Bank of Ireland Group plc Annual Report, Exercises of Business

Download Bank of Ireland Group plc Annual Report and more Exercises Business in PDF only on Docsity! are oe Coo ss ata se | FribSewe S Ld ee Dl Cd ee ee Bank of Ireland Group plc Annual Report Se —e Bank of Ireland Bank of Ireland Annual Report 2021 2 Inside this report Strategic Report 3 2021 key performance highlights 3 Chairman’s review 4 Chief Executive’s review 8 Our Ambition, Purpose and Values 12 Our strategy 13 Responsible and Sustainable Business at Bank of Ireland 20 Governance in action 48 Risk review 51 Financial Review 53 Governance 77 Risk Management Report 137 Financial Statements 194 Other Information 348 ‘In 2021 we delivered a strong rebound in financial performance, continued momentum in the execution of our National Champion bank strategy and agreed two transformational acquisitions. We are confident in our growth outlook for 2022 and beyond.’ Francesca McDonagh Group Chief Executive View this report online This Annual Report and other information relating to Bank of Ireland is available at: www.bankofireland.com The Group's forward- looking statement can be found on page 375. This is a true copy of the human readable layer of Bank of Ireland Group plc Annual Report prepared in accordance with Commission Delegated Regulation 2019/815 regarding the single electronic reporting format (ESEF) whereas this copy has not been prepared in accordance with ESEF. The Statutory financial statements prepared in accordance with ESEF are included on the Group's website. investment in transformation and supporting customers through new lending. As economic conditions normalise, regulatory capital requirements will evolve accordingly. As institutions, including this one, plan over a medium-to-long term cycle, we encourage as much visibility as possible from our regulators as to evolving future requirements. Distributions The Board recognises the importance of distributions to shareholders. Following the onset of the pandemic we outlined that our objective was for distributions to recommence as soon as possible based on our performance and capital position. The acquisitions that we announced during 2021, which we believe will enhance future returns, merit the allocation of surplus capital to execute them. However, the headroom provided by our capital position provides optionality beyond these proposed deals. The ECB’s request for banks to consider not distributing any cash dividends or conducting share buy-backs, or to limit such distributions, lapsed on 30 September 2021. Our strong capital position facilitates the reintroduction of distributions to shareholders. I am pleased to announce a proposed distribution of €104 million. €54 million of this will be distributed via a proposed dividend in respect of 2021 of 5 cent per share. A further €50 million will take the form of an ordinary share buyback in 2022, subject to regulatory approval. Purpose and Culture Last year I wrote about how our purpose, to enable our customers, colleagues and communities to thrive, was a clear North Star for the Group in responding to COVID- 19. Today, our purpose continues to be highly visible through the efforts that colleagues across the Group are making. Our core values – Customer Focused; One Group, One Team; Agile; and Accountable – are demonstrated on a daily basis. Taken together, our purpose and values inform and guide the decisions and actions we take as a Group. Throughout the many challenges presented by the pandemic, our purpose and values have never been more important to our company, our colleagues and our customers. Culture has been and will continue to be a key component of the Group’s transformation journey. Colleague surveys continue to show the success we have made and, while issues of the past still impact today, we are fully committed to ongoing learning and development of our culture. State Support Between 2009 and 2011, Bank of Ireland received €4.8 billion of support from the Irish State. In June last year, the Minister for Finance announced his intention to sell part of the State’s 13.9% remaining shareholding in Bank of Ireland and in November extended the share trading plan to this May. The shareholding is now below 6% and the State is no longer the largest shareholder in the Bank. As I have said before, Bank of Ireland is very grateful to the Irish taxpayer for this support. It should never have been required. Bank of Ireland is unique amongst Irish banks in being the only institution to have repaid the Irish taxpayer fully, which we did by 2013. Since then, through dividend payments and the ongoing sell down of the State shareholding, the return to the Irish State has continued to increase, amounting to c.€6.2 billion by end 2021. Remuneration Since receiving State support almost 14 years ago, Bank of Ireland has been subject to a number of significant remuneration restrictions, including a ban on performance related pay and benefits which applies to all colleagues at all levels within the Group and a pay cap. Since these restrictions were put in place, the European Banking Authority (EBA) has introduced remuneration guidelines which apply to banks across the Eurozone. These are much stricter than the guidelines that operated in the past, with a far greater emphasis on good risk management and financial sustainability. As an employer, Bank of Ireland operates in an increasingly competitive landscape when it comes to the attraction and retention of talent. This is driven by a number of factors, including the significant growth in the technology sector in Ireland and the substantial increase in international financial services firms locating in the country, exacerbated by Brexit. The remuneration restrictions which apply to Bank of Ireland are not replicated in any market in which the Group does business, creating an uneven playing field between the Bank and all other corporates – both banking and non-banking – with whom we compete for talent. This clear competitive disadvantage means that people risk at the Group has never been higher. As the State sells down its remaining shareholding and Bank of Ireland returns fully to private ownership, potentially later this year, our view is that the current crisis- era restrictions should be replaced by the EBA guidelines, allowing the Group to implement a remuneration approach which is aligned to European norms and operates to the highest risk management and risk culture standards. Responsible and Sustainable Business The Group unveiled a new Responsible & Sustainable Business (RSB) strategy, ‘Investing in Tomorrow’, in last year’s Annual Report. We have demonstrated progress under all three pillars of the strategy: Enabling all Colleagues to Thrive; Enhancing Financial Wellbeing; and Supporting the Green Transition. Also during 2021 and reflecting the increasing importance of environmental and social activities, the Board approved the establishment of a new standalone Board level RSB Committee, which was established during February 2022 and will be supported in its governance and oversight activities by the Group’s recently appointed Chief Sustainability & Investor Relations Officer. Bank of Ireland Annual Report 2021 Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 5 Related pages CEO review (page 8) Responsible & Sustainable Business at Bank of Ireland (page 20) Risk Management (page 37) Chairman’s review (continued) Ireland has a target to reduce greenhouse gas emissions by 51% by 2030 and to achieve a climate neutral economy by 2050. The achievement of this will require significant public and private sector investment. At Bank of Ireland, we are committed to doing all we can to support the national effort to combat climate change. Board The composition of the Board remained unchanged in 2021. The Board met in total on 21 occasions during the year, with heightened activity levels arising from the two acquisitions. There were also 66 Board Committee meetings during the year. I would like to acknowledge the very strong commitment of all of my fellow directors to the Group in 2021, as in prior years. In September, Myles O’Grady informed the Board of his intention to step down as Group Chief Financial Officer (CFO) and Executive Director. Myles provided exceptional financial leadership to the Group and we wish him the very best for the future. A process is underway to appoint a successor to the Group CFO, the outcome of which will be announced to the market when confirmed. Tom Hayes In November, Tom Hayes, our CEO of Corporate & Markets, very sadly passed away. Tom joined Bank of Ireland in 1979 and became CEO of Corporate Banking in 2006. There were few large business deals in Ireland over the last number of decades that Tom was not involved with and few colleagues in the Bank that he did not touch. These deep relationships, which were his hallmark, meant that his loss has been felt widely and deeply. To his wife Eimear and his daughters Sarah and Ciara, I reiterate the sympathies of all at Bank of Ireland. Outlook The pandemic has accelerated the pace of change for the banking industry. Increased digitisation has led a marked evolution in business models and how customers seek to engage with providers of financial services. Sustainability has moved to the top of the policy agenda. In our home market, we have a No. 1 or No. 2 market position in all principal product lines, to be further enhanced by our two acquisitions, as well as being Ireland’s only universal bancassurer. Ireland’s attractive demographics and strong economic base provide significant long-term opportunities for the Group. The recovery in housing activity and enhanced visibility offered by the Brexit deal augur well for credit formation as the economy recovers from the COVID-19 shock. In the UK, our strategic actions have delivered a significant improvement in performance. The Group’s net interest income is positively geared to the changing interest rate environment. In this regard, increased market expectations of higher interest rates may provide a further tailwind to revenues. The outlook for the Group is positive, with forecasts pointing to 2022 being a year of strong economic growth in Ireland and the UK. We continue to be vigilant of risks, including the lingering effects of COVID-19 and geopolitical uncertainties. Looking to the longer term, the Board is confident that we have the right people, portfolio of businesses and strategy to deliver for our shareholders. Patrick Kennedy Chairman 6 Chairman’s review (continued)Bank of Ireland Annual Report 2021 Cliffs of Moher Co. Clare 10 part of this, 1,900 colleagues received mental health training and over 50 ‘power down and recharge’ events were held to help colleagues perform at their best during the pandemic. To progress the Group’s Inclusion and Diversity ambitions, we launched dedicated female talent programmes and a range of initiatives to promote greater ethnic diversity. In 2021, the Group’s gender ratio of senior management appointments was 45% female: 55% male, improving to 49:51 by Q4 2021. The Group remains committed to achieving a 50:50 ratio. We announced a new hybrid working model to support flexible working on a permanent basis. This transition is underpinned by agile hubs, collaboration spaces, digitised meeting rooms and remote working options and has supported a further reduction in office space of 15% in 2021. Communities We are committed to supporting the communities where we live and work including our communities’ transition to a greener economy. Green lending to our customers has increased and we were the first bank to issue 100% bio-sourced sustainable cards and have issued more than 100,000 of these as part of a rollout to all cardholders. Our €4 million philanthropy programme, Begin Together, continued to support community-focused initiatives with 59 community and 39 arts projects awarded grants. In addition, the Group’s 'Money Smarts' programme and challenge, which promotes financial literacy, has had more than 13,220 secondary school students participate during 2021. We continue to proudly support Irish rugby across the four provinces and the Emerald Warriors, Ireland’s leading LGBTQ+ rugby club. We are key supporters of the IRFU Charitable Trust and Rugby Players Ireland. In February 2021, we also partnered with the Football Association of Ireland’s community programme ‘More than a Club’ pledging our support to the grassroots of Irish football. Responsible and Sustainable Business We launched our Responsible and Sustainable Business strategy, ‘Investing in Tomorrow’ in March 2021 and we have continued to deliver under our three key pillars. Enabling current and future colleagues to thrive In 2021, we introduced strategic future skills programmes and pathways, upskilling colleagues across data, cloud, project management and digital. 13% of colleagues graduated from future skills pathways in 2021, a significant increase on 2020. We received the ‘2021 Age Friendly Business Award’ and were the first Irish company to achieve Business Disability Forum accreditation. Enhancing Financial Wellbeing We have proactively engaged with customers who were only making minimum payments on their credit cards over a 12-month period to suggest alternative ways to manage their credit card debt. Customers who received targeted advice on reducing their long- term credit card debt were twice as likely to improve their financial wellbeing. In December 2021, the Group committed to support financial health and inclusion through its products, services and other measures as a founding signatory to the UN Principles for Responsible Banking ‘Commitment to Financial Health and Inclusion’. Supporting the green transition The Group’s ongoing commitment to supporting the green transition is focused on a five point plan – providing sustainable finance, managing climate related risks, setting science-based targets, decarbonising our own operations and transparently reporting our progress. In 2021, we increased the Group’s Sustainable Finance Fund by €3 billion to €5 billion to help fund the green transition, reflecting our expectation of a material increase in customer demand in the coming years. Since the launch of our Green Mortgage in 2019, €1.8 billion has been drawn and green mortgages accounted for c.35% of mortgage lending in 2021 and c.45% in Q4 2021. Our green lending to our business and corporate customers also increased significantly in 2021 with business banking term lending up over 50% and non-property corporate commitments up over 100%. We issued €1.3 billion of green bonds in 2021 and remain on track to establish and publish science based targets. We will issue our first sustainability report during 2022. Financial performance The Group delivered an underlying profit before tax of €1,366 million in 2021 with total income 12% higher and operating profit pre-impairment 53% higher compared to 2020. The Group’s loan book decreased by €0.3 billion during 2021 (€2.6 billion lower on a constant currency basis). New lending of €14.2 billion, positive foreign exchange and other movements of €2.2 billion and an impairment credit of €0.1 billion were more than offset by the impact of redemptions of €16.5 billion and the Group’s €0.3 billion Irish mortgage NPE transaction. UK deleveraging of €2.9 billion in the period was in line with strategy and a further reduction is planned in 2022. On a constant currency basis and excluding UK deleveraging and the NPE transaction, net lending increased by €0.6 billion, supported by activity across our Retail Ireland and Corporate portfolios. Net interest income of €2,219 million was 5% higher than 2020. The benefits of reduced liability costs, higher UK margins and income benefits from participation in the TLTRO were partly offset by reduced yields on liquid assets and structural hedges. Liquid assets as a proportion of average interest earning assets increased to 35% in 2021 compared to 26% in 2020 primarily as a result of participation in the TLTRO and higher deposit balances. Net interest margin (NIM) was 1.86%, 14 basis points lower vs 2020. The Group’s NIM reflects the positive impact from new lending margins and our strong commercial pricing discipline, more than offset by the impact of the Group’s participation in TLTRO lll (c.8 basis point negative impact in 2021), growth in liquid assets and lower structural hedge income. 2022 net interest income is expected to be broadly stable vs 2021. Fees and other income arise from diversified business activities including wealth, bancassurance, foreign exchange and transactional banking fees. Business income of €641 million, including share of associates and joint ventures (JVs), was 15% higher vs 2020, notwithstanding the impact of continued restrictions during 2021. Additional gains, valuation and other items of €89 million were reported in 2021 compared to a loss of €56 million in 2020. Chief Executive’s review (continued)Bank of Ireland Annual Report 2021 Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 11 Francesca McDonagh Group Chief Executive Business income includes Wealth and Insurance income which increased 24% vs 2020 due to higher new business and existing book income. Retail Ireland income increased 3% due to higher current account and card fee income. Corporate and Markets fee income increased by 13%, supported by higher customer activity and upfront fees. Share of associates and JV income continued to be affected by UK travel restrictions. 2022 business income is expected to be higher than 2021. Operating expenses (excluding levies and regulatory charges and impairment of intangible assets and goodwill) reduced by 4% compared to 2020. Non-core charges of €145 million included €110 million in restructuring programme costs. 2022 operating expenses are expected to be lower than 2021 after absorbing inflation and excluding the announced acquisitions. A net credit impairment gain of €194 million on financial instruments in 2021 compared to a charge of €1,133 million in 2020. This gain reflected the impact on IFRS 9 models of Forward Looking Information from the Group's latest macro-economic outlook; movement in management adjustments; and actual loan loss experience and portfolio activity in the period. The impairment performance in 2021 was better than our expectations, reflecting the improved economic outlook in December 2021 compared to December 2020, combined with positive actual loan loss experience in the period. This was partly offset by a higher management adjustment. The impairment outlook is expected to remain benign in 2022 with charges expected to be below normalised levels. Subject to no material change in the economic conditions or outlook, we expect the 2022 impairment charge to be lower than 20 basis points. NPEs reduced by €0.2 billion to €4.3 billion, equating to an NPE ratio of 5.5% of gross customer loans compared to 5.7% at end-2020. This improvement reflected the Group’s €0.3 billion NPE securitisation transaction backed by Irish mortgages and continued work with customers to agree sustainable solutions, slightly offset by new flows into default. Our regulatory CET1 capital ratio of 17% and fully loaded CET1 capital ratio of 16% at December 2021 were significantly ahead of regulatory requirements. Improvement in the ratios from the end of 2020 reflected organic capital generation combined with the benefit from impairment performance, balance sheet optimisation transactions and other movements. This was offset by the impact of investment in transformation and lending and a deduction for a foreseeable capital distribution. The Group’s 17% regulatory CET1 capital ratio at December 2021 provides headroom of c.720 basis points to our 2021 regulatory requirements excluding P2G. The Group has sufficient capital resources to complete the agreed acquisitions with capital investment of c.200 basis points. Outlook 2021 was a year of strong recovery and continued strategic execution. We delivered a significant rebound in financial performance with healthy growth in our capital ratios. This capital will support the expected completion of the KBCI portfolios and Davy acquisitions, which will further enhance the Group’s Irish franchise and are financially attractive. Our organic strategy will see continued progress in our digital competitiveness, cost efficiency and profitable growth. While uncertainties remain about the more enduring impacts of COVID-19 and geo-political developments, the outlook across our core markets is strong. We are committed to responsibly developing our long-term franchises. We see strong momentum as we execute our strategy, leading to positive outcomes for customers and colleagues and growth in sustainable returns for shareholders, supporting our target to deliver a return on tangible equity in excess of 10% in the medium term. During 2022, we plan to provide an update on our strategy and outlook to 2024, including refreshed medium-term targets. Chief Executive’s review (continued) Bank of Ireland Annual Report 2021 12 Our Ambition, Purpose and Values Amplified in response to COVID-19 Our purpose Bank of Ireland’s purpose is to enable our customers, colleagues and communities to thrive. Customers are at the heart of our business and always come first. As the economies where we work moved between various stages of lock-down and reopening, we continued to provide a range of ongoing supports to our customers. Reflecting changes in consumer behaviours we made changes to our branch network, but through a partnership with An Post we ensured extensive access to local counter services for those who want them. We continued to invest heavily in a wide range of digital banking services. We strengthened our position as a leading advocate for customer financial wellbeing. And in March 2021 we published our inaugural Responsible and Sustainable Business Strategy ‘Investing in Tomorrow’. As part of this we continue to develop a range of products to help customers reduce the carbon impact of their homes and businesses. Colleagues keep our organisation working by innovating and adapting to meet our customers’ needs. In 2021, our colleagues went above and beyond to deliver for our customers and each other at every stage of the pandemic. Given the challenges posed by COVID-19, we continued to place a strong emphasis on colleague wellbeing throughout the year, delivering programmes on the themes of Wellbeing, Workplace, Workday and Workload. We also provided suicide prevention training for all people managers in the Group. We launched our new hybrid working model including a network of remote hubs located outside large urban centres. We also invested in female talent and ethnic diversity initiatives to support greater inclusion and diversity in our business. Communities are where we live and work and they include groups such as our customers, shareholders, regulators and governments. Throughout 2021, as well as helping our customers continue to navigate COVID-19, we also strongly supported economic recovery in the communities where we live and work. We set out clear commitments to support collective action against climate change. And, through our Begin Together campaign, we provided financial support to almost 100 community and arts initiatives working with people of all ages. Our values Our purpose is supported by four key values which guide us in everything we say and do and these values are embedded in how we run our business. Throughout 2021 we saw our values in action, informing and underpinning decision making across the Group. Customer focused We understand our customers well. We listen to them to ensure they feel valued and use our insights to consider how best to serve their needs. We take appropriate actions to deliver solutions to meet customers' changing requirements. One Group, One Team We know we work smarter when we come together behind our common purpose. We learn from each other and share ideas to expand our thinking. We build an open, trusting and supportive environment. We foster diversity of thought, ideas and experiences to spark creativity and innovation. Agile We embrace change with an open mind and a can-do attitude. We respond quickly and proactively seek different perspectives. We challenge ourselves to look for new and simplified ways to efficiently deliver the best solutions for our customers. Accountable We are empowered to take ownership and trusted to do the right thing to support our customers, colleagues and communities. We lead by example and challenge ourselves and each other to do our best work at all times. We learn from our mistakes and celebrate our successes together. Our ambition Our ambition is to be the National Champion Bank in Ireland with UK and selective international diversification. A National Champion is a consumer champion, a driver of economic growth with a strong market share and brand position and an employer of choice. As we work to deliver on this ambition, we continue to transform the Bank of Ireland experience for our customers, colleagues and communities. 2021 was an extremely important year for the Group. Despite the continued impact of COVID-19 restrictions in the markets where we do business, we saw a strong recovery in economic and business activity and in our financial performance. Throughout the year we remained highly focused on our purpose, which is to enable customers, colleagues and communities to thrive. And we continued to deliver on our strategy, increasing income and reducing costs while announcing two landmark acquisitions. The progress made in the year is underlined by the ongoing sell down of the State’s shareholding in the Group, which was announced by the Department of Finance in June. Bank of Ireland Annual Report 2021 Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 15 Systems We are making a significant investment to transform our technology. This investment is critical to support our business growth, as well as improving efficiency and enhancing service to our customers. Target outcomes • Improve customer experience. • Simplification of products and processes. • Excellence in digitalisation and robotics. • Transforming our technology. How we performed in 2021 • 94% of all applications for everyday banking products1 are received digitally, of which c.80% are received without any staff assistance. • The Group was recognised as the ‘Best Consumer Digital Bank in Ireland’ at the 2021 Global Finance Awards. • A number of improvements were made to our Wealth and Insurance platforms in 2021, including a MyPension 365 upgrade and a new broker portal resulting in an 80% lead time reduction in broker portal applications. • Card control management features, developed for our mobile app in 2021, resulted in an estimated reduction of 13 million hours of customer toil. • To enable widespread remote working, the Group has continued to provide digital workplace enhancements including the roll out of Microsoft Teams, with over 6,000 colleagues successfully on boarded to date, use of webcams to facilitate customer meetings and digital smartboards to support effective collaboration. • We continued to invest in and transform our technology across key customer data and security platforms; enhancing our data management and ensuring we meet regulatory requirements while reducing operational risk. Business model We are committed to optimising our business model and ensuring our organisation is efficient and effective. We are simplifying our structures, making our teams more effective and improving the management of third- party providers. This will help us to become leaner, more agile and even closer to our customers. Target outcomes • A more simplified and customer centric organisation. • Effective and sustainable sourcing arrangements. How we performed in 2021 • In October, 88 branches closed, reducing our branch footprint to 169 locations in RoI, in response to acceleration in digital banking following the rollout of a range of new digital services during 2020. To support our customers impacted by closing branches, Bank of Ireland partnered with Ireland’s postal service, An Post, to enable our Personal and Business Current account and Demand Deposit account customers to carry out their everyday banking at over 900 local post offices across Ireland. Combined, Bank of Ireland customers now have more than 1,000 locations to bank in- person. In Northern Ireland, the branch network will also reduce by 15, from 28 to 13 branches. • The Group made significant progress in relation to organisational transformation with 1,585 colleagues availing of redundancy as part of the Group wide voluntary redundancy programme since its commencement in Q4 2020. The 2021 year end full time equivalent staff number was 8,696, compared to 9,782 in 2020. • Occupied office space reduced by a further 15% in 2021, bringing office space reduction to 44% over the last four years, enabled by the Group’s flexible working policy. Further reductions are planned for 2022. The property space being exited is typically older, less energy efficient buildings, in line with the Group’s RSB strategy. • Significant progress has been made against our UK strategy, including optimisation of our business in Northern Ireland to respond to significant and accelerating changes in how customers are banking. We are investing in our 13 retained branches and 3 business centres as well as enhancing our digital customer propositions. Bank of Ireland Annual Report 2021 1 Everyday banking products includes: Business Current Account, Personal Current Account, Personal Loans, Personal Credit Cards and Deposits in RoI. Related pages Responsible & Sustainable Business at Bank of Ireland (page 20) Risk Management (page 37) Divisional review (page 64) Our strategy (continued) 16 Digital growth Mobile App visits have risen to considerably with over 19 million visits per month in 2021 (up from 13 million visits per month in 2020), an increase of almost 50%. The Mobile App now accounts for 86% of all digital visits, up from 64% in 2020. Our strategy (continued) Serve customers brilliantly Embedding voice of customer in our businesses Customers are always at the very heart of our business, but never more than the last two years as we’ve seen their expectations around product, service and banking preferences - particularly in relation to digital - evolve at an accelerated pace. We are committed to supporting our customers’ needs and financial wellbeing by offering customer-centric propositions and services to enable them to thrive in all circumstances. Target outcomes • Significant improvement in customer satisfaction and advocacy. • Serving customers during their key life moments. • Customer centricity at the heart of our culture. How we performed in 2021 • Our Customer Effort Score (CES) measures ease of customers’ service experience across all channels including branches, contact centres, mobile app and the Group website. A key component of the CES is the mobile app which has experienced a 14 point increase since the launch of the new app in June 2020. • Customer complaints were up 2.5% in the Republic of Ireland in 2021, largely reflecting the impact of branch closures, but were still the second lowest yearly volume of complaints on record. Plans are being implemented to drive a reduction in complaints in 2022. In the UK, complaints reduced significantly for the second year in a row. • In line with our Financial Wellbeing programme, the Group became a founding signatory to UN Principles for Responsible Banking ‘Commitment to Financial Health and Inclusion’, a new UN-supported banking initiative, whose goal is to promote universal financial health and inclusion. • The Group’s Vulnerable Customer Unit supported approximately 6,000 vulnerable customers facing challenging situations in 2021 and we launched Global Chat, a financial inclusion initiative using the multiculturalism and diversity of our workforce to enable us to talk to our customers in the language they are most comfortable with. To date we have 93 volunteers who can translate into 38 languages. • We continued to support the €2 billion Strategic Banking Corporation of Ireland (SBCI) COVID-19 Credit Guarantee Scheme launched to provide liquidity to Small and medium enterprises (SMEs) in the Republic of Ireland. • In October 2021, the Group committed to support to the Irish Government's Brexit Impact Loan scheme, a €300 million fund launched to provide medium term funding for businesses impacted by Brexit. We are committed to building a customer-focused organisation that invests in improving service and digital capabilities, while also getting the basics right. We listen to customers and respond to their feedback. Bank of Ireland Annual Report 2021 Our strategy (continued) Pictured at the launch of the SBCI Brexit Impact Loan Scheme, Cormac Murphy of the European Investment Bank, Minister for Agriculture Charlie McConalogue, Bank of Ireland Group CEO Francesca McDonagh, An Tánaiste Leo Varadkar, SBCI CEO June Butler and Minister for Finance Paschal Donohoe Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 17 Investing in digital and physical channels We are investing in all channels to improve customer experience and service. We are re-designing and digitising high-priority journeys, upgrading service in our branches and contact centres, reallocating colleagues to customer facing roles and upgrading advisory services through colleague training and development. Target outcomes • Great customer experience and increased digitally-enabled customer journeys. • Extend the Application Programming Interfaces (APIs) foundation for Open Banking. How we performed in 2021 • Growth across digital channels continued in 2021 with an average of 23 million monthly visits in 2021 (up from 21 million monthly visits in 2020), representing an overall increase of 9% in traffic. • We have improved customer journeys through continued use of robotics and greater automation. • In December 2021, c. 95% of all new mortgage applications in RoI were managed on our digital platform, compared to less than 10% in 2019, with our customers now digitally managed from application to drawdown. • Wealth and Insurance customers were supported by the launch of a new MyPension365 platform in 2021. In addition, a new broker digital portal launched with 76% of new pensions applications and 57% of new savings and investments applications being received digitally for the first time, reducing customer toil, the risk of operational error and enabling efficiencies. • Continued digitisation of and improvements in targeted customer journeys as part of the End-to-End programme have resulted in a material reduction in customer complaints across personal current accounts and personal overdrafts, which are down 37% and 34% respectively on 2020. • In RoI, digital enhancements in our asset finance business have resulted in better outcomes for customers and car dealers, with faster decisions and payments, a 10% increase in conversions, increased customer retention and a lower cost base. • We have provided enhanced Open Banking through APIs for customers on both digital and Open Banking channels. The APIs are a crucial component of our digital capability that allows us to assemble digital customer propositions and experiences across our contact centres, digital and Open Banking channels. Our brand strategy We have identified our brand purpose and drivers, putting the customer at the heart of everything we do. We have repositioned our brand to bring our purpose to life in a way that differentiates us and offers real value to our customers, colleagues and communities. This positioning brings the constituent parts of the business together and is now reflected in our advertising and sponsorship assets. Target outcome • To become the number one banking brand in Ireland. How we performed in 2021 • The Group's national financial wellbeing campaign, the F- Word, led to Bank of Ireland receiving the #1 ranking in ‘Brand Shout’ tracking survey in July and being awarded JCDecaux's 'Campaign of the Month' in August. • Brand consideration remains relatively in line with 2020. A continued focus on simpler day to day experiences for customers and enhancements to the mobile app is expected to further enhance brand consideration in 2022. • Begin Together, the Group’s philanthropy platform, continued to support community-focused initiatives from its €4 million fund. 59 future facing projects were awarded grants in 2021. A further 39 arts projects were awarded grants from the Begin Together Arts Fund, in partnership with Business to Arts. • The Group became the first Irish bank to issue 100% bio- sourced sustainable cards with more than 100,000 cards issued to date and will be incrementally rolled out to all cardholders. The new bio-sourced card is made from 82% bio-sourced renewable materials derived from field corn. • The Group continues to proudly sponsor Irish Rugby across the four provinces and the Emerald Warriors, Ireland’s leading LGBTQ rugby club. We are also key supporters of the IRFU Charitable Trust and Rugby Players Ireland. In February, Bank of Ireland partnered with the FAI to become an Associate Sponsor of the League of Ireland and the FAI’s community programme ‘More than a Club’ pledging our support to the grassroots of Irish football. Bank of Ireland Annual Report 2021 Related pages Responsible & Sustainable Business at Bank of Ireland (page 20) Risk Management (page 37) Divisional review (page 64) Our strategy (continued) 20 Responsible and Sustainable Business at Bank of Ireland Behaving in a responsible and sustainable way is fundamental to achieving our purpose of enabling our customers, colleagues and communities to thrive. Sustainability at Bank of Ireland 2021 saw an ever increasing focus globally on climate-related issues with events such as Conference of Parties (COP 26) and the launch of the Irish and UK government’s Climate Action Plans highlighting the importance of the topic and the impact climate change will have on the lives of our customers and communities in the coming years. Bank of Ireland is committed to supporting the national effort to combat climate change. Building upon extensive development work in 2020, we launched the Group’s RSB strategy, Investing in Tomorrow in March 2021. The strategy provides clear commitments to working with customers, colleagues and communities to support their transition to a resilient, net zero economy by 2050. The recent appointment of a Chief Sustainability and Investor Relations Officer (CSIRO) and establishment of a dedicated board- level RSB committee, further demonstrate the strategic importance of RSB to the Group. For more information click here or go to: personalbanking.bankofireland.com/app/ uploads/Responsible-Sustainable-Business- Strategy-Document-VER09.pdf By enabling customers, colleagues and communities to thrive we can contribute to a better tomorrow. Investing time, money, effort and resources into this is therefore fundamental to our RSB Strategy. Bank of Ireland Annual Report 2021 Our Responsible and Sustainable Business Strategy, ‘Investing in Tomorrow’. Enabling colleagues to thrive We will be a ’digitally able’ learning organisation that values inclusion and diversity, reflecting society and our customer base. Focus areas Digitally able Employability Inclusive development Enhancing financial wellbeing We aim to empower people to thrive financially by enabling them to make better financial decisions. Focus areas Financial capability Financial inclusion Financial confidence Supporting the green transition We are committed to working with our customers, colleagues and communities to support their transition to a resilient, net zero economy by 2050. Focus areas Set science-based targets Provide sustainable financing Decarbonise own operations Manage climate-related risks Transparently report Foundations Underpinned by strong foundations which guide our commitment to being a responsible and sustainable business. Following the launch of our RSB strategy last year, the Group’s collective efforts in 2021 focused on implementing selected initiatives to deliver the strategy. Begin Together Fund – Pictured at the Liquid Therapy Surf Centre in Co. Donegal are Barry Gallagher, Head of Bank of Ireland Donegal, Sligo and Leitrim, and Shane Browne, Customer and Service Manager, Donegal with Liquid Therapy volunteers and founder Tom Losey Our commitments In 2021, the Group continued to make progress against the commitments contained in our RSB strategy. Key highlights include: • The Group continued to enhance its climate disclosures. The Group has been a supporter of the Taskforce on Climate-related Financial Disclosures (TCFD) since 2020. The Taskforce provides responsible financial institutions, like Bank of Ireland, with a voluntary framework to disclose consistent climate-related financial risk information for our investors, regulators and other interested stakeholders. For further insight, please refer to the TCFD report on page 30. • In September 2021, Bank of Ireland signed up to the Partnership for Carbon Accounting Financials (PCAF). PCAF is a collaboration between more than 150 financial institutions worldwide to enable harmonised assessments and disclosures of greenhouse gas (GHG) emissions financed by loans and investments. This complements our existing commitment to the Science-Based Target Initiative (SBTi) and is used as part of our progress towards setting science-based targets (SBTs). • Following the Group becoming a signatory to the United Nations Environment Programme Finance Initiative’s (UNEP FI) Principles for Responsible Banking in 2019, in December 2021, the Group was proud to be one of the first banks to commit to supporting financial health and inclusion through its products, services and other measures by signing up to the UN Principles for Responsible Banking ‘Commitment to Financial Health and Inclusion’. • The Group supported colleagues to begin successfully transitioning into new careers and roles by introducing future skills learning pathways. These serve to deliver against the Group's ‘Being Digitally Able’ commitment, offering colleagues courses associated with Career Agility, Digital Fitness, Business Agility and Data Fluency. • The Group introduced the 'Careers Lab', a new digital platform which provides colleagues with access to a personalised dynamic career path, supporting them to secure the role and location which is right for them. • The Group launched a Financial Wellbeing campaign, the F-Word, to encourage a more open discussion of personal finances among customers. The campaign responded to research that found almost three in four people either don’t talk about their finances at all or will only do so if they have to. • We continued to support customers facing challenging times through our vulnerable customer unit and supported customers in taking practical steps to improve their Financial Wellbeing through behavioural campaigns. Further details of the Group's progress against its RSB strategy are set out on the following pages. Governance and accountability In 2021, the Group’s execution of the RSB strategy continued to be overseen by the Nomination, Governance and Responsible Business (NGRB) Committee. Together with the Group Executive Committee (GEC), the NGRB Committee oversaw the Groups progress against its key RSB commitments and obligations. The NGRB Committee was supported at a senior executive level by the Chief Strategy Officer (CSO), who had delegated responsibility for the development and delivery of the RSB strategy, as well as its integration into our overall Group strategy. The CSO was supported in this by the in- house RSB team of specialists dedicated to supporting the Group’s delivery against each RSB strategy pillar. Refer to the section in the TCFD Report on Governance on page 30 for more information about the Group’s Climate and RSB governance. To further drive progress on RSB strategy execution, Eamonn Hughes has been appointed CSIRO and joined the Group in February 2022, with the Chief Financial Officer assuming delegated executive responsibility for the development and delivery of the RSB strategy from that date. In light of the increasing importance being applied to RSB across the Group, the Board has enhanced its governance of RSB through the establishment of a standalone Board-level RSB Committee in 2022. All RSB and UNPRB oversight responsibilities will transition from the NGRB Committee to the new RSB Committee during H1 2022 with the support of the Group’s new CSIRO. Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 21 Bank of Ireland Annual Report 2021Responsible and Sustainable Business at Bank of Ireland (continued) 22 Bank of Ireland Annual Report 2021 Responsible and sustainable business strategy In developing our RSB strategy, we engaged with our stakeholders to understand what was important to them and we undertook an assessment of the impact we have on society and the environment. We seek the views of our stakeholders on the sustainability topics that matter most to them, to ensure our RSB strategy aligns with stakeholder needs and to track our performance. The Group remains agile and regularly engages stakeholders, carefully considering their feedback to advance our RSB strategy in a purposeful way. In 2021, the Group, including key executives and senior management, continued to engage regularly with key stakeholders through a variety of methods, including surveys, social media, meetings and working groups. In 2020, the Group adopted a four-step approach to undertake a materiality assessment. The Group leveraged an array of engagement mechanisms to connect with our stakeholders – including customers, colleagues, trade associations and non-governmental organisations. Materiality assessment 1. Horizon Scanning We engaged a specialist external consultancy to support our materiality assessment. To start, we completed a horizon scanning exercise to understand the key issues in this agenda. This was informed by our purpose, values and strategic priorities, existing surveys with customers and colleagues, peer reviews, regulation and a review of trends, media and relevant research. A shortlist of 25 topics was produced from this exercise. 2. Prioritisation To prioritise, these topics were then explored in a comprehensive stakeholder engagement exercise which sought the views of customers, colleagues, suppliers, trade associations and Non-governmental organisations (NGOs) among others; through interviews and surveys. Stakeholders were asked to indicate how important they considered each of the topics to be and their reasons for this. 3. Validation The RSB Forum, together with other senior internal stakeholders, then validated these stakeholder engagement findings and assessed the impact and influence of each of the topics in detail against agreed criteria. 4. Finalisation The output of this process is the materiality matrix set out below, which plots issues of material importance to stakeholders as well as the bearing they might have on the Group and its ability to influence each of them. Our assessment culminated in a clear appreciation of the sustainability topics that matter most to our stakeholders. The results of our assessment are set out in the Materiality matrix below and were carefully considered by senior management and significantly inform our RSB strategy. The RSB landscape continues to evolve quickly and a focus on climate change ever increasing, with the recent COP 26 in Glasgow in October 2021 and the Irish Government’s ‘Climate Action Plan 2021’ published in November 2021 only further highlighting the importance of the agenda. We recognise the role the Group and wider financial services sector can play in the Green Transition with several initiatives illustrating our commitment to support it. Examples include the Woodland Nature Credit, a nature-based instrument for funding the planting of native woodlands – which in turn, supports the pledges made at COP 26 by more than 100 world leaders to end and reverse deforestation by 2030. The Group is also supporting the move towards Battery Electric Vehicles (BEV) by being the largest wholesale finance provider for electrically-charged vehicles in RoI. Materiality matrix Impact on Bank of Ireland Im po rt an ce to S ta ke ho ld er s The size of the bubble indicates the level of influence Bank of Ireland believes it has over reach each topic. Responsible and Sustainable Business at Bank of Ireland (continued) Key Performance Indicators Our impact in creating an active learning and career development culture is illustrated through the following 2021 activities: • 41% (900) of our People Managers graduated from our ‘You as a Manager (YaaM)’ programme; • 73% (of the 2,200 eligible) colleagues accessed the ‘Careers Lab’. 51% of these were female, 49% male; • the Group Colleague Culture Embedding Index is 75%, which is 21 points higher than when first measured in 2017; and • our colleague engagement score is 63% which is up 14 points since first measured in 2017. Declines for both metrics in 2021 align with the overall global financial services benchmark. Next steps and goals In 2022, we plan to scale participant numbers across our programmes as well as graduate our remaining 59% People Managers through YaaM. We will continue to expand and diversify our talent pipeline, supporting all sectors of society to gain entry to employment. We will also launch a Group-wide mentoring programme, assisting colleagues to learn and connect with each other, furthering our ethos of operating as One Group, One Team. Inclusive development We believe that through enabling every colleague to grow and develop as a person we can build an inclusive workplace which is more reflective of society and our customer base. We aim to foster an inclusive and welcoming working environment for all, where everyone is able to reach their full Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 25 potential. Through our Inclusion & Diversity (I&D) focus areas of: accessibility, gender balance, intergenerational, multicultural, parents and carers and ‘with pride’ (LGBT+), we provide dedicated learning opportunities and pathways to catalyse the careers of targeted colleague groups and attract, promote and retain diverse talent at all levels. In 2021, we launched two female talent programmes (Accelerate and RISE) and an ethnic minority talent programme (RISE) in addition to making I&D training mandatory and embedding I&D into our mentoring and recruitment platforms. We received the 2021 'Age Friendly Business Award’ and were the first Irish company to achieve Business Disability Forum (BDF) accreditation. Key Performance Indicators Progress is monitored through our I&D dashboard: • 354 colleagues attended I&D programmes and 8,306 (98%) colleagues received I&D training in 2021. The Gender ratio chart sets out our progress on this key area. In 2021, the Group’s management and leadership appointments were 45% female. In Q4 2021, 51% of management and leadership appointments were female, the strongest quarter reported to date. The Group remains committed to achieving a 50:50 ratio and the investment in dedicated programmes to build our female talent pipeline such as Accelerate and RISE, together with other levers such as mentoring, innovating on our policies and our external partnerships, combine to act as a catalyst for our female leaders of the future. Next steps and goals To drive our I&D agenda forwards, we will continue to develop the almost 300 women identified to participate in the Accelerate and RISE programmes during 2022. We will also improve our understanding and measurement of the diversity of our colleagues, assessing the results of our confidential Self ID campaign to inform the future development of our approach. Growing future skills The challenge Bank of Ireland is on a transformation journey and driving a shift in learning and organisational culture is an imperative for achieving its ambition of becoming a future ready learning organisation. The Group recognises the need to enable Colleagues transition from a traditional learning mindset to a development and growth mindset recognising the power of active engaged learners in creating the Bank of the future. What we did A number of accessible Group-wide capability programmes were created to support Colleagues in embracing this new cultural mindset, adopting new active learning behaviours, supporting their career ambitions, while at the same time building the capabilities needed in the future bank. Five ‘All-Colleague Learning Pathways’ were created on skills and capabilities that had been identified as the most relevant for colleagues to develop - project management, business agility, data fluency, digital fitness and career agility. A gamified approach incorporating badges, challenges and gentle nudging was used to incentivise learners. This transformed a potentially solo learning programme to a social learning experience for a virtual community. Colleagues commented that the transformed digital delivery methods provided them with the opportunity to remain connected with others remotely and control their choice of time to dedicate to their learning. Outcomes • 79% of colleagues engaged in self-directed learning, down 10% on 2020 due to the unprecedented number of colleagues accessing online learning in the prior year due to remote working and as part of the voluntary parting scheme. • This was further evidenced by the 13% of colleagues who graduated from future skills pathways. Bank of Ireland Annual Report 2021 Junior Level (Band 1 to 2) 63% 37% Middle level (Band 3) 47% 53% Management & Leadership Level (Band 4 to 7) 38% 62% Overall Group 54% 46% Gender ratio Gender ratio of new appointments to management and leadership levels (Band 4 to 7) 45% 55% (55% : 45% in 2020) (38% : 62% in 2020) (48% : 52% in 2020) (64% : 36% in 2020) (41% : 59% in 2020) Responsible and Sustainable Business at Bank of Ireland (continued) 26 Enhancing financial wellbeing Financial capability, inclusion and confidence are recognised as global priorities for improving the financial wellbeing of society. Capability Inclusion Confidence Financial capability Enabling people to know and do more is the key to financial capability. By increasing their financial capability individuals can more easily identify the actions they need to take to improve their financial wellbeing. Bank of Ireland is committed to working with its stakeholders to educate, empower and inspire people with the tools required to do just that. Key Performance Indicators Progress on developing financial capability during 2021 is illustrated through: • 202,765 visits to the Financial Wellbeing (FWB) online centre (146,927 in 2020, 126,506 in 2019); • 13,220 secondary school pupils participated in the ‘Money Smarts’ Programme and Challenge during the school year 2020/21 (55,560 participants in school year 2019/20). The decrease this year reflected the impact of COVID-19 and the pivot to an online programme given extensive school closures in RoI; • 6,511 hours of financial literacy support provided by coaches to customers, colleagues and communities (3,492 in 2020, 3,975 in 2019); and • a cumulative 151,620 Financial Healthchecks taken by people looking to start their FWB journey since the tool was launched in 2019. To further strengthen the impact and reach of the programme, a number of new initiatives were launched in 2021. ‘The F- Word’ campaign ignited discussions across Ireland about finances, tackling a notoriously difficult conversation topic in an accessible manner. Next steps and goals Our ambition for 2022 and beyond is to enable more people of all ages across the country to significantly improve their financial capability through interacting with educational content and using personalised digital tools. We aim to have reached over 1 million people by the end of 2022. Financial inclusion Financial inclusion means protecting our most vulnerable customers and supporting those that are marginalised in society to access banking services. As a founding signatory of the UN banking initiative on Financial Health and Inclusion, Bank of Ireland is committed to promoting universal access to and confidence in, financial services. We achieve this through supporting our most vulnerable customers, ensuring the marginalised in society have access to banking services and by promoting community financial wellbeing through our Begin Together Programme. Bank of Ireland’s Begin Together programme supported almost 100 projects and organisations in 2021 through the allocation of €825,000. Recipient groups included those tackling social isolation and financial illiteracy, as well as those encouraging accessibility for vulnerable groups. Responsible and Sustainable Business at Bank of Ireland (continued)Bank of Ireland Annual Report 2021 The health of our customers' finances can have a profound impact on their quality of life. Financial Wellbeing is about people having the knowledge, tools and confidence to manage their finances, so they can cover day-to-day expenses, plan for the future and cope with the unexpected. 2021 was a difficult year for financial wellbeing nationally as a result of COVID- 19. The Bank of Ireland Financial Wellbeing Index (August 2021) showed a drop from 66 (October 2020) to 65 for Bank of Ireland customers, while the national average fell to 64. The 2020 index results were bolstered by involuntary savings during national lockdown measures. As people emerge from COVID-19, we are committed to arming our customers with the necessary skills to enable them to thrive financially, both now and in the future. We will achieve this ambition by delivering across our three focus areas: Related pages CEO review (page 8) Our strategy (page 13) Bank of Ireland ‘F-word’ Financial Wellbeing campaign Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 27 Global Chat, a Group financial inclusion initiative which promotes multiculturalism and diversity, enables customers to talk to colleagues in the language they are most comfortable with. In 2021, customers of all ages were further supported to develop the necessary skills and confidence to access digital banking through a series of short, easy to follow video tutorials titled ‘Your Next Step’. Key Performance Indicators During 2021 we contributed to financial inclusion through: • supporting 6,000 vulnerable customers facing challenging situations (10,000 in 2020 of which 4,000 calls were to the COVID-19 support line, 3,000 in 2019); • an increase of 216% in Basic Bank Accounts opened in 2021. The increase has been assisted by a new dedicated section on the Group website, alternative state issued documentation that is acceptable as proof of identity and address and a bespoke service solution at the National Reception Centre for those seeking asylum and refugee status; • registering 93 colleague volunteers for Global Chat, allowing the Group to offer communication in 38 different languages; and • safeguarding customers who do not have decision making capacity, while ensuring they and their care givers can meet their daily care and comfort needs. Our Carers proposition, which involves opening or converting accounts specifically for this cohort, saw an increase of actively monitored accounts of over 24% in 2021. Next steps and goals Our approach to financial inclusion will continue to support our most vulnerable customers, ensuring they have access to banking services and the confidence to use them. We will strengthen this by working to tackle issues of mis-trust in mainstream banking services among those whom are marginalised in society. By further simplifying banking access and communications with those most affected, along with supporting victims of domestic violence we will continue to work to remove real and perceived barriers to this basic human right. Financial confidence Building financial confidence enables people to better understand their personal finances and make better financial decisions. By building financial confidence we empower people to trust more, not only in their own decision- making but also in their Bank. A key priority is strengthening customer relationships and building that trust through offering advice, products and services that meet the needs of our customers. Together with a better understanding of their financial position and a strong focus on fraud awareness and prevention, we can help our customers make financial decisions they can be confident in. Key Performance Indicators During 2021, we targeted over 171,000 customers through behavioural campaigns with practical steps on how they could improve their Financial Wellbeing. In addition, through a series of fraud campaigns focused on protecting customers financial wellbeing, we have seen an increase of over 181% in visits to our Online Security Zone, with customers searching for information on everything from identifying fraudulent text messages to discovering how to stay safe online. A new Senior Advisory Model for over 75’s, first launched in 2020, continued to go from strength to strength in 2021. The model involves Senior Advisors meeting customers, where appropriate, to complete a holistic needs review. Feedback has been extremely positive, with customers rating it one of the highest scoring customer experiences ever seen in the Group, citing it as friendly, helpful and, showing a genuine interest in their financial wellbeing. Next steps and goals The Group will continue to lead the national discussion on Financial Wellbeing in Ireland, supporting our customers as they face existing and new financial challenges. We will continue to empower people to manage the everyday, plan for their future and have the financial resilence to cope with the unexpected. Looking forward, we will significantly increase our reach by further leveraging behavioural science and digital tools, with the launch of personalised in-app capability to enable customers to better understand and manage their own financial behaviours. We will continue to focus on developing bespoke programmes for those in society who require additional support. Through our 2021 Financial Wellbeing survey, we identified a clear gap in the financial confidence of women. In response to this, we are launching a new programme dedicated to supporting women’s financial confidence with a programme of activities set to run through 2022. Responsible and Sustainable Business at Bank of Ireland (continued) Bank of Ireland Annual Report 2021 Using behavioural science to positively influence our customers’ credit card use In February 2021, as part of Bank of Ireland's ongoing focus to improve the financial wellbeing of its customers, the Group utilised behavioural science to better engage approximately 9,500 customers who were in persistent debt on their credit card. Behavioural science is essentially the study of how people make decisions and, when applied to the Group’s range of financial products, this creates opportunities to better support customers. This study centred on customers who typically only made the minimum (or very low) repayments on their credit cards over a twelve month period. Research indicates that certain customers are subject to cognitive biases around credit cards. This means they underestimate the long-term detrimental impact of its misuse and are unaware of their options. Offering customer advice Behavioural finance specialists, Oxford Risk, supported a BOI customer communications campaign, which sought to ‘nudge’ customers into corrective action through behaviourally informed messaging. Practical advice was offered to customers to help them reduce their debt and save money in the long-run. Options included increasing their monthly minimum repayments, making once-off payments to reduce their balance where possible, or even switching to a personal loan with a lower interest rate. These were presented with illustrative examples, demonstrating the significant impact that simple changes can make in the long-run. Delivering results The results of this campaign clearly demonstrate how leveraging behavioural science can significantly improve the financial wellbeing of our customers. Analysis conducted shows that 22% of customers took corrective action. This compares with only 11% of customers in the control group who received no communication. Results from this programme will inform future ways of engaging with customers to help them enhance their financial wellbeing. 30 TCFD report Governance Incorporating climate change into Board-level decision making The Board, through the Group Nomination, Governance and Responsible Business and Board Risk Committees, oversees the implementation of our climate change action plan. In order to adequately assess climate risks and opportunities, the Board draws on expertise both internally and externally. To enhance capability, the relevant Board Committees took part in climate-change training on relevant topics, including SBTs and emerging climate-related regulation in 2021. In 2021, in response to increasing regulatory expectations, the Group continued to refine its governance and oversight of the 5-Point Plan for the Green Transition pillar of our RSB strategy. The Board continued to oversee the progress on the Group's SBTs, resourcing, reporting and disclosures. In addition, the Board monitored the Group’s identification and management of climate-related risks. Methods used included our risk identification and assessment processes, integration into the Internal Capital Adequacy Assessment Process (ICAAP) and ESG and climate risk reporting. The Group’s oversight and management responsibilities in relation to our RSB and climate commitments in 2021 are outlined in the graphic above. Looking ahead to 2022, the Board has decided to further enhance the Group’s RSB governance through the establishment of a standalone Board-level RSB Committee. Oversight responsibilities for the Group’s RSB and UNPRB commitments will transition to the new committee from the Group NGRB Committee during the first half of 2022. The RSB Committee will report and make recommendations to the Board on all RSB matters, including the Group’s actions on climate change. At an Executive-level, the new committee’s oversight will be supported by the Group’s newly appointed CSIRO, who will report to the Chief Financial Officer. Bank of Ireland plc Board Green Transition Decision Group1 SBT Working Group Group Nomination, Governance & Responsible Business Committee Board Risk Committee RSB & Climate Board Oversight RSB & Climate Executive Oversight RSB & Climate Advisory Forums Group Executive Committee Executive Risk Committee Bank of Ireland Annual Report 2021 Related pages CEO review (page 8) Our strategy (page 13) Risk Management Report (page 137) The role of management committees The GEC has overarching responsibility for delivery of the Group’s RSB strategy. Members of the GEC include the CSO and Divisional Chief Executive Officers (CEOs) who have been actively involved in shaping the Group’s climate action plan. Going forward, specific executive responsibility for RSB (including climate change) is being delegated to the CSIRO, who joined in February 2022. Establishment of the ‘Green Transition’ Decision Group Following the publication of the Group’s RSB strategy in March 2021, the Green Transition Decision Group was established, convening senior business and functional executives from across the Group to enable the execution of the ‘Supporting the Green Transition’ delivery plan. This Decision Group was an advisory body to the CSO in 2021 and adopts a coordinated approach to both delivery and reporting of the Group’s RSB framework and strategy to the GEC. In 2021, the Green Transition Decision Group updated the GEC on progress against the five point plan, including key programme metrics and milestones. The Green Transition Decision Group will be an advisory body to the CSIRO in 2022. ESG Risk Working Group Climate risk responsibilities extend across the organisation, based on a ‘three lines of defence’ approach, in line with the Group Risk Framework. As climate risk impacts through existing risk channels, it requires a matrix approach and integration across multiple risk frameworks. With co- ordination from Enterprise Risk Management, climate is being integrated into existing risk control frameworks, policies and strategies. Within Group Risk, an ESG Risk Working Group brings together second line risk management from across key risk types (with the RSB team) to support an integrated approach to ESG management and climate-related risks within the Group. During 2021, the CSO acted as sponsor to ensure that climate risk was integrated into the Group’s risk management processes in the ‘first line of defence’. This responsibility transferred to the CSIRO in February 2022. By incorporating climate change into performance, the Group encourages behaviour consistent with our strategy In 2022, climate-related objectives will be included in our balanced scorecard performance assessments, along with Enabling Colleagues to Thrive and Enhancing Financial Wellbeing metrics which are already captured. ESG Risk Working Group 1 The Responsible & Sustainable Business Forum which operated in 2020, became the Green Transition Decision Group in 2021, with a revised terms of reference focused on the Green Transition. Overview of Group's Green Transition governance framework Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 31 Taskforce on Climate-Related Financial Disclosures Report (continued) Bank of Ireland Annual Report 2021 Five point plan As a signatory to the UN’s Principles for Responsible Banking, we have committed to aligning our strategy and practice with the Paris Climate Agreement. In 2020, we defined our climate strategy, incorporating our five point plan. In this section we cover how we are identifying risks and opportunities that climate change presents to our business model and how they are addressed in our five point plan. Strategy Tr an si ti on R is ks Policy and Legal • Increased pricing of carbon emissions. • Enhanced emissions-reporting obligations. • Regulation of existing products and services. • Exposure to litigation. Technology • Substitution of existing products and services with lower emissions options • Costs to transition to lower emissions technology • Unsuccessful investment in new technologies. Market • Changing customer behaviour • Increased cost of raw materials • Uncertainty in market signals. Reputation • Shifts in consumer preferences. • Increased stakeholder concern or negative stakeholder feedback. • Stigmatisation of specific sectors. Climate Risk Drivers for Businesses Acute • Increased severity of extreme weather events such as storms and floods. Chronic • Changes in rain patterns and extreme variability in weather patterns. • Rising mean temperatures. • Rising sea levels. Ph ys ic al R is ks Identifying key risks and opportunities to our business To avoid the worst impacts of climate change global action is being taken to reduce GHG emissions and keep global average temperature increases above pre-industrial levels to below 2°C and as close as possible to 1.5°C. Businesses and communities will continue to be forced to adapt to physical changes as the world transitions to a low carbon economy, realising risks and opportunities in the short, medium and long-term. We recognise that the biggest impact we can have on climate change is through the finance we provide to our customers. Our strategic assessment of risks and opportunities has highlighted that the ongoing work to develop emission reduction targets along with continuing changes in customer priorities could lead to substantial financial opportunities across sectors and business lines. This assessment of risks and opportunities continues to inform our strategic planning process. We recognise that the climate- related risks we face as a business need to be identified, assessed and managed on an ongoing basis to minimise negative impacts. We are committed to supporting our customers' green transition while building the Group’s resilience against these negative impacts by embedding climate-related impacts in key decision- making processes. The Group has continued to increase its understanding of the risks and opportunities that climate change presents to our business strategy. In Q4 2021, we conducted an assessment involving business leaders and subject matter experts from across the Group to assess the impacts of climate on different risk types (e.g. credit, business, people, operational, conduct and regulatory). The potential impact of transition and physical ! Home retrofit & electric vehicles The Irish Government have put in place a package of supports to make it easier and more affordable for homeowners to undertake home energy upgrades. The package includes a number of measures including exchequer investment of €8 billion to 2030 to help achieve the government target of 500,000 home energy upgrades, to B2 Building Energy Rating (BER) standard, by 2030. The Irish Government’s Climate Action Plan target is for 945,000 EVs on the road by 2030, with 845,000 of these to be private passenger cars. There are currently over 45,000 EVs registered on Irish roads so the pace of uptake must increase over the coming years to achieve our fleet electrification targets. SME Sectoral emission ceilings to be published in 2022, will give rise to an increasing market for green business loans to finance green transition through investment in new equipment (e.g. low emission equipment / infrastructure and renewables) and productivity / efficiency improvements. Corporate & Markets Opportunities across sectors include: • growing market for sustainability-linked loan facilities; • emission offsetting requirements enhances position of alternative finance instruments such as Woodland Nature Credit; and • increasing portion of high-energy rated buildings in lending portfolios feeds into eligible asset pool for Green Bond issuance. Renewables project finance RoI has a target of 80% of energy mix to be renewables by 2030 - Bank of Ireland is a leading lender to the on-shore wind farm sector and opportunities exist in financing off-shore wind and utility scale solar farms. ESG Advisory Opportunities to assist corporate and SME customers improve their sustainability profile and propose clear roadmaps on transition implementation journeys. Opportunities 32 Taskforce on Climate-Related Financial Disclosures Report (continued)Bank of Ireland Annual Report 2021 Strategy (continued) risk drivers was assessed for each key risk type over the short (< 3 years), medium (3- 5 years) and long-term (> 5 years). An overview of key risk types is set out on the table below. Given the outlook on investment requirements in our key markets, the transition to the ‘green economy’ presents material commercial opportunities for the Group. Strengthening our capabilities in terms of climate expertise and digital / data infrastructure is a key priority in the short-to-medium term to ensure the Group is well positioned to manage the Ke y Ri sk T yp es Climate risk Time Time assessment Transition risk impacts horizon Physical risk impacts horizon Credit • Borrowers' ability to repay if operating in Medium to • Collateral depreciation leading to negative Medium to risk sensitive sectors (e.g. Energy, Agriculture). long-term impacts on Loan to Value (LTV) (e.g. flooding) long-term • Changes in emission regulation or in user • Borrowers' ability to repay in sectors more sentiment could affect asset value (Stranded sensitive to weather impacts like floods Assets). and storms (e.g. Agriculture) Business • Credit ratings, returns and required levels of Long-term - - risk capital may be negatively impacted as a result of new capital expenditure and reduced repayment capacity of borrowers impacting on credit quality. People • The Group has to ensure that it has adequate Short-term - - risk and appropriate internal capabilities in place in place to address climate agenda. Operational - - • Extreme floods or storms at multiple Medium to risk locations impacting our business long-term continuity plans with consequent impact to services we provide to clients (e.g. transaction processing) Conduct & • Conduct: Failures in the design of ESG / Short • Potential for regulatory action if physical Medium to regulatory green products could lead to regulatory to medium- risks impact our business continuity plans long-term action, if there is a lack of transparency, term with consequent impact to services we misleading classification (greenwashing), provide to clients. or if clients suffer an unexpected loss due to climate risks. • Regulatory: Failure to implement in a timely manner changes in the regulation (e.g. NFRD, SFDR, EU Taxonomy) could affect the Group's profitability through regulatory action. Climate risk assessment: Material impacts across key risk types risks and optimise the opportunities associated with climate change. The Group will create new opportunities whilst also evaluating ongoing resilience to physical and transition climate change risks. Using scenario analysis to understand the resilience of our business Supporting the green transition also requires the Group to assess its own resilience to climate change. To address this requirement, the Group is taking steps to develop scenario analysis and stress testing capabilities in-line with emerging industry methodologies. Forward-looking climate scenarios are being used to manage climate-related risks and explore the resilience of the Group to physical and transition risks. We have further built on initial methodology developments undertaken in 2020 and as these methodologies continue to develop, we will be progressively drawing on our scenario analysis to inform our corporate strategy, business model and financial plans. During 2021, we continued to develop and test scenario analysis methodologies to quantify the potential impact of climate- related risks across our commercial and retail customer lending portfolios. We have integrated climate scenario analysis into our ICAAP as a key step in what will be an ongoing development of the Group’s data, modelling and risk management capabilities for managing climate-related risks. Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 35 Taskforce on Climate-Related Financial Disclosures Report (continued) Bank of Ireland Annual Report 2021 Strategy (continued) Green transport Bank of Ireland Finance is the largest provider of wholesale finance in the RoI market for Electrically Charged Vehicles (ECV) - both Battery and Plug-in. Bank of Ireland Finance provides wholesale finance to 13 of their current 15 car manufacturer franchises for their Battery Electric Vehicle (BEV), Hybrids (HEV) and Plug-in Hybrid Electric Vehicle (PHEV) ranges supporting the sector on the global journey to net zero emissions by 2050. Bank of Ireland Finance also offers subsidised consumer finance through our franchise partners, supporting the growth of ECVs in Ireland. In 2021, the Irish Government approved the Electric Vehicle Policy Pathway Report, which targets 180,000 EVs on our roads by 2025 and 945,000 by 2030. This supports Ireland’s Climate Action Plan target of a 51% reduction in transport emissions by 2030 and will be a key policy in meeting our national transition to a carbon neutral society. Given the Group's strong position in this area, it is well positioned to support this transition to green transport. Woodland Nature Credit At COP26, more than 100 world leaders committed to end and reverse deforestation by 2030. Carbon storage and sequestration can also be an important lever in Ireland’s overall decarbonisation strategy. That is why the Group developed the Woodland Nature Credit, a nature-based instrument for funding the planting of native woodlands. We have designed the Nature Credit to be scalable in terms of afforestation and we believe it could also provide a template for other land use schemes. The Woodland Nature Credit is a first of its kind credit combining the carbon, biodiversity and amenity values which the funding companies can report on as part of their environmental and social commitments. It is compliant with the EU Taxonomy whilst meeting five Sustainable Development Goals and has an independent scientific panel in place as part of its governance structure. Upon closing the first tranche in 2021, planting 600,000 trees creating 200 hectares of new forests began, with corresponding biodiversity and public amenity uplift. Tranche two will involve planting 1.2 million trees, creating 400 hectares of new forests and will commence in 2022. Delivering Energy Efficient Homes In 2014, the Minister for Public Expenditure and Reform announced the Government’s commitment of €300 million to deliver 1,500 social housing units across three different bundles under a Public Private Partnership (PPP) tender model. In 2021, Bank of Ireland supported Torc Sustainable Housing Partnership with senior debt financing to build 465 ‘A’ rated energy efficient homes. Torc represents the second of the three social housing bundles under the PPP initiative. These homes have been delivered by Torc across eight sites in six different counties – Cork, Kildare, Galway, Waterford, Roscommon and Clare. In December 2021, Torc achieved the significant milestone of all housing units being constructed and ready for handover. Under the PPP contract, the housing units remain under the ownership of the State with Torc obliged to maintain the upkeep of these units to a pre-defined condition for a period of 25 years. To date, Bank of Ireland is the only funder to support both bundles one and two - collectively providing the State with around 1,000 energy efficient homes over the last 24 months. Cloncreen Wind Farm In H1 2021, Bank of Ireland supported Bord na Mona with senior debt facilities to construct the Cloncreen Wind Farm, a 75MW on-shore wind farm on Cloncreen bog in Co. Offaly. The debt financing represented one of the first transactions under RESS to achieve financial close with commercial funders. Cloncreen Wind Farm will make a significant contribution to the achievement of Ireland’s 80% renewable electricity target by 2030. The wind farm is due to be built over an estimated 18 month construction period and, when operational in late 2022, will provide approximately 55,000 homes with green / renewable electricity. by 2050 and a reduction of 51% by 2030. To enable the continued growth of renewable electricity, the Irish Government introduced a Renewable Energy Support Scheme (RESS) with the aim of achieving 80% of our electricity generation from renewable sources by 2030. BoI has provided financing associated with the development of c.750MW of renewable wind capacity across the island of Ireland. Green farming We are supporting farmers in their investment of on-farm infrastructure that improves the overall environmental sustainability of all farms such as additional slurry storage, solar panels and low emission slurry spreading equipment and have recently partnered with Teagasc on the Signpost Programme which aims to educate farmers on how to reduce the climate footprint of their farms. Green bond framework The Group issued €1.3 billion in bonds through our Green Bond Framework during 2021, which further enabled the financing of additional projects across renewable energy, green buildings and clean transportation. In March 2022, the Group will publish its Green Bond Impact Report and Allocation Report for 2021 which will provide further information on the projects financed through the Green Bond Framework and their environmental impact. Under the Group's Green Bond Framework the following project types are eligible: • Residential green buildings - with a green energy efficiency rating placing them in the top 15% (in energy Financing renewable energy The growth of renewable energy in Ireland is predicated on Ireland diversifying its electricity generation mix away from traditional forms of carbon electricity such as coal and gas-fired power. The Climate Act 2021 commits Ireland to a legally binding target of net zero GHG emissions 36 efficiency terms) in the Republic of Ireland market, together with other eligibility criteria; • Commercial green buildings - holding a BREEAM ‘Outstanding’ or ‘Excellent’, or LEED ‘Platinum’ or ‘Gold’ Certification, together with other eligibility criteria; • Renewable energy generation facilities - including onshore and offshore wind, solar and geothermal; and • Clean transportation - including financing the purchase, manufacturing and operation of BEVs and electrically-powered public transport systems and the infrastructure that supports clean transportation. Setting our portfolios and lending practices on a pathway aligned with the Paris Agreement The Group has committed to aligning our lending portfolios on a pathway to the Paris Agreement and reducing the carbon emissions we finance. Read more on our progress towards contributing to the global ambition of keeping warming well below 2°C by setting SBTs within the Metrics and Targets section (page 40). Strategy (continued) EU taxonomy % as at 31 December 2021 Content of regulatory metric 1. Taxonomy-eligible activities as a 59% Activities with Financial and Non-financial corporates subject to NFRD, households and local proportion of total covered assets governments covered by the EU Taxonomy Climate Delegated Act divided by total covered assets. 2. Taxonomy non-eligible activities 41% Activities with Financial and Non-financial corporates subject to NFRD, households and local as a proportion of total covered governments not covered by the EU Taxonomy Climate Delegated Act divided by total covered assets assets. 3. Exposures to sovereigns as a 12% Exposures to sovereigns divided by total covered assets. Sovereigns include exposures to central proportion of total covered assets governments, central banks and supranational issuers. 4. Derivatives as a proportion of total 1% Derivatives in the non-trading portfolio divided by total covered assets. covered assets 5. Exposures to corporates not subject 31% Exposures to entities not obliged to report under the NFRD divided by total covered assets. to NFRD as a proportion of total covered assets 6. Trading book as a proportion of total 1% Exposures in the trading book divided by total covered assets. covered assets 7. On-demand interbank exposures as 0% Exposures in the on-demand interbank market divided by total covered assets. a proportion of total covered assets 8. Total covered assets (€bn)1 €90.7 Total assets excluding exposures to sovereigns and trading book. Total assets are defined according to the prudential consolidation of the Group. Taskforce on Climate-Related Financial Disclosures Report (continued)Bank of Ireland Annual Report 2021 Besides reducing the carbon emissions that we finance, the Group is also committed to reducing GHG emissions associated with the delivery of our products and services through our own operations. The SBTs to be set during 2022 will also include our operational Scope 1 and 2 emissions. The Metrics & Targets section (page 40) outlines our progress in 2021 and the initiatives we implemented in support of decarbonising our operations. 1 Voluntary information given to support the transparency of the regulatory metrics. The EU Taxonomy has six environmental objectives namely: • climate change mitigation; • climate change adaptation; • sustainable use and protection of water and marine resources; • transition to a circular economy; • pollution prevention and control; and • protection and restoration of biodiversity and ecosystems. In accordance with Article 8 of the EU Taxonomy Regulation and the underlying Disclosures Delegated Act, the Group is required to disclose the proportion of taxonomy-eligible and non-eligible activities related to the environmental objectives of climate change adaptation and mitigation for 2021, for which screening criteria have been established under the delegated acts. The Disclosures Delegated Act came into force on 1 January 2022. As the EU Taxonomy is still being developed and only covers two of the six environmental objectives, the Group does not yet fully utilise the taxonomy to inform its business strategy. Taxonomy-eligible activities illustrate the extent of the Group’s activities towards sectors covered by the EU Taxonomy. Consequently, the presented metrics below do not illustrate the Group’s proportion of green assets because these require classification as taxonomy- aligned activities. The below metrics are unaudited and have been prepared in line with available guidance to the best of our ability. Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 37 Taskforce on Climate-Related Financial Disclosures Report (continued) Bank of Ireland Annual Report 2021 Risk management Climate change –managing climate- related risks We are committed to supporting our customers' green transition while building Group resilience. We do this by embedding climate-related impacts in key decision making processes. Regulatory developments Climate change represents a systemic and persistent risk to our business and our customers. In recognition of this we have included climate risk in our Group ESG Risk Framework as a key driver of risk events across multiple risk types. This framework will develop and evolve over a medium-term timeframe and guide deepening integration of ESG and climate risk management into existing key risk management processes over annual planning cycles. During 2021, there has been growing regulatory focus on climate risk management. In the EU, the ECB released guidance in November 2020 on how banks should manage climate-related and environmental (C&E) risks. The guidance sets out 13 supervisory expectations for institutions when formulating and implementing their business strategy, governance and risk management frameworks with the ultimate aim of encouraging greater transparency in C&E risk disclosures. During the first half of 2021, significant institutions, including the Group, were requested to conduct a self- assessment of their current practices against the above expectations and to submit implementation plans detailing how and when they would bring their practices into line with the guide. The Group has developed an overarching Climate Risk Implementation Plan covering each of the ECB’s priorities, including actions to address gaps highlighted in the self-assessment, across a multi-year timeline. This Plan was developed following engagement with key stakeholders from across the Group and has been subject to review and peer benchmarking by specialist third party consultants. The Implementation Plan is consistent with the Group's overarching five-point climate action plan and has been jointly approved by the Board Risk Committee (BRC) and NGRB Committee. The Implementation Plan is a key step in progressively aligning the Group to the ECB guidelines on climate risk management in respect of strategy, risk governance and measurement. Integration of climate risks at a Group level The Group defines ESG risk as ‘the risk to value arising from an Environmental (including climate change), Social or Governance event or condition that, if it occurs, could cause an actual or potential material negative impact on: • the Group’s earnings, franchise value or reputation; • the long-term sustainability of our customers' operations and financial wellbeing; or • the communities and environment in which we and our customers operate’. Furthermore, in line with the ECB’s guidelines on climate-related and environmental risks and the recommendations of the TCFD, the Group defines two key sub-categories of climate- related risks and environmental risks that impact our business namely transition and physical risks. Further details on these climate-related risk drivers can be viewed on page 31. Both transition and physical risks can affect the creditworthiness of our customers and the stability of our lending portfolios, as well as the value of assets in the medium to long term. These climate risk drivers can intensify risks to the Group, impacting across existing key risk categories including, but not limited to: • Credit risk: increased costs associated with physical and transition risks may impact financial soundness of households and businesses reducing their ability to service debt and impairing asset values, resulting in financial loss to the Group through higher probability of default and higher losses given default. • Operational risk: physical risks could impact continuity of the Group’s operations or operations of its material suppliers, resulting in sustained disruption of the supply chain and ultimately our ability to service customers. Climate risk can also have reputational impacts if the Group fails to meet investor, customer, community and regulatory expectations of its support of the green transition. Identification and assessment of climate-related risks Guided by the Group’s ESG Risk Framework, we have begun progressively embedding climate risk into the Group’s key risk processes. Risk identification On an ongoing basis, through its risk management frameworks and processes, the Group identifies and assesses risks to which the Group is exposed, including climate risks. As part of ESG Risk, climate risk was integrated into this process during 2021. Due to the longer timeframes associated with climate impacts, a short, medium and long-term horizon, as laid out below, is being applied to the consideration of impacts. Our timeframes for climate-related risks are: • Short term: less than 3 years. • Medium term: 3-5 years. • Long term: more than 5 years. In conjunction with the integration into this annual risk identification process, a strategic assessment of the impact of climate-related impacts across the different key risk types was conducted and considered by the NGRB Committee and BRC in December 2021. The internal capital adequacy assessment process Climate risk considerations are being embedded in key processes where investment decisions and associated climate risks are material. The ICAAP is a key planning process for the Group and facilitates the Board and senior management in identifying, measuring and monitoring the Group’s risks and ensures that the Group holds adequate capital to support its risk profile. Given the long time horizon associated with climate change, scenario analysis is considered a key tool to inform strategic direction and risk management. The Group is developing scenario analysis capabilities on an iterative basis, leveraging improvements in climate data and methodologies as they become available. This process is beginning with the introduction of a preliminary scenario analysis within the ICAAP 2022 process, in order to increase our understanding and insights into the potential impacts of climate risk. This is a standalone analysis separate to the standard ICAAP Base and Stress analysis that focusses on longer term impacts out to 2050, beyond the standard three year time horizon of ICAAP. 40 Our focus in H2 2021, working with specialist advisors, has been to segment our balance sheet, according to the different asset classes defined by SBTi; identify which asset classes we intend to set targets for; and to calculate the baseline values, against which our targets can be set and progress tracked in the future. We intend to set our baseline values and report subsequently on progress against our targets, aligned with our financial year. We are using 2020 as our baseline year to calculate our financed emissions baseline values. Development of baselines We have developed preliminary estimated baseline attributed or ‘financed’ emissions intensity values for some of the asset classes for which we intend to set SBTs, Science Based Target initiative Bank of Ireland is one of over 2,000 businesses and financial institutions working with the SBTi to develop and apply standards to help reduce their emissions in line with science. The targets set will support keeping global temperature increases to ‘1.5°C’ above pre-industrial levels, raising the bar on the previous ambition of keeping global temperature increased to ‘well below 2°C’ and are aligned with the goal of the Paris Agreement. In setting our SBTs, we are applying the pilot version (April 2021) of the SBTi guidance for the financial sector. For more information click here or go to: sciencebasedtargets.org/sectors/financial institutions 1 Based on total customer lending (gross carrying amount) at 31 December 2020 of €78 billion. C.82% of total customer lending in scope for target setting with a minimum portfolio coverage level of 67% for target setting applicable across most asset classes. Listed bonds and equities also in scope for target setting. 2 Corporate Lending – including property and construction lending. 3 Denotes Property Investment Lending. with work in progress for the others. A variety of in-house and public data sources have been used to develop our estimated baseline financed emissions to calculate our estimated attributed emission intensities in line with the PCAF’s ‘Global Standard for the Finance Industry’. The quality of these different data sources are reflected in our PCAF data quality scores. Notwithstanding expectations of positive enhancements to data quality in the future, we believe these scores benchmark reasonably compared to our peers. Our plan for 2022 is to: • complete the development of our baseline values, develop SBTs and continue evaluating the commercial implications of implementing the SBTs; • submit our SBTs to and seek formal approval by SBTi by the end of 2022, well ahead of the end of our two year window allowed by SBTi for target submission; and • then communicate our SBTs and how our wider strategy will help support meeting them. We look forward to being able to report progress against our SBTs. We believe that this will be a key metric in providing evidence of the Group's progress to decarbonise both its business and operations, contributing to the transition to a low carbon economy and meeting the goals of the Paris Agreement. Our SBTs will help inform our commercial strategy, including the opportunities to further build out our sustainable finance offerings and the Group's exposures to different asset classes / sectors. Metrics and targets Bank of Ireland Annual Report 2021 Required asset classes for inclusion in SBTI target setting Corporate lending2 of which: • Commercial Real Estate3 €16.9bn €5.1bn 21.5% 6.5% Optional asset classes for inclusion in SBTI target setting Residential mortgages €44.7bn 57.0% Self-selected asset classes for target setting Motor Lending €2.7bn 3.4% Gross carrying amount at 31 % of December 2020 total (as baseline customer year) lending1 SBTI asset classes in customer lending portfolio €bn €bn Throughout 2021, we continued to develop SBTs for GHG emission reductions aligned with the Paris Agreement. We are targeting summer 2022 for submission of our SBTs for approval by the SBTi. Taskforce on Climate-Related Financial Disclosures Report (continued) Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 41 Partnership for carbon accounting financials In 2021, Bank of Ireland joined Partnership for Carbon Accounting Financials (PCAF), a global partnership of financial institutions working together to develop and implement a harmonised approach to assessing, attributing and disclosing GHG emissions associated with portfolios of loans and investments. Recognising the challenges associated with data availability, PCAF provides guidance on data quality scoring per asset class, facilitating data transparency and encouraging improvements to data quality in the medium and long term. This data quality score ranges from one to five, one being the highest data quality (for example, reported and verified emissions) and five being the poorest (emissions are based on unspecific industry data, for example emissions based on number of buildings and building type, as opposed to specific floor areas). For more information click here or go to: carbonaccountingfinancials.com Current estimated baseline financed emissions developed for certain key asset classes (as at 31 December 2020). Baseline absolute Baseline attributed attributed PCAF / ‘financed’ / ‘financed’ data emissions emissions quality SBTi asset class (TCO2e) intensity score Comments Property specific EPC data Mortgages (UK) 432,000 44.3 kgCO2e/m2 3.5 available for significant proportion of UK portfolio, resulting in higher data quality Mortgages (RoI) 504,000 51.0 kgCO2e/m2 4.2 score, compared to BER regional data for RoI portfolio. Electricity 60,000 0.09 kgCO2/kWh 2.9 Dominated by low intensity generation renewable wind generation (project finance) projects, but with some limited exposure to higher intensity energy-from-waste and gas-fired generation. Auto finance 270,000 0.134 kgCO2e/km 2.78 The baseline attributed / ‘financed’ emissions (absolute and intensity) values included above are working values. We will continue to refine our estimates and progress to setting targets for each of these asset classes during H1 2022, ahead of submission to SBTi for approval. Bank of Ireland Annual Report 2021 Metrics and targets (continued) Taskforce on Climate-Related Financial Disclosures Report (continued) 42 Climate-related metrics and targets in our operations Through its signature to Business in the Community Ireland’s (BITCI) Low Carbon Pledge in 2018, the Group demonstrated its commitment to achieving a 50% reduction in the carbon emissions intensity of our operations (Scope 1 and 2) by 2030. In 2020, we surpassed this goal. Based on our floor space-based intensity metric, in absolute terms we have achieved an 84% carbon emissions reduction as illustrated in the graph below. Building on the Group’s achievements to-date and in line with our RSB strategy, in 2021 the Group focused on a baseline assessment as part of setting SBTs, to accelerate the further reduction of the carbon emissions across our operations. SBTs will drive and develop our framework for reaching net zero. We recognise that the climate impact of our operations goes beyond carbon emissions from fuel consumption and electricity purchased and, in 2021, we continued to measure the Scope 3 emissions associated with own operations, which is laid out in the following table. The ongoing COVID-19 pandemic meant that many of our colleagues continued to work from home where possible throughout 2021. Through office building closures and widespread remote working, the Group saved an estimated 2 million kWhs of electrical energy. We continue to take tangible actions across our operations, working towards our commitment to making our own operations net zero by 2030. Key initiatives rolled-out in 2021 include: • expanding the use of renewable energy contract, resulting in 100% of energy supply to operations in Ireland, Northern Ireland and Great Britain coming from renewable sources; • updating LED lighting in four large administrative buildings and retail sites, resulting in a reduction of 1.3 million kWh of electrical energy per year; • upgrading to Uninterruptible Power Supplies (UPS) in Group’s data centre resulting in 140,000 kWh electrical energy reduction in 2021; and • continuing to reduce our office space, with a reduction of 44% in the last 4 years. Further reductions are planned for 2022, supported by the Group’s flexible working policy. Metric Unit 2021 2020 Scope 1 Fuel consumption tCO2e 4,285 5,579 Scope 2 Purchased electricity (market based) tCO2e 22 659 Scope 3 (material for own operations as set out below) tCO2e 557 2,203 - Business Travel tCO2e 503 1,954 - Waste tCO2e 29 32 - Purchased Goods & Services tCO2e 25 217 % of electricity renewably sourced % 100 93 2011 2012 2013 2014 2015 2016 2017 2018 2019 tCO2e/m 2 Reduction 84% - Scope 1 & 2 emissions Bank of Ireland 2011 - 2021 0.1289 0.1349 0.1280 0.1026 0.1086 0.0923 0.0876 0.0787 0.0785 2020 0.0265 2021 0.0210 Metrics and targets (continued) Taskforce on Climate-Related Financial Disclosures Report (continued)Bank of Ireland Annual Report 2021 Building on our collective achievements to-date, the Group will continue to work towards implementing our action plan to achieve our net zero commitment for our operations, by prioritising the following initiatives in 2022: • further updating of our offices’ LED lighting to further reduce the energy consumption by 50% and replace end of life lighting in retail sites; • maintaining certification of ISO 50001 Energy Management Standard across the Group to continue driving our energy reduction opportunities; and • replacing oil boilers on five retail sites with electric heating systems to reduce emissions. Carbon emissions from our own operations Paper reduction An initiative with DocuSign to enable electronic mortgage offer letters to be sent to customers was successfully rolled out. The Group is in final stages of approving the use of digital signatures on origination documents for brokers in The Mortgage Store, further supporting the promotion of a paperless environment. Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 45 Related pages CEO review (page 8) Our strategy (page 13) Responsible and Sustainable Business at Bank of Ireland (continued) Bank of Ireland Annual Report 2021 the impact of financial crime. The Group Anti-Money Laundering policy, Group Sanctions and Countering the Financing of Terrorism policy and the Group Anti- bribery & Corruption policy, amongst others, support this objective. All colleagues complete annual mandatory training and assessment in relation to key areas. For more information click here or go to: personalbanking.bankofireland.com/app/uploads /Financial-Crime-Compliance-Statement.pdf Sourcing responsibly It is important that supply partners who deliver goods and services for the Group, share our values and ambition to create a sustainable future. For this reason, we established a Code of Supplier Responsibility that applies to all of our suppliers. This builds on our internal values of accountability, customer focus, agility and teamwork, whilst setting out the key social, ethical and environmental standards that we want our suppliers to adhere to. This Code is supported by our Group Procurement policy. For more information click here or go to: personalbanking.bankofireland.com/app/ uploads/Code-of-Supplier-Responsibility.pdf Health and safety We seek to ensure the safety of our colleagues and customers by carefully planning our operations, identifying potential hazards and managing the associated risks at every stage. Implementation of the Group’s Health & Safety policy helps towards achieving this objective, supported by Group, property- specific risk assessments, an extensive auditing programme, as well as mandatory training. These form part of our ISO 45001 accredited management system which we are working towards extending to other areas of the business during 2022. Human rights Several policies and initiatives guide our approach in this area including our Code of Supplier Responsibility, our Modern Slavery Statement and our Vulnerable Customer Unit. We are also active in identifying possible activity linked to human trafficking through our Financial Crime Compliance unit. We have put in place Human Trafficking Risk Awareness training and are members of the Traffik Analysis Hub, a global data hub for intelligence on human trafficking across all industries and sectors. Cyber security To protect our customers from cybercrime and to stay digitally safe as a business, we have invested in and implemented a range of technologies and practices. In 2021, with more teams working remotely and the greater dependency on digital technology, we took extra steps. Our Group-wide Information Security Policies are aligned to the National Institute of Standards and Technology standards and security awareness training is now mandatory for all colleagues. The ‘Security Zone’ page on our website supports customer security awareness, including fraud alerts and information on how to report suspicious online activity, emails or phone calls. Data Protection Our customers, clients and colleagues trust us with their data, including giving them the control they need while being fully committed to keeping their information private. Our Data Privacy Notices explains how we hold and use personal information and explains people’s rights in relation to the collection of personal information and how they can exercise those rights. See the compliance and regulatory risk section of this report for further reference to relevant regulations. 1 These policies are available on the Group’s website. All other policies listed are not published externally. Environmental matters Policies • Group environment policy (ISO 14001)1 • Group energy policy (ISO 50001)1 Risks & management • Environment and Energy (page 37) Social and employee matters Policies • Inclusion and diversity policy • Group code of conduct1 • Equal opportunities policy • Group health and safety policy • Employee data privacy • Group vulnerable Customers policy • Group learning policy Risks & management • Vulnerable customers (page 26) • Inclusion and diversity (page 25) • Learning (page 24) • Wellbeing (page 24) • Communities (page 44) • People risk (page 140) Diversity report Policies • Board diversity policy1 Risks & management • Corporate Governance statement (page 78) Bribery and corruption Policies • Group code of conduct1 • Speak up policy • Group anti-money laundering policy • Group anti-bribery and corruption policy Risks & management • Code of conduct (page 44) • Anti-bribery and corruption (page 44) • Group anti-money laundering (page 44) • Conduct risk (page 185) Business model Risks & management • Divisional review (page 64) Policies followed, due diligence and outcome Risks & management • Risk management framework Description of principal risks and impact of business activity Risks & management • Key risk types (page 52) • Principal risks and uncertainties (page138) Non-financial key performance indicators • Key highlights (page 3) Respect for human rights Policies • Modern slavery and human trafficking statement1 • Code of Supplier Responsibility1 • Group procurement policy • Group data protection and privacy policy Risks & management • Information security (page 45) • Operational risk (page 52) • Human trafficking (page 45) The purpose of this table is to assist stakeholders in understanding our policies and management of key non-financial matters. Non-financial information statement We comply with the European Union (disclosure of non- financial and diversity information by certain large undertakings and groups) Regulations 2017. Related pages CEO review (page 8) Our strategy (page 13) Risk Management Report (page 137) 46 Responsible and Sustainable Business at Bank of Ireland (continued)Bank of Ireland Annual Report 2021 NS We . \ Tl et tele 50 Composition, Succession and Evaluation Appointments to the Board should be subject to a formal, rigorous and transparent procedure and an effective succession plan should be maintained for Board and senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths. • Board composition in 2021 (page 79) • Board composition and succession - diversity (pages 88 and 89) • Report of the NGRB (page 100) UK Code Principles Section The Board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the Board as a whole and membership regularly refreshed. • Your Board (Directors’ Bios) (pages 82 to 86) • Chairman’s introduction (page 78) • Chairman’s tenure (page 87) • Board composition and succession (page 88) • Report of the NGRB (page 100) • Diversity (page 89) Annual evaluation of the Board should consider its composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively. • Assessing the effectiveness of the Board (page 90) Audit, Risk & Internal Control The Board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements. • Board's oversight of risk management and internal control systems (page 95) • Report of the Group Audit Committee (page 107) UK Code Principles Section The Board should present a fair, balanced and understandable assessment of the company’s position and prospects. • Chairman’s review, Strategic Report (page 4) • Role of the Board (page 92) • Board oversight of risk management and internal control systems (page 95) The Board should establish procedures to manage risk, oversee the internal control framework and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives. • Board oversight of risk management and internal control systems (page 95) • Report of the Board Risk Committee (page 113) Remuneration1 Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values and be clearly linked to the successful delivery of the company’s long-term strategy. • Report of the Group Remuneration Committee (page 104) • Remuneration Report (page 125) UK Code Principles Section A formal and transparent procedure for developing policy on Executive remuneration and determining director and senior management remuneration should be established. No Director should be involved in deciding their own remuneration outcome. • Report of the Group Remuneration Committee (page 104) • Remuneration Report (page 125) Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance and wider circumstances. • Report of the Group Remuneration Committee (page 104) • Remuneration Report (page 125) 1 Some of the Remuneration provisions of the Code (including provisions 36 and 37) are not currently applicable to the Group, as the Group does not operate variable incentive arrangements, other than a small number of limited commission schemes. Governance in action (continued)Bank of Ireland Annual Report 2021 Strategic Report Risk Management Report Financial Statements Other InformationFinancial Review Governance 51 Risk review The environment within which the Group operates continues to be subject to considerable change, most notably as a result of COVID-19. The Group continues to monitor impacts on the risk profile. A strong risk culture is promoted throughout the Group which encompasses the general awareness, attitude and behaviour of everyone in the Group. Risk appetite defines the amount and type of risk we are prepared to accept in pursuit of our financial objectives. It forms a boundary condition to strategy by clarifying what is and is not acceptable. Based on the risk appetite approved by the Board, we set out an approach to risk in order to: i. manage financial volatility; ii. ensure solvency; and iii. protect the Group franchise. Our risk principles mean that risks may be accepted at transaction, portfolio and Group level if: • they are aligned with our defined risk appetite and risk identity; • the risks represent an attractive investment from a risk-return perspective; • we have the resources and skills to analyse and manage the risks; • appropriate risk assessment, governance and procedures have been observed; and • stress and scenario tests around the risks exist, where appropriate and are satisfactory. Group risk framework - key components The Group Risk Framework (the Framework) describes the overarching approach to risk management; it describes roles and responsibilities across the organisation, the risk the Group is exposed to, the processes followed to manage risk and key enablers of the process. The Framework applies to all colleagues and agents working on behalf of the Group and: • is organised around a comprehensive risk taxonomy; • ensures robust risk governance; • establishes a well-defined and mature risk management lifecycle; and • recognises that risk management is built on a foundation of key enablers. The Board of Directors is responsible for ensuring that an appropriate system of internal control is maintained. This is achieved through a risk governance structure designed to facilitate the reporting and escalation of risk concerns from business units and risk functions upwards to the Board and its appointed committees and conveying approved risk management policies and decisions to business units. Individual responsibility is a key tenet of risk management in the Group and we are all accountable for our actions. Principal risks and uncertainties Principal risks and uncertainties could impact on our ability to deliver our strategic plans and ambitions. We consider risks that arise from the impact of external market shocks, geopolitical event risks or other emerging risks as well as key risk types which could have a material impact on earnings, capital adequacy and / or on our ability to trade in the future. We believe great risk management leads to great customer outcomes. We follow an integrated approach to risk management. This means that all material classes of risk are considered and every colleague plays a role in managing risk. Most importantly our overall business strategy and remuneration practices are aligned to our risk and capital management strategies. Bank of Ireland Annual Report 2021 Further information in relation to these risks can be found in the Risk management report, on pages 137 to 193. 52 Key risk types The risk includes all risks that might impact on the volatility of our projected outcomes over the short term (including profit, income, costs, net worth or reputation). It includes pension risk and risk driven by Brexit. The risk that we do not attract and maintain an employee base with the skills, capabilities and culture necessary to execute our business objectives. It also includes risks relating to health and safety. The risks associated with the sustainability of our long-term business strategy. It includes risk related to both the design and execution of strategy, in the context of internal capabilities and the external market environment such as competition and disruptive business models / technologies (e.g. fintech). The risk of loss resulting from a counterparty failing to meet their contractual obligations to us arising in respect of loans or other financial transactions. The risk arises from loans and advances to customers, in addition to our transactions with other financial institutions, sovereigns and state institutions. The risk that we have insufficient financial resources to meet commitments when they fall due. The risk of unexpected variations in the amount and timing of insurance claims due to, for example, changing customer mortality, life expectancy, health and behaviour characteristics. The risk of loss arising from movements in interest rates, foreign exchange (FX) rates, credit spreads or other market prices. The risk that the Group and/or its staff, conduct business in an inappropriate or negligent manner that leads to adverse customer outcomes and/or non- compliance with laws, rules and regulations related to conduct of business, data protection and financial crime. It is also the risk of the failure to appropriately identify and implement governance arrangements for compliance with any new laws, rules and regulations that relate to licensed financial services activity. The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events which can lead to disruption of services to customers, financial loss and damage to our reputation. Risks include business continuity, change execution, business process, data quality and availability, information security and cyber, information technology, legal and contractual, model, payments, sourcing and physical security. Capital adequacy Capital adequacy is having a sufficient level or composition of capital to support normal business activities and to meet regulatory capital requirements both under normal operating environments or stressed conditions. Capital adequacy is not a risk type in itself but owing to the nature of capital as a critical risk mitigant is a key determinant of the overall Group risk appetite. Risk review (continued)Bank of Ireland Annual Report 2021 Enterprise risks Business People Strategic Financial risks Funding and liquidity Life insurance Market Credit Non-Financial risks Conduct and regulatory Operational Further information in relation to our risk management process can be found in the Risk management report, on pages 137 to 193. Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance 55 1 Formerly Corporate and Treasury, renamed Corporate and Markets. 2 Credit Valuation Adjustment; Debit Valuation Adjustment; Funding Valuation Adjustment. Summary consolidated income statement on an underlying basis (continued) Net other income Table: 2 2021 2020 Change Net other income €m €m % Net other income 725 505 44% Analysed as: Business income Retail Ireland 215 209 3% Wealth and Insurance 266 214 24% Retail UK 2 6 (67%) Corporate and Markets1 157 139 13% Group Centre and other (4) (7) (43%) Total business income 636 561 13% Other gains Transfers from debt instruments at fair value through other comprehensive income reserve 16 7 n/m Gain on disposal and revaluation of investment properties 1 1 - Net loss on disposal and revaluation of investments - (3) (100%) Total other gains 17 5 n/m Other valuation items Wealth and Insurance 34 (36) n/m - Interest rate movements (4) (22) (82%) - Unit-linked investment variance 38 (14) n/m Financial instrument valuation adjustments (CVA, DVA, FVA)2 and other 38 (25) n/m Total other valuation items 72 (61) n/m Business income of €636 million for 2021 has increased by €75 million or 13% compared to 2020. • Wealth and Insurance has increased by 24% due to higher new business and improved performance on the existing book. • Corporate and Markets earned higher fee income, supported by increased customer activity. • Retail Ireland increased by 3% due to higher current account and card fee income. Other gains of €17 million for 2021 have increased by €12 million mainly driven by gains realised on €1.6 billion of bond sales in August 2021. Other valuation items are a gain of €72 million in 2021, compared to a loss of €61 million in 2020. This largely reflects increased unit-linked fund prices in Wealth and Insurance as markets performed strongly resulting in a favourable variance to assumed growth leading to a positive investment return of €38 million, while lower investment returns on non-linked and shareholder funds resulted in a €4 million loss. This is combined with fair value equity gains and positive derivative related valuation adjustments in Corporate and Markets. Bank of Ireland Annual Report 2021 56 Summary consolidated income statement on an underlying basis (continued) Operating expenses Operating expenses (before levies and regulatory charges and impairment of intangible assets and goodwill) are €74 million or 4% lower than 2020, due to the Group's continued focus on efficiency and strategic cost reduction while continuing transformational investment. Staff costs (excluding pension costs) of €667 million are €58 million lower reflecting lower staff numbers (see table above), predominantly due to employees exiting the Group under the enhanced voluntary redundancy scheme up to and including 31 December 2021. This scheme has led to a reduction in staff numbers of 1,585 or 15% since it commenced in September 2020. Depreciation and amortisation of €222 million is €31 million or 12% lower as a result of legacy technology investments reaching the end of their useful lives. The Groups total transformation spend in 2021 was €243 million (2020: €418 million) of which: • €29 million is a transformation investment charge to operating expenses reflecting investment in technical infrastructure, applications and software licences (2020: €56 million); • €92 million is invested in the Group’s transformation asset and capitalised on the balance sheet (2020: €117 million); and • €122 million is charged to non-core and reflects transformation programme1 spend on strategic initiatives (2020: €245 million). Impairment of intangible assets and goodwill of €1 million was recognised on internally generated computer software. In 2020, the Group recognised a write down of €9 million against Marshall Leasing Limited, a commercial leasing and fleet management company in the UK and a €3 million write down on intangible assets. Pension costs of €140 million were €39 million or 39% higher than 2020. Defined benefit pension costs have increased by €39 million predominantly due to a €26 million gain recognised in 2020 in respect of a change in allowance for future pension increases in the New Ireland life assurance business (NIAC) pension scheme. New joiners are added to the Group’s defined contribution plans, the cost of which is unchanged compared to 2020. Other costs including technology, property, outsourced services and other non-staff costs are €3 million higher than 2020. Levies and regulatory charges of €130 million have increased by €5 million, reflecting increases in certain levies including the Single Resolution Fund (SRF) and Deposit Guarantee Scheme (DGS). Table: 3 2021 2020 Change Operating expenses €m €m % Staff costs (excluding pension costs) 667 725 (8%) Pension costs 140 101 39% - Retirement benefit costs (defined benefit plans) 105 66 59% - Retirement benefit costs (defined contribution plans) 35 35 - Depreciation and amortisation 222 253 (12%) Other costs 588 585 - Operating expenses (before transformation investment charge, levies and regulatory charges and impairment of intangible assets and goodwill) 1,617 1,664 (3%) Transformation investment charge 29 56 (48%) Operating expenses (before levies and regulatory charge and impairment of intangible assets and goodwill) 1,646 1,720 (4%) Levies and regulatory charges 130 125 4% Impairment of intangible assets and goodwill 1 12 (92%) Operating expenses 1,777 1,857 4% Change Staff numbers at year end 8,696 9,782 (11%) Average staff numbers during the year 9,342 10,303 (9%) Bank of Ireland Annual Report 2021 1 Comparative figures for transformation programme costs have been restated from €237 million to €245 million, to include €8 million other restructuring charges previously shown separately to total transformation programme costs on the table above. Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance 57 Summary consolidated income statement on an underlying basis (continued) Net impairment gains / (losses) on financial instruments Table: 4 2021 2020 Change Net impairment gains / (losses) on financial instruments €m €m % Net impairment gains / (losses) on loans and advances to customers at amortised cost Residential mortgages (41) (53) (23%) - Retail Ireland (58) (23) n/m - Retail UK 17 (30) n/m Non-property SME and corporate 102 (512) n/m - Republic of Ireland SME 37 (217) n/m - UK SME 23 (29) n/m - Corporate 42 (266) n/m Property and construction 43 (388) n/m - Investment 28 (372) n/m - Development 15 (16) n/m Consumer 43 (108) n/m Total net impairment gains / (losses) on loans and advances to customers at amortised cost 147 (1,061) n/m Net impairment gains / (losses) on other financial instruments (excluding loans and advances to customers at amortised cost)1 47 (72) n/m Total net impairment gains / (losses) on financial instruments 194 (1,133) n/m Net impairment gains / (losses) on loans and advances to customers (bps) 19 (134) n/m 1 At 31 December 2021, net impairment gains / (losses) on other financial instruments (excluding loans and advances to customers at amortised cost) included €52 million gain (2020: €65 million loss) on loan commitments, €1 million gain (2020: €4 million loss) on guarantees and irrevocable letters of credit and €6 million loss (2020: €3 million loss) on other financial assets. The Group recognised a net impairment gain of €194 million for 2021, which is €1,327 million favourable to the €1,133 million impairment loss in 2020. Included in the impairment gain is €147 million on loans and advances to customers at amortised cost (2020: €1,061 million loss). The net credit gain in 2021 incorporates a number of impairment dynamics reflecting: • impairment model updates incorporating the current macroeconomic outlook (c.€307 million net gain includes other financial instruments); • net impairment gains associated with portfolio activities including credit risk assessments and recoveries, offset by case specific loss emergence (c.€42 million net gain); offset by • the application of Group management adjustments at 31 December 2021 (c.€155 million net loss) which reflect a number of potential risks not included in modelled impairment loss allowances, including the potential risk that longer-term credit supports may be required for customers affected by COVID-19. A net impairment loss on the Retail Ireland mortgage portfolio of €58 million for 2021, includes a net impairment loss of €69 million on Stage 3 (i.e. credit impaired) assets and is €35 million higher than the loss of €23 million in 2020. A net impairment gain on the Retail UK mortgage portfolio of €17 million for 2021, includes a net impairment loss of €8 million on Stage 3 assets and compares to a net loss of €30 million in 2020. The net loss of €41 million in the Residential mortgages portfolio in 2021 reflects the recognition of the potential risk that longer term credit supports may be required for customers impacted by COVID-19, as well as other impairment model parameter updates, partly offset by the change in the macroeconomic outlook and observed resilience in the credit quality of customers including those who availed of payment breaks. The Retail Ireland mortgage net loss also reflects the recognition of losses associated with potential greater utilisation of portfolio sales and / or securitisations in resolution strategies for NPEs and the risk associated with diminished levels of asset sales data underpinning the loss given default (LGD) component of the impairment model. This was partly offset by a c.€12 million gain recognised on completion of a securitisation of €0.3 billion of NPE assets. Model updates for residential mortgages in 2021 included a number of changes to the residential mortgage LGD models resulting in a net increase in impairment loss allowance of c.€65 million in Retail Ireland, noting that the €50 million Group management adjustment for stage 3 residential mortgages previously applied at 31 December 2020 is no longer considered to be required. Details on the LGD model updates are outlined on page 171 of the Asset Quality section. A net €102 million impairment gain on the non-property SME and corporate loan portfolio for 2021, includes a net impairment loss of €57 million on Stage 3 and is €614 million favourable to the €512 million impairment loss for 2020. The net impairment gain in 2021 primarily reflects impairment reductions recognised for the change in the macroeconomic outlook combined with an improved credit profile in the non-defaulted portfolio. This is Bank of Ireland Annual Report 2021 60 The Group’s loans and advances to customers (after impairment loss allowances) of €76.3 billion are €0.3 billion lower than 31 December 2020. On a constant currency basis and excluding planned UK deleveraging of €2.9 billion and the successful NPE transaction of €0.3 billion, the loan book grew by €0.6 billion in 2021. The Group’s portfolio of liquid assets at 31 December 2021 of €49.7 billion increased by €19.0 billion since 31 December 2020 primarily due to TLTRO III funding of €10.8 billion, higher deposit balances of €2.6 billion (constant currency basis), lower lending volumes of €2.6 billion (constant currency basis), net increase in wholesale funding and subordinated debt of €2.4 billion, an increase in loans and advances to banks of €0.3 billion and an FX translation benefit due to sterling strengthening against the euro and other movements of €0.3 billion. The Group’s asset quality remains strong and continues to improve despite COVID- 19 restrictions remaining in place longer than expected, with limited evidence to date of adverse impacts on NPEs. NPEs reduced by €0.2 billion to €4.3 billion, this represented 5.5% of gross loans at 31 December 2021. In June 2021, the Group completed the securitisation of a pool of €0.3 billion non-performing residential mortgages, with an associated €12 million impairment gain. For further information see note 27. At 31 December 2021, overall Group customer deposit volumes of €92.8 billion are €4.2 billion (€2.6 billion on a constant currency basis), higher than 31 December 2020 due to growth in Retail Ireland of €6.0 billion predominately driven by higher household and SME volumes, partially offset by lower UK plc deposits of €1.6 billion, primarily due to planned UK deleveraging, and marginally lower Corporate and Markets5 volumes. Wholesale funding balances of €21.4 billion are €12.6 billion higher than 31 December 2020 primarily due to TLTRO III borrowings of €10.8 billion, senior minimum requirement for own funds and eligible liabilities (MREL) issuance of €1.6 billion, increase in net Bank of England (BoE) Term Funding Scheme (TFS) / Term Funding Scheme with additional incentives for SMEs (TFSME) of €0.8 billion, credit linked note issuance of €0.5 billion, partially offset by an Asset Covered Securities (ACS) bond maturity of €0.8 billion and decrease in bank deposits and other items of €0.3 billion. Total Monetary Authority borrowing at 31 December 2021 are €13.5 billion (31 December 2020: €1.9 billion). The net pension position is a surplus of €0.6 billion at 31 December 2021 (31 December 2020: deficit €0.1 billion) primarily driven by positive asset returns and employer contributions. The Group’s fully loaded CET1 ratio increased by c.260 basis points during 2021 to 16.0% and the regulatory CET1 ratio (net of Capital Requirements Directive (CRD) phasing) increased by c.210 basis points over the year to 17.0%. The fully loaded CET1 ratio increase of c.260 basis points is primarily due to organic capital generation (c.+185 basis points), net reduction in impairment (c.+30 basis points), the benefit of balance sheet optimisation (c.+90 basis points) and other net movements, including in the Group’s defined benefit pension scheme (c.+30 basis points); offset by risk weighted assets (RWAs) growth (c.-10 basis points), investment in the Group’s transformation programmes (c.-45 basis points) and an accrual for a proposed distribution (c.-20 basis points). For further information on capital see Capital Management on pages 189 to 193. 2021 2020 Summary consolidated balance sheet Table €bn €bn Assets (after impairment loss allowances) Loans and advances to customers1 6 76 77 Liquid assets 7 50 31 Wealth and Insurance assets 23 20 Other assets 8 6 6 Total assets 155 134 Liabilities Customer deposits 9 93 89 Wholesale funding 10 21 9 Wealth and Insurance liabilities 23 20 Other liabilities 8 5 5 Subordinated liabilities 2 1 Total liabilities 144 124 Shareholders' equity 10 9 Other equity instruments - Additional tier 1 1 1 Total liabilities and shareholders' equity 155 134 Key balance sheet metrics Liquidity Coverage Ratio2 181% 153% Net Stable Funding Ratio3 144% 138% Loan to Deposit Ratio 82% 86% Gross new lending volumes (€bn) 14.2 14.1 Average interest earning assets 119 106 Return on Tangible Equity4 (%) 12.8% (4.9%) Return on Tangible Equity4 (adjusted) (%) 12.7% (4.4%) Common equity tier 1 ratio - fully loaded 16.0% 13.4% Common equity tier 1 ratio - regulatory 17.0% 14.9% Total capital ratio - regulatory 22.3% 19.2% Summary consolidated balance sheet 1 Includes €0.4 billion of loans and advances to customers at 31 December 2021 (2020: €0.4 billion) that are measured at fair value through profit or loss and are therefore not subject to impairment under IFRS 9. 2 The Group’s Liquidity Coverage Ratio (LCR) is calculated based on the Commission Delegated Regulation (EU) 2015/61 which came into force on 1 October 2015. 3 The Group’s Net Stable Funding Ratio (NSFR) for 31 December 2021 is prepared on a regulatory group basis, in accordance with the EU Capital Requirement Regulations and Directive , as amended, which require the maintenance of a NSFR ratio greater than or equal to 100%, effective June 2021. Comparative NSFR, for 31 December 2020 is calculated based on the Group’s interpretation of the Basel Committee on Banking Supervision October 2014 document. For further information, see the Group’s Pillar 3 disclosures (tab 1.3), available on the Group’s website. 4 For basis of calculation of Return on Tangible Equity (ROTE), see page 380. 5 Formerly Corporate and Treasury, renamed Corporate and Markets. Bank of Ireland Annual Report 2021 Further information on measures referred to in the 2021 financial results, including gross new lending, NPEs, wholesale funding and organic capital can be found in Alternative performance measures on page 376. The Group's loans and advances to customers (after impairment loss allowances) of €76.3 billion are €0.3 billion lower than 31 December 2020. On a constant currency basis and excluding planned UK deleveraging of €2.9 billion and the successful NPE transaction of €0.3 billion, the loan book grew by €0.6 billion in 2021. In 2021, the Group completed a transaction whereby it derecognised €0.3 billion of loans and advances to customers (after impairment loss allowance). The Group entered into a securitisation arrangement for a portfolio of residential mortgage NPEs through an unconsolidated special purpose vehicle Mulcair Securities No.2 Designated Activity Company (DAC), 'Mulcair 2'. See note 27 for further information. Gross new lending performance of €14.2 billion is €0.1 billion higher than 2020, reflecting increased lending of 30% in Corporate and Markets3 and 7% in Retail Ireland, offset by a 24% reduction in Retail UK which is in line with the division's strategy to target higher value and lower volume lending. Redemptions and repayments of €16.5 billion is €2.5 billion or 18% higher than 2020 primarily due to planned deleveraging strategy in the UK. The Group's IFRS 9 staging profile continues to reflect the impact of COVID- 19 on the credit risk in the loan book. However, the application of updated Forward Looking Information (FLI) at the reporting date, individually assessed risk ratings and re-assessment for post-model adjustments resulted in a net €3.3 billion decrease in stage 2 loans in the period (i.e. cases that are no longer identified as having experienced a significant increase in credit risk). During 2021, the stock of impairment loss allowances decreased by €0.2 billion to €2.0 billion primarily due to impairment loss allowance utilisation of €0.3 billion and the net impairment gain on loans and advances to customers of €0.1 billion, partly offset by the impact of currency translation and other movements (€0.2 billion). Group NPEs decreased by €0.2 billion or 4% to €4.3 billion at December 2021 and represent 5.5% of gross loans to customers. The NPE securitisation of €0.3 billion had an associated €12 million impairment gain in 2021. The decrease was partly offset by the emergence of new defaults for case specific reasons primarily in the Corporate portfolio. Further detail on NPEs and impairment loss allowances are provided in the Asset Quality section (pages 164 to 168). 61 Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance Table: 6 2021 2020 Loans and advances to customers - Composition1 €m % €m % Residential mortgages 43,262 56% 44,742 57% - Retail Ireland 22,398 29% 22,942 29% - Retail UK 20,864 27% 21,800 28% Non-property SME and corporate 20,774 26% 19,858 25% - Republic of Ireland SME 6,997 9% 7,073 9% - UK SME 1,689 2% 1,790 2% - Corporate 12,088 15% 10,995 14% Property and construction 8,613 11% 8,591 11% - Investment 7,552 10% 7,633 10% - Development 1,061 1% 958 1% Consumer 5,229 7% 5,271 7% Total loans and advances to customers at amortised cost 77,878 100% 78,462 100% Less impairment loss allowance on loans and advances to customers at amortised cost (1,958) (2,242) Net loans and advances to customers at amortised cost 75,920 76,220 Loans and advances to customers at fair value through profit or loss 426 361 Total loans and advances to customers 76,346 76,581 Credit-impaired loans 4,265 4,465 NPEs 4,311 4,503 NPE ratio2 5.5% 5.7% 1 Includes €0.4 billion of loans and advances to customers at 31 December 2021 (2020: €0.4 billion) that are measured at fair value through profit or loss and are therefore not subject to impairment under IFRS 9. 2 For basis of calculation of NPE ratio, see page 379. 3 Formerly Corporate and Treasury renamed Corporate and Markets. Summary consolidated balance sheet (continued) Loans and advances to customers Loan book reduction of €0.3bn Group loan book movement Dec 2020 €76.6bn €14.2bn New lending NPE transaction Dec 2021Redemptions €76.3bn (€16.5bn) (€0.3bn) €0.1bn €2.2bn Impairment Foreign exchange / other Bank of Ireland Annual Report 2021 62 Summary consolidated balance sheet (continued) Liquid assets (after impairment loss allowance) Table: 7 2021 2020 Liquid assets (after impairment loss allowance) €bn €bn Cash at banks 3 2 Cash and balances at central banks 31 11 - Bank of England 4 3 - Central Bank of Ireland 27 8 Government bonds 11 12 - Financial assets at fair value through other comprehensive income 5 6 - Debt securities at amortised cost 6 6 Covered bonds 3 4 Senior bank bonds and other 2 2 50 31 The Group’s portfolio of liquid assets at 31 December 2021 of €49.7 billion increased by €19.0 billion since 31 December 2020 primarily due to TLTRO III funding of €10.8 billion (for more information see note 38), higher deposit balances of €2.6 billion (constant currency basis), lower lending volumes of €2.6 billion (constant currency basis), net increase in wholesale funding and subordinated debt of €2.4 billion, an increase in loans and advances to banks of €0.3 billion and an FX translation benefit due to sterling strengthening against the euro and other movements of €0.3 billion. Other assets and other liabilities Table: 8 2021 2020 Other assets and other liabilities €bn €bn Other assets 5.7 5.8 - Derivative financial instruments 1.6 2.2 - Deferred tax asset 1.0 1.2 - Pension surplus (net) 0.6 - - Other assets 2.5 2.4 Other liabilities 4.9 5.2 - Derivative financial instruments 2.2 2.3 - Notes in circulation 1.1 1.1 - Lease liabilities 0.5 0.5 - Pension deficit (net) - 0.1 - Other liabilities 1.1 1.2 Fair value movements of derivative assets and derivative liabilities are impacted by changes in equity markets, interest rates, FX and maturity of transactions during 2021. The net pension position is a surplus of €0.6 billion at 31 December 2021 (31 December 2020: deficit €0.1 billion). The primary drivers of the movement in the net pension position were positive asset returns and employer contributions. Bank of Ireland Annual Report 2021 65 Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance Divisional review (continued) Retail Ireland Transform the Bank • Continued to align to customer expectations by investing in our digital offering, accelerating our pivot to a digital relationship bank. • Delivered 14 digital customer journeys, including: - a seamless omni-channel experience for mortgages; and - a fully digital lending journey for small business and agri-customers; • 23 million visits on average per month to our digital channels, 86% of which are now to our mobile app, increasing from 64% in 2020. • Further enhanced our mobile app including the introduction of in-app card controls. • 94% of all applications for everyday banking products1 are received digitally, of which c. 80% of those are received without any staff assistance. • Bank of Ireland was recognised as the ‘Best Consumer Digital Bank in Ireland’ at the 2021 Global Finance Awards. • Completed the reduction in our branch footprint and launched our partnership with An Post. • Customers now have the choice of over 1,000 locations in their local communities to meet their day to day banking needs. • Announced acquisition of KBCI portfolios progressing, with engagement with the Competition and Consumer Protection Commission (CCPC) ongoing. • Enhanced our green mortgage discount offering, a green home loan of more than €300k, fixed for 4 years, has an interest rate of just 2%. Serve customers brilliantly • Financial Wellbeing programme activity and highlights in 2021 include: - brand marketing campaign ‘The F- Word’ launched in April to encourage people to talk about their finances; - InvestED, a series of talks giving customers the knowledge and confidence to invest; - Pension Pot, a series of webinars explaining how to plan forward to live your best retirement; - Youth FWB programme to improve financial literacy and equip young people with financial skills; and - Financial inclusion ‘Your Next Step’ video series, focused on how to access digital banking services. • Supporting business customers with funding through various Strategic Banking Corporate of Ireland (SBCI) schemes. • Supporting communities with our 3 year €4 million Begin Together Programme. • Supporting the environment and climate change by increasing our Sustainable Finance Fund by €3 billion to €5 billion. • Supporting our older customers with the launch of our senior advisory model and senior customer support line. • Supporting vulnerable customers through our dedicated vulnerable customer unit. Grow sustainable profits Compared to 2020: • Underlying contribution of €508 million increased by €392 million, mainly due to lower impairment charges. • Operating income of €1,139 million is €3 million lower primarily due to lower net interest income partially offset by higher fee income. • Operating expenses of €668 million are down €41 million or 6% due to continued emphasis on cost control. • Net impairment gain of €30 million compared to a prior year charge of €314 million which is reflective of the significant impact of COVID-19 in 2020. Compared to 31 December 2020: • Loans and advances to customers (after impairment loss allowances) of €32.2 billion are €0.8 billion lower, mainly due to the disposal of non- performing residential mortgages and higher redemptions than prior year. • Customer deposits of €65.0 billion were €6.0 billion higher than 31 December 2020, reflecting the build- up of household savings during extended periods of lockdown. Retail Ireland serves consumer and business customers across a broad range of segments and sectors with financial products, services and propositions tailored to meet their needs. €508m Underlying contribution €5.7bn Gross new lending (€445m) Net new lending €41m Reduction in operating expenses Bank of Ireland Annual Report 2021 1 Everyday banking products includes: Business Current Account, Personal Current Account, Personal Loans, Personal Credit Cards and Deposits in RoI. Further information on measures referred to in our business segments can be found in Alternative performance measures on page 376. Further information in relation to our divisional results can be found on page 71. 66 Transform the Bank • Commercialising technology investment through the delivery of pension’s new business capability, switching automation and top up capability. • Increasing business volumes on the new pension platform MyPension365, which provides customers with a modern, digital and customer-friendly experience in addition to a 90% reduction in onboarding time. • Phased roll-out of our digital advice platform commenced, which will lead to a greatly improved customer experience. • Launch of broker portal enabling customers and advisors to access products and services via a single source, with 76% of new pensions business applications coming in digitally. • Good progress continues across a range of initiatives that will enable sustainable, scalable and profitable growth. Serve customers brilliantly • New Ireland Assurance Company plc became a signatory for 'Principles for Responsible Investing', showing our commitment to invest customer funds responsibly and sustainably. • Improved retention of customers driven by a strong engagement program across all channels including proactive retention strategies and improved investment performance. • Our Customer Effort Score, which measures the customer sentiment across wealth advisory increased by 4% to +76. • c.35,000 customer meetings held, supporting customers with quality wealth advice, of which c.25,000 held remotely, leveraging full digital and remote capability. Grow sustainable profits Compared to 2020: • Operating income was €52 million or 25% higher reflecting strong overall business performance and the benefit of assumption changes. • Underlying contribution increased by €99 million reflecting strong overall business performance allied with the positive performance of investment markets in 2021. • Operating expenses are €23 million higher primarily due to pension credit in prior year. • Annual Premium Equivalent (APE) new business sales were €417 million in 2021, an increase of €104 million or 33% higher than 2020, driven by overall market conditions and increase in market share to 20% (2020: 19%). • Unit-linked fund prices increased, as markets performed strongly in 2021. The favourable variance to assumed growth led to a positive investment return of €38 million (2020: €14 million negative investment return). • Lower investment returns on non- linked and shareholder funds resulted in a €4 million loss compared to a €22 million loss in 2020. Wealth and Insurance is a market leading life, pensions, investments and general insurance provider in Ireland. The Group is the only Irish owned bancassurer in the Irish market. Divisional review (continued) Wealth and Insurance Bank of Ireland Annual Report 2021 €155m Underlying contribution €33% New business increase €417m New business APE 20% Market share Further information on measures referred to in our business segments can be found in Alternative performance measures on page 376. Further information in relation to our divisional results can be found on page 72. 67 Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance 1 FRES is a joint venture between Bank of Ireland UK and the UK Post Office. 2 Operating expenses before impairment of goodwill. In 2021 there was £nil impairment of goodwill (2020: £8 million). Transform the Bank • In 2020 we began a multi-year strategic transformation programme. Significant progress has been made against our UK strategy, including optimisation of our business in NI to respond to significant and accelerating changes in how customers are banking. We are investing in our 13 retained branches and 3 business centres as well as enhancing our digital customer propositions. • We continue to grow our award winning bespoke mortgage proposition and progress on our strategy to target higher value lending. • We maintained focus on operational resilience and during 2021 a major upgrade to our core mortgage platform was completed which delivers a modern, robust and secure platform and supports an improved customer journey and lays the foundations for future innovative product propositions. • With the accelerated move to hybrid working post pandemic the Group continued to review its property footprint while investing in creating more agile and flexible working places. Serve customers brilliantly • We have supported our customers through COVID-19. Our customers continue to avail of our COVID Hub on our website which signposts them towards help with any challenges including finding money advice support for personal banking. • Online access and processes for customers were further enhanced across all product lines in 2021, including increased digital application and document upload capability and delivery of customer video tutorials via our digital concierge technology. • The division's mortgage business was announced as winner of the ‘Best Specialist Lender’ category at the 2021 ‘L&G Mortgage Club Awards’ and our personal loans product offering was rated first in the ‘Fairer Finance’ customer experience ratings. • The focus on reducing customer complaints remains a priority and for the second year in a row ‘Complaints per 1000 accounts’, the key industry measure, reduced significantly. • In support of our more vulnerable customers, we have launched a ‘Tell Us Once’ bereavement process and now offer the option of online bereavement notification forms and document upload facilities. We have also partnered with ‘Victim Support’, a leading charity who offer customers both emotional and practical support. This is in addition to our vulnerable customer champions, who are specifically trained to support vulnerable customers. Grow sustainable profits Compared to 2020: • Positive underlying contribution of £358 million (2020: £15 million negative) primarily due to a materially lower impairment value in the year reflecting an improved economic outlook, combined with strong income growth and reduced costs. • Net interest income of £536 million increased by £39 million, primarily due to improved mortgage margins, an increasing mix of consumer lending volumes and lower overall funding costs. • Operating expenses2 of £245 million are 7% or £18 million lower as a result of the continued focus on cost management, including lower staff and operational costs. • Net impairment credit of £65 million compared to a prior year charge of £238 million, reflecting an improved economic outlook following a significant COVID-19 related impact in 2020. Compared to 31 December 2020: • Loans and advances to customers (after impairment loss allowances) of £21.9 billion were £2.6 billion lower reflecting the successful delivery of the strategic transformation programme and the focus on value rather than volume, with a reduction in net volumes across mortgages of £2 billion. Retail UK provides banking services in the UK, including mortgages, savings, personal lending, business banking, asset and car finance. Incorporating Northridge Finance, Marshall Leasing, financial services partnerships with the UK Post Office, The AA and FRES1. Divisional review (continued) Retail UK £358m Underlying contribution £3.5bn Gross new lending (£2.6m) Net new lending £18m Reduction in operating expenses2 Bank of Ireland Annual Report 2021 Further information in relation to our divisional results can be found on page 73. Further information on measures referred to in our business segments can be found in Alternative performance measures on page 376. 70 The tables below and on the following pages, provide further information on the financial performance of the Group’s divisions during 2021 as well as some key performance metrics. Information on the financial performance of the Group as a whole can be found on page 3 of the Strategic report. Basis of presentation Underlying divisional contribution reflects the underlying financial contribution of each division towards the consolidated Group underlying profit or loss, before tax, excluding non-core items which obscure the underlying performance of the business. Percentages presented throughout the Financial Review are calculated on the absolute underlying figures and so may differ from the percentage variances calculated on the rounded numbers presented, where the percentages are not measured this is indicated by n/m. Principal rates of exchange used in the preparation of the Financial Statements are set out on page 211. References to ‘the State’ throughout this document should be taken to refer to the RoI, its Government and, where and if relevant, Government departments, agencies and local Government bodies. 1 These financial results are presented on an underlying basis. Underlying excludes non-core items which are those items that the Group believes obscure the underlying performance trends in the business. See page 58 for further information. 2 Formerly Corporate and Treasury, renamed Corporate and Markets. 3 Other reconciling items represent inter segment transactions which are eliminated upon consolidation and the application of hedge accounting at Group level. 4 For basis of calculation of basic earnings per share see note 20. 5 The basis of calculation of key metrics provided is set out in alternative performance measures on pages 376 to 382. Divisional financial results 2021 2020 €m €m Underlying1 divisional contribution Retail Ireland 508 116 Wealth and Insurance 155 56 Retail UK 418 (17) Corporate and Markets2 797 29 Group Centre (515) (557) Other reconciling items3 3 (1) Group underlying profit / (loss) before tax 1,366 (374) Non-core items by division Retail Ireland (55) (42) Wealth and Insurance 24 (3) Retail UK (19) (19) Corporate and Markets2 (1) - Group Centre (95) (326) Other reconciling items3 1 4 Group non-core items (145) (386) Profit / (loss) before tax by division Retail Ireland 453 74 Wealth and Insurance 179 53 Retail UK 399 (36) Corporate and Markets2 796 29 Group Centre (610) (883) Other reconciling items3 4 3 Group profit / (loss) before tax 1,221 (760) Per ordinary share Basic earnings per share4 (€ cent) 91.2 (72.4) Underlying earnings per share5 (€ cent) 100.2 (38.6) Tangible Net Asset Value per share5 (€ cent) 880 732 Statutory cost income ratio5 (%) 66% 86% Underlying cost income ratio5 (%) 58% 64% Return on assets5 (bps) 68 (53) Bank of Ireland Annual Report 2021 Further information in relation to our divisional results can be found on pages 71 to 76. Further information on measures referred to in our business segments can be found in Alternative performance measures on page 376. 71 Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance Retail Ireland 2021 2020 Change Income statement €m €m % Net interest income 922 937 (2%) Net other income 217 205 6% Operating income 1,139 1,142 - Operating expenses (668) (709) (6%) Operating contribution before net impairment gains / (losses) on financial instruments 471 433 9% Net impairment gains / (losses) on financial instruments 30 (314) n/m Share of results of associates and joint ventures (after tax) 7 (3) n/m Underlying contribution 508 116 n/m Net impairment gains / (losses) on financial instruments Loans and advances to customers at amortised cost 20 (300) n/m - Residential mortgages (58) (23) n/m - Non-property SME and corporate 37 (217) n/m - Property and construction 35 (47) n/m - Consumer 6 (13) n/m Other financial instruments (excluding loans and advances to customers at amortised cost)1 10 (14) n/m Net impairment gains / (losses) on financial instruments 30 (314) n/m Loans and advances to customers (net) (€bn) At 31 December 32.2 33.0 (2%) Average in year 32.4 33.2 (2%) Customer deposits (€bn) At 31 December 65.0 59.0 10% Average in year 62.3 54.5 14% 1 At 31 December 2021, net impairment gains / (losses) on other financial instruments (excluding loans and advances to customers at amortised cost) included an €11 million gain (2020: €14 million loss) on loan commitments, offset by a loss of €1 million (2020: €nil) on guarantees and irrevocable letters of credit. Divisional financial results (continued) Retail Ireland Bank of Ireland Annual Report 2021 Further information in relation to the financial performance of Retail Ireland can be found on page 65. 72 Wealth and Insurance 2021 2020 Change Income statement €m €m % Net interest expense (7) (7) - Net other income 266 214 24% Operating income 259 207 25% Operating expenses (138) (115) 20% Operating contribution 121 92 32% Interest rate movement (4) (22) (82%) Unit-linked investment variance 38 (14) n/m Underlying contribution 155 56 n/m Wealth and Insurance 2021 2020 Change Income statement (Market Consistent Embedded Value performance) €m €m % New business profits 17 4 n/m Existing business profits 122 88 39% - Expected return 58 79 (27%) - Experience variance 19 19 - - Assumption changes 45 (10) n/m Interest payments (6) (6) n/m Operating profit 133 86 55% Unit-linked investment variance 54 (26) n/m Interest rate movements - (27) 100% Embedded value profit before tax 187 33 n/m Embedded value The table above outlines the Market Consistent Embedded Value (MCEV) performance using market consistent assumptions. The MCEV principles are closely aligned to the Solvency II principles and are consistent with the approach used for insurance contracts on an IFRS basis. Operating profit of €133 million for 2021 was €47 million or 55% higher than 2020, primarily due to higher new business volumes and a higher benefit of assumption changes when compared to 2020. Embedded value profit before tax of €187 million (2020: €33 million) was €154 million higher due to the impact of investment market movements on unit linked fund performance (€54 million gain) and flat investment returns on non-linked and shareholder funds compared to €27 million loss in 2020. The table below summarises the overall balance sheet of Wealth and Insurance on an MCEV basis at 31 December 2021 compared to the value at 31 December 2020. The Value of in Force (ViF) asset represents the after tax value of future income from the existing book. Wealth and Insurance 2021 2020 Summary balance sheet (MCEV) €m €m Net assets 562 500 ViF 759 679 Less Tier 2 subordinated capital / debt (162) (162) Less pension scheme deficit (61) (115) Total embedded value 1,098 902 Divisional financial results (continued) Wealth and Insurance Bank of Ireland Annual Report 2021 Further information in relation to the financial performance of Wealth and Insurance can be found on page 66. Financial Review Risk Management Report Financial Statements Other InformationStrategic Report Governance 75 O pe ra ti ng T ot al pr ofi t / ( lo ss ) S ha re o f G ai n on I ns ur an ce o pe ra ti ng b ef or e ne t N et r es ul ts o f d is po sa l / N et N et T ot al c on tr ac t i nc om e im pa ir m en t im pa ir m en t a ss oc ia te s liq ui da ti on P ro fi t in te re st in su ra nc e O th er o pe ra ti ng li ab ili ti es n et o f lo ss es lo ss es a nd jo in t o f b us in es s / ( lo ss ) i nc om e / pr em iu m i nc om e / i nc om e / an d cl ai m s in su ra nc e O pe ra ti ng o n fi na nc ia l on fi na nc ia l v en tu re s a ct iv it ie s an d b ef or e (e xp en se ) in co m e (e xp en se ) (e xp en se ) p ai d cl ai m s e xp en se s in st ru m en ts in st ru m en ts (a ft er t ax ) p ro pe rt y t ax at io n 20 21 € m € m € m € m €m € m € m € m €m € m € m €m D iv is io na l u nd er ly in g co nt ri bu ti on 1 Re ta il Ir el an d 92 2 - 2 17 1 ,1 39 - 1 ,1 39 (6 68 ) 47 1 3 0 7 - 5 08 W ea lth a nd In su ra nc e ( 7) 2, 01 9 1 ,3 70 3 ,3 82 ( 3, 08 9) 29 3 (1 38 ) 15 5 - - - 1 55 Re ta il U K 6 23 - 5 6 28 - 6 28 (2 85 ) 34 3 7 7 (2 ) - 4 18 Co rp or at e an d M ar ke ts 2 6 82 - 1 91 8 73 - 8 73 (1 71 ) 70 2 9 5 - - 7 97 G ro up C en tr e ( 2) (1 ) 1 1 8 - 8 (5 15 ) ( 50 7) ( 8) - - ( 51 5) O th er re co nc ili ng it em s 1 - 2 3 - 3 - 3 - - - 3 G ro up - un de rl yi ng 1 2 ,2 19 2 ,0 18 1 ,7 96 6 ,0 33 (3 ,0 89 ) 2 ,9 44 (1 ,7 77 ) 1, 16 7 1 94 5 - 1, 36 6 To ta l n on -c or e it em s Tr an sf or m at io n pr og ra m m e co st s3 - - - - - - ( 12 2) (1 22 ) - - - (1 22 ) IT S er vi ce C on tin ui ty F ra m ew or k - - - - - - (2 5) (2 5) - - - (2 5) G ro ss -u p fo r po lic yh ol de r ta x in th e W ea lth a nd In su ra nc e bu si ne ss - - 24 24 - 24 - 2 4 - - - 2 4 Cu st om er re dr es s ch ar ge s 8 - - 8 - 8 (3 0) (2 2) - - - (2 2) Po rt fo lio d iv es tm en ts - - 2 1 21 - 21 (1 3) 8 - - - 8 In ve st m en t r et ur n on tr ea su ry s to ck he ld fo r po lic yh ol de rs - - (8 ) (8 ) - (8 ) - (8 ) - - - ( 8) G ai n on li qu id at io n of b us in es s ac tiv iti es - - - - - - - - - - 2 2 An no un ce d ac qu is iti on tr an sa ct io n co st s - - - - - - (2 ) (2 ) - - - ( 2) Im pa ir m en t o f i nt er na lly g en er at ed co m pu te r so ft w ar e - - - - - - - - - - - - G ro up t ot al 2 ,2 27 2 ,0 18 1 ,8 33 6 ,0 78 (3 ,0 89 ) 2 ,9 89 (1 ,9 69 ) 1, 02 0 1 94 5 2 1 ,2 21 1 U nd er ly in g pe rf or m an ce e xc lu de s th e im pa ct o f n on -c or e ite m s (p ag e 58 ). 2 Fo rm er ly C or po ra te a nd T re as ur y, re na m ed C or po ra te a nd M ar ke ts . 3 Fo rm er ly tr an sf or m at io n in ve st m en t c os ts . T ra ns fo rm at io n pr og ra m m e co st s in cl ud es c os t o f r es tr uc tu rin g an d ot he r t ra ns fo rm at io n pr og ra m m e co st s. D iv is io na l f in an ci al r es ul ts (c on tin ue d) In co m e st at em en t - o pe ra tin g se gm en ts Bank of Ireland Annual Report 2021 76 O pe ra ti ng T ot al (lo ss ) / p ro fi t Sh ar e of G ai n on I ns ur an ce o pe ra ti ng b ef or e ne t N et r es ul ts o f d is po sa l / N et N et T ot al c on tr ac t i nc om e im pa ir m en t im pa ir m en t a ss oc ia te s liq ui da ti on ( Lo ss ) in te re st in su ra nc e O th er o pe ra ti ng li ab ili ti es n et o f lo ss es lo ss es a nd jo in t o f b us in es s / p ro fi t i nc om e / pr em iu m i nc om e / i nc om e / an d cl ai m s in su ra nc e O pe ra ti ng o n fi na nc ia l on fi na nc ia l v en tu re s a ct iv it ie s an d b ef or e (e xp en se ) in co m e (e xp en se ) (e xp en se ) p ai d cl ai m s e xp en se s in st ru m en ts in st ru m en ts (a ft er t ax ) p ro pe rt y t ax at io n 20 20 € m € m € m € m €m € m € m € m €m € m € m €m D iv is io na l u nd er ly in g co nt ri bu ti on 1 Re ta il Ir el an d 93 7 - 2 05 1 ,1 42 - 1 ,1 42 (7 09 ) 43 3 (3 14 ) (3 ) - 1 16 W ea lth a nd In su ra nc e ( 7) 1, 63 1 2 38 1 ,8 62 ( 1, 69 1) 17 1 (1 15 ) 56 - - - 5 6 Re ta il U K 5 59 - (2 ) 5 57 - 5 57 (3 05 ) 25 2 (2 68 ) (1 ) - ( 17 ) Co rp or at e an d M ar ke ts 2 6 30 - 1 31 7 61 - 7 61 (1 83 ) 57 8 (5 49 ) - - 2 9 G ro up C en tr e ( 2) (4 ) (7 ) ( 13 ) 1 ( 12 ) (5 43 ) ( 55 5) ( 2) - - ( 55 7) O th er re co nc ili ng it em s (2 ) - 3 1 - 1 ( 2) ( 1) - - - ( 1) G ro up - un de rl yi ng 1 2 ,1 15 1 ,6 27 56 8 4, 31 0 (1 ,6 90 ) 2 ,6 20 (1 ,8 57 ) 76 3 (1 ,1 33 ) (4 ) - ( 37 4) To ta l n on -c or e it em s Tr an sf or m at io n pr og ra m m e co st s3 - - - - - - ( 24 5) (2 45 ) - - - (2 45 ) IT S er vi ce C on tin ui ty F ra m ew or k - - - - - - - - - - - - G ro ss -u p fo r po lic yh ol de r ta x in th e W ea lth a nd In su ra nc e bu si ne ss - - 7 7 - 7 - 7 - - - 7 Cu st om er re dr es s ch ar ge s (2 6) - - ( 26 ) - ( 26 ) (1 3) (3 9) - - - (3 9) Po rt fo lio d iv es tm en ts - - 3 5 35 - 35 (3 0) 5 - - - 5 In ve st m en t r et ur n on tr ea su ry s to ck he ld fo r po lic yh ol de rs - - 9 9 - 9 - 9 - - - 9 G ai n on li qu id at io n of b us in es s ac tiv iti es - - - - - - - - - - 1 3 1 3 An no un ce d ac qu is iti on tr an sa ct io n co st s - - - - - - - - - - - - Im pa ir m en t o f i nt er na lly g en er at ed co m pu te r so ft w ar e - - - - - - ( 13 6) (1 36 ) - - - (1 36 ) G ro up t ot al 2 ,0 89 1 ,6 27 61 9 4, 33 5 (1 ,6 90 ) 2 ,6 45 (2 ,2 81 ) 36 4 (1 ,1 33 ) (4 ) 13 (7 60 ) 1 U nd er ly in g pe rf or m an ce e xc lu de s th e im pa ct o f n on -c or e ite m s (p ag e 58 ). 2 Fo rm er ly C or po ra te a nd T re as ur y, re na m ed C or po ra te a nd M ar ke ts . 3 Fo rm er ly tr an sf or m at io n in ve st m en t c os ts . T ra ns fo rm at io n pr og ra m m e co st s in cl ud es c os t o f r es tr uc tu rin g an d ot he r t ra ns fo rm at io n pr og ra m m e co st s. D iv is io na l f in an ci al r es ul ts (c on tin ue d) In co m e st at em en t - o pe ra tin g se gm en ts Bank of Ireland Annual Report 2021 Governance Contents Corporate Governance Statement Chairman’s introduction 78 Your Board 81 Report of the Nomination, Governance and Responsible Business Committee 100 Report of the Group Remuneration Committee 104 Report of the Group Audit Committee 107 Report of the Board Risk Committee 113 Attendance table 118 Report of the Directors 119 Schedule to the Report of the Directors 122 Remuneration report 125 Bank of Ireland Annual Report 2021 Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 77 80 Patrick Kennedy Chairman 25 February 2022 The Board succession plan, approved in 2021, has identified a number of decisions regarding the tenure of Directors and actions required to ensure the orderly succession of Directors over the coming years, many of which will commence in 2022. Market experience suggests it is increasingly challenging to identify suitable individuals of high calibre with an interest in taking on a bank board position on the current terms and conditions, due to the level of scrutiny, expectation and risk associated with such positions in the current environment. The imminent introduction of the Senior Executive Accountability Regime in Ireland, whilst welcome in many ways including the clarity it brings in relation to accountability in financial services, is likely to be another barrier to attracting diverse candidates from other industries to bank boards. Other Committee changes Ian Buchanan joined the Group Remuneration Committee on 1 January 2022. During 2021, reflecting the increasing importance of environmental and social activities, the Board approved the establishment of a new standalone Board-level Responsible and Sustainable Business (RSB) Committee, which commenced activities in February 2022 and will be supported by the Group’s new Chief Sustainability & Investor Relations Officer. The committee will be comprised of the following four NEDs, selected with regard to, inter alia, their backgrounds, skillsets, activity levels across the Group and subject matter interest: Director Position on RSB Committee Fiona Muldoon Chair Giles Andrews Member Evelyn Bourke Member Michele Greene Member Shared membership between the Board Risk Committee (BRC), vital in the context of the heavy risk focus that will be required in relation to RSB activities, particularly climate-related, will be achieved via the common membership of Giles, Evelyn and Michele. Shared membership is also achieved with the Group Audit Committee (GAC) via Fiona and Evelyn in the context of external financial and non-financial reporting. Board and individual effectiveness evaluation During 2021, the Board conducted the annual evaluation of its effectiveness. Having successfully concluded a comprehensive external evaluation in 2019, the 2020 and 2021 processes were internal and consisted of the completion of questionnaires by each Director and individual meetings between myself, as Chairman and the individual Directors. In addition, Committee Chairs met with Committee Members to consider the effectiveness of their respective Board Committees and, led by the Senior Independent Director (SID), the Directors completed questionnaires and held meetings to discuss my performance as Chairman. In summary, the 2021 evaluation confirm the continued effectiveness of the Board. The evaluation of individual directors concluded that individual directors continue to demonstrate commitments to their roles, with such commitment evidenced further during 2021 given the significantly heightened activity levels arising from the announced acquisition of Davy and KBCI portfolios. All Directors are considered to be experienced and provide objective perspective. The Board consider the effective contribution of each of the individual Directors and the Board as a whole to be important to the long-term sustainable success of the Group. On pages 87 and 90 respectively, you will find detail on the outcome of the 2021 evaluation of the Chair’s effectiveness, as well as that of the wider Board. As part of the process, we identified some areas for enhancement, details of which can be found later in the Report. Such enhancements are always welcomed and I look forward to reporting on progress on those areas in the next report. Updates on the areas for enhancement identified in the 2020 Board effectiveness evaluation are also reported on page 91. The Board met on 21 occasions during 2021, just one of which was in person, which reflects the continuing challenge of the pandemic. Whilst the Directors would have liked for more in- person meetings, the Board has considered it important to adhere to the Group’s guidelines for the workplace which have been applied to colleagues and are aligned with applicable Government guidelines on COVID-19. The Board looks forward in anticipation to more in-person meetings in 2022, whilst at all times setting the tone from the top for our colleagues and ensuring compliance with the prevailing Government guidelines. Looking ahead The Board will continue to work effectively with the Executive team in 2022 to ensure continued challenge to and delivery of the Group’s strategy in order to create sustainable long-term value for our shareholders. The Group’s governance framework will be subject to continuous review to ensure it remains robust and facilitates effective decision making and appropriate Board oversight. Alongside the Group’s transformation agenda, the health and safety of our colleagues and customers and the Bank’s wider role in the community and the successful execution of the announced acquisitions of Davy and KBCI portfolios for all stakeholders will remain top priorities. Chairman's introduction (continued) Bank of Ireland Annual Report 2021 Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 81 Your Board Group Executive Committee Francesca McDonagh (Group Chief Executive Officer) Myles O’Grady (Group Chief Financial Officer) Matt Elliott (Group Chief People Officer) Gavin Kelly (Chief Executive, Retail Ireland) Paul McDonnell (Interim Chief Executive, Corporate & Markets) Ian McLaughlin (Chief Executive, Retail UK) Sarah McLaughlin (Group Secretary and Head of Corporate Governance) Jackie Noakes2 (Chief Operating Officer) Stephen Roughton-Smith (Group Chief Risk Officer) Mark Spain (Chief Strategy Officer) Oliver Wall (Chief of Staff & Head of Corporate Affairs) Enda Johnson (Transformation Director) Evelyn Bourke (Chair) Eileen Fitzpatrick Richard Goulding Fiona Muldoon Steve Pateman Richard Goulding (Chair) Giles Andrews Evelyn Bourke Ian Buchanan Michele Greene Steve Pateman Steve Pateman (Chair) Giles Andrews Ian Buchanan Eileen Fitzpatrick Fiona Muldoon Patrick Kennedy (Chair) Eileen Fitzpatrick Richard Goulding Fiona Muldoon Group Audit Committee Board Risk Committee Group Remuneration Committee Nomination, Governance & Responsible Business Committee1 Board Ian Buchanan (Chair) Giles Andrews Richard Goulding Michele Greene Patrick Kennedy Group Transformation Oversight Committee Bank of Ireland Annual Report 2021 Fiona Muldoon (Chair) Giles Andrews Evelyn Bourke Michele Greene Group Responsible and Sustainable Business Committee1 The above list reflects GEC membership on 25 February 2022, including new appointments during 2021 and early 2022. The inclusion of Paul McDonnell as Interim Chief Executive, Corporate & Markets reflects the interim arrangements in place since August 2021. It was with great sadness that the Group learned of the passing of our dear friend and colleague Tom Hayes, who had been with the Bank since 1979 and a member of the GEC since 2018. Tom had deep relationships with his colleagues and customers and his loss has been felt widely. May he Rest in Peace. The Group is appreciative of Paul stepping in since August and continuing in this role, pending the identification of a permanent successor to the role of Chief Executive, Corporate & Markets. 1 The Nomination, Governance & Responsible Business Committee is to be renamed the Group Nomination and Governance Committee following the commencement of the Group Responsible and Sustainable Business Committee in February 2022. Updated Terms of Reference will be available on the Group website in Q3 2022. 2 Jackie Noakes departs the Group at the end of March 2022. The COO role will be restructured into a Chief Technology and Payments Officer (CTPO) role and an update on a successor to that role will be announced in due course. 82 Your Board (continued) NGRBGTOC Patrick Kennedy Richard Goulding Francesca McDonagh Giles Andrews Evelyn Bourke Eileen Fitzpatrick Michele Greene Fiona Muldoon Myles O’Grady Steve Pateman GTOCBRCRCAC AC GTOC AC BRC Audit Committee Board Risk Committee Group Transformation Oversight Committee Abbreviations Ian Buchanan GTOCBRCGTOC RCRSB GTOCAC BRC NGRB RCAC AC RC RC NGRB Nomination, Governance and Responsible Business Committee Remuneration Committee NGRB NGRB BRC BRC Bank of Ireland Annual Report 2021 BRC RSB RSB RSB RSB Responsible and Sustainable Business Committee Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 85 Your Board (continued) Eileen Fitzpatrick Independent Non-Executive Director Role Non-Executive Director (May 2019), Member, Audit Committee (May 2019), Remuneration Committee (May 2019) and Nomination, Governance and Responsible Business Committee (January 2020). Workforce Engagement Director ( January 2020). Particular Skills Eileen has extensive capital markets and public sector experience and has held a number of senior roles in both the asset management and stockbroking industries. External Appointments Chairman of the Outside Appointments Board, Department of Public Expenditure and Reform. Non-Executive Director and organisational effectiveness director for a number of KKR investment management firms in Ireland. A member of the Risk and Compliance Committee of KKR. Non-Executive Director of Urbeo Residential Limited. Experience Eileen joined the National Treasury Management Agency (NTMA) in 2006 as a director, where she oversaw the Alternative Assets Investment Programme, for the National Pensions Reserve Fund. Eileen was subsequently appointed as head of NewERA at the NTMA, a position she held from November 2011 to January 2019. Prior to her appointment at the NTMA Eileen was Chief Executive Officer at AIB Investment Managers from 2000 to 2006. From 1987 to 2000 Eileen held a number of senior investment and stockbroking positions, including with AIB Investment Managers, Goodbody Stockbrokers, National City Brokers and Montgomery Govett. Eileen has served in a number of non- executive positions including as chairman of the Irish Association of Investment Managers, as a board member of the Chartered Accountants Regulatory Board, as a member of the Governments Top Level Appointments Committee and as a member of the Governing Body of University College Dublin. Qualifications PhD in Science from University College Dublin. Michele Greene Non-Executive Director Role Non-Executive Director (December 2019). Member, Risk Committee and Group Transformation Oversight Committee (December 2019). Member, RSB Committee (December 2021). Particular Skills Extensive experience of financial services and retail banking, particularly in the areas of payments, transformational and digital innovation. External Appointments Non-executive Director of East End Fair Finance Limited. Director of Mololo Limited, an advisory firm specialising in the use of advanced technologies for performance management. Experience Michele held the role of managing director of Virgin Money’s Digital Bank until July 2018, prior to which she was director of strategic development, responsible for the bank’s future development. Michele joined Virgin Money initially as director of banking, with responsibility for building the bank’s new credit card business. Before joining Virgin Money, she was CFO of MBNA Europe where she held executive positions on the board of MBNA Europe Ltd. and Premium Credit Finance Limited. Michele’s earlier career was spent at Goldman Sachs, Credit Lyonnais and KPMG. Michele was appointed as a Non-executive Director of East End Fair Finance Limited in September 2021. Qualifications Master’s Degree from Trinity College Dublin. Fellow of Chartered Accountants Ireland. Fiona Muldoon Independent Non-Executive Director Role Non-Executive Director ( June 2015). Member, Nomination, Governance and Responsible Business Committee (January 2019), Audit Committee (May 2020) and Remuneration Committee (October 2020), Director and Audit Committee Chair, New Ireland Assurance Company (April 2021). Member, Risk Committee (November 2016 to December 2020). Chair, RSB Committee (December 2021). Particular Skills Extensive financial services leadership in general management and senior finance positions both nationally and internationally. Strong commercial acumen and significant capital markets experience. Prudential regulatory leadership during the financial services crisis. External Appointments None. Experience From 2015 to 2020, Fiona was group chief executive of FBD Holdings plc and FBD Insurance plc, one of Ireland’s largest general insurers. She served from 2011 to 2014 as Director of Credit Institutions and Insurance Supervision with the Central Bank of Ireland. Prior to that, Fiona spent the majority of her executive career with XL Group variously in Dublin, London and Bermuda, where she held a variety of mainly senior finance and strategic roles including as Group Treasurer. In that position she had responsibility for strategy, corporate development, rating agency relationships and debt issuance. Qualifications Bachelor of Arts Degree from University College Dublin. Fellow of Chartered Accountants Ireland. Bank of Ireland Annual Report 2021 86 Your Board (continued) Myles O’Grady Group Chief Financial Officer and Executive Director Role Group Chief Financial Officer, Executive Director ( January 2020); Director, New Ireland Assurance Company (February 2021). Particular Skills Significant expertise working with international and domestic regulators, government and state authorities, investors, market analysis and international investment banks. Experienced across strategy development, business restructuring and recovery, Finance function transformation, investor relations and Initial Public Offerings (IPOs). External Appointments Director of Irish Banking Culture Board. Experience Myles has 30 years’ experience as a finance professional with over 25 years in financial services. Prior to joining the Group he was CFO at D|Res Properties, an Irish homebuilding and property development company. Previously, he was group director of finance and investor relations at AIB, an Irish financial services group operating predominantly in Ireland and the UK. Myles’ earlier career was spent at Citibank and Dresdner Kleinwort Benson. Qualifications Fellow of the Chartered Association of Certified Accountants, an INEAD-certified board director and member of the Institute of Directors in Ireland. Steve Pateman Independent Non-Executive Director Role Non-Executive Director (September 2018). Chair, Remuneration Committee (January 2020, Member September 2018). Member, Audit and Risk Committees (September 2018). Particular Skills Brings to the Board the strategic insights of a CEO of a UK Bank and a strong lending and credit background with deep commercial experience including the operational challenges facing lending institutions. External Appointments Director of ActivTrades Loans plc. Experience Steve serves as a Director at ActivTrades where he works on a number of strategic projects. Steve chaired the Advisory Board of Arora from January 2016 to March 2020 and became CEO for a short period before returning to the Advisory Board from which he stood down in June 2021. Previously, Steve was the CEO of Hodge Group from January 2019 to March 2020 and of Shawbrook Bank from October 2015 to December 2018. He joined Shawbrook from Santander UK, where he had been an Executive Director and Head of UK Banking with responsibility for Santander’s corporate, commercial, business and retail banking operations as well as wealth management. He also held senior positions at Royal Bank of Scotland and NatWest and was a director of The Mortgage Lender Limited from May 2018 to January 2019. Qualifications Steve was elected as President of the Chartered Banker Institute in June 2021 having previously served as a Vice President and Senior Vice President. He was awarded an Honorary Doctorate from the University of Kent for services to banking. Bank of Ireland Annual Report 2021 Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 87 Bank of Ireland Annual Report 2021 Chairman's tenure Patrick Kennedy was appointed Chairman in August 2018. He was independent under the UK Code at the time of his appointment. As an existing NED, he registered service of nine years on the Board in July 2019. In the 2019 and 2020 Annual Reports, the Board’s consideration of Patrick’s continued strength of leadership was outlined against the backdrop of the UK Code recommendations. The UK Code and the supporting Guidance on Board Effectiveness identify service on the Board for more than nine years from the date of first appointment as a specific consideration in the evaluation of the independence of NEDs. The Chairman is not subject to the UK Code’s independence test other than on appointment. However, the UK Code recommends that the Chairman is subject to similar length of service considerations and should not remain in post longer than nine years. The UK Code provides for extension of the Chairman's tenure to facilitate succession planning and the development of a diverse Board, particularly in those cases where the Chairman was an existing NED on appointment. The principles and provisions of the UK Code in this area are not rigid rules but instead offer flexibility through the application of its ‘comply or explain’ provisions and the supporting Guidance; they are considered to support maintenance of the right combination of skills, experience and knowledge on the board, supported by formal processes of appointment and annual evaluation of performance. The 2020 Annual Report outlined the Board’s rationale for Patrick’s continuation as Chairman for a further period and the Board’s recommendation of his re-election at the 2021 Annual General Meeting (AGM), which was subsequently approved by the Company’s shareholders with greater than 98% of votes cast in favour of his re-election. The Company consulted with shareholders regarding an appropriate extension of Patrick’s tenure under the principles and provisions of the UK Corporate Governance Code during 2020. The outcome of this consultation was reported in our 2020 Annual Report. The position, outlined and supported by shareholders, both during consultation and in the positive voting outcome at our 2021 AGM, remains unchanged. In 2021, shareholders, representing c.50% of the Company’s share capital and the Department of Finance were again consulted. The outcome of this consultation was positive, with shareholders confirming their continued understanding of and full support for the Board’s position. An overview of the Board’s assessment of the key considerations on the Chairman's tenure, which was shared during the consultation, is outlined below. The Board’s assessment of the key considerations on the continuation of the Chairman's tenure Patrick Kennedy’s appointment as Chairman in August 2018 was governed by a rigorous process led by the SID with external benchmarking by Egon Zehnder which rated him as an exceptional candidate for the role. His performance in the role in the three years since his appointment - from his refocusing of the Board agenda, the innovation he has brought to the Board’s engagement with customers and staff, his structured approach to engagement with institutional shareholders and regulators, through to his leadership during the COVID-19 pandemic - has confirmed his exceptional qualities as Chairman. Patrick’s positioning as an internal candidate for the chairman arose out of a planned process of succession. As part of that succession planning, he had the opportunity to serve on each major Board Committee, including Chair of the Risk Committee and Deputy Chair until July and August 2018 respectively. His years of experience of Bank of Ireland prior to his appointment as Chairman, which are calculated in the assessment of tenure, are precisely what provided him with the detailed understanding of the business which, in the view of the Board, underpins his current success in the role. With seven out of eleven Board directors at January 2022 having been appointed within the last four years, the factors which were regarded as relevant to Patrick’s original selection as Chairman continue to be key Board considerations. These include: the significant level of change in Board membership which underlines a need for continuity on strategic issues and integration of new Board members into a coherent and effective team; and the complementary nature of Patrick’s knowledge and experience of the Irish environment, embracing all stakeholders including Customers, Regulators and the Government. Patrick has demonstrated exceptional commitment to Bank of Ireland and continues to bring very strong leadership to the Board. As the business embraces continuing significant internal change, including strategic acquisitions, the ongoing transformation of its culture and a multi-year programme of investment in systems and against a background of substantial change at Board level and within the executive team, his very detailed understanding of the business provides continuity of institutional knowledge and his continuing tenure provides desirable stability in the direction of the business. As referenced in the Chairman's opening statement, the risk arising from the continuing restrictions enforced by the Irish Government on Irish bank boards’ autonomy to determine remuneration policies that are appropriate to attract and retain talent and align executives' interests to the long-term sustainable success of the banks, is likely to have a growing impact on the tenure of executives; this goes further to supporting Patrick’s continuing tenure and resulting stability for Bank of Ireland. In relation to the senior management team, having regard to the relatively recent appointment of the CEO in 2017 and the imminent departure of the Group CFO in Q1 2022, the Board is satisfied that there is no issue of significant concurrent service arising as a governance concern. Patrick combines a detailed understanding of the Group with exceptional commercial acumen gained from a highly successful career in national and international business. He continues to demonstrate clear independence of mind and objective judgement. He has focused on strong succession at Board level with appointments of directors with experience of banking, technology, transformation and government policy. He has promoted diversity and constructive challenge amongst Board members and has reinforced relationships with the Group's stakeholders. His commercial skills and the knowledge he has acquired of banking are unusual in an Irish-based director. An independent review of his role provided by Praesta to the Board in January 2020 assessed him as a first-class Chairman, rated very highly by all Board members, which was reinforced in the internal review of his performance in role reported to the Board in both January 2021 and January 2022. Your Board (continued) 90 Bank of Ireland Annual Report 2021 Your Board (continued) The Board’s Professional Development and Continuous Education Programme • Formal Induction Programme: A suite of induction documentation is furnished to all incoming Directors to facilitate their understanding of how the Group operates and the key issues that it faces. A series of meetings with senior management are arranged on matters such as Group and Divisional strategy, the Group’s Risk Appetite and Group Risk Framework, the regulatory environment, people strategies, technology and operations, capital and liquidity management and the Group’s financial position. The induction programme is supplemented with an additional bespoke programme, developed in conjunction with the incoming Director, to address any specific requirements. • Continuous Education Programme: The continuous development requirements of the Board and individual Directors is informed by the outcome of annual effectiveness reviews, the annual review of the collective skillset of the Board, emerging external developments and areas the Board has identified for further focus. The Continuous Education Programme is delivered through varying means and facilitated by internal and external experts where appropriate. The approach to Directors’ induction and continuous development is set out in a Board-approved Director Induction, Training and Development Policy which is reviewed annually by the NGRB. • Subject to constraints imposed by COVID-19 restrictions, site visits across the Group including meetings with colleagues and customers. Assessing the effectiveness of the Board The Board seeks to continually enhance its operations and, each year, conducts a formal effectiveness evaluation of the Board, Board Committees and individual Directors. In addition to reviewing the Board’s operations, composition and overall effectiveness, the evaluation reviews past performance with the aim of identifying possible opportunities for improvement, determines whether the Board and its Committees are, as a whole, effective in discharging their responsibilities and in the case of individual Directors, determines whether each Director continues to contribute effectively and to demonstrate commitment to their role. The Board is required to have an external evaluation conducted once every three years; an external review will take place during 2022. The Group last had an external evaluation conducted by Praesta Ireland in 2019 which concluded positively regarding the effectiveness of the Board, the Committees and individual Directors. An internal process was undertaken in 2020 and 2021. The outcome of the 2020 review was reported in the 2021 annual report and a report on progress against opportunities identified for improvement in 2020 is set out on page 91. Details of the 2021 evaluation are set out below. The 2021 internal evaluation comprised: • an online survey of Directors which sought their views on a range of topics across the Board and Board Committees: • one-to-one meetings between the individual Directors and the Chairman; • one-to-one meetings between Committee Members and the Committee Chairs; • an online survey of Directors which sought their views on the performance of the Chairman; • a meeting of the Board in the absence of the Chairman to discuss the Directors’ views on the performance of the Chairman; • a meeting of the NEDs only to discuss their views on the performance of the CEO; and • consideration of the final Review Reports at the Board and Board Committees and agreement on actions to ensure continued enhancement. The scope of the internal evaluation included: • consideration of the Board Composition and Competence; • assessment of the Board Strategy and the Board's approach to risk taking during 2021; • evaluation of the Board's Culture and Behaviour; • appraisal of Board engagement and its discharge of its responsibilities; • consideration of the Board's response to COVID-19; • consideration of the Board’s approach to and consideration of, the two announced acquisitions of Davy and KBCI portfolios; • an overall assessment of the Board's effectiveness during 2021; • a summary of the Board's expected priorities for the coming year; and • an appraisal of how each Board Committee discharged its responsibilities under various, Committee-specific headings during 2021. Chairman Each Director completed an online survey and attended one-to- one meetings with the SID, Richard Goulding, which sought their views on the performance of the Chairman. Led by the SID, the Board then met to discuss the outcome of the survey in the absence of the Chairman. The SID subsequently provided an update on the positive outcome of the review to the Chairman. Patrick Kennedy is considered to be a highly effective Chairman and continues to provide very strong leadership to the Board. The Board confirmed its continued support for Patrick Kennedy and his continuation in office, including his proposal for re- election at the 2022 Annual General Meeting (AGM). Further details on the Chairman's tenure can be found on page 87. Individual Directors The Chairman met with Directors on a one-to-one basis to discuss their individual performance, taking account of their feedback submitted in advance of the meetings on a number of topics including their individual contributions and performance at the Board. The Chairman assessed each Director as being fully effective, with all Directors demonstrating strong commitment to their role, noting that in 2021 they were each required again to go above and beyond their normal required time commitment to the role. Their individual contributions continue to be important to the company’s long-term sustainable success. Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 91 Bank of Ireland Annual Report 2021 Your Board (continued) 2021 Conclusion The findings of the Board and Board Committee evaluations were reviewed by the Group Secretary. The summary findings were then shared and discussed with the Chairman and feedback on each of the Committees was shared with the individual Committee chairs. Feedback on individual Directors was shared directly by the Chairman. The results culminated in a consolidated report on the findings of the full evaluation process being presented to the Board in January 2022. The outcome of the evaluation was positive. Overall the effectiveness of the Board and its Committees continued to be enhanced year on year. The key themes identified through the Board evaluation as having contributed to the Board's effectiveness in 2021 included the Board's flexibility, dedication and diversity accompanied by a strong transparent senior management team, complemented by a strong Chairman. The Board evaluation also identified the following areas for enhancement: i. continued and further improvement in the quality and consistency of the Board papers and presentations; ii. the strength of the commercial and customer focus in deep dives conducted into each business division; and iii. incorporation of a longer-term risk management discussion on the Board agenda. Progress against the 2020 external Board Effectiveness Evaluation actions A summary of the Board’s progress against the actions arising from the 2020 internal effectiveness review are set out below: • quality and consistency of Board papers: The Group Secretary, the Group CEO's Office and the People Services’ learning team engaged with Accenture to design a tailored training programme for circa 150 senior leaders who write and present papers to the Boards and Board Committees throughout the Group, including the boards of major subsidiaries. Emphasis Training, a highly respected training partner, delivered the training programme. A new Paper Template and Style Guide was issued to the Group in December 2021 which specifies requirements of the Board with regard to Board papers. Work will continue to ensure enhanced paper quality and consistency during 2022; and • greater focus on the Group's RSB agenda: Greater focus on the RSB agenda was ensured via the inclusion of RSB activities in the NGRB terms of reference and work programme during 2021, along with enhanced reporting and training at the Board. The establishment of a standalone RSB committee at Board level in early 2022 will further enhance the focus on what is an increasingly important topic. Regular updates • Chair’s activities. • CEO activities and key areas of focus. • Business and financial performance. • Organisational Balanced Scorecard: Performance relative to strategic, financial and non-financial key performance indicators. • Risk Management. • Board Committee activities. Financial • 2020 full year results. • 2021 half-year results and interim management statement. • Impairments. • Funding and Liquidity Policy. • Internal Capital Adequacy Assessment. • Internal Liquidity Adequacy Assessment. • Financial and investment plans. • Cost and Efficiency. Environment • Investor relations. • Economic environment. • Stakeholder engagements. Risk management • Group Risk Appetite Statement. • Risk Policies and Frameworks. • Group’s Remuneration Policy. • Group Recovery Plan. • Regulatory interactions. • General material risks, including those related to Brexit, COVID-19 and the wider macro economy. • Non-financial risk. • AML and combating of financing of terrorism updates. • The UK Control environment and conduct risk. • Risk assessments of the two announced acquisitions. • Risk assessment of the closure of RoI and NI branches. • Risk Mitigation Plan action progress updates and approval requests. Board Focus in 2021 The Board held 21 meetings during the year ended 31 December 2021. Further details on the number of Board and Committee meetings and attendance by individual Directors are set out on page 118. While not intended to be exhaustive, below is a high level overview of a number of matters considered by the Board and Board Committees during 2021: 92 Bank of Ireland Annual Report 2021 Your Board (continued) Strategy • Announced acquisition of Davy. • Announced acquisition of KBCI portfolios. • Digital Relationship Bank. • Transformation programme. • Progress implementing the Group’s 2018–2021 strategy. • The approach to a strategy refresh 2021-2024 including a clear focus on ‘what’ the strategy is and ‘how’ it will be delivered. • UK strategy programme. • Irish Retail Mortgage Market. Governance • Key Board governance policies and documents. • Corporate governance frameworks. • Board, Committee and Individual Directors Effectiveness Evaluation. • Endorsement of Material Risk Takers (MRTs) and Key Function Holders (KFHs). • Subsidiary oversight. • Tracking of agreed actions. Culture and values • Group Culture Programme. • Colleague engagement and culture survey outcomes. • Talent and capability updates. • Customer call listening. • Workforce Engagement Director Reports on colleague engagements. • Customer Effort Scores and Net Promoter Score. • Financial Wellbeing. Roles and Responsibilities Role of the Board The Group is led by an effective and committed Board of Directors, who are collectively responsible for the long-term success of the Group. The Board’s role is to provide leadership of the Group within the boundaries of risk appetite and a framework of prudent and effective controls which enable risk to be identified, assessed, measured and controlled. The Board sets the Group’s strategic aims and risk appetite to support the strategy, ensuring that the necessary financial and human resources are in place for the Group to meet its objectives. The Board ensures that the Group’s purpose, values, strategy and culture are all aligned and reviews management performance in that regard. The Board is responsible for endorsing the appointment of individuals who may have a material impact on the risk profile of the Group and monitoring on an ongoing basis their appropriateness for the role. The removal from office of the head of a ‘control function’, as defined in the Irish Code, is also subject to Board approval. The respective roles of the Chairman and the Group CEO, which are separate, are set out in writing and have been agreed by the Board. The Board has a schedule of matters specifically reserved for its decision which is reviewed and updated regularly. The Board approves the Group Risk Framework on an annual basis and receives regular updates on the Group’s risk environment and exposure to the Group’s material risk types. Further information on risk management and the Board’s role in the risk governance of the Group is set out in the Risk Management Report on pages 113 to 117. The work of the Board follows an agreed schedule of topics which evolves based on business needs and is formally reviewed annually by the Board. Role of the Chairman The Chairman oversees the operation and effectiveness of the Board, including ensuring that agendas cover the key strategic items confronting the Group and encouraging all Directors to participate fully in the discussions and activities of the Board. He also ensures that there is effective communication with shareholders and promotes compliance with corporate governance standards. The Chairman commits a substantial amount of time to the Group and his role has priority over any other business commitment. Role of the Deputy Chair and Senior Independent Director The Deputy Chair adopts the role of Senior Independent Director (SID) and deputises for the Chairman as required and is a Trustee of the Bank Staff Pensions Fund. The SID provides a sounding board for the Chairman and serves as an intermediary for the other directors and shareholders if they have concerns that contact through the normal channels of Chairman, Group CEO or other Executive Directors has failed to resolve or for which such contact is inappropriate. As appropriate and when required, the SID meets a range of major shareholders in order to develop a balanced understanding of their views. The SID leads the evaluation of the Chairman in conjunction with the other Directors and would normally take responsibility for an orderly succession process for the Chairman working closely with the NGRB. Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 95 Bank of Ireland Annual Report 2021 Stakeholder engagement (continued) with colleagues and plans for opportunities both on a virtual basis or physically via site visits which will be implemented dependent on the COVID-19 situation. As the Board-designated Workforce Engagement NED, Eileen Fitzpatrick works to enhance existing engagement and feedback mechanisms between the Board and the workforce and to strengthen the ‘employee voice’ at the Board. The Workforce Engagement Director WED role operates under formal terms of reference and reports regularly to the Board on direct feedback from colleagues across the Group. This direct colleague connection supplements various existing regular feedback and reporting mechanisms on culture and behaviour to the Board and is intended to further assist the Board in understanding colleague concerns and where relevant enhance colleague-centred decision making. During 2021, Eileen undertook a number of valuable activities which provided great insights for the Board and facilitated further consideration of the workforce in Board decisions. These activities included, but are not limited to: • numerous ‘Open Door’ sessions with groups of colleagues drawn from various businesses and divisional teams and with senior management groups; • listening sessions with various representative groups; • feedback session on Irish Banking Culture Board (IBCB) report; • deep dives on the Open View survey results and Speak Up and Wellbeing surveys; and • meetings with UK colleagues and with the newly appointed UK Board Workforce Engagement Director. Matters discussed with colleagues during the WED sessions include the Group’s response to the COVID pandemic, the Group’s Ways of Working during and post the pandemic and organisational bandwidth. As referenced earlier in the Report, the Board is aware that the Group’s approach to Ways of Working post the pandemic is an area of interest for colleagues and the insights from the WED’s engagements, the Open View colleague survey and reports from the Executive are helpful when the Board is considering these matters. In the Chair’s Introduction, he acknowledges the heightened activity levels experienced during 2021 and referenced the Board’s focus with the Executive on assessing and ameliorating organisational bandwidth through a number of initiatives – again, the WED sessions provided further direct insights for the Board which informs its discussions and decision-making process. Regulators and Government The Chairman and members of the Board regularly meet with representatives from the regulators and government bodies, including the Joint Supervisory Team ( JST), the CBI, BoE, Financial Conduct Authority (FCA), Prudential Regulatory Authority (PRA), ECB and the Department of Finance. Core themes discussed at these meetings include regulation and supervision, risk governance and oversight, challenges facing the banking industry, strategic challenges and rebuilding trust and culture. The Chairman and Group CEO update the Board on their meetings with regulators and government bodies at each Board meeting. Management provides regular briefings to the Board on regulatory engagement and correspondence which ensures that the Board remains aware of regulatory expectations and areas of focus. Communities The Group’s communities are those where it has a physical presence, where colleagues live and work, as well as other local and global groups and partners. The Group supports the wider community through its community investment programme, Begin Together, its support of local enterprise and through its financial wellbeing programmes as well as playing an active role in society. Begin Together was launched in February 2020. The Fund provides valuable investment for community initiatives making a difference in towns and villages across the island of Ireland. In 2021 the Fund, working with the Community Foundation for Ireland, granted between €3,000 and €20,000 to 59 projects encompassing financial, mental and physical wellbeing projects included financial skills for young people, suicide prevention and physical exercise for the elderly. The Group is conscious of and acknowledges the importance of, its role in wider society. Board’s oversight of risk management and internal control systems Accountability and audit The Report of the Directors, including a going concern statement and a viability statement, is set out on pages 119 to 121. This Corporate Governance Statement forms part of the Report of the Directors. Board responsibility The Board is responsible for overseeing the Group’s risk management and internal control systems, which are designed to facilitate effective and efficient operations and to ensure the quality of internal and external reporting and compliance with applicable laws and regulations and to review the effectiveness of same. In establishing and reviewing the risk management and internal control systems, the Directors carried out a robust assessment of the principal risks facing the Group including those that would threaten its business model, future performance, solvency or liquidity, the likelihood of a risk event occurring and the costs of control. The process for identification, evaluation and management of the principal risks faced by the Group is integrated into the Group’s overall framework for risk governance. The Group is forward-looking in its risk identification processes to ensure emerging risks are identified. The risk identification, evaluation and management process also identifies whether the controls in place result in an acceptable level of risk. At Group level, a consolidated risk report and risk appetite dashboard is reviewed and regularly debated by the BRC and the Board to ensure satisfaction with the overall risk profile, risk accountabilities and mitigating actions. The report and dashboard provide a monthly view of the Group’s overall risk profile, key risks and management actions, together with performance against risk appetite and an assessment of emerging risks which could affect the Group’s performance over the life of the operating plan. Your Board (continued) 96 Bank of Ireland Annual Report 2021 Information regarding the main features of the internal control and risk management systems is provided within the risk management report on pages 150 to 193. The Board concluded that the Group’s risk management arrangements are adequate to provide assurance that the risk management systems put in place are suitable with regard to the Group’s profile and strategy. Control systems The Group’s overall control systems include: • a clearly defined organisation structure with defined authority limits and reporting mechanisms; • three lines of defence approach to the management of risk across the Group: line management in individual businesses and relevant Group functions, central risk management functions and Group Internal Audit (GIA); • Board and Management Committees with responsibility for core policy areas; • a set of policies and processes relating to key risks; • reconciliation of data consolidated into the Group’s financial statements to the underlying financial systems. A review of the consolidated data is undertaken by management to ensure that the financial position and results of the Group are appropriately reflected, through compliance with approved accounting policies and the appropriate accounting for non-routine transactions; • Codes of Conduct setting out the standards expected of all Directors, officers and employees in driving an appropriate, transparent risk culture; • a Risk Control Self-Assessment framework, where risks are logged, managed and mitigated across the first-line, with clear reporting, escalation and second-line oversight. Action plans are developed and implemented to address any control deficiencies; • a comprehensive set of accounting policies; and • a compliance framework incorporating the design and testing of specific controls over key financial processes. The Group operates a comprehensive internal control framework over financial reporting with documented procedures and guidelines to support the preparation of the consolidated financial statements. The main features are as follows: • a comprehensive set of accounting policies relating to the preparation of the annual and interim financial statements in line with IFRS as adopted by the EU; • an independent internal audit function with responsibility for providing independent, reasonable assurance to key internal (Board, Group and Subsidiary Audit and Risk committees and senior management) and external (Regulators and external auditor) stakeholders on the effectiveness of the Group’s risk management and internal control framework; • a compliance framework incorporating the design and testing of specific controls over key financial processes to confirm that the Group’s key controls are appropriate to mitigate the financial reporting risks; • a robust control process is followed as part of interim and annual financial statements preparation, involving the appropriate level of management review and attestation of the significant account line items and where judgements and estimates are made, they are independently reviewed to ensure that they are reasonable and appropriate. This ensures that the consolidated financial information required for the interim and annual financial statements is presented fairly and disclosed appropriately; • the Annual Report and Interim Report are also subject to detailed review and approval through a structured governance process involving Senior and Executive finance personnel; • summary and detailed papers are prepared for review and approval by the GAC covering all significant judgemental and technical accounting issues, together with any significant presentation and disclosure matters; and • user access to the financial reporting system is restricted to those individuals that require it for their assigned roles and responsibilities. Reviews by the Board The effectiveness of the risk management and internal control systems is reviewed regularly by the Board, the GAC and the BRC, which also receive reports of reviews undertaken by Group Risk and GIA. The GAC receives reports from the Group’s external auditor (which include details of significant internal control matters that they have identified) and has separate discussions with the external and internal auditors at least once a year without Executives present, to ensure that there are no unresolved issues of concern. Continuous improvement The Group’s risk management and internal control systems are regularly reviewed by the Board and are consistent with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council and compliant with the requirements of CRD V. They have been in place for the year under review and up to the date of the approval of the annual report. The Group continues to work towards compliance with the Basel Committee on Banking Supervision (BCBS) 239 risk data aggregation and risk reporting requirements and continues to actively manage enhancements. The Group’s controls frameworks are continuously improved and enhanced, addressing known issues and keeping pace with the dynamic environment. Progress continues to be made in operational (including IT and Information Security), regulatory and conduct risks. The 2021 internal control assessment provides reasonable assurance that the Group’s controls are effective, or that, where control weaknesses are identified, they are subject to management oversight and action plans. The GAC, in conjunction with the BRC, following an assessment of whether the significant challenges facing the Group are understood and are being addressed, concluded that the assessment process was effective and made a positive recommendation to the Board in that regard. Board Governance Conflicts of interest The Board has an approved Conflicts of Interest Policy which sets out how actual, potential or perceived conflicts of interest are to be identified, reported and managed to ensure that Directors act at all times in the best interests of the Group. This policy is reviewed on an annual basis. The Group Code of Conduct, which applies to all employees and Directors of the Group, clarifies the duty on all employees to avoid conflicts of interests. The Code of Conduct is reviewed on an annual basis and communicated throughout the Group. Time commitment The Group ensures that individual Board Directors have sufficient time to dedicate to their duties, having regard to applicable regulatory limits on the number of directorships which may be held by any individual Director. The Company and the Bank have each been classified as ‘significant institutions’ under CRD. During the year ended 31 December 2021, all Your Board (continued) Governance Risk Management Report Financial Statements Other InformationStrategic Report Financial Review 97 Bank of Ireland Annual Report 2021 Directors were within the directorship limits set out for significant institutions under CRD. All newly-appointed Directors are provided with a comprehensive letter of appointment detailing their responsibilities as Directors, the terms of their appointment and the expected time commitment for the role. A copy of the standard terms and conditions of appointment of NEDs can be inspected during normal business hours by contacting the Group Secretary. Directors are required to devote adequate time to the business of the Group, which includes attendance at regular meetings and briefings, preparation time for meetings and visits to business units. In addition, NEDs are normally required to sit on at least one Board Committee, which involves the commitment of additional time. Certain NEDs, such as the Deputy Chair, SID and Committee Chairs, are required to allocate additional time in fulfilling those roles. Before being appointed, Directors disclose details of their other significant commitments along with a broad indication of the time absorbed by such commitments. Before accepting any additional external commitments, including other directorships that might impact on the time available to devote to their role, the agreement of the Chairman and the Group Secretary, or, depending on the nature of the proposed commitment, the full Board, must be sought. In certain cases, advanced CBI approval must also be sought. Proposed new external commitments are assessed against conflicts of interest, over boarding and time commitment considerations. Any new external commitments proposed by the Chairman require SID and Group Secretary approval in the first instance and, depending on the nature of the proposed commitment, the Board and CBI approval in advance. During 2021, all Directors complied with the Board-approved process and sought approval in advance where required. A number of Directors took on additional external roles during 2021, following receipt of the requisite advanced approvals. Details of Directors external roles can be found on pages 83 to 86 and 97. The Group has an obligation to report the reasons for permitting significant appointments. The following appointments which took place during 2021 and early 2022 are considered significant in terms of additional external appointments. Evelyn Bourke sought approval in advance for non-executive directorship roles on the Boards of A J Bell (March 2021) and Admiral Group plc (April 2021). In considering whether to approve these external roles, the NGRB and the Board gave due and careful consideration to actual, potential or perceived conflicts of interest, the risk of ‘over boarding’, whether the additional roles would impact Evelyn’s ability to commit the requisite time to her Group duties and CRD directorship limitations. The Board was satisfied that there was no issue of concern that should impede Evelyn from proceeding and that the roles could be managed in accordance with the Board- approved policy. Evelyn also took up the role of Senior Independent Director at A J Bell in January 2022. In the 2020 Report we shared details on Evelyn’s appointment to the Marks & Spencer Group plc Board in February 2021, where she is a member of the Nomination and Audit Committees. Patrick Kennedy sought approval in advance for a non-executive directorship role, to include the role of Audit Committee Chair and Senior Independent Director, on the Board of ASOS plc. In considering whether to approve this external role, in the absence of the Chair, the NGRB and the Board gave due and careful consideration to actual, potential or perceived conflicts of interest, the risk of ‘over boarding’ in the particular context of his role as Chairman, whether the additional roles would impact Patrick’s ability to commit the requisite time to his Chairman duties and CRD directorship limitations. The Board also considered the Irish Code requirements and the need for advance approval from both the CBI and the JST. The Board was satisfied that there was no issue of concern that should impede Patrick from proceeding and that the role could be managed in accordance with the Board-approved policy. The external role has been approved by the Regulators and Patrick joined the ASOS plc Board on 13 January 2022. All Directors are reminded of their obligations under the Board’s Conflicts of Interest Policy when approved for any external roles and such roles remain under regular review. In accordance with the Group’s listing obligations, an RNS was issued to the market to advise of Evelyn and Patrick’s appointments. Balance and Independence The Board has determined that all nine NEDs in office at 31 December 2021 were independent in character and judgement and free from any business or other relationships with the Group which could affect their judgement. Michele Greene has been deemed non-independent as a consequence of her nomination for appointment to the Board by the Minister for Finance. Having regard for the nature of the individual and her contribution to the Board since appointment, the Board remains satisfied that in carrying out of her duties as a Director, Michele exercises independent and objective judgement without external influence. Term of appointment and re-election of Directors NEDs are normally appointed for an initial three-year term, with an expectation of a further term of three years, assuming satisfactory performance and subject to the needs of the business, shareholder re-election and continuing fitness and probity. Any continuation in term beyond two three-year terms is considered on an annual basis and will have regard for a number of factors including performance, independence, the Board's succession planning needs over the medium to long term and the best interests of the shareholders. A NED’s term of office will generally not extend beyond nine years in total unless the Board, on the recommendation of the NGRB, concludes that such extension is necessary due to exceptional circumstances. In such a situation the Board will document its rationale for any continuance and so advise the CBI in writing as required under the Irish Code. In respect of Executive Directors, no service contract exists between the Company and any Director which provides for a notice period from the Group of greater than one year. None of the NEDs have a contract of service with the Group. It is Group practice that, following evaluation, all Board Directors are subject to annual re-election by shareholders. All Directors retired at the AGM held on 25 May 2021. The following Directors, being eligible, offered themselves for election/re-election and were elected at the AGM in 2021: • Giles Andrews • Ian Buchanan • Evelyn Bourke • Eileen Fitzpatrick • Richard Goulding • Michele Greene • Patrick Kennedy • Francesca McDonagh • Fiona Muldoon • Myles O'Grady • Steve Pateman Your Board (continued)