it counters excessive risk - taking and ensures that decisions are taken in a sustainable manner. in addition, a strong governance framework is one which gives board members access to good data in good time. this is a pre - condition for wellinformed decision - making. [ 2 ] unfortunately, too many banks in the banking union still do not possess sufficiently agile it systems to adequately aggregate data on risk appetite, risk limits and risk profiles. weaknesses in this area are one of the main factors hindering the effectiveness of governance frameworks of these banks. beyond this, also banks ’ management bodies – both in their managerial and supervisory function – have an impact on banks ’ governance, performance and sustainability. i will now first focus on this other dimension of governance : the role and composition of banks ’ boards. role and composition of banks ’ boards banks ’ management bodies have an array of important responsibilities. they set the bank ’ s risk appetite and ensure that it is adhered to at every level of the institution. they ensure that any material risks to which the bank is, or could be, exposed are identified, monitored and mitigated. and they are responsible for communicating the bank ’ s strategic objectives, risk appetite and values, not only to external stakeholders through transparent disclosures, but also internally within the bank. in particular, management bodies play a key role in steering the strategic course of a bank and setting it on the path towards sustainable long - term objectives. especially in times of crisis, a well - governed bank, with a clear understanding of its main risks and core revenue sources, is likely to adapt more quickly and perform better. first with the pandemic and now with the war in ukraine, but also in the face of the climate and environmental crises, it is important that banks and their boards have an active strategy to tackle the challenges arising from events that can have a significant economic impact. as for the composition of banks ’ boards, and given their importance, the ecb pays particular attention to assessing their collective suitability, diversity and effective functioning. of course, ensuring the suitability of its management bodies and key function holders is, first and foremost, the bank ’ s own responsibility. the ecb acts as a gatekeeper by performing a prudential check on the candidates for these roles, as much as possible under the applicable laws before they take up their positions, and by setting conditions, obligations or recommendations that must be adhered to by the banks to ensure the suitability of its management

cyril roux : reflections on the good, the bad and the ugly of solvency ii address by mr cyril roux, deputy governor ( financial regulation ) of the central bank of ireland, at the central bank of ireland solvency ii forum, dublin, 20 april 2015. * * * mr bernardino, ladies and gentlemen, it is my pleasure to welcome you this morning to the central bank of ireland conference on solvency ii. it is the brainchild of sylvia cronin, director for insurance, and of her team ; i hope you will find it thought - provoking and informative. solvency ii has been long in coming, and at times seemed as if it would be abandoned or postponed indefinitely. certainly in the previous decade the 2012 deadline may have been felt far in the distance, and even more so the postponement to 2016. but here we are, less than a year away from its entry into application. internal model applications have been filed throughout europe since the beginning of the month. dry runs of solvency ii reporting are being prepared for submission to the supervisors. capital injections, here and there, are planned or processed so that insurers are ready for the new solvency requirements. maybe it is a time as good as any to reflect on the good, the bad and the ugly of solvency ii. solvency ii puts to the fore good governance of insurance undertakings. it delineates the role and responsibilities of the ams board. it lists a host of control functions and aims to ensure their independence. in doing so, solvency ii builds on the experience of several countries, including ireland. we have developed here a strong body of regulations in this regard, with our corporate governance code and our controlled functions ( cf ) and pre - approval controlled functions ( pcf ) roles. the governance framework that solvency ii requires of insurance undertakings is very familiar to irish insurers. it is a tribute to the good work of the irish regulator to see its approach to good governance being generalised across the eu. however, ireland can fain forget that in the matter of governance of banks or insurers, as in other matters, the issuance of regulations, however well meaning, is no guarantee that their spirit will be observed or that their aim will be achieved. solvency ii can be commended for bringing out governance requirements. it will be up to the insurance firms to live up to them. in this governance framework, solvency ii requires