Insiders dominate body that oversees the Central Bank

Three members of Central Bank Commission are the bank’s full-time employees, including Governor Gabriel Makhlouf

THE board charged with overseeing the Central Bank under a structure beefed up in the wake of the last financial crisis has fewer directors than required by law, and no longer has a majority of independent directors.

The annual report for 2019 published by the Central Bank of Ireland yesterday includes details of the current Central Bank Commission. In 2010, in the wake of the financial crisis, the Commission was tasked with ensuring the statutory functions of the Central Bank are properly discharged and avoiding the kind of group think that led to the crash.

However, the annual report shows there are now just eight members of the Commission, despite a legal requirement that the board have between ten and twelve members.

The board now also lacks a majority of independent directors to oversee the work of the

Central Bank. A minimum six of 10 members should be people appointed by the Minister for Finance.

Currently just four of the directors are independent non-executives.

Three of the current board are Central Bank full-time employees; Central Bank Governor Gabriel Makhlouf and deputy governors Sharon Donnery and Ed Sibley. They are appointed based on their main jobs.

The Secretary General of the Department of Finance, Derek Moran, also sits on the board in his capacity as a senior official.

Another Central Bank official, Neil Whoreskey, acts as secretary of the Commission.

Corporate governance expert Prof Niamh Brennan of UCD Smurfit Business School said half the current board would not be classed as independent in corporate governance terms – including Mr Moran because of links between the Department and the Regulator.

“Having a majority of independent members is best practice, but not a requirement on State boards,” she said.

Ironically, the composition of the Central Bank’s board falls short of the standard it sets for institutions it oversees.

The Corporate Governance Code for Credit Institutions and Insurance Undertakings – also introduced in 2010 after the crash – says boards of banks and insurers must have a majority of independent non-executive directors

The Commission had a clear majority of independent members until last year, when former trade union official Des Geraghty resigned. The ratio of insiders was further skewed this year when economist Alan Ahearne stood down.

The Department of Finance said Paschal Donohoe will move to fill the vacancies on the board and has recently requested that the Public Appointments Service (PAS) seek candidates.

Board was charged with avoiding the kind of group think that led to the last crash