentifying suitable candidates, the N&GCommittee considers the benefits of allaspects of diversity including the skillsidentified as relevant to the business ofthe Group, regional and industryexperience, background, nationality,gender, age and other relevant qualities inorder to maintain an appropriate rangeand balance of skills, experience andbackground on the Court. All Courtappointments are made on merit, in the

context of the skills, experience,independence and knowledge which theCourt as a whole requires to be effective.

During 2017 the N&G Committee reviewedthe Court Diversity Policy (the latestversion of which is available on theGroup’s website) and the measurableobjectives set out thereunder. The Courthas set a target of achieving a minimum of33% female representation on the Courtfor the year ending 31 December 2020. Asat 31 December 2017 there was 30%female representation on the Court. TheGroup is also addressing diversity in theGroup’s workforce through an Inclusionand Diversity Programme, whichrecognises that developing and utilisingthe skills and perspectives of all of ouremployees is critical to the Group’songoing business success.

As Chairman of the N&G Committee, Ireported to the Court after each meetingto ensure all Directors were fully informedof the N&G Committee’s activities. I wouldlike to thank the N&G Committeemembers and attendees for theircontribution and support in steering thework of the N&G Committee throughout2017.

Dear Shareholder,

On behalf of the Court RemunerationCommittee, I am pleased to present ourreport on the Court RemunerationCommittee activities during the financialyear ended 31 December 2017.

Membership and meetingsAt close of business on 31 December2017, the Court Remuneration Committeecomprised four independentNon-executive Directors from diversebackgrounds to provide a balanced andindependent view on remunerationmatters. The Court RemunerationCommittee is chaired by the SeniorIndependent Director and its compositionis compliant with the requirements of theIrish Code and CRD IV, and with therecommendations of the UK Code.

Richard Goulding was appointed to theCourt Remuneration Committee on 20 July2017 and Pat Butler resigned from theCourt Remuneration Committee on 31December 2017. In order to ensure thatremuneration policies and procedures areconsistent with effective risk management,there is common membership betweenthe Court Remuneration Committee andthe Court Risk Committe (CRC). KentAtkinson, Pat Butler and Richard Gouldinghave been members of both committeesin 2017. Biographical details, includingeach Director’s background, experienceand independence classification, are setout in the BOIG plc Annual Report onpages 89 to 92.

The Court Remuneration Committee metsix times in 2017, five of which werescheduled meetings. The Chairman andMembers of the Court RemunerationCommittee, together with their attendanceat meetings, are shown above. The GroupCEO, Head of Group HR and the Head ofGroup Performance and Reward areinvited to attend meetings as appropriate.

Matters considered by the CourtRemuneration CommitteeThe matters considered, and action takenby the Court Remuneration Committeeduring the year are set out in the tablebelow.

Role and responsibilitiesThe Court Remuneration Committee holdsdelegated responsibility from the Court forthe oversight of the Group remunerationpolicy with specific reference to theGovernor, Directors and seniormanagement across the Group, and thoseemployees whose activities have amaterial impact on the Group's risk profile.The Court Remuneration Committee isresponsible for overseeing the annual

review of the Group Remunerationpolicy with input from relevant riskmanagement functions and the CRC.

The remuneration of Non-executiveDirectors is determined and approved bythe Court. Neither the Chairman nor anyDirector participates in decisions relatingto their own personal remuneration.

The Group is currently operating under anumber of remuneration restrictions whichcover all Directors, senior management,employees and certain service providersacross the Group. For further information,please see page 118 of the RemunerationReport in the BOIG plc Annual Report.

Deloitte are the current advisors to theCourt Remuneration Committee. Inaddition to the provision of remunerationservices to the Remuneration Committeeof Bank of Ireland UK plc, Deloitteprovided the following services to theGroup in 2017:• Programme Management and support

for Change Projects.• Programme Management for

Regulatory projects.• Digital Capability.• Data Analytics.• Support for Insurance Broker tender.• Risk Advisory Support.



Matters considered and action taken by the Court Remuneration Committee in 2017

Report of the Court Remuneration Committee

Patrick Haren, Chairman


Court RemunerationCommittee EligibleMeetings to attend Attended Patrick Haren 6 6Kent Atkinson 6 5Pat Butler 6 6Richard Goulding 2 1Archie G Kane 6 6

Annual • Considered the external Remuneration Policy review with input from the Remuneration relevant risk management functions and the CRC and adopted the Review Group Remuneration Policy. Approved changes to the Group

Remuneration Policy as a result of the implementation of MiFID II.• Approved the performance and remuneration of the Group CEO, and the GEC.• Reviewed the remuneration of the Governor of the Court.• Approved the remuneration terms for senior management appointments.• Approved the performance and remuneration for senior management .• Reviewed and approved the Group’s Code Role policy, process and procedures.

Risk and conduct • Reviewed the Group Risk profile and its relationship to Remuneration.• Approved the Group Code Role Holder List.

Disclosures and • Recommended the draft Remuneration Reports in the Annual Report.governance • Recommended the remuneration element of the Pillar III disclosures.

• Approved governance documentation in respect of remuneration matters for BOIG plc and approved appropriate changes to Non-executive Directors and Executive contracts.• Reviewed the evaluation of the Court Remuneration Committee’s effectiveness and approved the process for the internal evaluation of the Court Remuneration Committee’s performance.• Reviewed and approved the Court Remuneration Committee’s Annual Schedule of Topics and reviewed its Terms of Reference.

Area of focus Role of the Court Remuneration Committee



Patrick HarenChairman of the Court Remuneration Committee23 February 2018

As Chairman of the Court RemunerationCommittee, I reported to the Court aftereach meeting to ensure all Directors werefully informed of the Court Remuneration

Committee’s activities. I would like tothank the Court Remuneration Committeemembers and attendees for theircontributions and support in steering the

work of the Court RemunerationCommittee throughout 2017.

Report of the Court Remuneration Committee (continued)


Dear Shareholder,

On behalf of the Court Audit Committee(CAC), I am pleased to present our reporton the CAC’s activity during the financialyear ended 31 December 2017.

Membership and meetingsAt close of business on 31 December2017, the CAC comprised fiveNon-executive Directors. Tom Considineresigned from the CAC on 31 December2017. The Court believes that I amconsidered independent and I may beregarded as an Audit Committee financialexpert and that the CAC as a whole hasan appropriate mix of skills, experience,professional qualifications, knowledge andrelevant financial / banking experience.Patrick Kennedy is the Chairman of theCRC and I am also a member of the CRC.Patrick Mulvihill and Davida Marston werealso members of the CRC during 2017.Patrick Haren is Chairman of the CourtRemuneration Committee and I am also amember of the Court RemunerationCommittee. This common membershiphelps facilitate effective governanceacross all finance and risk issues, andensures that agendas are aligned andoverlap of responsibilities is avoidedwhere possible. Biographical details,including each Director’s background,experience and independenceclassification, are set out in the BOIG plcAnnual Report on pages 89 to 92.

The Chairman and members of the CAC,together with their attendance at meetingsare shown below.

The CAC’s performance during 2017 wasassessed as part of Court / Committee performance evaluation process and is setout on page 7 of this report.

Matters considered by the CACThe CAC met 13 times in 2017, ten ofwhich were scheduled and mattersconsidered / action taken by the CACduring the year are set out below.

Role and responsibilitiesThe key responsibilities of the CAC are setout in its terms of reference, which areavailable on the Group’s website

Report of the Court Audit Committee

Kent Atkinson, Chairman


EligibleCAC meetings to attend Attended Kent Atkinson 13 13Tom Considine 13 13Patrick Haren 13 13Patrick Kennedy 13 13Davida Marston 13 10Patrick Mulvihill 13 13

Matters considered and action taken by the CAC in 2017

Internal • Reviewed the effectiveness of the Group’s internal controls, including controls and financial reporting controls review, IT@BOI review, reports from Group risk management Internal Audit, Group Compliance and Regulatory Risk and the Group

Anti-Money Laundering Officer.• Reviewed the Group’s fraud protection and prevention programme.• Reviewed the Group’s BCBS 239 Programme.• Reviewed reports from the Group Investment Committee - post implementation reviews for individual capital expenditure of over €20 million.• Recommended the Group’s ICAAP and ILAAP processes.• Reviewed the internal governance arrangements with respect to Liquidity Coverage Ratio (LCR) Regulatory Reporting

External • Reviewed and recommended annual and interim reporting including the reporting significant accounting and judgemental matters.

• Recommended the Group Impairment Policy and impairment provisions.• Approved the Going Concern assessment and the Group’s Viability Statement.• Approved the Group’s existing accounting policies, and new and significant changes in existing policies, prior to implementation.• Reviewed the Group’s preparations for IFRS 9 and GDPR.• Approved the Group’s Pillar III Disclosure Policy; disclosures and non-disclosures (due to immateriality) and Country by Country Reporting disclosures.

Internal auditors • Approved the Internal Audit plan.• Reviewed Group Internal Audit (GIA) findings and management’s response to GIA audits.• Approved annual review of GIA’s Charter.

External auditors • Reviewed the external auditors plan, report, external audit findings and the external auditor’s engagement letter.• Reviewed the Group’s audit tender plans, provided oversight for a competitive tender process and reviewed the audit transition process.• Considered the effectiveness of the External Auditor.• Approved the Non-audit Services Policy and non-audit fees for the External Auditor.

Governance and • Recommended the governance documentation including the talent prospectus and processes for the establishment of BOIG plc.

• Reviewed and recommended the 2017 Annual Compliance Statement.• Recommended the CAC’s Terms of Reference and approved the CAC’s Annual Schedule of Topics. • Reviewed the evaluation of CAC effectivenes.• Reviewed talent development and succession planning for the finance function in the Group.

Area of focus Role of the CAC




Report of the Court Audit Committee (continued)

(www.bankofireland.com) and arereviewed annually and approved by theCourt.

One of the key responsibilities of the CACis to assist the Court in monitoring theintegrity of the financial statements. Toachieve this for the current reportingperiod, the CAC reviewed the AnnualReport and considered whether thefinancial statements were consistent withthe operating and financial reviewselsewhere in the Annual Report. The CACalso reviewed the governance andapproval processes in place in the Grouprelating to the financial statements and theCAC Report within the CorporateGovernance Statement. Thesegovernance and approval processesinclude the completion by management ofdisclosure checklists to ensure all requireddisclosures from applicable company law,listing requirements and accountingstandards are included and review of thedraft Annual Report by the DisclosureCommittee. The CAC also considered thetreatment and disclosure of key events aspresented in the financial statements.

Significant issuesThe CAC considered, inter alia, thefollowing significant issues in its review ofthe financial statements for the year ended31 December 2017. In addressing theseissues, the CAC considered theappropriateness of management’sjudgements and estimates and, whereapposite, discussed those judgementsand estimates with the External Auditor.

Loan impairmentThe Group Risk Policy Committee (GRPC)approves the Group’s provisioningmethodology on a half yearly basis. TheCRC, on an annual basis, providesobservations on the Group’s asset qualitymanagement and profile to the CAC as aninput into the CAC’s assessment of yearend impairment provisions.

The CAC considered the methodology forloan loss provisioning, including thespecific trigger events which areconsidered as an indicator of impairment,as set out on pages 98 to 100 and anasset quality report from the CRC. TheCAC also discussed and challengedmanagement’s assumptions used indetermining the overall level ofimpairments recognised in the financialyear and the total impairment allowance atthe year end with management noting therequirements of IAS 39 in respect of the

timing of recognition of impairments (theincurred loss methodology) and therequirements of the relevant regulatoryauthorities.

The CAC reviewed management papersand was satisfied that the level of loansclassified as impaired and non-performingat year end was consistent with the Group’smethodology, and that the calculation andresulting provision recognised anddisclosures were appropriate, based on therelevant accounting and disclosurestandards including, among others, IAS 39and IFRS 7.

Deferred tax assetsThe CAC considered the extent of DTAs tobe recognised in respect of unutilised taxlosses, and in particular the projections forfuture taxable profits against which thoselosses may be utilised. In order for theGroup to recognise these assets, it mustbe probable that sufficient future taxableprofits will be available against which thelosses can be utilised.

The Group has prepared financialprojections which are being used tosupport the Group’s Internal CapitalAdequacy Assessment Process (ICAAP).The projections for future taxable profitsincorporate economic factors (e.g.economic activity including projectedgrowth levels, unemployment levels,interest rates, etc.) and projectedoperating performance for each divisionwithin the Group (e.g. projected newbusiness, margins, costs, loan losses,etc.). As part of this process, the Groupprepares impairment projections, involvinga review of projection models for loan lossprovisions and challenge of keyassumptions and scenarios.

The financial projections are prepared forthe purpose of the Group’s assessment ofits capital adequacy. They are subjectedto considerable internal governance at adivisional and Group level and arereviewed and approved by executivemanagement and the Court.Management’s assessment of theprojections determined that it wasprobable that there would be sufficienttaxable profits in the future to recover theDTA arising from unused tax losses.

The CAC discussed with management itsassessment of the recoverability of theDTA and the related disclosures. The CACand the Court concluded that it wasprobable that there would be sufficient

taxable profits in the future to recover theDTA arising from unused tax losses, andthat the related disclosures were asrequired under IAS 12.

Retirement benefit obligationsThe CAC considered management’s keyassumptions and judgements used indetermining the actuarial values of theliabilities of each of the Group’s sponsoredDB pension schemes under IAS 19.Management considered advice fromindependent actuaries, Willis TowersWatson, for the determination ofsignificant actuarial assumptions includingdiscount rates and inflation. The keyassumptions proposed by managementand considered by the CAC wereassumptions relating to inflation rates,demographic assumptions and discountrates in Ireland and the UK which are usedin determining liabilities at the balancesheet date.

During 2017, the Group refined itsapproach to the determination of thediscount rate used to value sterlingdenominated liabilities under IAS 19 byadopting an alternative model producedby the independent actuary and avaliableto all its clients. The CAC considered thisrefinement and its appropriateness for thedetermination of the discount rate appliedto the Group’s sterling schemes.

The CAC was satisfied that the inflationrates, discount rates and other significantassumptions were appropriate and thatthe accounting for the Group’s sponsoredDB pension schemes and relateddisclosures was in accordance with IAS19.

Further detail on the inflation rates,discount rates and other significantassumptions related to retirement benefitobligations are set out in note 45 to theconsolidated financial statements.

Tracker Mortgage Examination Review The CAC considered management’sassessment of the impact of the CentralBank of Ireland’s Tracker MortgageExamination Review, including the level ofprovisioning and the presentation of thecharge as a non-core item, excluded fromunderlying profit before tax. The CAC wassatisfied that the level of provisioning,related disclosures and presentation wereappropriate.




Life assurance operationsDuring 2017, the Group changed itsaccounting policy for the valuation ofinsurance contract liabilities and ViFbusiness, as set out on page 44. The CACconsidered management’s rationale for thechange, and was satisfied that the revisedpolicy was more relevant and no lessreliable than the previous policy, and wasconsistent with current market practiceand requirements.

The CAC considered management’s keyassumptions and judgements used indetermining the ViF business andinsurance contract liabilities. The keyassumptions in projecting future surplusesand other net cash flows attributable tothe shareholder arising from businesswritten were the interest rate and unitgrowth rate, lapse rates, mortality,morbidity and expenses.

The CAC was satisfied that the significantassumptions are appropriately applied andthat the accounting for the Group’s ViFbusiness and insurance contract liabilitiesis appropriate.

IFRS 9 transitionThe CAC considered the estimated impacton shareholders’ equity of transition toIFRS 9 on 1 January 2018. The CACreviewed management papers anddiscussed and challenged managementjudgements used in determining thecorrect classification and measurement offinancial assets and the opening stock ofimpairment loss allowance based on IFRS9 requirements. The CAC considered theassociated disclosures and concludedthat they were appropriate based on therelevant accounting and disclosurestandards, principally IAS 8.

Further information on the impact of thisnew accounting standard is set out onpage 55 in note 1.

Going concernThe CAC considered management’sassessment of the appropriateness ofpreparing the financial statements of theGroup for the year ended 31 December2017 on a going concern basis. In makingthis assessment, matters consideredinclude the performance of the Group’sbusiness, profitability projections, fundingand capital plans, under both base andplausible stress scenarios. Theconsiderations assessed by the CAC areset out on page 43 in the Going Concerndisclosure within the Accounting Policiesin note 1.

On the basis of the review performed andthe discussions with management, theCAC was satisfied that there were nomaterial uncertainties related to events orconditions that may cast significant doubton the Group’s ability to continue as agoing concern over the period ofassessment. This assessment togetherwith the Going Concern disclosure (as setout on page 43) was subsequentlyapproved by the Court.

IT operational riskThe CAC considered and discussedmanagement’s assessment of IT risks andthe ongoing risk management programmeto identify, rate, mitigate and report on ITrisks, including GIA’s review of the internalcontrol considerations related to theGroup’s IT investment programme. On thebasis of the review performed, discussionswith management, and the continuedoperation of the comprehensive internalcontrol framework over financial reporting,the CAC was satisfied that these risks donot impact financial reporting.

Further information on these significantitems is set out in the Critical AccountingEstimates and Judgements on pages 56to 58.

Other responsibilities The CAC is responsible for theappropriateness and completeness of thesystem of internal control. In close liaisonwith the CRC, it reviews the manner andframework in which management ensuresand monitors the adequacy of the nature,extent and effectiveness of internal controlsystems, including accounting controlsystems, and thereby maintains aneffective system of internal control.

In addition, the CAC has responsibility for: • assisting the Court in meeting

obligations under relevant StockExchange listing rules and otherapplicable laws and regulations;

• monitoring and reviewing theeffectiveness of the Group’s InternalAudit function and its operations; and

• discharging the statutory responsibilityof the Company under relevantstatutes or regulations.

The CAC is also responsible foroverseeing all matters relating to therelationship between the Group and itsExternal Auditors, including the externalaudit plan, terms of engagement, auditand non-audit fee arrangements, interimfindings and audit finding reports. TheCAC also meets annually with the External

Auditors without management present.PricewaterhouseCoopers (PwC) haveacted as sole auditors to the Group since1990. The External Auditors are requiredto rotate the Group audit engagementpartner every five years and this processoccurred in 2015. Kevin Egan of PwC hasbeen the Group’s senior audit partner witheffect from the audit for the 2015 financialyear.

The Group is committed to ensuring theindependence and objectivity of theExternal Auditor and on an annual basisthe CAC formally reviews theeffectiveness, independence andperformance of the External Auditor. Thisprocess is supported by tailoredquestionnaires completed by CACmembers and relevant seniormanagement personnel. The responsesreceived in 2017 were collated andpresented to the CAC for discussion.Based on the results and assessment ofthe review process and the CAC’s owninteractions with the External Auditors, theCAC concluded that they were satisfiedwith the performance of PwC as ExternalAuditor.

As an additional check on independence,the CAC has developed and implementeda Group Policy on the Provision ofNon-Audit Services by the Group’sStatutory Auditor. The Group policyensures, among other things, that auditorobjectivity and independence are notcompromised. Under this policy, a keyprocedural control requires that anyengagement of the external auditors toprovide non-audit services must beapproved in advance by the CAC. It is theGroup’s policy to engage the StatutoryAuditor to provide non-audit services onlywhere they are required by legislation,regulation or where this is required by anunderwriter in a capital marketstransaction. The CAC monitorscompliance with the Group policy on theprovision of non-audit services andreceives reports on the performance ofsuch services.

The fees paid to PwC for the year ended31 December 2017 amounted to €5.9million (2016: €4.9 million), of which €2.4million (2016: €1.3 million) was payable inrespect of non-audit services. Non-auditservices represented 69% of the statutoryaudit fee (2016: 36%). Further informationon fees paid in respect of audit andnon-audit services, along with details ofnon-audit services provided during theyear are set out in note 14 on page 69.




Having considered the impact of theupdated EU regulatory framework onstatutory audits and the relevantrecommendation of the UK Code, and toensure the continuing quality andeffectiveness of the external audit service,the Group had previously announced itsintention to conduct an external audittender in 2017. Following a transparentand competitive tender process, includingpresentations from all candidate firms anddiscussions with management, the CACrecommended to the Court that KPMG beappointed to replace PwC as the external

auditor of the Group commencing with the2018 financial year. This appointment willbe the subject of advisory resolution at theBank’s 2018 AGC.

The CAC was provided with a technicaltraining session on relevant accountingmatters during the year. The CAC alsomeets annually with the Group ChiefInternal Auditor and with the PwC GroupAudit Partner without any othermanagement present and with seniormanagement.

As Chairman of the CAC, I reported to theCourt after each meeting to ensure allDirectors were fully informed of the CAC’sactivities. I wish to thank the CACmembers and attendees for theircontributions and support in steering thework of the CAC throughout 2017.

I would also like to take this opportunity tothank PwC for their significant contributionas the Group External Auditor since theirappointment as sole auditors to the Groupin 1990.

Kent Atkinson Chairman of the Court Audit Committee23 February 2018



Dear Shareholder,

On behalf of the Court Risk Committee(CRC), I am pleased to present our reporton the CRC’s activity during the financialyear ended 31 December 2017.

The CRC is established to monitor riskgovernance and to assist the Court indischarging its responsibilities in ensuringthat risks are properly identified, reported,and assessed; that risks are properlycontrolled; and that strategy is informedby and aligned with the Group’s riskappetite.

Membership and meetingsAt close of business on 31 December2017, the CRC comprised fourNon-executive Directors. Patrick Mulvihilland Davida Marston resigned as membersof the CRC on 19 May 2017, and TomConsidine and Pat Butler resigned asmembers of the CRC on 31 December2017. Richard Goulding was appointed tothe CRC on 20 July 2017. Patrick Mulvihillwas re-appointed to the CRC on 1January 2018. Kent Atkinson is Chairmanof the CAC and I am also a member of theCAC. Kent Atkinson and Richard Gouldingare members of the Court RemunerationCommittee and Pat Butler was a memberof both committees during 2017.

The CRC met eleven times in 2017. TheChairman and Members of the CRC,together with their attendance atmeetings, are shown below.

This common membership helps facilitateeffective governance across all financeand risk issues, including remunerationdecisions, ensures that agendas are

Report of the Court Risk Committee

Patrick Kennedy, Chairman


EligibleCRC meetings to attend Attended Patrick Kennedy 11 11Kent Atkinson 11 10Pat Butler 11 9Tom Considine 11 11Richard Goulding 5 5Davida Marston 5 4Fiona Muldoon 11 11Patrick Mulvihill 5 5

Matters considered and action taken by the CRC in 2017

Risk Strategy • Recommended the RAS and approved the Group Risk Framework and and management Policy, and the Group Risk Identification Process.

• Reviewed the top five risks facing the Group and considered the impact of rising bond yields on the Group and the impact of Brexit. • Reviewed quarterly risk reports, the Group Recovery Plan and the quality of risk disclosures by the Group.

Operational risk • Approved the operational risk framework, including the RADAR system.• Reviewed IT risk and cybercrime and model risk.• Considered on an ongoing basis business continuity, technology, information security, cyber security and payments risk profiles.

Credit risk • Reviewed the Group’s asset quality. The observations of this asset quality review were brought to the attention of the CAC in the context of its assessment of impairment provisions. • Recommended the non-performing loans strategy and operating plan.• Recommended the Group Credit Policy.• Reviewed the Group Country Risk Policy and limits including the UK limit post Brexit and the Group’s Brexit Credit Risk Monitoring Programme.• Reviewed credit risk transfer transaction.

Market risk • Recommended the Group Market Risk Policy and reviewed controls on discretionary risk and stress testing and approved the Group Policy on Derivatives.

Liquidity Risk • Recommended the Group Funding and Liquidity Policy and management strategy including the Contingency Funding Plan and the Group Liquidity Stress Testing Position.

Other risk • Approved the regulatory risk framework including ongoing monitoring of the regulatory change programmes.• Approved Group Conduct Risk Framework and Policy, Group Property Collateral Valuation Policy, Anti-Money Laundering Policy, Group Sanctions and Countering the Financing of Terrorism Policy, and the Group Reputation Risk Policy.• Reviewed reports from the Head of Group Governance and Regulatory Risk and risk updates from significant subsidiaries.• Reviewed the Risk Mitigation Programme, material regulatory interactions and terms of reference for the Tracker Mortgage Examination Review.• Reviewed and considered Pension Risk, including the Group pension position.

Governance • Reviewed the CRC effectiveness evaluation and the discharge of its duties. Approved the CRC Terms of Reference and its Annual Schedule of topics.• Reviewed the minutes of risk committee meetings of material subsidiaries.• Provided the Court Remuneration Committee with risk input into the Group Remuneration Policy.

Area of focus Role of the CRC



Report of the Court Risk Committee (continued)

Patrick Kennedy Chairman of the Court Risk Committee23 February 2018

aligned and overlap of responsibilities isavoided where possible.

Biographical details, including eachDirector’s background, experience andindependence classification, are set out inthe BOIG plc Annual Report on pages 89to 92.

Matters considered by the CRCThe matters considered, and action takenby the CRC during the year are set out onpage 18.

Role and responsibilitiesThe CRC makes recommendations to theCourt on risk issues where the Court hasreserved authority, maintains oversight ofthe Group’s risk profile, includingadherence to Group risk principles,policies and standards, and approvesmaterial risk policies within delegateddiscretion. Further information on theGroup Risk Framework and the Risk

Governance of the Group is set out in theRisk Management Report on pages 49 to55 of the BOIG plc Group Annual Report.

The CRC also provides advice to theCourt Remuneration Committee to informremuneration decisions from a riskperspective, monitors the risk elements ofany due diligence appraisal of anyacquisition or divestment activity reservedfor Court decision, as required, andconsiders the findings of Group InternalAudit and Group Credit Review in respectof risk management.

The Boston Consulting Group undertook areview of the effectiveness of the CourtRisk Committee covering the areas ofagenda, role, attendance andmembership. The overall conclusion wasthat Committee was effective with anumber of opportunities to improveefficiency. An action plan was agreed andsignificantly implemented during 2017.

The GRPC is the most seniormanagement risk committee and reportsto the CRC. During 2017, the CRCreviewed the terms of reference of theGRPC. Further information on the role ofthe GRPC in the Risk Governance of theGroup is set out in the Risk ManagementReport on page 51 of the BOIG plc GroupAnnual Report.

On an ongoing basis, the CRC reviewsdecisions of the GRPC through its minutesas presented to the CRC and receivesreports from the committee chairman.

As Chairman of the CRC, I reported to theCourt after each meeting to ensure allDirectors were fully informed of the CRC’sactivities. I would like to thank all of theCRC members and attendees for theircontributions and support in steering thework of the CRC throughout 2017.


Corporate Governance StatementAttendance

table

Att

end

ance

at

sche

dul

ed a

nd u

nsch

edul

ed m

eetin

gs o

f the

Cou

rtan

d it

s C

omm

ittee

s d

urin

g th

e ye

ar e

nded

31

Dec

emb

er 2

017.

Further to a schem

e of arrangement approved by stockholders, Bank of Ireland Group plc (B

oIG plc) becam

e the

ultim

ate parent company of the Group on 7 July 2017, when The Governor and Com

pany of the Bank of Ireland

(the Bank) becam

e its sole direct subsidiary. In preparation for the scheme of arrangement, the Board of B

oIG plc

(the Board) w

as appointed on 23 March 2017 and, from the effective date of the schem

e of arrangement, the

composition of the Board and the Court of the Bank (the Court) have been identical. M

eetings of the Board and

the Court are run concurrently. A

ttendance at meetings of the Court prior to 23 March 2017 are counted as an

attendance for the purposes of the table above. Concurrent meetings of the Board and the Court are counted as

a single attendance in the table above.

Co

lum

n A

:Indicates the num

ber of m

eetings held during the period the Director was a mem

ber of the

Courtand / or

the Com

mittee and was eligible to attend. C

olu

mn

B: Indicates the num

ber of m

eetings attended.

1Resigned from

the Courton 1 October 2017.

2Resigned from

the Court, R

isk, Nom

ination and Governance, and Rem

uneration Com

mittees on 31 Decem

ber

2017.

3Resigned from

the Court, A

udit and Risk Com

mittees on 31 Decem

ber 2017.

4Appointed to the Court, R

isk and Rem

uneration Com

mittees on 20 July 2017.

5Resigned from

the Risk Com

mittee on 19 May 2017.

6Resigned from

the Courton 28 April 2017.

7Appointed to the Courton 2 October 2017.

8Resigned from

the Risk Com

mittee on 19 May 2017.

Court Court

Nomination and Nomination and Court Court

CourtAudit CourtAudit Governance G

overnance

Rem

uneration Rem

uneration CourtRisk CourtRisk

Court Court Committee Committee Committee Committee Committee Committee Committee Committee

scheduled unscheduled scheduled unscheduled

scheduled unscheduled

scheduled unscheduled

scheduled

unscheduled

Nam

e A B A B A B A B A B A B A B A B A B A B

K

ent

Atk

inso

n

1

1

10

6

4

10

1

0

3

3

-

-

-

-

5

4

1

1

1

1

10

-

-

Ric

hie

Bou

cher

1

8

6

5

4

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Pat

But

ler2

11

1

0

6

6

-

-

-

-

6

5

2

2

5

5

1

1

1

1

9

-

-

Tom

Con

sid

ine3

1

1

11

6

6

10

1

0

3

3

-

-

-

-

-

-

-

-

1

1

11

-

-

Ric

hard

Gou

ldin

g4

5

4

2

2

-

-

-

-

-

-

-

-

1

1

1

-

5

5

-

-

Pat

rick

Har

en

11

11

6

6

10

1

0

3

3

6

6

2

2

5

5

1

1

-

-

-

-

Arc

hie

G K

ane

11

1

1

6

6

-

-

-

-

6

6

2

2

5

5

1

1

-

-

-

-

A

ndre

w K

eatin

g

11

1

1

6

6

-

-

-

-

-

-

-

-

-

-

-

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-

-

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P

atric

k K

enne

dy

1

1

11

6

6

10

1

0

3

3

6

6

2

2

-

-

-

-

1

1

11

-

-

Dav

ida

Mar

ston

5

11

1

1

6

5

1

0

9

3

1

-

-

-

-

-

-

-

-

5

4

-

-

Bra

dle

y M

artin

6

4

3

3

2

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Fran

cesc

a M

cDon

agh7

3

3

1

1

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Fion

a M

uld

oon

11

11

6

6

-

-

-

-

-

-

-

-

-

-

-

-

11

1

1

-

-

P

atric

k M

ulvi

hill8

1

1

11

6

6

10

1

0

3

3

-

-

-

-

-

-

-

-

5

5

-

-

The Governor and Company of the Bank of Ireland - Investor … · 2018-03-09 · 31 December 2017...

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