Corporate Governance Statement

Download our Corporate Governance Statement in pdf format.

On 15 January 2009 the Government announced that it would take steps that would enable the Bank to be taken into State ownership. The Anglo Irish Bank Corporation Act, 2009 ('the Act') provided for the transfer of all the shares of the Bank to the Minister for Finance ('the Minister' and 'the Shareholder') and was enacted under Irish law on 21 January 2009. On the same date, the Bank was re-registered as a private limited company. During 2009 the Bank adopted the Code of Practice for the Governance of State Bodies and is working with the Department of Finance towards full compliance, where applicable. The Bank has also adopted, and is in compliance with, the corporate governance and other obligations imposed by the Ethics in Public Office Act, 1995 and the Standards in Public Office Act, 2001.

The Combined Code on Corporate Governance (the 'Combined Code') issued by the Financial Reporting Council in June 2008 sets out the principles of good governance and a code of best practice. Companies listed on the Irish Stock  exchange are required to report on their compliance with the provisions of the Combined Code. Although the Bank's shares are no longer listed on the Irish and London Stock Exchanges, the Board supports the principles and provisions of the Combined Code.

This corporate governance statement describes how the Bank applied the principles of the Combined Code throughout the financial period ended 31 December 2009.

Except where otherwise stated the Directors believe that the Group has complied with the provisions of the Combined Code throughout the financial period ended 31 December 2009.

Relationship with the Shareholder

In addition to the Act, a Relationship Framework between the Minister and the Bank was formally approved by the Board in June 2009. This provides a framework under which the relationship between the Minister and the Bank shall be governed. Under the Relationship Framework, certain key matters are reserved to the Minister, and in which the Board shall only engage on the instructions of, or with the prior consent of, the Minister.

There has been regular two way communication between the Shareholder and the Directors during the financial period on a wide range of issues, with the Directors being kept informed of the Shareholder’s views through regular reports to the Board by the Chairman and the Group Chief Executive and through meetings between the Board and the Minister.

Board of Directors and Membership

The Board of Directors recognises its responsibility for the leadership, direction and control of the Bank and the Group and its accountability to the Shareholder for financial performance. As at 31 December 2009, the Board comprised the Chairman, two Non-executive Directors and the Group Chief Executive. It is a priority for the Board to increase the number of Non-executive Directors.

The Non-executive Directors are independent of management with varied  backgrounds, skills and experience.

There have been a total of 59 board meetings during the financial period, 10 of which were scheduled. The purpose of the 49 unscheduled meetings was primarily to discuss the difficult market conditions that existed during the financial period, capital matters, legacy related matters and the Bank's Restructuring Plan.

All Directors are expected to attend each meeting and the attendance at scheduled board meetings during the financial period is set out on page 33. Directors are provided with relevant papers in advance of each meeting. In addition, electronic copies of meeting papers and other relevant information are available to Directors via a dedicated Directors' extranet.

If any Director is unable to attend a meeting, he will still receive the supporting papers and will usually discuss any matters he wishes to raise with the Chairman to ensure his views are given due consideration. During the financial period many of the unscheduled meetings were arranged at short notice and it was not always possible for all Directors to attend. The average attendance rate was 93%.

The Board keeps a formal schedule of matters specifically reserved for its decision. These are matters which are significant to the Bank because of their strategic, financial or reputational implications and include agreement of strategic objectives, annual plans and performance targets, monitoring and control of operations, review of the performance of Board Committees and approval of specific senior appointments. The schedule of matters reserved for the Board was reviewed, updated and approved by the Board in March 2010, having also been previously reviewed in 2009.

Ned Sullivan was the Senior Independent Non-executive Director until 19 January 2009. Given its current size and composition, the Board has not considered it necessary to appoint a new Senior Independent Director to replace Ned Sullivan. On the appointment of additional Non-executive Directors it is the Board's intention to reconsider the appointment of a Senior Independent Director.

The Bank has insurance in place to cover the Directors and Officers in respect of legal actions which may be brought against them in the course of their duties.

Roles of Chairman and Group Chief Executive

Donal O'Connor was appointed Chairman of the Bank on 18 December 2008 and Executive Chairman, on an interim basis, on 19 February 2009.

Following a comprehensive search and selection process, A.M.R. (Mike) Aynsley was appointed Group Chief Executive on 7 September 2009, at which point Donal O'Connor resumed his role as Non-executive Chairman and since that date the roles of Chairman and Group Chief Executive have been distinct and separate.

The Chairman's main responsibility is to lead and manage the Board, and to promote corporate governance and effective communication with the Shareholder. The Board has delegated the day to day responsibility of the Bank's  operations to the Group Chief Executive who in turn delegates the implementation of operational decisions to the senior management team.

Independence of the Board

The Board has carried out its annual evaluation of the independence of each of its Non-executive Directors, taking into account the relevant provisions of the Combined Code, namely whether the Directors are independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to affect, the Directors' judgement. The Board is satisfied that each of the current Non-executive Directors fulfilled the independence provisions of the Combined Code.

Appointments to the Board

The Board appoints new Directors on the recommendation of the Nomination and Succession Committee. Directors are appointed initially for three years and, subject to satisfactory performance, may be re-appointed for additional terms.

Following nationalisation, the Minister has additional powers to appoint Directors of the Bank under the Act. Alan Dukes and Frank Daly were appointed to the Board on 18 December 2008, under the terms of the Irish Government's Credit Institutions (Financial Support) Scheme 2008 (S.I. No. 411 of 2008). Maurice Keane was appointed as a Director on 21 January 2009 following consultation with the Minister for Finance.

Donal O'Connor was appointed as Chairman of the Board on 18 December 2008 following the resignation of the former Chairman. The Board assessed the requirements for the role and the urgency of making an appointment and, having consulted with the Minister, unanimously agreed that Donal O'Connor was the best candidate for the position. Accordingly, the role was not openly advertised and external search consultants were not used in the appointment process.

External search consultants were utilised in the process leading to the appointment of Mike Aynsley as Group Chief Executive.

The terms and conditions of appointment of Non-executive Directors are available for inspection at the registered office during normal business hours as well as at the 2009 Annual General Meeting.

Re-election

At the 2009 Annual General Meeting all Directors retired in accordance with the provisions contained in the Articles of Association and were re-elected by the Shareholder. Subsequently, following an amendment to the Articles of Association by shareholder resolution, the requirement to retire by rotation has been dispensed with

Induction

On joining the Board, new Directors receive an induction presentation, which explains their responsibilities as a Director and provides an overview of the Group and its business. Each Director receives an information pack which provides details of the disclosures that each is obliged to make to the Bank in order to comply with applicable laws and regulations. The programme also includes briefing sessions with senior management from each of the main business units.

Performance review

A formal performance evaluation of the Board, its Committees, individual Directors and the Chairman is completed annually. The 2009 evaluations took the form of detailed questionnaires, which were completed by each Director, complemented by individual interviews as appropriate. The Board reviewed the results of the evaluations and has agreed action plans to progress improvements in 2010, in particular the requirement to significantly augment the number of Non-executive Directors.

With regard to individual performance, the Chairman met with each of the Directors to discuss their performance. In the absence of an appointed Senior Independent Director, the Chairman of the Nomination and Succession Committee met privately with the other Directors with respect to the Chairman's performance and the results were shared with the Chairman.

The Directors can avail of the advice and services of the Group Company Secretary. The Directors and Committees of the Board can also seek independent professional advice if required, at the Bank's expense.

Board Committees

In accordance with the provisions of the Combined Code, the Board has established four Committees operating under their own specific terms of reference which were approved by the Board. These terms of reference, setting out the roles and responsibilities of each Committee, are available on request through the Group Company Secretary and on the Bank's website.

The minutes of all meetings of Board Committees are circulated to all Directors for information with their board papers and are formally noted by the Board.

There were short intervals during the financial period when the requisite number of members for the Committees fell below the minimum requirement as set out in the Combined Code. This was rectified as and when additional Directors were appointed. Following the resignation of Frank Daly on 22 December 2009, and with the exception of the Nomination and Succession Committee, the Board Committees do not have the requisite number of independent Non-executive Directors to comply with the provisions of the Combined Code. It is the intention of the Board to increase the number of committee members with the appropriate skill sets as and when additional Directors are appointed.

A description of each of these committees is given below.

Remuneration Committee

Members at 31 December 2009:
Alan Dukes (Chairman) and Maurice Keane.
Frank Daly (Member until 22 December 2009).

The Remuneration Committee is responsible for the formulation of the Group's policy on remuneration in relation to the Group Chief Executive and other senior executives. The Committee's report on behalf of the Board on Directors' remuneration and interests is set out in note 54 to the financial statements.

Terms of Reference for the Remuneration Committee (Pdf 73 KB)

Audit Committee

Members at 31 December 2009:
Maurice Keane (Chairman since 23 December 2009) and Alan Dukes.
Frank Daly (Chairman and member until 22 December 2009).

The Audit Committee reviews the Group's annual and interim financial statements, considers the significant financial reporting issues and judgements which they contain and makes recommendations to the Board concerning their approval and content. The Committee also monitors the integrity and effectiveness of the Group's system of internal financial control. It reviews the scope of the audits and the plans, findings and recommendations of the Group Internal Auditor and External Auditors.

The Committee is responsible for making recommendations to the Board regarding the appointment and removal of the External Auditors. During the financial period, the Committee led the competitive tender process for the award of the External Auditors' appointment, for which a number of accountancy firms were invited to participate. Following the conclusion of the tender process, Deloitte & Touche were appointed as External Auditors. The Committee is responsible for monitoring the independence of the External Auditors.

The Group Internal Auditor and External Auditors have unrestricted access to the Committee. The Committee meets privately with both the External Auditors and the Group Internal Auditor at least once a year without management present.

There is a process in place for the Audit Committee to review the nature and extent of all non-audit services provided by the External Auditor and, if appropriate, approves such services and the related fees. The Committee has recently strengthened this process with the introduction of a permitted non-audit service policy.

The Board has determined that Maurice Keane is the Committee's financial expert.

Terms of Reference for Audit Committee (Pdf 93 KB)

Risk and Compliance Committee

Members at 31 December 2009:
Maurice Keane (Chairman) and Alan Dukes.
Frank Daly (Member until 22 December 2009).

The Risk and Compliance Committee's role is to oversee risk management and compliance within the Group. It reviews, on behalf of the Board, the key risks and compliance issues inherent in the business and the system of internal control necessary to manage them and presents its findings to the Board. This involves oversight of management's responsibility to assess and manage the Group's risk profile and key risk exposures covering credit, market, funding/liquidity, operational, litigation and compliance risks.

The Committee makes recommendations to the Board regarding the Group's risk appetite and all material policies relating to the Group's risk profile. The Committee oversaw a number of independent external reviews of the risk management function, implementing the recommendations arising from these reviews. The Committee has also monitored progress of the Bank's internal NAMA project team on an ongoing basis.

Terms of Reference for Risk and Compliance Committee (Pdf 98 KB)

Nomination and Succession Committee

Members at 31 December 2009:
Alan Dukes (Chairman), Maurice Keane,
Donal O'Connor and Mike Aynsley.
Frank Daly (Member until 22 December 2009).

The Nomination and Succession Committee is responsible for recommending candidates to the Board for appointment as Directors and to senior management positions, and for ensuring that a suitable induction programme is in place for all new Directors. Three new Non-executive Directors were inducted during the financial period. The structure and composition of the Board has been the subject of ongoing assessment throughout the financial period.

Terms of Reference for Nominations and Succession Committee (Pdf 76 KB)

Internal control

The Directors acknowledge their overall responsibility for the Group's system of internal control and for reviewing its effectiveness. The system is designed to manage rather than eliminate the risk of failure to achieve the Group's business objectives and provides reasonable but not absolute assurance against material financial misstatement or loss. Such losses could arise due to the nature of the Group's business in undertaking a wide range of financial services that inherently involve varying degrees of risk.

Following the circumstances relating to the resignation of the former Chairman, the Board has adopted a policy which prohibits the provision of loans to Directors.

The Group's system of internal control includes:

• An organisation structure with clearly defined authority limits and reporting mechanisms to senior levels of management and to the Board;
• Divisional management in conjunction with the Group Risk Management and the Group Compliance functions have responsibility for ensuring that risks are identified, assessed and managed throughout the Group. The Group Credit Committee together with the Group Asset and Liability Committee provide support to the Audit Committee and the Risk and Compliance Committee;
• An annual budgeting and monthly financial reporting system for all Group business units which enables progress against plans to be monitored, trends to be evaluated and variances to be acted upon; and
• A set of policies and guidelines relating to credit risk management, asset and liability management (including interest, currency, and liquidity and funding risk), compliance, operational risk management, capital expenditure, computer security and business continuity planning.

The Group Internal Audit function reports to the Group Chief Executive and the Audit Committee. The system of internal control is reviewed by Group Internal Audit. Emphasis is focused on areas of greatest risk as identified by risk analysis. During the financial period, resources from Group Internal Audit, with the support of the Audit Committee, were diverted to carry out investigations and complete specific reviews both for the Board and in relation to the ongoing regulatory investigations. The internal control systems are subject to regulatory supervision by the Financial Regulator and overseas regulators.

The Board confirms that there is a framework in place (which is described in note 51) for identifying, evaluating and managing the significant risks faced by the Group. This framework is regularly reviewed and is in accordance with the Turnbull guidance.

Following an independent external review of the Group's credit structure and processes, the  governance of the credit risk management process has been strengthened through the implementation of the recommendations arising from this review. The Board has approved a new Risk Appetite Statement, an amended Group Credit Policy and resources have been enhanced within the Risk Management function.

The Directors confirm that they have reviewed the effectiveness of the Group's system of internal controls for the period ended 31 December 2009 and for the period up to and including the date of approval of the financial statements. The review undertaken covers all aspects of control including financial, operational and compliance controls and risk management. Any significant weaknesses identified from this review will be addressed by the Directors.

Going concern

The Directors confirm that they are satisfied that the Bank and the Group have adequate resources to continue to operate for the foreseeable future and are financially sound, as described in note 1.2. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Annual General Meeting

Following the nationalisation of the Bank and the transfer of all shares to the Minister the provisions of the Combined Code relating to shareholder relations and conduct at the Annual General Meeting are no longer applicable.

The Group uses its internet site (www.angloirishbank.com) to provide the full text of each annual and interim report for the previous five years. The website also provides detailed financial data, Bank information, information on credit ratings and other press releases.

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