Governance In a Changing World - Remarks by Governor Gabriel Makhlouf at the launch of "The Evolution of Bank Governance in the EU"

Good evening, everyone, and welcome to Central Bank of Ireland.

We are delighted to host the launch of The Evolution of Bank Governance in the EU. Congratulations to its editors, Professor Blanaid Clarke and Professor Christina Livada, and to all those who have contributed to it.

Blanaid and Christina, bringing together a book of this breadth is a considerable undertaking. It is a pleasure to have you here to celebrate its publication, alongside colleagues from academia, the financial sector and the regulatory community.

The book deals with questions that are very familiar to us at the Central Bank. How are banks led? How are decisions made and challenged? And how do we ensure that those entrusted with responsibility have the judgement and expertise to exercise it well?

These questions matter well beyond the boardroom. Households and businesses depend on banks to safeguard their money, provide credit and support their everyday activities.

The book puts today’s European governance framework into perspective, tracing its development while examining newer challenges, including artificial intelligence.

The financial crisis showed how much damage can result when boards do not understand the risks their institutions are taking, or when management is insufficiently challenged. Those lessons remain relevant, even as the circumstances facing banks change.

That brings us to the theme of this evening’s panel: governance in a changing world.

As Mary Elizabeth McMunn has emphasised, we learn a great deal about governance when conditions become difficult. Information needs to reach the right people quickly, concerns must be heard, and boards must be able to take difficult decisions while there is still time to act.

That requires expertise and independence of thought, supported by a culture in which people feel able to challenge assumptions. It’s an important reason why I’m a firm believer in the value and importance of diversity and inclusion.

It applies to familiar financial risks and to operational challenges such as cyber threats, disruption to critical services and dependence on external providers.

AI adds another dimension. It offers considerable opportunities to improve services and the way banks work. Boards need sufficient understanding to assess those opportunities, recognise the technology’s limitations and ensure that responsibility for decisions remains clear. It is welcome that the book addresses these questions.

There is also a connection here to the wider European debate and to our own work looking at Regulating and Supervising Well.

We want to make regulation clearer, remove duplication and address unnecessary complexity.

Strong governance supports that ambition. It helps banks understand their business, make better decisions and pursue opportunities with confidence.

The book’s examination of the Capital Requirements Directive provides a useful basis for considering how the European framework can support those outcomes, including as banks respond to climate and environmental risks.

Of course, all frameworks rely on the people who put it into practice.

Our fitness and probity and individual accountability frameworks address connected questions about people’s suitability, their responsibilities and the standards expected of them.

Following Andrea Enria’s review, we have also worked to make our own fitness and probity processes clearer, fairer and more consistent.

Within firms, clear responsibilities should help people take ownership of decisions and escalate concerns. Alongside that individual responsibility, boards need the collective ability to question the direction being taken and look beyond immediate pressures.

These are issues on which researchers, practitioners and supervisors can learn from one another.

This book contributes to that exchange, and we are pleased to bring those perspectives together this evening.

Blanaid and Christina, congratulations again to you and your fellow contributors, and thank you for sharing your work with us.

I will now hand over to Colm to chair the panel.

Thank you.