Bank of Ireland GP

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Bank of Ireland Group plc Annual Report 20 23 Inside this report Strategic Report 3 2023 strong financial performance and strategic progress highlights 3 Chairman’s review 4 Chief Executive’s review 6 Our strategy 10 Sustainability 14 Governance in action 46 Risk review 49 Operating and financial review 50 Governance 74 Risk Management Report 134 Financial Statements 184 Other Information 351 Bank of Ireland Annual Report 2023 2 'In 2023, the group performed well with strong financial results, tangible strategic progress and improved customer and employee outcomes. This represents an excellent start to our three year strategic cycle, underpinned by our differentiated business model, the attractive markets in which we operate, especially Ireland, and guided by our purpose to help customers, colleagues, shareholders and society to thrive.' Myles O'Grady Group Chief Executive The Group's forward looking statement can be found on page 354. View this report online This Annual Report and other information relating to Bank of Ireland is available at: www.bankofireland.com Strategic Report 2023 strong financial performance and strategic progress highlights Step change in business performance Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 3 Further information on financial measures referred to above can be found in alternative performance measures on page 356. Strategic delivery +23% Irish Loans +8% Customers1 +18% AUM Strong financial performance €1.9bn PBT (20222: €1.0bn) 42% CIR3 (20222,3,4: 54%) 17.3% RoTE adjusted (20222,4,: 10.1%) Step change in distributions 340bps Net capital generation (2018-22 average 100 bps) 14.3% Fully loaded CET1 (20222 : 15.1%) €1.15bn 72% total distribution5 13% of market capitalisation6 1 New Irish bank channel customer relationships as a proportion of total customers at the start of the year. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. As a result comparative figures have been restated to reflect the impact of the new standard. 3 The Group’s 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 non-core table on page 55 for further details. For calculation of underlying cost / income ratio (CIR) see page 362. 4 Comparative figures have been restated to reflect a reallocation of €2 million from Retail Ireland business income to 'other valuation items'. 5 Proposed ordinary dividend subject to shareholder approval. 6 Based on market capitalisation of Bank of Ireland Group plc at 31 December 2023. Introduction Bank of Ireland performed strongly in 2023, financially and strategically. Underlying profit before tax increased by 75% to €2.02 billion, the highest level of profitability in the Group's history. The Group also made further significant progress on its transformation journey, delivering on the refreshed strategy which it communicated last March. The very strong financial performance reflects commercial delivery across all business lines, supported by a more favourable interest rate environment. The increase in interest rates over the last 18 months follows a fall in recent years to the lowest levels recorded. Strategy and performance The Group delivered on each pillar of its refreshed strategy. Some highlights include: • Under Stronger Relationships, we helped c.14k people to buy a new home, achieving a 41% share of the new mortgage lending market in Ireland; • Under Simpler Business, our ongoing focus on efficiency supported a significant reduction in our underlying cost / income ratio, to 42%; • Under Sustainable Company, we maintained our position as the leading provider of green mortgages in Ireland, and published our United Nations Principles for Responsible Banking financial health and inclusion targets. We also welcomed c.150,000 new customers to the Group last February when the acquisition of the KBC Bank Ireland (KBCI) portfolios was completed. The Group’s strategic plan runs to the end of 2025. The scorecard, a third of the way through, shows a positive start, delivering for all of our key stakeholders. For customers, our Relationship Net Promoter Score (RNPS) strengthened to +5 from a 2022 baseline of +4, and complaints in Retail Ireland fell by a further 5% in 2023. For colleagues, our Culture Embedding Index increased by 4 points on 2022 to 80%, 5 points above the Global Financial Services benchmark. For shareholders, we are proposing an increased dividend and a substantial share buyback. We continued to make strong delivery against our Environmental, Social and Governance (ESG) ambitions, growing sustainability related finance to €11.1 billion. We also delivered a RoTE of 17.3% in 2023, which is meaningfully above our c.15% medium-term target. Capital and distributions The Group delivered strong net organic capital generation in 2023, which maintained its robust capital base even after taking into account the acquisition of the KBCI portfolios, a meaningful step-up in distributions and growth in organic net lending in Ireland. Through continual engagement with shareholders, your Board understands the importance of distributions. Today, I am pleased to announce a proposed 60 cent per share dividend in respect of 2023 performance, equating to a 40% ordinary dividend payout ratio, plus a share buyback of €520 million. Taken together, this distribution of €1.15 billion represents a material step- change from last year's total of €350 million. This results in a fully loaded CET1 capital ratio of 14.3% at 31 December 2023, and is aligned to our ambition to distribute down towards our capital target of a CET1 greater than 14%. The total distribution, comprising the buyback and the ordinary dividend, equates to 13% of the Group’s end-2023 market capitalisation of c. €8.7 billion. In an update to the Group's distribution policy, we are going to commence capital distributions on a semi-annual basis. Remuneration In late 2022, the Irish Government announced that a number of crisis-era restrictions relating to remuneration were being lifted in respect of the Group. We have responded to this in a careful and considered manner, with a focus on better linking remuneration to the achievement of our long term strategic and commercial goals, and delivery for our customers. In-line with best practice, the Group’s profit share framework incorporates ESG and other metrics. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 4 Chairman’s review The Group’s scorecard, a third of the way through the 2023 – 2025 strategic plan, shows a positive performance, delivering for customers, colleagues, shareholders and society. Related pages CEO review (page 6) Sustainability (page 14) Risk Management Report (page 134) Patrick Kennedy Chairman As an institution which is critically important to Ireland’s economic progress and prosperity, both as a leading provider of lending to consumers, businesses and corporates and as a major employer, the Group will continue to engage with all stakeholders on the future development of the sector. This includes dialogue on the remaining restrictions applicable to the Group, which are not replicated in any market where it does business, creating an uneven playing field with other corporates, both banking and non- banking. Board and senior management The Board met in total on 10 occasions during the year. There were also 68 Board Committee meetings during the year. As in prior years, I would like to acknowledge the very strong commitment of all of my fellow directors to the Group in 2023. In September, Fiona Muldoon retired as a Non-Executive Director, having served on the Board since June 2015. She also served as a Director of New Ireland Assurance Company (NIAC). We are grateful for the very meaningful contribution Fiona made to the Group across a wide range of roles held during her tenure. Margaret Sweeney joined the Board last October, also joining the Group Audit and Remuneration Committees. Akshaya Bhargava joined last month, also joining the Group Risk and Transformation Oversight Committees. I am delighted to welcome both of them to the Group, and know that it will benefit from their extensive experience in the coming years. There were also a number of changes to the Group Executive Committee (GEC) during the year. Gavin Kelly was appointed CEO of the Corporate and Commercial division. This division now includes Business Banking, which had previously been part of the Retail Ireland division. Áine McCleary was appointed to the newly created role of Chief Customer Officer, Susan Russell was appointed as Retail Ireland CEO, and last month, Ciarán Coyle joined us as Chief Operating Officer. During the year, Ian McLaughlin stepped down as CEO of Bank of Ireland UK plc. We thank him for his commitment and success in this role, and wish him well for the future. Gail Goldie joined us last month as Ian’s successor. 240 years Since the Global Financial Crisis, the frame of reference for Irish banking has often felt limited to just 15 years, which is very understandable. However, last June we marked the 240th anniversary since we first opened our doors to customers in 1783. Since then, we’ve served many millions of customers, and have continuously evolved to meet their changing needs. On reaching this important date, it is appropriate to remind ourselves that, as well as growing as a commercial enterprise, we have also played a major role in Ireland’s economic development throughout our history. Our ambition is to continue to play a positive role for Ireland’s economy and society, and especially for our customers and colleagues, for many years to come. Conclusion As referred to in recent Annual Reports, it is my intention to step down as Chairman later this year, after fourteen years on the board and six as Chairman. My term as Chairman has spanned two strategy refreshes that have helped to reshape the Group, with better customer outcomes, increased colleague engagement, and improved culture. For shareholders, greater efficiency and higher returns have led to growing distributions including the return of buybacks for the first time since the Global Financial Crisis. In addition, we have completed the transformative acquisitions of Davy and the KBCI portfolios, and the Group has been returned to full private ownership. It has been a great privilege for me to have been a Board member and Chairman and I have been fortunate to work alongside an outstanding group of professionals, both on the Board and throughout the Group. I would like to thank all the Directors and the management teams who I have worked with over the years. I would particularly like to acknowledge the three excellent Chief Executives the Group has had in that period: Richie Boucher, Francesca McDonagh and Myles O’Grady. Finally, I would like to thank you, our shareholders, for your support. I firmly believe that the Group’s strong leadership, clear strategy and attractive market positions gives it the platform to deliver its full potential for all of our stakeholders. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 5 Patrick Kennedy Chairman 2023 was another year of significant progress for the Group. The financial performance reflects the Group’s successful strategy execution, commercial delivery across all our businesses, and a favourable interest rate environment. The Group’s refreshed strategy, announced in March 2023, made clear our commitment to build further on the Group’s progress in recent years and future-proof our business model. Our strategy is creating sustainable economic value and returns, increasing net loans, wealth assets and customer numbers. We continue to invest for the future, improve culture and deliver for our customers, colleagues, shareholders and society. The strong financial performance in 2023 is reflected in: • a profit before tax of €1.9 billion; • a cost-income ratio of 42%1; • an adjusted RoTE of 17.3%; and • 340 basis points net organic capital generation, supporting the distribution of €1.15 billion to shareholders, equivalent to 13% of market capitalisation. Delivering on our Strategic Pillars Last year saw clear strategic progress, including: Stronger Relationships • 8% increase in customers in 2023, reflecting our success in attracting new customers in our domestic Irish franchise. • Improvements for customers, evidenced by our RNPS of +5 points, 1 point higher vs 2022, and a 5% reduction in complaints. • 23% increase in Irish customer loans, with new mortgage lending of €4.9 billion in Ireland, +25% vs 2022, and our share of drawdowns increasing from 28% to 41% while maintaining our commercial focus and underwriting standards. • Completion and successful migration of the KBCI portfolios in February 2023. • Business income +10% vs 2022 predominately from our Wealth business. • Assets under Management (AUM) increased €7 billion (c.18%) to c.€46 billion with strong net inflows reflecting the strength of our New Ireland and Davy franchises. Simpler Business • Ongoing focus on driving efficiency, resulting in a cost-income ratio1 of 42% vs target of <50%. • Customer effort score +3 points in 2023 to +53. • For colleagues, +4% increase in colleague culture index and +5% in engagement with both at their highest level ever, combined with a reduction in attrition from 8% post pandemic to 6% in 2023. • Expanding Corporate and Markets to include Business Banking, previously part of Retail Ireland. • Established Davy as a centre of excellence for all of the Group’s high net worth clients and successfully migrated c.2,000 customers from the Bank to Davy. Sustainable Company • Maintaining our #1 position for Financial Wellbeing. • Further progress on our ESG strategy, with continued leadership in green lending in Ireland, including being the #1 provider for green mortgages. We have provided sustainable finance of c. €11.1 billion, which represents an increase vs 2022 of 35%. We are well on track to meet our c.€15 billion target for 2025 and c.€30 billion for 2030. • Innovation in sustainable finance solutions, for example our Enviroflex Sustainability loan partnership with Kerry Dairy Ireland in the agri-sector. • Inaugural science based targets emission reduction disclosures; 42% reduction in own operations from 2020 baseline and a c.10% emissions reduction in our RoI residential mortgage loan books. • Further balance sheet de-risking with the NPE ratio reducing to 3.1% during 2023, a 50 basis point improvement from the prior year. • RoTE of 17.3%, outperforming our c.15% target. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 6 Chief Executive's review Myles O’Grady Group Chief Executive In 2023, the group performed well with strong financial results, tangible strategic progress and improved customer and employee outcomes. This represents an excellent start to our three year strategic cycle, underpinned by our differentiated business model, the attractive markets in which we operate, especially Ireland, and guided by our purpose to help customers, colleagues, shareholders and society to thrive. 1 The Group’s 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. Economic Outlook The overall macroeconomic outlook for Ireland, which represents the bulk of our revenue, profits and balance sheet, is positive, with clear signs of resilience, including total employment increasing to a record 2.7 million in Q3 2023, +13% since end-2019 (pre-COVID). Housing completions were 32,695 in 2023, a 15 year high and 10% above the outturn for the previous year. That said, with imports and exports summing to 234% of nominal GDP, Ireland is among the world’s most open economies. General global macro headwinds and some sector-specific weakness contributed to downwards revisions for headline Irish GDP forecasts in 2023. Therefore, international developments can have an outsized effect on economic metrics. Consequently, we remain alert to global macroeconomic developments, including evolving expectations about the trajectory of monetary policy across the geographies in which the Group operates. In addition, last year, I noted that Ireland was relatively well positioned against a backdrop of elevated inflation and rising interest rates due to a combination of robust private sector balance sheets and the Irish State’s strong fiscal position. Household finances remain strong with the ratio of household debt to disposable income at 88% in Q3 2023 compared to the peak of 210% in Q4 2009. The Irish Department of Finance forecasts that the State will run a third successive annual surplus in 2024. Ireland’s structural qualities, including favourable demographics, underpin its economic resilience. Also, the annual headline rate of consumer price inflation has moderated from a multi- decade high of 9.2% in October 2022 to 4.6% in December 2023. In the UK, which is our second largest market, continued tight labour market conditions and positive real earnings are helpful from an asset quality lens, particularly in the housing market. Mortgage rates have reduced from the previously elevated levels, further helping to improve affordability generally. It should be noted that we have been very disciplined regarding loan origination in the UK market for some years now with our loan book down 30% from 2019 levels. Our decision to exit the UK personal loan market is further evidence of this discipline. Key outcomes for stakeholders Customers Putting customers first is a core value and integral to our purpose of helping customers thrive. We bring this to life by making it easier to interact, as evidenced through an increase in our customer effort score and continued reduction in customer complaints (down by 49% since 2018). In 2023, the Group delivered an increase in RNPS while increasing customer product holding by 75,000. We continue to protect our customers’ Financial Wellbeing and support them when they need us most, including our response to the growing threat of fraud. We also continue to invest in our infrastructure, enhancing customer offerings and resilience. Colleagues and Society 2023 was a year of stronger colleague engagement and further contributions to society. We underlined our commitment to sustainability by making it a core strategic pillar. For our colleagues, we refined our values to better align with colleague feedback and this supported a tangible improvement in engagement and cultural embeddedness scores including a 7% increase in colleagues advocating BoI as a place to work. During 2023, the Group opened 3 new office hubs with 16 now available across Ireland, offering location flexibility to colleagues as part of our successful hybrid working model. For society, we strengthened our commitment to the climate transition with sustainable finance targets set and our inaugural science based targets emission reduction disclosures. We were also just one of twenty banks globally to publish UN Principles for Responsible Banking Financial Health and Inclusion targets last June. Shareholders As outlined at the start of 2023, we expected 2023 to be a very strong year with targets being exceeded, and so it proved. In 2023, the Group delivered a 17.3% RoTE compared to our target of c.15%, a cost-income ratio of 42% compared to a target of <50%. There was a structural shift in capital generation, with 340 basis points of net organic capital generation in 2023, and distributions. On distributions, our ordinary dividend payout ratio of 40% in 2023 was achieved a year early. We are distributing a total of €1.15 billion to shareholders, equivalent to 13% of market capitalisation, comprising a cash dividend1 of 60 cents per share (€634 million) and an approved share buyback of €520 million. Our CET1 ratio finished at 14.3% at year end, in-line with our guidance of >14%, reflecting prudent management of our balance sheet and the strategic allocation of our capital for our shareholders. 2023 Business and Financial Performance Group The Group reported profit before tax of €1.9 billion in 2023 (20222: €1.0 billion). Net interest income of €3.7 billion, an increase of 48% compared to 2022, was supported by organic loan growth in Ireland, higher interest rates and customer balances, and the KBCI portfolio acquisition partially offset by higher wholesale funding and customer deposit costs. 2024 net interest income is expected to be 5-6% lower than the Q4 2023 annualised run rate of €3.65 billion primarily reflecting the anticipated lower interest rate environment. The Group’s loan book increased by €7.7 billion during 2023. This increase includes the €8 billion of loans acquired from KBCI in February 2023. On a constant currency basis, excluding the KBCI acquisition, a €2 billion increase in net lending in Irish non- property loan books has been offset by a €0.1 billion reduction in NPEs, a €0.8 billion reduction in Retail UK, in-line with our strategy, and against an uncertain geopolitical backdrop, a €1.6 billion reduction in net lending in property and international corporate reflecting prudent capital allocation. Business income of €732 million, including share of associates and joint ventures, was 10% higher than 2022. This primarily reflected growth in Wealth and Insurance and the full year benefit of the Davy acquisition. Business income in 2024 is expected to be mid-single digit percent higher supported by continued growth in Wealth and Insurance and Retail Ireland. Cost discipline is core to our strategy. Reported costs were 11% higher in 2023, primarily reflecting impacts of both acquisitions, lifting of variable pay restrictions and additional investment Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 7 1 Proposed ordinary dividend subject to shareholder approval. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. As a result comparative figures have been restated to reflect the impact of the new standard. to drive future efficiencies. 2024 operating expenses are expected to be mid-single digit percent higher than 2023 reflecting inflation, business growth and additional investment to future proof our business, partially offset by efficiencies. We expect levies and regulatory charges to be €160 - €165 million in 2024. An underlying net credit impairment charge of €403 million (49bps of gross customer loans) arose in 2023 compared to a charge of €187 million in 2022. This charge reflected loan loss experience in the period; and additional management adjustments to address potential risks, primarily in Commercial Real Estate. In 2024, subject to no material change in economic conditions or outlook, we expect an impairment charge in the low 30s basis points. Our liquidity profile is very strong, supported by our retail franchise in Ireland. The Group’s liquidity ratios reflect this strength. At December 2023, the Group’s liquidity coverage ratio was 196% (2022: 221%), the loan to deposit ratio was 80% (2022: 73%), and the net stable funding ratio was 157% (2022: 163%). As expected, the changes in all three ratios in 2023 primarily reflect the impact of the KBCI transaction. Our fully loaded and regulatory CET1 capital ratios were 14.3% and 14.5% respectively at December 2023. The Group’s capital performance in 2023 benefitted from strong net organic capital generation of 340 basis points partially offset by the completion of the KBCI acquisition, investment in RWA and IFRS17 implementation. Capital ratios also reflect the full impact of the Group’s announced capital distributions, including the accrual of our foreseeable cash dividend for 2023 of €634 million, achieving our ordinary dividend payout ratio target of 40% one year early, and the approved share buyback of €520 million. The Group expects 2024 distributions to comprise a combination of ordinary dividends and share buybacks, with interim distributions to commence. Ireland Our Retail Ireland business reported a 103% increase in income, supported by our strong commercial performance, continued pricing discipline, and higher interest rates. Our new lending in Ireland was particularly strong last year underpinned by €1.7 billion of net lending in mortgages. Irish customer balances of €80.1 billion increased by €2.5 billion in 2023, supported by the KBCI portfolio acquisition and organic growth across our franchise. The acquisition of Davy now enables the Group to offer money market products from within the Group with transfers from Retail Ireland to Davy occurring during the year. As the number of customers increases we see ongoing evidence of increased digitalisation with improved customer metrics. In 2023, active digital users increased 18%, our mobile app customer effort score increased 3 points and complaints about our mobile app reduced 35%. Wealth and Insurance Our Wealth and Insurance business had a strong performance with operating contribution 15% higher in 2023 vs 2022. Growth in AUM, with net inflows of €3.3 billion was an important driver of this strong performance. Our strategic ambition to be the number one partner of choice for Wealth and Insurance in Ireland remains on track, underpinned by the attractive demographics and strong household balance sheets combined with the breadth of our propositions across retail, mass affluent and high net worth wealth segments. UK In 2023, we continued to successfully execute our strategy of value over volume in the UK. Reflecting this strategy, we increased our new lending by 22% in 2023 vs 2022 and since 2019 have delivered a 57% increase in underlying profit before tax. As part of our ongoing focus on capital allocation, in December 2023, we announced our decision to exit the UK personal loans business. Excluding the impact of exiting the personal loans business, we expect our loan book in the UK to stabilise in 2024. The Group’s UK motor finance business is participating in the FCA’s review of historical commission arrangements, with an update expected later in the year. Corporate and Commercial In 2023, we expanded Corporate and Markets to include Business Banking, previously part of Retail Ireland, offering business and corporate customers a one-stop shop for businesses at all stages of their development, while helping to build our own business at home and abroad. Profitability in Corporate and Commercial increased by 35% in 2023 supported by a 41% increase in net interest income. Reflecting our more cautious approach to property and international corporate, lending is 10% lower at end 2023 compared to 2022. Outlook 2023 was a year of strategic progress and very strong financial performance, and we have delivered tangible evidence of better outcomes for our customers, colleagues, shareholders and society. We look to the future with continued confidence. While we are mindful of the risks presented by the external environment, the overall outlook for our core markets, and Ireland in particular, remains positive. The combination of this positive outlook, the attractions of the markets in which we operate, our differentiated business model and our strategic clarity and focus supports this confidence in our prospects. We remain on track to deliver the financial and non-financial targets set over our FY23-25 strategic cycle. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 8 Myles O'Grady Group Chief Executive Key highlights +23% increase in Irish loans #1 for green mortgages in Ireland +8% new customer relationships -5% reduction in customer complaints +18% increase in AUM to €46bn 42% Cost income ratio 17.3% adjusted RoTE €1.15bn of total distributions to shareholders BoI Announces New Multi-Year Partnership with IRFU, Myles O’Grady (CEO), pictured at the Aviva Stadium, with Ireland Rugby internationals, Deirbhile Nic a Bháird and Iain Henderson. In March 2023, our refreshed Group Strategy for 2023-2025 was launched. This strategy builds on our 240 year heritage and is guided by our purpose, which is to help customers, colleagues, shareholders and society to thrive. Our values are central to how we work to deliver this strategy. At Bank of Ireland, we are customer first, better together, we take ownership and are decisive. Our strategy is built on three strategic pillars: building stronger relationships with our customers and colleagues, continuing to simplify our business for customers and colleagues, and creating a culture of constant improvement in the sustainability of the company for the future. Customers continue to remain at the core of everything we do. We are deepening customer relationships through our market leading financial wellbeing programme and enhancing customer experiences through digital and data. The Group’s business model is in a strong and differentiated position as a result of key strategic actions executed, outcomes delivered and recent strategic acquisitions. The fundamentals underpinning our strategic plan remain supportive and we have clear plans in place to continue to deliver further progress. The highly attractive Irish market and demographics continue to support momentum in delivering against our 2025 strategy, in particular the growing Irish housing and mortgage market, strong labour market and household finances, and our Irish franchises driving profit growth. This is further supported by our complementary international footprint. Notwithstanding the positive backdrop, we are mindful of the potential impact of global themes such as the higher interest rate environment, uncertainty around inflation and ongoing geo-political unrest, as the Group aims to support our customers and society to navigate these trends. Year one saw strong progress made against our strategic plan and targeted outcomes and builds on the positive progress that we have made in recent years. For our retail customers and businesses, we are meeting more of their financial needs throughout their lifecycle, by enhancing functionality, simplifying customer experiences and delivering greater service capabilities. For our colleagues, progress continues to be made on creating a differentiated colleague experience, with flexibility and wellbeing at its heart. For society, our focus remains on supporting the financial wellbeing of all customer segments in addition to supporting the green transition. We are also seeking to put in place a more diverse workforce that more closely represents society. The Group also had a very strong year financially achieving the highest level of profitability in its 240 year history. We delivered strong net organic capital generation in 2023 and are delivering a material step-change in distributions compared to 2022. This strong performance strategically and financially provides positive momentum for the remaining two years of the current strategic cycle so that we can continue to deliver against our targeted outcomes for all our stakeholder groups. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 10 Our strategy Delivering stronger relationships with customers and colleagues, a simpler and more efficient business, and a Bank with sustainability at its core. Related pages CEO review (page 6) Sustainability (page 14) Divisional review (page 61) Risk Management Report (page 134) Strategic progress in 2023 Completion of KBCI portfolios acquisition Successfully completed in H1 2023 Increased new customer relationships by 8%1 in 2023 c.35% increase in sustainability- related finance to €11.1 billion Strategic delivery in our UK business Delivering strong returns through a niche strategy 240th Anniversary 1 New Irish bank channel customer relationships as a proportion of total customers at the start of the year. Our strategy (continued) Stronger relationships Establish deeper, mutually value-adding customer relationships led by our colleagues through tailored engagement, and easier, joined-up services and products across customers’ financial needs and life stages. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 11 2025 target outcomes We remain on track to deliver: • Growth in mortgage balances whilst maintaining risk and commercial discipline. • 5% increase in financial needs met per customer1, equivalent to 250,000 incremental products for existing customers over the 2023-25 period. • +10 Relationship Net Promoter Score by 2025, up from +4 in 20222, demonstrating stronger How we performed in 2023 After the first year of delivery under the 2023-2025 strategy, we remain on track to deliver against our 2025 target outcomes, with notable key achievements outlined below. • This year marked 240 years since Bank of Ireland first opened its doors to customers. We’ve grown to be an organisation that serves more than four million customers in Ireland and abroad and employ over 10,000 people. • We welcomed Ulster Bank and KBCI customers to the Group. Consolidation in our core market offered unique customer acquisition opportunities which created a foundation for developing stronger relationships and saw us increase our new customer relationships by 8%3 in 2023. • The newly created role of Group Chief Customer Officer is aligned to our customer first value and supports our continued focus on customers. • We have captured value in a growing mortgage market, helping c.14k people to buy a new home and achieving a 41% share of the Irish mortgage market (up 13 points year on year). • We have continued to grow our Wealth and Insurance business (18% growth in AUM year on year), by leading the market via clear brand propositions. • Enhanced product offerings have helped us to meet a broader range of customer needs. New products and propositions launched for customers include a SuperSaver deposit account, a 1-year term deposit account for personal and business customers, and for Wealth and Insurance customers, a dual mortgage life protection offering, Employer PRSA and Dynamic Protected Bond. • Our brand and customer metrics have also improved and our customer first approach is positively reflected by improvements in our Relationship Net Promoter Score to +5 (up 1 point year on year), as customers express positive experiences with colleagues. • Our mobile app customer engagement engine, which provides customers with helpful insights, generated c.500k customer-led engagements supporting their day-to-day banking needs, up 21% year on year. 1 Measured by average product holdings. 2 6-month average at end of December 2022. 3 New Irish bank channel customer relationships as a proportion of total customers at the start of the year. Customer engagement c.500k customer-led engagements via mobile app New products and propositions Launched SuperSaver deposit offering Irish mortgages Helped c.14k people buy a new home, achieving 41% market share Our strategy (continued) Simpler business Simplify the day-to-day activities and interactions of our customers and colleagues, particularly leveraging digital and data, allowing them to do more, faster and more easily. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 12 2025 target outcomes We remain on track to deliver: • Cost: income ratio <50% over the 2023-25 period. • +10pts improvement in customer effort score by 2025, from 50 in 2022. • +6pts improvement in colleague engagement score by 2025, from 68% in 2022. How we performed in 2023 We have committed to delivering a better experience for our customers and colleagues by simplifying processes and leveraging digital and data. • Enhanced customer experience supported by simplified customer journeys and ongoing digitisation has contributed to driving an increased Customer Effort Score of +53 (up 3 points year on year) in 2023. • Customer complaints have reduced by 5% year on year supported by improved customer journeys. • Investment in digitisation continues to benefit our customers with an 18% year on year increase in active digital users. • We rolled out over 60 enhancements to the mobile app in 2023 reducing customer effort and bringing new features to the market at a faster pace, including biometrics and additional fraud monitoring. • Continued digitisation progress in Wealth and Insurance with the launch of a customer portal and strong adoption of Wealth and Insurance's digital advice platform and broker and agent portals. • The introduction of Conversational IVR1 in 2023 has improved routing of 100k customer calls per month, saving time and improving overall customer experience. • Simplified the Group's application estate by decommissioning over 75 IT applications in 2023. • Strengthened enterprise-wide, colleague-led simplification with the 2023 launch of ‘Voice of Colleague’, a framework to capture and respond to colleague ideas for simplification across the enterprise, and for identifying improvements for both customers and colleagues. • Continued to invest significantly in technology and strategic capabilities across the Group’s key customer groups. 1 Interactive Voice Response (IVR). 2 The Group’s 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. Operating efficiency 42%2 cost / income ratio, with operating expenses in line with market guidance Investment in digitalisation 18% increase in active digital users Mobile app Over 60 enhancements to our mobile app Our strategy (continued) Sustainable company Deliver impact on the most critical challenges facing our customers, colleagues and society and ensure ongoing focus on stability, risk management and operational risk resilience across the Group for our expanded customer base. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 13 2025 target outcomes We remain on track to deliver: • RoTE of c.15% over the 2023-25 period. • No.1 rating for Financial Wellbeing maintained. • €15 billion sustainable financing by 2025, from €8 billion in 2022. How we performed in 2023 We continue to make progress against our sustainable company strategic pillar which is centred on enhancing customer financial wellbeing, supporting the green transition and enabling our colleagues to thrive. • First and only Irish bank and one of 23 globally to set and publish our UN Principles for Responsible Banking commitments on financial health and inclusion. • Fostered financial resilience by launching our 'Extra Help Hub' to support our customers in building financial literacy and capability. We also launched our financial wellbeing 'Money Worries Hub' which provides simpler supports, tools and guidance to customers with financial concerns. • Strengthened colleague engagement: We delivered an uplift in our Colleague Engagement Index which is now 73% (up 5 points), with colleague enjoyment, advocacy of Bank of Ireland as a place to work and pride all increasing. • Supported our colleagues through delivery of events such as the People Manager summit encompassing performance, career development and growth and wellbeing. We also launched the 'MyReward' flexible benefits platform for colleagues, supporting our people and their financial wellbeing. • Focused on Inclusion and Diversity (I&D) by launching our refreshed three year I&D strategy, making strong progress on increasing diversity of our colleagues across gender, ethnicity, sexual orientation and disability, and achieving ‘Investors in Diversity’ Gold Employer and ‘Investing in Ethnicity’ accreditations. • Increased sustainability-related finance: The level of sustainability-related finance on our balance sheet to households and businesses grew by c.35% in 2023, to €11.1 billion. We enabled customers to buy more sustainable homes with green mortgages accounting for over half of our new mortgage drawdowns. • Strong capital position: In terms of capital and distributions, the Group delivered strong net organic capital generation in 2023 and is announcing distributions of €1.15 billion, equating to c.40% of statutory profits plus a share buyback of €520 million. This represents a material step-change from last year's total distributions of €350 million. Financial Wellbeing No.1 brand known for Financial Wellbeing in RoI Green Transition Sustainability-related finance to households and businesses grew by c.35% in 2023, to €11.1 billion Enabling colleagues to thrive Engagement Index grew +5% to 73%, compared to 2022 Sustainability Contents Our commitment to sustainability 15 Supporting the green transition 17 Enabling colleagues to thrive 19 Enhancing financial wellbeing 20 Foundations to our Sustainable company framework 21 Reporting and ESG ratings 23 TCFD compliance statement 24 Governance 24 Strategy 25 Risk management 30 Metrics and targets 37 EU Taxonomy compliance statement 42 Non-financial information statement 45 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 14 Key highlights Sustainability related finance increased by 35% in 2023 to €11.1bn. Launched Enviroflex agri-business green loans in conjunction with Kerry Dairy Ireland Science-based targets achieved over 85% of our own operations 2030 target and over 90% of 2025 target for long-term corporate lending Leaders in Financial Wellbeing in Ireland first and only Irish bank and one of 23 banks globally to set and publish our UNPRB commitments on Financial Health & Inclusion 46% (2022: 40%) female appointments to management & leadership positions 80% colleague score for culture embeddedness +5 points vs global financial services benchmark Green bond issuance issued €2.25bn in bonds through Green Bond Framework bringing total issuances to date to c.€4.75bn Our commitment to sustainability Our world is changing We continue to face unprecedented challenges at home and globally including economic uncertainty, wars across Europe and the Middle East, inflation worries and a cost-of-living crisis. Vulnerable groups are most affected. Coupled with this, the focus on climate change has intensified with extreme weather events and record- breaking temperatures putting greater urgency on the need to support the transition to a net zero economy. Aligned with this, the interlinkages with nature and the role protection of biodiversity plays in tackling climate change is a growing focus. In December 2023, the United Nations (UN) held the 28th Conference of Parties (COP28) in Dubai which was the first ‘Global Stocktake’ of progress against the 2015 Paris Agreement. It ended with a pledge to transition away from fossil fuels in a just and equitable way, underpinned by deeper emissions cuts and scaled-up finance with the overarching aim to keep the global temperature limit to no greater than 1.5°C above pre-industrial levels. Sustainability a core strategic pillar In 2023, sustainability was embedded as one of the Group's three core strategic pillars, Sustainable Company, and we continued to turn our ambitions into action, delivering practical sustainability solutions that make a difference. Sitting below the Group’s Sustainable Company pillar is our ‘Investing in Tomorrow’ Sustainability strategy. Our focus is on our material Environmental, Social and Governance (ESG) impacts and opportunities aligning to science and best practice, starting with the UN Sustainable Development Goals (SDG), the blueprint for a more sustainable future for all. Our Sustainability strategy and approach centres on three pillars: supporting the green transition, enhancing financial wellbeing and enabling our colleagues to thrive, supported by a number of foundational topics. Linking sustainability to value creation Our commitment to ‘Sustainable Company’ is grounded in our central belief that supporting our customers, colleagues and society, whilst appropriately allocating our capital, and making the necessary investments in upskilling, capacity and risk management, will create long-term sustainable value for our shareholders. Successfully executing our strategy means we will capture an appropriate share of the opportunities, potentially supporting Return on Tangible Equity (RoTE) over a longer period and the long-term growth rate of the franchise. It may also reduce our cost of funding and the cost of equity that investors seek to hold our shares. Overall these should drive a higher intrinsic value for the Group. In addition, by ensuring our economic value is underpinned by the creation of value for society, we will build trust and strengthen long-term relationships with our customers, motivate and inspire our colleagues and contribute to the prosperity of societies in which we operate. The world of ESG is witnessing significant changes in regulation, reporting requirements, customer preferences and societal attitudes. Progress will not be linear, as is often assumed by financial models, but having a ‘franchise value’ mindset strengthens the long-term perspectives we will bring to our actions. Translating ambition into action In 2022, we became the first Irish retail bank with greenhouse gas (GHG) emission reduction targets validated by the global gold standard Science Based Targets initiative (SBTi). These Science Based Targets (SBTs) set GHG reduction targets across both our business operations and sustainable finance deployment to support the transition by our customers. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 15 As a business with a heritage spanning 240 years, we recognise the major role and responsibility that we have in delivering impact that matters on the most critical challenges facing our customers, colleagues, society and shareholders, today and into the future. Related pages CEO review (page 6) Our strategy (page 10) Laura O'Donovan (Irish Centre for Diversity) with Myles O’Grady (CEO) as BoI awarded Gold Investors in Diversity EDI Mark Our commitment to sustainability (continued) Our targets are aligned with Irish, EU and UK climate change policies and law. In the 2023 Annual Report, we are making our inaugural reporting disclosures on progress against our SBTs. They show a 42% reduction in emissions in 2023 (from a 2020 baseline) from our own operations. The SBTs cover three quarters of the loan book. We recorded reductions (emission intensity from a 2020 baseline) of 6% across the residential mortgage loan book and an 11% reduction in the commercial real estate portfolio, in line with the Group's expectations. Delivery on sustainable finance targets supports the transition to a low carbon economy for our customers. The Davy Decarbonisation white paper 'Investing in Tomorrow: Shaping a Net-Zero Future' sets out that €129 billion of investment is required across key sectors in order to meet Ireland’s 2030 climate targets. We are supporting Ireland in reaching these targets and in early 2023, extended our Group sustainable finance loan target for customers to c.€15 billion by 2025 and c.€30 billion by 2030. In 2023, the level of sustainability- related finance on our balance sheet to households and businesses grew by 35% to €11.1 billion. We enabled customers to buy more sustainable homes with green mortgages accounting for approximately half of our new mortgage drawdowns. We also issued €2.25 billion in bonds through our Green Bond framework, bringing total green issuances to date to c. €4.75 billion. We made significant progress on our social commitments. Protecting our customers' and colleagues' financial wellbeing is a key focus for us and we continue to be the #1 bank for financial wellbeing in the Irish market. We strengthened our commitment even further by publishing our United Nations Principles for Responsible Banking (UNPRB) Financial Health and Inclusion targets, one of 23 banks globally to do this. On Inclusion and Diversity, we achieved the Gold Investors in Diversity EDI Mark. Through colleague feedback, we also refined our values to better align with our updated strategy. We have embedded our values across the Group and seen a year on year increase in our Culture Embedding and Engagement scores. We have a risk management framework (RMF) and risk policies in place that support the embedding of ESG risk management in our business. During 2023, we expanded our sustainability-related disclosures which contributed to improved ESG rating agency scores. The EU’s Corporate Sustainability Reporting Directive (CSRD) will bring a step change to our 2024 disclosures. The Group has undertaken its initial Double Materiality Assessment (DMA) exercise in 2023 which will continue to be refined over the course of 2024 as part of the CSRD implementation plan. Looking ahead While we have made notable progress on our ambitions, there is much more to do to support the generation of competitive long-term financial returns for shareholders whilst having a positive social and environmental impact, on a sustainable basis: • for customers, we will continue to support transition with innovative financial solutions, seek to protect financial wellbeing and support customers when they need us most, including protection against the growing threat of fraud and helping those who find themselves in vulnerable situations. • for colleagues, we will continue to invest in making their jobs more rewarding, attracting new talent and building an inclusive workforce that is reflective of our society. • for society, we will continue to support our communities to prosper and seek to drive greater engagement; and • for shareholders, we will continue to deliver long-term value creation with a resilient business model and improving our franchise value with a RoTE that is more sustainable. Our Sustainability Report will provide a more detailed update on our progress and future plans which we expect to publish in Q2 of this year. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 16 Key financial sponsor for Re-turn, the government's new bottle deposit scheme; Ossian Smyth (TD, Minister of State),) Nikki Canavan (Head of Origination at Corporate and Commercial Banking), Tony Keohane (Chair of Re-turn), Séamus Clancy (Interim CEO of Re-turn), & Darragh O’Neill (Director of New Business Origination at Corporate & Commercial Banking) As a signatory to the UNPRB, we have committed to aligning our strategy and practices with the Paris Climate Agreement. Our Five Point Climate Action Plan, first introduced in 2021, outlines the key role we play in facilitating Ireland's green transition to a low-carbon economy and our efforts to reduce our own impact on the environment. Since launching, we have made significant progress on supporting the move towards a net zero economy. In early 2023, we extended our sustainable finance lending targets to c.€15 billion by 2025 and c.€30 billion by 2030. We have a suite of sustainable finance products covering a range of sectors from Home Buying and Everyday Banking through to Corporate and Commercial. Each product is designed to fund and support our customers with innovations to help them transition towards a more sustainable business model and a low carbon future. In 2022, we became the first Irish bank to have our GHG emission reduction targets validated by SBTi, covering all the Group’s operations and 76% of our FY2020 baseline loan book. This includes Scope 1 and 2 emissions present in our operations and Scope 3 emissions in our downstream value chain. Having our GHG targets validated by the global gold standard SBTi reinforces the credibility of our commitment to assisting Ireland in achieving its climate targets. This year we are reporting our progress against these targets for the first time. To progress further action on nature, through 2023, we participated in several key initiatives to help us improve our understanding of our impacts, dependencies, risks and opportunities. This included participation in the Taskforce for Nature-Related Financial Disclosures (TNFD) Forum, the Partnership for Biodiversity Accounting Financials (PBAF), and the UNPRB Nature Target- setting working group. We were also one of six inaugural partner organisations that supported the development of the first Irish Business and Biodiversity Platform. Key 2023 achievements With the successful implementation of our Five Point Climate Action Plan, we have moved from a planning and execution phase into a delivery phase, or from ambition to action. Set out on the next page are our 2023 key achievements against our five point plan. In line with our 'comply or explain' obligations under the UK's Financial Conduct Authority's Listing Rules, we can confirm that we have made disclosures consistent with the Task Force for Climate-related Financial Disclosure (TCFD) recommendations and recommended disclosures, except for one area: we do not fully disclose Scope 3 GHG emissions as we are in the process of conducting a detailed analysis of our financed portfolio. Further details are set out in the metrics and targets section of the TCFD compliance statement on page 37. The table below sets out where you can find details of our progress in 2023 against each of the Five Point Climate Action Plan topics in the corresponding TCFD disclosure section of the report. Bank of Ireland's Five Point Climate Action Plan (TCFD Pillars) Governance (page 24) Strategy (page 25) Risk Management (page 30) Metrics & Targets (page 37 ) (1) Providing sustainable finance (2) Manage climate related risks (3) Science-based targets (4) Decarbonise our own operations (5) Transparently report our progress Support customers through core financing and advisory capabilities to enable them transition to net zero and develop and deploy low carbon technologies. Build resilience by embedding climate-related impacts in our decision making processes for our own operations, in lending and investment decisions and the advice we give our customers. Manage and track our lending practices to make progress against our emission reduction targets. Make our own operations net zero by 2030. Commit to transparently reporting on our progress towards our ambitions and reporting in line with the recommendations of the TCFD. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 17 Supporting the green transition Related pages CEO review (page 6) Our strategy (page 10) Eoin Lowry (Head of Agri Sector) BoI with James O'Connell, General Manager, Kerry Agribusiness at the launch of Enviroflex Sustainability-linked loans. Supporting the green transition (continued) Five point climate action plan Objective Key achievements in 2023 Targeted actions in 2024 Science based targets (SBT) Target outcome: Alignment with decarbonisation goals of the Paris Agreement. Success measured by: Meeting our validated SBTs covering our own operations and 76% of our lending. Progress is in line with the Group's expectations: • Own operations: By 2023 we achieved a 42% reduction1 in absolute scope 1 and 2 GHG emissions in our own operations and continue to source c.100% renewable electricity for all our operations. • Lending decarbonisation: Emissions intensity reduced across: – Residential Mortgages (down 6%1) – Commercial Real Estate (CRE) (down 11%1) – Electricity Generation Project Finance (down 28%1) • SBT lending coverage: 23%2 of our corporate customer base have now set SBTs with a further 20% in the target validation phase. To report progress towards our SBTs as we execute our strategy to further decarbonise our customer lending during 2024. Providing sustainable finance Target outcome: Support the delivery of national climate plans in Ireland and the UK. Success measured by: Meeting our sustainability related finance targets of c.€15bn by 2025 and c.€30bn by 2030. • Sustainability related finance increased by c.35% in 2023 from c.€8.2bn to c.€11.1bn with the Group on track to meet near-term lending target. • This lending was supported by the issuance of €2.25bn in green bonds in 2023, bringing total issuances to date to c.€4.75bn. • Significant innovation with continued expansion of our Sustainable Finance solutions for the key sectors in transition (Agriculture, Property, Business and Energy). • Food-agri: Enviroflex product launched in conjunction with Kerry Dairy Ireland to support farmers in implementing sustainable farm practices. • Business: Green CapEx product available for corporate banking customers for investments that meet Group sustainable finance and / or EU Green Taxonomy criteria. Continue to increase sustainable financing on a linear path towards near-term 2025 strategic target of c.€15bn. Decarbonise our own operations Target outcome: Obligation to deliver our products and services in a sustainable manner. Success measured by: Make our own operations net zero by 2030. • Key initiatives to drive energy efficiency and carbon reductions: – continued certification of the ISO 50001 Energy Management Standard (EMS) and transition from fossil fuels to electric heating systems in the branch network; – installation of LED lighting in 130 retail sites to reduce electrical consumption by 10% to 15%; – review conducted across retail/admin sites to eliminate wasteful use of hot water, air conditioning and heating systems; and – rolling out of internal communications for staff to encourage positive behaviours and habits to reduce energy use. Implement new ISO standard to complement existing EMS; replace gas boilers with heat pumps, replacing kerosene with hydrotreated vegetable oil and additional solar panels. Manage climate related risks Target outcome: Build resilience by embedding climate risk impacts in our decision making processes. Success measured by: Implementation of ECB’s guidance on the management of climate- related and environmental risks. • Implementing the Group's multi-year climate action plan to embed climate risk management in line with regulatory guidance. • Embedded climate related impacts into our processes for our own operations, in lending and investment decisions and the advice we give our customers. • Enhanced disclosure on climate risk management as we progressed our embedding of the European Central Bank's (ECB) guidance on the management of climate-related and environmental risks. Build on the infrastructure implemented for climate risk management to continually mature and to address the broader scope of ESG risk in the context of CSRD readiness. Transparently report our progress Target outcome: Need to report on progress in supporting the green transition to our stakeholders. Success measured by: Alignment of our disclosures with expectations of regulators, ESG rating agencies and our shareholders. • Strengthened alignment of our climate disclosures with expectations of regulators across Ireland and the UK. • Progress reporting against climate targets following the setting of targets for GHG reduction (SBTi) and sustainable finance development. • Increased disclosure on key climate metrics, energy efficiency on property and alignment with the EU Taxonomy in line with Pillar 3 disclosures. • Maturing the reporting framework, with increased level of controls and assurance. • Winner of the 'Sustainability ESG reporting (listed entities)' award for our 2022 sustainability disclosures by Chartered Accountants Ireland. • Expanded sustainability disclosures and activities which supported ESG ratings upgrades. Full implementation of Pillar 3 ESG reporting following 'phase in' period and enhanced disclosures required under CSRD. 1 Reduction from 2020 baseline. 2 Emissions weighted basis. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 18 In 2023, we refreshed our values to better align with our updated strategy and we have embedded our values across the Group. Our Culture Embedding Index, now 80% (+4 points year on year), is +5 points vs global financial services benchmark, clearly demonstrating our success in integrating our refreshed values into the organisation. We also experienced an uplift in our Engagement Index to 73% (+5 points year on year), with colleague enjoyment, advocacy of Bank of Ireland as a place to work and pride all increasing. To capitalise on these achievements, our people agenda aims to further embed our values internally and focuses on three priorities; building a future ready workforce, creating a differentiated colleague experience, and simplifying our ways of working. Build a future ready workforce An essential part of our people strategy is developing growth skills and capabilities. 40% of colleagues are investing in our growth skills programmes at both foundational and advanced level. This is further supported through 'Thrive', our new colleague performance experience platform. Our Emerging Careers programme continues to mature, providing people from all backgrounds with opportunities to enter the workforce. In 2023, we grew our community engagement initiatives in collaboration with Business in the Community Ireland. We also launched 11 new programmes with our Delivering Equality of Opportunity in Schools programme, specifically designed to enhance numeracy and literacy skills and aid in planning for future careers. In 2023, we launched our refreshed three year I&D strategy and made strong progress against our gender, ethnicity, sexual orientation and disability diversity ambitions. We saw 46% female leadership appointments (40% in 2022) with an ongoing commitment to achieve a 50:50 ratio. 14% of new joiners self-declared as ethnic minority against the 2022 Irish CSO data of 7%. This progress is also evident through our ‘Investors in Diversity’ Gold Employer and ‘Investing in Ethnicity’ accreditations. Create a differentiated colleague experience. We continued our journey to be an employer of choice through leading edge colleague supports, flexibility and an enhanced reward proposition. MyReward The introduction of the reward and benefits platform 'MyReward' has increased colleague access, understanding and flexibility with their benefits and overall reward package. Almost 80% (or over 7,800 colleagues) accessed the platform within the first 10 days of launch and experienced a more personalised and holistic view of their total rewards package, including value of salary, pay, benefits, and other Group supports, products and rates. Family Matters We offered further enhanced supports to women and families through our Family Matters initiative including, Surrogacy and Adoptive leave, 6 weeks paid paternity leave, and paid provisions for early pregnancy loss. Additionally, we launched progressive policies covering domestic violence, fertility and menopause leave. Inclusion and Diversity Initiatives We progressed our inclusive education journey through targeted initiatives for the Board and Group executives focusing on unconscious bias training. We also introduced an Inclusion Passport allowing colleagues with health conditions, disabilities, and caring responsibilities to communicate their unique needs and preferences to colleagues and managers. Neuroinclusion strategy We aim to create a working environment where everyone can thrive. We partnered with Auticon, a social enterprise that supports organisations to become more neuroinclusive. In Q2 2023, we commenced delivery of our 3 year neuroinclusion strategy to create a better experience for neurodiverse colleagues and customers, which focuses on Neurodiversity education and improvements to processes, policies and accommodations. Wellbeing We are committed to being an employer that promotes opportunities to connect and improve social fitness, leveraging the flexibility of our hybrid working model. In 2023, colleagues participated in a number of social connection and engagement activities across the business including c.2,500 participants in Bank of Ireland's fittest teams, a 3 week fitness programme and further investment in mental health training for all colleagues. Simplify our ways of working Our hybrid work model recognises that one size does not fit all enabling teams and leaders to interpret hybrid working for their unique needs and purposes. Our aim is to reduce colleague toil and make it easier to get work done. Colleague positivity on our processes and efficient ways of working continues to increase, underpinned by the Group transformation journey. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 19 Enabling colleagues to thrive Related pages CEO review (page 6) Our strategy (page 10) Investing in Ethnicity Award I&D Multicultural network members, Matt Elliott & Kate Butler on accreditation of award We are committed to empowering people with the knowledge and skills needed to make the most of their finances, so they can be in control of their everyday spending, have a plan for the future and the resilience to withstand the financial impact of an unexpected expense or a major life event. We strive to leave no one behind on the journey to financial health. Our 2023 research shows Ireland's Financial Wellbeing Index Score1, which provides an insight into the financial wellbeing of the nation, decreased to 59 from 60 in July 2022. In addition, for the first time since research began in 2018, the nation has been classified as ‘stretched2‘, albeit marginally down from having previously been in the ‘managing3’ category. This demonstrates the impact the changing economic environment is having on peoples’ financial lives. The Group's financial wellbeing strategy is driven by 3 key pillars: • fostering financial inclusion; • improving financial literacy and capability; and • building a more financially resilient and confident Ireland. Fostering financial inclusion Our ambition is to ensure inclusive and effective access to products and services for priority groups, striving to leave no one behind on the journey to financial health. Our Vulnerable Customer Unit (VCU) has supported c.33,000 customers since its establishment in 2019. It is fundamental to promoting financial inclusion amongst prioritised groups and provides enhanced expert banking support to customers in vulnerable circumstances or situations. In 2023, we launched our ‘Extra Help Hub’ which centralizes information on our website on all the additional supports available to customers, families, carers and advocates across a range of topics e.g. safeguarding people, accessibility and assistance. The Assisted Decision Making Capacity Act came into effect in Ireland in April 2023 ensuring that every person is treated individually and that certain groups of people are not automatically deemed to lack capacity. We are currently working with the Irish Alzheimer’s Society and the HSE to build a training and education programme, so all branches can become ‘Dementia Friendly’ by the end of 2024. Improving financial literacy and capability Our ambition is to empower people (including colleagues) with the knowledge and skills to help improve their financial literacy and capability which are key building blocks on the journey to financial health. Championing youth financial education is a key focus for us. Our award winning financial literacy programmes continue to grow year-on year with more than 100,000 students participating in the 2022/2023 school year. During 2023, we provided financial education to over 17,700 customers, colleagues and communities. Through Mi365, our in-app money management tool, we have delivered over 133 million personalised insights and tailored nudges to customers since launch enabling them to understand and manage day-to-day spending, stay in control of their finances, and enhance their financial wellbeing. Building a more financially resilient and confident Ireland Our ambition is to increase the number of customers and colleagues who have the resilience to withstand the financial impact of an unexpected day-to-day expense or a major life event. In July 2023, the UN published the commitments made by 23 banks globally (including the Group) to support universal financial inclusion and a banking sector that supports its customers' financial health. Our commitment focuses on supporting our customers' day-to-day and life event financial resilience. In 2023, supporting customers with ‘money worries’ was an important focus area for us. We launched a 'Money Worries Hub' on our website and set up a dedicated helpline. This will continue to be a key focus area for 2024. We also continued to build awareness and protect customers against the growing threat of fraud, encouraging customers not to immediately react to potentially fraudulent texts or click on suspicious links but instead 'Stop, Think, Check'. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 20 Enhancing financial wellbeing Related pages CEO review (page 6) Our strategy (page 10) Myles O’Grady (CEO) and Mairead McGuinness (European Commissioner) alongside all 16 teams competing in the Money Smarts Quiz Challenge Grand Final in Trinity College Exam Hall, 12 May 2023. 1 Source: Red C, Financial Wellbeing and Financial Literacy Survey September 2023. Base: all adults aged 18+ living in Republic of Ireland; n=1,023. 2 Stretched - Index score range 40 – 59: ‘Live within means from pay check to pay check with little ability to save/think about future’. 3 Managing - Index score range: 60 – 79: ‘Live within means, manage to pay bills and better ability to provide for future. Culture The Group is in a new phase of its strategic cycle and our culture is a critical enabler to its successful delivery. Our culture is rooted in our Purpose ‘Helping you thrive’ and brought to life by our four values of ‘Customer First’, ‘Better Together’, ‘Take Ownership’ and ‘Be Decisive’, co- created with colleagues in 2023. The Culture Action Plan 2023/24 reflects planned strategic deliverables that will accelerate culture change and is aligned to our purpose and values. The delivery of the Culture Action Plan is further driven by culture leader led enabler groups to tackle challenging impediments and promote shared accountability for culture across the Group. Progress against this plan is measured on an ongoing basis through our Culture Embedding Index and Engagement Index in our Open View colleague surveys. In addition, specific metrics associated with each of our values are included in a Culture Transformation Dashboard which is reported to Board-level. Business ethics Business ethics represents a critical foundation of our business and trusted relationship with our clients and customers, which needs to be safeguarded at all times. For this reason, we set high standards when dealing with others inside and outside the Group and our personal financial dealings in our Code of Conduct. The code is supported by the Group’s suite of responsible business policies such as our Speak Up policy and our Market Integrity policy. All colleagues also complete annual mandatory training and assessment across these areas. Community investment We recognise our role in supporting the local communities where our customers live and work and it is an important part of our sustainable business activity. Our approach is focused on providing financial support to local not-for-profits, community groups and social enterprises who are working to address social issues and make a lasting change in their communities. We also enable each colleague to avail of one day of paid leave to volunteer for a charity or in their local community. In 2023, we provided support to a range of local initiatives working to foster inclusion and build capability amongst underserved groups across the island of Ireland through our Begin Together platform. In 2023, the Community Fund in partnership with Community Foundation for Ireland distributed c.€500,000 to 20 organisations delivering initiatives spanning financial literacy and wellbeing, mental health, inclusion and diversity. In addition, the Begin Together Arts Fund, delivered in partnership with Business to Arts, provided c.€100,000 of funding to eight projects focused on engaging vulnerable artists or audiences. A further c.€300,000 was donated by colleagues to local causes and not-for- profit organisations from the Fund for Colleagues. Our 2023 community activity brings our total community investment to c. €7.1 million since 2020. We also recognise that sometimes there is a need for direct support. That is why in 2023 we provided a further c. €1.0 million of funding to support those most impacted by the cost-of- living crisis through a dedicated fund. This was fast tracked to organisations working directly with impacted groups. Financial crime Protecting the integrity of the financial system from financial crime risks including money laundering, terrorist financing, bribery and corruption is of paramount importance to us. We are committed to playing our part in safeguarding the financial systems and our customers from the impact of financial crime. The Group's Financial Crime Framework, including our policies and procedures support this objective. All colleagues complete mandatory training and assessments annually, so that the Group's policies and procedures are embedded in operational activities. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 21 Foundations to our Sustainable company framework To operate successfully as a Sustainable company, it is crucial that we have solid foundations to underpin our strategy. Transparently managing, monitoring and disclosing against these foundational topics drives the trust we have with our key stakeholders. Related pages CEO review (page 6 ) Our strategy (page 10) In 2023, the Group committed €1m funding to organisations in immediate need due to cost of living pressures. Pictured is Hill Street Family Resource, an intercultural centre in Dublin’s north east inner city, one of the groups that benefited from funding. Foundations to our Sustainable company framework (continued) Sourcing responsibly It is important that our supply partners who deliver goods and services to the Group, share our values and ambition to create a sustainable future. For this reason, we continue to review and update our Code of Supplier Responsibility which sets out the responsible business practices we expect of all our suppliers. This Code is further supported by our Group Procurement and Group Environmental policies. Health and safety We aim to ensure the safety of our colleagues and customers at all times by carefully planning our operations, identifying potential hazards and managing the associated risks at every stage. Implementation of the Group’s Health and Safety policy helps with this objective. Key components of our safety management systems are property specific risk assessments, an extensive auditing programme, as well as a robust health and safety training plan which includes role specific training and two mandatory training courses for all colleagues. Our Safety Management system is fully accredited to ISO 45001 which is the most reputable and recognised standard for health and safety management systems internationally. The accreditation was achieved following 20 days of rigorous auditing by a certified external audit company. Recertification audits of the system are conducted annually over 4 days, which will provide ongoing confidence that safety is being managed in a compliant and effective manner, in line with the ISO 45001 standard. Human rights Several policies and initiatives, including our Code of Supplier Responsibility, Modern Slavery Statement and Vulnerable Customer Unit, guide our approach to ensure that modern slavery and human trafficking does not affect our business or our supply chain. We have put in place Human Trafficking Awareness training and all staff have a legal obligation to report any suspicious activities that may indicate possible human trafficking, including modern slavery and sexual exploitation. Through the work of our Financial Crime Compliance team, in partnership with global non-governmental organisation (NGO), 'Stop the Traffik' and An Garda Síochána Protective Services Bureau, we are active in helping to identify and disrupt money flows from human trafficking and in improving the accessibility of financial services to victims of human trafficking. Cyber security We continue to invest in our cyber capability across people, process and technology. We apply a 'security by design' approach to business and technology-driven change. We recognise the importance of a strong security culture within the Group, with annual mandatory web-based training for all colleagues coupled with a well- established and growing Cyber Community of Practice. 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 explain how we hold and use personal information and outline people’s rights in relation to the collection of personal information and how they can exercise those rights. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 22 Reporting and ESG ratings 2023 ESG ratings The Group participates in a number of ESG ratings and benchmarks with a focus on agencies that have a strong reputation for financial services industries based on market insight and investor feedback. In 2023, the Group participated with three key rating agencies, Sustainalytics, MSCI and S&P, and also reported to the CDP climate change questionnaire investor benchmark with scores below. Agency Rating Scale 2023 2022 Sustainalytics Scale of 0 - 100, with a lower score being positive 17.9 20.0 The Group's score was improved in the low risk category, placing the Group in the top 18th percentile of banks globally (2022: 23rd percentile). MSCI AAA to CC, AAA as a best possible score A BBB The Group was upgraded to A in September 2023 continuing the momentum from the prior year. CDP A+ to F, with A+ as best possible score B B The Group's overall CDP score remained unchanged at B, with improvements noted in risk management processes. S&P Global Scale of 0 - 100, with a higher score being positive 50 56 Decrease is consistent with a number of our peers. Preparing for the Corporate Sustainability Reporting Directive (CSRD) We seek the views of our internal and external stakeholders on the sustainability topics that matter most to them, to ensure our strategy aligns with stakeholder needs and to track our performance. During 2023, as part of our preparation for our first CSRD compliance report for 2024, we undertook a Double Materiality (DMA) assessment with extensive stakeholder engagement. A DMA is the essential first step towards CSRD compliance that identifies which sustainability-related matters are most material to the Group and our stakeholders, taking both an “inside- out” approach (i.e. Impacts (I) that the Group has on sustainability matters) and an “outside-in” approach (i.e. Risks (R) and Opportunities (O) that may be generated by sustainability matters that can have financial effects on the Group). This process built on our previous Materiality Assessment updating our understanding of our material ESG risks and opportunities, and their financial effects on the Group. The results are informing our strategy and processes for managing our IROs. They are shaping our ESG data collection and form the basis of the Group’s CSRD reporting requirements expected in Q1 2025. CSRD will be a significant input into our overall Sustainability strategy as we aim to support a deeper integration of sustainability across our operations and this includes influencing decision making at every level. TCFD compliance statement The following pages include our climate-related disclosures under our TCFD commitment and the EU Taxonomy. We will have more disclosures across our three sustainability pillars in our more extensive FY23 Sustainability report in Q2 2024. In November 2023, TCFD was succeeded by the International Sustainability Standards Board (ISSB). Going forward, we will align our disclosures with CSRD and the International Financial Reporting Standards (IFRS) for Climate and Sustainability disclosures, S1 and S2. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 23 TCFD compliance statement Governance Sustainability at Board-level The Board is collectively responsible for the long-term sustainable success of the Group and for ensuring there is a strong corporate structure in place, which is aligned with the Group’s strategy and purpose. It provides leadership of the Group, setting strategic aims, within the boundaries of the Group’s risk appetite and a framework of prudent and effective controls. Responsibilities in respect of Sustainability and ESG strategy are delegated to the Group Sustainability Committee (GSC), which, jointly with the Board Risk Committee (BRC), is also responsible for ensuring ESG risks have been integrated into the Group Risk Management Framework. Group Sustainability Committee (GSC) On behalf of the Board, the GSC oversees the development and implementation of the Group’s Sustainability strategy and, together with the BRC, oversees related risks, including monitoring the Climate Risk Implementation Plan. As part of that role, the GSC oversees progress against ESG targets, review of ESG-related commitments and the publication of the Sustainability Report. Board Risk Committee (BRC) On behalf of the Board, the BRC is responsible, jointly with the GSC, for inter alia ensuring that ESG risks are integrated into the Risk Management Framework. Group Audit Committee (GAC) On behalf of the Board, the GAC is responsible for inter alia monitoring the quality and integrity of the financial statements, including sustainability disclosures. The level of GAC involvement in sustainability related matters is intended to increase over the course of 2024, given enhanced disclosure requirements under CSRD. Group Executive Committee (GEC) The most senior executive committee in the Group, the GEC, acts in an advisory capacity to the CEO and assists the CEO in the management and leadership of the Group on a day- to-day basis. The GEC has overarching responsibility for delivery and operationalisation of the Group’s Sustainability strategy, with specific executive responsibility for sustainability (including climate change) delegated to the Chief Sustainability and Investor Relations Officer (CSIRO), who reports to the Group Chief Financial Officer (CFO). Members of the GEC include the CFO, Divisional CEOs and the Chief Risk Officer (CRO). Executive Risk Committee (ERC) The ERC supports both the GEC and the BRC, in overseeing the material risks of the Group, taking a holistic approach to overseeing the effective management of risk, including climate and environmental risks. Sustainability Decision Group (SDG) The SDG brings together senior business and functional management across the Group to enable a coordinated approach to sustainability objectives across the 3 pillars and to provide a discussion and decision- making forum to deliver on the Group’s sustainability agenda. The SDG is chaired by the CSIRO and regularly updates the GEC on progress against key initiatives. Divisional and Subsidiary ESG Working Groups All materially impacted business divisions and businesses have in place dedicated ESG leads and ESG working groups to ensure ESG strategy and operational aspects are integrated into the Group's business model. ESG Risk Working Group The ESG Risk Management Framework sets out the approach to the management of ESG risk factors in the Group. Coordinated by Group Risk, the ESG risk working group brings together Second Line of Defence (2LOD) risk management from across the principal risk types (with representation from the First Line of Defence (1LOD) Sustainability team) to ensure there is a coordinated, cohesive and challenging approach to the management of ESG risks (including climate-related and wider ESG risks) within the Group. Incorporating Sustainability into Performance Management With 'Sustainable Company’ now a core strategic pillar, ESG is mainstreamed into our performance management system. This puts it on every colleague’s ‘to do’ list. The Group is introducing a performance-related profit share scheme which will see colleagues rewarded by April 2024 based on the company's financial, operating and sustainability performance, as well as individual performance considerations during 2023. The appropriateness of the final profit share will be assessed against a mix of financial and non-financial criteria. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 24 Related pages CEO review (page 6) Our strategy (page 10) Risk Management Report (page 134) Sustainability governance framework TCFD compliance statement (continued) Strategy Emission reduction targets SBTs set our portfolios and lending practices on a pathway that is aligned with the Paris Agreement goals. Achievement of SBTs will also contribute to fulfilling the Group’s commitments as a signatory of the UNPRB. These independently validated targets guide our emission reduction plans and are contingent on the current Irish and UK government's Climate Plan ambitions and planned actions. The majority of the Group's emissions stem from our economic lending activities. Achieving our ambitious Scope 3 SBTi targets necessitates significant progress in national climate action plans in both Ireland and the UK. Additionally, the successful realisation of these targets relies on the actions taken by our customers. Our ambition is to actively assist them in transitioning to more sustainable practices, both in their lifestyles and business operations. Given the integral role of the financial services sector in our economies, we recognise our potential as a key facilitator of the low- carbon transition. By setting SBTi emission reduction targets, we underscore our commitment to facilitating tangible change for our customers and society. The SBTi validated our target of a 49% reduction in GHG emissions from our own operations (Scope 1 and 2), which supports our broader aim of net zero emissions in our own operations by 2030. Reduction targets have also been set for emissions arising from the Group’s lending activities (Scope 3) which are consistent with levels required to meet the goals that are aligned to the Paris Agreement. Under the SBTi validated sector decarbonisation approach targets, we are committing to a 48% reduction in residential mortgage portfolio emissions intensity (Ireland and UK), a 56% reduction in commercial real estate portfolio emissions intensity and a 63% reduction in electricity generation project finance portfolio emissions intensity by 2030. The base year for the reduction targets is 2020. Under the SBTi validated portfolio coverage approach targets, 25% of the Group’s corporate loan portfolio and corporate bonds will have SBTi validated targets by 2025. The table below summarises our progress against the six SBT categories with further details included in the metrics and targets section of the TCFD compliance statement (see page 37). 2023 in-scope lending SBT pathway convergence required progress by 2023 RAG1 status Science Based Targets (SBT) Categories €bn % of customer lending Science based targets vs. 2020 baseline Progress to date by 2023 Absolute emissions reduction Absolute emissions Own operations n/a n/a 49% reduction by 2030 q42% q35% Lending portfolios Sector Decarbonisation Approach Emissions intensity Residential property2 39.9 49% 48% reduction by 2030 q6% q15% RoI mortgages 24.9 31% q10% UK mortgages 15.0 18% q2% Commercial real estate 5.2 6% 56% reduction by 2030 q11% q17% Electricity generation - Project Finance 0.3 0.3% 63% reduction by 20303 q28% q19% Lending portfolios Portfolio Coverage Approach SBT portfolio coverage Corporate loans 7.8 10% 25% coverage by 20254 p23% p15% Corporate bonds 0.9 n/a 25% coverage by 20255 p7% p15% 1 The Group has assigned a Red, Amber, Green (RAG) status to measure progress. Green means our progress to date is ahead or in line with the convergence pathways towards the respective SBTs for each portfolio. Amber rating means our progress is currently lagging the convergence pathway but we consider the lag to be recoverable by the target date. 2 Does not include residential mortgages acquired from KBCI in 2023. 3 Target reduction updated to 63% from 40% and notified to the SBTi following restatement of the volume of electricity generation financed in the 2020 baseline. 4 Defined as 25% of Corporate Lending Customers with validated SBTs (weighted by company emissions). 5 Defined as 25% of Corporate Bond Customers with validated SBTs (weighted by investment value). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 25 TCFD compliance statement (continued) Strategy (continued) Our key climate risks and opportunities In the effort to mitigate the most severe consequences of climate change, there is a global push to reduce GHG emissions and limit the rise in global average temperatures to below 2°C, with the aim of mitigating the increase 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, resulting in risks and opportunities in the short, medium and long-term. Our strategy execution is informed by our assessment of risks and opportunities. Climate-related risks We recognise that the climate-related risks we face need to be identified, assessed and managed on an ongoing basis to minimise negative impacts (see table on right hand side for risk drivers). 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. In the Group’s key planning process, the Internal Capital Adequacy Assessment Process (ICAAP) the potential impact of transition and physical risk drivers is assessed for each key risk type over the short (< 3 years), medium (3-5 years) and long-term (> 5 years). The key climate-related risk impacts are: • 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. • Business and Strategic risk: Long-term franchise impacts if strategic commitments are not achieved by the Group and the Group’s product offering does not adapt to changing market dynamics. • 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. • Conduct risk: Potential impact if failures in product design, market practice or customer engagement lead to greenwashing claims or poor customer outcomes. Our assessment of climate risk drivers is informed by the use of climate change scenario analysis. For details please refer to the Scenario Analysis segment in this Strategy section of the TCFD compliance statement. The Group has continued to embed the management of climate risk drivers into its risk management framework to mitigate the risk that climate change presents to our business strategy. For further details, please refer to the Risk Management section of the TCFD compliance statement. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 26 Climate related risk drivers Transition risks Policy and legal • Increased pricing of carbon emissions. • Enhanced emissions-reporting obligations. • Enhanced regulation of existing products and services. • Exposure to climate-related 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. Physical risks 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. TCFD compliance statement (continued) Strategy (continued) Our approach to climate scenario analysis Supporting the green transition also requires the Group to assess its own resilience to climate change. To address this requirement, the Group has been continually developing its scenario analysis and stress testing capabilities in line with emerging industry methodologies and regulatory guidance. The Group is developing scenario analysis capabilities on an iterative basis, leveraging improvements in climate data and methodologies as they become available. Given the long time horizon associated with climate change, scenario analysis is considered a key tool to inform strategic direction and risk management. Our starting point for modelling climate-related risks are climate scenarios published by the Network of central banks and Supervisors for Greening the Financial System (NGFS). The NGFS has developed the scenarios, each of which reflects a different climate policy pathway to provide a common starting point for the financial sector to analyse physical and transition climate-related risks. During 2023, we developed internal scenarios and methodologies to quantify the potential impact of climate-related risks across our commercial and retail customer lending portfolios. Each scenario has a separate risk driver profile (made up of both physical and transitional risks) that have implications for credit quality, including the probability of default (PD) and loss given default (LGD). These scenarios and their associated risk profiles can then be applied to lending sectors (e.g. commercial lending, residential mortgages and car finance) to understand the implications for credit quality for that sector. Climate scenario analysis is integrated within the ICAAP in order to increase our understanding and insights into the potential impacts of climate risk. 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. We have integrated climate into the ICAAP and its broader scenario analysis framework to assess the impacts of climate on different risk types (e.g. credit, business, operational, conduct and regulatory). The potential impact of transition and physical risk drivers is assessed for each key risk type over the short (< 3 years), medium (3-5 years) and long- term (> 5 years). This is a standalone analysis separate to the standard ICAAP Base and Stress analysis that focuses on longer term impacts out to 2050, beyond the standard three year time horizon of ICAAP. This scenario analysis informs climate risk materiality assessments to quantify the potential impacts across the Group's risk types that is being integrated into the Group's ICAAP. Please refer to the Risk Management section of the TCFD compliance statement on page 30 for details on how scenario analysis is informing materiality assessments of potential climate impacts by risk type and climate drivers such as flood risk. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 27 Climate scenarios Each scenario represents a different climate policy pathway Risk drivers Implications for credit quality including probability of default and loss given default Lending sectors Implications for credit quality from climate impacts NGFS scenarios Transition risk e.g. economic changes resulting from the transition to a low- carbon economy Commercial lending Residential mortgages Internally developed scenarios Physical risk e.g. weather and flooding that results from climate change Car finance TCFD compliance statement (continued) Strategy (continued) Climate-related opportunities We recognise that the most significant impact we can have on climate change is through the finance we provide to our customers. Our assessments highlight that given the anticipated investment requirements in our key markets, the transition to the ‘green economy’ could lead to substantial financing opportunities across sectors and business lines. In November 2023, our Davy Decarbonization unit’s white paper 'Investing in Tomorrow: Shaping a Net-Zero Future' showed that c.€129 billion expenditure is required by 2030 across the key sectors illustrated in order to meet Ireland’s Climate Action Plan targets. This shows the investment opportunities that are arising from the transition. At Bank of Ireland, we aim to be at the centre of a sustainability support system for the Green Transition which informs our approach to sustainable finance. By providing the right finance in the right place at the right time, we can support innovation and drive scaling. We are addressing these opportunities in our business planning and product development. This focuses on our home and business customers in the sectors transitioning across electricity, transport, buildings, industry and agriculture. We expect the commercial realisation of the opportunities to materially increase in the medium to long-term. Investment required for Ireland's green transition to 2030 (Davy, November 2023 estimates) Sector Total €bn Public €bn Private €bn of which; Debt €bn of which; Equity €bn Electricity 43.0 – 43.0 32.0 11.0 Transport 43.0 4.0 39.0 39.0 – Residential buildings 23.0 13.0 10.0 10.0 – Commercial buildings 13.0 – 13.0 11.7 1.3 Industry 3.0 – 3.0 2.7 0.3 Agriculture 4.3 1.7 2.6 2.3 0.3 Total 129.3 18.7 110.6 97.7 12.9 Climate-related opportunities for the Group Sector Opportunities Time frame Renewables Finance • The Group is a leading lender to the onshore wind sector and is expanding supports to the offshore wind and solar sectors. Materially increasing in the medium to long-term (2024-30) Home Buying and Everyday Banking • Up to 500,000 homes to be retrofitted by 2030. • Ongoing support for buyers of energy efficient new homes. • Target of 845,000 Private Electric Vehicles on Irish roads by 2030. Corporate and Commercial • Increasing market opportunities to finance green transition through investment in new equipment (e.g. low emission equipment/ infrastructure), productivity and property energy efficiency improvements. ESG Advisory • Expert advisory is provided by our Davy Horizons sustainability consultancy to assist business customers improve their sustainability performance across climate and all ESG aspects. Increasing our sustainable finance products and support We are at the heart of the movement towards sustainability in Ireland, particularly in supporting the green transition in line with Ireland’s Climate Action Plan. Our goal is to help our customers adapt to this change. A key part of our commitment is to develop financial products that support the transition. This aligns with our dedication to the UNPRB. Our range of sustainable finance products is carefully designed to help our customers make real, impactful changes. This includes green mortgages, loans for eco-friendly cars, and business loans for small and medium-sized enterprises (SMEs) and farmers, focusing on renewable energy, capital expenditure, and sustainability-linked lending. This year, we introduced the innovative Enviroflex loan, a new funding option for farmers to encourage sustainable farming practices. In our efforts to aid corporate clients in reducing their carbon footprint and enhancing their environmental strategies, we have been offering loans with sustainability-linked pricing since 2019. Green mortgages are available to new customers who are buying or building a property with a BER of B3 or better as well as to customers who are retrofitting an existing property to a BER of B3 or better. In 2021, the Group extended the availability of its Green mortgage to include customers switching from another lender and to include B rated BER properties, previously applied to BER A rated properties. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 28 TCFD compliance statement (continued) Strategy (continued) We are constantly developing and expanding our range of sustainable finance solutions. For the latest information on our product offerings and supports please see our range of dedicated Green Hub sites for each customer channel by using the hyperlinks below. RoI home buying and everyday banking RoI business banking (SME) Corporate banking New Ireland Davy Current home buying and everyday banking products: • Green Mortgage • Green Home Improvement Loan • Green Motor Loan • Motor Financing for Electric Vehicles (EVs) Current business banking products: • Enviroflex: Sustainability- Linked Agri Lending • SBCI Growth and Sustainability Loan Scheme • Green Business Loan Current corporate banking products: • Green Capex Loan • Sustainability- Linked Loans • CRE Green Loan • Project Finance • Woodland Nature Credit New Ireland aim to be a sustainable insurer and a responsible investor and offers a range of investment funds to its clients that promote environmental and/ or social characteristics. Davy offers a range of investment solutions to its wealth clients that are sustainable, and provides specialist sustainability supports to its corporate and institutional clients. Link to the ' Personal Banking Green hub ' for the latest product offering. Link to the ' Business Green hub ' for the latest product offering. Link to the 'Corporate Banking Product and Services hub' for the latest product offering. Link to the ' New Ireland Sustainable Investing hub ' for the latest product offering. Link to the ' Davy Sustainable Investing hub ' for the latest product offering. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 29 Sustainability partnership for customers Bank of Ireland sustainable finance Our approach supports meeting our SBTs by reducing the GHG emissions that our business finances. With this science and policy-based approach, we can focus our resources where it matters to support credible action. We offer a growing portfolio of sustainable financing products and services, including green residential mortgages, renewable energy project financing and electric vehicle financing, supported by our Green Bond programme. Through these offerings, we seek to not only align with the national climate action plans in both Ireland and the UK, as well as the Paris Agreement, but also to provide tangible benefits to our customer base in a more sustainable way. TCFD compliance statement (continued) Risk management Climate change – managing climate-related risks ESG risks are important considerations for financial institutions and stakeholders. The Group recognises ESG factors (including climate-related risks) represent a common risk driver across the Group's principal risk types. The Group ESG Risk Management Framework sets out the approach to the management of ESG risk factors in the Group. ESG risk management is relatively immature across the industry and continues to evolve. Implementation to date, in the Group and industry, has largely focused on climate-related risk drivers. During 2023, the focus of ESG risk management in the Group has expanded to include non-climate environmental risks. Our strategic commitment to supporting our customers' green transition is underpinned by our management of the risks associated with climate change. We do this by embedding climate-related impacts in key decision making processes. The Group has a detailed multi-year (2021-2024) Climate Risk Implementation Plan in place to address the ECB guidance on how banks should manage climate-related and environmental risks (November 2020). The guidance sets out expectations for institutions when formulating and implementing their climate business strategy, governance and risk management frameworks and disclosures. Execution of the plan has seen the Group progressively aligning to the ECB guidelines, embedding climate risk and ESG considerations in business and risk management processes in line with the Board approved plan. Integration of climate risks at a Group level The Group defines ESG factors as environmental, social or governance matters that may have a positive or negative impact on the Group and represent a common driver across the Group’s Principal risk types. The Group defines ESG risks as risks that stem from the current or prospective impacts of ESG factors on the Group that, could cause an actual or potential material negative impact on: • the Group’s earnings, franchise value or reputation; • the Group's regulatory standing; • the long-term sustainability of our customers' operations and financial wellbeing; and • 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. These are the risks associated with the transition to a low- carbon economy and from climate- related physical events. Further details on these climate-related risk drivers can be viewed on page 26. 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, Business and Strategic risk, Operational risk and Conduct risk. 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. Per the Group’s Risk Management Framework and its Group Risk Library, ESG risk factors such as climate-related risks are managed within the framework the Group has in place for its established risk types. Therefore, the Group is integrating the management of climate risk into its existing policies, controls, reporting and operating procedures, in accordance with the ECB guidelines on the management of climate and environmental-related risk. The Group has dedicated resources to lead the coordination of the Group’s approach to ESG risk management, both in 1LOD (Group Sustainability function in the Group Finance division) and in 2LOD (Business, Strategic and Sustainability Risk function in the Group Risk division). ESG Risk Factors i i i i i i i i i Credit risk Market risk Funding & liquidity risk Life insurance risk Capital adequacy risk Business & strategic risk Conduct risk Regulatory risk Other operational risk First Line of Defence (1LOD): The business divisions or functions taking on risk have the primary responsibility for managing the risk generated by their actions and this includes managing ESG factors. Second Line of Defence (2LOD): 2LOD has the responsibility for ensuring the ESG risk factors are considered when executing second line responsibilities as set out in the Group Risk Management Framework. This includes consideration as part of policy setting and taking reasonable steps to ensure the Group does not suffer outcomes outside of Risk Appetite. Third Line of Defence (3LOD): 3LOD is responsible for ensuring the first and second lines of defence assess whether all significant risks are identified and appropriately reported by management to the executive and board of management, as well as assessing whether risks are adequately controlled. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 30 TCFD compliance statement (continued) Risk management (continued) Identification and assessment of climate-related risks Guided by the Group’s ESG Risk Management Framework, we are progressively embedding climate risk into the Group’s key risk processes. We continue to improve how we assess climate risk drivers taking into account potential impacts, our mitigating actions, and next steps for each risk type. The following table summarises the current position on the identification, assessment and mitigation of climate-related risks across the Group's Principal Risk types: Principal risk types Impacting climate risk drivers Climate risk impacts Quantified Potential Impacts1 What are we doing to mitigate climate risk drivers Short Medium Long Credit risk Transition risk: • Policy & legal • Technology • Market • Reputation Physical risk: • Acute • Chronic • Borrowers’ ability to repay if operating in sensitive sectors. • Changes in emission regulation or in user sentiment could affect asset value (Stranded Assets). • Collateral depreciation leading to negative impacts on Loan To Value (LTV) (e.g. flooding, storms). • Borrowers’ ability to repay in sectors more sensitive to weather impacts like floods and storms (e.g. agriculture). ll ll lll • Credit Risk Policy: ESG risks form part of credit assessment. ESG reporting requirements included in collateral valuation; excluded sectors and risk limits. • Limits and controls: Limits on property energy ratings (Commercial Real Estate / Buy to Let); requirements for flood insurance. • ESG Risk Lending Fora established in Corporate and Business Banking to assess lending where ESG risk is elevated. • Quantitative risk metrics embedded in procedures for key portfolios in scope for SBTs. • Climate risk scenario analysis for Credit Risk integrated into the Group ICAAP. Business & strategic risk Transition risk: • Policy & legal • Technology • Market • Reputation Physical risk : • Acute • Chronic • Long term franchise impacts if strategic commitments are not achieved and product offering does not adapt to changing market dynamics. ll ll ll • Group Strategy: Sustainable company is a key strategic pillar underpinned by Group Objectives and Key Results (OKRs) (including risk OKRs). • Business and Strategic Risk Policy requires ESG risk factors to be reflected in strategic planning and internal and external business environment assessments. Operational risk Transition risk: • Policy & legal • Technology • Market • Reputation Physical risk: • Acute • Chronic • Climate driven impacts on operational processes include increasing levels of systems, data, models and sourcing risk to manage. • Extreme floods or storms at multiple locations impacting our Business Continuity Plans with consequent impact to services we provide to clients (e.g. transaction processing). • Potential need to increase resilience of our network, supply chain and production process where off-shore operations are more exposed to increasing physical climate risks. ll ll ll • Climate risk integrated into ICAAP scenario analysis for Operational Risk. • Business Continuity Mission Critical Services Scenario Analysis: climate-related scenario testing carried out. • Third Parties and Outsourcing: ESG (including climate change) is part of supplier due diligence assessment; ESG-related metrics and tolerance levels where ESG materially impacts supplier. • Data Risk: Standard group control framework applies to climate data. • Model Risk: Climate risk factors to be considered in models including assessing data collection requirements to enable inclusion in models. 1 An estimation of: (i) The time horizon at which each risk is likely to materialise: short term, within 3 years; medium term, between 3 and 5 years; or long-term, more than 5 years. (ii) The relative materiality of each risk: Negligible (-); Low (l); Moderate (ll); Significant (lll). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 31 TCFD compliance statement (continued) Risk management (continued) Principal risk types Impacting climate risk drivers Climate risk impacts Quantified Potential Impacts1 What are we doing to mitigate climate risk drivers Short Medium Long Conduct risk Transition risk: • Policy & legal • Reputation Physical risk: • Acute • Chronic • Failures in ESG/green product design, market practice or customer engagement could lead to regulatory sanctions and brand damage, if there is a lack of transparency and misleading classification (greenwashing), or if clients suffer an unexpected loss due to climate risks. l l l • ESG considerations are incorporated in new product approvals and ongoing product lifecycle reviews for all product / service / channel initiatives that are classified or marketed as a Green / ESG proposition to mitigate potential claims of ‘Greenwashing’. • Group Customer Protection Risk Policy requires mitigation of greenwashing risk. • All colleague training on climate concepts and processes, as well as role specific training on sustainable finance and ESG risk management launched in 2023. Regulatory risk Transition risk: • Policy & legal • Technology • Market • Reputation Physical risk: • Acute • Chronic • Failure to implement in a timely manner ongoing changes in climate regulation could affect the Group’s profitability through regulatory sanctions. • Potential for regulatory sanctions if physical risks impact our services with consequent impact to services we provide to clients. l ll ll • Upstream Regulatory Change Monitoring: ongoing horizon scanning with quarterly 1LOD/2LOD meeting to review any developments captured in climate regulation applicable to the Group. Funding & liquidity risk • n/a • Group liquidity risk profile does not include instruments where climate concerns may significantly impact funding and liquidity pools. - - - • Climate risk scenario analysis for funding & liquidity risk integrated into the Group's internal liquidity adequacy assessment process (ILAAP). Market risk • n/a • The material trading instruments in the Group do not include equities and commodities where climate concerns may significantly impact the valuation. - - - • Policy controls on exposure to climate sensitive traded instruments. • Climate risk scenario analysis for market risk integrated into the Group ICAAP. Life insurance risk • n/a • The potential for climate risk drivers to drive sudden increases in morbidity and mortality risk is assessed as minimal. - - - • Climate risk scenario analysis for life insurance risk is part of the ORSA (Own Risk & Solvency Assessment) process for the New Ireland entity which manages life insurance risk of the Group. Capital adequacy risk • Aggregate of the risk impacts above. • The risk of increased capital depletion from the impact of climate risks across the Group's other principal risks. lll lll lll • Aggregation into ICAAP 2023 quantitative Climate Risk Assessment across principal risk types. 1 An estimation of: (i) The time horizon at which each risk is likely to materialise: short term, within 3 years; medium term, between 3 and 5 years; or long-term, more than 5 years. (ii) The relative materiality of each risk: Negligible (-); Low (l); Moderate (ll); Significant (lll). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 32 TCFD compliance statement (continued) Risk management (continued) Measurement and monitoring of climate-related risks During 2023, methodologies were developed to allow climate risk to be actively measured and monitored by the Group in a similar manner to other key risk types: • the Board Risk Report (BRR) is the report used by the Board to review and monitor the Group's risk profile across all Principal Risks, compliance with Risk Appetite and Risk Policies. ESG risk in the Group is reported on through the BRR on a minimum quarterly basis and is the primary source of reporting for the impact of ESG-related risks on the Group's risk profile; and • key risk metrics on the lending portfolio aligned to Pillar 3 ESG Reporting are monitored by the GSC on a quarterly basis to ensure transparency and comparability. These include: 1. Sectoral concentrations. 2. The energy efficiency profile of property lending portfolios. 3. Exposure to physical climate risks. 1. Sectoral Concentrations We monitor sectors most sensitive to climate change on a quarterly basis. The Group loan book breakdown below shows the current composition of our commercial loan portfolio and the percentage of lending to sectors the Group considers most sensitive to climate change – in line with European Banking Authority (EBA) Pillar 3 ESG reporting standards. In terms of portfolio mix, the Group has no direct exposure to fossil fuels in energy and extraction, and as a predominantly retail lending bank, c.70% of our customer lending is in residential and commercial property and car finance. This assessment also highlights that the Group’s direct exposure to fossil fuels is nil and to commercial lending segments with high emissions is relatively low (with the exception of the agricultural sector, which due to its specific challenges requires broader support in which we will play an active role). Sectoral concentrations key risk indicators 2023 Gross Carrying Amount (GCA) €bn 2023 % Total YoY Change Exposure to high contributing sectors1 19.3 71.4% q(8%) Exposure to top 20 global emitters2 – – – Direct fossil fuel exposure3 – – – Indirect fossil fuel exposure4 0.2 0.7% q(25%) 1 Denotes exposure to commercial lending sectors that highly contribute to climate change as classified in Pillar 3 Reporting. The €27.1 billion in the pie chart denotes the total FY2023 exposure to commercial lending (non-financial counterparties). 2 Denotes exposure to companies listed among the top 20 most carbon intensive firms globally. 3 Denotes exposure classified in the following Pillar 3 Reporting sub-sectors in Mining & Quarrying: B.05 - Mining of coal and lignite; B.06 - Extraction of crude petroleum (oil) and natural gas. 4 Denotes exposure classified in Pillar 3 to counterparties with revenue from non-direct fossil fuel activities (logistics and supply chain) – denoted in Pillar 3 as Excluded from EU Paris-aligned Benchmarks. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 33 28.6% Low Contributing Sectors €7.8bn €27.1bn1 6.5% Agri Forestry & Fishing €1.7bn 0.4% Mining & Quarrying €0.1bn 16.4% Manufacturing €4.5bn 2.0% Electricity & Other Utilities €0.5bn 29.0% Construction & Real Estate €7.9bn 5.6% Accommodation and Food Services €1.5bn 3.1% Transportation & Storage €0.8bn 8.4% Wholesale & Retail €2.3bn Commercial lending exposure to sectors that contribute to climate change TCFD compliance statement (continued) Risk management (continued) Energy Performance Certificate (EPC) data RoI Mortgages - exposure collateralised by residential immovable property (GCA of €32.5 billion): • for the December 2023 disclosure, 100% of the BER / EPC data for RoI mortgages is estimated, and not based on specific BER labels. A national database maintained by the Sustainable Energy Authority of Ireland (SEAI) on domestic properties with recorded energy ratings has been used to provide an estimated view on the energy rating profile of RoI lending collateralised by residential property, based on key explanatory factors (namely year of build, property type and location); and • during 2023, the Group has developed data capture capabilities within its RoI home buying customer journey, so that data based on specific BER certificates is being collected from the start of 2024. UK Mortgages - exposure collateralised by residential immovable property (GCA of €15.0 billion) • for UK mortgages, the Group has processes for the collection of EPC data in place since 2020. For this December 2023 disclosure, 80% of the EPC data for the stock of UK mortgages is based on specific EPC labels, with coverage above 91% for lending originated in 2023. For the residual UK located properties, EPC ratings have been estimated based on key explanatory factors (namely year of build, property type and location). Commercial Real Estate (CRE) - exposure collateralised by commercial immovable property (GCA of €9.3 billion): • during 2023, the Group has developed data capture capabilities within its CRE lending business to progressively expand and enhance the collection of data based on specific EPC certificates. Data collection is being progressed in phases and this has seen coverage of the portfolio where specific EPC ratings are available, double from 14% in FY2022 to 29% in FY2023. Further increases in coverage expected in 2024 as further phases of the data collection process are progressively rolled out across the CRE portfolio; and • for the residual properties, national EPC ratings data on non-domestic properties is used to estimate the energy rating profile for those properties based on property type. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 34 Energy efficiency of property lending portfolios (FY2023) 2. Energy efficiency of property lending portfolios The Group is committed as part of our sustainability ambitions to support our customers to increase their residential energy efficiency whilst encouraging the purchase of energy efficient properties. Energy efficiency is represented by Energy Performance Certificate (EPC) ratings, with A indicating the best and G the worst in terms of energy efficiency. The charts to the right summarise the energy efficiency of the Group’s residential and commercial property portfolios in RoI and the UK, based on a combination of actual and estimated EPC ratings. Currently, c.41% of our RoI mortgage portfolio (and c.50% of new lending in the year) corresponds to properties in the A to B EPC categories. In the UK, c.9% of properties in our mortgage portfolio (and c.13% of new lending in the year) are A to B rated. The EPC profiles and pace of improvement reflect the differences in housing stocks across the two jurisdictions. The EPC profile of our commercial property portfolio is also improving reflecting initial progress made in our lending strategies to decarbonise our property lending portfolios. 1 100% of the BER / EPC data for RoI mortgages at FY2023 is estimated and not based on specific BER labels. Data based on specific BER certificates is being collected from the start of 2024 and embedded in future reports. TCFD compliance statement (continued) Risk management (continued) 3. Exposure to physical climate risks During 2023, the Group has continued to develop and expand its capabilities to identify, measure and monitor the potential financial impacts emerging from climate-related physical risks. For this purpose, the Group has acquired data from Moody’s to assess physical risks, at a Nomenclature of territorial units for statistic1 (NUTS) 3 regional level across six sub-types of physical risk that have been categorised into acute and physical risk categories as follows: Acute physical risks Chronic physical risks • Floods • Heat Stress • Hurricanes • Sea Level Risk • Wildfire • Water Stress Exposures sensitive to climate change: physical For exposures collateralised by immovable property (residential and commercial), in line with guidance the collateral location is used to assign exposures to the NUTS 3 regions level to assess the exposure to physical risk. Where the lending is not collateralised, the country of risk is used. If any of the six physical risks are classed as 'Highly Exposed' for that region, the exposure is classed as Sensitive to Impact from Chronic and Acute Physical Risks based on the categorisation of the risk factors above. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 35 €1.4bn 1.7% lending 85% Exposure sensitive to acute physical risks only 14% Exposure sensitive to chronic physical risks only 1% Exposure sensitive to both acute & chronic physical risks Exposure sensitive to physical risks (€m) As a % of total exposure2 YoY change3 Group Total 1,149 192 11 1.67% p0.13% UK Mortgages 357 183 11 3.67% p0.04% RoI Mortgages 404 1.24% q(0.03%) Commercial Lending 388 9 1.43% p0.47% Acute only Both Chronic only 1 The Nomenclature of territorial units for statistics is a geographical nomenclature subdividing the economic territory of the European Union (EU) into regions at three different levels (NUTS 1, 2 and 3 respectively, moving from larger to smaller territorial units). Please see the flood risk map on the following page for a visual representation of the NUTS3 regions. 2 Group total exposure is total gross carrying amounts for loans and advances to customers at amortised cost. 3 Material driver of YoY change is increase in coverage of flood risk assessment across CRE portfolio. TCFD compliance statement (continued) Risk management (continued) Flood risk scenario analysis As an additional lens to identify exposure sensitive to physical risks a more property specific physical risk assessment has been undertaken for properties in RoI and the UK that are residential or commercial property collateral for lending exposures. The locations of these properties have been geo- coded for flood risk assessment. Using latitude and longitude, properties are matched to building and street based on address data available. The map below represents the proportion of RoI and UK properties at high risk of flood as a percentage of the Group’s mortgage lending under a forward looking climate scenario. The locations of these properties have been geo-coded for flood risk assessment using data and modelling from JBA Flood Risk Management, a leading provider of climate flood modelling in the Irish and UK market. The JBA flood model for RoI and UK includes river (fluvial), surface water (pluvial) and coastal flood risk. It assigns flood risk per property based on the potential flood damage to the property dependent on the type, frequency and depth of flooding modelled. The scoring ranges from 0 to 53, with 0 being lowest and 53 being the highest risk. The flood scores are projected forward based on the RCP 8.5 Pathway1 where emissions continue to rise throughout the 21st century and global temperatures increase by 2100 by 3.2 to 5.4 degrees. Properties classified at high risk of flooding are: • properties in RoI with a score of 31 and above by 2050 on an undefended basis2; and • properties in the UK with a probability of a flood event occurring by 2030 of >5%3. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 36 1. Border % of total mortgage lending: 2.5% % of regional lending at risk: 0.9% 2. West % of total mortgage lending: 4.9% % of regional lending at risk: 0.2% 3. Mid West % of total mortgage lending: 4.5% % of regional lending at risk: 2.1% 5. South East % of total mortgage lending: 4.0% % of regional lending at risk: 2.4% 4. South West % of total mortgage lending: 7.5% % of regional lending at risk: 1.4% 7. Mid East % of total mortgage lending: 13.0% % of regional lending at risk: 0.9% 6. Midlands % of total mortgage lending: 2.8% % of regional lending at risk: 0.1% 8. Dublin % of total mortgage lending: 29.1% % of regional lending at risk: 2.2% 9. Northern Ireland % of total mortgage lending: 1.5% % of regional lending at risk: 2.8% 20. Wales % of total mortgage lending: 1.1% % of regional lending at risk: 3.9% 10. Scotland % of total mortgage lending: 2.6% % of regional lending at risk: 2.0% 11. North East % of total mortgage lending: 1.0% % of regional lending at risk: 1.1% 12. North West % of total mortgage lending: 3.1% % of regional lending at risk: 1.8% 18. South West % of total mortgage lending: 2.6% % of regional lending at risk: 2.4% 19. West Midlands % of total mortgage lending: 2.1% % of regional lending at risk: 1.0% 16. Greater London % of total mortgage lending: 6.5% % of regional lending at risk: 3.2% 15. East of England % of total mortgage lending: 2.9% % of regional lending at risk: 1.5% 13. Yorkshire and the Humber % of total mortgage lending: 1.6% % of regional lending at risk: 3.2% 14. East Midlands % of total mortgage lending: 1.8% % of regional lending at risk: 1.7% 17. South East % of total mortgage lending: 4.8% % of regional lending at risk: 3.2% 1 Representative Concentration Pathways for greenhouse gas concentration trajectories adopted by the IPCC (Intergovernmental Panel on Climate Change). The pathways describe different climate futures, all of which are considered possible depending on the volume of GHGs emitted in the years to come. 2 Undefended denotes that flood mitigating defences are not taken into account. The flood data provided is on an undefended basis in the Republic of Ireland as the Office of Public Works currently only allows members of the Insurance Institute of Ireland access their defended areas data. 3 Probability based on projected JBA Flood Scores. RoI (c.€32.5bn) and UK (c.€15.0bn) mortgage portfolios - flood risk by region in forward looking stress climate scenarios (FY2023) TCFD compliance statement (continued) Metrics and targets Science Based Targets progress reporting We believe that progress towards our SBTs is a key metric in providing evidence of the Group’s progress to decarbonise both our business and operations, contributing to the transition to a low carbon economy and meeting the goals of the Paris Agreement. Our SBTs are informing our commercial strategy, including the opportunities to further expand our range of sustainable products and services, all supported by our green bond programme. The individual report cards below track our progress against the six target categories and provide details on metrics, progress to date, convergence pathways and data quality. Targets have been validated by SBTi with reference to convergence pathways that are denoted in the report cards as follows: • SBTi 1.5°C: SBTi pathway designed to facilitate limiting warming to 1.5 degrees Celsius above pre-industrial levels. • ETP B2DS: Beyond 2 Degrees Scenario (B2DS) aims to limit with a 50% chance global temperature rise to 1.75 degrees Celsius above pre-industrial levels. Progress to date is in line with management’s expectations and is reflective of progress at a national level in terms of decarbonisation and the early stage of the Group’s Sustainability strategy implementation. Our progress is benchmarked against convergence pathways that in general reflect a linear progression to the targets. Where our progress to date is ahead or in line with the convergence pathway, we have assigned a green RAG rating. Where our progress is lagging the convergence pathway, we have assigned an amber RAG rating as we deem the lag to be recoverable by the target date. As property retrofit activity and the anticipated effect of our interventions increase, reductions are expected in the medium term, with the full impact of decarbonisation of the energy grid expected in the back end of the decade. The achievement of these targets is informing our strategic interventions in terms of portfolio management, credit policy products and customer engagement and credit policy. By using these targets to align our lending portfolios to the Paris Agreement, the SBTs can help mitigate the climate-related credit risks associated with the green transition and ensure that we can address the opportunities to support the transition with measurable impact. Science Based Targets Progress Reporting by Category RAG Status 1. Own operations Target statement The Group commits to reduce its absolute Scope 1 and 2 GHG emissions 49% by 2030 from a 2020 base year and increase annual sourcing of renewable electricity to 100% by 2025. Baseline (FY2020) 6,238 tCO2e (tonnes of carbon dioxide equivalent) Current position (FY2023) 3,625 tCO2e (tonnes of carbon dioxide equivalent) Absolute emissions reduction from baseline 42% Annual sourcing of renewable electricity c.100% Notes • Progress achieved by FY2023 (from a 2020 baseline) has reduced absolute emissions from own operations by c.42% (from 6,238 to 3,625 tCO2e). This supports our broader objective of net zero emissions by 2030. The drivers of change in emissions year on year are covered in more detail in the 'climate related targets and metrics in our own operations' section on page 41. • In addition, there is a secondary target to increase annual sourcing of renewable electricity to 100% by 2025 that the Group substantially achieved in 2022 with full coverage expected in 2024. 1 SBTi pathway designed to facilitate limiting warming to 1.5 degrees Celsius above pre-industrial levels. The Group’s portfolio is largely renewable and very low emissions intensity at 2020 reflected in the 49% reduction target to 2030 to align with this 2050 pathway. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 37 Partnership for Carbon Accounting Financials (PCAF) Since 2021, Bank of Ireland has been a member of the Partnership for Carbon Accounting Financials, 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). Data quality - focus on continuous improvement To ensure progress and achievement of its Science Based targets, the Group is implementing sectoral strategies with a continuous focus on improving data quality and availability. Informed by PCAF guidance, we are developing customer engagement processes and partnerships with third parties to enhance data quality across all portfolios and will continually report on our progress with reference to the PCAF Data Quality Scale. TCFD compliance statement (continued) Metrics and targets (continued) RAG Status 2. Residential property Target statement Bank of Ireland commits to reduce residential mortgage portfolio GHG emissions 48% per square metre by 2030 from a base 2020 year. Baseline (FY2020) 46 kgCO2/m2 (weight of carbon dioxide equivalent emitted per square meter) Current position (FY2023) PCAF data quality score2 43 kgCO2/m2 3.8 (-) Reduction from baseline 6% Notes • The residential property category is seeing the RoI and UK mortgage portfolios decarbonising at different speeds, with the emissions of the RoI portfolio down c.10% since FY2020, driven by new lending which has an emissions intensity that is c.20% lower than the opening stock as at 1 January 2023. • This reduction is partially offset by relatively muted progress in the UK mortgage portfolio (down c.2% since FY2020) which is aligned to reported progress by other lenders in the UK market. • As retrofit activity and the anticipated effect of our interventions increases, accelerating reductions are expected in the medium term, with the full impact of decarbonisation of the energy grid expected in the back end of the decade. • Amber rating reflects strong progress to date driven by profile of new lending but is lagging convergence pathway. However, this lag is being mitigated and considered recoverable by the target date of 2030 at this stage of strategy execution by (i) increasing the focus on retrofitting of existing property stock and (ii) the impact of the decarbonisation of the electricity grid expected in the longer term. RAG Status 3. Commercial real estate Target statement The Group commits to reduce commercial real estate portfolio GHG emissions 56% per square metre by 2030 from a base 2020 year. Baseline (FY2020) 73 kgCO2/m2 (weight of carbon dioxide equivalent emitted per square meter) Current position (FY2023) PCAF data quality score2 65 kgCO2/m2 3.5 (-) Reduction from baseline 11% Notes • Amber rating reflects strong progress to date driven by profile of new lending which has an emissions intensity that is c.20% lower than the opening stock as at 1 January 2023 but with a lag to the SBT convergence pathway. • However, this lag is being mitigated and considered recoverable by 2030 at this stage of strategy execution by (i) credit policy amendments in 2023 to support the retrofitting of existing property stock and (ii) the impact of the decarbonisation of the electricity grid expected in the longer term. 1 Beyond 2 Degrees Scenario (B2DS) aims to limit with a 50% chance global temperature rise to 1.75 degrees Celsius above pre-industrial levels. 2 Reflects PCAF data quality score as at FY2023 with changes in score from baselines FY2020 position shown in brackets. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 38 TCFD compliance statement (continued) Metrics and targets (continued) RAG Status 4. Electricity generation - Project Finance Target statement The Group commits to reduce electricity generation project finance portfolio GHG emissions 63% per kilowatt hour (kWh) by 2030 from a base 2020 year. Baseline (FY2020) 0.155 kgCO2e/kWh (weight of carbon dioxide equivalent emitted per kilowatt hour) Current position (FY2023) PCAF data quality score1 0.110 kgCO2e/kWh 2.9 (-) Reduction from baseline 28% Notes • This portfolio consists of a small number of projects (c.25) and during 2023 the financed power generation attributed to two projects in the baseline was found to have been overstated. This has resulted in a restatement of the 2022 baseline for the portfolio from 0.097 to 0.155 kgCO2/kWh – an increase of 60% (the size of the aggregate impact being due to the small sample size). • Given consideration of this change in starting point and acknowledging the Group’s objective to align with the SBT 1.5 pathway by 2030, the targeted 2030 intensity of 0.058 kgCO2/kWh is maintained and the target reduction from 2020 is increased to 63%3 to reflect the reset 2020 baseline of 0.155 kgCO2/kWh. • Green rating reflects progress towards the 2030 target is progressing in line with business planning as the Group expanded its renewables portfolio from onshore wind to include offshore in 2023. This sees decarbonisation of c.28% to date versus the 2020 baseline. RAG Status 5. Long-term corporate lending Target statement The Group commits to 25% of its long-term corporate lending (weighted by financed emissions) setting SBTi validated targets by 2025. Baseline (FY2020) 0% coverage Current position (FY2023) Pipeline % portfolio in SBTi validation process 23% 20% Notes • Green rating reflects (i) strong adoption of SBTs among larger corporate clients (in line with convergence pathway to 100% coverage by 2040) and (ii) a strong pipeline, with a further 20% of the portfolio in the process of having SBTs validated. • Validation status of corporate customers based on SBTi reporting, with emissions data for portfolio weightings provided by ICE Urgentem. 1 Reflects PCAF data quality score as at FY2023 with changes in score from baselines FY2020 position shown in brackets. 2 SBTi pathway designed to facilitate limiting warming to 1.5 degrees Celsius above pre-industrial levels. The Group’s portfolio is largely renewable and very low emissions intensity at 2020 reflected in the 63% reduction target to 2030 to align with this 2050 pathway. 3 Target reduction updated to 63% from 40% and notified to the SBTi following restatement of the volume of electricity generation financed in the 2020 baseline. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 39 TCFD compliance statement (continued) Metrics and targets (continued) RAG Status 6. Long-term corporate bonds (bank bonds) Target statement The Group commits to 25% of its corporate bond customers (weighted by investment value) setting SBTi validated targets by 2025. Baseline (FY2020) 0% coverage Current position (FY2023) Pipeline % portfolio in SBTi validation process 7% 30% Notes • Amber rating reflects a lag to the linear SBT convergence pathway, which is due to the bonds in the portfolio being issued by financial institutions. Due to the later publication of SBT methodologies for the financial services sector, financial institutions have lagged other sectors in having SBTs validated, with the Group among the first to have their targets validated in December 2022. The lag is currently considered recoverable and mitigated by a strong pipeline of institutions in the process of having SBTs validated (30% of portfolio) with further approvals expected in H1 2024. Sustainable finance1 2023 GCA €bn 2022 GCA €bn YoY increase %2 2025 target GCA €bn 2030 target GCA €bn RAG status Customer lending 11.1 8.2 35% 15.0 30.0 of which: RoI Green Mortgages 6.5 4.0 59% UK Green Mortgages 1.3 1.1 21% Green CRE 1.7 1.7 2% Renewables Project Finance 0.3 0.2 46% Electric Vehicles 0.1 0.1 73% Sustainability-Linked Loans 1.2 1.1 10% 1 Exposures of c.€11.1 billion disclosed in this table comprise loans within the Group's Green Bond eligible assets portfolio, UK residential mortgages to EPC A and B rated properties and Sustainability-Linked loans. 2 Percentages are based on underlying calculation of amounts not rounded. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 40 Sustainable Finance 11% Sustainability-Linked Loans €1.2bn 1% Electric Vehicles €0.1bn 2% Renewables Project Finance €0.3bn 16% Green CRE €1.7bn 12% UK Green Mortgages €1.3bn 58% RoI Green Mortgages €6.5bn €11.1bn Sustainable finance products In line with our ambitions for 2023, we have set targets for sustainable financing: c.€15 billion by 2025 and c.€30 billion by 2030. We've made significant strides towards these goals. By the end of 2023, our sustainable finance portfolio grew by c.35%, reaching about €11.1 billion. We are on track to meet our targets, thanks in part to the popularity of our green mortgages, which represented c.50% of all new mortgage lending in the Republic of Ireland this year. Additionally, we have seen considerable annual growth in financing for renewable energy projects and electric vehicles in Ireland. The Sustainability-Linked Loan amounts disclosed in the table below are the drawn figures. The Group also monitors the commitments which has increased from €1.4 billion in 2022 to €2.7 billion in 2023 demonstrating customers' increased appetite for such products. TCFD compliance statement (continued) Metrics and targets (continued) Climate related metrics and targets in our own operations In 2023, the Group demonstrated its commitment to GHG emission reduction within its own operations by achieving over 85% of its SBTi 2030 target reduction in GHG emissions from its own operations (Scope 1 and 2). The following principles and methodology were applied in determining the emissions: CO2e emissions Scope 1 Scope 1 covers CO2e emissions from heating using oil, natural gas, refrigerants and from the usage of the Group’s controlled company cars. The emissions from heating are calculated on the basis of heating consumption, using specific emission factors from the Department of Environment, Food and Rural Affairs (DEFRA) and in accordance with the Greenhouse Gas Protocol Guidance. For company cars, the emissions are calculated on the basis of the fuel type (diesel, petrol, hybrid, plug-in hybrid and electric), estimated mileage and emission factors from DEFRA. Over the course of 2023, we have made enhancements to our reporting methodology due to improved data availability from our fleet providers. The impact of this methodology change resulted in an increase in the quantum measurement of our fleet emissions of c.380tCO2e. We note that on a like for like methodology basis, emissions generated by the fleet would be broadly flat year on year. Excluding this change, our underlying emissions continued to decrease by c.450tCO2e as a result of the initiatives detailed in the ‘Supporting the green transition’ section on page 17. As we aim for continual improvement in emissions data quality, we will use the same methodology during 2024 while continuing to identify opportunities to enhance emissions data quality. CO2e emissions Scope 2 Scope 2 covers emissions from electricity supplied by external suppliers. For the RoI, conversion factors for electricity were sourced from the Commission for Regulation of Utilities (CRU) and DEFRA, and for the UK conversion factors were sourced from DEFRA. Scope 2 emissions are reported in accordance with the market-based and location-based methodology from the Greenhouse Gas Protocol Guidance. For the location-based approach, the emission factors from electricity consumption are calculated using average country specific emission factors. For the market-based methodology, supplier specific emission factors were used to calculate emissions. CO2e emissions Scope 3 Scope 3 covers CO2e emissions from: • scope 3.1: purchased goods and services (limited to water supply and treatment); • scope 3.5: covering waste (including waste treatment, recycling, energy and paper); and • scope 3.6: business travel (air, road and rail) and downstream leased assets. Emissions from our financed emissions under 3.15 are not included in these figures. • Scope 3.1: The emissions from water supply and treatment were calculated on the basis of actual consumption provided by the suppliers and emission factors from DEFRA. • Scope 3.5: The emissions from waste were calculated based on actual consumption and emission factors from DEFRA. • Scope 3.6: The emissions from business travel were based on actual spend data on air, car hire, taxi, travel mileage and railway fares. For business travel by road, the emissions were calculated on the basis of the mileage and fuel specific emission factors from DEFRA as per fuel type. For business travel by air, the emissions were calculated based on the total spend, average cost of flights and distance travelled based on airline information. For downstream leased assets, DEFRA natural gas and electricity conversion factor for leased building was used to quantify the emissions. Scope 3 emissions were higher than in 2022 reflecting ongoing normalisation of business travel post-pandemic. Metric 2023 tCO 2e 2022 tCO 2e Scope 1 fuel consumption 3,615 3,682 Scope 2 purchased electricity (market based) 10 12 Scope 3 (material for own operations as set out below) 5,141 3,261 Business travel 4,348 2,947 Waste 23 22 Purchased goods & services 122 33 Downstream leased assets (market based) 1 648 259 % of electricity from renewable sources2 c.100% c.100% 1 Downstream leased asset Gas 259 tCO2e, Electricity 493 tCO2e. 2 Percentage is 99.83% (2022: 99.83%) with full coverage expected in 2024. Financed emissions The Group will commence reporting of financed emissions from H2 2024 in line with Pillar 3 ESG Reporting timelines. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 41 EU Taxonomy compliance statement The preparation of the EU Taxonomy reporting is based on prudential consolidation of the Group, excluding NIAC. The consolidation is in accordance with the supervisory reporting of financial institutions as defined in Regulation (EU) No 575/2013 of the European Parliament and of the Council, and the Commission Implementing Regulation (EU) 2021/451 (FINREP). The EU Taxonomy is a classification system of economic activities that make a substantial contribution to environmental sustainability under Taxonomy Regulation (EU) 2020/852. In addition, the preparation of reporting is based on the Delegated Act supplementing Article 8 of the Taxonomy Regulation (Disclosures Delegated Act 2021/2178). Article 3 of the EU Taxonomy Regulation sets out the criteria that an economic activity must meet to qualify as environmentally sustainable. This includes economic activity that is carried out in compliance with the minimum safeguards and contributes substantially to one or more of the environmental objectives. The EU Taxonomy has six environmental objectives namely: • climate change mitigation (CCM); • climate change adaptation (CCA); • sustainable use and protection of water and marine resources (WTR); • transition to a circular economy (CE); • pollution prevention and control (PPC); and • protection and restoration of biodiversity and ecosystems (BIO). Minimum Safeguards As part of the assessment of environmentally sustainable economic activities, it is required that economic activity is carried out in compliance with minimum safeguards as part of Article 18 of the EU Taxonomy Regulation. The purpose of the minimum safeguards is to ensure compliance with minimum human and labour rights standards, preventing activities that breach key social principles by aligning with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights. In the Taxonomy reporting, compliance with minimum safeguards is an integral part of the non-financial undertakings’ Taxonomy KPIs that the Group applies to exposures. Substantial contribution to the EU environmental objectives Through its financing of large undertakings subject to the Non- Financial Reporting Directive (NFRD) and investments in securities, the Group supports a variety of economic activities that contribute substantially to the EU environmental objectives. In addition, the Group’s sustainable finance products including green mortgages, green home improvement loans, green motor loans and motor financing for EVs contributes to the EU environmental objective of climate change mitigation. Taxonomy KPIs For the first time, the Group is reporting on Taxonomy KPIs and green asset ratios (GAR). Reporting includes input on turnover and CapEx from Taxonomy KPIs. The total GAR covers the two climate-related (CCM and CCA) EU environmental objectives. The Group’s total GAR based on turnover amounted to 2.4% of total covered assets, with the total GAR based on CapEx equivalent to c.2.4% of total covered assets as at year end 2023. The Taxonomy-aligned activities amounted to €2.3 billion at year end 2023. Gross carrying amount of total covered assets amounted to €94.2 billion as at year end 2023 (2022: €86.7 billion). Total green asset ratio: Taxonomy-aligned activities as a proportion of total covered assets. Total covered assets: Total assets excluding exposures to sovereigns and trading book. Total assets are defined according to the prudential consolidation of the Group per FINREP. Climate Delegated Act The Complementary Climate Delegated Act 2022/1214 including specific nuclear and gas energy activities published in July 2022, requires the Group to assess and disclose taxonomy- eligibility and non-eligibility of nuclear and fossil gas-related activities at 31 December 2023. Whilst the Group has no direct exposure through lending to customers that have economic activities related to the production of electricity or heating using nuclear installations or electricity generation facilities that produce electricity from nuclear processes, it has exposure to nuclear activities through its AUM. The Group also has exposure to customers involved in the operation of electricity generation facilities that produce electricity using fossil gaseous fuels. See supplementary information on the Group’s website for template related to nuclear and fossil gas activities which are reported under Annex XII of the Delegated Act. This is published on our website, 'Financial information'. Enhancing our EU Taxonomy Disclosures As companies' transparency in line with the EU Taxonomy increases, it will enable expanded reporting against the Taxonomy. The adoption of CSRD and European Sustainability Reporting Standards (ESRS) will support the further implementation of the EU Taxonomy Regulation into our business strategy, systems, and investment and lending processes. Limitations in Data When assessing Taxonomy-eligible and Taxonomy-aligned activities for financial and non-financial undertakings, actual published information provided by counterparties is required. However, a complete data collection has been limited as published reporting on Taxonomy-alignment KPIs from financial and non-financial undertakings is not yet available at the reporting date. In addition, Taxonomy-eligible and non- eligible activities related to the additional four EU environmental objectives (WTR, CE, PPC, and BIO)1 are not reported for the year end 2023 due to lack of data. 1 WTR – Water and marine resources, CE – Circular Economy, PPC – Pollution, BIO – Biodiversity and Ecosystems. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 42 EU taxonomy compliance statement (continued) Summary of KPIs The following table is a summary of KPIs to be disclosed by credit institutions under Article 8 of the EU Taxonomy Regulation. See supplementary information on the Group's website for additional EU Taxonomy tables reported under Annex VI of the Disclosures Delegated Act and taxonomy aligned activities. This is published on our website, 'Financial information'. Total environmentally sustainable assets €m KPI turnover1 % KPI CapEx2 % % coverage (over total assets) 3 % of assets excluded from the numerator of the GAR4 % of assets excluded from denominator of the GAR5 Main KPI Green asset ratio (GAR) stock 2,289 2.43% 2.43% 1.70% 26.94% 29.93% Additional KPIs GAR (flow) 139 0.92% 0.92% 0.89% 51.37% 3.09% Trading book6 n/a n/a n/a Financial guarantees – – – Assets under management7 – – – Fee and commission income6 n/a n/a n/a 1 Based on the Turnover KPI of the counterparty. 2 Based on the CapEx KPI of the counterparty, except for lending activities where for general lending Turnover KPI is used. 3 Percentage of assets covered by the KPI over banks' total assets. 4 Article 7 (2) and (3) and Section 1.1.2 of Annex V 5 Article 7 (1) and Section 1.2.4 of Annex V 6 Trading Book and Fees and Commissions KPIs only apply starting 2026. 7 Assets under management (AUM) KPIs are not material for the year end 2023. The calculations relate to Davy and are based on the following assumptions: AUM is based on Article 8 offerings, the Article 8 offerings do not have specific EU Taxonomy targets, AUM and offerings are based on data from 31 December 2023, and calculation is based on data provided by MSCI. Limitations in data Reporting on Taxonomy-aligned activities for FY 2023 has been constrained due to current limitations on the availability of relevant information across key categories: • When assessing Taxonomy-eligible and Taxonomy-aligned activities for financial and non-financial counterparties, actual information published by counterparties is required: – published reporting on Taxonomy-alignment KPIs from financial undertakings is not available at the reporting date; – non-financial undertakings have not yet published data for FY2023; consequently, the Taxonomy reporting of eligibility and alignment for non-financial undertakings is based on published data from FY2022; – furthermore, reporting on Taxonomy-eligibility for the four additional environmental objectives implemented in 2023 is not possible for FY2023 as non-financial undertakings are only reporting on these objectives from FY2023, with financial undertakings reporting on these objectives from FY2024; and – exposure to non-financial counterparties in the Group’s corporate lending portfolio currently considered taxonomy eligible is limited at c.€155 million due to the eligibility criteria requiring counterparties to be large companies publicly listed in the EU. The alignment of this exposure is <€1 million based on the data reported by the eligible counterparties at FY2022. • One renewable energy project finance exposure has been included as aligned in the GAR as it meets Local Government Financing eligibility criteria. Further cases will be under future consideration as reporting criteria regarding public-private joint ventures becomes more established. • When assessing Taxonomy-eligible and Taxonomy-aligned activities for lending to households, other data limitations impact reporting: – Residential mortgage exposures have been included in the GAR only where they are not subject to high physical risk of flood and have been built before 31 December 2020. These exposures are aligned if collateralised by properties with an A EPC rating if RoI based and an A or B rating if UK based. This set of criteria reflects current limitations on data availability on our lending stock and as such will not be fully reflective of underlying alignment. Newly implemented data collection processes are expected to have a positive impact on data availability in future reporting periods; and – Electric Vehicle (EV) lending exposures originated since the beginning of FY2023 of c.€50 million are considered eligible per taxonomy criteria. However they are not classified as aligned due to the lack of available information in the industry to assess the vehicles against the Taxonomy DNSH (Do No Significant Harm) criteria. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 43 EU taxonomy compliance statement (continued) Green Asset Ratio (GAR) The table below provides a breakdown of the Taxonomy-aligned exposure within the GAR. It should be noted that for this first round of disclosures we have taken a conservative application of the qualifying criteria underpinning the GAR based on the guidance provided to date and currently available data. Due to these current limitations across the industry changes in this ratio in future reporting periods will be driven in part by increased data availability. Taxonomy-aligned exposures based on turnover €m GAR based on turnover % Taxonomy-aligned exposures based on CapEx €m GAR based on CapEx % GAR on financial undertakings (total of CCM and CCA) – – – – GAR on non-financial undertakings (total of CCM and CCA) – – – – GAR for residential mortgages (CCM) 2,245 2.38% 2,245 2.38% GAR for electric vehicle loans (CCM) – – – – GAR for loans to local governments for house financing and other specialised lending 44 0.05% 44 0.05% Total 2,289 2.43% 2,289 2.43% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 44 The purpose of this table is to assist stakeholders in understanding our policies and management of key non-financial matters. We are in the process of preparing for alignment of our non-financial reporting with CSRD by 2026. In the interim, alignment is to the current non-financial reporting regulations. Our overarching Sustainability strategy is 'Investing in Tomorrow' 2021 to 2024. Our sustainability agenda is guided by a range of policies, statements and reports which are listed below. Reporting Requirement Policies Risk & management Environmental matters • Group environment policy 1 • Group energy policy 1 • Responsible and sustainable sector statement1 • Environment and energy (page 30) Non-financial key performance indicators • n/a • Key highlights (page 3) Business model • n/a • Divisional review (page 61) Diversity report • Board diversity policy • Corporate Governance statement (page 76) Bribery and corruption • Group code of conduct 1 • Speak up policy1 • Group anti-money laundering policy • Group anti-bribery and corruption policy • Social and financial inclusion policy1 • Respect at work policy1 • Recruitment policy1 • Corporate affairs statement1 • Financial crime compliance statement1 • Code of conduct (page 21) • Anti-bribery and corruption (page 21) • Group anti-money laundering (page 21) • Conduct risk (page 154) Due diligence and outcome • n/a • Risk management framework (page 143) Description of business risks and impact of business activity • n/a • Principal risks and uncertainties (page 135 ) Social and employee matters • Inclusion and diversity policy • Group code of conduct 1 • Equal opportunities policy • Group health and safety policy 1 • Employee data privacy • Group vulnerable customers policy • Group learning policy • Third party policy1 • Responsible and sustainable sector statement1 • Vulnerable customers (page 20) • Inclusion and diversity (page 19) • Learning (page 19) • Wellbeing (page 19) • Communities (page 21) • People risk (page 181) Respect for human rights • Modern slavery and human trafficking statement • Code of supplier responsibility • Group procurement policy • Group data protection and privacy policy • Information security (page 22) • Human rights (page 22) • Operational risk (page 181) • Human trafficking (page 22) 1 These policies are available on the Group’s website 'Our Reports and Policies - Bank of Ireland'. All other policies listed are not published externally. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 45 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. This implements the EU NFRD in RoI. Related pages CEO review (page 6 ) Our strategy (page 10) Risk Management Report (page 134) Through a year which has proved to be highly productive for the Group, against the backdrop of a challenging global environment, the role of corporate governance in ensuring effective decision- making has continued to be of paramount importance. The Board is responsible for corporate governance, encompassing leadership, direction and control of the Group, and setting strategic aims within the boundaries of the risk appetite and a framework of prudent and effective controls. The Group’s corporate governance standards are implemented by way of a comprehensive and coherent suite of frameworks, policies, procedures and standards, covering corporate governance as well as business and financial reporting, and risk management activities. These are supported by a strong tone from the top on expected culture and values. The Group’s purpose and its values are the cornerstone of its culture, providing the Board and GEC with a clear foundation upon which key decisions are taken. 2023 was a year of significant progress for the Group and our purpose, of enabling our customers, colleagues, society and shareholders to thrive, remained at the forefront of all our actions. The Group announced the launch, in March 2023, of the Group’s refreshed Strategy for 2023-2025, which continues to build on our purpose and values. The Board is collectively responsible for the long-term sustainable success of the Group and ensuring there is a strong corporate structure in place. The CEO is supported by the GEC, which is composed of the Executive Directors and other senior executives, which assists the CEO in leading the Group’s day to day operations and in the execution of the Board-approved Group Strategy, in line with the Group’s purpose. Details of the GEC can be found on page 79. The Group’s ability to continue to operate effectively in the current environment is supported strongly by the Group’s robust corporate governance framework, which the Board continually seeks to enhance through regular reviews and challenges. In the Governance Section on page 89, our Chairman reports on the key areas of Board focus during 2023. The Board is committed to upholding high standards and seeking continual enhancements, and its corporate governance standards are overseen by the Group Nomination and Governance Committee, which continues to play a central role in the review and selection of directors, their development, and their continued individual and collective suitability for the Board. The Board is supported by a number of committees: Group Nomination and Governance Committee (N&G) Patrick Kennedy (Chair) Responsible for leading the process for Board appointments and succession planning, considering the appointment of Key Function Holders and overseeing subsidiary governance. It is also responsible for corporate governance policies and practice. Group Sustainability Committee Eileen Fitzpatrick (Chair) Responsible for providing oversight of the Group’s Responsible and Sustainable Business Strategy, ESG targets and objectives, including monitoring of the Group’s implementation of the UN Principles for Responsible Banking. Group Remuneration Committee Ian Buchanan (Chair) Responsible for overseeing the Group's remuneration policy and approving the policy and terms for the Chairman, the Executive Directors, the GEC and certain other designated officers. Group Audit Committee Evelyn Bourke (Chair) Responsible for monitoring the quality and integrity of the financial statements and, in partnership with the Board Risk Committee, monitoring the effectiveness of the Group’s internal controls, including accounting, financial reporting and risk management systems. Responsible for monitoring the independence and performance of the internal and external auditors. Board Risk Committee Michele Greene (Chair) Responsible for monitoring risk governance and assisting the Board in discharging its responsibilities by ensuring that risks are properly identified, reported, assessed, and properly controlled; and that strategy is informed by and aligned with the Group’s risk appetite. Group Transformation Oversight Committee Giles Andrews (Chair) Responsible for overseeing, supporting and challenging the delivery and execution of the Group’s major strategic systems transformation and programmes, with high dependency on technology related change. Disclosures As a company listed on both the London and Euronext Dublin (formerly the Irish Stock Exchange) stock exchanges, the Group is required to report to shareholders on how it applies the main principles of the UK Corporate Governance Code (UK Code). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 46 Governance in action Leadership and company purpose S usan Russell (Bank of Ireland CEO Retail Ireland) with Jack O’ Keeffe (9) and Farrah Culhane (8) at Bank of Ireland College Green to commemorate the Group’s 240th anniversary. Governance in action (continued) The table below outlines where you can find the relevant disclosures throughout this Report. Board Leadership and Company Purpose UK Code Principles Section A successful company is led by an eﬀective and entrepreneurial Board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society. • Chairman's introduction (page 75) • Your Board (page 79) • Role of the Board (page 90) • Strategic Report (page 3) The Board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture. • Chairman’s introduction (page 75) • Strategic Report – Chairman’s review (page 4) • Governance in action (page 46) • Assessing the eﬀectiveness of the Board (page 88) The Board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The Board should also establish a framework of prudent and eﬀective controls, which enable risk to be assessed and managed. • Chairman’s introduction (page 75) • Strategic Report – Chairman’s review (page 4) • Governance in action (page 46) • Assessing the eﬀectiveness of the Board (page 88) • Report of the Board Risk Committee (page 114) In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure eﬀective engagement with, and encourage participation from, these parties. • Stakeholder engagement (page 91) • Strategic Report (enabling colleagues to thrive) (page 19) The Board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern. • Stakeholder engagement – colleagues (page 91) • Strategic Report (enabling colleagues to thrive) (page 19) • Report of the N&G (page 98) Division of Responsibilities UK Code Principles Section The Chairman leads the Board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. In addition, the chair facilitates constructive Board relations and the effective contribution of all Non- Executive Directors (NEDs), and ensures that directors receive accurate, timely and clear information. • Roles and responsibilities (page 90) • Chairman's tenure (page 85) • Board Committees (page 85) • Chairman (page 88) • Individual Directors (page 88) The Board should include an appropriate combination of Executive and Non- Executive (and, in particular, Independent Non-Executive) Directors, such that no one individual or small group of individuals dominates the Board’s decision-making. There should be a clear division of responsibilities between the leadership of the Board and the executive leadership of the company’s business. • Board composition changes (page 77) • Board composition and succession (page 85) • Roles and responsibilities (page 90) NEDs should have suﬃcient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, oﬀer specialist advice and hold management to account. • Assessing the eﬀectiveness of the Board (page 88) • Roles and responsibilities (page 90) • Board governance (page 94) The Board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function eﬀectively and eﬃciently. • Roles and responsibilities (page 90) • Role of the Board (page 90) • Report of the N&G (page 98) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 47 Governance in action (continued) Composition, Succession and Evaluation UK Code Principles Section 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 changes (page 77) • Board composition and succession (page 85) • Diversity (page 87) • Report of the N&G (page 98) 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) (page 81) • Chairman’s introduction (page 75) • Chairman's tenure (page 85) • Board composition and succession (page 85) • Report of the N&G (page 98) • Diversity (page 87) 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 88) • Diversity (page 98) Audit, Risk & Internal Control UK Code Principles Section 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 oversight of risk management and internal control systems (page 93) • Report of the Group Audit Committee (page 108) The Board should present a fair, balanced and understandable assessment of the company’s position and prospects. • Strategic Report - Chairman's review (page 4) • Role of the Board (page 90) • Board oversight and risk management and internal control systems (page 93) 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 and risk management and internal control systems (page 93) • Report of the Board Risk Committee (page 114) Remuneration UK Code Principles Section 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 102) • Remuneration report (page 125) 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 102) • 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 102) • Remuneration report (page 125) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 48 The Group RMF is the foundation stone for how we manage risk. Good risk management aligns with our strategic objectives, code of conduct and stakeholder priorities. Risk management is central to the financial and operational management of financial services companies and is fundamental to the Group’s strategic pillars of: • stronger relationships; • simple business; and • sustainable company. Group Risk Management Framework The RMF sets out our Group-wide approach to risk management and reflects our Risk Culture. The RMF establishes: • common principles for the risk management process of identifying, assessing, monitoring, mitigating, and controlling risks to the Group; • standard definitions of risk terms and classifications to ensure consistent application across the Group; • clear roles and accountabilities for the management of risk across the Group; • governance mechanisms by which risk oversight is exercised and risk decisions taken; • Group standards on risk policies, committee papers and reporting to ensure consistent application across the Group; • standard methods to identify and classify risks faced by the Group; • principles for setting risk appetite to articulate tolerances for the adverse outcomes of taking risk, and setting risk exposure limits designed to ensure a low probability of exceeding those tolerances; • risk policies and procedures as the foundation for risk mitigation in implementing the RMF; and • a framework for forward looking monitoring and reporting on risk as part of risk management information in the Group. Risk management is the set of activities and mechanisms through which we make risk taking decisions. It is how we control and optimise the risk-return profile of the Group. This is a Group- wide activity, and it is structured across the following five Risk Management activities: • Risk Identification and Assessment. • Risk Appetite. • Risk Policies. • Stress Testing and Scenario Analysis. • Risk Monitoring and Reporting. Within each category we maintain risk management standards and collectively these represent our risk management approach. The Group’s overarching risk strategy is to set and maintain the RMF to ensure that the Group has clearly identified and classified the risks it faces, set its risk appetite through statements of risk tolerance and quantitative limits, and through adherence with risk policy, has observed these tolerances and limits as boundaries to its business strategy. This is achieved through appropriate processes, controls, reporting, and governance which enable the Group to: • address its target market with confidence; • protect its balance sheet; and • deliver sustainable profitability. Risk culture within the Group requires all colleagues to have a holistic understanding of the risks posed by the activities they undertake. It is underpinned by the Group’s purpose and values that should act as a behavioural compass. Risk Governance is exercised through the decision-making authority vested in Risk Committees and accountable officers. The Board sets, approves and oversees the high-level policy and strategic direction on the risk the Group is prepared to assume. It approves key risk documents on which it has reserved authority including the Group's Risk Appetite, RMF, and certain risk policies. 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 emerging risks as well as primary categories of risk identified as principal risks which could have a material impact on earnings, capital adequacy and / or on our ability to trade in the future. See pages 135 to 142 for further detail. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 49 Risk review In 2023, the Group continued to focus on the implementation of a strengthened Risk Management Framework, including embedding of process led operational risk management, and delivery of strategic requirements to improve operational resilience. Related pages Risk Management Report (page 134) Nicola Sadlier (Head of Fraud, Bank of Ireland), along with Baz Ashmawy and members of the BoI Fraud team in masks. Summary consolidated income statement on an underlying basis Table 2023 €m Restated1 2022 €m Net interest income 1 3,682 2,482 Net other income 2 746 635 Operating income 4,428 3,117 Operating expenses (before levies and regulatory charges) 3 (1,857) (1,675) Levies and regulatory charges 3 (170) (142) Operating profit before net impairment losses on financial instruments 2,401 1,300 Net impairment losses on financial instruments 4 (403) (187) Share of results of associates and joint ventures (after tax) 25 40 Underlying profit before tax 2,023 1,153 Non-core items 5 (85) (142) Profit before tax 1,938 1,011 Tax charge (337) (153) Profit for the year 1,601 858 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Profit before tax of €1,938 million was reported by the Group for 2023, €927 million higher compared to 2022. Underlying profit before tax of €2,023 million was €870 million higher than 2022 which was primarily attributable to the following: • an increase of €1,311 million or 42% in operating income due to: – a €1,200 million increase in net interest income primarily driven by higher liquid asset income, supported by higher Irish deposit rates and volumes, higher lending income and the KBCI portfolio acquisition, partially offset by the higher cost of funds; and – a €111 million increase in net other income driven by a €83 million increase in business income, primarily due to an increase in Davy income (12 months income in 2023 compared to 7 months in 2022) and positive impacts from valuation items / other expenses of €28 million. • an increase of €182 million or 11% in operating expenses (before levies and regulatory charges) was largely due to an increase of €81 million relating to acquisitions of Davy and KBCI portfolios, €62 million relating to the reintroduction of variable pay and additional investment to deliver sustainable benefits, including efficiencies. Excluding these costs, operating expenses (before levies and regulatory charges) increased by €39 million or 2.3%. • an increase of €28 million or 20% in levies and regulatory charges was primarily due to the increase in the Deposit Guarantee Scheme (DGS) fees. • an increase of €216 million in net impairment losses on financial instruments reflects actual loan loss experience in the year; movement in management adjustments; impact on IFRS 9 models of Forward Looking Information (FLI) from the Group's latest macro-economic outlook; and impairment model changes. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 50 Operating and financial review Profit before tax €1,938m (20221: €1,011m) Underlying profit before tax €2,023 m (20221: €1,153m) RoTE (adjusted) 17.3% (20221: 10.1%%) Underlying cost income ratio 42% (20221: 54%) Basis of presentation The financial results are presented on an underlying basis. Underlying performance excludes non-core items which are those items that the Group believes obscure the underlying performance trends in the business. Further information on measures referred to in the operating and financial review (OFR) is found in Alternative performance measures on page 356. Percentages presented throughout this document 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. Summary consolidated income statement on an underlying basis (continued) • a decrease of €15 million in share of results of associates and joint ventures (after tax) primarily due to recognition of losses on investment during the year. The Group's non-core charges decreased by €57 million or 40% compared to 2022, primarily due to receipt of a refund of €18 million for other transformation costs in Retail UK (2022: €33 million charge) and no customer redress charges in 2023 (2022: €29 million charge). Tax charge for 2023 of €337 million (20221: €153 million) reflects an effective statutory taxation rate of 17% (2022: 15%) for the Group. On an underlying basis, the effective taxation rate for 2023 was 16% (2022: 15%). The effective tax rate is influenced by changes in the jurisdictional mix of profit and losses and the impact of a re-assessment of the tax value of certain losses carried forward in the prior year. Key ratios 2023 Restated1,2 2022 Statutory cost income ratio (%) 47 63 Underlying cost income ratio (%)2 42 54 Return on Tangible Equity (%) 15.5 8.2 Return on Tangible Equity (adjusted) (%)2 17.3 10.1 Return on assets (bps) 103 57 Per ordinary share Basic earnings per share (€ cent) 140.1 72.9 Underlying earnings per share (€ cent) 149.6 83.4 Tangible Net Asset Value per share (€ cent) 965 863 Dividend per share (€ cent)3 60 21 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect a reallocation of €2 million from Retail Ireland business income to 'other valuation items'. 3 The 2023 dividend is a proposed dividend, subject to shareholder approval. Net interest income Table: 1 Net interest income / net interest margin 2023 €m 2022 €m Change % Net interest income 3,682 2,482 48% Average interest earning assets (€bn) Loans and advances to customers 79 76 4% Other interest earning assets 43 50 (14%) Total average interest earning assets 122 126 (3%) Net interest margin 3.01% 1.96% Gross yield - customer lending 4.13% 3.42% Gross yield - liquid assets 3.53% 0.34% Average cost of funds - interest bearing liabilities and current accounts (0.90%) (0.22%) Net interest income of €3,682 million for 2023 was €1,200 million higher than 2022 primarily driven by increased liquid asset income, supported by higher Irish deposit rates and volumes, higher lending income and the KBCI portfolio acquisition, partially offset by the impact of higher wholesale funding and deposit costs from the cessation of negative interest rates and the pass through of higher interest rates. The Group net interest margin (NIM) was 3.01% (2022: 1.96%). Average cost of funds and gross yield represent the interest income or expense recognised on interest bearing items net of interest on derivatives which are in a hedge relationship with the relevant asset or liability. The gross customer yield increased by 71 basis points (bps) to 4.13% from 2022, with higher interest rates increasing all divisional lending yields. The liquid asset yield increased by 319 bps to 3.53% from 2022, with higher interest rates increasing the yield. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 51 Further information on financial measures referred to in our 2023 key performance highlights can be found in Alternative performance measures on page 356. Summary consolidated income statement on an underlying basis (continued) Net other income Table: 2 Net other income 2023 €m Restated 1,2,3 2022 €m Change % Net other income 746 635 17% Analysed as: Business income Wealth and Insurance1 332 234 42% Corporate and Commercial2 281 297 (5%) Retail Ireland2,3 146 144 1% Retail UK (34) (36) (6%) Group Centre and other (18) (15) 20% Total business income 707 624 13% Other (expenses) / income Loan sale expenses (6) – n/m Gain on disposal and revaluation of investment properties 2 2 – Transfers from debt instruments at fair value through other comprehensive income reserve – 98 (100%) Total other (expenses) / income (4) 100 n/m Other valuation items Investment valuation movement1 36 (97) n/m Financial instrument valuation adjustments (CVA, DVA, FVA) 4 7 6 17% Other3 – 2 (100%) Total other valuation items 43 (89) n/m 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect the Business Banking transfer from Retail Ireland to Corporate and Commercial (formerly Corporate and Markets). 3 Comparative figures have been restated to reflect a reallocation of €2 million from Retail Ireland business income to 'other valuation items'. 4 Credit Valuation Adjustment; Debit Valuation Adjustment; Funding Valuation Adjustment. Net other income of €746 million for 2023 was 17% higher than 2022. In 2023, Global Markets and Corporate Banking (together formerly known as Corporate and Markets) were consolidated with Business Banking into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. As a result, total net other income of €154 million (2022: €128 million) has been reallocated from Retail Ireland to Corporate and Commercial. Business income increased by €83 million or 13% compared to 2022 primarily due to: • Wealth and Insurance including Davy which increased by €98 million or 42% due to the inclusion of Davy income for a full year compared to seven months in 2022 (€79 million) and a €19 million increase in business income in NIAC, reflecting earnings on business written in prior years and increased returns on New Ireland shareholder funds, following a change in strategic asset allocation in 2022; offset by; • Corporate and Commercial which decreased by €16 million or 5% reflecting the impact of cessation of business activity, partially offset by €24 million growth in business banking income; • Retail Ireland income which increased by €2 million, reflecting higher current account fee income, offset by lower ATM income; and • Retail UK which primarily reflects profit sharing partnership arrangements with the benefits reflected in net interest income. Other expenses / income of €4 million decreased by €104 million, mainly due to non-recurrence of gains realised on c.€4 billion of bond sales completed in 2022. Bond disposals arose from a decision to reduce credit risk exposure in the Group’s liquid asset portfolio during 2022. Other valuation items were a gain of €43 million for 2023, compared to a €89 million loss in 2022. These movements have resulted from positive derivative related valuation adjustments across divisions and a positive investment variance in Wealth and Insurance. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 52 Summary consolidated income statement on an underlying basis (continued) Operating expenses Table: 3 Operating expenses 2023 €m Restated 1 2022 €m Change % Staﬀ costs (excluding pension costs) 814 688 18% Pension costs 66 94 (30%) Retirement beneﬁt costs (deﬁned beneﬁt plans) 17 54 (69%) Retirement beneﬁt costs (deﬁned contribution plans) 49 40 23% Depreciation and amortisation 227 225 1% Other costs 750 668 12% Operating expenses (before levies and regulatory charges) 1,857 1,675 11% Levies and regulatory charges 170 142 20% Total operating expenses 2,027 1,817 12% 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Staff numbers (including Davy) 2023 2022 Change % Staﬀ numbers at year end (full time equivalents) 10,845 10,153 7% Average staﬀ numbers during the year 10,562 9,894 7% Operating expenses (before levies and regulatory charges) were €182 million or 11% higher than 2022. This was largely due to an increase of €72 million in Davy operating expenses (12 months expenses in 2023 compared to 7 months in 2022), additional investment to drive sustainable benefits, including efficiencies, an increase related to the KBCI portfolio acquisition and an accrual for variable pay. Excluding these costs, operating expenses (before levies and regulatory charges) increased by €39 million or 2.3%, reflecting pay awards (excluding variable pay), cost of living supports for staff, increased investment to deliver regulatory and risk programmes, and other cost increases partially offset by efficiencies and lower pension charges. The Group continues to focus on efficiency and strategic cost reduction while maintaining investment in regulatory compliance, technology and growth in the existing business. Staff costs (excluding pension costs) of €814 million were €126 million higher than 2022 reflecting the acquisition of Davy and the KBCI portfolios and salary increases averaging 4% which were effective from 1 January 2023. Staff costs also reflect increased resources required to support market growth and accruals for performance related variable pay. At 31 December 2023, the number of staff (full time equivalents) was 10,845, an increase of 692 compared to 10,153 at 31 December 2022. The increase in full time equivalents was largely in response to market growth, insourcing of key skills and increased volumes driven by the KBCI portfolio acquisition and Ulster Bank exit from the Irish market. Average staff numbers employed by the Group in 2023 of 10,562 were 7% higher compared to 9,894 in 2022. The increase in average staff numbers was predominantly due to employees who joined the Group following the acquisition of Davy on 1 June 2022, additional resources required to support market growth and the KBCI portfolio acquisition. Pension costs of €66 million for 2023 were €28 million or 30% lower than 2022. Defined benefit pension costs have decreased by €37 million. Following a review of the Life Balance defined benefit pension scheme with the Trustee Board, staff representatives and members, an agreement was reached to cease discretionary contribution increases effective from 1 April 2023 and replace them with annual contributions into a defined contribution scheme. This resulted in a negative past service cost of €17 million. New joiners to the Group are added to the defined contribution plan, the cost of which has increased by €9 million compared to 2022. Other costs which include technology, property, outsourced services and other non-staff costs were €82 million or 12% higher than 2022. The increase reflects costs associated with opening accounts for former Ulster Bank and KBCI customers following their exit from the Irish market, Davy operational costs, as well as higher IT change and operating costs. Levies and regulatory charges of €170 million increased by €28 million, reflecting increases in the DGS fees as a result of increased deposits. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 53 Summary consolidated income statement on an underlying basis (continued) Net impairment (losses) / gains on financial instruments Table: 4 Net impairment (losses) / gains on ﬁnancial instruments 2023 €m 2022 €m Change % Net impairment (losses) / gains on loans and advances to customers at amortised cost Residential mortgages (108) (22) n/m Retail Ireland (71) 40 n/m Retail UK (37) (62) (40%) Non-property SME and corporate (29) (124) (77%) Republic of Ireland SME 10 28 (64%) UK SME 1 (13) n/m Corporate (40) (139) (71%) Property and construction (173) (18) n/m Investment (168) (23) n/m Development (5) 5 n/m Consumer (87) (24) n/m Total net impairment losses on loans and advances to customers at amortised cost (397) (188) n/m Net impairment (losses) / gains on other ﬁnancial instruments (excluding loans and advances to customers at amortised cost) (6) 1 n/m Total net impairment losses on ﬁnancial instruments (403) (187) n/m Underlying net impairment losses on loans and advances to customers (bps)1 (49) (25) 96% Net impairment losses on loans and advances to customers (bps)1 (52) (25) n/m 1 For calculation see Alternative Performance Measures on page 358. The Group recognised an underlying net impairment loss of €403 million for 2023, with a further €22 million impairment loss being recognised as non-core relating to UK personal loans (see page 56 for further details on non-core). Including the €22 million impairment loss being recognised in non-core, the total net impairment loss for 2023 was €425 million and reflects a number of impairment dynamics: • net impairment losses associated with portfolio activities including credit risk assessments, recoveries, case specific loss emergence, and Non-Performing Exposure (NPE) resolution activity including portfolio disposals (c.€283 million net loss includes other financial instruments); • impairment model updates incorporating the current macroeconomic outlook (c.€82 million net loss includes other financial instruments); and • the application of Group management adjustments at 31 December 2023 (c.€60 million net loss in the year), which reflect a number of potential risks not included in modelled impairment loss allowances, including the potential for latent risk within certain cohorts of the Investment Property portfolio, offset by the utilisation of the management adjustment recognised at 31 December 2022 (see page 227 for further details). The net loss of €108 million in the residential mortgages portfolio in 2023 reflects a combination of the once-off impairment loss in Q1 2023 on the acquired KBCI portfolio; loss emergence including losses on defaulted assets; the impact of impairment model parameter updates; and the credit risk associated with elevated inflation and interest rates. Model parameter updates for residential mortgages in 2023 included a number of changes to the residential mortgage LGD models resulting in a net increase in impairment loss allowance of c.€42 million at the reporting date (details on the LGD model changes are outlined on page 161 of the Credit Risk section). The net loss also reflects the application of a Group management adjustment to recognise estimated losses related to enhancements to the Retail Ireland mortgage loss given default impairment models planned in 2024. • A net impairment loss on the Retail Ireland mortgage portfolio of €71 million for 2023 was €111 million adverse to the gain of €40 million in 2022, and includes a net impairment loss of €33 million on credit-impaired assets (Stage 3 and purchased or originated credit-impaired assets or ‘POCIs’). The net charge also includes a c.€17 million loss associated with loans acquired from KBCI in the first quarter of 2023. • A net impairment loss on the Retail UK mortgage portfolio of €37 million for 2023, includes a net impairment loss of €22 million on Stage 3 assets, and compares to a net loss of €62 million in 2022. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 54 Summary consolidated income statement on an underlying basis (continued) Net impairment (losses) / gains on financial instruments (continued) A net €29 million impairment loss on the non-property SME and corporate loan portfolio for 2023 compares to a €124 million impairment loss for 2022 and includes a net impairment loss of €41 million on credit-impaired assets. The net impairment loss in 2023 primarily reflects the impact of impairment model parameter updates, specific loss emergence primarily on defaulted cases in the Corporate portfolio, and impairment increases recognised for changes in macroeconomic outlook. The non-property SME and corporate loan portfolio net loss also reflects the completion of the sale of a portfolio of NPEs in the second half of the year, incorporating utilisation of an associated NPE post model adjustment (€36 million at 31 December 2022 reducing to €18 million at 30 June 2023) which has been partially offset by the application of a new post model adjustment to recognise losses associated with potential portfolio disposals for business banking NPE resolution in 2024. A net impairment loss of €173 million on the property and construction loan portfolio for 2023 includes a net impairment loss of €58 million on credit-impaired assets and was €155 million adverse to the loss of €18 million in 2022. The net loss also reflects impairment increases arising from the change in the macro-economic outlook and model updates. The net loss includes the application of a Group management adjustment to reflect latent risk within certain cohorts of the Investment Property portfolio, including the potential impact of prevailing interest rates. A net impairment loss of €109 million on the consumer loans portfolio includes €87 million on an underlying basis (per table above) with a further €22 million recognised as non-core relating to UK personal loans. See page 56 for further details on non-core. The €109 million net impairment loss (€62 million loss in Retail UK, €38 million loss in Retail Ireland and €9 million loss in Corporate and Commercial), includes a loss on Stage 3 assets of €68 million and was €85 million adverse to the loss of €24 million in 2022. The net loss primarily reflects loss emergence on defaulted assets as well as credit risk associated with elevated inflation and interest rates. The net loss also reflects a new post model adjustment to recognise losses associated with potential portfolio disposals for NPE resolution within the Consumer portfolio. Non-core items Table: 5 Non-core items 2023 €m 2022 €m Change % Acquisition costs (61) (54) 13% Gross-up for policyholder tax in the Wealth and Insurance business 26 (2) n/m Liability management exercises (22) – n/m Portfolio divestments (net) (18) 1 n/m Loss on disposal / liquidation of business activities (8) – n/m Transformation programme costs (2) (50) (96%) Cost of restructuring programme (20) (17) 18% Other transformation refund / (costs) 18 (33) n/m Customer redress charges – (29) (100%) Investment return on treasury shares held for policyholders – (8) (100%) Total non-core items (85) (142) (40%) Acquisition costs The Group acquired Davy in 2022 as a business combination in line with IFRS 3. In 2023, the following costs associated with the acquisition were expensed to the income statement: • integration costs of €21 million (2022: €33 million) include external costs relating to project management, professional advice and support; and internal integration costs related to an internal dedicated team to deliver the acquisition and integration of Davy; • deferred remuneration expense of €25 million (2022: €11 million) was accrued and includes the incurred portion of deferred remuneration noted in the enterprise value, as well as remuneration related to a Special Incentive and Retention Plan (SIRP). The costs were payable to some Davy employees on the fulfilment of certain conditions. See note 49 for further details; and • amortisation of €6 million (2022: €nil) related to the acquired intangible assets (customer relationships and brand). The Group completed a loan book acquisition of KBCI on 3 February 2023. Included within non-core charges were internally generated costs related to the acquisition totalling €9 million (2022: €10 million). Gross-up for policyholder tax in the Wealth and Insurance business IFRS requires the income statement to be grossed up for the total tax payable by Wealth and Insurance, comprising policyholder and shareholder tax. In 2023, this was a non-core gain of €26 million (2022: €2 million charge). The movement was mainly due to higher investment returns in 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 55 Summary consolidated income statement on an underlying basis (continued) Non-core items (continued) Liability management exercises In 2023, a loss of €22 million (2022: €nil) on liability management exercises was recognised, reflecting the repurchase of certain Group perpetual non-call instruments. Further details are disclosed in note 9 other operating income and note 42 subordinated liabilities. Portfolio divestments In December 2023, in line with the Group’s transformation strategy to be the leading multi-niche bank in the UK, the Group announced the conclusion of its financial services partnership with the Automobile Association (AA) and ceased the provision of unsecured personal loan products under the Bank of Ireland UK and UK Post Office brand. As a result, included within the portfolio divestment net charge of €18 million (2022: €1 million gain) was income of €28 million (2022: €2 million), expenditure of €24 million (2022: €1 million) and impairment charges of €22 million (2022: €nil). Loss on disposal / liquidation of business activities The Group recognised a €8 million loss (2022: €nil) relating to the recycling of cumulative unrealised foreign exchange (FX) gains and losses through the income statement following the liquidation of foreign denominated subsidiaries. Transformation programme costs During 2023, the Group recognised a net transformation programme charge of €2 million (2022: €50 million): • Other transformation programme amounts were associated with the implementation of key business initiatives in the Group’s Retail UK future state operating and business model. In 2023, the Group recognised a €18 million refund related to costs incurred in prior years on a project in Retail UK that did not proceed (2022: €33 million charge); and • In 2023, the Group recognised €20 million (2022: €17 million) of restructuring charges which relate to the implementation of the Group's RoI and UK property and branch strategy, voluntary redundancy scheme and external programme management costs. Customer redress charges There were no customer redress charges in 2023. The 2022 charge of €29 million relates to the Tracker Mortgage Examination Review (€36 million), offset by provision releases relating to the interest rate implementation review (€5 million) and other customer redress items (€2 million). Investment return on treasury shares held for policyholders The Group income statement excludes the impact of the change in value of Bank of Ireland Group plc (BoIG plc) shares held by Wealth and Insurance for policyholders. In 2023, this was €nil (2022: €8 million loss). At 31 December 2023, there were 0.8 million shares (2022: 1.3 million shares) held for the benefit of policyholders. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 56 Summary consolidated balance sheet Summary consolidated balance sheet Table 2023 €bn Restated1 2022 €bn Assets Loans and advances to customers 6 80 72 Liquid assets 7 44 49 Wealth and Insurance assets1 25 22 Other assets 8 7 8 Total assets 156 151 Liabilities Customer deposits 9 100 99 Wholesale funding 10 12 11 Wealth and Insurance liabilities1 24 21 Other liabilities1 8 5 6 Subordinated liabilities 2 2 Total liabilities 143 139 Shareholders' equity 12 11 Other equity instruments - Additional tier 1 1 1 Total liabilities and shareholders' equity 156 151 The Group's loans and advances to customers (after impairment loss allowances) of € 79.7 billion were €7.7 billion higher than 31 December 2022. In February 2023, the Group completed a loan book acquisition from KBCI of €8.0 billion, consisting of €7.9 billion of mortgages and €0.1 billion of commercial and consumer loans. On a constant currency basis, excluding the KBCI portfolio acquisition, the loan book remained broadly stable following the impact of net redemptions and a higher impairment charge. The Group’s portfolio of liquid assets at 31 December 2023 decreased by €5.1 billion to € 43.6 billion, primarily due to the loan and deposit acquisitions from KBCI (€6.5 billion) and lower deposit volumes of €1.1 billion (constant currency basis excluding the KBCI deposit acquisition), partially offset by higher wholesale funding volumes of €0.6 billion, lower loan volumes of €0.6 billion (constant currency basis excluding the KBCI loan acquisition), other items (includes retained earnings) and FX movements on liquid assets. The Group’s asset quality remains robust despite the impact of geopolitical risk, elevated inflation and interest rates, with limited evidence to date of adverse impacts on credit quality. NPEs reduced by €0.1 billion to €2.5 billion, representing 3.1% of gross loans at 31 December 2023 (2022: 3.6%). In 2023, the Group completed the disposal of a pool of non-performing assets in the business banking and residential mortgages portfolios, with a gross carrying value of €0.3 billion and an associated €6 million impairment loss. At 31 December 2023, customer deposit volumes of €100.2 billion were €1.0 billion higher, the increase was predominantly driven by the acquisition of the KBCI deposit portfolio of €1.8 billion, partially offset by lower RoI deposits of €0.6 billion and lower Retail UK deposits of €0.2 billion. Wholesale funding balances of € 11.8 billion at 31 December 2023 were €0.6 billion higher compared to 31 December 2022. The increase was primarily due to minimum requirement for own funds and eligible liabilities (MREL) senior bond issuances of €2.3 billion, partially offset by senior bond maturities of €1.7 billion. The Group's fully loaded common equity tier 1 (CET1) ratio decreased by c.80 basis points during 2023 to 14.3%, primarily due to a foreseeable distribution deduction (c.-240 basis points), acquisition of KBCI loans (c.-110 basis points) and Risk Weighted Asset (RWA) growth (c.-70 basis points), offset by the benefit of organic capital generation (c.+340 basis points). For further information see Capital Adequacy section from page 150. Key balance sheet ratios 2023 Restated1 2022 Liquidity coverage ratio (%) 196 221 Net stable funding ratio (%) 157 163 Loan to deposit ratio (%) 80 73 Gross new lending volumes (€bn) 15.8 15.6 Average interest earning assets (€bn) 122 126 CET1 ratio - fully loaded1 (%) 14.3 15.1 CET1 ratio - regulatory1 (%) 14.5 15.6 Total capital ratio - regulatory1 (%) 19.2 20.8 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 57 Summary consolidated balance sheet (continued) Loans and advances to customers Table: 6 Loans and advances to customers - Composition 2023 2022 €bn % €bn % Residential mortgages 47 58% 38 52% Retail Ireland 32 40% 22 30% Retail UK 15 18% 16 22% Non-property SME and corporate 20 25% 22 30% Republic of Ireland SME 7 9% 7 10% UK SME 1 1% 2 3% Corporate 12 15% 13 17% Property and construction 8 10% 8 11% Investment 7 9% 7 10% Development 1 1% 1 1% Consumer 6 7% 5 7% Total loans and advances to customers at amortised cost 81 100% 73 100% Less impairment loss allowance on loans and advances to customers at amortised cost (1) (1) Net loans and advances to customers at amortised cost 80 72 Loans and advances to customers at FVTPL – – Total loans and advances to customers 80 72 The Group's loans and advances to customers (after impairment loss allowances) of €79.7 billion were €7.7 billion higher than 31 December 2022. In February 2023, the Group completed a loan book acquisition from KBCI of €8.0 billion, consisting of €7.9 billion of mortgages and €0.1 billion of commercial and consumer loans. On a constant currency basis, excluding the KBCI portfolio acquisition, the loan book remained broadly stable following the impact of net redemptions and a higher impairment charge. Gross new lending of €15.8 billion was €0.2 billion higher than 31 December 2022, reflecting increased lending of 24% in Retail Ireland due to strong growth in mortgage lending and 22% in Retail UK, partially offset by a 22% reduction in Corporate and Commercial, concentrated in Property and International lending. Redemptions and repayments of €16.2 billion were €1.7 billion lower than 31 December 2022, primarily due to lower redemptions in Retail UK, partially offset by higher redemption activity in Retail Ireland and Corporate and Commercial. The Group's IFRS 9 staging profile has improved reflecting a number of dynamics in the loan book. There was a net increase of €7.9 billion of loans in Stage 1 primarily reflecting the acquisition of KBCI assets in Q1 2023, which was partly offset by reductions in the Non-property SME and Corporate portfolio. There was a net decrease of €0.1 billion of loans in Stage 2 (i.e. assets identified as having experienced a significant increase in credit risk) in the year to €12.5 billion (31 December 2022: €12.6 billion). This reflects the impact of model updates in the year (see page 227 for further details) and portfolio activity (including net repayments / redemptions in the year) partly offset by the impact of elevated inflation rates and interest rates on credit risk in the loan book and the application of an updated approach to identifying significant increase in credit risk for relationship managed commercial portfolios during 2023. Stage 3 balances decreased by €0.1 billion to €2.4 billion (2022: €2.5 billion) reflecting resolution activities in the year, partly offset by the emergence of new defaults. During 2023, the stock of impairment loss allowances decreased by €0.1 billion to €1.2 billion. This was primarily due to impairment loss allowance utilisation of €0.6 billion, including c.€0.2 billion associated with NPE portfolio disposals, partly offset by the net impairment loss on loans and advances to customers of €0.4 billion, as well as the impact of currency translation and other movements. Group NPEs decreased by €0.1 billion to €2.5 billion at 31 December 2023 and represent 3.1% of gross loans to customers. The NPE portfolio disposals of €0.3 billion had an associated €6 million impairment loss in 2023, net of impairment loss allowance utilisation of c.€0.2 billion. In addition, NPE reductions were delivered through case specific resolution strategies, particularly in relation to a small number of large defaulted cases in the Corporate non-property portfolio. NPE decreases were partly offset by the acquisition of €0.1 billion of NPEs from KBCI and flows into NPE from the emergence of new defaults in the year. NPEs 2023 €bn 2022 €bn Credit-impaired loans 2.5 2.6 NPEs 2.5 2.6 NPE ratio (%) 3.1 3.6 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 58 Summary consolidated balance sheet (continued) Liquid assets (after impairment loss allowance) Table: 7 Liquid assets (after impairment loss allowance) 2023 €bn 2022 €bn Cash at banks 2 3 Cash and balances at central banks 32 37 Central Bank of Ireland 28 33 Bank of England 3 3 Other (including Federal Reserve) 1 1 Government bonds 5 6 Debt securities at amortised cost 4 5 Financial assets at FVOCI 1 1 Covered bonds 3 2 Senior bank bonds and other 2 1 Total liquid assets 44 49 The Group’s portfolio of liquid assets at 31 December 2023 has decreased by €5.1 billion to €43.6 billion, primarily due to the loan and deposit acquisitions from KBCI (€6.5 billion) and lower deposit volumes of €1.1 billion (constant currency basis excluding the KBCI deposit acquisition), partially offset by higher wholesale funding volumes of €0.6 billion, lower loan volumes of €0.6 billion (constant currency basis excluding the KBCI loan acquisition), other items (includes retained earnings) and FX movements on liquid assets. Other assets and other liabilities Table: 8 Other assets and other liabilities 2023 €bn Restated 1 2022 €bn Other assets 7.4 8.4 Derivative ﬁnancial instruments 4.3 5.1 Deferred tax asset 0.8 1.0 Pension surplus (net) 0.7 0.7 Fair value changes due to interest rate risk of the hedged items in portfolio hedges (0.1) (0.7) Other assets 1.7 2.3 Other liabilities 5.4 6.2 Derivative ﬁnancial instruments 4.5 6.5 Fair value changes due to interest rate risk of the hedged items in portfolio hedges (1.1) (2.8) Notes in circulation 0.9 0.9 Other liabilities1 1.1 1.6 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Fair value movements of derivative assets and derivative liabilities were impacted by changes in equity markets, interest rates, FX and maturity of transactions during 2023. The movement in fair value changes due to interest rate risk of the hedged items in portfolio hedges was attributable to interest rate moves between 2022 and 2023. The deferred tax asset (DTA) primarily relates to unused historic tax losses and has decreased in the year due to utilisation against current year profits. See note 31 for further details. The net pension position was a surplus of €0.7 billion at 31 December 2023 (2022: €0.7 billion surplus). The primary drivers of the movement in the pension surplus were experience losses resulting in higher liabilities offset by positive asset returns. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 59 Summary consolidated balance sheet (continued) Customer deposits Table: 9 Customer deposits 2023 €bn Restated1 2022 €bn Retail Ireland1 44 42 Deposits 20 19 Current account credit balances 24 23 Corporate and Commercial1 43 43 Deposits 12 11 Current account credit balances 31 32 Retail UK 13 14 Retail UK (£bn equivalent) 12 12 UK Post Oﬃce 6 6 Other Retail UK 6 6 Total customer deposits 100 99 1 Comparative figures have been restated to reflect the Business Banking transfer from Retail Ireland to Corporate and Commercial (formerly Corporate and Markets). At 31 December 2023, overall Group customer deposit volumes of €100.2 billion were €1.0 billion higher predominantly driven by the acquisition of the KBCI deposit portfolio of €1.8 billion, partially offset by lower RoI deposits of €0.6 billion and lower Retail UK deposits of €0.2 billion. In 2023, Global Markets and Corporate Banking (together formerly known as Corporate and Markets) were consolidated with Business Banking into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. As a result, comparative figures have been restated to reflect a €33.8 billion increase in the customer deposits in Corporate and Commercial and the corresponding decrease in Retail Ireland. Wholesale funding Table: 10 Wholesale funding 2023 €bn 2022 €bn Secured funding 4 4 Monetary Authority 2 2 Covered bonds 1 1 Securitisations 1 1 Unsecured funding 8 7 Senior debt 7 6 Bank deposits 1 1 Total wholesale funding 12 11 Wholesale market funding < 1 year to maturity 1 2 Wholesale market funding > 1 year to maturity 9 7 Monetary Authority funding < 1 year to maturity 1 – Monetary Authority funding > 1 year to maturity 1 2 Wholesale funding balances of €11.8 billion at 31 December 2023 were €0.6 billion higher compared to 31 December 2022. The increase was primarily due to MREL senior bond issuances of €2.3 billion, partially offset by senior bond maturities of €1.7 billion. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 60 Divisional review Bank of Ireland Group is one of the largest financial services groups in Ireland and provides a broad range of banking and other financial services. The Group is organised into four trading segments and on e support division to effectively serve our customers. Retail Ireland Retail Ireland serves its customers delivering day-to-day services, products, propositions and a financial wellbeing programme tailored to meet customers’ individual needs. Customers use their preferred channels to request and fulfil their banking requirements. These channels include our branches, 24/7 ATMs, digital, contact centre and our post office partnership for day-to-day banking services. Wealth and Insurance Wealth and Insurance includes the Group's life assurance subsidiary NIAC and Davy, Ireland's leading provider of wealth management and capital markets services. NIAC distributes protection, investment and pension products to the Irish market, across three core channels made up of the Group’s distribution channels, independent financial brokers and its own financial advisor network as well as corporate partners. Wealth and Insurance also includes investment markets, and the Group’s general insurance brokerage, Bank of Ireland Insurance Services, which offers home, car and travel insurance cover through its agency with insurance providers. Retail UK Retail UK incorporates the UK residential mortgage business, the Group’s branch network and business banking business in Northern Ireland, as well as asset finance and contract hire, incorporating Northridge Finance. It also includes the financial services partnership and FX joint venture with the UK Post Office. In December 2023, Retail UK announced the conclusion of its financial services partnership with the AA and ceased the provision of unsecured personal loan products under the Bank of Ireland UK and Post Office brand. The Retail UK division includes the activities of BoI (UK) plc, the Group’s wholly owned UK licenced banking subsidiary. Corporate and Commercial In 2023, Global Markets and Corporate Banking (together formerly known as Corporate and Markets division) were consolidated with Business Banking into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. The combined division provides a full range of lending, banking and treasury risk management services to the Group's national and international Corporate and Business customers, many of which are at the heart of the Irish economy. Our relationship teams are based in offices in Ireland and the UK with niche international businesses across Europe and in the US. These teams have a wealth of experience across a broad range of segments and sectors, including corporate and business banking, commercial real estate, acquisition finance, foreign direct investment and treasury solutions. Group Centre Group Centre incorporates the Group's central support and control functions. Core responsibilities of the function include overseeing the Group wide Customer Strategy, establishing clear governance and control frameworks with appropriate oversight, providing management services to the Group, and managing the key processes and IT delivery platforms for the trading divisions. The following pages provide further information on the ﬁnancial performance of the Group’s divisions during 2023 as well as some key performance metrics. Other reconciling items represent transactions between operating segments which are eliminated upon consolidation and the application of hedge accounting at Group level. 2023 €m Restated1,2,3 2022 €m Underlying divisional contribution Retail Ireland1,2 954 346 Wealth and Insurance3 133 (13) Retail UK 275 305 Corporate and Commercial1,2 1,213 901 Group Centre2 (577) (382) Other reconciling items 25 (4) Group underlying profit before tax 2,023 1,153 Non-core items by division Retail Ireland1 (6) (41) Wealth and Insurance 10 (5) Retail UK (4) (29) Corporate and Commercial1 – 5 Group Centre (46) (62) Other reconciling items (39) (10) Group non-core items (85) (142) Profit / (loss) before tax by division Retail Ireland1,2 948 305 Wealth and Insurance3 143 (18) Retail UK 271 276 Corporate and Commercial1,2 1,213 906 Group Centre2 (623) (444) Other reconciling items (14) (14) Group profit before tax 1,938 1,011 1 Comparative figures have been restated to reflect the Business Banking transfer to Corporate and Commercial (formerly Corporate and Markets), resulting in a €470 million increase in the underlying divisional contribution, a €5 million increase in non- core and a €475 million increase in profit before tax in Corporate and Commercial, with the corresponding decrease in Retail Ireland. 2 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. 3 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 61 Further information on our alternative performance metrics referred to in the divisional review can be found on page 356. The Group notes the following achievements under our three strategic pillars for 2023: Stronger relationships • Successfully completed the acquisition of KBCI portfolios in H1, welcoming c.150,000 new customers to the Group. • Our mobile app customer engagement engine, which provides customers with helpful insights, generated c.500k customer lead engagements supporting their day-to-day banking needs, up 21% year on year. • Retail Ireland's active personal customer base remains strong and continues to grow with 2.2 million active customers at the end of 2023, c.4% higher year on year. • Our Customer Effort Score (+53, up 3 points) and Relationship Net Promoter Score (+6, up 1 point) have increased year on year, a positive reflection of day-to-day customer service and brand loyalty. • Convenient on-site banking services were provided to more than 300k employees (1% higher year on year) at c.400 companies (c.5% higher year on year), making banking simpler for them through our Bank at Work proposition. Simpler business • Continuing to invest in our mobile app and digitising customer journeys, resulting in an increase in digitally active customers. Average monthly digital log-ins has increased to 1.7 million in 2023 from 1.4 million in 2022. • The Brilliant Basics programme gives front line colleagues the opportunity to highlight customer service inefficiencies, which enables continuous improvements and reduces customer and colleague toil. • In 2023, Retail Ireland launched a digital servicing hub for existing mortgage customers, which allows customers to self-serve 24/7, resulting in over 15,000 such requests being completed. • Customer complaints have continued their downward trend, reducing a further 5% in 2023 versus 2022. Sustainable company • Supporting our customers' financial wellbeing with initiatives including: – 'Money Worries' and 'Mortgages Fresh Start' initiatives; – fraud awareness campaigns; – 'How to Invest for your Future' webinar series; – 'Youth Financial Literacy Programme'; – 'Money Smarts' challenge with almost 2,000 pupils across Ireland participating; – dedicated cost of living advice; and – a fund which has provided €1 million in support to those most at risk from cost of living pressures. • In 2023, more than 50% of Retail Ireland's new Irish home loans were green mortgages. • During 2023, we continued to invest in our branch network, upgrading branch lighting with the installation of LED lights to 133 branches across Ireland. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 62 Divisional review (continued) Retail Ireland Retail Ireland serves customers across a broad range of segments and sectors with financial products, services and propositions tailored to meet their needs. Money Smarts challenge with almost 2,000 pupils participating New financial wellbeing initiatives launched Divisional review (continued) Retail Ireland financial results In 2023, Global Markets and Corporate Banking (together formerly known as Corporate and Markets) were consolidated with Business Banking into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. As a result comparative figures have been restated to reflect a decrease of €470 million in underlying contribution, €9.0 billion in loans and advances to customers and €33.8 billion in customer deposits. Compared to 2022: • operating income was €788 million higher reflecting the improving interest rate environment with higher earnings on deposits, the KBCI portfolio acquisition and increased core fee and transaction income; • operating expenses were 5% higher, largely due to additional KBCI resources, higher depreciation and higher processing, printing and correspondence items in respect of rate changes; and • the net impairment loss of €109 million, was €152 million higher than 2022, driven by an impairment gain in prior year from the release of a Group Management adjustment. The 2023 net impairment loss reflects the impact of the acquisition of the KBCI book and model updates for NPE portfolio sales, mortgage cure rates and a LGD model review. Compared to 31 December 2022: • 2023 reflects strong new lending, with increases across all lending portfolios, supplemented by the KBCI portfolio acquisition in H1, resulting in an overall net increase of €10.0 billion in the lending book; and • customer deposits of €43.9 billion were €1.7 billion higher, reflecting the KBCI portfolio acquisition and onboarding of former Ulster Bank and KBCI customers. Retail Ireland Income statement on an underlying basis 2023 €m Restated1,2 2022 €m Change % Net interest income 1,409 619 n/m Net other income 146 148 (1%) Operating income 1,555 767 n/m Operating expenses2 (485) (464) 5% Operating contribution before net impairment losses on ﬁnancial instruments 1,070 303 n/m Net impairment (losses) / gains on ﬁnancial instruments (109) 43 n/m Share of results of associates and joint ventures (after tax) (7) – n/m Underlying contribution 954 346 n/m Net impairment (losses) / gains on ﬁnancial instruments Loans and advances to customers at amortised cost (109) 43 n/m Residential mortgages (71) 40 n/m Consumer (38) 3 n/m Net impairment (losses) / gains on ﬁnancial instruments (109) 43 n/m Summary Balance sheet Loans and advances to customers (net) (€bn) At 31 December 33.8 23.8 42% Average in year 32.1 23.4 37% Customer deposits (€bn) At 31 December 43.9 42.2 4% Average in year 44.1 39.4 12% 1 Comparative figures have been restated to reflect the Business Banking transfer from Retail Ireland to Corporate and Commercial (formerly Corporate and Markets). 2 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 63 The Group notes the following achievements under our three strategic pillars for 2023: Stronger relationships • New Ireland continues to focus on delivery for customers with provision of low risk propositions including Dynamic100 and PruFunds, and protection propositions such as General Insurance panel and Dual Life Mortgage Protection. • New Ireland market share grew from 19.2% in November 2022 to 19.5% in November 2023. • Only bank in Ireland to compare two home insurance quotes for customers through our General Insurance panel, in order to provide better choice, value and competitive pricing for all customers. • Weather events and storms gave us the opportunity to be there for our customers with over 70k texts issued with emergency contact details, home emergency assist and vehicle breakdown / recovery. • Financial Wellbeing programme in New Ireland supporting c.36k customer meetings with quality wealth advice, which is up 20% versus prior year. • Introduction of a 'right to be forgotten' for cancer survivors applying for mortgage protection insurance. • Significant growth in the Davy private client business, as Funds Under Management grew by €6.5 billion, leading to 35% growth in 2023 of which €2.8 billion were net client inflows, €1.7 billion of equity market movements and €2.0 billion related to high net-worth (HNW) client migration of c.1,700 clients from Bank of Ireland Private. • Davy Capital Markets continues to lead in Irish equities while building out in UK’s mid-cap companies. Simpler business • New Ireland won 'Best Consumer Innovation and Transformation in Ireland' at the 2023 Global Finance Awards. • Strong adoption of New Ireland digital advice platform continues resulting in a greatly improved customer experience. AUM on MP365 platform grew to c.€1.4 billion at Dec 2023 from c.€0.4 billion at Dec 2022. • Enhancement of Broker and Agent Portal digital journeys across channels and products benefiting both customers and colleagues. The New Ireland broker portal enables brokers and advisors to access products and services via a single source, with strategic products available digitally to customers including protection, pensions, savings and investment products. • New Ireland is continuing to invest in its technology platforms with a new customer portal launched with seamless log-in, digital capture forms, self-serve customer actions and direct to print triggers for customer documentation. • Significant increase in adoption of New Ireland Corporate Pensions Platform, MyPension365, which provides customers with a modern, digital and customer friendly experience. • Davy invested significantly in the technology capabilities of its support functions in 2023, with focus through 2024 on simplifying critical wealth processes. Sustainable company • Supporting our customers' financial wellbeing with initiatives including our InvestEd campaign in New Ireland. The customer webinar series educated customers on the topics of Pension pot optimization, additional voluntary contributions, auto-enrolment, coming close to retirement and women in pensions. • Sustainability is at the core of New Ireland's investment offerings. At 31 December 2023, under Sustainable Financial Regulatory Disclosures (SFDR), New Ireland had greater than a third of its AUM in Article 8 classified funds (products claimed to promote positive environmental and social characteristics). • Davy continues to invest in its sustainability agenda, under the stewardship of a dedicated Sustainability Executive Committee. Through 2023, Davy effected significant improvements across our internal operations, expanded our sustainable investment offering and continued to invest in services to support Irish corporates define and execute their sustainability strategies. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 64 Divisional review (continued) Wealt h and Insur ance Wealth and Insurance is a market leading life, pensions, investments and general insurance provider in Ireland and includes New Ireland Assurance and Davy. €507m New Ireland Life and Pension APE, 17% increase from 2022 +18% increase in AUM to €46bn Divisional review (continued) Wealth and Insurance financial results On 1 January 2023, the new insurance accounting standard, IFRS 17 ‘Insurance Contracts’ became effective, replacing IFRS 4 'Insurance Contracts'. This has a material impact on the recognition, measurement, presentation and disclosure of the insurance business in the Group's financial statements. There are, however, no changes to the underlying business and operations of the Wealth and Insurance segment. See notes 1 and 18 for further details. IFRS 17 has introduced contractual service margin (CSM) which represents the unearned profit of a group of insurance and reinsurance contracts which is released in line with the insurance service provided. The CSM of the Group increased by €36 million to €589 million during 2023 (2022: €553 million) driven mainly by new business and positive market movements. €76 million CSM was released to the income statement for insurance services provided reflecting the quality of business previously written. See note 18 for further details. Compared to 2022: • operating income was €95 million or 41% higher than 2022, reflecting growth in overall business performance in New Ireland, in addition to the inclusion of 12 months Davy income compared to 7 months post acquisition in 2022; • operating expenses were €82 million or 56% higher primarily due to the inclusion of 12 months Davy expenses in 2023 compared to seven months in 2022; • AUM have grown from €39.2 billion at 31 December 2022 to €46.1 billion at 31 December 2023; and • the impact of markets has resulted in a positive investment valuation movement of €36 million in New Ireland for 2023 (2022: €97 million investment loss). Wealth and Insurance Income statement on an underlying basis 2023 €m Restated 1 2022 €m Change % Net interest expense (7) (8) (13%) Net other income 332 238 39% Operating income 325 230 41% Operating expenses (228) (146) 56% Operating contribution 97 84 15% Investment valuation movement 36 (97) n/m Underlying contribution 133 (13) n/m 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Embedded value The table opposite outlines the Market Consistent Embedded Value (MCEV) performance using market consistent assumptions. The calculation of the MCEV company value is closely aligned to Solvency II and follows MCEV principles. IFRS 17 does not change the economic value of the business, which MCEV represents, but does change the timing of accounting profit recognition through deferral of profits captured in the CSM. As a result, the amounts in the MCEV tables are not directly comparable to IFRS 17 results. Please refer to note 1 and 18 for further detail relating to the transition to IFRS 17. The table opposite summarises the overall balance sheet of Wealth and Insurance on an MCEV basis, which increased to €1,299 million at 31 December 2023 (31 December 2022: €1,169 million). The Value of in Force (VIF) asset represents the after tax value of future income from the existing book. Operating profit of € 102 million for 2023 was €89 million lower than 2022, primarily due to lower assumption changes, lower persistency and higher costs. This was partially offset by higher expected returns on shareholder main fund holdings, higher new business and higher mortality/morbidity profits. Embedded value profit before tax of €155 million profit (2022: €42 million) was €113 million higher than 2022 due to the impact of investment valuation market movements which resulted in a positive valuation movement of €53 million in New Ireland (2022: €149 million investment loss). W&I (excluding Davy) Summary balance sheet (MCEV) 2023 €m 2022 €m Net assets 575 534 ViF 886 806 Less Tier 2 subordinated capital / debt (162) (162) Less pension scheme deﬁcit – (9) Total embedded value 1,299 1,169 W&I (excluding Davy) Income statement (MCEV) 2023 €m 2022 €m New business proﬁts 18 15 Existing business proﬁts 92 182 Expected return 58 69 Experience variance (5) 14 Assumption changes 39 99 Interest payments (8) (6) Operating proﬁt 102 191 Investment valuation movement 53 (149) Embedded value proﬁt before tax 155 42 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 65 The Group notes t he following achievements un der our three strategic pillars for 2023 : Stronger relationships • To support our residential mortgage customers experiencing the financial pressure of increasing mortgage repayments, the Mortgage Business signed up to the UK Mortgage Charter (initiated by the UK government), which formalises the provision of temporary concessions to residential mortgage customers experiencing financial difficulties. • Northridge Finance had strong new lending in 2023 (£335 million higher than 2022), with the contact hire division benefiting from higher resale values in the second hand car market. • The first phase of the Consumer Duty programme was delivered by the Financial Conduct Authority (FCA) compliance date of 31 July 2023, by way of a Board approved implementation plan. Phase two which includes key priorities such as enhancement of customer insights and customer understanding review is now underway. The Programme will continue to embed all changes into every day operations, in line with the FCA compliance date for closed book products (31 July 2024). • In December 2023, as part of the Group's strategy, the UK announced the conclusion of its financial services partnership with the AA and ceased the provision of unsecured personal loan products under the BoI (UK) and Post Office brands. Simpler business • Adoption of a continuous innovation approach to identify pain points on customer journeys and increase efficiency driving the best outcomes for our customers and our colleagues with 32 improvements to the Mortgage Application Processing system, made during 2023. Further improvements are planned during 2024. • During 2023, a multi-million pound investment in the UK mortgage business commenced, to improve customer journeys and operational efficiency, including automated redemptions process, improvement in customer refund times from 10 days down to 3 days and automated account processing which has seen 1,400 accounts automatically processed since launch. • Our new Customer Hub launched in November 2023, allowing improved registration process for new customers and more simplified services to all customers. Additionally, Web Chat was rolled out during H2 which has reduced customer wait times with the average response time now less than 90 seconds. • Refreshed UK website launched in 2023, addressing the two main customer challenges, ease of locating relevant content and ease of navigation. As result of the improvements made there has been a 15% increase compared to 2022 of website 'click-throughs' to product application forms. Sustainable company • During 2023, Retail UK agreed a three year Group aligned Sustainability strategy. Governance was enhanced through the creation of a UK Sustainability Committee and working groups across the three sustainability pillars. • UK Mortgage business have a defined Green Strategy supporting the management of its targets, developing new sustainable products and supporting customers through education. In H2, the business offered new retention products for those customers soon to be maturing from green products. • 2023 has seen a rapidly increasing interest rate environment in the UK. In response to this and to meet regulatory obligations, to ensure responsible lending through a robust and risk conscious origination strategy, a series of changes to stress rate parameters were delivered which underpin the customer affordability assessment. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 66 Divisional review (continued) Retail UK Retail UK provides banking services to customers in the UK, including mortgages, savings, foreign exchange, asset finance and contract hire; incorporating Northridge Finance and a partnership with the Post Oﬃce which includes FRES1. Multi-million pound investment in UK Mortgages to improve customer journeys. £9 million reduction in operating expenses compared to 2022. 1 FRES is a joint venture between Bank of Ireland UK and the UK Post Office. Divisional review (continued) Retail UK financial results Compared to 2022: • operating income has decreased by £47 million, due to lower net interest income driven by lower lending volumes offset by the higher interest rate environment and gains within our asset finance business on used cars; • operating expenses were £9 million lower as a result of maintaining a strong cost discipline while still creating new resource to support emerging requirements across the business such as vulnerable customer teams, control and assurance roles, and continued investment in improving product offerings; and • the underlying impairment loss of £ 73 million (which excludes €22 million impairment loss being recognised as non-core relating to UK personal loans), decreased by £19 million driven by one-off charges during 2022 for the NPE sales, offset somewhat by provisions for default within the mortgage and personal lending businesses. Compared to 31 December 2022: • Loans and advances to customers (after impairment loss allowances) were £0.8 billion lower, reflecting the UK strategy of value rather than volume. • Customer deposits were £0.5 billion lower as a result of further optimisation of the balance sheet and funding positions. Retail UK Income statement on an underlying basis 2023 £m 2022 £m Change % Net interest income 538 590 (9%) Net other income (16) (21) (24%) Operating income 522 569 (8%) Operating expenses (before impairment of goodwill) (235) (244) (4%) Operating contribution before impairment losses on ﬁnancial instruments 287 325 (12%) Net impairment losses on ﬁnancial instruments (73) (92) (21%) Share of results of associates and joint ventures (after tax) 25 28 (11%) Underlying contribution 239 261 (8%) Underlying contribution (€m equivalent) 275 305 (10%) Underlying net impairment (losses) / gains on ﬁnancial instruments Loans and advances to customers at amortised cost (75) (91) (18%) Residential mortgages (32) (53) (40%) Non-property SME and corporate 1 (11) n/m Property and construction (9) – n/m Consumer (35) (27) 30% Other ﬁnancial instruments: loan commitments and guarantees 2 (1) n/m Underlying net impairment losses on financial instruments (73) (92) (21%) Summary Balance sheet Loans and advances to customers (net) (£bn) At 31 December 17.4 18.2 (4%) Average in year 17.8 20.9 (15%) Customer deposits (£bn) At 31 December 11.8 12.3 (4%) Average in year 11.9 13.6 (13%) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 67 The Group notes the following achievements under our three strategic pillars for 2023 : Stronger relationships • Strong Relationship Net Promoter Score (RNPS) scores, Corporate Bank and Global Markets combined score of +3 points in 2023, versus 2022. Strong customer satisfaction levels reflecting quality and accessibility of relationship managers, and strong knowledge and understanding of customers business. RoI Business RNPS also performed strongly +4 points above baseline to year end. • Proactively supporting customers as they navigate a challenging global economic environment, with vibrant thought leadership programme in place and data driven commercial and sectoral insights. Strong increase in the levels of interest rate hedging solutions. • Loan approvals of €925 million in place to fund development of c.21k residential units across c.170 sites in RoI (19 of 26 counties) which include more than 3.2k units for social housing (including part V). The majority of these new homes to be delivered 2024-2027. • Delivering on customer focused programmes, including Benchmark Reform (US Dollar) which successfully delivered transition to alternative rates. • No. 1 bank for international companies establishing in Ireland again in 2023. Simpler business • In 2023, Global Markets, Business Banking and Corporate Banking franchises were consolidated into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. • Continued simplification of our day-to-day activities for customers and colleagues, allowing them to do more, faster and more easily. • Business current account penetration performed strongly ahead of baseline, +14% Q4 2023 versus Q4 2022, while deposit and savings accounts are +6% in 2023 versus 2022. • Meeting customers’ changing behaviours and expectations. Continued investment in digital enhancements and operational excellence across key products and customer journeys, backend and customer-facing systems. • FXpay, our digital FX channel, achieved active customer dealing growth during 2023 of +10% versus 2022, while DocuSign customer onboarding increased over 20%. Sustainable company • Progressive delivery of ESG strategy, extensive customer engagement focused on how best to support their ESG ambitions and providing thought leadership. • Enviroflex an innovative sustainability-linked loan was launched in conjunction with Kerry Dairy, to support and enable farmers to improve the environmental footprint of their farms. • New green capex product launched, to support Corporate Banking customers with their green initiatives. • First to market with launch of Strategic Banking Corporation Ireland (SBCI) Growth and Sustainability Loan Scheme, a long-term low cost scheme to support eligible businesses, when investing in climate action and environmental sustainability. • Expansion of offshore wind portfolio burnishes our ESG credentials. • Growth in sustainability-linked loans (€2.7 billion of Corporate commitments as at Dec 2023), lending on renewable energy projects and increased Green Bond eligible lending. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 68 Divisional review (continued) Corporate and Commercial Provides full range of lending, banking services and operating products focused on the Group's Corporate and Commercial Banking customers, along with the provision of treasury risk management services to all customer segments. New Green Capex product supporting corporate banking customers with green initiatives Launched Enviroflex, an innovative sustainability- linked loan encouraging sustainable farming practices Divisional review (continued) In 2023, as a result of Global Markets and Corporate Banking being consolidated with Business Banking into a single ‘Corporate and Commercial’ division, comparative figures have been restated to reflect an increase of €470 million in underlying contribution, €9.0 billion in loans and advances to customers and €33.8 billion in customer deposits. Compared to 2022: • operating income was €426 million higher, reflecting the improved interest rate environment; • operating expenses were €30 million higher due to continued investment in IT systems, with inflationary pressure largely contained through strong cost discipline; and • the net impairment loss of €210 million (2022: €130 million loss), reflects the current macro environment, including the potential impact of inflation and rising interest rates on loan valuations. The prior year also recognised an impairment gain relating to the recognition of cash recoveries from customers. Compared to 31 December 2022: • the loan book was €1.7 billion or 6% lower, reflecting redemption and NPE resolution activity, along with a cautious approach to international corporate and property lending. Corporate and Commercial Income statement on an underlying basis 2023 €m Restated 1,2 2022 €m Change % Net interest income 1,667 1,185 41% Net other income 257 313 (18%) Operating income 1,924 1,498 28% Operating expenses2 (505) (475) 6% Operating contribution before impairment losses on ﬁnancial instruments 1,419 1,023 39% Net impairment losses on ﬁnancial instruments (210) (130) 62% Share of results of associates and joint ventures (after tax) 4 8 (50%) Underlying contribution 1,213 901 35% Net impairment (losses) / gains on ﬁnancial instruments Loans and advances to customers at amortised cost (202) (126) 60% Non-property SME and corporate (30) (111) (73%) Property and construction (163) (19) n/m Consumer (9) 4 n/m Other ﬁnancial instruments: loan commitments and guarantees (8) (4) 100% Net impairment losses on financial instruments (210) (130) 62% Summary Balance sheet Loans and advances to customers (net) (€bn) At 31 December 25.9 27.6 (6%) Average in year 26.7 27.2 (2%) Customer deposits (€bn) At 31 December 42.9 43.1 – Average in year 43.0 39.8 8% Euro liquid asset bond portfolio (€bn) At 31 December 8.9 7.8 14% Average in year 8.3 11.0 (25%) 1 Comparative figures have been restated to reflect the Business Banking transfer from Retail Ireland to Corporate and Commercial (formerly Corporate and Markets). 2 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 69 The Group notes the following achievements under our three strategic pillars for 2023: Stronger relationships • Following the establishment of the Group Customer Office, a step back review of customer expectations, in-flight customer initiatives and target customer outcomes associated with the Group’s Strategy was completed, supporting the Group's customer vision, setting out new initiatives to accelerate delivery of target customer outcomes to meet customers’ expectations. • First Irish bank and one of 23 globally to communicate our UNPRB commitments on financial health and inclusion. • Expanded our range of sustainable finance solutions across key sectors launching Enviroflex, which provides an additional funding option for farmers implementing sustainable farming practices. • A number of Mobile App Enhancements bringing new features to the market at a faster pace including; biometrics, enhanced narrative for pending transactions, and additional fraud monitoring. • Awarded the gold 'Investors in Diversity' EDI mark. • Launch of ‘Extra Help’ and ‘Money Worries’ hubs providing guidance for customers who may be experiencing vulnerabilities. • Supporting our colleagues through delivery of events such as the People Manager summit enabling colleagues to have better quality conversations, encompassing performance, career development and growth and wellbeing and the launch of the 'MyReward' flexible benefits platform for colleagues, supporting our people and their financial wellbeing. Simpler business • Enterprise Simplification function established to improve customer and colleague experience, removing process inefficiencies, embedding colleague led continuous improvement and building colleague capabilities for the future. • Improvement in end-to-end delivery & oversight to the change environment, increasing transparency, driving efficiency, productivity and stability through the launch of the Data Solutions and Homebuying value streams, Lean Agile Centre of Excellence and the Transformation Risk Reduction Plan. • Our annual Engagement Survey headlines show that we are making strong progress on colleague engagement and culture through further increases in our Engagement Index +5 points and the Culture Embedding Index +4 points, with both at their highest level yet. • Technology deployments including an Enterprise Data Warehouse update, a successful transition to real time gross payments system and releases reducing Fraud risk. • Digital application journeys developed to support enhanced Family Matters policies and development of hybrid working model, supporting the Group and its colleagues. Sustainable company • In our 2023-25 Strategy we set sustainability related finance lending targets of c.€15 billion by 2025 and c.€30 billion by 2030. By the end of 2023, we reached €11.1 billion, up from €8.2 billion at the end of 2022. • Launched 'Green Hub', a new sustainability one stop shop information hub for retail and business customers. • Rolled out ESG trainings and workshops internally including; in-person senior leaders training, all colleagues training and divisional sustainability training. • Awarded 'Sustainability and ESG reporting (listed entities)' for our Annual Report sustainability disclosures at the Chartered Accountants Ireland Leinster Society Published Accounts Awards. • Our MSCI and Sustainalytics rating continued to improve (from BBB to A and Medium to low risk respectively) reflecting management actions taken over the last 18 months. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 70 Divisional review (continued) Group Centre Group Centre incorporates the Group's central support and control functions, overseeing the Gro up customer strategy, establishing clear governance and control frameworks as well as providing management services to the Group. Establishment of Group Customer Office supporting the Group's customer vision and priorities. Awarded the gold 'Investors in Diversity' EDI mark Divisional review (continued) Group Centre financial results Group Centre’s income and costs comprise income from capital and other management activities; unallocated Group support costs; costs associated with the Irish Bank levy; along with contributions to the SRF, DGS and other levies. Compared to 2022: • net operating expense was €81 million higher compared to €55 million income in the prior year. In 2022, the Group benefitted from gains on disposal of government bonds of €96 million; • operating expenses were €80 million or 26% higher primarily due to the introduction of variable pay, additional investment to deliver sustainable benefits, including efficiencies and defined benefit pension movements; and • levies and regulatory charges were € 26 million higher year on year. This was primarily due to an increase in the DGS levy which was driven by both covered deposit volume growth of 12% year on year together with an increase in Group contribution rate, due to the departure of other financial institutions from the market, partially offset by a reduction in the risk profile for the Group. Group Centre Income statement on an underlying basis 2023 €m Restated1 2022 €m Change % Net operating (expense) / income (26) 55 n/m Operating expenses (before levies and regulatory charges)1 (389) (309) 26% Levies and regulatory charges (162) (136) 19% Net impairment gains on ﬁnancial instruments – 7 (100%) Gain on disposal / liquidation of business activities and property – 1 (100%) Underlying contribution (577) (382) (51%) 1 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 71 Divisional review (continued) Income statement on an underlying basis - operating segments In the tables below, 'underlying' excludes the impact of non-core items (page 55). The tables provides a reconciliation of the income statement on an underlying basis to the Group Statutory profit / loss before tax. Operating profit / (loss) before net impairment losses on ﬁnancial instruments €m Net impairment (losses) / gains on ﬁnancial instruments €m Share of results of associates and joint ventures (after tax) €m Loss on disposal / liquidation of business activities €m Net other income 2023 Net interest income / (expense) €m Insurance service result €m Insurance investment & finance result €m Other income / (expense) €m Total operating income / (expense) €m Operating expenses €m Profit / (loss) before taxation €m Divisional underlying contribution Retail Ireland 1,409 – – 146 1,555 (485) 1,070 (109) (7) – 954 Wealth and Insurance (7) 51 110 207 361 (228) 133 – – – 133 Retail UK 619 – – (18) 601 (270) 331 (84) 28 – 275 Corporate and Commercial 1,667 – – 257 1,924 (505) 1,419 (210) 4 – 1,213 Group Centre (7) – – (19) (26) (551) (577) – – – (577) Other reconciling items 1 – – 12 13 12 25 – – – 25 Group - underlying 3,682 51 110 585 4,428 (2,027) 2,401 (403) 25 – 2,023 Total non-core items Acquisition costs – – – – – (61) (61) – – – (61) Gross-up for policyholder tax in the Wealth and Insurance business – – – 26 26 – 26 – – – 26 Liability management exercises – – – (22) (22) – (22) – – – (22) Portfolio divestments 25 – – 3 28 (24) 4 (22) – – (18) Loss on liquidation of business activities – – – – – – – – – (8) (8) Transformation programme costs – – – – – (2) (2) – – – (2) Customer redress charges – – – – – – – – – – – Investment return on treasury stock held for policyholders – – – – – – – – – – – Group total 3,707 51 110 592 4,460 (2,114) 2,346 (425) 25 (8) 1,938 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 72 Divisional review (continued) Income statement on an underlying basis- operating segments (continued) Operating profit / (loss) before net impairment losses on ﬁnancial instruments €m Net impairment gains / (losses) on ﬁnancial instruments €m Share of results of associates and joint ventures (after tax) €m Gain on disposal / liquidation of business activities €m Profit / (loss) before taxation €m Net other income Restated1,2,3 2022 Net interest income / (expense) €m Insurance service result €m Insurance investment & finance result €m Other income / (expense) €m Total operating income / (expense) €m Operating expenses €m Divisional underlying contribution Retail Ireland2,3 619 – – 148 767 (464) 303 43 – – 346 Wealth and Insurance1 (8) 60 (19) 100 133 (146) (13) – – – (13) Retail UK 691 – – (25) 666 (286) 380 (107) 32 – 305 Corporate and Commercial2,3 1,185 – – 313 1,498 (475) 1,023 (130) 8 – 901 Group Centre3 (5) – – 60 55 (445) (390) 7 – 1 (382) Other reconciling items – – – (2) (2) (2) (4) – – – (4) Group - underlying 2,482 60 (19) 594 3,117 (1,818) 1,299 (187) 40 1 1,153 Total non-core items Acquisition costs – – – – – (54) (54) – – – (54) Gross-up for policyholder tax in the Wealth and Insurance business – – – (2) (2) – (2) – – – (2) Liability management exercises – – – – – – – – – – – Portfolio divestments – – – 2 2 (1) 1 – – – 1 Loss on liquidation of business activities – – – – – – – – – – – Transformation programme costs – – – – – (50) (50) – – – (50) Customer redress charges 5 – – – 5 (34) (29) – – – (29) Investment return on treasury stock held for policyholders – – – (8) (8) – (8) – – – (8) Group total 2,487 60 (19) 586 3,114 (1,957) 1,157 (187) 40 1 1,011 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect the Business Banking transfer from Retail Ireland to Corporate and Commercial (formerly Corporate and Markets). 3 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 73 Governance Contents Corporate Governance Statement 75 Chairman’s Introduction 75 Your Board 79 Report of the Group Nomination & Governance Committee 98 Report of the Group Remuneration Committee 102 Report of the Group Audit Committee 108 Report of the Board Risk Committee 114 Attendance table 119 Report of the Directors 120 Schedule to the Report of the Directors 123 Remuneration Report 125 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 74 Corporate Governance Statement Chairman ’s introduction Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 75 Patrick Kennedy Chairman Dear Shareholders, I am pleased to present our Corporate Governance Report for 2023. The Report explains how corporate governance standards are applied across the Group, how they are overseen by the Board, how the Board operates, and how the Board evaluated its effectiveness during 2023. It includes reports from the four mandatory Board Committees which further illustrate how the principles of good governance are embedded. The Board is cognisant of its role in creating sustainable, long-term value for our shareholders and in contributing to wider society. The Group’s role in wider society and our purpose of enabling our customers, colleagues, society and shareholders to thrive was at the top of all of our minds as we faced the many challenges brought about by high inflation and the impact of the conflicts in Ukraine and the Middle East. The Group’s ability to continue to operate effectively in the current environment is supported strongly by the Group’s robust corporate governance framework which the Board continually seeks to enhance through regular reviews and challenge. The Board is committed to achieving high standards of governance designed to protect the long-term interests of shareholders and all other stakeholders, while promoting the highest standards of integrity, transparency and accountability. The Board is accountable to shareholders for the overall direction, control and oversight of the Group. The established governance framework provides for systems of checks and controls required to drive accountability and effective decision making across the Group, with appropriate policies and practices in place to ensure that the Board and its Committees operate effectively. Corporate governance requirements A key objective of the Group’s governance framework is to ensure compliance with applicable corporate governance requirements. During 2023, the Group complied fully with the following corporate governance requirements: • Central Bank of Ireland Corporate Governance Requirements for Credit Institutions 2015 ('Irish Code'), except in relation to compliance by Bank of Ireland Mortgage Bank Unlimited Company (BoIMB) with parts of S. 22, and Ss. 7.1 and 7.2 of Appendix 1, of the Irish Code, further details of which are provided under Subsidiary Governance on page 101; • Statutory Instruments 158/2014 European Union (Capital Requirements) Regulations 2014 and 159/2014 European Union (Capital Requirements) (No.2) Regulations 2014, both as amended; • EBA Guidelines on internal governance under Directive 2013/36/EU, as amended; and • Joint European Securities and Markets Authority (ESMA) and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders under Directive 2013/36/EU and Directive 2014/65/EU, as amended. The Group is also subject to the 2018 UK Corporate Governance Code published by the Financial Reporting Council in the UK ('UK Code') and the Irish Corporate Governance Annex to the Listing Rules of Euronext Dublin (formerly the Irish Stock Exchange). During 2023, the Group applied the main principles and complied with all provisions of the UK Code other than in instances related to Section 3, Provision 19, the rationale and explanation for which is set out on page 85 and Section 5: Remuneration, in particular principle R and provisions 36, 37 and 41. The rationale and explanation for non- compliance with these provisions are set out below: • the decision of the State to disapply a number of remuneration restrictions was announced on 29 November 2022 and became effective on 16 December 2022. However, due to remaining remuneration restrictions from certain agreements in place with the Irish State, the Group Remuneration Committee and the Board were restricted in their ability to fully comply with principle R and associated provisions; Chairman’s introduction (continued) • under such agreements, the implementation of variable remuneration structures remains limited, capped at €20,000. The Board’s discretion remains limited and, as such, the Board could not be in full compliance with the recommendation to exercise independent judgement, as such discretion regarding variable remuneration is capped; • following the removal of a number of restrictions, the Group has adhered to these principles and provisions to the extent permitted, in the design, implementation and operation of any variable remuneration structures which have been created in 2023; and • the pension contribution rates for Executive Directors, where provided, were and are aligned with those available to the workforce. Action is planned to enhance engagement with the workforce on remuneration matters during 2024, to include how executive remuneration aligns with wider company pay policy. People and culture 2023 has been another highly productive year for the Group as we embedded the Davy Group and refreshed the Group’s strategy, purpose and values under the leadership of a new CEO. Our people remain at the very core of what we do, and I continue to be impressed by the commitment shown by all of our colleagues to support one another and our customers. The Board has worked with the Executive team to ensure a continued focus on the Group’s culture during 2023. The Board is satisfied that the Group’s culture, its purpose, values and strategic priorities are aligned. The Board appreciates that the level of productivity and transformation being experienced is a result of significant effort from all colleagues and the leadership of the Executive team. The Board has been focused, with the Executive, on ways to assess and ameliorate organisational bandwidth, reduce complexity and enhance efficiency through a number of initiatives. For this reason, the Group’s Open View colleague survey, conducted in Q4 2023, continues to provide rich insights into colleague sentiment. The survey included a broad range of employee engagement and culture topics with benchmarking data provided by a specialist engagement consultancy. I am pleased to report that, in 2023, colleague participation reached its highest level to date (82%), with colleagues clearly welcoming the opportunity to share their views and opinions. Survey results show strong increases in our Engagement Index which is now 73% (+5 points YoY) and our Culture Embedding Index of 80% (+4 points YoY). These headlines show that we are making strong progress on colleague engagement and culture. The increase in Engagement has been driven by uplift across three constituents during 2023, with job enjoyment (+7 points), advocacy/recommending the Group as a place to work (+7 points), and pride in working here (+3 points). The increase in the Culture Embedding Index means that the Group is now 5 points higher than the external benchmark. All four constituents regarding our purpose and values Index increased in 2023 with Awareness +2 points, Understanding +4 points, Belief +6 points, and Demonstration +3 points. There was also a significant uplift in the statement which measures whether the Group’s culture is changing for the better (+5 points). The survey results are largely positive with colleagues feeling more supported and connected, and, importantly, the sentiment on several key topics, including psychological safety, inclusion, hybrid working, and the levels of strain being experienced across the Group, has improved. The Board appreciates that such positive results are directly attributable to the combined efforts of all colleagues and the leadership of the Executive team. As the Board’s Workforce Engagement Director (WED), Eileen Fitzpatrick continued to provide a positive additional point of connection between the Board and the workforce during 2023. Later in the Report, we share some activities undertaken by Eileen in 2023. Eileen’s activities, coupled with the Board’s direct engagement with senior colleagues during regular ‘visibility sessions’ (held in the absence of the CEO, CFO and wider Executive team), complements the pre-existing mechanisms through which the Board gains valuable insights into how colleagues experience the work environment and, importantly, the leadership and culture of the Group. Having served in the role since its creation in 2019, Eileen will hand the WED role to Evelyn Bourke at the end of February 2024. Evelyn will leverage and build upon the great work undertaken by Eileen as the Group’s first WED. On behalf of the Board, I would like to thank Eileen for her dedication to the role, the insights she provided the Board as to colleague sentiment ‘on the ground’ and her open engagement with colleagues. Another important aspect of our culture is embedding diversity and inclusion throughout the organisation. Gender and ethnic diversity have been an area of focus for the Group at both workforce and Board-level. The Board has set a target of a minimum of 40% female representation on the Board, with a medium-term aspiration to have broadly equal gender representation and the inclusion of at least one Director from an ethnic minority. It is also the Board’s intention over the medium-term to have at least one of the senior Board positions of Chair, CEO, CFO and Senior Independent Director (SID) held by a female. The representation of females on our Board is currently 33% and none of those senior Board roles are held by females. Our target to have at least one Director from an ethnic minority has been met. While we have not yet achieved our targets fully, our recruitment of Directors remains focused on increasing the diversity of our Board and we will take into account the need for greater diversity when considering candidates for future appointment to these roles. For more information on the Board’s Diversity Policy, go to: bankofireland.com/about-bank-of-ireland/corporate- governance The Group remains committed to the Race at Work Charter and meeting, and in certain cases exceeding, the standards set out in that Charter, which comprises five principal calls to action for leaders and organisations to ensure their workplaces are tackling barriers that ethnic minorities face in recruitment and progression. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 76 Chairman’s introduction (continued) Recently, the Group has been accredited as an Investing in Ethnicity Employer in recognition of our progress in developing an inclusive and ethnically diverse workforce that is reflective of the population. Supporting equality in the workplace is the responsibility of all leaders and the Board has pledged its commitment to zero tolerance for any form of racial harassment, bullying or inappropriate behaviours from any source, be it management, colleagues, customers or contractors. Board composition changes The Group Nomination and Governance Committee (N&G) is responsible, on behalf of the Board, for reviewing the composition of the Board and its Committees and assessing whether the balance of skills, experience, knowledge and independence is appropriate to enable them to operate effectively. The composition of the Board remains under continuous review and the N&G maintains a constant focus on succession planning, to ensure the continuation of a strong and diverse Board and the orderly succession of Board members, which is appropriate to the Group’s purpose and the industry within which it operates. The N&G oversaw a number of changes to the Board and its Committees during 2023. Margaret Sweeney joined the Board on 1 October 2023. On appointment, Margaret joined the Board’s Remuneration and Audit Committees. Margaret has extensive board and executive experience across a number of sectors including financial services, with a clear focus on strategy and corporate development, delivering transformational change, audit and accounting. Akshaya Bhargava joined the Board on 12 January 2024. Following his appointment, Akshaya joined the Board’s Risk and Transformation Oversight Committees. Akshaya has extensive experience across FinTech, wealth management, broader international financial services, and transformation and change. The appointments of Margaret and Akshaya further strengthen the Board’s collective skills, experience, and diversity profile. Fiona Muldoon retired from the Board on 30 September 2023, after eight years on the Board. On behalf of the Board, I wish to thank Fiona for her dedication and the meaningful contribution she made to the success of the Group. Details of further Board Committee changes are outlined in the N&G Report on page 99. The Board succession plan continued to be reviewed during 2023 and a number of decisions regarding the tenure of Directors and actions required to ensure the orderly succession of Directors over the coming years have been identified. A bank board position is undeniably an increasingly demanding role, including the level of scrutiny, expectation and risk associated with such positions in the current environment. Nevertheless, there are exciting opportunities for high calibre individuals on bank boards. Board and individual effectiveness evaluation The Board, its committees and individual Directors are committed to regular, independent evaluation of their effectiveness at least once every three years. Having concluded an independent evaluation in 2022, the annual review of the effectiveness of the Committee was internally facilitated in 2023. The N&G led the process, approving the questionnaires, designed by the Group Company Secretary, which were completed by the Board, Committee Members and regular attendees at Committee meetings. The N&G enhanced the process in 2023 by adding a new Board Perception Review, which sought views on the Board and its operations from a wider cohort of senior Group colleagues. To gather qualitative feedback on the Board, for the Board Perception Review, the Group Company Secretary, together with the Deputy Group Secretary, held a number of round table discussions with senior colleagues. The final effectiveness review report to the Board incorporated the feedback from the Board Perception Review. At its January 2024 meeting, the Board considered the findings of the reviews. Overall, the work of the Board continues to be rated highly and it is viewed as operating effectively. In general, there were consistent findings across the Board and committee reviews. These included: • a positive view of the effectiveness of the Chairs of the Board and committees and the participation of their members; • a greater desire to be even more forward looking; and • a need for continued focus on the quality of meeting materials to ensure that content remains focused, clear and precise. Similar discussions were led by each of the committee chairs in their respective meetings. The Board and each committee agreed on a number of areas of focus and enhancement for 2024, actions in response to which will be monitored and addressed on an ongoing basis. Progress against these actions will be included in the 2024 Annual Report. As part of the formal annual review process, I carry out individual Director reviews. All Directors are experienced and knowledgeable, and I am confident that they each bring valuable skills to the Board and provide an objective perspective. The Board considers that the effective contribution of each of the individual Directors and the Board as a whole is, and continues to be, important to the long-term sustainable success of the Group. The Board met on 10 occasions during 2023, the majority of which were in person as the organisation embraces post- pandemic ways of working, including hybrid working. Directors’ attendance at and contribution during meetings of the Board and its Committees has continued to demonstrate the Directors' commitment to the Group. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 77 Chairman’s introduction (continued) A summary of the 2023 Board effectiveness review can be found on page 88. The outcome of the review of my effectiveness as Board Chairman and details on plans for succession to the Board Chairman role, each led by the SID in consultation with the other Directors, can be found on page 88. Looking ahead The Board will continue to work effectively with the Executive team in 2023 to ensure continued challenge to and delivery of the Group’s strategy 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, building strong relationships, simplifying our business, and growing a Sustainable company, will be our focus in 2024. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 78 Patrick Kennedy Chairman 23 February 2024 Your Board Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 79 Board Group Audit Committee Evelyn Bourke (Chair) Eileen Fitzpatrick Richard Goulding Michele Greene Steve Pateman Margaret Sweeney Board Risk Committee Michele Greene (Chair) Giles Andrews Akshaya Bhargava Evelyn Bourke Ian Buchanan Richard Goulding Steve Pateman Group Remuneration Committee Ian Buchanan (Chair) Giles Andrews Eileen Fitzpatrick Margaret Sweeney Group Nomination and Governance Committee Patrick Kennedy (Chair) Evelyn Bourke Eileen Fitzpatrick Richard Goulding Group Transformation Oversight Committee Giles Andrews (Chair) Akshaya Bhargava Ian Buchanan Richard Goulding Michele Greene Patrick Kennedy Group Sustainability Committee Eileen Fitzpatrick (Chair) Giles Andrews Evelyn Bourke Michele Greene Group Executive Committee Myles O’Grady (Group Chief Executive Officer) Mark Spain (Group Chief Financial Officer) Ciarán Coyle (Chief Operating Officer) Matt Elliott (Chief People Officer) Gail Goldie (Chief Executive Officer, Retail UK) Enda Johnson (Chief Strategy and Transformation Officer) Gavin Kelly (Chief Executive Officer, Corporate and Commercial) Áine McCleary (Chief Customer Officer) Sarah McLaughlin (Group Secretary and Head of Corporate Governance) Stephen Roughton-Smith (Chief Risk Officer) Susan Russell (Chief Executive Officer, Retail Ireland) Oliver Wall (Chief of Staff and Head of Corporate Affairs) The above list reflects GEC membership on 23 February 2024, including new appointments during 2023 and early 2024. Your Board (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 80 Patrick Kennedy Richard Goulding Myles O'Grady GTOC / N&G GAC / BRC / GTOC / N&G Akshaya Bhargava BRC / GTOC Evelyn Bourke GAC / BRC / N&G / GSC Ian Buchanan BRC / GTOC / GRC Eileen Fitzpatrick GAC / N&G / GRC / GSC Michele Greene GAC / BRC / GTOC / GSC Steve Pateman GAC / BRC Giles Andrews BRC / GTOC / GRC / GSC Mark Spain Margaret Sweeney GAC / GRC Abbreviations: GAC Group Audit Committee I BRC Board Risk Committee I GTOC Group Transformation Oversight Committee I N&G Nomination & Governance Committee GRC Group Remuneration Committee i GSC Group Sustainability Committee Your Board (continued) Patrick Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 81 Patrick Kennedy Chairman and Non- Executive Director Appointed Independent Non-Executive Director in July 2010 and Chairman in August 2018. Committee and other Group Roles Chair of the Nomination & Governance Committee. Member of Group Transformation Oversight Committee. Experience Patrick is a Chartered Accountant with a successful track record spanning 30 years across a range of domestic and international businesses. Prior to joining Bank of Ireland, Patrick served as Chief Executive Officer of Paddy Power plc and also held executive and non-executive roles in that company. Before this, Patrick held the position of CFO at Greencore Group plc and also worked in various senior strategic and corporate development roles. He has previously held roles with KPMG Corporate Finance in Ireland and the Netherlands, with McKinsey & Company in London, Dublin and Amsterdam, and as a Non-Executive Director of Elan Corporation plc and ASOS plc. He is currently Chair and Non-Executive Director of CarTrawler. Patrick holds the role of Honorary Treasurer of the Irish Rugby Football Union and is a Patron of Chapter Zero Ireland. Richard Goulding Deputy Chair and Senior Independent Director Appointed Independent Non-Executive Director in July 2017. Appointed Deputy Chair and Senior Independent Director in January 2021. Committee and other Group Roles Member of the Audit Committee, the Nomination & Governance Committee, the Risk Committee and the Group Transformation Oversight Committee. Chair of the Remuneration Committee of J&E Davy. Experience Richard is a Chartered Accountant with an extensive international track record of risk management and executive experience. Prior to joining Bank of Ireland, Richard held the role of Group Chief Risk Officer and Director at Standard Chartered Bank, where he was a member of the Group Executive Committee, having previously held the role of Chief Operating Officer, Wholesale Banking Division. Richard is a former Director of Citigroup Global Markets Limited where he served as Chair of its Audit, Remuneration and Nomination committees. He previously held senior executive positions with Old Mutual Financial Services in the U.S., UBS Warburg / SBC Warburg in London and Switzerland, Astra Holding plc, Bankers Trust Company, and the Midland Bank Group. He holds Non- Executive Director positions in Zopa Group Limited and Zopa Bank Limited. Richard is a member of Council and Chair of the Finance and General Purposes Committee in the Royal College of Music. He also is a member of the Business Strategy Committee in the Global Risk Institute. Myles O'Grady Group Chief Executive Officer and Executive Director Appointed Group Chief Executive Officer and Executive Director in November 2022. Experience Myles is a highly experienced leader with excellent delivery capabilities. He has extensive local market knowledge and deep experience of working with a range of stakeholders including customers, colleagues, investors and regulatory authorities. His experience encompasses strategy development, business restructuring and recovery, M&A, organisational transformation and investor relations. In a career spanning more than 30 years, Myles has worked nationally and internationally in senior roles in retail, business and investment banking, including Citibank, AIB and Dresdner Kleinwort Benson. Myles was appointed BoI Group Chief Financial Officer in 2019 and was also appointed Group Non-Executive Director of Bank of Ireland (UK) plc and New Ireland Life Assurance Company plc. As Group Chief Financial Officer, Myles played an integral role in the development and execution of the Group's strategy, including the successful acquisitions of Davy and the KBC Ireland portfolios. Myles is a Fellow of the Chartered Association of Certified Accountants, an INSEAD certified board director and a member of the Institute of Directors Ireland. Your Board (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 82 Giles Andrews Independent Non- Executive Director Appointed Independent Non-Executive Director in November 2020. Committee and other Group Roles Chair of the Group Transformation Oversight Committee. Member of the Remuneration Committee, the Risk Committee, and the Group Sustainability Committee. Experience Giles possesses in-depth experience in financial technology, investment, and lending, in addition to strong management experience. He received a Master’s Degree in Experimental Psychology from Christ Church at Oxford University and an MBA from INSEAD. Prior to joining Bank of Ireland, Giles co-founded Zopa, the first ever online peer-to-peer lending marketplace. In 2020, Zopa also launched a Digital Bank. Giles held a number of senior positions with Zopa including Chief Executive Officer and Chairman. He currently remains a member of Zopa Group Board and Zopa Bank Board. He was previously Non-Executive Director of Market Finance Limited, a FinTech platform that provides working capital finance to small businesses in the UK. Giles serves as a Non-Executive Director and Chairman on the board of Carwow Limited, a platform for buying new cars from franchised dealers. Most recently, he was appointed as an Independent Non-Executive Director of C. Hoare & Co, the UK’s oldest privately owned bank. Giles was awarded an OBE in 2015 for his services to financial services. In 2016, Giles was named FinTech leader of the year at the FinTech Innovation Awards. At present, he is an Advisor to the fund at Northzone Ventures, a venture capital fund. Akshaya Bhargava Independent Non- Executive Director Appointed Independent Non-Executive Director in January 2024. Committee and other Group Roles Member of the Risk Committee and Group Transformation Oversight Committee. Experience Akshaya is a Banking and Wealth Management professional, with extensive experience across fintech, wealth management, broader international financial services, technology innovation and change. Akshaya spent 22 years at Citibank in a variety of senior roles in different countries and more recently, was Global CEO for Barclays Wealth and Investments. He was previously the founding CEO of Infosys BPO (formerly known as Progeon Ltd.) and has founded a number of companies, including Bridgeweave, a fintech firm that uses AI models to provide institutional quality investment ideas to self-directed equity investors, where he currently serves as Executive Chair. Akshaya has previously served as a director on the boards of Wealthify Group Limited, Mindtree Limited, Barclays Asset Management Limited, Vahanna LLC, and Avendus Wealth Management. Akshaya holds an MBA in Finance and Marketing from the Indian Institute of Management Calcutta and BA (Hons) in Economics from Pune University in India. Evelyn Bourke Independent Non- Executive Director Appointed Independent Non-Executive Director in May 2018. Committee and other Group Roles Chair of the Audit Committee. Member of the Nomination & Governance Committee, Risk Committee and the Group Sustainability Committee. Experience Evelyn has a strong track record in global executive management, including extensive experience in financial services, risk and capital management, and mergers and acquisitions. She is a Fellow of the Institute and Faculty of Actuaries and received an MBA from the London Business School. Previously, Evelyn served as Group Chief Executive Officer of Bupa, the international health insurance and health care group. She joined Bupa as Chief Financial Officer from Friends Life Group, where she had been the Chief Executive Officer of the Heritage Division. She served as Non-Executive Director and Risk Committee Chair with IFG plc, Dublin. Evelyn’s early career was spent in the UK at Standard Life plc, Chase de Vere Financial Solutions, St. James’s Place plc, Nascent Group, Tillinghast Towers Perrin and in Ireland with Bank of Ireland and New Ireland Assurance. Currently, Evelyn is a Non-Executive Director and Senior Independent Director with AJ Bell plc and a member of its Audit, Nomination, Risk and Compliance committees. She is a Non-Executive Director, Audit Chair, and a member of the Nomination Committee with Marks and Spencer Group plc. Evelyn is a Non-Executive Director and Remuneration Committee Chair of Admiral Group plc. She is a member of The Investment Committee of The Athenaeum Club and served as a director on the board of The Ireland Fund of Great Britain. Your Board (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 83 Ian Buchanan Independent Non- Executive Director Appointed Independent Non-Executive Director in May 2018. Committee and other Group Roles Chair of the Group Remuneration Committee. Member of the Group Transformation Oversight Committee and Risk Committee. Non-Executive Director and Member of the Risk Committee of Bank of Ireland (UK) plc. Experience Ian possesses diverse experience in the areas of technology, digital, business transformation and customer operations gained through his work in a number of international retail, commercial and investment banks. Ian holds a Bachelor of Science degree in Physics from the University of Durham. Prior to his role in Bank of Ireland, Ian held the roles of Group Chief Information Officer for Barclays plc and Chief Operating Officer for Barclaycard. Previously, he was Chief Information Officer for Société Générale Corporate and Investment Banking. He was a member of the Public Board and Group Manufacturing Director of Alliance & Leicester plc. He is a former member of the Executive Committee of Nomura International and was Chief Operations and Technology Officer of Nomura International. Ian’s early career was spent at Credit Suisse, Guinness, and BP. Ian is a Senior Advisor to Cerberus Capital Management. Eileen Fitzpatrick Independent Non- Executive Director Michele Greene Independent Non- Executive Director Appointed Independent Non-Executive Director in May 2019. Committee and other Group Roles Chair of the Group Sustainability Committee. Member of the Audit Committee, Nomination & Governance Committee, and Remuneration Committee. Workforce Engagement Director Non-Executive Director and Chair of the Risk & Compliance Committee of J&E Davy. Experience Eileen, a Capital Markets professional, has extensive experience at Senior Executive, Board and Governmental level in financial markets. She is a graduate of University College Dublin where she received a PhD in Science. Prior to joining Bank of Ireland, Eileen held multiple Senior Director positions, including as Chief Executive Officer of AIB Investment Managers and Director of the National Treasury Management Agency (NTMA), where she oversaw the Alternative Assets Investment Programme, for the National Pensions Reserve Fund. Subsequently, she was appointed Director of NewERA at the NTMA which provides financial advice to Government on the Commercial State sector. In her early career, Eileen held a number of senior roles in stockbroking including Goodbody Stockbrokers. She is a Non-Executive Director with a number of KKR companies in Ireland and serves as Chair of the Remuneration Committee for KKR Credit Advisors (Ireland). She is a Non-Executive on the board of Sherry FitzGerald Group Ireland Holdings where she is Chair of the People and Culture Committee. Eileen previously served as the Chair of the Outside Appointments Board, Department of Public Expenditure and Reform. Appointed Non-Executive Director in December 2019. Committee and other Group Roles Chair of the Risk Committee. Member of Audit Committee, Group Transformation Oversight Committee, and the Group Sustainability Committee. Non-Executive Director and Chair of the Nomination Committee of J&E Davy. Experience Michele is a Chartered Accountant and an experienced business executive and finance professional, operating at executive management and board level. She received a BSc (Mgmt) and MA from Trinity College Dublin. Prior to joining Bank of Ireland, Michele held several senior roles with Virgin Money’s Digital Bank, including Managing Director, 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. She also served as Chief Financial Officer of MBNA Europe, where she held executive positions on the board of MBNA Europe Limited and Premium Credit Finance Limited. Michele’s early career was spent at Goldman Sachs, Credit Lyonnais and KPMG. Michele is currently an Executive Director of Mololo Limited and a Non-Executive Director of East End Fair Finance Limited and Vanquis Banking Group plc. Your Board (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 84 Mark Spain Group Chief Financial Officer and Executive Director Appointed Group Chief Financial Officer and Executive Director in March 2022. Committee and other Group Roles Group Non-Executive Director of Bank of Ireland (UK) plc. Experience Mark has over 25 years of experience as a finance professional, having qualified as a Chartered Accountant in 1994. He received a Bachelor of Commerce (Accounting) Degree and a Diploma in Professional Accounting from University College Dublin. Mark is a strategically adept leader, with a track record of leading multi-functional teams to successfully deliver significant and positive commercial outcomes. He joined the Group in 1998 as a Director in IBI Corporate Finance, an M&A advisory boutique. He became Director of Group Investor Relations in 2013, followed by Director of Group Finance in 2016. In 2019, he was appointed Chief Strategy Officer and member of the Group Executive Committee. Prior to joining the Group, Mark worked in Diageo plc’s M&A team and KPMG. Margaret Sweeney Independent Non- Executive Director Appointed Independent Non-Executive Director in October 2023. Committee and other Group Roles Member of the Audit Committee and Remuneration Committee. Experience Margaret is a Fellow of Chartered Accountants Ireland and a Chartered Director with Institute of Directors. She is an experienced CEO and has held many Board Director roles across listed and non listed companies operating in different industry sectors in Ireland and internationally, including financial services. She is currently CEO and an Executive board director of Irish Residential Properties REIT plc since 2017, having joined the board as a Non-Executive director in 2016. She is Chair of Dublin City University Business School Industry Advisory Board. Margaret previously served on the Board of Dalata Hotel Group plc for nine years to 2023, was Senior Independent Director and Chair of the Remuneration Committee. She was Chair of the Board of Irish Institutional Property as well as the boards of HSBC Institutional Trust Services (Ireland) DAC, Bramshott Capital Funds, Invention Investment Ireland Funds, and Galway University Foundation, among other board positions. She also served as the President of the Dublin Chamber of Commerce. Margaret has a degree in Commerce from University College Galway (now NUIG) and was awarded the National University of Ireland Galway 2009 Alumni Award for Business, Public Policy and Law. Steve Pateman Independent Non- Executive Director Appointed Independent Non-Executive Director in September 2018. Committee and other Group Roles Member of the Audit Committee and Risk Committee. Non-Executive Director of Bank of Ireland Mortgage Bank u.c. Experience Steve is an experienced banker, advisor and Board Director, with a strong track record of building and rebuilding businesses. Prior to joining Bank of Ireland, Steve was the Chief Executive Officer of Shawbrook Bank and, subsequently, of Hodge Group. Steve chaired the Advisory Board of Arora Group and served as Chief Executive Officer. Previously, he worked with Santander UK, where he held the roles of Executive Director and Head of UK Banking with responsibility for Santander’s corporate, commercial, business and retail banking operations, as well as wealth management. Steve held several senior positions at Royal Bank of Scotland and NatWest and was a Director of The Mortgage Lender Limited. Steve was elected President of the Chartered Banker Institute, 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. Steve previously served as Chief Executive Officer and Executive Director of StreamBank plc. He is currently a Non-Executive Director for Affordable Housing & Healthcare Investment Management Limited. Your Board (continued) 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 Non-Executive Director (NED), he registered service of nine years on the Board in July 2019. As set out in the Annual Reports for 2019-2022, the Board’s consideration of Patrick’s continued strength of leadership was outlined against the backdrop of the UK Code recommendations, along with details of shareholder consultation on his continued tenure and the positive outcome of shareholder votes on his recommended re-election at each Annual General Meeting (AGM). In the 2022 Annual Report, we reported on the Board’s careful consideration of the implications of the UK Code and its view that Patrick’s tenure should be extended to 2024 to allow his services to be retained in the best interests of the Company and its shareholders, and subject always to annual performance assessments and the annual re-election by shareholders at the Company's AGM. The Board established a sub-committee, chaired by the SID, to lead the process through which an appropriate successor to Patrick would be identified. Given the nature and importance of the role to the Group, and to ensure an extensive and robust process, two external third-party firms have been engaged in that work during 2023 and the process continues into 2024. A further update on the process will be made at the appropriate juncture. The two firms that have been engaged in the process are Egon Zehnder and Spencer Stuart, each of whom are global search and leadership consulting firms who are used by the Group on occasion for Board or executive searches. Neither firm has any connection with the Company other than in a recruitment capacity. The Board considers that Patrick continues to be a committed and highly effective Chairman, who provides strong leadership to the Board. He continues to promote diversity and constructive challenge amongst Board members and has reinforced relationships with the Group's stakeholders. 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. His commercial skills and the knowledge he has acquired of banking are unique in an Irish-based director. Patrick’s performance remains at a consistently high level and his continued effectiveness has once again been affirmed through the annual effectiveness review process, the outcome of which was considered by the Board in January 2024. As such, the Board considers it appropriate for Patrick to remain in role for a further period and will be recommending his re-election at the 2024 AGM to allow his services to be retained in the best interests of the Company and its shareholders, pending the appointment of a successor via the active process and a reasonable handover period. A market notation via Regulatory News Services (RNS) will issue at the appropriate juncture in the process. Board Committees The Board is assisted in the discharge of its duties by a number of Board Committees, whose purpose it is to consider, in greater depth than would be practicable at Board meetings, matters for which the Board retains responsibility. Each Committee operates under terms of reference approved by the Board. Appropriate cross-membership of key Board Committees, including between the GAC and BRC, and GRC and BRC, is ensured. The N&G formally reviews the composition and purpose of the Board Committees annually on behalf of the Board. The minutes of all meetings of Board Committees are circulated to all Directors for information and are formally noted by the Board. Papers for all Board Committee meetings are also made available to all Directors, irrespective of membership. The Chair of each Board Committee reports to the full Board on the key considerations of each Committee meeting. Such circulation of minutes and papers and the Chair reports are restricted should there be a conflict of interest or issues of personal confidentiality. The terms of reference of the GAC, the BRC, the N&G, the GRC, the GTOC and the GSC are available on the Group's website: www.bankofireland.com/about-bank-of-ireland/corporate- governance/court-committees. The GTOC has a mandate to support the Board in overseeing, supporting, and challenging the actions being taken by management in relation to the execution of the Group’s strategic transformation, focused on technology related change. As the Group pivots towards a more customer-focused, digital banking model, with greater levels of customer digital engagement and automation of servicing and processes, the Committee oversees the step change required in the Group’s business and technology practices alongside changes required to optimise digital skills, organisational models and ways of working in order to deliver the right customer experience, systems, and processes to deliver the desired outcomes. The GSC has a mandate to support the Board in overseeing the Group’s performance as a responsible and sustainable business and in delivering the Group’s Sustainability strategy, in order to achieve the Group’s purpose. Both GTOC and GSC have appropriate common membership in place with each of BRC and GAC. In carrying out their duties, Board Committees are entitled to take independent professional advice, at the Group’s expense, where deemed necessary or desirable by the Committee Members. Reports from the GAC, the BRC, the N&G and the GRC are presented on pages 98 to 118. Board composition and succession The Board comprises twelve Directors: two Executive Directors, the Chairman, who was independent on appointment, and nine independent NEDs. The biographical details of each of the Directors, along with each of their individual dates of appointment, are set out on pages 81 to 84. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 85 Your Board (continued) The Board considers that a board size of ten to twelve Directors allows for a good balance between having the full range of skills necessary on the Board and to populate its Committees and retaining a sense of accountability by each Director for Board decisions. The Board acknowledges that this number may go below ten or beyond twelve for a short term as may be required to accommodate succession planning activities and to ensure the timely induction and development of new Directors. The N&G ensures a formal, rigorous and transparent procedure when considering candidates for appointment to the Board and maintains continuous oversight of the Board’s composition to ensure it remains appropriate and has regard for its purpose, culture, major business lines, geographies, risk profile and governance requirements. Both on an individual and a collective basis, the Directors are considered to have the range of skills, understanding, experience and expertise necessary to ensure the effective leadership of the Group and that high corporate governance standards are maintained. The N&G leads the process for appointments to the Board and ensures plans are in place for orderly succession to both the Board and Executive positions. In 2023, the Board reviewed its skills, knowledge and experience and found it to be collectively suitable. The Board reviews its collective suitability at least annually, and with each change in membership. The process has regard for the impact of expected retirements of Directors and the Group’s strategic direction. As part of the process, the N&G approves a detailed role profile, based on its analysis of the skills and experiences needed and selects an external search firm to facilitate the process. The N&G ensures that a comprehensive due diligence process is undertaken, which includes the candidate’s self- certification of probity and financial soundness, external references and external checks. The due diligence process facilitates the N&G in satisfying itself as to the candidate’s independence, fitness and probity, and capacity to devote sufficient time to the role before making a formal recommendation to the Board. Regulatory assessment and formal approval is required and received for all Board appointments. A Board-approved Policy for the Assessment of Directors, which outlines the Board appointment process, is in place, and is in accordance with applicable joint guidelines issued by ESMA and the EBA. With the introduction of the Central Bank (Individual Accountability Framework) Act 2023, the Board received a briefing on the Framework, including the Common and Additional Conduct Standards that came into effect on 29 December 2023 and approved a number of new and refreshed policies to ensure adherence to the Framework and the Common and Additional Conduct Standards by the Board and the wider Group. Throughout 2023, the Board provided oversight of the implementation of the Framework in the Group to ensure good governance of the process. The Board and its Committees perform their duties in alignment with the Framework and the Common and Additional Conduct Standards. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 86 Your Board (continued) Diversity The Board is fully committed to diversity in all forms and believes that diversity is an essential ingredient of sound decision-making. The Board’s approach to diversity in all its forms is set out in the Board Diversity Policy which has retained the specific gender target of maintaining a minimum of 40% female representation on the Board. The Policy was enhanced to reflect the commitment to ensure the inclusion of at least one Director that is from an ethnic minority, which has been met, and the appointment of a female to one of the four senior Board roles of CEO, CFO, Chairman and SID. While not yet achieving all diversity targets, the Board’s searches for new Independent Non-Executive Directors (INEDs) has included a focus on growing the Board’s profile in relation to all aspects of diversity. We intend to make further progress on our diversity targets through our current INED and Chair searches. The Board is committed to the application of recruitment and selection criteria that are explicitly informed by the relevant targets for ethnic minority and female representation. No. of Board members % of the Board No. of senior positions on the Board No. in Executive management % of Executive management Men 8 67% 4 8 67% Women 4 33% - 4 33% White British or other white (incl. minority white groups) 11 92% 4 12 100% Asian/Asian Irish 1 8% - - - Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 87 Qualifications Science 18% Accountant 50% Inst. of Banking 8% Economics & Finance 8% IT Professional 8% Actuary 8% Board Executive Directors 17% Non-Executive Directors 83% Europe 100% Age Range International Experience 60-69 33% 50-59 67% Asia 25% Americas 33% Africa 8% MENA 25% Australia 8% Your Board (continued)Diversity The Board’s Professional Development and Continuous Education Programme On appointment, new Directors are provided with tailored and comprehensive induction programmes to fit with their individual experiences and needs, including the process for avoiding or managing conflicts. Thereafter, we seek to ensure that all Board members receive appropriate training, both individually and collectively, throughout their time on the Board. The approach taken to the Board’s Professional Development and Continuous Education Programme is as follows: • 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 is 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 are 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 N&G; and • 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. During 2023, an internal effectiveness review was conducted with positive conclusions regarding the effectiveness of the Board. An external evaluation was carried out the previous year and will continue to be conducted every three years. The internal review included effectiveness questionnaires in relation to the Board and its Committees, which were completed by members and standing attendees, and was complemented during 2023 with a wider Board Perception Review process involving senior Group colleagues. The outcome of the 2022 review was reported in the 2022 Annual Report and a report on progress against opportunities identified for improvement in 2022 is set out below. Further details on the 2023 review can be found on page 77. Chairman The performance of the Chairman was also assessed through the internal evaluation process. Led by the SID, the Board met to discuss the Chairman’s performance, in his absence. The SID subsequently provided an update on the positive outcome of the review to the Chairman. Patrick Kennedy is considered to continue to be a highly effective Chairman and to provide very strong leadership to the Board. The Board confirmed its continued support for Patrick Kennedy and his continuation in office, pending the appointment of a successor, including his proposal for re-election at the 2024 AGM. Further details on the Chairman’s tenure can be found on page 85. Individual Directors In addition to the internal evaluation process, 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. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 88 Education and Development Session delivered in 2023 The following were in focus during development and education sessions facilitated during the year. These sessions were facilitated, as appropriate, by internal and / or external subject matter experts and advisors: • Remuneration trends, • Wealth and Insurance, • Irish Mortgage Market, • Economic Outlook, • Culture, Inclusion and Diversity, • Model Risk, • Anti-Money Laundering and Counter Terrorism Financing, • Chat GPT / Artificial Intelligence, • Environmental, Social and Governance, • Market and Regulatory Developments, • RAROC, • The capital adequacy assessment process, • External / Competitive Landscape, • Cyber Security, • Corporate Governance requirements, • Individual Accountability Framework, including the Common and Additional Conduct Standards, In addition to training provided by the Group, individual Directors undertook external development opportunities that covered a wide breath of topics relating to finance, investment management and wealth, digital, cyber, diversity, environmental and social governance, governance and remuneration. Your Board (continued) The Chairman assessed each Director as being fully effective, with all Directors demonstrating strong commitment to their role, noting that during 2023 their contributions continued to be important to the company’s long-term sustainable success. 2023 Conclusion A consolidated report on the findings of the full evaluation process was presented to the Board in January 2024. 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 2023 include the strong leadership of the Chairman, the Board’s diligence and commitment, open dialogue, the strength and breadth of the Board's collective skillset and expertise. The Board evaluation also identified the following areas for focus and continued enhancement: • the incorporation on the Board agenda of even more forward-looking matters, including market and competitive evolution and related threats; • the quality of meeting materials to ensure that content remains focused, clear and precise; and • opportunities for NEDs to engage with a wider cohort of senior colleagues outside formal meetings. Progress against the 2022 Board Effectiveness Evaluation The Board continued to monitor and make progress across the following areas identified for enhancement arising from the 2022 effectiveness review: • finding the right balance of challenge and support; • simplifying the operating mechanism; • bringing further external and customer focus to bear; and • further focus on a longer time horizon. The Board is cognisant of ensuring continued focus on these areas into 2024, with enhanced focus on those aforementioned areas identified following the 2023 review. Board Focus in 2023 The Board held 10 meetings during the year ended 31 December 2023. Further details on the number of Board and Committee meetings and attendance by individual Directors are set out on page 119. 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 2023: Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 89 Regular updates • Chairman’s activities. • CEO's activities and key areas of focus. • Business and financial performance. • Organisational Scorecard Performance. • Risk Management. • Regulatory and legal matters. • Board Committee activities. Financial • Results and Accounts. • Distribution Policy. • Impairments. • Funding and Liquidity Policy. • Capital and Liquidity Policy. • Financial and investment plans. • Cost and Efficiency. Risk management • Regulatory interactions. • Group Risk Appetite Statement. • Risk Policies and Frameworks. • Group Risk Framework. and associated policies and standards. • Group’s Remuneration Policy. • Group Recovery Plan. • Geopolitical events and the wider macro economy. • Non-financial risk. • AML and combating of financing of terrorism. • The Group Control environment and conduct risk. • The high inflation rate environment. • Risk Mitigation Plan action progress updates and approval requests. • Process improvement / operational risk. • Technology, including lessons learned from the August 2023 ATM IT incident. Governance • Key Board Governance policies and terms of reference. • Subsidiary Governance framework. • CEO and CFO performance and succession. • Board renewals, appointments and succession. • Board, Committee and Individual Directors Effectiveness. • Appointments / Endorsements of Material Risk Takers (MRTs) and Key Function Holders (KFHs). • Subsidiary oversight. • Tracking of agreed actions. • AGM and resolutions. Culture and values • The Group's Culture Programme. • Colleague engagement. • Talent and capability. • Customer efforts scores and net promoter score. • Financial wellbeing. Environment / External Insights • External / competitive landscape. • Investor relations. • Macroeconomic environment. • Stakeholder engagements. • Environmental, social and governance, including Group's Sustainability Strategy, Financial Wellbeing, and progress relative to UNPRB Commitments. Strategy • 2023 - 2025 Group Strategy. • External and internal assumptions underpinning the 2023 - 2025 Group Strategy. • Technology and Digitisation. • Emerging threats. • Transformation. Your Board (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 90 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’s Risk Management 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 134 to 182. 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 has adopted the role of SID and deputises for the Chairman as required. 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 other Directors. Role of the Independent Non-Executive Director During the year the Chairman and the NEDs met without the Executive Directors present, to discuss a range of business matters. The NEDs (including the Chairman and the Deputy Chairman) bring independent challenge and judgement to the deliberations of the Board through their character, objectivity and integrity. Executive Directors Executive Directors have executive functions in the Group in addition to their Board duties. The role of Executive Directors, led by the Group CEO, is to propose strategies to the Board and, following challenging Board scrutiny, to execute the agreed strategies to the highest possible standards. Role of the Group CEO The Group CEO is responsible for execution of the approved strategy, holds delegated authority from the Board for the day-to- day management of the business and has ultimate executive responsibility for the Group’s operations, compliance and performance. Procedures are in place to review the Group CEO’s contract at least every five years. Matters Reserved for the Board While arrangements have been made by the Directors for the delegation of the management, organisation and administration of the Group’s affairs, certain matters are reserved specifically for decision by the Board. The schedule of matters reserved for the Board is reviewed at least annually to ensure that it remains relevant and to reflect any enhancements required under evolving corporate governance requirements and industry best practice. The Directors have access to the advice and services of the Group Secretary, who advises the Board on matters relating to governance, ensuring good information flows and comprehensive practical support for Directors. She maintains the Group’s Corporate Governance Framework and communicates with shareholders as appropriate, ensuring due regard is paid to their interests. The Group Secretary provides dedicated support for Directors on any matter relevant to the business on which they require advice separate from or additional to that available in the normal Board process. Both the appointment and removal of the Group Secretary is a matter for the Board as a whole. The Directors also have access to the advice of the Group General Counsel and to independent professional advice, at the Group’s expense, if and when required. Committees of the Board have similar access and are provided with sufficient resources to undertake their duties. The Group has in place Directors’ and Officers’ liability insurance in respect of legal actions against its Directors. Your Board (continued) Stakeholder Engagement Board understanding of views of major shareholders To facilitate the Board’s understanding of the views of major shareholders, Directors receive an investor relations update from management at all scheduled Board meetings. The content of this update is varied, based on recent investor activities, but typically includes market updates, details of recent equity and debt investor interactions, share price and valuation analysis, analyst updates, and share register analysis. All Directors are facilitated to ensure that they are informed of the views of investors and analysts. The Chairman meets at least annually with a number of major shareholders to discuss governance matters, delivery of strategic priorities and progress in delivering transformation. The Chairman and / or the SID are available to all shareholders if they have concerns that cannot be resolved through the normal channels. Institutional equity investors and analysts Communication with shareholders is given high priority. One of the responsibilities of the Chairman is to ensure effective communication with shareholders and to ensure that Directors develop an understanding of the views of major investors. Group Investor Relations has primary responsibility for managing and developing the Group’s external relationships with existing and potential institutional equity investors and analysts. The Group has an active and well-developed Investor Relations programme, which involves regular meetings by Executive Directors, selected Senior Executives and Group Investor Relations and other authorised officers with the Group’s principal institutional shareholders, other investors, financial analysts and brokers. During 2023, c.500 such meetings and presentations were held. All meetings are conducted in such a way as to ensure that price sensitive information is not divulged. A dedicated Investor Relations section of the Group website provides access to relevant information, including presentations, publications and public announcements. Retail shareholders The Group Secretariat and Corporate Governance team, supported by the Group’s Registrar, Computershare Investor Services (Ireland) Limited (‘Computershare’), maintains the Group’s share register, engages with retail shareholders and delivers the Group’s AGM and Extraordinary General Meetings (EGMs) as required. With the assistance of Computershare, the Group addresses shareholder queries and, through its online facilities, enables shareholders to view their portfolio and amend their information securely. Annual and Extraordinary General Meeting The AGM provides an opportunity for shareholders to hear directly from the Board on the Group’s performance and strategic direction. The general aim of the Board is to make constructive use of the AGM and shareholders are encouraged to participate in the proceedings. Questions are invited from shareholders in advance of the AGM, and a substantial part of the agenda of the AGM is dedicated to responding to shareholder questions. A ‘Help Desk’ facility is provided by the Group’s registrar to assist shareholders to resolve any specific queries that they may have in relation to their shareholding. The 2023 AGM was held on 23 May 2023 in the O’Reilly Hall, UCD, Belfield, Dublin 4. At the 2023 AGM, separate resolutions were proposed on each substantially separate issue and voting was conducted by way of poll. The results of every general meeting, including details of votes cast for, against and withheld on each resolution, are posted on the Group’s website and released to Euronext Dublin (formerly the Irish Stock Exchange) and the London Stock Exchange. As soon as the results of the 2023 AGM were calculated and verified, they were released to applicable exchanges, as set out above, and were made available on the Group’s website. At the 2023 AGM all resolutions passed, with all resolutions receiving between 86.98% and 100% approval. In line with the Group’s policy to issue notice of the AGM 20 working days before the meeting, notice of the 2023 AGM was circulated to shareholders on 19 April 2023. It is usual for all Directors at the time of the AGM and any EGM to attend. All members of the Board attended the 2023 AGM. The 2024 AGM is scheduled to be held on 23 May 2024. Shareholders who will be unable to attend on this date are encouraged to submit queries and vote in advance to ensure continued participation. Customers The Group’s aim is to serve customers brilliantly by being the number one bank for service and having the best brand in our target markets, including supporting our partnerships in the UK. The Board consistently reviews the strategy, receives updates on implementation and reviews progress as part of the governance process. The emphasis the Board and the Group places on the customer is further demonstrated by the creation during 2023 of a new GEC role of Chief Customer Officer. The role holder is an advocate for the customer across the entire Group and is responsible for developing a Group-wide customer strategy to help improve customer attraction, retention, and satisfaction. Enhancements to training and development, user and customer experience, and investment in technology will all be considered as part of the strategy. The Group’s approach to customer engagement and progress against customer metrics through which the experience of customers when dealing with the Bank is assessed, is a key focus for the GEC. 'Customer outcomes' is required to be a key area of focus for all formal governance across the Group. The Board receives regular updates on progress against customer metrics and reports from the Group CEO, the respective business CEOs, and, more recently, the Chief Customer Officer. In addition, its understanding of customers’ perspectives is informed by deep dives on customer themes and customer complaints, site visits by Directors to customer call centres and branches, meetings directly with customers and other customer focused tools to enable the Board to hear customer voices at first hand. The Board is acutely aware of the impact of the significant technology outage experienced in August 2023, which saw many of the online services unavailable to customers. While the Board commends colleagues and the Executive for its resolution and the efforts taken to support customers during and after the outage, focus has been applied to assessing learnings from the outage and taking the actions required to reduce the risk of such outages recurring in the future. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 91 Your Board (continued) Stakeholder Engagement (continued) Colleagues The Board receives regular updates on the progress of the Group Culture Programme and reviews the outputs from the Group’s Open View staff surveys and receives updates on progress in implementing actions in response to staff feedback. The Board pays particular attention to the Group Code of Conduct and Speak Up Policy, the effectiveness of which are reviewed by Board Committees annually. The Board strives to create an environment in which staff are encouraged to speak up where they have any concerns. During 2023, Evelyn Bourke, on behalf of the Board, actively sponsored the Speak Up Policy. During 2023, the Board met with senior colleagues from across the Group in ‘Visibility Sessions’, which form part of the annual Board programme of work which is considered and approved each year. Matters discussed with colleagues during the visibility sessions held in 2023 included the Group's hybrid working arrangements, organisational bandwidth, the senior executive accountability regime, and cost of living measures, and the external operating and competitive environment. The Board returned to site visits during 2023; site visits provide the Board with a first-hand view of the work of colleagues and the supports they provide to our customers. The 2024 Board programme of work continues to incorporate and prioritise engagement with colleagues. The Board-designated WED role enhances engagement and feedback mechanisms between the Board and the workforce and strengthens the ‘employee voice’ at the Board. The 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 experiences and inform its decision making. During 2023, as the WED, Eileen Fitzpatrick undertook a number of activities which provided valuable insights for the Board and facilitated further consideration of the workforce in Board decisions. These activities included, but were not limited to: • regular ‘Open Door’ sessions with groups of colleagues drawn from various businesses and divisional teams, and branch visits during which a number of items were discussed including resourcing, remuneration, hybrid working and colleague wellbeing; • listening sessions with various representative groups; • engagements with Industrial Relations and the UK Partner’s Council, including on remuneration; • deep dives into the Irish Banking Culture Board reports; and • deep dives on the Open View survey results and Speak Up and Wellbeing surveys. With the planned change in the WED role during Q1 2024, the terms of reference, operations and future areas of focus of the role will be reviewed, in conjunction with Eileen, to leverage Eileen’s experiences and to ensure continued evolution of the role and that the right insight continues to be gained from colleagues to support and better inform the Board when taking decisions. 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, Bank of England (BoE), 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, business performance, and culture. The Chairman and Group CEO update the Board on their meetings with regulators and government representatives at each Board meeting. Management provide regular briefings to the Board on regulatory engagement and correspondence which ensures that the Board remains aware of regulatory expectations and areas of focus. Society The communities where the Group has a physical presence, where colleagues live and work, as well as other local and global groups and partners are the places where the Group’s work touches the wider society. The Group delivers positive societal impact in a number of different ways. Through investment in Financial Literacy programmes, our United Nations Principles of Responsible Banking commitments and our support for sport through wide- ranging rugby sponsorship, the Group works continuously to enable society to thrive. The Group channels philanthropic societal investment through the Begin Together initiative to deliver direct impact to the communities where we live and work. Begin Together supports future-facing projects that engender positive change for society with a specific focus on vulnerable groups. Working with partners Community Foundation Ireland the Group funded 20 community projects in 2023. Initiatives received up to €45,000 each for projects that ranged from financial literacy and wellbeing, mental health, inclusion and diversity, to helping people with disabilities, migrants and refugees, the Travelling community and more. In collaboration with Business to Arts, the Bank of Ireland Begin Together Arts Fund continued the Group's legacy of supporting the arts community by investing in a number of important community projects bringing the arts to vulnerable groups. In addition, over 600 donations were made on behalf of colleagues across the Group to charitable causes and not for profit organisations that matter to them, bringing Bank of Ireland's investment in wider society closer to home for our colleagues. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 92 Your Board (continued) 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 120 to 124. 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 principal risks are detailed at pages 135 to 142. 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 and has been in place for the year under review and up to the date of approval of the Annual Report. 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. Information regarding the main features of the internal control and risk management systems is provided within the risk management report on pages 134 to 182. 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 are regularly reviewed by the Board, along with 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. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 93 Your Board (continued) 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 the CRD V. They have been in place for the year under review and up to the date of approval of the annual report. The Group continues to work towards compliance with the Basel Committee on Banking Supervision 239 (BCBS 239) risk data aggregation on 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 2023 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. Both the Conflicts of Interest Policy and Group Code of Conduct were reviewed in 2023 to align fully with the Individual Accountability Regime, including the Common and Additional Conduct Standards. 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 2023, all Directors were within the Directorship limits set out for significant institutions under CRD. During 2023, the time commitments for Committee chairing roles were reviewed and specific time commitments were allocated to each role to ensure that Directors holding those roles have sufficient time to fulfil the duties of the role. 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. Certain NEDs, such as the Deputy Chairman, 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. A number of Directors took additional external roles during 2023 following receipt of the requisite approvals. Details of Directors external roles can be found on pages 81 to 84. The Group has an obligation to report the reasons for permitting significant appointments. The following appointments which took place in 2023 are considered significant in terms of additional external appointments and were duly considered by the Board. • Michele Greene: appointment as NED of Vanquis Banking Group plc (formerly Provident Financial Plc) (March 2023); and • Fiona Muldoon: appointment as Non-Executive Director and Chair of Sretaw Unlimited Company (Sretaw 1) (May 2023); appointment as NED and Chair of Sretaw 3 Unlimited Company. In considering whether to approve these external roles, the N&G 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 the Director’s ability to commit the requisite time to his or her Group duties and CRD Directorship limitations. In each case, the Board was satisfied that there was no issue of concern that should impede the relevant Director from proceeding and that the roles could be managed in accordance with the Board approved policy. 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 Michele and Fiona’s appointments. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 94 Your Board (continued) Balance and Independence The Board determined that all NEDs in office on 31 December 2023 were independent in character and judgement and free from any business or other relationships with the Group which could affect their judgement. 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 N&G, 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 23 May 2023. The following Directors, being eligible, offered themselves for election and were elected at the AGM in 2023: • Giles Andrews • Evelyn Bourke • Ian Buchanan • Eileen Fitzpatrick • Richard Goulding • Michele Greene • Patrick Kennedy • Fiona Muldoon • Myles O'Grady • Steve Pateman • Mark Spain The names of Directors submitted for election or re-election are accompanied by sufficient biographical details and any other relevant information in the AGM documentation to enable shareholders to take an informed decision on their election. The 2024 AGM is scheduled to be held on 23 May 2024 and, in line with previous AGMs, all Directors will retire from office at the date of the AGM and may choose to offer themselves for re-election. Organisational structure The Group believes it has robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks to which it is or might be exposed, and appropriate internal control mechanisms, including sound administrative and accounting procedures, IT systems and controls. The system of governance is subject to regular internal review. These governance arrangements provide systems of checks and controls to ensure accountability and drive better decision-making, and also include policies and practices which ensure that the Board and its Committees operate effectively. The Group’s overall control systems include a clearly defined organisation structure with defined authority limits and reporting mechanisms to higher levels of management and to the Board, which support the maintenance of a strong control environment. Corporate and capital structure is a matter requiring Board approval. In accordance with section 225(2) of the Companies Act 2014, the Directors acknowledge that appropriate structures that are, in the Directors' opinion, designed to secure material compliance with the relevant obligations (as defined in section 225(1)) have been put in place. The Board reviews annually the corporate legal structure of the Group and any changes to the structure of the Group effected since the Board’s previous review. Group Executive Committee The most senior executive committee in the Group, the GEC, acts in an advisory capacity to the CEO and assists the CEO in the management and leadership of the Group on a day-to-day basis, making decisions on matters affecting the operations and performance of the Group’s business and the delivery of the Board-approved strategy. It is supported by a number of senior executive committees, encompassing: • Executive Risk Committee, which supports the GEC and Board in, inter alia, overseeing the material risks of the Group, taking a holistic approach to overseeing the effective management of risk (financial and non-financial) and monitoring the overall risk profile of the Group, as well as compliance with risk appetite and other approved policy limits; • Group Asset and Liability Committee, which oversees the strategic direction of the Group’s assets and liabilities and the profit and loss implications of balance sheet management actions and considers the appropriate allocation of capital, funding and liquidity and market risk resources; • Group Transformation Committee, which monitors progress on the Group’s strategic transformation agenda, encompassing culture, systems and business model initiatives, ensuring they are fully aligned with the Group’s Strategy, Purpose and Values and that all strategic transformation initiatives have clearly defined business and customer outcomes, along with appropriate mechanisms to track and report progress; • Group Data Management Board, which oversees the development of standards, metrics and tolerances for data quality with the application of an adequate data control environment to support effective management within the Group’s risk appetite; and • Announcements Committee, which, oversees compliance with the Group’s Market Abuse Regulation obligations. Summary biographical details on each of the GEC members are set out on the following page. The Committee’s purpose is to assist the Group CEO in leading the Group’s day-to-day operations and developing and leading the execution of the Group’s Strategy in line with the Group’s Purpose. The two Executive Directors, Myles O’Grady, CEO, and Mark Spain, CFO, are members of the GEC. In addition to the Group CEO and Group CFO, whose biographical details can be found on pages 81 to 84, the GEC is currently composed of the following Members: Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 95 Your Board (continued) Ciarán Coyle Chief Operating Officer Ciarán was appointed Group Chief Operating Officer in January 2024 to lead the Group's technology, digital, data, payments and change delivery. He joined Bank of Ireland from Ulster Bank / NatWest Group where he held the position of Managing Director, Retail Banking and previously served as Chief Operating Officer. Ciarán is a certified Bank Director (Institute of Bankers) and holds a Diploma in Company Direction (Institute of Directors). He is a University of Limerick graduate (BSc in Technology and Communications) and has also completed the University of Cambridge Sustainability Leadership Programme. Matt Elliott Chief People Officer Matt Elliott was appointed to the role of Chief People Officer for the Group in February 2019. He is responsible for transforming the culture of the Bank and developing a company where colleagues thrive. Prior to that he was Group People Director with Virgin Money. Under Matt's leadership, Virgin Money successfully acquired and integrated Northern Rock. Matt was part of the executive team who successfully listed the company on the London Stock Exchange, and created a company widely acknowledged to be a cultural leader in the UK. A passionate advocate for inclusion and diversity, Matt appeared as a leading ally in the Financial Times lists for gender, ethnicity and LGBT+, the first leader to appear in all three lists. Gail Goldie Chief Executive Officer, Bank of Ireland (UK) Gail was appointed Bank of Ireland (UK) CEO in January 2024 to lead the delivery of the next phase of Bank of Ireland's UK strategy. She joined bank of Ireland from Tesco Bank where she served as Chief Banking Officer, prior to which she held senior management positions in Barclays (UK) including Managing Director, Unsecured Lending and Managing Director, Premier Banking. Gail also previously held leadership roles in Santander (UK) and American Express. Gail is a graduate of the University of Warwick (BSc Management Science). Enda Johnson Chief Strategy and Transformation Officer Enda Johnson was appointed to the new role of Transformation Director for the Group in February 2022. He is responsible for driving the simplification agenda and ensuring strategy is delivered consistently across the Group. Enda is also a Group NED of BoI (UK) plc. Prior to joining Bank of Ireland, Enda was Interim CFO with Virgin Money, having previously held the role of Group Corporate Development Director for CYBG plc. Enda led the acquisition of Virgin Money by CYBG plc and broader strategic planning in the Group. Prior to Virgin Money / CYBG, Enda held a number of senior strategy, corporate development and investment banking roles at AIB, the NTMA and Merrill Lynch. Enda is a graduate of Brown University with degrees in Engineering and Economics and is a Main Board Trustee for Action for Children. Gavin Kelly Chief Executive Officer, Corporate and Commercial Gavin was appointed Corporate and Commercial CEO in March 2023. He has held a number of senior management positions in BoI since joining in 2007, including interim Group CEO from September to November 2022, and CEO Retail Ireland prior to that. He oversees the provision of banking products and services to all corporate and commercial customers, including wholesale financial services, property, project and asset- backed finance, and specialised acquisition finance. the division focuses on core markets across Ireland, the UK, France, Germany, Spain and the US. He is a Certified Bank Director and a Fellow of the Institute of Banking, and is currently director of New Ireland Assurance Company. Gavin was President of the Banking and payments Federation, Ireland from January 2019 to December 2020. Áine McCleary Chief Customer Officer Áine McCleary was appointed to the role of Chief Customer Officer in May 2023 as an advocate for the customer across the entire Group. She joined Bank of Ireland in 2000 and has held a wide variety of senior roles in Global Markets and Retail Banking since then. Between 2018 and 2021, she was Director of Distribution Channels, leading a team of 3,000 colleagues serving personal and business customers across the branch, contact centre and digital channels. Most recently, Áine played a leadership role in the Group's acquisition strategy. Áine served as President of the Institute of Banking from 2018 to 2019. A business graduate of University College Dublin, she holds a Master's Degree in Business Studies from the Smurfit School of Business. She is a Certified Bank Director, a Fellow of the Institute of Banking and a NED of BoIMB. Sarah McLaughlin Group Secretary and Head of Corporate Governance Sarah joined Bank of Ireland as Group Secretary and Head of Corporate Governance in September 2019. Sarah is responsible for assisting the Chairman in establishing the policies and processes the Board needs in order to function properly, in ensuring that these are complied with, and advising the Board on all governance matters. Sarah previously held the role of Group Secretary and Head of Corporate Governance at AIB Group plc, having held a variety of roles across corporate governance, finance and private banking. Stephen Roughton-Smith Chief Risk Officer Stephen Roughton-Smith joined Bank of Ireland in December 2021 as Group CRO from Belmont Green, a FinTech-orientated mortgage lender where he was CRO. Previously he was part of the senior team which set up the risk management function at ADIA, Abu Dhabi’s main sovereign wealth fund, Deputy Group CRO at Lloyds Bank, UK CRO at ABN AMRO, and Co-Head of EMEA Structured Finance at Moody’s. Stephen started his banking career in front office roles at Bankers Trust, Merrill Lynch and Barclays Capital in trading and structured products. He has a BSc in Physics from Imperial College London, an MPhil in Physics from Cambridge University, and qualified as a Chartered Accountant with Price Waterhouse. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 96 Your Board (continued) Susan Russell Chief Executive Officer, Retail Ireland Susan has more than 20 years' experience in Financial Services both in Ireland and the UK. As CEO of Retail Ireland, Susan is responsible for over 2.2 million active customers across all segments including mass market, premier, youth and vulnerable customers. Retail Ireland's distribution channels encompass the branch network and contact centres along with a wide range of digital banking options. A full suite of retail banking products and services are offered through these channels including mortgages, loans, everyday banking, and wealth and insurance. Susan holds a Bachelor of Commerce degree and Masters in Business Studies from University College Dublin. Susan is a Group NED of New Ireland Assurance Company and a Director of the Banking and Payments Federation of Ireland. Oliver Wall Group Chief of Staff and Head of Corporate Affairs Oliver joined Bank of Ireland as Group Chief of Staff in 2017, taking on additional responsibility as Head of Corporate Affairs in 2019. He joined the Bank from HSBC, where he was Head of External Affairs UK and Europe. Oliver previously held a range of roles in both the public and private sectors, including working in the Department of the Taoiseach. Oliver represents the Bank as a Director on the Irish Banking Culture Board. Subsidiary governance The interaction between the Group Board and the boards of our strategically significant subsidiaries is closely monitored. The Chairman meets regularly with the Chairs of these subsidiaries to ensure good communication and alignment and attends a number of subsidiary board meetings during the year. The Group Board receives reports conducted on the effectiveness of these significant subsidiaries. In accordance with the Group’s Subsidiary Governance Policy, a number of the Group’s Independent NEDs serve on subsidiary boards. This enhances information flows and, where appropriate, the escalation of matters requiring Group Board attention. • Ian Buchanan is a NED on the Board of BoI (UK) plc and a member of its Risk Committee. • Eileen Fitzpatrick, Richard Goulding, and Michele Greene are Independent NEDs on the Davy Board. Eileen is the Chair of Davy’s Board Risk and Compliance Committee and a member of its Audit Committee. Richard is the Chair of the Remuneration Committee and a member of the Board Audit and Nominations Committees. Michele is the chair of the Nominations Committee and a member of the Board Risk and Compliance and Remuneration Committees. • Steve Pateman is an Independent NED on the Board of BoIMB. • Fiona Muldoon acted as an Independent NED on the Board of New Ireland Assurance Company and Chair of its Audit Committee until her retirement on 30 September 2023. Subsidiary Committee Chairs and the equivalent Group Committee Chairs also engage on their respective areas of responsibility, as appropriate. The Chairs of the established Board Audit and Risk Committees of the material subsidiaries attend and present at the Group Audit and Board Risk Committees annually to provide an account of the subsidiary Board Committees' activities in these key areas and to engage in private session with the Group Board NEDs in the absence of management. The Group Subsidiary Governance Policy is reviewed annually by the Group Secretary and triennially by the N&G and Board, with material amendments proposed by the Group Secretary following her annual review to be proposed to the N&G and Board for approval. The Policy sets out the key aspects of the Group's governance and oversight mechanisms, clear escalation routes where issues may arise to ensure they are addressed, and governance standards required of subsidiary entities. It also includes the required procedure should any party in the Group wish to set up a new Group subsidiary or entity in which the Group will have a controlling interest. The Group’s corporate simplification programme was established to remove a number of subsidiaries from the Group, thereby simplifying the corporate structure with a view to generating efficiencies, and cost savings and reducing risk. Since its inception six years ago, this programme has enabled the Group to dissolve forty-five entities. The Group’s subsidiary, BoIMB, is required to comply with the Irish Code. Due to retirements of two INEDs from the BoIMB Board (one of whom was the Chair of the BoIMB Audit Committee), following the expiration of their respective terms in office in 2022, BoIMB did not comply with the requirements in Sections 22.1 - 22.3, and Sections 7.1 and 7.2 of Appendix 1, of the Irish Code. A search process to find suitable candidates to be appointed as INEDs (including an Audit Committee Chair) to the BoIMB Board commenced in 2022 and continued through 2023, culminating in the appointments of Kevin Kingston as an INED and Audit Chair and Steve Pateman as an INED. While the BoIMB Board is now compliant with the Irish Code board composition requirements, further action is underway to address the composition of its Audit Committee, with a third INED candidate progressing through the requisite approvals processes. During 2023, the GAC ensured enhanced focus on BoIMB audit matters in the absence of a BoIMB level committee, pending restoration of compliance with the Audit Committee requirements of the Irish Code. These matters of non- compliance were reported promptly to the CBI, including the steps being taken to rectify the position. On behalf of the Board, the N&G considered the outcome of a review undertaken as to the root cause of the issues of non- compliance and agreed a number of actions for management to mitigate the risk of future non-compliance. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 97 Report of the Group Nomination & Governance Committee Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 98 Patrick Kennedy Chair Dear Shareholders, On behalf of the Group Nomination & Governance Committee (the ‘Committee’ or the 'N&G') I am pleased to introduce the Committee report on its activities for the year ended 31 December 2023. Committee responsibilities The Committee's key responsibilities include: • leading the process for nominations and renewals for Board and Board Committees as appropriate, and making recommendations in this regard to the Board for its approval; • ensuring plans are in place for orderly succession to both the Board and GEC, and overseeing the development of a diverse pipeline for succession; • considering and making recommendations to the Board in respect of the appointment of KFHs; • keeping Board governance arrangements under review and making appropriate recommendations to the Board to ensure corporate governance practices are consistent with best practice standards; and • overseeing subsidiary governance arrangements to ensure that appropriate and proportionate governance arrangements are in place for Group subsidiaries, including in relation to the composition of the Boards of the Group’s material subsidiaries. Committee membership and meeting attendance Details on Committee Members, Committee meetings and attendance at meetings during 2023 are outlined below. In addition to the six scheduled meetings, the Committee also held two ad hoc meetings to consider proposals for GEC appointments. Committee Meetings Eligible to attend Attended Patrick Kennedy 8 8 Eileen Fitzpatrick 8 8 Richard Goulding 8 71 Fiona Muldoon2 7 7 Evelyn Bourke3 6 6 1 Richard Goulding was unable to attend an ad hoc meeting due to a prior commitment. 2 Fiona Muldoon retired from the Board and the Committee on 30 September 2023. 3 Evelyn Bourke joined the Committee on 7 March 2023. Committee activities in 2023 While not intending to be an exhaustive list of the Committee’s considerations and activities in 2023, a number of areas that were subject to Committee focus during the year are outlined below. Report of the Group Nomination & Governance Committee (continued) Matters considered and action taken by the Committee in 2023 Board Composition, renewal, succession and eﬀectiveness Committee considerations The Committee continued its focus on ensuring that the Board and its members, both collectively and individually, possess the skills, knowledge and experience necessary to oversee, challenge and support management in the achievement of the Group’s strategic and business objectives. NEDs serve two three-year terms, with any appointments beyond this to be determined on an annual basis with reference to the needs of the Board and the performance and contribution of the individual. On behalf of the Board, the Committee oversaw a number of changes to Board composition, including the retirement of Fiona Muldoon and the appointments to the Board and certain of the Board Committees of Margaret Sweeney and Akshaya Bhargava. Further details on the board changes during 2023 can be found on page 77. The Committee also spent time considering other individual profiles for potential future appointment having due regard for the Board Succession Plan and the required evolution of the Board over the medium term, the Group’s strategy and the environment within which it operates. The Committee will continue to monitor the market for potential candidates for appointment to the Board in both the short and medium term, to ensure that the Board has a pipeline of credible successors and continues to be equipped to discharge its responsibilities effectively. External search firms are leveraged for Board appointments. During 2023, Board Works Ltd and MWM Consulting were engaged to facilitate board-level searches. The Committee also oversaw a number of changes to the Board Committees, including the rotation of key board roles: • during 2023, Eileen Fitzpatrick was appointed as the Chair of the Group Sustainability Committee, succeeding Fiona Muldoon on her retirement from the Board, and Giles Andrews was appointed as the Chair of the Group Transformation Oversight Committee, succeeding Ian Buchanan; • with effect from 1 January 2024, Ian Buchanan was appointed as the Remuneration Committee Chair, succeeding Steve Pateman, and Michele Greene was appointed as the Board Risk Committee Chair, succeeding Richard Goulding; and • with effect from 28 February 2024 Richard Goulding will become Group Audit Committee Chair, succeeding Evelyn Bourke and Evelyn Bourke will take up the role of WED. The Committee leads the process by which the Directors are assessed initially on appointment and thereafter to ensure continued suitability for their roles on the Board. The Committee makes a recommendation to the Board as to the continued suitability of each Director, and the Board as a collective, on the basis of the outcome of certain due diligence checks and skills assessments. This process is considered alongside the annual independence assessment and outcome of the annual effectiveness process and forms the basis on which each Director is proposed to shareholders for election or re-election each year. The Board recognises the importance of diversity, and the strengths diversity brings to Board effectiveness. Diversity is taken into account in its broadest sense when considering succession plans and appointments at both Board and senior management level, as well as more broadly across the Group. The focus on diversity at Board level continued during 2023, including as a result of the UK Listing Authority Rules. In line with the Board’s Diversity Policy, the Board remains committed to appropriate diversity at Board and senior levels to ensure we reflect the markets and societies we serve. The Board Diversity Policy is available at www.bankofireland.com/about- bank-of-ireland/corporate-governance. On behalf of the Board, the Board is committed to having a diverse Board, to achieving the targets set and to ensuring an open and fair recruitment and selection process. The Committee has regard for the targets set by the Board to (1) have a minimum of 40% female representation on the Board, with a medium-term aspiration to have broadly equal gender representation; and (2) achieve minority ethnic representation. At the end of 2023, the Board was comprised of four females and seven males, equating to 36% female representation. The appointment of Akshaya Bhargava on 12 January 2024 enhances the Board’s minor ethnic minority representation. Further information on the Board’s profile can be found on page 87. The Committee is also mindful of the expectation that a woman holds at least one of the senior Board positions of Chairman, CEO, SID or CFO. The Chairman succession process is underway, and the Committee considers succession for the other key Board roles on an ongoing basis. At the end of 2023, all those holding these senior Board positions at the Group were male. The Committee will take into account the need for greater diversity when considering candidates for appointment to these roles. The Board is committed to achieving this target over the medium term. Further details on activities to improve diversity across senior management and the wider workforce, together with representation statistics, can be found on page 76. In December 2022, the Board established a special purpose committee to oversee the Chairman succession process, under the leadership of the SID. A separate report on the Chairman's tenure and succession can be found on page 85. Committee conclusion The composition of the Board remains compliant with applicable regulations and is appropriate in the context of the nature, scale and complexity of the Group and the locations and the sectors in which it operates. Appropriate plans are in place for orderly succession to the Board. Each Director continues to be suitable to perform their roles on the Board and to bring the requisite knowledge, skills and experience, and integrity, ensuring the collective suitability of the Board. The Committee is satisfied with the appropriateness of the continued retention of Board Works Ltd MWM Consulting for Board searches in 2023 and 2024. MWM Consulting is based in London with a team who have extensive internal reach and provides board search services to the UK market. MWM Consulting has no connection with the Company other than in a recruitment capacity. Board Works Ltd provides similar services to the Irish market generally and through this work has engaged with firms associated with individual Directors on occasion. Board Works Ltd has no connection with the Company other than in a recruitment capacity. A further update on the outcome of active search and succession processes will be provided to the market at the appropriate juncture. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 99 Report of the Group Nomination & Governance Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Effectiveness Evaluation Committee considerations The Committee oversaw the design of and approach to the 2023 Board evaluation process, which considers the Board’s composition, diversity and how effectively members work together to achieve objectives. The process incorporates a review of each the Board, the board committees and individual directors. Having completed a positive external process in 2022, the 2023 process was internal, and the Committee supplemented it with a wider Board Perception Survey, gaining insights from a wider population of senior leaders to ensure the continued enhancement of the Board and its operations. The Directors are cognisant of the importance of acting with integrity, leading by example and promoting the desired culture; the addition to the process of the Board Perception Survey is intended to bring further insights into the tone being set by and the impact of the Board and will ensure its continued enhancements. A separate report on the outcome of the board evaluation can be found on page 88. Committee conclusion The Committee is satisfied with the approach to and outcome of the annual effectiveness process for 2023 and intends to continue the supplemental Perception Survey which added value to the Board and was received well by colleague participants. Executive level appointments, succession and diversity profile Committee considerations On behalf of the Board, the Committee considered a number of GEC and KFH appointments during 2023, satisfying itself as to the outcome of suitability and fitness and probity assessments, and with due regard to succession planning. The Committee also continued to monitor the gender and ethnic diversity profile of the Group and to challenge the Executive on data, progress and enhancement activities in that regard. Significant progress was made in 2023 with the Group receiving accreditation as an Investing in Ethnicity Employer, in recognition of our progress in developing an inclusive and ethnically diverse workforce. Committee conclusion The Committee supported the appointment of: • the Head of Operational Risk, who took up this role alongside an existing role in January 2023; • the CEO of Corporate and Commercial Banking, who took up his role in March 2023; • the CEO of Retail Ireland, who took up her role in July 2023; • the Chief Customer Officer, who took up her role in May 2023; • the Interim CEO of Retail UK and BoI (UK) plc, who took up his role in October 2023, pending appointment of a permanent role-holder; • the CEO of Retail UK and BoI (UK) plc, who took up her role in January 2024; and • the Chief Operating Officer, who took up his role in January 2024. A GEC succession plan is in place to ensure the orderly succession of GEC positions in the event of any departures. The Committee continues to work with the Group CEO and Group Chief People Officer to ensure the Group is positioned to respond to departures by maintaining access to and awareness of the external market and through the focused development of internal talent. The Committee considered the process to determine the appropriateness of individuals being appointed to or holding Key Function Holder roles across the Group and made recommendations to the Board in that regard. In terms of the wider Group diversity profile, the Group is targeting enhancements in gender and ethnic diversity representation across the workforce and the Committee continues to challenge the Executive in that regard. The GEC currently has 31% female representation, which is an improvement from the 25% female representation in 2022. The direct reports of the GEC have 51% female representation, which is an increase from 44% in 2022. Whilst not reaching the target of 50:50 gender appointments in managerial roles, female representation in managerial bands has increased slightly to 39%, against 38% in 2022, with the total senior female population having grown by 5% since November 2022, from 732 to 767. The Board recognises that progress is being made and that more is required, and the Committee will continue to oversee the Group’s activities to ensure progress is made in diversity and inclusion at Bank of Ireland. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 100 Report of the Group Nomination & Governance Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Group and Board level Governance Committee considerations The Committee continued to assess the Group and Board governance arrangements to ensure that they operated in line with corporate governance best practice, and, during 2023, considered and approved, where relevant: • a new Individual Accountability Framework Policy to ensure compliance with and preparedness for the newly introduced executive accountability regime; • the Group Code of Conduct; • the Annual Corporate Governance Statement of compliance with the Irish Code for filing with the CBI; • updates on Corporate Governance Developments; • the Capital Requirements Directive Compliance Statement; • Corporate Governance disclosures; • the Group’s Fitness and Probity and Suitability Assessment Policy; • the Board terms of reference and Matters Reserved for the Board; • the Committee Terms of Reference and annual calendar; • the Board Conflicts of Interest Policy; • the Director Assessment Policy; • the Board Training, Development and Induction Policy; • the Group Subsidiary Governance Policy; • the Group’s corporate structure; and • the Board Diversity Policy and progress against targets set out therein. The Committee approved changes to internal policies to ensure continued compliance with all applicable Corporate Governance requirements and best practice governance standards, including enhancements required to ensure compliance with the Individual Accountability Framework. More detail on the Group’s compliance with corporate governance requirements and practices can be found on pages 120 to 124. Subsidiary Governance Committee Considerations Subsidiary governance remained a key feature of the Committee’s agenda during 2023 and the Committee: • oversaw all appointments to the board of directors of each of the boards of the Group’s Tier 1 material subsidiaries; • received updates on the succession plans for each of the Group’s Tier 1 material subsidiaries; • considered the outcome of effectiveness evaluations conducted in relation to the boards of the Group’s Tier 1 material subsidiaries; • received updates on the activities of established nomination committees of the Group’s Tier 1 material subsidiaries via minutes of their committee meetings; • received updates on the status of compliance with the Irish Code for each of the Irish Tier 1 material subsidiaries, including updates as to the various matters leading to the non- compliance with the Irish Code requirements on board composition by BoIMB, following which a number of actions were requested by the Committee to mitigate future recurrence; • reviewed the Group’s Tier 1 material subsidiary boards’ terms of reference and matters reserved for the Board and Shareholder; and • approved updates to the Group Subsidiary Governance Policy, to provide greater clarity to all stakeholders as to the approach to and requirements of applicable regulations and best practice guidelines on both the Group and the subsidiaries. Committee conclusion The Committee is satisfied that the actions taken in response to BoIMB Board composition challenges will mitigate future recurrence of non-compliance with the Irish Code and that the Group’s subsidiary boards comprise suitable directors and have sound governance structures. The Committee’s subsidiary governance oversight activities complement the Board and Committee Chair’s regular engagements with the Tier 1 material subsidiary boards’ respective chairs, details of which are reported to the Board. For more information on the Committee’s responsibilities go to: bankofireland.com/about-bank-of-ireland/corporate- governance. The Committee reports to the Board on how it discharges its responsibilities and makes recommendations to the Board on key matters. A Committee effectiveness review was conducted during 2023 as part of the wider annual Board effectiveness evaluation process and found that the Committee continued to operate effectively. For more information on the annual effectiveness review, see page 88. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 101 Patrick Kennedy Chair of the Nomination & Governance Committee 23 February 2024 Report of the Group Remuneration Committee Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 102 Ian Buchanan Chair Dear Shareholders, On behalf of the Group Remuneration Committee (the 'Committee'), I am delighted to introduce the report on the Committee's activities for the year ended 31 December 2023. Having served on the Committee since 2018, and as Chair of the Committee since 2020, Steve Pateman completed five years on the Committee and stepped down as the Committee Chair on 31 December 2023. During his tenure, the Group passed a number of significant milestones, including the partial lifting of the remuneration restrictions, the re-introduction of variable remuneration (capped at €20,000), the introduction of gender pay gap reporting, and the oversight of a new material regulated subsidiary upon the acquisition of J&E Davy (Davy). The Committee thanks Steve for his dedication and thoughtful leadership. Having served on the committee since 1 January 2022, I am pleased to be able to succeed Steve in the role of Committee Chair, effective 1 January 2024. Committee responsibilities At a high level, the Committee is established by the Board to ensure that the Group’s remuneration policies and practices are designed to support the Group’s strategy and promote long-term sustainable success. The Committee is responsible for the oversight of Group-wide remuneration policy and has responsibility for: • overseeing the design and implementation of the Group’s overall Remuneration Policy for employees and directors, which is designed to support the long-term business strategy, values and culture of the Group, as well as to promote effective risk management and comply with applicable legal and regulatory requirements; • overseeing the operation of Group-wide remuneration policies and practices for all employees, with specific reference to Executive Directors, GEC Members, Heads of Control Functions, the Group Company Secretary and MRTs; and • performing any other functions appropriate to a Remuneration Committee or assigned to it by the Board. The partial release of the remuneration restrictions in November 2022 afforded the Board, and this Committee, greater autonomy and the ability to ensure, to a limited degree, that the Group’s remuneration policies and practices are aligned to the Group’s purpose and values, clearly linked to the successful delivery of the Company's long-term strategy and aligned to relevant legal and regulatory requirements. In that context, I was pleased that our Directors' remuneration policy received strong support at the 2023 AGM, with more than 98% of the votes cast in favour of the policy. The Group continues to engage with the Department of Finance regarding the continuing constraint on the Board's autonomy with regard to the Group's remuneration policies and, if the remaining restrictions were lifted, the Group would consider such changes and seek shareholder approval to update the existing remuneration policy, as appropriate, including the possible introduction of a market competitive variable pay scheme for Executive Directors. Committee membership and meeting attendance Details on Committee Members, Committee meetings and attendance at meetings during 2023 are outlined below: Committee Meetings Eligible to attend Attended Steve Pateman 11 11 Giles Andrews 11 11 Ian Buchanan 11 11 Eileen Fitzpatrick 11 11 Fiona Muldoon 8 8 Margaret Sweeney 3 3 Report of the Group Remuneration Committee (continued) During 2023, there were a number of Committee membership changes. Fiona Muldoon retired from the Board and the Committee on 30 September 2023. She had been a member of this Committee since 2020 and we thank Fiona for her well- considered contributions to its work over the years. On 1 October 2023, the Committee welcomed Margaret Sweeney as a new member and we look forward to working with her. In terms of planned changes in 2024, Eileen Fitzpatrick, who has been a member of this Committee since 2019, will step down from the Committee, and as WED, on 28 February 2024, when Evelyn Bourke will join the Committee and take up the duties of the WED. The Committee thanks Eileen for her contribution, considered focus on the wellbeing of colleagues throughout the Group, and dedication during a time which involved changes to the remuneration policy for our colleagues across the Group. The Committee acts independently of the Executive and is comprised of independent NEDs. On 31 December 2023, the Committee was comprised of five independent NEDs from diverse backgrounds, who provide a balanced and independent view on remuneration matters. The Committee’s composition is compliant with the requirements and provisions of the applicable Irish, UK and EBA Governance Codes and Guidelines. In order to ensure that remuneration policies and procedures are consistent with effective risk management, shared membership is in place between this Committee and the BRC via Giles Andrews, Steve Pateman and the Committee Chair, who were members of both Committees in 2023. In addition, Eileen Fitzpatrick, who serves as WED, is a member of this Committee. The Chairman, the Group CEO, Chief People Officer, Group CRO and the Head of Reward also attend meetings, as appropriate, and at the invitation of the Committee Chair. Representatives from PricewaterhouseCoopers LLP (‘PwC UK’) also attend for certain topics to provide technical support and advice to the Committee in their role as remuneration adviser, including remuneration benchmarking and market pay practices. PwC UK was appointed as remuneration adviser by the Committee in 2020, following a review of potential advisers and the services provided. In 2023, the Committee completed the annual review of its performance, which included an assessment of the quality of information provided to the Committee to discharge its responsibilities. The remuneration advisors serve as a key source of such information. The Committee confirmed that the information and support received enabled its work and agreed to retain the service of PwC UK into 2024. PwC UK is a signatory to the voluntary code of conduct in relation to remuneration consulting in the UK. PwC UK, and its network firms, provides professional services in the ordinary course of business, including assurance, advisory, and tax advice to the Group. The Committee is satisfied that the advice received is independent and objective and receives an annual statement setting out protocols that have been followed by PwC UK to maintain independence. There are no connections between PwC and individual Directors to be disclosed. Key decisions by the Committee during 2023 In November 2022, the Irish Government announced a change to the remuneration restrictions, resulting in the removal of the cap on fixed remuneration and the re-introduction of variable remuneration, capped at €20,000, which applies to all colleagues in the Group (excluding Davy, which operates under a separate remuneration model in line with the terms of the acquisition). During 2023, the Committee focused its work on providing oversight of: • the design of the Group Profit Share (GPS) scheme, which provides all employees an opportunity to share in the success of the business based on Group and individual performance, capped at €20,000 for all employees across the Group, including Executive Directors (Davy colleagues do not participate in the GPS); • the overall annual salary review budget for 2023 which was set at 3.5% with additional cost of living support; • enhancements to colleagues benefits, including a personal benefit pot for junior colleagues, the ability to buy and sell annual leave, and a new health insurance benefit for all colleagues that will be provided in 2024 to Ireland (RoI) and Northern Ireland (NI) colleagues (colleagues in other jurisdictions already have access to health insurance benefits); • the completion of key regulatory requirements, including approval of policies and remuneration disclosures, MRT identification, remuneration and suitability, and other regulatory matters; and • the fees for the Chairman (currently €394,000 per annum) as part of the Board’s process for identifying an appropriate successor to Patrick Kennedy. As part of this review, the Committee noted that the current fee, which was reduced in 2009, has remained unchanged since then. As a result, the Chairman fee level is currently towards the lower quartile of fees paid for equivalent roles in the market. The Committee also noted that over the past 15 years there has been an increase in the demands and expectations of the role, including regulatory and corporate governance expectations. Noting the time commitment, experience and skills required for the role, the Committee concluded that the fee for the Chairman may need to be increased to help ensure the Group can attract a candidate with the appropriate experience and expertise. Whilst the partial lifting of some of the remuneration restrictions is welcomed, the cap on variable pay continues to significantly constrain the Group’s ability to structure and position remuneration for all colleagues that creates a strong link between individual colleague’s behaviour, performance, and their compensation outcomes. Company performance and the Group Profit Share Scheme The Committee reviewed and agreed the GPS pool based on an assessment of the Group’s profit performance relative to expectations set at the start of the financial year and taking into account performance against a range of financial and non- financial measures. In making this assessment, the Committee took into consideration the following: Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 103 Report of the Group Remuneration Committee (continued) • improvement in the Group’s financial performance, in particular noting profit before tax increased to €1.9 billion (2022 restated for IFRS 17: €1.0 billion); • the strong capital position with fully loaded CET1 ratio of 14.3%; • good progress on improving customer satisfaction; • improvements in the employee engagement metric, increasing to 73% (68% in 2022); • strong progress against our climate initiatives of increasing green / sustainable financing; and • the Group’s performance against financial and non- financial measures, including the performance of the Group’s risk management. Based on the above assessment, the Committee approved a profit share pool for 2023. In setting this pool, the Committee applied a risk related reduction, relating to risk profile and risk events during 2023. Approximately 10,000 eligible employees, including Executive Directors, are participating in the profit share pool with individual awards dependent on individual performance ratings. Executive Director Remuneration in 2023 In line with the variable pay restrictions applicable to the Group, the maximum award for the Group CEO and Group CFO for 2023 was capped at €20,000. Taking into account the Group performance versus a mix of financial and non-financial criteria, including profit and risk assessment, the risk reduction applied to the 2023 profit share pool (as noted above) and their individual performance, the Committee has determined that they both should receive a GPS award of €16,500. A summary of their personal performance is provided in the Directors’ Remuneration Report on page 127. During the year, the Group engaged and met with a number of our significant shareholders. As part of this engagement, we also discussed their views on the implementation of our new remuneration policy. We found this engagement useful. Noting the Group's unique circumstances, a number of our larger shareholders expressed the view that Executive Director pay is positioned below benchmarks and that this gap should be reviewed, with consideration also given to strengthening alignment of interests between the Executive Directors and shareholders. The Committee will undertake to review the current approach to Executive Director remuneration during 2024. As part of this review, the Committee will also engage with our shareholders and proxy advisory bodies to discuss and understand their perspective on Executive Director remuneration. If considered appropriate, the Committee may look to bring a revised Directors' remuneration policy for shareholders' approvals at the 2025 AGM. Workforce Engagement The Group continues to prioritise workforce engagement to good effect. The colleague engagement metric is up 22 points since it was first measured in 2017, to 73%. This is due to a number of initiatives including those undertaken by the WED, who is a member of the Committee and during 2023 undertook the following: • ‘Open Door’ sessions with groups of colleagues drawn from various businesses and divisional teams during which a number of items were discussed including resourcing, remuneration, hybrid working and colleague wellbeing. • Deep dive listening sessions with the Industrial Relations team and UK Partners Council, including on remuneration. • Branch visits with staff across Dublin and Mayo. Colleagues discussed a variety of issues with the WED, which were shared with the Board during 2023, including the positive impact of hybrid working; the increase to UK entry level salaries; the introduction of a suite of family friendly policies and wellbeing initiatives; the 2023 salary review; and the cost of living measures that had been introduced to support the financial wellbeing of colleagues. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 104 Report of the Group Remuneration Committee (continued) Matters considered and action taken by the Committee in 2023 Remuneration Policy, including impact on the Group's risk proﬁle Committee considerations • Approval of Group Remuneration Policy, including the approach to MRT identification, and of governance and monitoring of that policy. • Review of the Group risk proﬁle and implications of remuneration policies for risk and risk management, including the GPS scheme. • Review of the remuneration approach for the workforce in the context of the cost of living challenges experienced by our workforce. • Review of the subsidiary remuneration practices. • Consideration of the Davy Group remuneration model and approval of related aspects of remuneration in the new subsidiary. Davy colleagues do not participate in the GPS scheme but have their own variable pay schemes. Committee conclusion • Current Remuneration Policy, including the approach to MRT identification, is properly governed and implemented and does not lead to inappropriate risk taking. • The Committee reviewed and agreed the GPS pool based on an assessment of the Group’s profit performance relative to expectations set at the start of the financial year and taking into account performance against a range of financial & non- financial measures. The GPS scheme is subject to the €20,000 cap on variable remuneration. • The Committee reviewed workforce remuneration trends and provided oversight of the cost of living challenges experienced by the workforce and management’s considered response. • The Committee’s desired remuneration policy continues to be the implementation of a competitive, market-aligned, performance- related remuneration model, fully compliant with regulatory requirements, which will allow the Group to clearly link Group culture and values, risk culture, customer outcomes and Group performance to remuneration and enable the achievement of the Group’s strategic objectives. However, during 2023, due to the remaining remuneration restrictions, this has yet to be fully achieved. • In 2023, the Committee continued to provide oversight of remuneration governance of its subsidiaries, with particular focus on variable remuneration in Davy and its remuneration policy and practices. Remuneration Disclosure Committee considerations • Approval of the Pillar 3 disclosures and the Remuneration Report. • Approval of the publication of the Gender Pay Gap Report. • Consideration of remuneration disclosures for variable remuneration and fixed share allowances (FSAs) for Persons Discharging Managerial Responsibility. Committee conclusion • Current disclosures are appropriate. • The Committee approved the publication of the Gender Pay Gap Report. • Disclosures continue to reﬂect good remuneration practice, strong governance and shareholder expectations. Governance and review of remuneration practice Committee considerations • Approval of the Group Remuneration Policy. • Approval of the approach to the identification of MRTs, which forms part of the Group Remuneration Policy. • Approval of Group MRT list and the review of MRT suitability. • Review of workforce remuneration, top earners, and compliance with the remaining remuneration restrictions. • Review of regulatory developments. • Review of internal audits relevant to remuneration policy or practice. Committee conclusion • There is good governance around remuneration, particularly of Executive Directors, senior management, senior officers in independent control functions and those who could materially impact the Group’s risk proﬁle (MRTs). • The Committee has responsibility for MRTs, including oversight of their remuneration and ongoing suitability in role. • There is good governance around reviewing regulatory developments. The outcome of internal audits relevant to the remuneration policy and practice are reviewed annually. • Compliance with UK Code Principle R, that Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, wider circumstances and associated provisions and guidance, is based on operating within the relevant terms of the agreement in place with the Irish State. Specifically, under the terms of this agreement and a partial release, a very limited variable remuneration scheme has been designed, but it remains capped at €20,000 under the remaining restrictions of this agreement. The Group fully adheres to these principles and associated provisions and guidance in the design, implementation and operation of variable remuneration structures, as far as is possible under the remaining restrictions. • The Committee keeps aspects of remuneration and reward for the Chairman, Executive Directors, senior management (i.e. members of the GEC) and the wider employee population under review. In determining remuneration arrangements for Executive Directors, regard is given to the conditions of the wider workforce. Wider workforce engagement on pay arrangements at the Group takes place with the Group’s Staﬀ Representative Bodies. ` Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 105 Report of the Group Remuneration Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Performance and Remuneration of senior management Committee considerations • Oversee the operation of Group-wide remuneration policies and practices for all employees, with specific reference to Executive Directors, GEC members, Heads of Control Functions, the Group Company Secretary, and MRTs. • Approve the Group Chief Executive Officer’s annual performance assessment, performance objectives, and remuneration terms. • As part of the annual performance review process, assess whether the GEC’s collective knowledge and expertise remains appropriate given the Group’s risk profile. • Review of the approach to remuneration of Senior Oﬃcers in independent control functions. • Benchmarking and approval of changes to remuneration of senior management (existing and incoming). • Review of Executive Director Remuneration Policy and practice, with a view to clarity, simplicity, risk predictability, proportionality and alignment to culture. • Engagement with the Department of Finance on Executive and senior management remuneration in the context of the remaining remuneration restrictions. Committee conclusion • There is an appropriate process in place to assess the performance of senior management, which was enhanced in 2023 with the introduction of Thrive, the Group’s performance appraisal process. This includes the review of the Group CEO’s annual performance assessment, performance objectives and remuneration terms. • Changes to senior management remuneration are properly assessed and approved, in line with the Remuneration Policy and regulatory requirements, including the performance and remuneration of Executive Directors. • Through the performance review process, there is an appropriate process in place to annually assess that the GEC’s collective knowledge and expertise remains appropriate given the Group’s risk profile. • The Committee provides oversight of the remuneration of Senior Officers in independent control functions at the time of appointment and at least annually thereafter. • Workforce remuneration and appropriate benchmarking trends are reviewed in advance of reviewing and setting Executive Director and senior management remuneration. • An appropriate process is in place to review the Remuneration Policy and practice in relation to Executive Directors and all colleagues. Oversight of the Remuneration Policy includes particular focus on clarity, simplicity, risk predictability, proportionality and alignment to culture for Executive Directors. • The Committee approved the design of the GPS for all colleagues in the Group. • The Committee supported the Group’s ongoing dialogue with the Department of Finance in relation to the remaining remuneration restrictions. Group Chairman and subsidiary NED fees Committee considerations • Review of the fees paid to the Chairman and NEDs of subsidiary boards. Committee conclusion • The Chairman's fee remained unchanged during 2023. • The Committee reviewed and agreed that an increase in the all- inclusive fees for the Chairman role is required to attract a candidate with the appropriate experience and skills, and to reflect the time commitment required. • The review of subsidiary NED fees considered the time since the fees were last changed, market benchmarking, and workforce remuneration trends during the same time period. Subsidiary NED fees are kept under review, with a view to attracting and retaining NEDs with the necessary knowledge, skills and experience required for each major regulated subsidiary. • The remuneration of Group NEDs is not a matter for the Committee and is instead reviewed by the Chairman of the Board in consultation with the Group CEO, the Chief People Oﬃcer and the Group Company Secretary. Group NED fees are determined by the non-conflicted members of the Board within the limits set by shareholders in accordance with the Constitution. Remuneration for all Group NEDs does not include share options or other performance-related elements. No director is involved in deciding their own remuneration outcome. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 106 Report of the Group Remuneration Committee (continued) For more information on the Committee’s responsibilities, go to: bankofireland.com/about-bank-of-ireland/corporate- governance. The Committee reports to the Board on how it discharges its responsibilities and makes recommendations to the Board on key matters. An internal effectiveness evaluation of the Board and its Committees was conducted during 2023, and that evaluation was reviewed by the Board and its Committees in January 2024. The Committee continuously highlights the challenge faced, as a result of the remuneration restrictions, in discharging the Committee’s duties and ensuring that the Group’s remuneration policies and practices are designed to support strategy and promote long-term sustainable success and to ensure that executive remuneration is aligned to company purpose and values, and clearly linked to the successful delivery of the Company's long-term strategy. Whilst the partial release of the remuneration restrictions during 2023 is welcome progress toward a normalised pay environment, the remaining cap on variable remuneration will continue to impact the attraction and retention of key talent and the structure of pay for senior roles, which will remain predominantly fixed, by necessity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 107 Ian Buchanan Chair of the Group Remuneration Committee 23 February 2024 Report of the Group Audit Committee Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 108 Evelyn Bourke Chair Dear Shareholders, On behalf of the Group Audit Committee (the ‘Committee’ or ‘GAC’), I am pleased to introduce the report on the Committee’s activities for the year ended 31 December 2023. Committee responsibilities The Committee is responsible for monitoring the quality and integrity of the financial statements, and, in partnership with the BRC, monitoring the effectiveness of the Group's internal control, including accounting, financial reporting and risk management systems. The Committee also monitors the independence and performance of the internal and external auditors. Based on the oversight activities of the GAC and the oversight activities of the BRC, the Committee is satisfied that a strong financial risk management and control environment is in place and that internal controls over financial reporting were appropriately designed and operating effectively during the year. The Committee maintains specific focus on protecting the interests of the shareholders in relation to internal controls as they relate to financial reporting. The Committee also evaluates the independence and performance of GIA and the external auditor, KPMG, and considers and recommends the interim and annual financial statements to the Board for approval. During 2023, the Committee oversaw the updates to the Group’s Speak Up Policy and related processes which are in place to support colleagues to confidently and confidentially raise concerns identified in the workplace. Committee membership and meeting attendance Details on Committee Members, Committee meetings and attendance at meetings during 2023 are outlined below. Committee Meetings Eligible to attend1 Attended Evelyn Bourke 13 13 Eileen Fitzpatrick 13 13 Richard Goulding 13 13 Fiona Muldoon 10 10 Steve Pateman 13 13 Michele Greene2 10 9 Margaret Sweeney3 3 2 1 These included four meetings held in conjunction with the BRC to consider the impairment charges being applied to the 2022 financial statements and the 30 June 2023 interim financial statements and to receive specific internal control updates relevant to both committees. 2 Michele Greene was unable to attend an ad hoc meeting shortly after joining due to prior commitments. 3 Margaret Sweeney was unable to attend an ad hoc meeting shortly after joining due to prior commitments. The composition of the Committee changed during 2023, with the appointment to the Committee of Michele Greene, on 7 March 2023, and Margaret Sweeney, on 1 October 2023. Fiona Muldoon stepped down from the Committee on her retirement from the Board of BoIG plc and the Court of Directors on 30 September 2023. I would like to welcome Michele and Margaret to the Committee and thank Fiona for her support and contribution to the effective work of the Committee during her tenure. Common membership between the Committee and the BRC was maintained during 2023 through the membership of both committees of Richard Goulding, Steve Pateman, Michele Greene and I; this facilitates appropriate co-ordination and effective governance across key areas of internal control. The Committee acts independently of the Executive. All members of the Committee are INEDs with relevant ﬁnancial experience and their biographies can be found on pages 81 to 84. The members of the Committee have extensive knowledge of ﬁnancial markets, treasury, risk management and International Financial Reporting Standards (IFRS) and the Committee’s composition is considered to meet all of the applicable requirements, including the need for recent and relevant ﬁnancial experience and competence in accounting or auditing. Report of the Group Audit Committee (continued) Members maintain their knowledge base on relevant Committee matters through continuous development opportunities, Board deep dives and training. The Group CFO, Group Financial Controller, the Group Chief Internal Auditor (GCIA), the Group CEO, the Group Chief Compliance Officer and the Group CRO each attend meetings of the Committee, when appropriate and at the Committee’s request. The Committee also holds private sessions with members of senior management. During 2023, the Committee met in private session (without other members of executive management being present) with each of the Internal and External Audit teams and with the Group CFO. Committee Activities in 2023 While not intending to be an exhaustive list of the Committee’s considerations and activities in 2023, a number of areas that were subject to Committee focus during the year are outlined below. Group Internal Audit In monitoring the activities and effectiveness of GIA, the Committee approved the Internal Audit Charter, the annual audit plan (and subsequent changes thereto), the skills and capabilities assessment and budget, including resources, and reviewed progress against the plan throughout the year. The Committee received regular reports from GIA on internal audit activities across the Group which outlined details of the audit approach, management engagement and areas identified during audits requiring further strengthening across the Group’s risk management and internal control framework. These reports also covered matters of relevance to the Committee’s assessment of the effectiveness of the internal controls over the financial reporting processes. Reports are rated based on the strength of the control environment in operation, management’s awareness of the risks facing their business areas and the controls in place to mitigate those risks. In conjunction with the GIA reports, the Committee considers management’s responses to and the timeliness of the remediation of, identified issues on key audits. The Committee also considered the Quality Assurance Review Report from GIA. An independent External Quality Assessment of GIA concluded in January 2024. The review found GIA to be mature, independent, agile and respected across the Group. Areas for improvement were also noted and, together with actions agreed as part of the 2023 Supervisory Review and Evaluation Process, will be subject to Committee oversight and challenge through to closure. I continued to act as Sponsor of the Speak Up Policy, which is owned by GIA and was reviewed and approved by the Committee during 2023. The Group’s Speak Up Policy, processes and procedures remain under regular review to ensure their continued appropriateness and alignment with the Protected Disclosures Act and to monitor actions being taken to increase awareness of Speak Up across the Group. The Speak Up and Investigations unit was subject to external audit by Grant Thornton during 2023. The Committee considered the final report, which was rated Satisfactory, in December 2023. In consideration of the Committee’s oversight activities of GIA and the aforementioned actions underway and plans regarding the continued enhancement of GIA, the Committee is satisfied that the quality, experience and expertise of GIA is appropriate for the business. External audit KPMG was appointed as the Group's external auditor on 19 April 2018, following an external tender process and has since been re-appointed as external auditor on an annual basis. The Committee oversees the Group's relationship with KPMG, and KPMG's lead audit partner for the Group attends Committee meetings. During the year, the Committee considered KPMG’s terms of engagement (including remuneration), independence and objectivity, audit quality / performance and plans for the interim review and year-end audit. The Committee also assessed KPMG’s findings, conclusions and recommendations arising from the interim review and year-end audit. The Committee considers that the Group has appropriate safeguards in place to protect the independence and objectivity of KPMG. The Committee operates a policy to regulate the use of KPMG for non-audit services, to ensure compliance with the revised Ethical Standard for Auditors (Ireland) 2020 from the Irish Auditing Accounting Supervisory Authority (IAASA), the Financial Reporting Council's revised Ethical Standard 2019 and applicable legislation. In order to ensure the objectivity and independence of the external auditor, the policy formalises certain restrictions on the provision of non-audit services and requires that all non- audit services provided by KPMG must be approved in advance by the Committee, or, in exceptional circumstances by the Committee Chair, prior to engagement with KPMG. Additional provision is made for the approval by certain members of senior management of non-material services. Annually, details of expected non-audit services for the coming year are presented to the Committee for pre-approval. Any proposed additional services exceeding these levels require additional specific pre-approval. The fees paid to KPMG for the year ended 31 December 2023 amounted to €7.4 million (2022: €7.2 million), of which €1.2 million (2022: €1.4 million) was payable in respect of assurance services. Assurance services represented 19% of the statutory audit fee (2022: 24%). Further information on fees paid and details in respect of audit and assurance services provided during the year are set out in note 12 to the consolidated financial statements ‘auditor’s remuneration’. The interim review fee of €0.2 million is reflected on the assurance services line as in similar years and is included in the statutory fee. In considering the independence and effectiveness of the external audit process, the Committee reviewed the robustness and quality of performance across key categories of process, delivery, reporting, people and service. The Committee concluded that it was satisfied with the independence, quality and performance of KPMG in respect of the year ended 31 December 2023 and recommended that the Board propose KPMG for re-appointment approval at the 2024 AGM. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 109 Report of the Group Audit Committee (continued) Financial reporting A key activity for the Committee is the consideration of significant matters relating to the annual and interim financial report, with key accounting judgements and disclosures subject to in-depth discussion with management and KPMG. The Committee provides robust challenge to key judgements in advance of making a recommendation to the Board that all financial reports are considered to be a fair, balanced and understandable assessment of the Group’s financial position. The GAC and BRC continued their specific focus on the approach to and implementation of management judgement (including overlays) for the Expected Credit Loss (ECL) model to account for the expected impairment arising from the relatively high inflationary environment, elevated interest rates, geopolitical events and other risks, prior to the publication of the interim and year-end financial statements. Much of this consideration took place in conjunction with the BRC, following which the Committees made recommendations to the Board regarding the approach and quantum of the proposed net impairment loss applied to the Group’s financial statements. The Committee also considers, provides challenge to and ultimately recommends, the annual and semi-annual Pillar III Disclosures to the Board for approval. It also considers and approves the Country-by-Country report required under the CRD. Further information on some of these significant items is set out in note 2 Critical Accounting Estimates and Judgements. Overall, the Committee was satisfied that the 2023 annual report, including the financial statements, is fair, balanced and understandable. Matters considered and action taken by the Committee in 2023 IFRS 9 and impairment of ﬁnancial instruments Committee considerations The Committee reviewed management papers and discussed and challenged management judgements used in determining the following, based on IFRS 9 requirements: • correct classiﬁcation and measurement of ﬁnancial instruments; • model parameter updates incorporating Forward Looking Information (FLI); • Group management adjustments to reﬂect management judgement in impairment model parameters and other Post- Model Management Adjustments; and • net impairment loss for the year; and quantum of Non- Performing Exposures (NPEs). The Group’s approach to the measurement of impairment is set out at high level in the Board-approved Group Credit Risk Policy and in more detail in the Group Impairment Policy. The Group Impairment Policy is approved by the Group Credit Risk Committee and includes the Group’s criteria for allocating ﬁnancial instruments to stages, the method used to measure impairment for each material portfolio, core impairment model methodologies and the criteria for classifying ﬁnancial assets as NPEs. The impairment models are approved for use by the Risk Measurement Committee and are maintained and executed by a specialist central unit within Group Risk. The Committee reviewed the impact of key model changes and of management overlays made during the year. The Committee is satisﬁed that the classiﬁcation and measurement of ﬁnancial assets, stage allocations, model parameter updates (including FLI), impairment loss allowances and the net impairment loss for the year, has been appropriately determined in accordance with the Group’s methodologies and IFRS 9. The Committee is also satisﬁed that the associated disclosures were appropriate based on the relevant accounting standards including IAS 1 and IFRS 7. The Committee, in conjunction with the BRC, considered and made recommendations to the Board regarding the approach to and measurement of the proposed net impairment loss applied to the Group’s 2023 ﬁnancial statements. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 110 Report of the Group Audit Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Retirement beneﬁt obligations Committee considerations The Committee considered management’s key assumptions and judgements used in determining the actuarial values of the liabilities of each of the Group’s sponsored deﬁned beneﬁt pension schemes under IAS 19 ‘Employee Beneﬁts’. Management considered advice from independent actuaries, Willis Tower Watson, for the determination of signiﬁcant actuarial assumptions. The key assumptions proposed by management and considered by the Committee were the discount rates and inﬂation rates applied in valuing liabilities in both Ireland and the UK. Committee conclusion The Committee is satisﬁed that the inﬂation rates, discount rates and other signiﬁcant assumptions are appropriate and that the accounting for the Group’s sponsored deﬁned beneﬁt pension schemes and related disclosures are in accordance with IAS 19. Deferred taxation Committee considerations The Committee considered the extent of DTAs to be recognised in respect of unutilised tax losses and in particular the projections for future taxable proﬁts against which those losses may be utilised. In order for the Group to recognise these assets, it must be probable that suﬃcient future taxable proﬁts will be available against which the losses can be utilised. The Group has prepared ﬁnancial projections which are used to support the Group’s ICAAP. The ﬁnancial projections are prepared for the purpose of the Group’s assessment of its capital adequacy. They are subjected to considerable internal governance at a divisional and Group level and are reviewed and approved by Executive management and the Board. Management’s assessment of the projections determined that it was probable that there would be suﬃcient taxable proﬁts in the future to recover the DTA recognised arising from unused tax losses. In relation to DTA arising from Irish tax losses carried forward by The Governor and Company of the Bank of Ireland (the ‘Bank’) management considered the following: • IAS 12 provides that a DTA can only be recognised when it is probable that taxable proﬁts will be available against which the losses and deductible temporary diﬀerences can be utilised; • The disclosure impact of the minimum rate of Corporation tax of 15% enacted into Irish legislation in December 2023 and the related amendments to IAS 12. The most recent financial projections indicate a recovery period of 5 years for the Bank and thus the carrying value of DTA relating to trading losses carried forward is not required to be reduced for the year ended 31 December 2023. Committee conclusion The Committee discussed with management its assessment of the recoverability of the DTA and the related disclosures. The Committee agreed that the Irish DTA should be recognised in full and that the related disclosures are as required under IAS 12 ‘Income Taxes’. IFRS 17 and Life assurance accounting Committee considerations The Committee considered management’s key assumptions and judgements used in determining the value of the insurance contract liabilities. The key assumptions underlying the insurance contract liabilities were the interest rate and unit growth rates, lapse rates, mortality, morbidity and expenses. Interest rates and unit-growth rates are based on a range of duration-speciﬁc rates determined by a risk-free yield curve including an allowance for illiquidity premium. Interest rates are based on market information and are determined using the top-down approach for the annuity portfolios and the bottom-up approach for other contracts, as permitted under IFRS 17. Committee conclusion The Committee approved the IFRS 17 Transition assumptions and judgements required for calculation of the opening IFRS 17 liabilities at 1 January 2023, and concluded that that related disclosure was as required by IAS 8. The Committee is satisﬁed that the signiﬁcant assumptions are appropriately applied and that the accounting for the Group’s insurance contract liabilities is appropriate. Intangible assets - capitalisation and impairment Committee considerations The Committee considered the appropriateness of management’s internal controls and governance surrounding the capitalisation of costs related to intangible assets. The Committee also considered management’s assessment of the existence of impairment indicators in respect of the asset and the impact on the carrying value of the associated intangible assets. Committee conclusion The Committee considers the level of the impairment charge to be recognised in 2023, as reasonable and in line with the requirements of IFRS. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 111 Report of the Group Audit Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Viability statement Committee considerations In accordance with the requirements of the UK Corporate Governance Code, the Committee considered whether it had a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of assessment and made a recommendation to the Board in that regard. This required a robust assessment of the principal risks facing the Group, including those that would threaten its business model and future performance, solvency and liquidity. Committee conclusion The Committee undertook a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity and concludes that there is a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment. The Group adopted a three-year period, having regard to existing relevant process and frameworks which are performed over time periods ranging from six months to three years. Going concern Committee considerations The Committee considered management’s assessment of the appropriateness of preparing the ﬁnancial statements of the Group for the year ended 31 December 2023 on a going concern basis. In making this assessment, matters considered included the performance of the Group’s business, proﬁtability projections, funding and capital plans, under both base and plausible stress scenarios, including consideration of a range of other factors such as the economic outlook for the Irish economy and the current global macroeconomic and geopolitical environment. The considerations assessed by the Committee are set out on page 203 in the Going Concern disclosure within the Accounting Policies in note 1 to the consolidated ﬁnancial statements. Committee conclusion On the basis of the review performed and the discussions with management, the Committee is satisﬁed that there are no material uncertainties related to events or conditions that may cast signiﬁcant doubt on the Group’s ability to continue as a going concern over the period of assessment. This assessment together with the Going Concern disclosure (as set out on page 203) was subsequently approved by the Board. IT risk Committee considerations The Committee considered and discussed management’s assessment of IT risks and the ongoing risk management programme to identify, rate, mitigate and report on IT risks, including GIA and KPMG’s ﬁndings of the internal control environment and actions arising therefrom. Committee conclusion On the basis of the review performed, discussions with management and the continued operation of the comprehensive internal control framework over ﬁnancial reporting, the Committee is satisﬁed that these risks do not impact ﬁnancial reporting processes. Davy Goodwill Impairment Assessment Committee considerations The Committee considered management’s assessment of impairment indicators in relation to the goodwill recognised following the Group’s acquisition of J&E Davy (Davy) in June 2022. The Committee reviewed and challenged management’s key assumptions and judgements in relation the calculation of the recoverable amount. These assumptions included cash flow projections, the discount rate and the growth rate. Cash flow projections are based on internal management information for a period of up to 5 years, after which a long-term growth rate appropriate to the business is applied. The initial 5 years’ cash flows are consistent with approved plans for the business prepared under the Group’s ICAAP process. Committee conclusion The Committee is satisfied that the key assumptions are appropriate and no impairment of Goodwill is required at 31 December 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 112 Report of the Group Audit Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Northridge Commissions Committee considerations The UK motor finance industry continues to experience an increase in the volume of complaints and court claims in relation to historical commission arrangements. The Financial Conduct Authority (FCA) announced in January 2024 that they are using their powers under Section 166 (s166) of the Financial Services and Markets Act 2000 to review historical motor finance commission arrangements and sales across several firms. The FCA has indicated that if they find there has been widespread misconduct and customer harm, they will identify how best to remediate consumers through an appropriate settlement arrangement in an orderly, consistent and efficient way and, if necessary, resolve any contested legal issues of general importance. Management considers that a possible obligation in this regard exists in the Group’s UK Northridge motor finance business, pending the outcome of the s166 review. Committee conclusion On the basis of the review performed and discussions with management, particularly considering the requirements of IAS 37, the Committee is satisfied with management's recommendation that it is not considered that a legal or constructive obligation has been incurred in relation to these matters that would require a provision to be recognised at this stage. Furthermore, given the inherent uncertainties relating to the scope and timing of any possible outflow, it is not currently practicable to estimate the extent of any financial impact. The Committee is also satisfied that a contingent liability exists, as an outflow of resources is possible, and that the disclosure of this matter included in note 39 contingent liabilities and commitments is appropriate. The Committee also: • sought updates from senior management on key audit findings; • dedicated time to the consideration of semi-annual Regulatory Reporting updates; • considered updates from the Audit Committee Chairs and Head of Audit for each of the BoI (UK) plc, Davy and NIAC subsidiary Audit Committees, as well as minutes of each Committee meeting. GAC also ensured enhanced focus on BoIMB pending the approval of new BoIMB directors and the associated reinstatement of the BoIMB Audit Committee; and • reviewed talent development in and succession planning for the Finance function A full list of responsibilities is detailed in the Committee’s terms of reference, which can be found in Board / Court Committees on the Group Website: bankofireland.com/about-bank-of- ireland/corporate-governance. The Committee reports to the Board on how it discharges its responsibilities and makes recommendations to the Board on key matters. A Committee effectiveness evaluation review is completed on an annual basis and the 2023 review found that the GAC continued to operate effectively. I stand down as the Committee Chair and as a member of the Audit Committee on 27 February 2024 and Richard Goulding will take on the role as Committee Chair. I would like to wish Richard well in his new role and to thank the Committee Members for their support and contribution to the effective functioning of the Committee since I commenced in the Chair role in January 2021. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 113 Evelyn Bourke Chair of the Group Audit Committee 23 February 2024 Report of the Board Risk Committee Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 114 Michele Greene Chair Dear Shareholders, On behalf of the Board Risk Committee (the ‘Committee’ or the ‘BRC’), I am pleased to introduce the report on the Committee’s activities for the year ended 31 December 2023. I joined the Committee in December 2019 and became the Committee Chair on 1 January 2024, having engaged in a detailed handover process with the previous Committee Chair, Richard Goulding, during 2023. Richard served as Committee Chair for just over 5 years, from August 2018, and committed a significant amount of time to supporting and challenging Management and leading the Committee in order to ensure the continued enhancement of the Committee’s operations and the Group’s approach to Risk Management. On behalf of the Committee, I would like to thank him for his strong leadership of the Committee and his contribution to the wider Group during his tenure as Committee Chair. Richard remains as a member of the Committee and we will continue to benefit from his relevant expertise. Committee purpose and responsibilities The Committee was established to advise and support the Board on oversight of risk management and to ensure that the Group’s risks are properly identified, reported and assessed; that risks are properly controlled; and that strategy is informed by, and aligned with the Group’s risk appetite. It makes recommendations to the Board, or approves under delegation, certain risk matters and maintains oversight of the Group’s risk profile, including adherence to Group risk principles, policies and standards. The Committee oversees the implementation of the Group’s Risk Management Framework, constituent policies, adherence to risk appetite and management of risk within operational limits. Committee membership and meeting attendance Details of the Committee members, Committee meetings and attendance at meetings during 2023 are outlined below: Committee Meetings Eligible to attend1 Attended Giles Andrews 21 21 Evelyn Bourke 21 21 Ian Buchanan 21 202 Richard Goulding 21 21 Michele Greene 21 21 Steve Pateman 21 21 1 Including 5 joint meetings with the GAC to consider the impairment charges being applied to the 2022 financial statements and the 30 June 2023 interim financial statements and 1 joint meeting with the Group Sustainability Committee to consider ESG matters and 2 joint meetings with the GTOC to consider risk assessment of investment allocation. 2 Ian Buchanan was unable to attend an ad hoc meeting due to a pre-existing engagement. The Committee met a total of thirteen times on a standalone basis in 2023, driven by oversight of implementation of the Group Risk Management Framework, together with oversight of regulatory requirements. The Committee also met in four joint sessions with the GAC to discuss impairment, twice with the GTOC to discuss the risk aspects of investment allocation given the Group’s investment in digital capabilities, and twice with the Group Sustainability Committee to consider ESG matters. Akshaya Bhargava joined the committee on appointment to the Board of BoIG plc and the Court of Directors on 12 January 2024. The Committee acts independently of the Executive and comprises seven NEDs. The Committee’s composition ensures appropriate coverage of core banking skills and competence in the financial sector, with experience and expertise in risk that is considered appropriate to the scale and complexity of the Group. Committee members have extensive knowledge of financial markets, consumer banking and risk management, together with broad experience in technology, digital and operations. There is also a keen awareness of the importance of taking all reasonable steps to ensure good customer outcomes. Members’ biographies can be found on pages 81 to 84. Report of the Board Risk Committee (continued) Board consideration of risk-related issues is considered to be enhanced by Members serving on more than one Board sub- committee. The BRC is required under regulation to have one shared member with each of the GAC and the GRC. Given the Group's ongoing focus on transformation activities and related risk considerations, the Group has determined that shared membership of the GTOC is also appropriate. The Responsible and Sustainable Business (RSB) Committee was renamed in 2023 to the GSC and shared membership between the BRC and the GSC is also considered appropriate in the context of risk management in respect of ESG particularly climate-related activities. Shared membership between the BRC and each of the GAC, GRC, GTOC and GSC is currently maintained as follows: Committee Shared Members with the BRC GAC Evelyn Bourke1, Richard Goulding, Steve Pateman and Michele Greene GRC Giles Andrews and Ian Buchanan GTOC Giles Andrews, Ian Buchanan, Richard Goulding, Michele Greene and Akshaya Bhargava GSC Giles Andrews, Evelyn Bourke and Michele Greene 1 Evelyn stands down from the Audit Committee on 27 February 2024. The Committee holds private sessions with senior management. During 2023, the Committee met in private session (without other members of management being present) with each of the Group CRO and Group CEO. The Group CRO has full access to the Committee and normally attends all meetings. The GCIA and members of the wider Executive also attend meetings as appropriate and at the invitation of the Committee Chair. During December 2023, the Group CRO, Stephen Roughton- Smith, announced his intention to depart from the Group in 2024, following the design and implementation of a new structure for the second line of defence and initiation of a new Group Risk Management Framework. Stephen will remain in role until a successor is appointed. The Committee would like to thank Stephen for his commitment to the role and the aforementioned risk management change since joining the Group in December 2021. Committee activities in 2023 While not intending to be an exhaustive list of the Committee's activities, a number of areas that were the subject of particular focus are outlined below: Risk Management Framework, library and organisation The Committee sharpened its focus during 2023 on the implementation of a strengthened Risk Management Framework and the embedding of a process-led operational risk management. As part of this focus, the committee approved refreshed risk policies for Level 1 risks which digitise risk mitigation requirements in a format which enables their management via respective controls to be monitored across the Group’s mapped process universe. Amendments to the Risk Management Framework and Risk Library were also approved by the committee to reflect additions, amendments and revisions made to Level 2 and 3 risks as part of the Level 1 risk review, and the articulation in Risk Appetite Statements of Financial and Non-Financial Risks was enhanced to ensure full alignment. The Committee provided formal approval for the Operational Risk Reduction Plan, which provides a clear link between Risk Issues and the related investment and organisational capacity required to reduce Operational Risk. The Operational Risk Reduction Plan also forms an intrinsic part of the Group’s Strategic Demand Plan. In the context of enhancing the control environment, Credit Reviews across the Corporate Banking RoI and UK non- property portfolios were reviewed and challenged by the committee. Deep Dives on the risk and control adequacy pertaining to the Property and Construction portfolio as well as to the control environment for certain risk types, including Model Risk, Regulatory Risk and ESG Risk were also reviewed by the committee. The Committee also reviewed the adequacy of resourcing in the Risk Function with a focus on ensuring that an effective and efficient second line of defence is in place. Risk Assessments In 2023, the Committee recommended to the Group Remuneration Committee a Risk Adjustment Process for Variable pay which applies to the Group Profit Share Scheme. The Committee also held detailed discussions with the Board Risk Committee Chairs and CROs of the respective material subsidiary entities, covering the risk profiles and areas of focus of the subsidiary board risk committees during the year. This included separate private sessions with the subsidiary board risk committee chairs in the absence of management. In October 2023 the Committee recommended two securitisation transactions to the Board in the form of an NPE disposal and a Credit Risk Transfer. These transactions facilitate the Group achieving its NPE target, reduce credit risk and increase the Group’s transitional CET1 and Total Capital ratios. The Group has also set out its approach to the CSRD and assessed final results from the aligned Double Materiality Assessment as approved jointly by the Group Sustainability and Board Risk Committees. This signifies a pivotal step forward in the Group’s journey towards aligning financial success with environmental and societal wellbeing. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 115 Report of the Board Risk Committee (continued) Operational Resilience In 2023, the Group continued its implementation of strategic requirements to improve operational resilience. The process required to map out each of the Group’s important business services, to establish baseline information required to identify potential vulnerabilities, was recommended by the Committee to the Board in Q4 2023. Resilience mapping enables the Group to identify resources that enable an important business service, and it is therefore an important tool in the assessment of these resources for potential vulnerabilities. The mapping methodology leveraged the process maps required as part of the Risk Management Framework implementation, recorded Risk Issues, Business Impact Assessments and Business Continuity Plans. This work is a logical extension of the Risk Management Framework elements put in place and approved by the Committee in recent years. The Committee also considered events in 2023 that led to the collapse of Silicon Valley Bank and Credit Suisse to identify any learnings for the Group arising from these events. Lessons learnt for the Group include the growing impact and pace of social media and actions required in the context of communications strategy, frameworks and planning. The Committee noted the positive introduction of the Group Social Media Framework as part of the Crisis Management Framework which was recommended to and subsequently approved by the Board in the latter part of 2023. The monitoring and response management to adverse social media driven activity will be an increasing area of focus for the Committee in 2024. Risk Appetite Events Other significant matters considered by the committee include the event on Tuesday 15 August 2023 in which the Group experienced a significant central mainframe incident which impacted multiple services, and which constituted a breach of the Group’s Risk Appetite. Root cause analysis, lessons learned, and critical customer impact were also reviewed by the committee in conjunction with the GTOC. Matters considered and action taken by the Committee in 2023 Credit risk Committee considerations • Inflation and interest rate risks continue to impact the macro- economic outlook and consumer affordability which contributes to NPE percentage of total loans. • Falling collateral values and reduced liquidity in commercial property impact recovery and resolution on NPEs. Committee conclusion • Early Warning Indicators are reviewed regularly to monitor trends in key portfolios and challenge management on actions underway. Capital adequacy Committee considerations • Regular reviews are undertaken to ensure that Regulatory and Fully Loaded capital ratios have appropriate buffers above the Group’s own minimum targets and regulatory requirements. The BRC considered the impacts of future capital requirements and capital availability and reviewed in detail the ICAAP, including stress scenarios, with updates considered post changes in macroeconomic assumptions midyear. Committee conclusion • The Group holds sufficient capital to meet its regulatory and business requirements over its planning horizon. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 116 Report of the Board Risk Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Funding and liquidity risk Committee considerations • Regular reviews are undertaken to ensure that the Group is compliant with all risk appetite measures and regulatory liquidity requirements. The Committee reviewed the results of regular stress testing and of the ILAAP. • During the period of heightened market uncertainty, the Group convened the Group’s Crisis and Liquidity Management Committee commencing on 15 March which monitored market and Group idiosyncratic market and funding dynamics on an intraday basis. The Group’s Recovery Plan Status was also increased to Business As Usual (BAU) elevated from BAU as a precautionary step. The Group’s recovery status reverted to BAU on 21 April as markets stabilised. Committee conclusion • The Group continues to be fully compliant and has no issues with market access or pricing. • The Group remains vigilant to macro events where potential triggers specific to the Group’s business model (e.g., decline in Irish housing market) or Group specific (e.g., regulatory fine for past misconduct) could lead to negative market reaction, impact on financials or further regulatory impact. The Group has mitigating actions in place for such events including monitoring of social media activity, volatility in the wider sector, communication plans and recovery and resolution planning. Market risk Committee considerations • Regular reviews are undertaken to ensure that the Group is compliant with all risk appetite measures across credit spread risk, discretionary risk, Value at Risk (VaR) and scenario-based stress testing. Committee conclusion • The Group continues to be fully compliant with risk appetite. Operational risk Committee considerations • Inflation and interest rate risks continue to impact the macro- economic outlook and consumer affordability which contributes to NPE percentage of total loans. • Falling collateral values and reduced liquidity in commercial property impact recovery and resolution on NPEs. Committee conclusion • Inflation and interest rate risks continue to impact the macro- economic outlook and consumer affordability which contributes to NPE percentage of total loans. • Falling collateral values and reduced liquidity in commercial property impact recovery and resolution on NPEs. • Early Warning Indicators are reviewed regularly to monitor trends in key portfolios and challenge management on actions underway. Regulatory risk Committee considerations • Managing Regulatory Risk continues to be a key focus for the Group due to the complexity, pace and volume of regulatory change to be managed. The BRC continued to experience a busy regulatory and compliance agenda in 2023, as the Group underwent digital and compliance on-site inspections. Committee conclusion • The Group has applied lessons learned from previous regulatory failings. The Group continues to meet its regulatory and compliance requirements. Conduct risk Committee considerations • The effective management of Conduct risk is essential to serving our customers and creating the right culture. In 2023, the BRC considered frequent reports on the resolution of customer conduct issues, in particular in relation to potential customer detriment from the IT outage event of August 15, consumer errors, Financial Crime Events, persistent Central Credit Register errors, commissions within automotive finance and BoI (UK) plc customer complaint resolution. Committee conclusion • The Group continues to prioritise Conduct risk matters and seeks to minimise any forms of customer harm or detriment, particularly in relation to Market Integrity, Customer Protection, Financial Crime and Data Privacy. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 117 Report of the Board Risk Committee (continued) Matters considered and action taken by the Committee in 2023 (continued) Business and strategic risk Committee considerations • The BRC recognises the risks in delivering the approved strategy, particularly in the context of geopolitical conflict and the knock-on impact of this on supply chains and global growth. The Committee also monitors any changes in the market that may impact the business model. Committee conclusion • The Committee annually considers the risk impact of Strategic updates including review and challenge of underlying macro assumptions underpinning the Group strategic plans. People risk Committee considerations • Group focus in 2023 continues in respect of addressing people strain and supporting colleague wellbeing. The Committee monitors appointments to meet the Gender Target, attrition and engagement and culture embedding as part of its oversight. Committee conclusion • In 2023 attrition remained more than 2% below the Irish Business and Employers Confederation Financial Services Benchmark with good engagement and culture embedding scores. A full list of responsibilities is detailed in the Committee’s terms of reference, which can be found in Board / Court Committees on the Group Website: bankofireland.com/about-bank-of-ireland/corporate-governance. The Committee reports to the Board on how it discharges its responsibilities and makes recommendations to the Board on key matters. A Committee effectiveness evaluation survey is completed on an annual basis and the 2023 review found that the committee continued to operate effectively. For more information on the annual effectiveness review, see page 88. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 118 Michele Greene Chair of the Board Risk Committee 23 February 2024 Attendance table The table below reports Directors’ attendance at scheduled and out of course Board and Committee meetings in 2023. Board Audit Committee Nomination & Governance Committee Remuneration Committee Risk Committee Group Transformation Oversight Committee Group Sustainability Committee A B A B A B A B A B A B A B Giles Andrews 10 9 11 11 21 21 6 6 9 9 Evelyn Bourke 10 9 13 13 6 6 21 21 9 9 Ian Buchanan 10 9 11 11 21 20 6 6 Eileen Fitzpatrick 10 10 13 13 8 8 11 11 7 6 Richard Goulding 10 9 13 13 8 7 21 21 6 6 Michele Greene 10 10 10 9 21 21 6 6 9 9 Patrick Kennedy 10 10 8 8 6 6 Fiona Muldoon (resigned 30 September 2023) 8 7 10 10 7 6 8 8 7 6 Myles O'Grady 10 10 Steve Pateman 10 10 13 13 11 11 21 21 Mark Spain 10 10 Margaret Sweeney (appointed 1 October 2023) 2 2 3 2 3 3 Column A: Indicates the number of meetings held during the year the Director was a member of the Board and / or the Committee and was eligible to attend. Column B: Indicates the number of meetings attended. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 119 Report of the Directors Results In 2023 , the Group made a profit before tax of € 1,938 million (2022 restated for IFRS 17: €1,011 million) and a profit after tax of € 1,601 million (2022 restated for IFRS 17: €858 million). € 1,595 million (2022 restated for IFRS 17: €850 million) of profit after tax is attributable to ordinary shareholders and €6 million of profit after tax (2022: €8 million) is attributable to non- controlling interests (NCI). Distributions In respect of the 2023 financial year, the Board proposed a distribution of €1,154 million including an ordinary dividend of €634 million, equivalent to 60 cents per share, and representing c.40% of profits after tax subject to ordinary shareholder approval and a share buyback of €520 million which has been approved by the ECB. The ordinary dividend of 60 cents per share will be paid on 11 June 2024 to ordinary shareholders who appear on the Company’s register on 10 May 2024, the record date for the dividend, subject to shareholder approval. The Group's policy is to distribute ordinary dividends of c.40-60% of statutory profits. The Board will also consider the distribution of surplus capital on at least an annual basis. The distribution level will reflect, amongst other things, the strength of the Group’s capital and capital generation, the Board’s assessment of the growth and investment opportunities available, any capital the Group retains to cover uncertainties (e.g. related to the economic outlook) and any impact from the evolving regulatory and accounting environments. Group activities The Group provides a range of banking and other financial services. The Strategic Report on pages 3 to 49 and Financial Review on pages 50 to 73 contains a review of the results and operations of the Group, of most rece nt events, and of likely future developments. In relation to the Group’s business, no contracts of significance to the Group within the meaning of LR 6.1.77(10) of the Euronext Dublin (formerly the Irish Stock Exchange) Listing Rules existed at any time during the year ended 31 December 2023. Principal Risks and Uncertainties Information concerning the Principal Risks and Uncertainties facing the Group is set out on pages 135 to 142 in the Risk Management Report. Financial risk management objectives and policies Information regarding the financial risk management objectives and policies of the Group, in relation to the use of financial instruments, is set out in the Risk Management Report on pages 134 to 182. Share capital At 31 December 2023, the Group had 1,056,636,305 ordinary shares of €1.00 each in issue, of which 797,735 were treasury shares. Further detail on the structure of the Group’s capital is set out in note 43. Takeover Bids Regulations The disclosures required by the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 are set out in the Schedule to the Report of the Directors on page 123. Directors The names of the members of the Board of Directors of the Company at 31 December 2023 , together with a short biographical note on each Director appear on pages 81 to 84. At the AGM held on 23 May 2023, Myles O'Grady was elected following his appointment to the Board on 17 November 2022; Giles Andrews, Evelyn Bourke, Ian Buchanan, Eileen Fitzpatrick, Richard Goulding, Michele Greene, Patrick Kennedy, Fiona Muldoon, Steve Pateman, and Mark Spain were re-elected. Remuneration See Remuneration Report on pages 125 to 133. Directors’ and Secretary’s interests The interests of the Directors and Secretary in office at 31 December 2023 in the shares issued by the Company as disclosed to the Company are shown in the Remuneration Report on page 132. Listing rules disclosures Information required under UK Listing Rule LR 9.8.4C can be found on pages 126 to 127 for Directors’ Emoluments and above under ‘Group activities’ for Contracts of Significance. Substantial shareholdings There were 80,452 registered holders of ordinary shares of the Company at 31 December 2023. In accordance with LR 6.1.82 (2) of the Euronext Dublin Listing Rules, details of notifications received by the Company in respect of substantial interests in its ordinary shares are provided in Table 1 below at 31 December 2023 and 23 February 2024. Other than the Directors’ interests set out on page 132 there were no other interests disclosed to the Company in accordance with the Market Abuse Regulation and Part 5 of the Transparency Regulations and the related transparency rules during the period from 31 December 2023 to 23 February 2024. For information on acquisition or disposal of own shares, refer to note 43. Table: 1 31 December 2023 % 23 February 2024 % Blackrock, Inc. 10.03% 10.03% Massachusetts Financial Services Company 6.01% 7.09% Norges Bank 4.81% 4.81% Orbis Investment Management Limited 3.99% 3.99% FMR LLC 3.03% 3.03% Authority to purchase own ordinary shares At the AGM held on 23 May 2023, the members gave the Company, and any of its subsidiaries, the authority to make market purchases up to c.10% of its own ordinary shares. This authority will expire on close of business on the date of the AGM of the Company in 2024 or on 23 August 2024, whichever is earlier. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 120 Report of the Directors (continued) Any such purchases would be made only at a price level that the Directors considered to be in the best interest of shareholders generally, after taking into account the Company’s overall financial position and regulatory capital obligations and requirements. In addition, the authority provides that the minimum price which may be paid for such shares shall not be less than the nominal value of the shares and the maximum price shall be the higher of 105% of the average market price of such ordinary shares and the amount stipulated by Article 3(2) of Commission Delegated Regulation (EU) 2016/1052. Corporate governance The Group is subject to the 2018 UK Corporate Governance Code published by the Financial Reporting Council in the UK (UK Code) and the Irish Corporate Governance Annex to the Listing Rules of Euronext Dublin (formally the Irish Stock Exchange). The Corporate Governance Statement forms part of the Report of the Directors. Statements by the Directors in relation to the Group’s compliance with the CBI’s Corporate Governance Requirements for Credit Institutions 2015, (the ‘Irish Code’) and additional requirements of Appendix 1 and Appendix 2 of the Irish Code for High Impact Designated Institutions, and Credit Institutions which are deemed ‘Significant’ Institutions (for the purposes of the CRD IV), respectively, are set out on page 75 to 122. Directors’ Compliance Statement As required by Section 225 of the Companies Act 2014, as amended, of Ireland, the Directors acknowledge that they are responsible for securing the Company's compliance with its ‘relevant obligations’ (as defined in that legislation). The Directors further confirm that a compliance policy statement has been drawn up, and that appropriate arrangements and structures have been put in place that are, in the Directors' opinion, designed to secure material compliance with the relevant obligations. A review of those arrangements and structures has been conducted in the financial year to which this report relates. Political donations Political donations are required to be disclosed under the Electoral Acts 1992 to 2014. The Directors, on enquiry, have satisfied themselves that there were no political donations made during 2023. Branches outside the State The Company has no branches established outside the State. The Bank has branches in the UK, France, Germany, the US and Spain. Going concern The Directors have considered the appropriateness of the going concern basis in preparing the financial statements for 2023 on page 203, which forms part of the Report of the Directors and on page 112, in the Corporate Governance Statement. Viability Statement In accordance with the requirements of the UK Code, the Directors have assessed the viability of the Group, taking account of the Group’s current position and the potential impact of the principal risks facing the Group. The Directors have selected a three-year period for this assessment, reflecting the time horizon that they consider fits with the various risk and planning frameworks taken into account in arriving at the viability statement. The Directors have assessed the prospects of the Group through a number of frameworks, including the ICAAP, the ILAAP, each of which include an assessment of the uncertain geopolitical environment and the macro-economic outlook, the monitoring of key risks identified under the Group’s risk identification process by the Executive Risk Committee (ERC), the BRC and the Board (see page 143 of the Risk Management Report), and the assessment of Principal Risks and Uncertainties (pages 135 to 142) together with the Group’s strategic direction as set out in the Strategic report (pages 3 to 49). Within the Principal Risks and Uncertainties, the Directors consider Credit risk, Funding and Liquidity risk and Capital Adequacy, together with Environmental, Social and Governance risk (including climate risk), Operational risk and Digital to be the most relevant to the viability assessment. The ICAAP facilitates the Board and senior management in adequately identifying, measuring and monitoring the Group’s risks and ensures that the Group holds adequate capital to support its risk profile. ICAAP is subject to review by the Group’s prudential regulator, the ECB Single Supervisory Mechanism (SSM). Underpinning the ICAAP, the Group prepares detailed financial projections under both a base case and a stress case. Base case projections are prepared using consensus macroeconomic forecasts together with Group- specific assumptions, and the stress case is prepared based on a severe but plausible stress economic scenario, (Risk Management Report sections 3.2). The ICAAP demonstrates that the Group has sufficient capital under both the base and stress case scenarios to support its business and achieve its objectives, having regard to Board approved risk appetite and strategy, and to meet its CRD IV regulatory capital, leverage and liquidity requirements. The economic impact of uncertainty in the geopolitical environment and the impact in the Group's core markets as the COVID-19 crisis abates have been among the items considered in a number of areas of the Group’s ILAAP, which demonstrates that the volume and capacity of liquidity resources available to the Group are adequate to support its business model, to achieve its strategic objectives under both business as usual and severe but plausible stress scenarios and to meet regulatory requirements including the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The Directors confirm that their assessment of the principal risks facing the Group, through the processes set out above, was robust. Based upon this assessment, and their assessment of the Group’s prospects, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2025. Accounting records The Directors ensure that adequate accounting records are kept at Baggot Plaza, 27-33 Upper Baggot Street, Dublin 4, D04 VX58, through the appointment of suitably qualified competent personnel, the implementation of appropriate computerised systems and the use of financial and other controls over the systems and the data. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 121 Report of the Directors (continued) Auditor KPMG, Chartered Accountants, were appointed statutory auditor on 19 April 2018. They have been re-appointed annually since that date and will continue in office in accordance with section 383(2) of the Companies Act 2014. Relevant audit information The Directors in office at the date of this report have each confirmed that as far as they are aware, there is no relevant audit information of which the Group’s Auditor is unaware; and they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Group’s Auditor is aware of that information. Non-ﬁnancial information Information required in accordance with the EU (Disclosure of Non-Financial and Diversity Information by certain large undertakings and Groups) Regulations 2017 can be found in the Strategic Report on page 45. The strategic report also includes information on topics such as the Environment and Employee matters. Post balance sheet events These are described in note 60 to the financial statements. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 122 Patrick Kennedy Richard Goulding Chairman Deputy Chairman Bank of Ireland Group plc Registered Office 2 College Green, Dublin 2 23 February 2024 Schedule to the Report of the Directors Information required under the European Communities (Takeover Bids (Directive 2004/ 25/EC)) Regulations 2006. As required by these Regulations, the information contained below represents the position at 31 December 2023 . Structure of the Company’s capital The capital of the Company is divided into ordinary shares and preference shares. At 31 December 2023, there were 1,056,636,305 ordinary shares in issue. At 31 December 2023, there were no preference shares in issue. Further detail on the structure of the Company’s capital is set out in note h to the financial statements. Rights and Obligations attaching to the classes of shares Ordinary shares Dividend rights Under Irish law, dividends are payable on the ordinary shares of the Company only out of profits available for distribution. Subject to the provisions of the Companies Act 2014 (the ‘Companies Act’), holders of the ordinary shares of the Company are entitled to receive such dividends as may be declared by the Company by ordinary resolution, provided that the dividend cannot exceed the amount recommended by the Directors. The Company may pay shareholders interim dividends if it appears to the Directors that they are justified by the profits of the Company available for distribution. Any dividend which has remained unclaimed for twelve years from the date of its declaration may be forfeited and cease to remain owing by the Company. Voting rights Voting at any general meeting is by a show of hands or by poll. On a show of hands, every shareholder who is present in person or by proxy has one vote regardless of the number of ordinary shares held by him or her. On a poll, every shareholder who is present in person or by proxy has one vote for every ordinary share of €1.00 each. A poll may be demanded by: • the Chair of the meeting; • at least three members of the Company present in person or by proxy having the right to vote at the meeting; • any member or members present in person or by proxy representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or • a member or members present in person or by proxy holding shares in the Company conferring the right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. The necessary quorum for a general meeting is two persons present in person or by proxy and entitled to vote. All business is considered to be special business if it is transacted at an EGM as is all business transacted at an AGM other than the declaration of a dividend, the consideration of the Company’s statutory financial statements and reports of the Directors and Auditors on those statements, the review by the members of the Company’s affairs, the election of Directors in the place of those retiring, the reappointment of the retiring Auditors (subject to Sections 380 and 382 to 385 of the Companies Act), the fixing of the remuneration of the Auditors and the consideration of a special resolution for the purpose of Section 1102(2)(b) of the Companies Act. Any business that is required to be dealt with by way of special resolution must be passed by not less than 75 per cent of the votes cast by such members as, being entitled to do so, vote in person or by proxy at a general meeting at which not less than twenty one clear days’ notice specifying the text or substance of the proposed resolution has been duly given. Any business that is required to be dealt with by way of ordinary resolution must be passed by a simple majority of the votes cast by the members as, being entitled to do so, vote in person or by proxy at a general meeting. An EGM (other than an EGM called for the passing of a special resolution) may be called on at least 14 days’ notice where: • the Company offers the facility for members to vote by electronic means accessible to all members who hold shares that carry rights to vote at general meetings; and • a special resolution reducing the period of notice to fourteen days has been passed at the immediately preceding AGM or at an EGM held since the immediately preceding AGM. Liquidation rights In the event of any surplus arising on the occasion of the liquidation of the Company, the ordinary shareholders would be entitled to a share in that surplus in proportion to the capital at the commencement of the liquidation paid up or credited as paid up on the ordinary shares held by them respectively. Preference shares At 31 December 2023, there were no preference shares in issue. Where authorised to issue authorised but unissued shares in the capital of the Company (including where relevant, by shareholder approval under Section 1021 of the Companies Act), and subject to the scope of any such authority, in accordance with the Company’s articles of association (the ‘Articles’), the Directors are authorised to issue all or any of the authorised but unissued preference shares from time to time in one or more classes or series, and to fix for each such class or series such voting power, full or limited or no voting power, and such designations, preferences or special rights and qualifications, limitations or restrictions thereof in any resolution adopted by the Directors providing for the issuance of such class or series of preference shares. Variation of class rights Whenever the share capital of the Company is divided into different classes of shares, the rights attached to any class may be varied or abrogated with the consent in writing of three- fourths in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class, either while the Company is a going concern or during or in contemplation of a winding-up. Percentage of the Company’s capital represented by class of share The ordinary shares represent 99.9% of the authorised share capital and 100% of the issued share capital. The preference shares represent 0.1% of the authorised share capital and 0% of the issued share capital. Restrictions on the transfer of shares in the Company There are no restrictions imposed by the Company on the transfer of shares, nor are there any requirements to obtain the approval of the Company or other shareholders for a transfer of shares, save in certain limited circumstances set out in the Articles. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 123 Schedule to the Report of the Directors (continued) A copy of the Articles may be found on the Group website: www.bankofireland.com. Persons with a signiﬁcant direct or indirect holding of stock in the Company. Details of significant shareholdings may be found on page 120 of the Report of the Directors. Special rights with regard to the control of the Company There are no special rights with regard to control of the Company. Shares relating to an employee share scheme that carry rights with regards to the control of the Company that are not exercisable directly by employees. The Bank of Ireland Inland Revenue Approved UK Stock Incentive Plan (SIP) provides that in respect of resolutions proposed at general meetings of the Company, voting rights in respect of shares held in trust for employees who are participants in the SIP are to be exercised in accordance with the employees’ written instructions to the trustees of the SIP. In the case of ‘any other business’ at an AGM of the Company, the SIP trustees are entitled to vote (or refrain from voting) as they think fit. The Group's 2023 FSA Plan provides for the granting of awards of shares to Executive Directors and certain employees of the Group. In the case of any shares held in trust for participants pursuant to any award under the FSA, the trustee shall confer a proxy on each participant in whom the beneficial interest in such shares are vested so that such shares may be voted by such participants at any vote or meeting of shareholders. Restrictions on voting rights There are no unusual restrictions on voting rights. Agreements between shareholders that are known to the Company and may result in restrictions on the transfer of securities or voting rights. There are no arrangements between shareholders, known to the Company, which may result in restrictions on the transfer of securities or voting rights. Rules of the Company concerning the: Appointment and replacement of Directors All Directors appointed between AGMs are submitted to shareholders for re-election at the first AGM following their appointment. In accordance with the UK Code, all Directors retire by rotation every year and, if eligible, may offer themselves for re-election, subject to satisfactory performance evaluation. In proposing the election or re-election of any individual Director to the AGM, the reasons why the Board believes that the individual should be elected or re-elected are provided in the Chairman’s Letter to shareholders. Amendment of the Company’s Constitution The Company’s Constitution may be amended by special resolution passed at an AGM or EGM. An AGM and a Meeting called for the passing of a special resolution shall be called by at least twenty one clear days’ notice. Special resolutions must be approved by not less than 75 per cent of the votes cast by such members as, being entitled to do so, vote in person or by proxy. No business may be transacted at any General Meeting unless a quorum of members is present at the time when the Meeting proceeds to business. Two persons present in person or by proxy and entitled to vote shall constitute a quorum. Powers of the Company’s Directors, including powers in relation to issuing or buying back by the Company of its shares Under its Articles, the business of the Company is managed by the Directors, who exercise all powers of the Company as are not, by the Articles or by the Companies Act, required to be exercised by the Company in General Meeting. The Directors may exercise all the borrowing powers of the Company and may give security in connection therewith. These borrowing powers may be amended or restricted only by the shareholders in General Meeting. The members of the Company in General Meeting may at any time and from time to time by resolution increase the share capital of the Company by such amount as they think proper. Whenever the share capital of the Company is so increased, the Directors may, subject to various provisions of the Articles, issue shares to such amount not exceeding the amount of such enlargement as they think proper. All ordinary shares so issued shall rank in equal priority with existing ordinary shares. Subject to provisions of the Companies Act, to any rights conferred on any class of shares in the Company and to the Articles, the Company may purchase any of its shares of any class and may cancel any shares so purchased or hold such shares as treasury shares (the ‘treasury shares’) with liberty to re-issue any such treasury shares in accordance with Section 109 of the Companies Act 2014. The Company shall not make market purchases of its own shares unless such purchases shall have been authorised by a special resolution of the Company and by a special resolution passed at a separate general meeting of the holders of each class of shares. Signiﬁcant agreements to which the Company is a party that take eﬀect, alter or terminate upon a change of control of the Company following a bid and the eﬀects of any such agreements. There are no significant agreements to which the Company is party that take effect, alter or terminate upon a change of control of the Company following a bid, however, certain Group agreements may be altered or terminated upon a change of control of the Bank or BoI (UK) plc following a takeover. Those that may be deemed to be significant in terms of their potential impact on the business of the Group as a whole are the joint venture agreements between BoI (UK) plc and Post Office Limited in the UK (in respect of FX and Post Office branded retail financial services products). Agreements between the Company and its Directors or employees providing for compensation for loss of oﬃce or employment that occurs because of a bid. There are no agreements between the Company and its Executive Directors or employees providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) that occur because of a bid. The service contracts for NEDs do not make provision for benefits on termination in the event of bid. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 124 Remuneration Report At a glance 2023 changes to Remuneration Executive Directors In line with the changes to the Directors' Remuneration Policy confirmed in an advisory vote at the 2023 AGM, and as outlined in the Group's 2022 Annual Report, the following changes were made to the remuneration of the Executive Directors in 2023: • Salary: An increase in the salary of the Group Chief Financial Officer (CFO) to €550,000, implemented from the date of the AGM. • Pension: Inclusion of the Group Chief Executive Officer (CEO) in the Group's pension scheme, implemented from the date of the AGM. • Variable pay: Participation in the new Group Profit Share (GPS) scheme on the same basis as all eligible employees. Payments are capped at €20,000. Group Profit Share The Group introduced a GPS variable pay scheme in 2023 which is capped at €20,000 for all employees across the Group, including Executive Directors (Davy colleagues do not participate in the GPS). Other Remuneration Changes for the wider workforce • An annual salary review budget for 2023 of 3.5% was applied with effect from 1 January 2023. The actual colleague level of salary increase was based on each colleague's 2022 individual performance evaluation. • Enhancements were made to colleague benefits including the implementation of a personal benefit pot of €200 / £175 for junior colleagues and the ability to buy and sell annual leave, for all colleagues. In addition, a new health insurance benefit, was announced in 2023, which will be provided in 2024 to the wider workforce, not already in receipt of same. • Additional cost of living supports were provided to colleagues, including an additional 1.5% salary increase on 1 June 2023 for junior colleagues and provision of a once off cost-of-living voucher of €750 (£940) to all colleagues below senior manager level. Remuneration restrictions • In November 2022, the Irish Government announced a change to the remuneration restrictions following the sell down of their shareholding in Bank of Ireland, including: – removal of the €500,000 cap on total remuneration; – the ability to operate variable schemes, subject to a cap on variable remuneration of €20,000 which applies to all colleagues, Group wide (excluding Davy); and – the ability to implement new benefits. • The cap on variable pay of €20,000 significantly constrains the Group's ability to structure and position senior role holder's compensation packages competitively against the market. This causes significant risk for the Group for the recruitment and retention of senior high calibre employees with appropriate skills and also constrains our ability to create a strong link between their individual behaviour and their compensation outcomes. • The Group maintains an ongoing dialogue with the Department of Finance in relation to the remaining remuneration restrictions and if these were to be lifted, the Group would consider these changes and seek shareholder approval to update the existing remuneration policy, as appropriate, including the possible introduction of a market competitive variable pay scheme for Executive Directors. Shareholders' statement on remuneration Shareholders in an advisory vote approved the 2022 Directors' Remuneration Report and the 2023 Directors' Remuneration policy for three years at the AGM held on 23 May 2023. Directors' Remuneration Report: Vote No of shares Percentage For 235,964,200 99.57 Against 1,014,520 0.43 Directors' Remuneration Policy: Vote No of shares Percentage For 228,924,498 98.64 Against 3,152,953 1.36 2023 summary of Group performance 73% employee engagement score 46% female appointments to management & leadership positions €1,938m Profit before tax Green bond issuance Issued €2.25bn in bonds through Green Bond Framework bringing total issuances to date to c.€4.75bn 14.3% CET1 Ratio 17.3% RoTE1 (adjusted) in 2023 (2022 restated: 10.1%) €1.15bn Capital distributions 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. As a result comparative figures have been restated to reflect the impact of the new standard Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 125 Remuneration Report (continued) Summary Executive Directors' remuneration and alignment to wider workforce A summary of the remuneration structures for the Executive Directors, including how this aligns with the approach for all colleagues, is set out below and is provided for information only. The full policy, including recruitment and leaver provisions, can be found on pages 119 to 131 of the 2022 Annual Report and on the Group website at https://investorrelations.bankofireland.com/app/ uploads/Bank-of-Ireland-Annual-Report-2022.pdf. Fixed Remuneration Operation Executive Directors Alignment with Wider Workforce Salary reflecting skills and experience required for role, with reference to market benchmarking. Base salaries are set at a level to reflect the skills and experience required supporting recruitment and retention. Salary levels are reviewed on an annual basis and may increase with reference to a number of factors including individual performance, market rates of pay and Group Performance. Paid 100% in cash. Reviewed on a regular basis versus market information. Fixed Share allowance (FSA) Enabling the Group to align total pay, closer to market, reflecting the cap on variable pay, without the need to increase salary. Paid in BoI Group shares four times a year. A retention period applies with shares released annually on a pro-rata basis over three years from the date of payment of the allowance. The allowance is not subject to any performance conditions. To be introduced from 2024 onwards for Executive Directors at 25% of salary for 2024. increasing to 50% of salary from 2025. Allowances are delivered over a multi- year period aligning to longer term shareholder interests. A number of senior colleagues are eligible for a FSA under the same terms and conditions as the Executive Directors with the allowance level set for each participant based on a number of factors, including the external market. Pension To encourage planning for retirement and provide retirement benefits that are appropriately competitive in the market. The Group operates a Defined Contribution (DC) scheme (RetireWell) for all new hires. Employees hired prior to September 2014 are members of the Group's legacy Defined Benefit (DB) or hybrid pension schemes, with terms consistent across the eligible populations. Paid as an employer contribution to the relevant pension scheme, on the same basis as other colleagues participating in the relevant pension scheme. A pension cash alternative is available to colleagues who meet certain Revenue thresholds. Benefits Provision of market competitive benefits that support colleagues in carrying out their duties. Access to benefits and benefit levels can vary based on seniority. Benefit provision is kept under regular review to ensure the benefits provided are valued by employees, competitive versus the market and cost effective. Life assurance is provided to all eligible employees. Other benefits are typically dependent on role and may include mobile phone; car; cash allowance; and relocation costs. A new health insurance benefit will be provided in 2024 to the wider workforce, not already in receipt of same. All employee share plans Not currently in place, but if implemented, will be designed to promote share ownership. If implemented, all Directors and employees will participate on the same basis. Group profit share To provide all employees an opportunity to share in the success of the business based on Group and individual performance. All employees of participating Group entities, who meet certain criteria will be eligible for a GPS award. The award will consider individual and Group performance over the year. Consistent terms for all employees including Executive Directors. Award levels, as a percentage of salary, are consistent for all employees, based on their individual performance rating and subject to overall Group performance. The appropriateness of the final profit share is assessed against a mix of financial and non-financial criteria, including profit. Awards are subject to the relevant regulatory requirements, including risk adjustment. Awards are limited to €20,000 in line with current remuneration restrictions, or tax rules. A standard individual performance assessment process applies to all colleagues across the Group, including Executive Directors, with Colleagues' personal performance rating determining the award, subject to available funding. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 126 Remuneration Report (continued) Variable remuneration Operation Executive Directors Alignment with wider workforce Shareholding requirement To provide long term alignment between the experience of Executive Directors and Bank of Ireland shareholders during and post- employment. In-employment of 100% of salary. Post-employment of the minimum of the in-employment level or actual shareholding at time of departure. Shares are to be held for 2 years post departure from the Group. Applied to Executive Directors from 1 January 2024, upon implementation of the Fixed Share Allowance. Not applicable. 2023 Group Profit Share Outcome The Committee reviewed and agreed the GPS pool based on an assessment of the Group’s profit performance relative to expectations set at the start of the financial year and taking into account performance against a range of financial and non-financial measures. In making this assessment, the Committee took into consideration the following: • improvement in the Group’s financial performance, in particular noting profit before tax increased to €1.9 billion (2022 restated for IFRS 17: €1.0 billion); • the strong capital position with fully loaded CET1 ratio of 14.3%; • good progress on improving customer satisfaction; • improvements in the employee engagement metric increasing to 73% (2022: 68%); • strong progress against our climate initiatives of increasing green / sustainable financing; and • the Group’s performance against financial and non-financial measures, including the performance of the Group in terms of risk management. Based on the above assessment, the Committee approved a profit share pool for 2023. In setting this pool, the Committee applied a risk related reduction relating to risk profile and risk events during 2023. Approximately 10,000 eligible employees, including Executive Directors participating in the profit share pool with individual awards dependent on individual performance ratings. Remuneration outcomes in 2023 for the Executive Directors Single total figure of Remuneration for Executive Directors in 2023 The information below forms an integral part of the audited financial statements as described in the basis of preparation in note 1 to the financial statements. Executive Directors Reported Year Gross Salary €’000 Benefits1 €’000 Pension2 €’000 Total fixed pay €’000 Annual Bonus €’000 Total €’000 M O’Grady 3 2023 950 9 95 1,054 17 1,071 2022 249 7 13 269 – 269 M Spain4 2023 530 – 94 624 17 641 2022 375 2 90 467 – 467 F McDonagh 2023 – – – – – – 2022 663 4 – 667 – 667 G Kelly 2023 – – – – – – 2022 176 2 20 198 – 198 1 The figure includes car allowances and, where applicable, benefits in kind. 2 All pension amounts have been determined by Willis Towers Watson, the Group's actuarial advisors. 3 M O'Grady held the role of CFO until 31 March 2022 and was appointed CEO on 17 November 2022. 4 M Spain was appointed CFO on 31 March 2022. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 127 Remuneration Report (continued) Remuneration outcomes in 2023 for the Non-Executive Directors Remuneration for Chair and Non-Executive Directors Non-Executive Directors Reported Year Fees €’000 Benefits €’000 Total €’000 Chair: P Kennedy 2023 394 – 394 2022 394 – 394 Deputy Chair: R Goulding 2023 206 – 206 2022 180 – 180 G Andrews 2023 104 – 104 2022 94 – 94 I Buchanan 2023 160 – 160 2022 169 – 169 E Bourke 2023 117 – 117 2022 110 – 110 E Fitzpatrick 2023 175 – 175 2022 139 – 139 M Greene 2023 156 – 156 2022 123 – 123 F Muldoon1 2023 132 – 132 2022 174 – 174 S Pateman 2023 98 – 98 2022 98 – 98 M Sweeney1 2023 20 – 20 2022 – – – 1 F Muldoon held the role of Independent Non-Executive Director (NED) until 30 September 2023. M Sweeney was appointed independent NED on the 1 October 2023. The annual base fee of Directors and additional fees for committee membership and chairing roles was reviewed during 2023. The Directors' base fee had not been reviewed since the application of the remuneration restrictions in 2009. In accordance with the permissions granted by shareholders by resolution in 2017 and in the Constitution, an increase of €12,000 in the annual base fee payable to Directors was approved, effective on 1 January 2024. In accordance with the Constitution, fees for committee membership and chairing duties are approved in certain instances to reflect additional responsibilities outside the scope of the ordinary duties of a Director. The approach to these additional fees was also reviewed to ensure it remained appropriate and a 5% increase (equating to c.€5,250 per annum) was applied to areas of heightened activity levels, also effective from 1 January 2024. When reviewing the remuneration of Directors, consideration was given to the extended period since they were last reviewed, the nature and complexity of the role of Non- Executive Director of the Bank, and wider workforce remuneration and related changes over the extended period. The increases were broadly aligned to increases across the workforce during the same time period. No Director participated in deciding their own remuneration. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 128 In line with the variable pay restrictions applicable to the Group and maximum award for the Group CEO and Group CFO for 2023 was capped at €20,000. Taking into account the Group performance versus a mix of financial and non- financial criteria, including profit and risk assessment, the risk reduction applied to the 2023 profit share pool (as noted above) and their individual performance, the Committee has determined that they both should receive a Group Profit Share award of €16,500. A summary of their personal performance is provided below. Myles O'Grady (Group Chief Executive) Mark Spain (Group Chief Financial Officer) Successfully completed a strategic review and launched the Group's strategy. Successful financial management, delivering key financial measure outcomes (including PBT and RoTE). Revised the Group's Purpose and Values, creating a framework to drive forward the Group's culture. Managing cost base in highly inflationary environment. Successful delivery of financial, commercial, ESG and colleague outcomes. Effective balance sheet management with CET1 ratio of 14.3%. Refreshed leadership team through a number of internal and external key appointments Led implementation of ESG strategy. Remuneration Report (continued) Wider workforce remuneration ethos and principles Our approach to remuneration is consistent for all employees. Our ethos is to reward employees fairly and competitively for their contribution to the Group. Reward structures are reviewed on a regular basis to assess the competitiveness of the total reward arrangements against market norms and ensure compliance with the prevailing regulatory requirements and remuneration restrictions. The following principles apply, however, their application is impacted/negated for senior role holders by the €20,000 cap on variable pay. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 129 Seeks to reward all employees fairly and transparently, promoting the concept of 'equal pay for equal work' by operating a consistent approach to remuneration for colleagues. Reward structures are designed to attract, retain, and engage high calibre employees. Employee focused Supporting and encouraging fair treatment of customers, whilst mitigating the potential for conflict between commercial, customer and public interests with pay practices. The reward structures are designed to avoid any conflict with an employee's duty to act in the best interests of customers or clients. Customer focused Inclusive basis The Group uses recognised external benchmarks to understand the remuneration levels of industry peers and remuneration offered by other industries who compete with the Group for talent in each of the Group’s geographical locations. Externally aligned Performance development plays a key role in aligning individual objectives with the Group’s overall strategy, financial and non-financial goals and values. Performance outcomes, using a combination of 'what' objectives and 'how' behaviours, inform individual remuneration and provide a clear link between performance and remuneration. Performance aligned Reward is determined taking into account the Group’s performance against its environmental objectives and its customer and employee goals. ESG aligned The Policy is designed to promote high performance and, a strong risk management culture where risk- taking is aligned to the Group Risk Appetite Statement. All employees are required to have a risk priority in their Thrive performance development plan. Increases in remuneration and the potential awarding of variable remuneration is subject to the Group’s ability to pay and on maintaining strong capital and liquidity levels. Risk aligned The Policy is designed and implemented on an inclusive basis, including gender-neutrality, with pay for male and female colleagues monitored on an annual basis. Workforce engagement The Group continues to prioritise workforce engagement to good effect; the colleague engagement metric is up 22 points since it was first measured in 2017, to 73%. This is due to a number of initiatives including those undertaken by the Workforce Engagement Director (WED), who is a member of the Group Remuneration Committee and during 2023 undertook the following: • 'open door' sessions with groups of colleagues drawn from various businesses and divisional teams; • deep dive listening sessions with the industrial relations team and UK Partners' Council; and • branch visits with staff across Dublin and Mayo. Colleagues discussed a variety of issues with the WED which were shared with the Board during 2023, including the positive impact of hybrid working; the increase to UK entry level salaries; the introduction of a suite of family friendly policies and well- being initiatives; the 2023 salary review; and the cost of living measure that had been introduced to support the financial wellbeing of colleagues. Remuneration Report (continued) Implementation of the Remuneration Policy for 2024 (for the Executive Directors) Salary: Group CEO salary remains unchanged, Group CFO salary will increase to €600,000 with effect from 1 January 2024 as per the planned increase previously set out in our 2022 Directors Remuneration Report. Other fixed pay: A Fixed Share Allowance (FSA) of 25% of salary will be paid in 2024, (this will increase to 50% of salary in 2025). The FSA is awarded in four instalments during the year in BoI shares and delivered over a three-year period. There are no performance conditions attached to the FSA. Maximum variable pay opportunity: No change from 2023. The Executive Directors participate in the Group Profit Share scheme on the same basis as all other eligible colleagues and the maximum award is the lower of 10% of salary or €20,000. Group profit share: The 2024 Group profit share scheme will operate on a similar basis to the 2023 scheme, with awards subject to overall Group performance (assessed against a mix of financial and non-financial criteria, including profit and related metrics, affordability, customer and ESG, with the overall pool subject to risk assessment) and individual performance. Other required disclosures Role holder Contract start date Notice period from the Group and the role holder Group CEO 17 November 2022 9 Months Group CFO 31 March 2022 6 Months Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 130 Remuneration Report (continued) SRD year on year change in remuneration The table below is required under the Companies Regulations 2019 (Directors’ Remuneration Policy and Directors’ Remuneration Report), which implement Articles 9a and 9b of European Directive 2017/828/EC1 (commonly known as the Revised Shareholder Rights Directive or SRD), the table below shows the year on year change and percentage change in Directors’ remuneration and the year on year change and percentage change in the average remuneration of employees during the year ended 31 December 2023 compared to the year ended 31 December 2022, 31 December 2021 and 31 December 2020 and 31 December 2020 and 31 December 2019. NED fees are annualised. Changes to NED fees reflect additional responsibilities associated with membership of additional committees or appointment as Chair of committees, or as a Workforce Director, or to boards of subsidiaries. Unaudited: 2023 vs 2022 2022 vs 2021 2021 vs 2020 2020 vs 2019 Year on year (YoY) change in remuneration of Directors compared to employee average YoY change €’000 YoY change % YoY change €’000 YoY change % YoY change €’000 YoY change % YoY change €’000 YoY change % Executive Directors M O'Grady 1 (appointed CEO in 2022) 802 298% (283) (51%) 2 – n/a n/a F McDonagh (stood down as CEO in 2022) n/a n/a (293) (31%) (1) – 2 – Mark Spain (appointed CFO in 2022) 174 37% 467 n/a n/a n/a n/a n/a Non-Executive Directors P Kennedy – – – – – – – – R Goulding 26 14% 35 24% 27 23% 20 21% G Andrews (appointed NED in 2020) 10 11% 7 8% – – n/a n/a I Buchanan (9) (5%) 3 2% 6 4% 19 14% E Bourke 7 6% 8 7% 24 30% – – E Fitzpatrick 36 26% 37 36% 16 18% 8 10% M Greene 33 27% 44 55% – – 8 11% F Muldoon (stood down in September 2023) (42) (24%) 38 28% 62 66% 16 20% S Pateman – – – – – – 11 13% M Sweeney (appointed NED in October 2023) 20 100% n/a n/a n/a n/a n/a n/a P Haren (stood down 2020) n/a n/a n/a n/a n/a n/a – – P Mulvihill (stood down in 2020) n/a n/a n/a n/a n/a n/a 8 7% Change in average employee remuneration year on year 3 4% 1 1% 1 1% 2 3% Group profit after tax (€m) 1,601 897 1,055 (707) Percentage change in Group result after tax (%) 78% (15%) 249% (258%) 1 The level of increase reflects Myles O'Grady first year as CEO compared to a part year as CFO in 2022 and CEO for less than two months in 2022. Executive share options held by Directors and Secretary No share options were granted or exercised during 2023 and there were no options to subscribe for ordinary shares outstanding in favour of the Executive Directors or Secretary at 31 December 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 131 Remuneration Report (continued) Directors’ pension benefits Set out below are details of the change in accrued pension benefits for the Directors during the year ended 31 December 2023. (a) Additional inflation-adjusted accrued DB pension in the year € (b) Increase/ (decrease) in DB transfer value € (c) Accrued DB Pension Benefits at 31 December 2023 € (d) Group DC contributions € Executive Directors M Spain 16,772 312,922 198,404 17,085 Column (a) represents the inflation-adjusted increase in each individual's accrued DB pension during the year. Increases are shown after the opening position has been adjusted for statutory revaluation, and comprise allowance for additional pensionable service, any increases in pensionable earnings and any agreed adjustment in the individual's pension accrual. This is in line with the requirements of the Listing Rules and the related actuarial professional guidance. Column (b) is the additional / (reduced) capital value, less each Director's contributions, of Column (a) which could arise if the DB pension were to be transferred to another pension plan on the Director leaving the Group and is calculated using factors supplied by the actuary in accordance with actuarial guidance notes ASP PEN-2, and is based on leaving service pension benefits becoming payable at normal retirement date, age 60. Column (c) is the aggregate DB pension benefit payable at normal retirement age based on each Director's pensionable service with the Group at 31 December 2023. Column (d) is the Group's contributions to the supplementary section of its RetireWell DC arrangement. Directors’ and Secretary’s interests in shares A shareholding of a minimum of 34 shares is required by each Director within two months of their appointment to the Board. The beneficial interests of the Directors and Secretary in shares issued by the Group as disclosed to the Group are detailed below in accordance with the Euronext Dublin Listing Rules. The information below forms an integral part of the audited financial statements as described in the basis of preparation in note 1 to the financial statements. Number of €1.00 ordinary shares in BoIG plc at 31 December 2023 Number of €1.00 ordinary shares in BoIG plc at 1 January 2023 or at date of appointment Directors M O’Grady 5,000 5,000 M Spain 4,000 4,000 G Andrews 20,000 20,000 E Bourke 18,339 18,339 I Buchanan 5,034 5,034 E Fitzpatrick 5,000 5,000 R Goulding 25,000 25,000 M Greene 4,000 4,000 P Kennedy 180,156 180,156 F Muldoon 4,033 4,033 S Pateman 4,000 4,000 M Sweeney 6,060 1,060 Secretary S McLaughlin 874 – G Ryan – 327 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 132 Remuneration Report (continued) Apart from the interests set out above, the Directors and Secretary had no other interests in the shares / securities of the Company or its Group undertakings at 31 December 2023. There has been no change in the interests of each Director disclosed to the Company under the provisions of article 19 of the Market Abuse Regulation occurring between the end of the period under review and 23 February 2024. Advice to the Committee The Committee was assisted in its considerations by PwC UK, who was formally appointed by the Committee as its remuneration adviser in 2020 following a review of potential advisors and the quality of advice received. In 2023 the Committee completed the annual review of its performance which included an assessment of the quality of information provided to the Committee to discharge their responsibility. The remuneration advisors serve as a key source of such information. The Committee confirmed that the information and support received enabled its work and agreed to retain the services of PwC UK. PwC UK is a signatory to the voluntary Code of Conduct in relation to remuneration consulting in the UK. PwC UK and its network firms provide professional services in the ordinary course of business including assurance, advisory and tax advice to the Group. The Committee is satisfied that the advice received is independent and objective and receives an annual statement setting out protocols that have been followed by PwC UK to maintain independence. There are no connections between PwC and individual Directors to be disclosed. The Group Chairman, the Group CEO, Group Chief People Officer, Group CRO and the Head of Reward also attend meetings as appropriate at the invitation of the Committee Chair. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 133 Risk Management Report Contents 1 Principal Risks and Uncertainties 135 2 Risk Management Framework 143 2.1 Risk statement 143 2.2 Risk management 143 2.3 Risk roles and responsibilities 146 2.4 Risk culture 147 2.5 Recovery and resolution planning 147 2.6 Risk governance 147 3 Management of Principal Risks 150 3.1 Business and strategic risk 150 3.2 Capital adequacy risk 150 3.3 Conduct risk 154 3.4 Credit risk 155 3.5 Funding and liquidity risk 171 3.6 Life insurance risk 176 3.7 Market risk 176 3.8 Operational risk 181 3.9 Regulatory risk 182 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 134 The information in sections or paragraphs denoted as audited in sections 3.2, 3.4, 3.5, 3.6 and 3.7 and all the tables (except those denoted unaudited) in the Risk Management Report form an integral part of the audited financial statements as described in the basis of preparation in note 1 to the financial statements. All other information, including charts and graphs, in the Risk Management Report is additional disclosure and does not form an integral part of the audited financial statements. 1 Principal Risks and Uncertainties Principal risks and uncertainties facing the Group are set out below. For many of the risks, the allocation of capital against potential loss is a key mitigant; other mitigating considerations include those outlined below. This summary should not be regarded as a complete and comprehensive statement of all potential risks, uncertainties or mitigants; nor can it confirm that the mitigants would apply to fully eliminate or reduce the corresponding principal risks. Additionally, other factors not yet identified, or not currently material, may adversely affect the Group. ESG factors (including climate-related risks) represent a common risk driver across the Group's principal risk types and the Group ESG Risk Management Framework sets out the approach to the management of ESG risk factors in the Group. The Group continues to face a diverse set of challenges, including transformation agenda, higher inflationary and interest rate environment, and continuing volatile geopolitical environment. Business and strategic risk (Section 3.1 ) Business and strategic risk is the risk of not achieving agreed strategic and business goals, arising due to inadequate planning or implementation, and / or changes in the external environment or economic factors. This also includes adverse impacts on the franchise value, e.g. by implementing an unsuitable strategy, or maintaining an obsolete business model. Key points • In March 2023, the Group published its refreshed three-year strategy. Its aim is to build on the Group’s strong performance and strategic execution in recent years and future proof the business model for the medium term. The Group has also made significant progress with the integration of material strategic initiatives including the acquisitions of the KBCI portfolio and Davy. • The evolving competitive landscape, accelerated digitisation, changing consumer and business behaviours impact on the Group’s business model and strategic risk. The Group has a number of programmes underway delivering against its strategy. These programmes will support the Group’s strategic aims and improve the risk profile but can lead to increased risk as the programmes are executed. • The Group is committed to the UK market with its multi-year transformation strategy and ambition to be the leading multi- niche bank in the UK. This will be achieved by retaining a focus on value over volume, targeting specific market segments where the Group has expertise, building sustainable competitive advantage and delivering improvements in the provision of products and services to customers. This approach will deliver improved performance against financial objectives, which in turn reduces risk in the UK business. • There is ongoing caution relating to the higher inflationary and interest rate environment, and the associated cost of living impacts (customers’ financial wellbeing and affordability, Group values, political risks), given that further pressures could impact consumers’ appetite and ability to use Group products and services. • The Group continues to monitor developments in the geopolitical environment. Conflict in the Middle East, coupled with the continued fallout from Russia’s invasion of Ukraine, has the potential to create further inflationary pressures, in particular on oil prices, and create supply chain issues that could impact the global economy. The potential impacts of these macroeconomic and geopolitical dynamics represent a risk to the Group in its markets and this could manifest in adverse impacts to pricing, customer confidence and credit demand, collateral values, and customers' ability to meet their financial obligations. Key mitigating considerations • The Group has a Board approved Strategic Plan in place for the period 2023 - 2025 setting out a 3 year business plan with clear objectives to achieve, as well as Board approved risk appetite limits. • The Group strategy is supported by business divisional strategies and key enabling strategies across the Group’s functions which have been reviewed, challenged, and endorsed by the Board, the delivery of which will be monitored on an ongoing basis. • On an annual basis, the Board reviews the Group’s strategic objectives and key underlying assumptions to confirm that the strategic shape and focus of the Group remains appropriate. • The Board also receives regular deep dive presentations on key aspects of the Group’s strategy and regular updates on performance against strategic objectives by way of the Group OKRs dashboard. • The Board receives comprehensive reports setting out business and financial performance relative to plan, financial projections and capital and liquidity plans. The Board’s business, financial and risk considerations are further informed by regular economic updates, together with updates on developments relevant to the Group’s franchises, operations, customers, colleagues and other business activities. • The Enterprise Portfolio Office provides Group-wide portfolio oversight capability that considers culture, business model and systems to support delivery execution and leverage enterprise wide opportunities. • The current status of business and strategic risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 135 1 Principal Risks and Uncertainties (continued) Capital adequacy risk (Section 3.2) Capital adequacy risk is the risk that the Group has insufficient capital to support its normal business activities, meet its regulatory capital requirements or absorb losses should unexpected events occur. Capital adequacy risk includes pension risk and recovery and resolution requirements. While all material risks impact on the Group’s capital adequacy to some extent, capital adequacy is primarily impacted by significant increases in credit risk or RWAs, materially worse than expected financial performance and changes to minimum regulatory requirements. Key points • CET1 ratio of 14.5% under regulatory rules and 14.3% on a fully loaded basis at 31 December 2023. • The Group is required to maintain a minimum CET1 ratio of c.10.93% on a regulatory basis at 31 December 2023: – this includes a Pillar 1 requirement of 4.5%, a Pillar 2 requirement (P2R) of 1.27%, a capital conservation buffer (CCB) of 2.5%, an Other Systemically Important Institutions (O-SII) buffer of 1.5% and a countercyclical buffer of 1.16%; – Pillar 2 guidance (P2G) is not disclosed in accordance with regulatory preference. • Total capital ratio of 19.2% under regulatory rules at 31 December 2023. • Leverage ratio of 6.4% on a regulatory basis and 6.3% on a fully loaded basis at 31 December 2023. • MREL ratio of 31.7% at 31 December 2023 is c.280bps above the Group's 1 January 2024 MREL requirement of c.28.9%. Key mitigating considerations • The Group closely monitors capital and leverage ratios to ensure all regulatory requirements and internal targets are met. In addition, these metrics are monitored against the Board approved Risk Appetite Statement and suite of Recovery Indicators. • Comprehensive stress tests / forward-looking ICAAP financial projections are prepared, reviewed, and challenged by the Board to assess the adequacy of the Group's capital, liquidity and leverage positions. • The Group has a contingency capital plan which sets out the framework and reporting process for identifying the emergence of capital concerns and potential options to remediate same. Pension risk • A number of the Group sponsored deﬁned beneﬁt pension schemes are currently in deficit under the IAS 19 accounting deﬁnition, requiring the Group to set aside capital to mitigate these risks. • The deﬁned beneﬁt pension schemes are subject to market fluctuations and these movements impact on the Group’s capital position, particularly the Group’s CET1 capital ratio, which amongst other things, could impact on the Group’s dividend capacity. See note 41 Retirement beneﬁt obligations. Key mitigating considerations • Board approved risk appetite limits. • To help manage pension risk, defined benefit schemes were closed to new entrants in 2007 and a new hybrid scheme (which included elements of defined benefit and defined contribution) was introduced for new entrants to the Group. The hybrid scheme was subsequently closed to new entrants in 2014 and a new defined contribution scheme was introduced for new entrants to the Group from that date. • In addition, the Group implemented two Pension Review programmes in 2010 and 2013 resulting in significant restructuring of defined benefit scheme benefits which were accepted by unions and by staff through individual staff member consent. • In return for the deficit reduction achieved through these programmes, the Group also agreed to increase its support for the schemes, above existing arrangements, so as to broadly match the IAS 19 deficit reduction arising from the benefit changes and to facilitate a number of de-risking initiatives. • The Group monitors on an ongoing basis the opportunities at an appropriate cost to increase the correlation between the assets and liabilities of the scheme. ◦ Continued progress was made over the course of the year on the de-risking of the investment strategy of the Bank of Ireland staff pensions fund (BSPF), the Group’s largest pension scheme. ◦ De-risking over recent years has resulted in a reduction in the sensitivity of the Group’s pension schemes to movements in interest rates, inflation and equities. ◦ The Group’s net defined benefit position is a surplus of €0.7 billion at 31 December 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 136 1 Principal Risks and Uncertainties (continued) Conduct risk (Section 3.3) Conduct risk is the risk of poor outcomes for, or harm to, customers, clients, and markets, arising from the delivery of the Group’s products and services. The Group is exposed to conduct risk as a direct and indirect consequence from all the activities that the Group engages in during the normal conduct of its business. These risks may materialise from failures to comply with regulatory requirements or expectations, as an outcome of risk events in other principal risk categories, from changes in external market expectations or conditions, provision of products and services and the various activities performed by staff, contractors and third party suppliers. Conduct risk includes market integrity, customer protection, financial crime, and data privacy risks. Key points • During 2023, regulatory oversight by supervisory bodies focused on a number of the key conduct risk areas, including KBCI and Ulster Bank exits, Structural Retail Products, Benchmark Reform, Product Suitability and the CBI’s continuing comprehensive review of the 2012 Consumer Protection Code. • Engagement with the Group’s regulators in 2023 included matters such as account switching, evolution of the interest rate environment (particularly in the context of deposit rates), the integration of Davy and the acquisition of the KBCI portfolio. • The heavy regulatory agenda impacting conduct risk is expected to continue in 2024. The Group will maintain its focus on continuing compliance with the existing regulatory requirements of the jurisdictions in which it operates and that its products and services continue to meet the expectations of customers, clients, and markets. • Regulators continue to conduct investigations and examinations on an industry wide basis from time to time. Key mitigating considerations • Board approved Risk Appetite Statement is informed by a set of key risk indicators. • A suite of policies are in place for the management of conduct risk across the Group. Requirements for risk mitigation for each risk are outlined in the respective risk policies and procedures. • Group-wide processes are in place to identify, assess, plan, develop and implement key conduct requirements. • Processes are in place to identify, assess, manage, monitor and report conduct risks as well as controls to mitigate those risks. • Regular status updates and monitoring at senior levels in the Group including reporting to the BRC and the Board. • Processes in place to support the reporting, investigation, resolution and remediation of incidents of non-compliance. • Culture strategy developed based on the outcomes we wish to deliver guided by the Group’s values. • Group-wide education and training are in place. Credit risk ( Section 3.4) Credit risk is the risk of loss resulting from a counterparty being unable to meet its contractual obligations to the Group in respect of loans or other financial transactions, or any other deterioration in a counterparty's creditworthiness. This risk includes debt underwriting risk, loan origination risk, credit concentration risk, cross-border transfer risk, credit quality deterioration risk, default risk, and collateral valuation risk. Credit risk arises from loans and advances to customers and from certain other financial transactions such as those entered into by the Group with financial institutions, sovereigns, and state institutions. Key points • The macroeconomic outlook remains uncertain in the Group’s key markets, reflecting risks associated with geopolitics, elevated inflation, and interest rates. • Total loans and advances to customers (before impairment loss allowance) at amortised cost increased to €80.7 billion at 31 December 2023 from €73.0 billion at 31 December 2022 reflecting the loan book acquisition from KBCI of €8.0 billion, partly offset by the combined impacts of NPE disposals, currency translation, utilisation of impairment loss allowances and net redemptions in the year. • The Group’s asset quality remains robust despite the impact of geopolitical risk, elevated inflation and interest rates. NPEs have reduced in the year from €2.6 billion to €2.5 billion primarily due to resolution strategies including the disposal of non-performing exposures, partially offset by flows into NPE in residential mortgages reflecting the impact of the acquisition of €0.1 billion of NPEs from KBCI and new defaults in the year. The volume of assets in stage 2 reduced marginally from €12.6 billion to €12.5 billion. • Total net impairment loss on financial instruments of €425 million (includes €22 million impairment loss being recognised as non- core relating to UK personal loans) compared to a prior year loss of €187 million. The net loss reflects a net loss of c.€283 million from portfolio activity; a c.€82 million net loss arising from impairment model updates incorporating the change in the macroeconomic outlook; and c.€60 million net loss from the application of management adjustments at 31 December 2023. Key mitigating considerations • Board approved Group Credit Risk Policy and risk appetite limits, including credit category limits, together with a framework for cascade to businesses and portfolios. • Exposure limits for credit concentration risk. • Defined credit processes and controls, including related credit risk policies, independent credit risk assessment and defined authority levels for sanctioning lending. • Processes to monitor compliance with policies and limits. • Enhanced management of credit risk associated with customers affected by the economic impacts of elevated inflation and interest rates (as detailed on page 164 of the Risk Management Report). • Dedicated structures focused on the management of customers in financial difficulty. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 137 1 Principal Risks and Uncertainties (continued) Funding and liquidity risk (Section 3.5 ) Funding and liquidity risk is the risk that the Group will experience difficulty in financing its assets and / or meeting its contractual payment obligations as they fall due, or will only be able to do so at substantially above the prevailing market cost of funds. Liquidity risk arises from differences in timing between cash inflows and outflows. Cash inflows are driven by, amongst other things, the maturity structure of loans and investments held by the Group, while cash outflows are driven by items such as the term maturity of debt issued by the Group and outflows from customer deposit accounts. Funding risk can occur where there is an over-reliance on a particular type of funding, a funding gap, or a concentration of wholesale funding (including securitisations) maturities. The Group funds an element of its sterling balance sheet in part from Euro (via cross currency derivatives), which creates an exposure to the cost of this hedging. Key points • Group customer deposit volumes of €100.2 billion are €1.0 billion higher predominantly driven by the acquisition of the KBCI deposit portfolio of €1.8 billion, partially offset by lower RoI deposits of €0.6 billion and lower Retail UK deposits of €0.2 billion. On a constant currency basis, Group customer deposits increased by €0.7 billion (see page 357 for further information on alternative performance measures). • The Group’s loan to deposit ratio (LDR) increased by 7% to 80% at 31 December 2023 (2022: 73%). • The Group’s LCR at 31 December 2023 was 196% (2022: 221%). The Group’s NSFR at 31 December 2023 was 157% (2022: 163%). Key mitigating considerations • Board approved risk appetite limits. • Group Funding and Liquidity Policy, procedures and methodologies. • Comprehensive liquidity monitoring framework. • Annual Board approved forward looking ILAAP. • Strategic plan articulating and quantifying deposit projections, wholesale funding and lending projections for all divisions. • Contingency Funding Plan and Recovery Plan in place with annual updates. • Maintenance of liquid assets and contingent liquidity available for use with market counterparties and / or in liquidity operations offered by Monetary Authorities. • The maturity profile of the Group’s cross currency hedging is broadly spread over 24 months. Life insurance risk (Section 3.6) Life insurance risk is the risk of unexpected variation in the amount and timing of claims associated with insurance benefits. This variation, arising from changing customer mortality, life expectancy, health, or behavioural characteristics, may be short or long-term in nature. Life insurance risk arises from the Group's life insurance subsidiary, NIAC selling life insurance products in the Irish market. Key points • NIAC remains focused on the Irish insurance market, selling a core suite of products across a range of distribution channels, including the BoI customer base. The risk profile in respect of life insurance risk is largely stable. The processes of appropriate underwriting at both the new business and claims stages, as well as reinsuring a proportion of the life insurance risk written, all remain principal risk management tools. • The 2023 ORSA has been completed and reported to the NIAC Board. The process confirmed the robustness of NIAC’s financial position in the face of extreme but plausible adverse scenarios. • NIAC maintains sufficient capital and liquid resources to enable it to meet cash flows associated with establishing and maintaining a portfolio of life insurance business. Available resources have been tested for adequacy under a wide range of adverse sensitivities and scenarios, with no significant weaknesses identified. The Company’s capital structure is consistent with its risk profile. • Experience in 2023 was reasonably stable and broadly in line with assumptions overall. Key mitigating considerations • Board approved risk appetite limits. • Underwriting standards and limits are in place and apply throughout the policy lifecycle from risk acceptance to claim settlement. • Reinsurance is used to manage the volatility from both individual claims and aggregate risk exposures. Coverage is placed with a diversified list of approved counterparties. High levels of reinsurance act as a significant mitigant if there were adverse mortality developments, together with the diversification effect of mortality and longevity risk. • The sensitivity of the Group’s exposure to life insurance risk is assessed regularly and appropriate levels of capital are held to meet ongoing capital adequacy requirements. • A range of sensitivities and scenario tests are performed as part of the annual ORSA process. • Management undertakes a rigorous analysis of claims and persistency experience on a regular basis and monitors these against the assumptions in its valuation and pricing bases so that these can be adjusted to reflect experience. Management undertakes pro-active operational initiatives in order to manage persistency risk. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 138 1 Principal Risks and Uncertainties (continued) Market risk (Section 3.7) Market risk is the risk of loss arising from movements in interest rates, FX rates, equity, credit spreads or other market prices. Market risk includes market risk in the trading book, market risk in the banking book, and market risk in the life business and is made up of discretionary risk, structural interest rate risk in the banking book (IRRBB) risk, credit spread risk, risks from the transaction of financial instruments for customers, structural FX risk, and securities underwriting risk. Market risk arises in the balance sheet which contains assets and liabilities linked to a benchmark market rate or an administered rate (structural basis risks), in the Group’s business mix, predominantly retail and corporate lending activity, discretionary risk taking in interest rate, credit and equity markets and in the Group’s bond portfolio, which is subject to the impact of changes in the spread between bond yields and swap rates. The market risk profile of the Group may, in addition to the above risks which arise in the usual course of a business cycle, be impacted by shifts in market volatility as a result of external factors. Earnings for NIAC are also indirectly exposed to changes in equity and property markets through fee income generated on unit-linked customer investments. The Group permits discretionary risk taking activity in Davy's Capital Markets business. Discretionary risk arises through market-making, whereby positions can be held to facilitate client orders. Structural market risk arises from the presence of non-interest bearing liabilities (equity and some current accounts), the multi-currency nature of the Group’s balance sheet and changes in the volume of impaired assets and the floating interest rates to which the Group’s assets and liabilities are linked. Key points • The VaR arising from discretionary risk and residual gap risk remained at relatively low levels during 2023. The Group has ceased proprietary trading in its Global Markets business with the remaining discretionary risk assumed in Davy. • With the exception of market basis risks, the Group manages structural market risks arising from interest rate and FX positions according to passive Asset Liability Management conventions, which are regularly reviewed by the Asset and Liability Committee (ALCO). Key mitigating considerations • Board approved risk appetite limits. • Group Market Risk Policy. • Comprehensive framework for monitoring compliance with the Board’s market risk appetite limits, more granular market risk limits and other controls. • The Group substantially reduces its market risk through hedging in external markets. • VaR and extensive stress testing of market risks. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 139 1 Principal Risks and Uncertainties (continued) Operational risk (Section 3.8) Operational risk is the risk of loss resulting from suboptimal or failed internal processes, systems, human factors or from external events. It includes information technology, change management, information security and cyber, third party risk management (TPRM) and outsourcing, transaction processing, people, physical infrastructure, legal (a component being litigation and regulatory proceedings), data, model, financial and regulatory reporting, and tax risks. Operational risk arises as a direct or indirect consequence of the Group’s normal business activities through the day-to-day execution of business processes, the functioning of its technologies and in the various activities performed by its staff, contractors and third party suppliers. Operational risk losses can also be driven by: major change and the failure to deliver on the Group’s multi-year transformation agenda; model design, implementation errors or the inappropriate use of model outputs, data unavailability, poor quality, inadequate retention, misuse and destruction management, and failure to comply with legal and regulatory requirements. Operational risks can also arise from more complex and intense drivers such as the increasingly hostile and sophisticated cyber environment. Operational resilience works together with operational risk management to minimise operational disruptions and their effects. As the Group’s resilience profile improves, it becomes less prone to incur untimely lapses in the provision of Important Business Services. Key points • The management of operational risk has continued to mature across the Group resulting in enhanced risk identification and assessment, leading to improved risk based decisions and prioritisation of mitigating activities. • Progress continued on the enhancement and implementation of the revised Risk Library and on transitioning over time to a process driven risk and control assessment for operational risks. This is critical to enhance the effectiveness of the operational risk and resilience management throughout the Group. • The Group is managing a significant amount of change across culture, its business and operating model. This is underpinned by the ongoing multi-year programme on which substantial investment in its IT systems is being made. Given the risk associated to any large transformation, there is continued focus to ensure the sustainability and integrity of the Group’s operations. • The Group continues to strengthen the operational resilience maturity profile. During 2023 the Board approved the Group's Operational Resilience Policy, the Important Business Services and relevant Impact Tolerances; reflecting the adoption of the CBI Guidance and industry best practices. • On August 2023, the Group suffered a major IT incident impacting various Important Business Services. A thorough lessons learned exercise was conducted, in line with the Policy, to ensure a continuous improvement of the capabilities, to adapt and respond to future operational events. • Natural (non-redundancy) attrition has reduced throughout the year, being somewhat below pre-pandemic levels, with voluntary redundancy levels significantly reduced compared to 2021 / 2022. While the employment market remains buoyant for certain specialist skillsets, progress continues to be made in developing such skills internally via career pathways, and natural attrition in these skillsets have also reduced. Key mitigating considerations • Board approved risk appetite limits. • The RMF aims to embed adequate and effective risk management practices within business units throughout the Group. A number of policies, processes, technical standards and strategies, including an effective control environment and appropriate management actions, are employed to control the operational risk exposure. • Processes to identify, assess, manage, monitor and report risks as well as controls to mitigate those risks are in place with regular internal audits and testing carried out to ensure adequacy of controls. The Group continues to substantially invest in the transformation of IT systems and processes to reduce the likelihood and impact of risk events and improve operational resilience. • The people strategy provides a range of programmes and initiatives to enable the Group to retain appropriate numbers and / or calibre of staff having regard to remuneration restrictions in place for most of 2023 imposed by government, tax or regulatory authorities. • The Group continues to evolve and hone its colleague wellbeing supports including physical, mental, and financial, with a structured Wellbeing programme in place across the Group. Litigation and regulatory proceedings • Uncertainty surrounding the outcome of disputes, legal proceedings and regulatory investigations and proceedings including potential adverse judgements in litigation or regulatory proceedings. Key mitigating considerations • The Group has processes in place to seek to ensure the Group's compliance with legal and regulatory obligations, together with clear controls in respect of the management and mitigation of such disputes, proceedings and investigations as may be instigated against the Group from time to time. Tax risk • Tax risk is the risk that the Group fails to comply with all applicable tax laws and regulations including reporting and filing obligations, or is unaware of a tax liability. Key mitigating considerations • The Group has clearly defined tax governance procedures to identify, assess, manage, monitor, and report tax risks and to ensure controls mitigating those risks are in place and operate effectively. • The Group monitors potential changes to tax legislation or government policy and considers any appropriate remedial actions. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 140 1 Principal Risks and Uncertainties (continued) Regulatory risk (Section 3.9) Regulatory risk is the risk that the Group does not identify legal or regulatory change or appropriately manage its relationships with its regulators. The Group is exposed to regulatory risk as a direct and indirect consequence from all the activities that the Group engages in during the normal conduct of its business. Regulatory risk may materialise from failure to identify new or existing regulatory and / or legislative requirements or deadlines, ensure appropriate governance is in place to embed regulatory requirements into processes, or the failure to appropriately manage the Group's regulatory relationships. Regulatory risk includes ineffective regulatory change governance and ineffective regulatory engagement. Key points • During 2023, regulatory oversight by supervisory bodies focused on a number of key areas including business model and profitability, internal governance and risk management, operational risks, credit risks, the evolving Irish financial sector, and the developing global economic outlook. • Engagement with the Group’s regulators in 2023 included matters such as the evolution of the interest rate environment, regulatory reporting, IT resilience and operational risk, the integration of the Davy entity and KBCI portfolio, ESG, structural interest rate risk, credit exposures and the macroeconomic outlook. • The heavy regulatory and compliance agenda is expected to continue in 2024. The Group will maintain its focus on continuing compliance with the existing regulatory requirements of the jurisdictions in which it operates. • Regulators continue to conduct investigations and examinations on an industry wide basis from time to time. Key mitigating considerations • Board approved Risk Appetite Statement set in conjunction with the Group's business strategy and supported by a set of key risk metrics. • A suite of policies is in place for the management of risks across the Group. Requirements for risk mitigation for each risk are outlined in the respective risk policies and procedures. • Group-wide processes in place to identify, assess, plan, develop and implement key regulatory requirements. • Processes in place to identify, assess, manage, monitor and report regulatory risks as well as controls to mitigate those risks. • Regular status updates and monitoring at senior levels in the Group including reporting to the BRC and the Board. • Processes in place to support the reporting, investigation, resolution, and remediation of incidents of non-compliance. Key themes under focus Digital • Banking models are rapidly evolving, for both consumers and businesses in Ireland and globally. Rapidly shifting consumer behaviours and available technologies are changing how customers consume products and services. • These developments aﬀect the manner in which customers manage their day-to-day ﬁnancial aﬀairs. Money transmission and data driven integrated services are also forecast to rapidly evolve in the coming years, underpinned by regulatory developments including Regulation on Instant Credit Transfers. How the Group adapts to these developments could impact the realisation of market strategies and ﬁnancial plans, dilute customer propositions and cause reputational damage. Key mitigating considerations • In the context of the overall business strategy, the Group assesses and develops its complementary technology strategy to support and mitigate these risks. • Given the signiﬁcant developments to increase the digital capabilities of the Group on technology as well as increased regulatory requirements, the Group rigorously manages these demands within risk, capacity and ﬁnancial constraints. • The Group’s policies, standards, governance and control models undergo ongoing review to ensure continued alignment with the Group’s strategy to accelerate its pivot to digital and the resulting solutions, engaging appropriate external experts as required. Environmental, Social and Governance risk (including Climate risk) • The Group recognises ESG and climate-related considerations continue to be a growing agenda item for financial institutions and stakeholders. ESG risks and opportunities will continue to impact how the Group implements its strategy, business model, customer offering and how it manages risk in the Group. Accelerating climate change could lead to sooner than anticipated physical risk impacts to the Group and the wider economy and there is uncertainty in the scale and timing of technology, commercial and regulatory changes associated with the transition to a low carbon economy. In addition the focus from a stakeholders (investors, regulators, customers, colleagues etc.) and wider societal expectations is seeing an expanding of expectations from largely climate driven focus to the wider ESG agenda with increasing emphasis on a fairer and inclusive society. Key mitigating considerations • Conducting the Group’s business in a responsible and sustainable way is fundamental to achieving its purpose to help customers, colleagues, shareholders and society to thrive. Sustainability is embedded in the Group Strategy as one of the Group's core strategic pillars (Sustainable Company). • How the Group will achieve this aim is set out in the Group Sustainability Strategy which supports the Group Strategy through its three ESG pillars: Enabling Colleagues to Thrive, Enhancing Financial Wellbeing and Supporting the Green Transition. • The Group was the first Irish bank to have its greenhouse gas emission reduction targets approved by the Science Based Targets initiative including a target that our own operations will be net zero by 2030. BoI is also a signatory to the UN Principles for Responsible Banking and a supporter of the TCFD. • The Group recognises ESG factors (including climate-related risks) represent a common risk driver across the Group’s principal risk types and the Group ESG Risk Management Framework sets out the approach to the management of ESG risk factors in the Group. The BRR is the primary source of reporting for the impact of ESG related risks on the Group’s risk profile. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 141 1 Principal Risks and Uncertainties (continued) Key themes under focus (continued) Macroeconomic conditions and geopolitical uncertainty • The Group’s businesses may be affected by adverse economic conditions in countries where we have exposures, particularly in Ireland and the UK, unfavourable exchange rate movements and changes in interest rates, with international tax reform and the threat of increased global protectionism posing additional risks. • Geopolitical uncertainties could impact economic conditions in countries where the Group has exposures, market risk pricing and asset price valuations thereby potentially reducing returns. • The Group businesses may be affected by political, economic, financial and regulatory uncertainty from time to time in its key markets. • Conflict in the Middle East, coupled with the continued fallout from Russia’s invasion of Ukraine, has the potential to create further inflationary pressures, in particular on oil prices, and create supply chain issues that could impact the global economy. There is also a risk of other countries being drawn into the conflict in the Middle East, further exacerbating the situation, potentially impacting Irish and UK economies (the Group’s core markets), investment markets, and consumer sentiment. The potential impacts of these macroeconomic and geopolitical dynamics represent a risk to the Group in its markets and this could manifest in adverse impacts to pricing, customer confidence and credit demand, collateral values, and customers' ability to meet their financial obligations. Key mitigating considerations • The Group monitors the risks and impact of changing current and forecast macroeconomic conditions on the likely achievement of the Group’s strategy and objectives. • The Group manages its exposures in accordance with principal risk policies including maximum single counterparty limits and defined country limits. • The Group has in place a comprehensive stress and scenario testing process. • The Group is diversified in terms of asset class, industry and funding source. Transformation risk • The Group is undergoing significant transformation across culture, business model and systems which present challenges and risks and customer considerations. Failure to transform successfully could prevent the Group from realising its strategic priorities. Key mitigating considerations • The Board has put in place the GTOC that oversees the delivery of the Group's Transformation agenda and meet on a monthly basis. • The Group has also mobilised an Executive level forum: the Group Transformation Committee (GTC) which monitors the performance of the Group against the Transformation Plan. The Group has completed a Board approved plan for 2023 - 2025 setting out the Group’s strategic priorities. • Group has formulated a suite of transformation roadmaps that are underpinned by the Transformation Plan. A transformation focused management function co-ordinates and supports the safe delivery of this scale of change. • The GTOC oversees the business and strategy aspects of the Transformation Plan for its duration including review of updates relating to risks associated with key transformational initiatives. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 142 2 Risk Management Framework 2.1 Risk statement Risk appetite sets the boundaries the Group, including subsidiaries, is prepared to take in its risk taking and related business activities. The Group's approach to risk management ensures that the Group’s overall business strategy and remuneration practices are aligned with its risk and capital management strategies. The RMF is the foundation stone for how we manage risk in the Group. It sets out the Group-wide approach to risk management and reflects the Group's Risk Culture. At least annually, the RMF is reviewed by the Group CRO and approved by the Board following consideration and recommendation by the BRC. It establishes: • common principles for the risk management process of identifying, assessing, monitoring, mitigating, and controlling risks to the Group; • standard definitions of risk terms and classifications to ensure consistent application across the Group; • clear roles and accountabilities for the management of risk across the Group; • governance mechanisms by which risk oversight is exercised and risk decisions taken; • Group standards on risk policies, committee papers and reporting to ensure consistent application across the Group; • standard methods to identify and classify risks faced by the Group; • principles for setting risk appetite to articulate tolerances for the adverse outcomes of taking risk, and setting risk exposure limits designed to ensure a low probability of exceeding those tolerances; • risk policies and procedures as the foundation for risk mitigation in implementing the RMF; and • a framework for forward looking monitoring and reporting on risk as part of risk management information in the Group. 2.2 Risk management Risk management is the set of activities and mechanisms through which we make risk taking decisions and how we control and optimise the risk-return profile of the Group. Good risk management aligns with strategic objectives, code of conduct and stakeholder priorities. Risk management is central to the financial and operational management of financial service companies and fundamental to the Group’s strategic pillars of: • stronger relationship; • simple business; and • sustainable company. It is a Group-wide process of identifying, assessing, monitoring, and mitigating risks to the Group’s earnings, solvency, and franchise and is structured across five activities: • Risk Identification and Assessment. • Risk Appetite. • Risk Policies. • Stress Testing and Scenario Analysis. • Risk Monitoring and Reporting. Within each category the Group maintains risk management standards. Collectively these standards represent the Group’s risk management approach. Risk Identification and Assessment The Group ensures appropriate identification of risk through both top-down and bottom-up risk identification processes. A standard risk library is used to define all the Group's risk types in a consistent manner. The Risk Library document outlines the Group’s risk classification system. This system provides the structure through which accountability for risk management is assigned, and risk is reported. The Risk Library is used to define risk types and to cover the totality of gross risk types to which the Group is exposed. Principal risk types are the highest level risk type used to assist with identifying, assessing, monitoring, and mitigating risks to which the Group is exposed. They guide the assignment of risk management resourcing and organisation of the Group Risk division. The Group maintains and updates the Risk Library in two ways: • Firstly, during the annual review of its RMF, Group Risk conducts a top-down risk identification process. This establishes risk management’s view of the primary categories of types of risk facing the Group. These primary categories of risk are identified as the Group’s principal risk types. • Secondly, a bottom-up risk type assessment process is undertaken to identify the granular level risks that arise from all the activities that the Group engages in. Financial risks originate in the Group's business and primarily reside in the financial balance sheet. Financial risks are generally identified in the lending and trading processes in the case of credit and market risks, with the risk types defined in the Risk Library and quantified in terms of potential financial impacts. Similarly, for funding and liquidity, capital adequacy, risk assessment processes such as the ICAAP and ILAAP are used to identify, categorise, quantify, and control the risks to the Group. Operational risks originate in the activities the Group conducts. Once identified, the risk is assessed to determine the level of gross risk exposure and, after consideration of any mitigants, the residual risk exposure can be determined. These measurements (gross risk exposure and residual risk exposure) inform metrics used to monitor and control the Group’s risk profile against risk appetite. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 143 2 Risk Management Framework (continued) 2.2 Risk management (continued) The nine principal risk types are outlined below: ESG factors (including climate-related risks) represent a common risk driver across the Group's principal risk types. Risk Appetite The Group’s overarching risk strategy is to set and maintain the RMF to ensure that the Group has clearly identified and classified the risks its faces, set its risk appetite through statements of risk tolerance and quantitative limits, and through adherence with risk policy has observed these tolerances and limits as boundaries to its business strategy. This is achieved through appropriate processes, controls, reporting, and governance in place which enable the Group to: • address its target market with confidence; • protect its balance sheet; and • deliver sustainable profitability. Risk appetite flows from the Group's risk identity. Risk identity is the broad risk profile the Group must necessarily run to successfully pursue the Group's chosen business strategy, within risk capacity. The elements are: • the National Champion Bank in Ireland focused on having long-term relationships with our retail, commercial and corporate customers; • our core franchise is in Ireland, with income and risk diversification through a meaningful presence in the UK and selected international activities where we have proven competencies; and • the Group will pursue an appropriate return for risks taken, and on capital deployed while operating within prudent Board-approved risk appetite parameters to have and maintain a robust, standalone financial position. Risk capacity defines the externally imposed constraints within which the Group must operate. The Risk Appetite Statement articulates tolerances for the adverse outcomes of taking risk in order to determine how much exposure the Group can take. It is set in conjunction with the Group’s business strategy and sets the outer boundaries of risk the Group, including its subsidiaries, is prepared to take. It flows from the risk identity of the organisation, which is linked to the capital adequacy, desired risk profile, reputation, and strategic business intent of the Group. For financial risks, tolerances for negative outcomes are set for earnings and capital volatility, and for how long the Group can survive under liquidity stress. For operational risk, tolerances for negative outcomes are set at an overarching operational risk level for financial loss and customer impacts. At least annually, the Board approves risk appetite limits which are the outer boundaries for the risks that can be taken in the execution of Board approved strategy. The Group maintains a detailed risk appetite breach escalation process which ensures that breaches of risk appetite are escalated to senior management and the Board in a timely way. This facilitates timely consideration of the breach and any actions that may be required to remedy the breach. Risk Policies Risk policies set out detailed risk mitigation standards that are designed to ensure that there is only a low probability of the Group’s Board-approved risk appetite being exceeded. These Risk policies are owned by Group Risk. 1LOD functions managing the risk are responsible for ensuring that they have appropriately proceduralised the risk mitigation standards specified for that risk type, and designed and implemented a reliable process incorporating these procedures. Stress Testing and Scenario Analysis Where predictable and probable events are factored into business as usual planning and budgeting, risk arises when less predictable or unanticipated events can materialise. These types of events may result in severe impacts to the Group and therefore it is important that they are considered, and that mitigating controls and actions are put in place to ensure that the Group can continue to operate within risk appetite in that event. Stress testing and scenario analysis is the activity that addresses this requirement. Certain principal risks are measured, managed, and reported using risk models in line with the risk policies and management procedures which are in place for each risk type. For credit, funding and liquidity, life insurance, market, operational, and pension risks, risk models are used to measure, manage, and report on these respective risk types. Risk limits and diversification, together with regular review processes, are in place to manage potential credit risk and funding and liquidity risk concentrations which in turn could lead to increased volatility in the Group’s expected financial outcomes. Additionally, the Group’s calculation of economic capital takes into consideration the extent to which credit concentration risk exists in respect of single name, sector, and geography. At Group level, common measures for risk measurement have been adopted, to inform operational and strategic plans, and ensure the Group is managed within its tolerance for exposure to risk. These include one-year or multi-year forecasting / stress testing and a capital allocation framework which incorporates economic capital modelling and risk adjusted return analysis. The Group uses a suite of risk measurement models and systems to support decision making processes at transaction and portfolio levels, e.g. approving a loan facility to a borrower. Forecasting and stress testing are risk management tools used by the Group to alert management to potential adverse outcomes related to a variety of risks and inform risk appetite and contingent mitigating action. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 144 Business & Strategic Capital Adequacy Conduct Credit Funding & Liquidity Life Insurance Market Regulatory Operational 2 Risk Management Framework (continued) 2.2 Risk management (continued) Scenario analysis and stress testing, in the context of operational risk, are used to understand the Group’s ability to withstand operational disruption and the impact of potential operational risk events on capital. The Group conducts: • loan loss forecasting which informs senior management about potential outcomes related to loan loss evolution under chosen macroeconomic scenarios. This information is regularly used as an input into the Group’s budget, strategic plan and ICAAP. Additionally, it can be used to forecast future provisioning needs and / or to understand, and therefore anticipate, earnings volatility and future capital utilisation, such as at portfolio / transaction level. Results of forecasting are used by the Group to enhance the understanding of potential vulnerabilities and to make decisions around risk appetite and capital adequacy or to help prepare mitigating actions; • solvency stress testing to evaluate the Group’s financial position under a ‘severe but plausible’ scenario or shock and provide an indication of how much capital might be needed to absorb losses should such a shock occur. Scenarios for solvency stress testing are approved by ALCO but regulators can also request that a mandated stress scenario be run to assess capital needs across banks in a particular jurisdiction. The approved scenarios are applied to the Group’s balance sheet and risks as appropriate, in order to generate stressed loan loss forecasts and potential stressed impacts on the Group's financial and capital ratios. The outputs of the solvency stress testing are reviewed by the Group to inform risk appetite, strategy and capital planning and are an integral component of the Group’s ICAAP. They are also used by regulators to assess the Group’s ability to continue to meet its capital requirements under severe adverse conditions; • earnings stress testing in respect of earnings volatility and tolerances in respect of required capital to withstand a severe but plausible stress; and • reverse stress testing to evaluate the Group’s ability to survive an unforeseen severe event or combination of events that would cause the Group’s business model to become unviable. Reverse stress testing complements and builds on solvency stress testing by exploring more extreme scenarios / events beyond the likelihood thresholds looked at in solvency stress testing. This is achieved as reverse stress testing is developed in reverse, working back from an outcome of business failure to causal analysis, while the more typical solvency stress testing works towards defining a range of outcomes or probabilities given defined inputs. A key focus of solvency stress testing activities during 2023 and into 2024 is the impact on the Group's key economies of potential adverse events such as rising geopolitical tensions, further supply chain or energy price induced shocks, or a slowdown in international trade, including how such shocks in aggregate impact the Group’s profitability and solvency under different interest rate environments. In parallel the Group continued to develop its capabilities in the climate risk scenario modelling space (refer to page 31). The Group also runs more frequent and / or ad hoc stress tests for general risk management purposes. These cover: Funding and liquidity risk: The Group stresses its exposure to liquidity risk through liquidity stress testing which provides senior management with the ability to assess the degree to which the Group is vulnerable to extreme but plausible adverse liquidity conditions. It is used to identify the potential impact of a range of adverse shocks, including the impacts of rating downgrades and the reduction / withdrawal of certain funding markets such as customer deposits or wholesale markets on the Group’s ability to fund its outflows (asset financing and / or contractual obligations) at the required time and at a reasonable cost. Life insurance risk: Life insurance regulations require each life company to complete an annual ORSA. The ORSA process is intended to consider severe but plausible risks to the business and the capital or mitigating actions required to withstand those risks within the context of its business plans. This assessment considers a range of sensitivities and scenario tests, including deterioration in the insurance risk experience. Market risk: The following market risks are subject to stress testing as part of its normal risk measurement and management process: • market risk, consisting of trading book and banking book interest rate gap risk exposures in Global Markets and Group Treasury; • structural IRRBB consisting of balance sheet basis risk; and • structural FX, the sensitivity of Group capital ratios to exchange rate movement. Interest rate risk and basis risk are stressed using empirically- based scenario analyses. In the case of interest rate risk, the stress test results are potential changes in the economic value of positions; in the case of basis risk, the results are potential changes in one year-ahead net interest income. Operational risk: Potential operational risk stresses (loss impacts) are modelled using a scenario-based approach. Severe, yet plausible operational risk loss scenarios are applied on a Group-basis to assess the impact of the materialisation of key operational risk events at various likelihood and are used to inform the assessment of the Group's economic capital requirement. Risk Monitoring and Reporting Reporting of risk exposure is how we ensure management and governance forums can monitor the maintenance of the Group’s risk profile within tolerances for exposure to risk. Furthermore, it is a means for bringing management attention to where significant changes in the risk profile bring into question whether the Group can remain within risk appetite in the future. It enables the Group to respond in an effective and timely manner and to take decisions such as whether to maintain current business activity. The Group’s risk monitoring and reporting process operates within Group Risk: • it is the responsibility of the 2LOD to take reasonable steps to ensure that the Group does not suffer outcomes outside of risk appetite for each principal risk; • the Office of the Chief Risk Officer is responsible for reporting on the Group’s risk profile at an aggregate level by consolidating reporting from the 2LOD Group Risk Function; Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 145 2 Risk Management Framework (continued) 2.2 Risk management (continued) • risk reports are designed to report against principal risks and sub risks in a structured and consistent way so that the usability of reports is consistent across risk types and risk committees; • reports are designed with reference to regulatory principles for Effective Risk Data Aggregation and Risk Reporting (BCBS 239), addressing report accuracy, comprehensiveness, clarity, usefulness, frequency, and distribution; • the specific processes for monitoring, reporting, and reviewing risks are set out in the relevant policy and procedural documents consistent with Financial and Regulatory Reporting Risk Policy; and • at Group level, the risk monitoring, reporting, and review process is overseen by the ERC and its appointed committees. All the key identified risk types are reported monthly, with monthly reporting of risk dashboards including associated risk appetite metrics compliance. Management and the Board also consider other themes that have an impact on the risk profiles of more than one risk type. The Group currently uses a coordinated approach in relation to risk driven by both ESG factors and Group Transformation related factors. The Board Risk Report is the report used by the Group to review and monitor the Group’s Risk Profile across all Principal Risks and monitor compliance with Risk Appetite and Risk Policies. The Report is subject to review by ERC prior to review by the Group’s management body (Board and BRC). This risk management approach is enabled by an operating model where responsibilities for each activity are clearly assigned and adequately resourced. The design, implementation and performance of this risk management approach is subject to risk governance. 2.3 Risk roles and responsibilities Three Lines of Defence Every colleague has a specific responsibility for ensuring the Group operates within its risk appetite. These responsibilities are defined in terms of the role of colleagues in the ‘Three Lines of Defence’ as set out below. The role of each of the Three Lines of Defence is: First Line of Defence (1LOD): Primary responsibility for managing risk within risk appetite and pre-defined triggers. Second Line of Defence (2LOD): Establishing the policies under which 1LOD activities shall be performed and taking reasonable steps to ensure that the Group does not suffer outcomes outside of risk appetite. This involves: • setting and owning risk policy, establishing the policies and standards which must be implemented by the 1LOD in relevant activities; • ensure that standards are reliably adhered to and thereby ensure a high level of confidence that there are unlikely to be outcomes outside of risk appetite; • establishing limits and triggers, consistent with the risk appetite of the Group; • establishing tolerances for exposure to risk to minimise the possibility of having an outcome outside risk appetite; • using standard methods to conduct oversight of the risk types associated with activity and inadequate controls; • independently review, oversee, and monitor the performance of the financial balance sheet and process universe against pre-defined control tolerances; and • reporting and escalation obligations are adhered to. Third Line of Defence (3LOD): Ensuring the 1LOD and 2LOD assess whether all significant risks are identified and appropriately reported by management to the executive and board of management, as well as assessing whether risks are adequately controlled. GIA provides independent, reasonable assurance to key stakeholders on the effectiveness of the Group’s risk management and internal control framework. GIA conducts risk based assignments covering Group businesses and functions (including outsourcing providers - subject to the right to audit), with ratings assigned as appropriate. Findings are communicated to senior management and other key stakeholders, with remediation plans monitored for progress against agreed completion dates. Group Risk Organisational Structure Group Risk comprises of Group Risk functions and Group Compliance. A 2LOD Risk Officer is assigned for each principal risk type, and for each sub risk type for operational risk. This ensures that there is unambiguous 2LOD oversight responsibility for every principal risk type, and every operational risk sub risk type – with no gaps or duplication. In addition, for colleagues throughout the Group, the Board, and regulators, it is clear who they should approach within Group Risk regarding any given type of risk. Group Risk is responsible for the Group’s overall risk strategy and integrated risk reporting to the Board, the BRC and Group Executive team. The function is led by the Group CRO who is a member of the Group Executive team and reports directly to the Group CEO and may directly influence business decisions. The Group CRO is leaving the Group in 2024, and a recruitment process is underway. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 146 2 Risk Management Framework (continued) 2.4 Risk culture The Group Risk Appetite Statement articulates a tolerance for the inevitable outcomes of taking risk. The risk appetite is set in conjunction with the Group’s business strategy and sets the risk the Group is prepared to take. It guides the Group, including its subsidiaries, in its risk taking and related business activities. The culture of the Group reflects the balance between: • risk management and financial return; and • risk taking and incentives. Risk culture within the Group requires all colleagues to have a holistic understanding of the risks posed by the activities they undertake. It is underpinned by the Group’s Purpose and Values that should act as a behavioural compass. The Group’s risk culture is a key element of the Group’s effective RMF, which enables decisions to be taken in a sound and informed manner. Standards of behaviour are detailed in the Group Code of Conduct to which all management and staff must adhere and affirm annually. The Speak Up Policy sets out the steps staff can take to raise any concerns they might have of wrongdoing, risk, or malpractice in the Group. 2.5 Recovery and resolution planning In line with the provisions of the Single Resolution Mechanism Regulation and the Bank Recovery and Resolution Directive (BRRD), the Group maintains a recovery plan which sets out options to restore financial stability and viability of the Group in the event of the relevant circumstances arising. The Group’s recovery plan is approved by the Board on the recommendation of BRC and ALCO. The Group resolution plan is prepared by the Single Resolution Board (the central resolution authority within the Banking Union) in cooperation with the Central Bank of Ireland, rather than by the Group itself. The plan establishes how the resolution authorities intend to approach the Group’s resolution and for the Group the Preferred Resolution Strategy is a single point of entry bail-in at BoIG plc level. The Group works closely with the resolution authorities to support the preparation of the resolution plan, to identify and address any impediments to the execution of the resolution strategy and to demonstrate that it is resolvable and prepared for crisis management. The resolution authorities also determine the MREL corresponding to the loss absorbing capacity necessary to execute the resolution strategy. 2.6 Risk governance Risk Governance The Board has ultimate responsibility for the governance of risk at the Group. Oversight of risk activities is achieved through a risk governance structure designed to facilitate the risk identification, assessment, monitoring, mitigating and ultimate reporting on risk activities and material considerations to the Board. The Board is assisted in its risk governance responsibilities by the delegated sub-committees of the Board, primarily the BRC and GAC respectively and at executive level by the ERC, ALCO and their supporting appointed executive committees, namely the Group Credit Risk Committee (GCRC), Group Regulatory and Conduct Risk Committee (GRCRC), Group Operational Risk Committee (GORC), Private Equity Risk Committee (PERC), Risk Measurement Committee (RMC), Balance Sheet and Structural Risk Committee, Market Risk Committee, Group Securitisation Committee and Group Liquidity / Capital Committee (if required). The Board of Directors is ultimately accountable for the effective management of risks and for the system of internal controls in the Group. The system of internal control is designed to ensure thorough and regular evaluation of the nature and extent of risks and the ability of the Group to react accordingly. The Board is supported by the BRC on risk oversight matters and the GAC in relation to the effectiveness of the system of internal controls. Each of the Board committees and the executive committees that form part of the risk governance framework operate in accordance with clear terms of reference, approved by the Board or parent executive committee, setting out their respective roles and responsibilities. Further detail outlining the key responsibilities of the Group's Board-level risk committees can be found on pages 114 to 118 within the Governance section. The ERC and ALCO are the Group’s most senior management risk committees and operate with delegated authority from the GEC, which monitors and oversees the performance of these committees. The BRC also exercises oversight of these committees, as outlined in their respective terms of reference. The ERC is chaired by the Group CRO and ALCO is chaired by the Group CFO. The membership of these committees comprises members of the Group Executive team and Group- wide divisional and control function executives. The ERC met 24 times and the ALCO met 11 times, during 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 147 2 Risk Management Framework (continued) 2.6 Risk governance (continued) The ERC is responsible for the oversight of all material risk types across the Group, with the exception of certain financial risks and outcomes including market risk, funding and liquidity risk, and capital adequacy risk. The ERC and ALCO delegate specific responsibility for oversight of major classes of risk to specific appointed committees and individuals that are accountable to them. The Board, ERC, ALCO, and their appointed committees are subject to annual effectiveness reviews, which may result in further enhancement. The relevant ERC appointed committees are set out in the following table. Committee Delegated responsibility Group Credit Risk Committee Oversight of credit risk. Group Regulatory and Conduct Risk Committee Oversight of conduct risk and regulatory risk. Group Operational Risk Committee Oversight of operational risk. Private Equity Risk Committee Oversight of private equity risk. Risk Measurement Committee Oversight of model risk. The relevant ALCO appointed committees are set out in the following table. Committee Delegated responsibility Balance Sheet & Structural Risk Committee Responsible for supporting ALCO in the areas of Funding Transfer Pricing and Structural Risk Management. Market Risk Committee Responsible for supporting ALCO in the governance, measurement and control of market risk and oversight of derivative activity. Group Securitisation Committee Supports ALCO in providing oversight of collateral management and asset encumbrance. Group Liquidity / Capital Committee May be established in line with the escalation process outlined in the Group's Recovery Plan to provide senior management oversight and direction in respect of the Group's liquidity / funding and capital positions during periods of market disruption. Subsidiary Oversight The Board has the overall responsibility for ensuring that there is an appropriate governance framework in place for the Group. The Board exercises oversight over Group subsidiaries, while respecting the independent legal and regulatory responsibilities that apply to the boards of such subsidiaries. The Group Subsidiary Governance Policy sets out how the Board exercises oversight of Group subsidiaries and the high-level governance standards that shall be applied across the Group in a proportionate manner. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 148 2 Risk Management Framework (continued) 2.6 Risk governance (continued) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 149 Board-level Risk Committees Independent risk oversight scrutinising and challenging executives’ actions and proposals (pages 114 and 118). Board of Directors On the top of the risk pyramid has the ultimate oversight and accountability for the risk and related control environment (page 79) Group Executive Committee Monitors and oversees performance of the Group’s most senior management risk committees (page 148). Senior Management Risk Committees Reviewing and challenging risk information and escalation issues (page 148). Group Functions Aggregating, analysis and coordinating risk management activities and processes. Independent internal audit function. Business Units Identifying, assessing, managing, monitoring, and reporting risks inherent to the business in line with the Group Risk Management Framework and standards. 3 Management of principal risks 3.1 Business and strategic risk Deﬁnition The risk of not achieving agreed strategic and business goals, arising due to inadequate planning or implementation, and / or changes in the external environment or economic factors. This also includes adverse impacts on the franchise value, e.g., by implementing an unsuitable strategy, or maintaining an obsolete business model. Risk management, measurement, and reporting The Group’s risk monitoring and reporting process operates within Group Risk. Business and strategic risk is a principal risk type in the RMF with a dedicated 2LOD owner in Group Risk. It is the responsibility of the Head of Business, Strategic and Sustainability Risk to take reasonable steps to ensure that the Group does not suffer outcomes outside of business and strategic risk appetite. Divisions and business units are responsible for delivery of their business plans and management of such factors as pricing, sales and loan volumes, operating expenses and other factors that may introduce earnings volatility. Business, divisional and portfolio strategy is developed within the boundaries of the Group’s strategy as well as the Group’s Risk Appetite Statement. The current status of business and strategic risk, including risk dashboards and risk appetite compliance is reported through the Board Risk Report on a monthly basis. The key dimensions evaluated within business and strategic risk are: • the strength of the Group's returns; • the Group’s performance against business plans including strength of returns; • evaluation and risk assessment of the Group’s strategy and implementation of the strategy; • strength of the Group’s competitive position; and • impact of the economic and geopolitical environment on the Group’s strategy. The Group also reviews business and strategic risk as part of the annual risk identification process. Risk mitigation The Group mitigates business risk through business planning methods, such as the diversification of revenue streams, cost base management and oversight of business plans, which are informed by expectations of the external environment and the Group’s strategic priorities. At an operational level, the Group’s annual budget process sets expectation at a business unit level for lending volumes, margins, and costs. The tracking of actual and regularly forecasted volumes, margins and costs against budgeted levels is a key financial management process in the mitigation of business risk. In the case of strategic risk, this risk is mitigated through regular updates to the Board on industry developments, the macroeconomic environment and associated trends which may impact the Group’s activities, review of the competitive environment and strategies at a divisional and business unit level. On an annual basis, the Board reviews the Group’s strategic objectives and key underlying assumptions to confirm that the strategic shape and focus of the Group remains appropriate. 3.2 Capital adequacy risk Definition (audited) The risk that the Group has insufficient capital to support its normal business activities, meet its regulatory capital requirements or absorb losses should unexpected events occur. Capital adequacy risk includes pension risk and recovery and resolution requirements. Capital management objectives and policies (audited) The objectives of the Group’s capital management policy are to ensure that the Group has sufficient capital to cover the risks of its business and support its strategy and, at all times, to comply with regulatory capital requirements. It seeks to minimise refinancing risk by managing the maturity profile of non-equity capital while the currency mix of capital is managed to ensure that the sensitivity of capital ratios to currency movements is minimised. The capital adequacy requirements set by the regulatory authorities and economic capital based on internal models are used by the Group as the basis for its capital management. The Group seeks to maintain sufficient capital to ensure that these requirements are met. The current status of capital adequacy risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. ICAAP (unaudited) The ICAAP facilitates the Board and senior management in adequately identifying, measuring, and monitoring the Group’s risk profile to ensure the Group holds sufficient capital to cover these risks and support its strategy. Underpinning the ICAAP, the Group prepares detailed financial projections. Base case projections are prepared using consensus macroeconomic forecasts together with Group-specific assumptions and the stress case is prepared based on a severe but plausible stress economic scenario. The ICAAP demonstrates that the Group has sufficient capital under both the base and stress case scenarios to support its business and achieve its objectives having regard to Board approved risk appetite and strategy and to meet its regulatory capital, leverage, and liquidity requirements. The Board approved ICAAP Report and supporting documentation is submitted to the ECB and CBI on an annual basis and is subject to regulatory review as part of the Supervisory Review and Evaluation Process (SREP). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 150 3 Management of principal risks (continued) 3.2 Capital adequacy risk (continued) Restated 1 CRD IV - 2022 (unaudited) CRD IV - 2023 (unaudited)2 Regulatory €m Fully loaded €m Regulatory €m Fully loaded €m Capital Base 11,522 11,522 Total equity1 12,561 12,561 (350) (350) less foreseeable distribution deduction3 (1,154) (1,154) (975) (975) less AT1 capital (975) (975) 10,197 10,197 Total equity less foreseeable dividend deduction and equity instruments not qualifying as common equity tier 1 10,432 10,432 (772) (1,002) Regulatory adjustments being phased in / out under CRD IV (699) (818) (802) (1,002) Deferred tax assets 4 (736) (818) – – 10% / 15% threshold deduction1 – – 30 – IFRS 9 transitional adjustment 37 – (2,147) (2,147) Other regulatory adjustments (2,097) (2,097) (165) (165) Expected loss deduction (153) (153) (981) (981) Intangible assets and goodwill (971) (971) (625) (625) Pension asset deduction (583) (583) (376) (376) Other adjustments 5 (390) (390) 7,278 7,048 Common equity tier 1 7,636 7,517 Additional tier 1 975 975 AT1 instruments (issued by parent entity BoIG plc) 975 975 8,253 8,023 Total tier 1 capital 8,611 8,492 Tier 2 1,632 1,632 Tier 2 instruments (issued by parent entity BoIG plc) 1,640 1,640 (160) (160) Regulatory adjustments (160) (160) 1,472 1,472 Total tier 2 capital 1,480 1,480 9,725 9,495 Total capital 10,091 9,972 46.8 46.8 Total risk weighted assets (€bn) 1 52.6 52.5 Capital ratios1,2 15.6% 15.1% Common equity tier 1 14.5% 14.3% 17.6% 17.1% Tier 1 16.4% 16.2% 20.8% 20.3% Total capital 19.2% 19.0% 6.4% 6.2% Leverage ratio 6.4% 6.3% 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Capital ratios have been presented including the benefit of the retained profit in the year. Under Article 26 (2) of the Capital Requirements Regulation, financial institutions may include independently verified interim profits in their regulatory capital only with the prior permission of the competent authority, namely the ECB, and such permission has been obtained. The capital ratios are calculated using unrounded risk weighted asset amounts. 3 A foreseeable distribution of €1,154 million representing ordinary dividend of €634 million (subject to ordinary shareholder approval) and share buyback of €520 million (31 December 2022: €350 million representing ordinary dividend of €225 million and share buyback of €125 million) has been deducted as required under Article 2 of European Union Regulation No. 241/2014. 4 Deduction relates to deferred tax assets on losses carried forward, net of certain deferred tax liabilities. The deduction is phased at 90% in 2023, increasing to 100% in 2024. 5 Includes technical items such as non-qualifying Common equity tier 1 items, prudential valuation adjustment, calendar provisioning, IFRS 9 addback adjustment to the deferred tax charge, cash flow hedge reserve, own credit spread adjustment (net of tax), coupon expected on AT1 instrument and securitisation deduction. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 151 3 Management of principal risks (continued) 3.2 Capital adequacy risk (continued) Restated 1 CRD IV - 2022 (unaudited) CRD IV - 2023 (unaudited) Regulatory €bn Fully loaded €bn Regulatory €bn Fully loaded €bn Risk weighted assets 35.9 35.9 Credit risk 39.3 39.3 0.8 0.8 Counterparty credit risk 0.8 0.8 1.4 1.4 Securitisation 1.7 1.7 0.4 0.4 Market risk 0.2 0.2 4.8 4.8 Operational risk 5.9 5.9 3.5 3.5 Other assets / 10% / 15% threshold deduction1 4.7 4.6 46.8 46.8 Total RWA 52.6 52.5 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Risk weighted assets (unaudited) RWAs on a regulatory basis were €52.6 billion at 31 December 2023 (20221: €46.8 billion). The increase of €5.8 billion in RWA is primarily due to the acquisition of the KBCI loan portfolios, loan book movements and an increase in operational risk RWA as a result of higher operating income. RWAs in the table above reflect the application of certain CBI required Balance Sheet Assessment adjustments and the updated treatments of expected loss. Further details on RWA can be found in the Group’s Pillar 3 disclosures which are available on the Group’s website. Capital Requirements Directive IV (unaudited) The ratios outlined in this section reflect the Group’s interpretation of the CRD IV rules as published on 27 June 2013 and subsequent amendments, including EU Regulation 2019/876 Capital Requirements Regulation (CRR II) and EU Directive 2019/878 (CRD V) published on 7 June 2019 and EU Regulation 2020/873 published on 26 June 2020 (COVID-19 Quick Fix). In line with the above regulations, the Group’s regulatory capital ratios reflect the phased implementation of the DTAs (dependent on future profitability) deduction and the transitional implementation of IFRS 9. These items will be fully implemented in 2024 and 2025 respectively. Regulatory Capital Developments (unaudited) The CRD IV rules continue to evolve through amendments to current regulations, directives, and the adoption of new technical standards. There were no changes that materially impacted the capital ratios at 31 December 2023. The revisions to the capital requirements for market risk, originally intended to apply in 2021, have been deferred until 2025. The Basel Committee revisions to the Basel Framework focus on the standardised and internal ratings-based approaches to measuring credit risk. These include the introduction of an aggregate output floor to ensure banks’ RWAs calculated via internal models are no lower than 72.5% of RWAs calculated under the standardised approach. The revised standards which were originally due to take effect from 1 January 2022, are now deferred to 1 January 2025 following a European Commission review in October 2021, with a phase-in period of five years for the aggregate output floor. The Group continues to monitor developments with any impact dependent on the implementation at EU level. Regulatory ratio (unaudited) The Group's regulatory CET1 ratio is 14.5% at 31 December 2023 (20221: 15.6%). The decrease of c.110 basis points since 31 December 2022 is primarily due to a foreseeable distribution deduction (c.-240 basis points), the acquisition of the KBCI loan portfolio (c.-110 basis points), RWA growth (c.-70 basis points) and the impact of CRD phasing for 2023 (c.-30 basis points) offset by the benefit of organic capital generation (c.+340 basis points). Fully loaded ratio (unaudited) The Group’s fully loaded CET1 ratio is 14.3% at 31 December 2023 (20221: 15.1%). The decrease of c.80 basis points since 31 December 2022 is primarily due to a foreseeable distribution deduction (c.-240 basis points), the acquisition of KBCI loans (c.-110 basis points) and RWA growth (c.-70 basis points) partially offset by the benefit of organic capital generation (c. +340 basis points). Leverage ratio (unaudited) The leverage ratio at 31 December 2023 is 6.4% on a CRD IV regulatory basis (20221: 6.4%) and 6.3% on a proforma fully loaded basis (20221: 6.2%). A binding leverage requirement of 3% is applicable. The Group expects to remain well in excess of this requirement. Capital requirements / buffers (unaudited) The following table sets out the Group’s CET1 capital requirements for 2023 and the authorities responsible for setting those requirements. The Group is required to maintain a CET1 ratio of 10.93% on a regulatory basis at 31 December 2023. This includes a Pillar 1 requirement of 4.5%, a CET1 P2R of 1.27%, a CCB of 2.5%, an O-SII Buffer of 1.5% and a Countercyclical Buffer of 1.16%. P2G is not disclosed in accordance with regulatory preference. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 152 3 Management of principal risks (continued) 3.2 Capital adequacy risk (continued) The Group was notified of the ECB's final decision on the Group's Own Funds Requirements applicable from 1 January 2024 following the 2023 SREP on 1 December 2023. This will result in an increase of the P2R of 10bps to 2.35% for Total Capital with the CET1 P2R increasing to 1.32%. Countercyclical Capital Buffers (CCyBs) are independently set in each country by the relevant designated authority. In July 2022, the Bank of England confirmed the increase in the UK CCyB to 2%, effective from July 2023. This results in a UK CCyB requirement of c.0.50%. In June 2022, the CBI announced the phased reintroduction of the RoI CCyB at 0.5% from June 2023. In November 2022, the CBI announced the further increase of the CCyB to 1% from November 2023. In June 2023, the CBI confirmed the further increase of the CCyB to 1.5% from June 2024. This will result in the Group's CCyB increasing to c.0.9% from June 2024. The CBI has advised that the Group is required to maintain an O-SII buffer of 1.5% subject to annual review by the CBI. The Group expects to maintain both regulatory and fully loaded capital ratios significantly in excess of minimum regulatory requirements. Minimum Requirement for Own Funds and Eligible Liabilities (unaudited) The Group’s requirements, to be met from 1 January 2024, are c.28.9% on RWA basis and 7.59% on a leverage basis. The MREL RWA requirement consists of a Single Resolution Board (SRB) requirement of 23.75% and the Group’s Combined Buffer Requirement (CBR) of 5.16% on 1 January 2024 (comprising the Capital Conservation Buffer of 2.5%, and an O- SII buffer of 1.5% and a Countercyclical Buffer of 1.16%). The SRB target is subject to annual review; while the CBR is dynamic, updating as changes in capital requirements become effective. The Group’s expects the 2024 MREL requirement to increase to c.29.2% reflecting the phase-in of the CCyB requirements. The Group’s MREL position at 31 December 2023 is 31.7% on an RWA basis and 12.4% on a leverage basis. The Group expects to maintain a buffer over its MREL requirements. The Group issued €2,250 million of MREL eligible senior debt in 2023. Pro forma CET1 Regulatory Capital Requirements (unaudited) Set by 2022 2023 2024 Pillar 1 - CET1 CRR 4.50% 4.50% 4.50% Pillar 2 Requirement SSM 1.27% 1.27% 1.32% Capital Conservation Buﬀer CRD 2.50% 2.50% 2.50% Countercyclical buﬀer Ireland (c.63% of RWA) CBI – 0.63% 0.94% UK (c.25% of RWA) BoE 0.26% 0.50% 0.50% US and other (c.12% of RWA) Fed / Various 0.01% 0.03% 0.03% O-SII Buﬀer CBI 1.50% 1.50% 1.50% Pro forma Minimum CET1 Regulatory Requirements 10.04% 10.93% 11.29% Pillar 2 Guidance Not disclosed in line with regulatory preference Distribution policy (unaudited) In respect of the 2023 financial year, the Board proposed a distribution of €1,154 million including an ordinary dividend of €634 million, equivalent to 60 cents per share, and representing c.40% of profits after tax subject to ordinary shareholder approval and a share buyback of €520 million which has been approved by the ECB. The ordinary dividend of 60 cents per share will be paid on 11 June 2024 to ordinary shareholders who appear on the Company’s register on 10 May 2024, the record date for the dividend, subject to shareholder approval. The Group's policy is to distribute ordinary dividends of c.40-60% of statutory profits. The Board will also consider the distribution of surplus capital on at least an annual basis. The distribution level will reflect, amongst other things, the strength of the Group’s capital and capital generation, the Board’s assessment of the growth and investment opportunities available, any capital the Group retains to cover uncertainties (e.g. related to the economic outlook) and any impact from the evolving regulatory and accounting environments. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 153 3 Management of principal risks (continued) 3.2 Capital adequacy risk (continued) Share buyback (unaudited) The Group completed the €125 million buyback programme on 26 June 2023, repurchasing 13,690,346 ordinary shares for cancellation at a weighted average price of €9.131 per share. Distributable items (unaudited) At 31 December 2023, the Company had reserves available for distribution of €5.8 billion (2022: €6.1 billion). Further information on the Company’s equity is provided on page 346. Individual consolidation (unaudited) The regulatory CET1 ratio of the Bank calculated on an individual consolidated basis as referred to in Article 9 of the CRR is 16.7% at 31 December 2023 (2022: 17.5%). Impediments to the transfer of funds (unaudited) There is a requirement to disclose any impediment to the prompt transfer of funds within the Group. In respect of the Group’s licensed subsidiaries, the Group is obliged to meet certain license conditions in respect of capital and / or liquidity. These requirements may include meeting or exceeding appropriate capital and liquidity ratios and obtaining appropriate regulatory approvals for the transfer of capital or, in certain circumstances, liquidity. The Group’s licensed subsidiaries would be unable to remit funds to the parent when to do so would result in such ratios or other regulatory permissions being breached. Apart from this requirement, there is no restriction on the prompt transfer of own funds or the repayment of liabilities between the subsidiary companies and the parent. At 31 December 2023, own funds were in excess of the required minimum requirement. 3.3 Conduct risk Deﬁnition Conduct risk is the risk of poor outcomes for, or harm to, customers, clients, and markets, arising from the delivery of the Group’s products and services. The Group is exposed to conduct risk as a direct and indirect consequence from all the activities that the Group engages in during its normal conduct of its business. These risks may materialise from failures to comply with regulatory requirements or expectations, as an outcome of risk events in other principal risk categories, from changes in external market expectations or conditions, provision of products and services and the various activities performed by staff, contractors and by third party suppliers. The key conduct risk exposure areas managed by the Group include the following: Market Integrity: The risk that the Group fails to ensure that business activities, and those carrying them out, are authorised and comply with regulatory requirements, manage conflicts of interest, observe proper standards of market conduct, and enable employees to raise concerns without fear of retaliation. Customer Protection: The risk that Group sales (including advice), execution and remediation of our products and services fail to meet the expectations of our customers and regulators. Financial Crime: The risk that the Group’s associated persons (employees or third parties) commit or facilitate financial crime, and / or the Group's systems, products and / or services are used by customers, employees or third parties to facilitate or attempt to facilitate financial crime. Data Privacy: The risk that Group does not comply with relevant data protection and privacy laws and regulations. Risk management and measurement From an ESG perspective, 'Green Washing', or misrepresenting the environmental benefits of green financial products or investments, is an emerging risk within conduct risk. The Group has updated its product approval policy and process to scrutinise green products with this risk in mind. The Group manages conduct risk under the RMF. The framework establishes the common principles for the risk management process of identifying, assessing, monitoring, and mitigating risks to the Group. This is implemented by accountable executives and monitored by the GRCRC, the ERC, the BRC and Board in line with the overall Group risk governance structure outlined on pages 147 to 149. The effective management of conduct risk is primarily the responsibility of business management and is supported by Group Compliance. The Group has no tolerance for knowingly causing harm to customers, clients, and markets, arising from the delivery of its products and services. However, we recognise that mistakes and errors of judgement or failures of processes can and do lead to customer harm which we have limited tolerance for. We mitigate this risk through our conduct risk policies. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 154 3 Management of principal risks (continued) 3.3 Conduct risk (continued) Risk mitigation Risk mitigants include the early identification, appropriate assessment, measurement and reporting of risks. The primary risk mitigants for conduct risk are the establishment, through Group conduct policies, of standard mitigating requirements throughout the business. The standards of behaviour are detailed in the Group Code of Conduct Policy to which all management and staff must adhere and affirm annually. The Speak Up Policy sets out the steps staff can take to raise any concerns they might have of wrongdoing, risk, or malpractice in the Group. A training schedule is in place across the Group to support staff and management in this regard. Risk reporting The current status of conduct risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. The Group Chief Compliance Officer reports on the status of conduct risk in the Group, including the status of the top conduct risks, assurance activity, the progress of risk mitigation plans, issues and breaches, and significant regulatory interactions to the ERC and BRC by way of the quarterly Group Chief Compliance Officer report. 3.4 Credit risk Definition (audited) Credit risk is the risk of loss resulting from a counterparty being unable to meet its contractual obligations to the Group in respect of loans or other financial transactions, or any other deterioration in a counterparty's creditworthiness. This risk includes debt underwriting risk, loan origination risk, credit concentration risk, cross-border transfer risk, credit quality deterioration risk, default risk, and collateral valuation risk. At portfolio level, credit risk is assessed in relation to the degree of name, product, industry, and geographic concentration to inform the setting of appropriate risk mitigation and transfer mechanisms, and to assess risk capital requirements. Risk appetite measures for credit risk are set by the Board. Credit risk arises from loans and advances to customers and from certain other financial transactions such as those entered into by the Group with financial institutions, sovereigns, and state institutions. Credit facilities can be largely grouped into the following categories: • cash advances (e.g. loans, overdrafts, revolving credit facilities (RCFs) and bonds), including associated commitments and letters of offer; • credit related contingent facilities (issuing of guarantees / performance bonds / letters of credit); • derivative instruments; and • settlement / clearing lines. The manner in which the Group’s exposure to credit risk arises, its policies and processes for managing it and the methods used to measure and monitor it are set out below. Debt underwriting risk Debt underwriting risk is the risk of loss arising from movements in credit spreads or other changes in market conditions in respect of debt underwriting transactions. Loan origination risk Loan origination risk is the risk of loss from originating credit exposures where asset quality is outside risk appetite. Credit concentration risk Credit concentration risk is the risk of loss due to excessive exposures to a single entity, or group of entities with similar activities and similar economic characteristics, which would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Cross-border transfer risk Cross-border transfer risk is the risk that sovereign or other counterparties within a country may be unable, unwilling, or precluded from fulfilling their cross-border obligations due to changing political, financial, or economic circumstances such that a loss to the Group may arise. Credit quality deterioration risk Credit quality deterioration risk is the risk for potential loss due to a ratings downgrade (e.g. Probability of Default (PD) or IFRS9 staging migration). Default risk Default risk is the risk that companies or individuals (counterparties) will be unable to meet the required payment on their debt obligations. Collateral valuation risk Collateral valuation risk is the risk of loss arising from a change in the value or enforceability of security held due to errors in the nature, quantity, pricing, or characteristics of security held in respect of a transaction with credit risk. ESG factors, including climate change represent a common driver across the Group's principal risk types, including credit risk and its sub risks. ESG risk factors are managed as part of credit risk and its sub risks including in policies, risk appetite, risk monitoring and reporting. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 155 3 Management of principal risks (continued) 3.4 Credit risk (continued) Credit risk management (audited) Credit risk statement The Group actively seeks opportunities to provide credit facilities to borrowers who are assessed as having the capacity to service and discharge their obligations and to allow growth in the volume of loan assets in line with the Group’s risk appetite and to provide a solid foundation for sustained growth in earnings and shareholder value. The Group’s credit strategy is to underwrite credit risk within a clearly defined Board-approved risk appetite. This is done through the extension of credit to customers and financial counterparties in a manner that results in an appropriate return for the risks taken and on the capital deployed, while operating within Board-approved risk parameters. Credit risk management Within the Group’s lending divisions the approach to the management of credit risk is focused on a detailed credit analysis at origination followed by early intervention and active management of accounts where creditworthiness has deteriorated. Through its ongoing credit review processes, the Group seeks early identification of deteriorating loans with a view to taking corrective action to prevent a loan becoming credit-impaired. Typically, loans that are at risk of becoming credit-impaired are managed by dedicated specialist units / debt collection teams focused on working out loans. A separate Customer Loan Solutions function provides experienced and dedicated management of challenged assets. For loans that become credit-impaired, the focus is to minimise the loss that the Group will incur. This may involve implementing forbearance solutions, entering into restructuring arrangements, action to enforce security, asset / portfolio disposals or securitisations. The Group Credit Risk Function has responsibility for the independent oversight of credit risk and for overall risk reporting to the GCRC, ERC, the BRC and the Board on developments in credit risk and compliance with specific risk limits. It is led by the Chief Credit Officer who reports directly to the Group CRO. The function provides independent oversight of the Group’s credit risk strategy, credit risk management information and credit risk underwriting. Credit policy The core values and principles governing the provision of credit are contained in the Group Credit Risk Policy which is approved by the Board. The Group Credit Risk Policy is supported by the following additional credit risk related policies; i) Group Impairment Policy; ii) Group Forbearance Policy; iii) Group Property Collateral Valuation Policy; iv) Group Country Risk Policy; v) Group Bank Risk Policy and vi) Group Policy on Definition of Default. Individual business unit loan origination standards set out key loan acceptance criteria at product, sector, or portfolio level. Business unit credit risk procedures are also required for each portfolio or business unit involved in lending and credit related activities. These documents describe the end-to-end credit risk lifecycle. These standards and procedures are aligned with, and have regard to, the Group’s Risk Appetite Statement and applicable credit limits, the lessons learned from the Group’s loss history, the markets in which the business units operate and the products which they provide. Lending authorisation The Group’s credit risk management systems operate through a hierarchy of lending authorities which are related to internal loan ratings. All exposures above certain levels require approval by the Group Credit Transactions Committee (GCTC). Other exposures are approved according to a system of tiered individual authorities, which reflect credit competence, proven judgement, and experience. Material lending proposals are referred to credit underwriting units for independent assessment / approval or formulation of a recommendation for subsequent adjudication by the applicable approval authority. Certain retail loan applications may be approved automatically where they meet both approved policy rules and minimum thresholds for the score produced by internal credit scoring tools. Controls and limits The Group imposes credit risk control limits and country risk exposure guide points to mitigate significant concentration risk. These limits and guide points are informed by the Group’s Risk Appetite Statement which is approved annually by the Board. It includes specific long-term limits for each category and maximum exposure limits to a customer or a group of connected customers. The Board approves a framework of country maximum exposure guide points which are used as benchmarks for the setting of country limits, with individual country limits approved by GCRC. A maximum exposure limit framework for exposures to banks is also approved by the GCRC for each rating category. Limits are set and monitored for countries, sovereign obligors, and banks in accordance with these frameworks. Credit risk measurement (audited) All credit transactions are assessed at origination for credit quality and the borrower is assigned a credit grade based on a predefined credit rating scale. The risk and consequently the credit grade, is reassessed periodically. The use of internal credit rating models and scoring tools, which measure the degree of risk inherent in lending to specific counterparties, is central to the credit risk assessment and ongoing management processes within the Group. Loan impairment Under IFRS 9, essentially all credit risk exposures not measured at fair value through profit or loss (FVTPL) are subject to recognition of an impairment loss allowance for ECL. The Group’s impairment modelling methodologies are approved by Model Risk Committee (MRC) and / or RMC and the quantum of the Group’s impairment gain or loss, NPEs and impairment loss allowances are reviewed by the GCRC and the ERC in advance of providing a recommendation to the GAC. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 156 3 Management of principal risks (continued) 3.4 Credit risk (continued) The Group’s credit risk rating systems and impairment models and methodologies play a key role in quantifying the appropriate level of impairment loss allowance. Further details are provided in the section on credit risk methodologies beginning on page 159. An analysis of the Group’s impairment loss allowances at 31 December 2023 is set out in note 25. Credit risk mitigation (audited) An assessment of the borrower’s ability to service and repay the proposed level of debt (principal repayment source) is undertaken for credit requests and is a key element in the Group’s approach to mitigating risk. In addition, the Group mitigates credit risk through the adoption of both proactive preventative measures (e.g. controls and limits) and the development and implementation of strategies to assess and reduce the impact of particular risks should these materialise, including hedging, securitisation, the taking of collateral (which acts as a secondary repayment source) and selective asset / portfolio disposals. Risk transfer The objective of risk mitigation / transfer is to limit the risk impact to acceptable levels. At portfolio level, credit risk is assessed in relation to the degree of name, sector, and geographic concentration. Where possible emergence of undue risk concentrations are identified, the risk capital implications are assessed and, where appropriate, risk transfer and mitigation options (e.g. disposals, securitisations, hedging strategies) are explored. Collateral Credit risk mitigation includes the requirement to obtain collateral, depending on the nature of the product and local market practice, as set out in the Group’s policies and procedures. The Group takes collateral as a secondary repayment source, which can be called upon if the borrower is unable or unwilling to service and repay debt as originally envisaged. Various types of collateral are accepted, including property, securities, cash, guarantees and insurance. The nature and level of collateral required depends on a number of factors including, but not limited to, the amount of the exposure, the type of facility made available, the term of the facility, the amount of the borrower’s own cash input and an evaluation of the level of risk or PD. The Group’s requirements around completion, valuation and management of collateral are set out in appropriate Group policies, business unit loan origination standards and credit risk procedures. The extent to which collateral and other credit enhancements mitigate credit risk in respect of the Group’s Residential mortgage portfolio are set out in the tables on pages 169 to 170. Counterparty credit risk arising from derivatives Trading in over-the-counter (OTC) derivatives is governed by the European Market Infrastructure Regulation. The Group has executed standard internationally recognised documents such as International Swaps and Derivatives Association (ISDA) agreements and Credit Support Annexes (CSAs) with all of its derivative financial counterparties. In addition, the Group has Cleared Derivatives Execution Agreements (CDEAs) with its principal interbank derivative counterparties enabling the Group to clear eligible derivatives through an EU approved and regulated central counterparty. If a derivative contract cannot be cleared through a central counterparty, a CSA serves to limit the potential cost of replacing that contract at market price in the event of a default by the financial counterparty. All of the Group’s financial counterparty derivatives are covered by CDEAs or CSAs and are hence collateralised. Credit risk reporting / monitoring (audited) Credit risk at a Group, divisional and significant operating unit / product type level is reported on a monthly / quarterly basis to senior management. Reporting includes information on loan book composition and asset quality (credit grade, PD profiles, impairment loss allowances and RWAs). The current status of credit risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. A report on exceptions to credit policy is reviewed by GCRC members on a quarterly basis. On a monthly / quarterly basis the GCRC considers credit concentration reports which track changes in portfolio, product / sectoral and single name concentrations measured under agreed parameters. In addition, other reports are submitted to senior management and the Board as required. The Group maintains an independent Credit Review function which provides ongoing assessment of the Group's credit risk management processes. Using a risk based approach, the Credit Review function carries out periodic reviews of Group lending portfolios, lending units and credit underwriting units. The results of reviews carried out by the Credit Review function are communicated to the Board and senior management. Management of challenged assets (audited) The Group has in place a range of initiatives to manage challenged and non-performing credit. These include: • enhanced collections and recoveries processes; • specialist work-out teams to ensure early intervention for borrowers in or potentially in financial difficulty; • intensive review cycles for ‘at risk’ exposures and the management of arrears and excess positions; and • support from central teams in managing ‘at risk’ portfolios at a business unit level. Group forbearance strategies A forbearance measure is a concession to a borrower for reasons relating to the actual or apparent financial difficulties of that borrower. A concession is any change to the terms and conditions of a credit agreement (e.g. term extension, margin change, release of security, covenant waiver) or a total or partial refinancing of a credit facility. If the concession to a borrower is not granted for reasons relating to the actual or apparent financial difficulty of that borrower, then it does not represent a forbearance measure. The key objective of granting forbearance measures are to; prevent performing borrowers entering arrears, from reaching a non-performing status or to pave the way for non-performing borrowers to return to performing status. Forbearance measures are intended to return the exposure to a sustainable repayment situation. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 157 3 Management of principal risks (continued) 3.4 Credit risk (continued) Forbearance strategies adopted by the Group seek to maximise recoveries and minimise losses arising from non- repayment of debt, while providing suitable and sustainable restructure options that are supportive of customers in actual or apparent financial difficulties. Such strategies may include, where appropriate, one or a combination of measures such as a temporary reduction in contractual payments, a term extension, capitalisation of arrears, adjustment, or non- enforcement of covenants and / or more permanent restructuring measures. Forbearance requests are assessed on a case by case basis, taking due consideration of the individual circumstances and risk profile of the borrower. A request for forbearance will always be a trigger event for the Group to undertake an assessment of the customer’s financial circumstances and ability to repay prior to any decision to grant a forbearance treatment. This assessment may result in a deterioration in the credit grade assigned to the loan, potentially impacting how frequently the loan must be formally reviewed. This assessment may also result in a loan being considered to have experienced a ‘significant increase in credit risk’ or becoming classified as credit-impaired. The Group Forbearance Policy outlines the core principles and parameters underpinning the Group’s approach to forbearance with individual business unit procedures defining in greater detail the forbearance strategies appropriate to each unit. Borrower compliance with revised terms and conditions may not be achieved in all cases. Non-compliance could, for example, arise because the individual circumstances and risk profile of the borrower continue to deteriorate, or fail to show an expected improvement, to the extent that an agreed reduced level of repayment can no longer be met. In the event of non-compliance, a request for further forbearance may be considered. It is possible that the Group, by virtue of having granted forbearance to a borrower, could suffer a loss that might otherwise have been avoided had enforcement action instead been taken. This could, for example, arise where the value of security held in respect of a loan diminishes over the period of a forbearance arrangement which ultimately proves unsustainable. It is the Group’s policy to measure the effectiveness of forbearance arrangements over the lifetime of those arrangements. A forbearance arrangement is considered to be effective where the risk profile of the affected borrower stabilises or improves over the measured time period, resulting in an improved outcome for the Group and the borrower. The measurement of effectiveness takes account of the nature and intended outcome of the forbearance arrangement and the period over which it applies. Asset quality - Loans and advances to customers (audited except where denoted unaudited) Asset quality methodology The Group has allocated financial instruments into one of the following categories at the reporting date: • Stage 1 - 12 month expected credit losses (not credit- impaired) Financial instruments which have not experienced a significant increase in credit risk since initial recognition and are not credit-impaired. An impairment loss allowance equal to 12-month ECL is recognised, which is the portion of lifetime ECL resulting from default events that are estimated within the next 12 months. • Stage 2 - Lifetime expected credit losses (not credit- impaired) Financial instruments which have experienced a ‘significant increase in credit risk since initial recognition’ and are not credit-impaired. An impairment loss allowance equal to lifetime ECL is recognised, being the ECL resulting from all estimated default events over the expected life of the financial instrument. ‘Credit risk’ in this context refers to the change in the risk of a default occurring over the expected life of the financial instrument. • Stage 3 - Lifetime expected credit losses (credit-impaired) Credit-impaired financial instruments, other than Purchased or Originated Credit-impaired (POCI) financial assets. An impairment loss allowance equal to lifetime ECL is recognised. The manner in which the Group identifies financial assets as credit-impaired results in the Group’s population of credit-impaired financial assets being consistent with its population of defaulted financial assets (in accordance with regulatory guidelines including EBA Guidelines on the application of the definition of default under Article 178 of the Capital Requirements Regulation (CRR). This encompasses loans where: (i) the borrower is considered unlikely to pay in full without recourse by the Group to actions such as realising security and / or (ii) the borrower is greater than or equal to 90 days past due and the arrears amount is material. • POCI ﬁnancial assets Financial assets that were credit-impaired at initial recognition. A POCI is not subject to any initial impairment loss allowance but an impairment loss allowance is subsequently recognised for the cumulative changes in lifetime ECL since initial recognition. A POCI remains classified as such until it is derecognised, even if assessed as no longer credit-impaired at a subsequent reporting date. POCI obligations remain outside of the normal stage allocation process for the lifetime of the obligation. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 158 3 Management of principal risks (continued) 3.4 Credit risk (continued) Further information on the approach to identifying a ‘significant increase in credit risk since initial recognition’ and in identifying credit-impaired assets is outlined in the following section on 'credit risk methodologies'. The Group continue to apply the following classifications at the reporting date. Forborne loans Loans where a forbearance measure has been granted and where the criteria to exit a forborne classification, in line with EBA guidance, are not yet met. Loans that have never been forborne or loans that are no longer required to be reported as ‘forborne’ are classified as 'non-forborne’. Non-performing exposures These are: • credit-impaired loans which includes loans where the borrower is considered unlikely to pay in full without recourse by the Group to actions such as realising security, and / or loans where the borrower is greater than or equal to 90 days past due and the arrears amount is material; and • other loans meeting NPE criteria as aligned with regulatory requirements. Credit risk methodologies (audited) The Group’s credit risk methodologies encompass internal credit rating models and scoring tools and impairment models and are set out below. Internal credit rating models The use of internal credit rating models and scoring tools, which measure the degree of risk inherent in lending to specific counterparties, is central to the credit risk assessment and ongoing management processes within the Group. The primary model measures used are: • PD: the probability of a given counterparty defaulting on any of its borrowings from the Group within the next twelve months; • Exposure at Default (EAD): the exposure the Group has to a defaulting borrower at the time of default; and • LGD: the loss incurred (after the realisation of any collateral) on a specific transaction should the borrower default, expressed as a percentage of EAD. These measures are used to calculate regulatory expected loss and are fully embedded in and form an essential component of the Group’s operational and strategic credit risk management and credit pricing practices. The structure of internal rating systems The Group divides its internal rating systems into non-retail and retail approaches. For the Group’s retail consumer and smaller business portfolios, the credit risk assessment is grounded on application and behavioural scoring tools. For larger commercial and corporate customers, the risk assessment is underpinned by statistical risk rating models which incorporate quantitative information from the customer (e.g. financial statements) together with a qualitative assessment of non-financial risk factors such as management quality and market / trading outlook. Lending to financial institutions is assigned an internal rating supported by external ratings of the major rating agencies. PD calculation For the purposes of internal credit rating models, the Group produces estimates of PD on either or both (hybrid PD) of the following bases: • Through-the-Cycle (TtC) estimates are estimates of annual default rate, averaged over an entire economic cycle. These are in effect averaged expectations of PD for a borrower over the economic cycle; and • Cyclical estimates are estimates of default applicable to the next immediate twelve months. These cyclical estimates partially capture the economic cycle in that they typically rise in an economic downturn and decline in an economic upturn but not necessarily to the same degree as default rates change in the economy. Non-retail internal rating systems The Group has adopted the Foundation Internal Ratings Based (FIRB) approach for most of its non-retail portfolios. Under this approach, the Group calculates its own estimates for PD and uses supervisory estimates of LGD and credit conversion factors. To calculate PD under the FIRB approach, the Group assesses the credit quality of borrowers based on transaction and borrower specific characteristics. Scorecards are developed for each significant portfolio or type of lending, with outputs used to assign a PD grade to each borrower. In the case of financial institutions, external credit agency ratings are used to provide a significant input to the Group’s ratings approach. For exposures other than financial institutions, external ratings, when available for borrowers, play a role in the independent validation of internal estimates. For non-retail exposures, the Group calculates PDs on a TtC or cyclical basis depending on the portfolio. The TtC PD estimates are based on internal default experience, or where default data is limited, statistical model estimates combined with available data to reflect the average annual default rate over the course of an economic cycle. The TtC PDs do not vary with the economic cycle and are used to calculate risk weighted exposure amounts and to determine minimum regulatory capital requirements. The cyclical PD estimates which capture a change in borrower risk over the economic cycle are used for internal credit management purposes. Both measures are estimated from the same borrower risk factors. Retail internal rating systems The Group has adopted the Retail Internal Ratings Based (IRB) approach for the majority of its retail exposures. Under this approach, the Group calculates its own estimates for PD, LGD and credit conversion factors. External ratings do not play a role within the Group’s retail internal rating systems, however, external credit bureau data can play a role in assessing certain borrowers. Under the Retail IRB approach, scorecards based on internal behavioural data and, where relevant, transaction-specific characteristics are developed for specific portfolios or product types. The output from the scorecard is used to determine the PD estimate. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 159 3 Management of principal risks (continued) 3.4 Credit risk (continued) The Group calculates retail PDs on a TtC or cyclical basis depending on the portfolio. The TtC estimates are calibrated based on long run average annual default rates over the course of an economic cycle (based on internal default experience) within identified discrete risk pools. The cyclical estimates are calibrated based on a weighted average of the expected long run default rate over the course of an economic cycle and the most recently observed annual default rate. These retail PDs are used for both the calculation of risk weighted exposure amounts and for internal credit management purposes. LGD estimates are based on historic losses and associated costs for all observed defaults for a defined time period. The time period is set for each model to ensure LGD estimates are representative of economic downturn conditions. Some portfolios have a Best Estimate of Expected Loss (BEEL) LGD modelling component for stock default accounts. Estimates of credit conversion factors (which determine the extent to which a currently undrawn amount is expected to be drawn and outstanding at the point of default) are similarly derived based on historic experience from observed defaults and are calibrated to produce estimates of behaviour characteristic of an economic downturn if those are more conservative than the long run average. The assumption that the time periods and data used for the estimation of LGD and credit conversion factors remain representative of economic downturn conditions is subject to review and challenge on an ongoing basis Other uses of internal estimates Internal estimates play an essential role in risk management and decision making processes as well as the credit approval functions, the internal capital allocation function and the corporate governance functions of the Group. The specific uses of internal estimates differ from portfolio to portfolio, and for retail and non-retail approaches, but typically include: • credit decisioning / automated credit decisioning and borrower credit approval; • credit management; • calculation of RAROC; • internal reporting; and • internal capital allocation between businesses of the Group. For other purposes, the cyclical PD estimates are typically used, both the TtC and cyclical estimates feature within internal management reporting. Control mechanisms for credit rating and impairment models The Group Model Risk Policy, as approved by the BRC and ERC, sets out the Group’s overall approach to model risk management. Supporting standards set out more detailed requirements with respect to development, monitoring and validation of credit rating and impairment models. These standards are approved by the RMC and / or the MRC. Model development and redevelopments for credit rating and impairment models are approved by the RMC and the results of model performance monitoring are reported to the MRC with onward reporting at the RMC on a regular basis. The Group mitigates model risk for credit rating and impairment models as follows: • model development standards: the Group adopts centralised standards and methodologies over the operation and development of models. This ensures a common approach in key areas such as documentation, data quality and management and model testing; • model governance: the Group adopts a uniform approach to the governance of all risk rating model related activities and impairment model related activities, ensuring the appropriate involvement of relevant stakeholders; • model performance monitoring: credit risk rating and impairment models are subject to testing on a quarterly basis which is reported to the relevant committees. This includes assessment of model performance against observed outcomes, including: – rank order of borrowers; – accuracy of parameter estimates; – the stability of the rating; – the quality of data; and – the appropriateness of model use. • independent validation: all models are subject to in-depth analysis on a periodic basis, which includes an assessment of model performance against observed outcomes, including: rank order of borrowers; accuracy of parameter estimates; the stability of the rating population; the quality of data; and the appropriateness of model use. This analysis is carried out by a dedicated unit the ‘Independent Validation Unit’ (IVU) which is independent of credit origination and management functions. When issues are raised on risk rating or impairment models, plans are developed to remediate or replace such models within an agreed timeframe. In addition, GIA regularly reviews the risk control framework, including policies and standards, to ensure that these are being adhered to, meet industry good practices and are compliant with regulatory requirements. Methodology for loan loss provisioning under IFRS 9 Approach to measurement of impairment loss allowances Impairment is measured in a way that reflects: (a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; (b) the time value of money; and (c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions, and forecasts of future economic conditions. Impairment is measured through the use of impairment models, individual discounted cash flow (DCF) analysis and modelled loss rates, supplemented where necessary by Group management adjustments. A loss allowance is recognised for all financial instruments in scope for the impairment requirements of IFRS 9. There have been no significant changes in the quality of collateral or credit enhancements as a result of changes in the Group’s collateral policies during the year. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 160 3 Management of principal risks (continued) 3.4 Credit risk (continued) The Group’s methodologies for valuation of property collateral are set out on page 164, noting further that FLI (page 221) is applied as appropriate to RoI and UK property collateral values in measuring impairment loss allowances under IFRS 9. The Group’s critical accounting estimates and judgements, including those with respect to impairment of financial instruments, are set out in note 2 of the consolidated financial statements. An analysis of the Group’s net impairment losses / gains on financial instruments and impairment loss allowance is set out in notes 13, 24 and 25 of the consolidated financial statements. Impairment models The Group has in place a suite of IFRS 9 compliant impairment models which are executed on a monthly basis. The ECL framework allocates financial instruments to Stage 1, 2 or 3 and measures the applicable 12 month or lifetime ECL. The characteristics of an exposure determine which impairment model is applied, with influencing factors including product type (e.g. residential mortgage, unsecured personal loan, business loan) and market segment (e.g. owner occupier, Buy to Let (BTL), general corporate lending, general business lending). ECLs are calculated as the sum of the marginal losses for each time period from the reporting date. The key components of the ECL calculation are PD, EAD and LGD and are described below. Other components include discount rate and maturity. The current contractual interest rate is generally used as the discount rate as it is considered a suitable approximation of the effective interest rate determined at initial recognition. For term lending including committed RCFs, contractual maturity is used in the ECL calculation. For other revolving facilities, behavioural life is generally used. IFRS 9 Probability of Default Where available, the ratings or underlying scores from internal credit rating models are used as a starting point for IFRS 9 PD calibration. While calibration techniques are similar to those used for regulatory purposes, the IFRS 9 PD differs from through-the-cycle PDs as it is a point-in-time PD measure based on current conditions adjusted to reflect FLI under a range of scenarios. A current point-in-time IFRS 9 PD is calculated as the expected default rate over the next 12 months. This PD is used in the calculation of 12-month ECL and as a starting point in the calculation of lifetime PD. Future point-in-time IFRS 9 PDs are also calculated, being the expected default rates for each year from the start of year two to maturity of the financial instrument. Transition matrices are used to determine how an exposure moves between different PD bands over time. Together, the current point-in-time IFRS 9 PD and future point- in-time IFRS 9 PDs are used to calculate an IFRS 9 lifetime PD expectation for each FLI scenario. The scenario-weighted averages are used to generate an overall IFRS 9 lifetime PD expectation. At origination of a new financial instrument, these expectations are stored, together with prepayment estimates where relevant and allow for comparison at future reporting dates as one of the key determinants as to whether a ‘significant increase in credit risk’ has occurred. As lifetime PD was not calculated historically, the Group used reasonable and supportable information available without undue cost or effort to approximate the residual IFRS 9 lifetime PD expectations at initial recognition for most financial instruments originating prior to the adoption of IFRS 9 on 1 January 2018. The PD component utilised for certain Corporate and Property impairment models was updated in 2023. The PD calibrations for both Corporate and Property portfolios were enhanced to alleviate excessive sensitivity to a small change in the number of defaults and changes in asset quality ratings. The combined result of both of these changes was a c.€32 million increase in impairment loss allowance noting the management judgement utilised in the PD model calibration process for these portfolios at 30 June 2023 is no longer considered to be required. The PD component of the model utilised for the Leverage Acquisition Finance segment of the Corporate portfolio was updated in 2023 to address a deterioration in the performance of the macroeconomic relationship in the PD model. The macro-economic model factors were reviewed and updated with UK interest rates now included as a model factor with UK unemployment. The impact of this change was a c.€23 million decrease in impairment loss allowance. The calibration of the Lifetime PD at initial recognition for Retail Ireland residential mortgage impairment models was refined in 2023. This was required to address an unintended dynamic which resulted in a proportion of newly originated loans migrating to stage 2 due to differences in the PD calibration approach for newly originated loans (<6 months on book) versus seasoned loans (>=6 months on book). This resulted in loans migrating from stage 1 to stage 2 despite analysis demonstrating there was no underlying increase in credit risk. The impact of this change was a decrease in impairment loss allowance of c.€7 million. Further details are provided in note 2 Critical Accounting Estimates and Judgements. IFRS 9 Exposure at Default Current point-in-time EAD is the expected EAD were the borrower to default within the next 12 months. Future point-in- time EAD also incorporates expected contractual cash flows. IFRS 9 EAD differs from regulatory EAD in that it incorporates expected contractual cash flows and caps the exposure at the contractual limit. IFRS 9 Loss Given Default Current point-in-time LGD is the loss that would be incurred should default occur in the next 12 months. To facilitate the calculation of lifetime ECL, future point-in-time LGDs are calculated for each year from the start of year 2 to maturity of the exposure. The starting point for individual components of the calculation is historical data. Cure rate is incorporated as appropriate into the calculation and represents the expected propensity of borrowers to return to the non-defaulted book without a loss having been realised. FLI is also incorporated into LGD as appropriate where RoI or UK property collateral is held. IFRS 9 LGD may differ from regulatory LGD as conservatism and downward assumptions are generally removed. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 161 3 Management of principal risks (continued) 3.4 Credit risk (continued) The ECL model framework was updated in 2023 to reflect an enhanced approach to applying realisation rates and costs calculations within the LGD component of the impairment models for Corporate Banking and Business Banking portfolios. The changes to the LGD component of the Corporate Banking and Business Banking impairment models, resulted in an increase in impairment loss allowance of c.€13 million. The ECL model framework was also updated in 2023 with model factor updates to reflect recent observed information. This included the application of updated portfolio disposal data within the Retail Ireland residential mortgages LGD model, resulting in an increase in impairment loss allowance of c.€20 million. In addition the Retail Ireland and UK residential mortgage LGD models were updated in the year to reflect an updated approach to estimating cure rates to ensure these are representative of future borrower behaviour. The revised methodology applies a prudent approach to accounts that cured from default while availing of Covid related payment breaks. This change results in an increase in impairment loss allowance of c.€22 million. An internal model validation review completed in 2022 incorporated observations on the estimation of LGD for a segment of the micro-SME portfolio. A new LGD model has been developed for this segment in 2023. The change has resulted in a reduction in impairment loss allowance of c.€10 million. Further details are provided in note 2 Critical Accounting Estimates and Judgements. Individual Discounted Cash Flow analysis For credit-impaired financial instruments in Business Banking, Corporate Banking and certain other relationship-managed portfolios, the impairment loss allowance is primarily determined by an individual DCF analysis completed by lenders in business units and subject to review, challenge and, potentially, revision by independent credit professionals in underwriting units. The expected future cash flows are based on an assessment of future recoveries and include forecasted principal and interest payments (not necessarily contractual amounts due) and expected cash flows, if any, from the realisation of collateral / security held, less realisation costs. Modelled loss rates For some smaller and / or lower risk portfolios, (primarily UK unsecured consumer lending and RoI asset finance portfolios) impairment loss allowances are measured by applying modelled loss rates to exposure amounts. Modelled loss rates are generally determined on a component basis taking into account factors such as the nature and credit quality of the exposures and past default and recovery experience on the portfolio or on portfolios with similar risk characteristics. Generally, a number of different loss rates will be set for a portfolio to allow differentiation of individual financial instruments within the portfolio based on their credit quality. Identifying a signiﬁcant increase in credit risk The Group’s standard criteria to identify financial instruments which have had a ‘significant increase in credit risk since initial recognition’ are applied to the vast majority of loans and advances to customers. ‘Credit risk’ in this context refers to the change in the risk of a default occurring over the expected life of the financial instrument. Unless credit-impaired or a POCI, a financial instrument is generally allocated to Stage 2 if any of the following criteria are met at the reporting date: • remaining lifetime PD is more than double and more than 50 basis points higher than the remaining lifetime PD at the reporting date as estimated based on facts and circumstances at initial recognition (adjusted where relevant for changes in prepayment expectations); • a contractual payment is greater than 30 days past due; • the credit management PD risk rating for individually assessed / relationship managed assets is above a defined risk threshold; and • the exposure is a forborne loan or an NPE. The above criteria are automatically applied as part of the monthly execution of the Group’s impairment models. In addition, the Group considers other reasonable and supportable information that would not otherwise be taken into account that would indicate that a significant increase in credit risk had occurred. In this regard, the Group has assessed the impact of elevated inflation and interest rates on asset quality. Credit risk assessments on the impact of higher inflation and interest rates on debt affordability were completed across the Group's loan portfolios. Where appropriate, outputs have been utilised to identify significant increases in credit risk and the classification of assets in stage 2. These credit risk assessments, which leveraged qualitative information not already captured in impairment models, resulted in a credit management decision to classify €2.8 billion of stage 1 residential mortgage and consumer assets as stage 2 at the reporting date, with an associated €33 million increase in impairment loss allowance. Where a financial asset has been modified but not derecognised, the quantitative assessment of ‘significant increase in credit risk’ continues to be based on the remaining lifetime PD at the reporting date as estimated based on facts and circumstances at initial recognition (adjusted where relevant for changes in prepayment expectations). The Group assesses the effectiveness of its staging criteria semi-annually, taking into account considerations such as the extent to which: (i) exposures have moved directly from Stage 1 to Stage 3; (ii) exposures have moved to Stage 3, having spent only a short period in Stage 2; (iii) exposures have moved frequently between Stages 1 and 2; and (iv) there is potential over-reliance on backstop or qualitative criteria in identifying Stage 2 exposures. The Group applies the low credit risk expedient to all debt securities in scope for the impairment requirements of IFRS 9 (with the exception of a small amount of debt securities associated with corporate banking relationships) and similarly to loans and advances to banks, central banks, and investment firms. ‘Low credit risk’ encompasses PD grades 1 to 5 on the Group’s internal PD rating system, which broadly aligns with ratings of AAA to BBB- for the external major rating agencies. Such financial instruments are allocated to Stage 1. For some smaller and / or low risk portfolios, the Group identifies a ‘significant increase in credit risk since initial recognition’ solely by reference to whether a contractual payment is greater than 30 days past due. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 162 3 Management of principal risks (continued) 3.4 Credit risk (continued) Identifying defaulted assets and credit-impaired assets The Group’s population of credit-impaired financial assets are consistent with its population of defaulted financial assets and closely aligned with the Group’s definition of NPEs. Where default criteria are no longer met, the credit facility (obligor for non-retail exposures) exits credit-impaired (Stage 3), subject to meeting defined probation criteria, in line with regulatory requirements. Under the definition of default the Group considers certain events as resulting in mandatory default and credit-impaired classification without further assessment. These include: • greater than or equal to 90 days past due and the past due amount is material; • more than 3 full monthly payments past due (retail credit facilities only); • a forbearance arrangement is put in place and that arrangement involves debt forgiveness or reduction in interest rate / margin; • legal action is underway by the Group to enforce repayment or realise security; • the Group or a receiver takes security into possession; • the Group has formally sought an insolvency arrangement in respect of the borrower; • the exposure is classified as non-performing forborne for supervisory reporting purposes; and • residential mortgages where default has occurred on another credit facility secured on the same property collateral, or more than 20% of overall balance sheet exposure to the customer in the mortgage portfolio is in default. Certain other events necessitate a lender assessment and, if the outcome of the lender assessment is that the contractual amount of principal and interest will not be fully repaid in what is assessed to be the most likely cash flow scenario or will be repaid only via recourse by the Group to actions such as realising security, default and credit-impaired classification is mandatory. For larger value commercial lending cases (typically greater than €1 million or £850,000), the lender assessment involves production of an individual discounted cash flow analysis. The events differ by portfolio and include those set out below. All portfolios: • a forbearance measure has been requested by a borrower and formally assessed; • the non-payment of interest (e.g. via interest roll-up, arrears capitalisation etc.) as a result of the terms of modification of loans, including refinancing and renegotiation of facilities where during the renegotiation process, the lender becomes aware that the borrower is under actual or apparent financial distress; • there are justified concerns about a borrower’s future ability to generate stable and sufficient cash flows; • a borrower’s sources of recurring income are no longer available to meet regular loan repayments; • evidence of fraudulent activity by the borrower or another party connected with the loan; • the contractual maturity date has passed without repayment in full; • repayment of a credit obligation is suspended because of a law allowing this option or other legal restrictions; and • it becomes known that an insolvency arrangement is in force in respect of the borrower or that the borrower has formally sought an insolvency arrangement. Residential mortgage portfolios: • offer of voluntary surrender of security or sale of security at a possible shortfall; or • it becomes known that the borrower has become unemployed with no comparable new employment secured. Larger Small and Medium Enterprise / corporate and property loans: • the borrower has breached the covenants of a credit contract with the Group; • there is a crisis in the sector in which the counterparty operates combined with a weak position of the counterparty in this sector; • external credit rating has been downgraded below a certain level; • financial statements or financial assessment indicates inability of the borrower to meet debt service obligations and / or a negative net assets position; • the borrower has ceased trading; • a fall in the assessed current value of security such that the LTV ratio is greater than or equal to 120% (Property and construction only); • a fall in net rent such that it is inadequate to cover interest with little / no other income to support debt service capacity (investment property exposures only); • a fall in the assessed gross development value such that sale proceeds are no longer expected to fully repay debt (development exposures only); or • the borrower has been granted multiple forbearance arrangements over a period of 3 years. Review of credit-impaired loans It is Group policy to review credit-impaired loans above agreed thresholds semi-annually or on receipt of material new information, with the review including a reassessment of the recovery strategy and the continued appropriateness of a credit-impaired classification. The minimum requirements for a credit-impaired loan to return to non credit-impaired status are that the borrower must not be greater than 90 days past due on a material amount, the borrower must be considered likely to pay in full without recourse by the Group to actions such as realising security and there must be no forbearance arrangement in place where future reliance on realisation of collateral is expected for repayment in full when this was not originally envisaged. Typically, an updated assessment of the borrower’s current financial condition and prospects for repayment is required with the borrower to have satisfactorily met repayments required under the original or modified agreement regularly for a reasonable period of time. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 163 3 Management of principal risks (continued) 3.4 Credit risk (continued) Methodologies for valuation of property collateral The Group’s approach to the determination of the market value of property collateral is set out in the Group Property Collateral Valuation Policy, supported by related Group Property Collateral Valuation Guidelines, and is summarised below. The Group’s approach to applying FLI to those values for the purposes of measuring impairment loss allowance for the year ended 31 December 2023 is set out in the Group Impairment Policy and is described below. Retail Ireland mortgage loan book property values are determined by reference to the original or latest property valuations held indexed to the CSO Residential Property Price Index (RPPI). Retail UK mortgage loan book property values are determined by reference to the original or latest property valuations held indexed to the Nationwide UK house price index. Commercial property valuations may include formal written valuations from external or internal professionals, or ‘internally assessed valuations’ completed by business units. Internally assessed valuations are informed by the most appropriate sources available for the assets in question. This may include property specific information / characteristics, local market knowledge, comparable transactions, professional advice (e.g. asset management reports) or a combination thereof, in line with more detailed guidance approved by the GCRC. This guidance is informed by both internal and externally sourced market data / valuation information, including input from the Group’s Real Estate Advisory Unit. Internally assessed valuations are subject to review, challenge and, potentially, revision by independent credit professionals in underwriting units and are approved as part of the normal credit process. Typically, more frequent valuations are required for properties held as security for NPEs with an annual valuation required for NPEs in excess of €300,000 / £250,000. Credit risk associated with geopolitical risk, inflation, and interest rates In 2023, the Group conducted a number of assessments in relation to credit risk associated with the impact of elevated inflation and interest rates on asset quality. As outlined previously, credit risk assessments were implemented across the residential mortgage and consumer portfolios and, where appropriate, outputs have been utilised to identify significant increases in credit risk and the classification of stage 1 assets as stage 2. These credit risk assessments, which leveraged qualitative information not already captured in impairment models, resulted in a credit management decision to classify €2.8 billion of stage 1 assets as stage 2 at the reporting date, (2022: €1.9 billion), with a corresponding €33 million increase in impairment loss allowance (2022: €12 million). The impact of elevated inflation and interest rates have been taken into account within individual credit assessments in the relationship managed commercial portfolios. All US Commercial Real Estate Office exposures have been downgraded to ensure all performing loans in this portfolio are classified as stage 2 or lower. The estimated impact of this judgement was a c.€10 million increase in impairment loss allowance. In addition to this an Investment Property post- model adjustment to the Group's impairment loss allowance of €48 million was recognised to reflect latent risk in the wider Investment Property portfolio including the impact of prevailing interest rates in the commercial property market. Furthermore, the final set of probability weightings applied FLI scenarios utilised in the Group’s impairment models incorporated the application of management judgement to the initial probability weightings to reflect economic uncertainty associated with factors including geopolitical risk; elevated inflation and interest rates in the Group’s key economies. The estimated impact of this judgement was a c.€31 million increase in impairment loss allowance (2022: c.€37 million). Further details on the selected FLI scenarios for the reporting period, Group management adjustments and management judgement incorporated into impairment model parameters are provided in note 2 Critical Accounting Estimates and Judgements. Quantitative information about credit risk within ﬁnancial instruments held by the Group can be found in note 25 Credit risk exposures. Forward Looking Information Changes in estimates FLI refers to probability-weighted future macroeconomic scenarios used in the measurement of impairment loss allowances under IFRS 9, and is approved semi-annually by the ERC. The Group has used four RoI FLI scenarios and four UK FLI scenarios at 31 December 2023, comprised of a central scenario, an upside scenario, and two downside scenarios, including one severe downside scenario. All scenarios extend over a five year forecast period, with reversion to long run averages for property price growth for years beyond this. The Group keeps under review the number of FLI scenarios and the need to produce projections for other jurisdictions. The central FLI scenario for the year ending 31 December 2023 is based on internal and external information and management judgement and follows the same process as used in prior periods. In order to incorporate available, reasonable and supportable information and apply meaningful upside and downside FLI scenarios, three alternative scenarios (one upside and two downside) were constructed by the Group's Economic Research Unit (ERU) and the Real Estate Advisory Unit (REAU) along specific scenario narratives to reflect different levels of geopolitical tensions, varying impacts of energy price disruption and inflation; the depth of downturn in the RoI, UK and global economies; and the pace of economic recovery. The alternative scenarios were assessed relative to the historical distribution of key macroeconomic factors to derive an initial set of relative probabilities. The probability weightings attached to the scenarios are a function of their relative position on the distribution of historical outcomes, with a lower probability weighting attached to the scenarios that were assessed to be more distant from the centre of the distribution. The final weightings were also informed by other qualitative factors and expert judgment. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 164 3 Management of principal risks (continued) 3.4 Credit risk (continued) The overall ECL for an exposure is determined as a probability weighted average of the ECL calculated for each scenario, weighted by the probability of each scenario occurring. Beyond the forecast period, default rates are assumed to revert over time to an observed long run average and the value of property collateral for LGD purposes is assumed to grow at an observed long run rate. Typically, one or two macroeconomic variables are incorporated into each impairment model, being those determined through macro regression techniques to be most relevant to forecasting default of the credit risk exposures flowing through that model. The lifetime PD expectation for an exposure generated under each of the scenarios, weighted by the probability of each scenario occurring, is used to generate the lifetime PD expectations used for the assessment of ‘significant increase in credit risk'. Forecasts of residential and commercial property price growth are incorporated as appropriate into the LGD component of the ECL calculation. The application of property price growth forecasts for the estimation of stage 3 impairment loss allowances ensures that the property collateral value at the point of liquidation does not incorporate an improvement on the current market condition. FLI is also taken into account in relation to the estimation of impairment loss allowances for relationship- managed corporate and business banking portfolios where recovery values are dependent on non-property cash flows and / or collateral. For further information, see note 2 Critical Accounting Estimates and Judgements. The development of climate risk modelling capabilities is a key objective of the Group's Climate Risk Action Plan. Methodology development is in the early stages across the industry. Initial implementation has focused on development of scenario analysis capabilities which is expected to be followed by integration into impairment models and internal credit ratings models in the medium term. Composition and impairment The tables below summarise the composition, credit-impaired volumes and related impairment loss allowance of the Group's loans and advances to customers at amortised cost at 31 December 2023. These tables exclude €205 million of loans and advances to customers at 31 December 2023 (2022: €217 million) that are measured at FVTPL and are therefore not subject to impairment under IFRS 9. In February 2023, the Group completed the acquisition of a €8.0 billion portfolio of loans (predominantly residential mortgages) from KBCI. This resulted in a once-off impairment loss in the first quarter of c.€17 million. This acquisition represents a primary driver of the increase in the Group’s loans and advances to customers in the year. Credit-impaired includes Stage 3 and POCI assets of €118 million (2022: €79 million). €25 million of POCI assets (2022: €1 million) were no longer credit-impaired at the reporting date due to improvement in credit risk since purchase or origination. These loans will remain classified as POCI loans until derecognition. The increase in POCI assets is due to the KBCI loan acquisition. 2023 Credit-impaired loans and advances to customers - Composition and impairment (audited) Advances (pre- impairment loss allowance) €m Credit- impaired loans €m Credit- impaired loans as % of advances % Credit- impaired Impairment loss allowance €m Impairment loss allowance as % of credit- impaired loans % Residential mortgages 47,130 770 1.6% 141 18% Retail Ireland 32,102 383 1.2% 89 23% Retail UK 15,028 387 2.6% 52 13% Non-property SME and corporate 20,449 1,080 5.3% 330 31% Republic of Ireland SME 7,153 342 4.8% 161 47% UK SME 1,547 80 5.2% 22 28% Corporate 11,749 658 5.6% 147 22% Property and construction 7,223 369 5.1% 80 22% Investment 6,683 320 4.8% 69 22% Development 540 49 9.1% 11 22% Consumer 5,801 130 2.2% 61 47% Total 80,603 2,349 2.9% 612 26% Purchased / originated credit-impaired 143 118 82.5% 12 10% Total 80,746 2,467 3.1% 624 25% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 165 3 Management of principal risks (continued) 3.4 Credit risk (continued) Advances (pre- impairment loss allowance) €m Credit- impaired loans €m Credit- impaired loans as % of advances % Credit- impaired Impairment loss allowance €m Impairment loss allowance as % of credit- impaired loans % 2022 Credit-impaired loans and advances to customers - Composition and impairment (audited) Residential mortgages 38,016 450 1.2% 89 20% Retail Ireland 22,468 251 1.1% 69 27% Retail UK 15,548 199 1.3% 20 10% Non-property SME and corporate 21,452 1,534 7.2% 563 37% Republic of Ireland SME 7,175 561 7.8% 269 48% UK SME 1,578 121 7.7% 45 37% Corporate 12,699 852 6.7% 249 29% Property and construction 8,141 355 4.4% 102 29% Investment 7,024 339 4.8% 97 29% Development 1,117 16 1.4% 5 31% Consumer 5,350 146 2.7% 81 55% Total 72,959 2,485 3.4% 835 34% Purchased / originated credit-impaired 80 79 98.8% 33 41% Total 73,039 2,564 3.5% 868 34% At 31 December 2023, loans and advances to customers (pre- impairment loss allowance) of €80.7 billion were €7.7 billion higher than 31 December 2022, reflecting the acquisition of the KBCI portfolio, the combined impacts of currency translation, NPE resolution activity (including portfolio disposals and utilisation of impairment loss allowances) and net redemptions in the year. Credit-impaired loans decreased to €2.5 billion or 3.1% of customer loans at 31 December 2023 from €2.6 billion or 3.5% at 31 December 2022. This decrease reflected resolution strategies that include appropriate and sustainable support to viable customers who are in financial difficulty. Resolution strategies include the disposal of non-performing portfolios, realisation of cash proceeds from property sales activity and, where appropriate, have given rise to utilisation of impairment loss allowance against loan amounts for which there is no reasonable expectation of recovery. In the second half of the year the Group completed the disposal of a pool of non-performing business banking and residential mortgage loans with a gross carrying value of €0.3 billion in the year, with an associated €6 million net impairment loss (including the full utilisation of the €35 million post-model adjustment recognised at 30 June 2023). The decrease from resolution strategies was partly offset by the acquisition of €0.1 billion of NPEs from KBCI in 2023 and from the emergence of new defaults in the year (primarily in the residential mortgage portfolio). The application of updated FLI, individually assessed risk ratings, credit risk assessments and impairment methodology updates resulted in the net migration of €0.1 billion loans from Stage 2 to Stage 1 (i.e. cases that are no longer identified as having experienced a significant increase in credit risk) in the year. This net migration reflects the impact of impairment methodology changes relating to the calibration of Lifetime PD at initial recognition for Retail Ireland residential mortgage impairment models (note 2), updates to FLI weightings and other portfolio activity (including net repayments / redemptions in the year) offset by the impact of elevated inflation and interest rates on the credit risk in the loan book, and the application of an updated approach to identifying significant increase in credit risk for relationship managed commercial portfolios. The stock of impairment loss allowance on credit-impaired loans was €0.6 billion at 31 December 2023, which was €0.2 billion lower than the stock at 31 December 2022. The net decrease incorporates impairment loss allowance utilisation of €0.6 billion, including c.€0.3 billion associated with NPE portfolio disposals. This was partly offset by the impact of the impairment loss on credit-impaired loans of €0.2 billion and the impact of currency translation and other movements. The total impairment loss allowance at 31 December 2023 includes a total Group management adjustment of €85 million (2022: €60 million), all of which was recognised against loans and advances to customers. Details on the Group management adjustment are provided in note 2 on pages 227 to 229. ILA cover for credit-impaired loans decreased to 25% compared to 34% at 31 December 2022. This primarily reflects changes in the underlying asset / portfolio mix of the stage 3 population following the portfolio disposal of highly provisioned NPE exposures and other resolution activity with lower impairment requirements for assets migrating to stage 3 in the year as well as the impact of the acquisition of the KBCI portfolio. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 166 3 Management of principal risks (continued) 3.4 Credit risk (continued) Risk profile of forborne loans and advances to customers The Group’s total risk profile of loans and advances to customers at amortised cost at 31 December 2023 of €80.7 billion (2022: €73.0 billion) is available in note 24. The tables below exclude €205 million of loans and advances to customers at 31 December 2023 (2022: €217 million) that are measured at FVTPL and are therefore not subject to impairment under IFRS 9. Exposures are before impairment loss allowance. 2023 Loans and advances to customers at amortised cost - Composition (audited) Stage 1 (not credit- impaired) €m Stage 2 (not credit- impaired) €m Stage 3 (credit- impaired) €m Purchased / originated credit- impaired €m Total €m Non-forborne loans and advances to customers Residential mortgages 42,781 3,371 542 118 46,812 Retail Ireland 29,361 2,214 231 118 31,924 Retail UK 13,420 1,157 311 – 14,888 Non-property SME and corporate 14,737 3,454 269 1 18,461 Republic of Ireland SME 5,667 991 217 1 6,876 UK SME 1,154 218 49 – 1,421 Corporate 7,916 2,245 3 – 10,164 Property and construction 3,336 2,573 145 – 6,054 Investment 2,934 2,536 145 – 5,615 Development 402 37 – – 439 Consumer 4,870 800 128 – 5,798 Total non-forborne loans and advances to customers 65,724 10,198 1,084 119 77,125 Forborne loans and advances to customers Residential mortgages 5 203 228 24 460 Retail Ireland 4 140 152 24 320 Retail UK 1 63 76 – 140 Non-property SME and corporate – 1,178 811 – 1,989 Republic of Ireland SME – 153 125 – 278 UK SME – 95 31 – 126 Corporate – 930 655 – 1,585 Property and construction – 945 224 – 1,169 Investment – 893 175 – 1,068 Development – 52 49 – 101 Consumer – 1 2 – 3 Total forborne loans and advances to customers 5 2,327 1,265 24 3,621 At 31 December 2023, forborne POCI loans included €1 million (2022: €1 million) of loans which, while credit-impaired upon purchase or origination, were no longer credit-impaired at the reporting date due to improvement in credit risk. These loans will remain classified as POCI loans until derecognition. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 167 3 Management of principal risks (continued) 3.4 Credit risk (continued) Stage 1 (not credit- impaired) €m Stage 2 (not credit- impaired) €m Stage 3 (credit- impaired) €m Purchased / originated credit- impaired €m Total €m 2022 Loans and advances to customers at amortised cost - Composition (audited) Non-forborne loans and advances to customers Residential mortgages 34,019 3,272 281 1 37,573 Retail Ireland 19,732 2,276 112 1 22,121 Retail UK 14,287 996 169 – 15,452 Non-property SME and corporate 15,253 3,123 385 – 18,761 Republic of Ireland SME 4,931 1,437 233 – 6,601 UK SME 1,177 187 61 – 1,425 Corporate 9,145 1,499 91 – 10,735 Property and construction 3,864 2,991 17 – 6,872 Investment 3,216 2,568 14 – 5,798 Development 648 423 3 – 1,074 Consumer 4,694 509 143 – 5,346 Total non-forborne loans and advances to customers 57,830 9,895 826 1 68,552 Forborne loans and advances to customers Residential mortgages 1 274 169 3 447 Retail Ireland 1 208 139 3 351 Retail UK – 66 30 – 96 Non-property SME and corporate – 1,542 1,149 16 2,707 Republic of Ireland SME – 246 328 – 574 UK SME – 93 60 – 153 Corporate – 1,203 761 16 1,980 Property and construction – 931 338 60 1,329 Investment – 901 325 60 1,286 Development – 30 13 – 43 Consumer – 1 3 – 4 Total forborne loans and advances to customers 1 2,748 1,659 79 4,487 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 168 3 Management of principal risks (continued) 3.4 Credit risk (continued) Loan to value profiles - total Retail Ireland mortgages (audited) The tables below set out the weighted average indexed loan to value (LTV) for the total Retail Ireland mortgage loan book. The tables exclude POCI loans of €142 million (2022: €4 million). The increase in POCI assets is due to the KBCI loan acquisition. 2023 Loan to value ratio of total Retail Ireland mortgages (audited) Owner occupied Buy to let Total Not credit- impaired €m Credit- impaired €m Total €m Not credit- impaired €m Credit- impaired €m Total €m Not credit- impaired €m Credit- impaired €m Total €m Less than 50% 13,042 138 13,180 940 31 971 13,982 169 14,151 51% to 70% 10,156 90 10,246 186 7 193 10,342 97 10,439 71% to 80% 3,504 25 3,529 30 3 33 3,534 28 3,562 81% to 90% 3,503 12 3,515 37 6 43 3,540 18 3,558 91% to 100% 258 11 269 11 2 13 269 13 282 Subtotal 30,463 276 30,739 1,204 49 1,253 31,667 325 31,992 101% to 120% 19 10 29 5 2 7 24 12 36 121% to 150% 14 5 19 2 5 7 16 10 26 Greater than 151% 6 13 19 6 23 29 12 36 48 Subtotal 39 28 67 13 30 43 52 58 110 Total 30,502 304 30,806 1,217 79 1,296 31,719 383 32,102 Weighted average LTV: Stock of Retail Ireland mortgages at year end 54% 42% 53% New Retail Ireland mortgages during the year 75% 55% 74% Owner occupied Buy to let Total 2022 Loan to value ratio of total Retail Ireland mortgages (audited) Not credit- impaired €m Credit- impaired €m Total €m Not credit- impaired €m Credit- impaired €m Total €m Not credit- impaired €m Credit- impaired €m Total €m Less than 50% 9,670 68 9,738 967 23 990 10,637 91 10,728 51% to 70% 7,109 41 7,150 189 8 197 7,298 49 7,347 71% to 80% 2,383 16 2,399 32 3 35 2,415 19 2,434 81% to 90% 1,552 9 1,561 51 7 58 1,603 16 1,619 91% to 100% 212 6 218 10 3 13 222 9 231 Subtotal 20,926 140 21,066 1,249 44 1,293 22,175 184 22,359 101% to 120% 9 12 21 6 6 12 15 18 33 121% to 150% 11 6 17 4 8 12 15 14 29 Greater than 151% 5 11 16 7 24 31 12 35 47 Subtotal 25 29 54 17 38 55 42 67 109 Total 20,951 169 21,120 1,266 82 1,348 22,217 251 22,468 Weighted average LTV: Stock of Retail Ireland mortgages at year end 52% 44% 51% New Retail Ireland mortgages during the year 72% 54% 72% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 169 3 Management of principal risks (continued) 3.4 Credit risk (continued) Weighted average loan to value ratios are calculated at a property level and reflect the average property value in proportion to the outstanding mortgage. Property values are determined by reference to the property valuations held, indexed to the CSO RPPI. The indexed LTV profile of the Retail Ireland mortgage loan book is based on the CSO RPPI at October 2023. The CSO RPPI for October 2023 reported that average national residential property prices were 5.1% above peak (2022: 2.9% above peak), with Dublin residential prices 6.3% below peak and outside of Dublin residential prices 6.1% above peak (2022: 5.7% below peak and 1.8% above peak respectively). In the 10 months to October 2023, residential property prices at a national level increased by 1.9%. At 31 December 2023, €32.0 billion or 99.7% of Retail Ireland mortgages were classified as being in positive equity, 99.8% for Owner occupied mortgages and 96.7% for BTL mortgages. Loan to value profiles - total Retail UK mortgages (audited) The tables below set out the weighted average indexed LTV for the total Retail UK mortgage loan book. Weighted average loan to value ratios are calculated at a property level and reflect the average of property values in proportion to the outstanding mortgage. Property values are determined by reference to the original or latest property valuations held, indexed to the published ‘Nationwide UK House Price Index’. 2023 Loan to value ratio of total Retail UK mortgages (audited) Standard Buy to let Self certified Total Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Total £m Less than 50% 1,996 37 1,967 67 383 23 4,346 127 4,473 51% to 70% 2,772 39 1,931 95 253 25 4,956 159 5,115 71% to 80% 1,507 15 312 14 22 4 1,841 33 1,874 81% to 90% 1,145 7 9 2 2 1 1,156 10 1,166 91% to 100% 411 2 2 1 1 1 414 4 418 Subtotal 7,831 100 4,221 179 661 54 12,713 333 13,046 101% to 120% 8 – – 1 2 – 10 1 11 121% to 150% 1 1 – – – – 1 1 2 Greater than 150% – – – – – 1 – 1 1 Subtotal 9 1 – 1 2 1 11 3 14 Total 7,840 101 4,221 180 663 55 12,724 336 13,060 Weighted average LTV: Stock of Retail UK mortgages at year end 62% 56% 51% 55% 46% 56% 57% 55% 57% New Retail UK mortgages during year 75% 68% 60% 57% 52% – 73% 64% 73% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 170 3 Management of principal risks (continued) 3.4 Credit risk (continued) 2022 Loan to value ratio of total Retail UK mortgages (audited) Standard Buy to let Self certified Total Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Not credit- impaired £m Credit- impaired £m Total £m Less than 50% 2,265 30 2,585 28 485 17 5,335 75 5,410 51% to 70% 3,059 33 2,159 31 276 19 5,494 83 5,577 71% to 80% 1,615 7 189 3 20 2 1,824 12 1,836 81% to 90% 728 3 7 – 4 – 739 3 742 91% to 100% 208 1 2 – 1 – 211 1 212 Subtotal 7,875 74 4,942 62 786 38 13,603 174 13,777 101% to 120% 6 – – – 2 – 8 – 8 121% to 150% 2 – – – – – 2 – 2 Greater than 150% – – 1 1 – 1 1 2 3 Subtotal 8 – 1 1 2 1 11 2 13 Total 7,883 74 4,943 63 788 39 13,614 176 13,790 Weighted average LTV: Stock of Retail UK mortgages at year end 59% 54% 49% 53% 45% 52% 55% 53% 55% New Retail UK mortgages during year 77% 77% 65% 40% 42% – 75% 75% 75% 3.5 Funding and liquidity risk Definition (audited) Funding and liquidity risk is the risk that the Group will experience difficulty in financing its assets and / or meeting its contractual payment obligations as they fall due or will only be able to do so at substantially above the prevailing market cost of funds. Liquidity risk arises from differences in timing between cash inflows and outflows. Cash inflows are driven by, amongst other things, the maturity structure of loans and investments held by the Group, while cash outflows are driven by items such as the term maturity of debt issued by the Group and outflows from customer deposit accounts. The liquidity risk of the Group may also be impacted by external events which could result in a sudden withdrawal of deposits or the potential changes in customer behaviour. Funding risk can occur where there is an over-reliance on a particular type of funding, a funding gap, or a concentration of wholesale funding (including securitisations) maturities. The Group’s ability to access funding markets at a sustainable cost and in a sufficient volume can be negatively impacted by a disruption to wholesale and / or currency funding markets, credit rating downgrade(s) or deterioration in market sentiment which in turn could impact the financial position of the Group. Liquidity risk statement (audited) Funding and liquidity risk arises from a fundamental part of the Group’s business model, the maturity transformation of primarily short-term deposits into longer-term loans. The Group’s funding and liquidity strategy is to maintain a stable funding base with loan portfolios substantially funded by retail originated customer deposit portfolios. Liquidity risk framework (audited) The Group has established a Liquidity Risk Management Framework which encompasses the liquidity policy, procedures and methodologies in place to ensure that the Group is positioned to address its daily liquidity obligations and to withstand a period of liquidity stress. Principal components of this framework are the Group’s Risk Appetite Statement and associated limits and the Group’s Funding and Liquidity Policy, both of which are approved by the Board on the recommendation of ALCO. The Group Funding and Liquidity Policy outlines the Group’s governance process with respect to funding and liquidity risk and sets out the core principles that govern the manner in which the risk is mitigated, monitored and managed. The operation of this policy is delegated to the Group’s ALCO. These principal components are supported by further liquidity, procedures, and methodologies which the Group has to manage funding and liquidity risk. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 171 3 Management of principal risks (continued) 3.5 Funding and liquidity risk (continued) Liquidity risk management (audited) Liquidity risk management within the Group focuses on the control, within prudent limits, of risk arising from the mismatch in contracted maturities of assets and liabilities and the risks arising from undrawn commitments and other contingent liabilities. The Group manages its liquidity by jurisdiction with liquid assets predominantly held in the currency of each jurisdiction. The Group’s treasury function within Group Finance provides top down centralised management of the Group’s funding and liquidity position including overall responsibility for the management of the Group’s liquidity position and funding strategy. This ensures a coordinated approach to balance sheet management and is accomplished through the incorporation of funding and liquidity risk appetite metrics into risk appetite at a consolidated level, monitoring liquidity metrics for each jurisdiction and compliance by the business units with the Group’s funds transfer pricing methodology. The Group Market and Liquidity Risk function provides independent oversight of funding and liquidity risk and is responsible for proposing and maintaining the Group’s Funding and Liquidity Risk Management Framework and associated risk appetite metrics. Liquidity risk management consists of two main activities: • structural liquidity management focuses on the balance sheet structure, the funding mix, the expected maturity profile of assets and liabilities and the Group’s debt issuance strategy; and • tactical liquidity management focuses on monitoring current and expected daily cash flows to ensure that the Group’s liquidity needs can be met. The Group is required to comply with the regulatory liquidity requirements of the SSM and the requirements of local regulators in those jurisdictions where such requirements apply to the Group. SSM requirements include compliance with CRR / CRD IV and associated Delegated Acts. The Group has remained in full compliance with the regulatory liquidity requirements throughout 2023 and at 31 December 2023 maintained a buffer significantly in excess of regulatory liquidity requirements. BoI (UK) plc is authorised by the PRA and is subject to the regulatory liquidity regime of the PRA. BoI (UK) plc has remained in full compliance with the regulatory liquidity regime in the UK throughout 2023 and at 31 December 2023 maintained a buffer significantly in excess of regulatory liquidity requirements. The annual ILAAP enables the Board to assess the adequacy of the Group’s Funding and Liquidity Risk Management Framework, to assess the key liquidity and funding risks to which it is exposed; and details the Group’s approach to determining the level of liquid assets and contingent liquidity that is required to be maintained under both business as usual and severe stress scenarios. A key part of this assessment is cash flow forecasting that includes assumptions on the likely behavioural cash flows of certain customer products. Estimating these behavioural cash flows allows the Group to assess the stability of its funding sources and potential liquidity requirements in both business as usual and stressed scenarios. The stressed scenarios incorporate Group specific and systemic risks and are run at different levels of possible, even if unlikely, severity. Actions and strategies available to mitigate the impacts of the stress scenarios are evaluated as to their appropriateness. Stress test results are reported to ALCO, the BRC and the Board. The Group also monitors a suite of Recovery Indicators and Early Warning Signals in order to identify the potential emergence of a liquidity stress. As part of its contingency and recovery planning, the Group has identified a suite of potential funding and liquidity options, which could be exercised to help the Group to restore its liquidity position on the occurrence of a major stress event. Liquidity risk reporting (audited) The Group’s liquidity risk appetite is defined by the Board to ensure that funding and liquidity are managed in a prudent manner. The current status of funding and liquidity risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis, including any significant changes. The Board Risk Report includes the results of the Group’s liquidity stress testing. This estimates the potential impact of a range of stress scenarios on the Group’s liquidity position including its available liquid assets and contingent liquidity. Management reviews funding and liquidity reports and stress testing results on a daily, weekly, and monthly basis against the Group’s Risk Appetite Statement. It is the responsibility of ALCO to ensure that the measuring, monitoring, and reporting of funding and liquidity is adequately performed and complies with the governance framework. Liquidity risk measurement (audited) The Group’s cash flow and liquidity reporting processes provide management with daily liquidity risk information by designated cash flow categories. These processes capture the cash flows from both on-balance sheet and off-balance sheet transactions. The tables below summarise the maturity profile of the Group’s financial assets and liabilities, excluding those arising from insurance and participating investment contracts at 31 December 2023 and 31 December 2022. These maturity profiles are based on the remaining contractual maturity period at the reporting date (discounted). The Group measures liquidity risk by adjusting the contractual cash flows on deposit books to reflect their behavioural stability. Unit-linked investment liabilities and unit-linked insurance liabilities with a carrying value of €7,692 million and €15,113 million respectively (2022 restated for IFRS 17: €6,859 million and €13,410 million respectively) are excluded from this analysis as their repayment is linked directly to the financial assets backing these contracts. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 172 3 Management of principal risks (continued) 3.5 Funding and liquidity risk (continued) Customer accounts include a number of term accounts that contain access features. These allow the customer to access a portion or all of their deposits notwithstanding that this withdrawal could result in a financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the ‘Demand’ category in the following table. Other financial assets at FVTPL and trading securities exclude equity shares which have no contractual maturity (note 20). 2023 Maturities of ﬁnancial assets and liabilities (audited) Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m Assets Cash and balances at central banks 31,843 – – – – 31,843 Trading securities – 19 – 2 48 69 Derivative ﬁnancial instruments 740 57 281 1,739 1,524 4,341 Other ﬁnancial assets at FVTPL 1,647 38 37 394 3,766 5,882 Loans and advances to banks 294 1,504 109 – – 1,907 Debt securities at amortised cost – 28 75 2,934 2,678 5,715 Financial assets at FVOCI – 44 354 2,717 853 3,968 Loans and advances to customers (before impairment loss allowance) 1,644 4,043 7,888 31,673 35,703 80,951 Total 36,168 5,733 8,744 39,459 44,572 134,676 Liabilities Deposits from banks 88 532 – – – 620 Monetary authorities secured funding – – 1,058 1,417 – 2,475 Customer accounts 92,325 4,747 2,354 757 – 100,183 Derivative financial instruments 596 49 240 2,734 871 4,490 Debt securities in issue – 2 – 6,159 2,509 8,670 Subordinated liabilities – – – – 1,600 1,600 Lease liabilities – 13 40 155 196 404 Short positions in trading securities 1 – – 68 36 105 Total 93,010 5,343 3,692 11,290 5,212 118,547 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 173 3 Management of principal risks (continued) 3.5 Funding and liquidity risk (continued) 2022 Maturities of ﬁnancial assets and liabilities (audited) Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m Assets Cash and balances at central banks 36,749 106 – – – 36,855 Trading securities – – – – – – Derivative ﬁnancial instruments 272 102 356 2,614 1,794 5,138 Other ﬁnancial assets at FVTPL 1,701 13 18 404 3,394 5,530 Loans and advances to banks 342 2,645 57 – – 3,044 Debt securities at amortised cost 1,418 63 – 1,350 1,641 4,472 Financial assets at FVOCI 334 237 280 2,304 1,099 4,254 Loans and advances to customers (before impairment loss allowance) 1,497 4,921 8,359 29,800 28,679 73,256 Total 42,313 8,087 9,070 36,472 36,607 132,549 Liabilities Deposits from banks 143 708 – – – 851 Monetary authorities secured funding – – – 2,594 – 2,594 Customer accounts 92,197 4,889 1,377 581 156 99,200 Derivative financial instruments 268 416 338 3,085 2,419 6,526 Debt securities in issue – 4 908 5,714 1,148 7,774 Subordinated liabilities – – – – 1,656 1,656 Lease liabilities – 13 42 165 203 423 Short positions in trading securities – 3 – – – 3 Total 92,608 6,033 2,665 12,139 5,582 119,027 Funding strategy (unaudited) The Group seeks to maintain a stable funding base with loan portfolios funded substantially by granular retail originated deposits with any residual funding requirements principally met through term wholesale funding and equity. Customer deposits (unaudited) The Group’s customer deposit strategy is to: • maintain and optimise its stable retail customer deposit base in line with balance sheet requirements; • prudently manage deposit pricing and margins; and • optimise stable funding levels in line with regulatory liquidity requirements. As per the table on page 60 of the OFR, overall Group customer deposit volumes of €100.2 billion are €1.0 billion higher predominantly driven by the acquisition of the KBCI deposit portfolio of €1.8 billion, partially offset by lower RoI deposits of €0.6 billion and lower Retail UK deposits of €0.2 billion. The Group's LDR at 31 December 2023 was 80% (2022: 73%). Customer deposits do not include €0.5 billion (2022: €0.3 billion) of savings and investment products sold by Wealth and Insurance. These products have fixed terms (typically five to seven years) and consequently are an additional source of stable funding for the Group. Wholesale funding (unaudited) The Group in the normal course aims to maintain funding diversification, minimise concentrations across funding sources and minimise refinancing maturity concentrations. The Group issued c.€2.3 billion of MREL eligible senior debt and down-streamed it to the Bank in 2023 (2022: €2 billion). Foreign exchange funding mismatch (unaudited) The Group’s strategy is to originate all new retail lending in the UK through BoI (UK) plc which is funded primarily via sterling deposits. The Group also provides banking services in the UK through its UK branch. This comprises corporate and business banking activities and the management of certain residential mortgage contracts which have been retained by the UK branch and which are funded primarily via cross currency derivatives. At 31 December 2023, the stock of sterling denominated assets funded by cross currency derivatives was c.£6.6 billion (2022: c. £6.7 billion) of which c.£0.9 million relates to funding provided to BoI (UK) plc. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 174 3 Management of principal risks (continued) 3.5 Funding and liquidity risk (continued) Wholesale funding expected maturity analysis (unaudited) 2023 2022 Unsecured funding €bn Secured funding from Monetary Authorities €bn Secured funding private sources €bn Total wholesale funding €bn Unsecured funding €bn Secured funding from Monetary Authorities €bn Secured funding private sources €bn Total wholesale funding €bn Less than three months 1 – – 1 1 – – 1 Three months to one year – 1 – 1 1 – – 1 One to ﬁve years 6 1 1 8 5 2 1 8 More than ﬁve years 1 – 1 2 – – 1 1 Wholesale funding 8 2 2 12 7 2 2 11 Funding and liquidity position (unaudited) During 2023, Standard & Poor's (S&P) upgraded the BoIG plc senior debt rating to BBB (from BBB-) and The Governor and Company of the Bank of Ireland (GovCo) senior debt rating to A (from A-). They also revised the outlook to Stable (from Positive). Moody's revised the outlook to Positive (from Stable) and affirmed the senior debt ratings of A3 for BoIG plc and A1 for GovCo. Fitch have upgraded the BoIG plc senior debt rating to BBB+ (from BBB) and GovCo senior debt rating to A- (from BBB+). 2023 2022 BoIG plc - Senior debt (unaudited) Standard & Poor's BBB (Stable) BBB- (Positive) Moody’s A3 (Positive) A3 (Stable) Fitch BBB+ (Stable) BBB (Stable) The Governor and Company of the Bank of Ireland (GovCo) - Senior debt (unaudited) Standard & Poor's A (Stable) A- (Positive) Moody’s A1 (Positive) A1 (Stable) Fitch A- (Stable) BBB+ (Stable) Balance sheet encumbrance (audited) It is Group policy to ensure that the level of encumbrance of the balance sheet is consistent and supportive of the Group’s unsecured funding issuance plans. As part of managing its funding requirements, the Group from time to time encumbers assets as collateral to support wholesale funding initiatives. This would include covered bonds, asset backed securities, securities repurchase agreements, and other structures that are secured over customer loans. At 31 December 2023, €9 billion (2022: €14 billion) of the Group’s assets and collateral received were encumbered, primarily through these structures. The Group's overall encumbrance level was 6% (2022: 10%). The decrease in encumbered assets is primarily due to the withdrawal of assets previously encumbered within the Group's Special Mortgage- Backed euro Promissory Note (SMBPN) programmes. The Group’s overall encumbrance is prepared on a regulatory group basis, in accordance with the CRD IV, which comprises banking and other relevant financial institutions within the BoI Group, but excludes non-banking related institutions such as insurance entities. For further information, see the Group’s Pillar 3 disclosures (tab 1.3), available on the Group’s website. Covered bonds, a key element of the Group’s long-term funding strategy are issued through its subsidiary BoIMB. BoIMB is registered as a designated mortgage credit institution to issue Irish Asset Covered Securities in accordance with relevant legislative requirements. BoIMB is required to maintain minimum contractual overcollateralisation of 5% and minimum legislative overcollateralisation of 3% (both on a prudent market value basis). This is monitored by the Covered Asset Monitor on behalf of the CBI. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 175 3 Management of principal risks (continued) 3.6 Life insurance risk Deﬁnition (audited) Life insurance risk is the risk of unexpected variation in the amount and timing of claims associated with insurance benefits. This variation, arising from changing customer mortality, life expectancy, health, or behavioural characteristics, may be short or long term in nature. Risk management (audited) The Group manages life insurance risk under its RMF. Life insurance risk is underwritten and managed by NIAC, a wholly owned subsidiary of the Group. The management of life insurance risk is the responsibility of the NIAC Board which is delegated through internal governance structures. Aggregate life insurance risk exposure and exposure to the sub- categories of life insurance risk are monitored through a suite of management reporting metrics. The risks that arise as a result of writing life insurance business are also managed by a number of governance fora as well as senior management. The minimum standards required when managing these risks are set out in a suite of NIAC Board approved policies. The Group transfers some life insurance risk to reinsurance companies who then meet an agreed share of the claims that arise on a book of business in return for a premium. This creates a credit exposure to these reinsurance companies which is managed within the NIAC RMF with responsibilities delegated through the Reinsurance Risk Policy. A review of the panel of reinsurers that may be used and the structure of reinsurance arrangements is carried out at least annually. Senior members of the management team with actuarial and underwriting expertise, contribute to the effective oversight of this risk. Risk measurement (audited) Risk experience is monitored regularly with actual claims experience being compared to the underlying risk assumptions. The results of this analysis are used to inform management of the appropriateness of those assumptions for use in pricing, capital management and new product design. Exposure to life insurance risk is measured by means of sensitivity and scenario testing. Risk capital is calculated for each individual risk type by stressing the best estimate assumptions of future experience by extreme, but plausible, factors. The stress factors are pre-defined by regulation and are set at a level with an expected frequency of occurrence of one year in every 200. NIAC also carries out an ORSA annually which is overseen by the NIAC Board. Within the ORSA, NIAC’s risk profile is considered, both quantitatively and qualitatively, in a holistic manner with potential areas of risk identified along with conclusions in respect of how those risks will be mitigated. Further details can be found in note 18. Risk mitigation (audited) The Group mitigates the potential impact of life insurance risk through a number of measures. Capital is held against exposure to life insurance risk. Exposure to this risk is also managed and controlled by the use of medical and financial underwriting, risk mitigating contract design features and reinsurance, as detailed in risk management policies. Risk reporting (audited) The current status of life insurance risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. NIAC’s ORSA report in respect of the NIAC annual assessment is also presented to the ERC on an annual basis. 3.7 Market risk Deﬁnition and background (audited) Market risk is the risk of loss arising from movements in interest rates, FX rates, equity, credit spreads or other market prices. Market risk arises from the structure of the balance sheet, the Group’s business mix and includes discretionary risk-taking. Additionally, market risk arises through the conduct of customer business, particularly in respect to fixed-rate lending and the execution of derivatives and foreign exchange business. The market risk profile of the Group may, in addition to the above risks which arise in the usual course of a business cycle, be impacted by shifts in market volatility as a result of external factors. Earnings for NIAC are also indirectly exposed to changes in equity and property markets through fee income generated on unit-linked customer investments. Risk management, measurement, and reporting (audited) The management of market risk in the Group is governed by the Group’s Risk Appetite Statement and by the Group Market Risk Policy, both of which are approved by the Board. These are supplemented by a range of ALCO approved limits and controls. The Group has an established governance structure for market risk that involves the Board, its risk committees (BRC and ERC) and ALCO, which has primary responsibility for the oversight of market risk in the Group. The current status of market risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 176 3 Management of principal risks (continued) 3.7 Market risk (continued) Group Market & Liquidity Risk (GM&LR) provides 2LOD oversight of the Group’s exposure to market risk, ensuring that the Group correctly identifies and assesses the market risks to which it is exposed. GM&LR is a part of the Group Risk Function reporting to the Group CRO. It is Group policy to minimise exposure to market risk, subject to defined limits. Nonetheless, certain structural market risks remain and, in some cases, are difficult to eliminate fully. In addition, the Group bears economic exposure to adverse movements in the credit spreads of bonds held as liquid assets, or held as matching assets in NIAC in the matching assets portfolio. The latter is the predominant economic exposure arising on the NIAC fixed interest portfolio. Market risks that arise are transferred to and managed by Bank of Ireland Global Markets (BoIGM) or Group Treasury, the treasury execution arms of the Group. These market risks are hedged as a matter of course with the external market. Similarly, market risks in the Group’s life assurance business, NIAC, are managed within defined tolerances. However, certain residual risks are inherent in this business, notably exposure to credit spreads on assets held to match policyholder liabilities and indirect exposure to equity markets through changes in the discounted value of fees applied to equity assets held by policyholders in insurance contracts. This is outlined in greater detail below. Classiﬁcation of market risk (unaudited) In accordance with regulatory requirements and guidance the Group classifies market risk as follows: • Market Risk in the Trading Book: Market risk on positions which are required to be booked in the trading book as set out in the CRR. The risk arises primarily as a result of discretionary risk taking or underwriting business in Davy or through the transaction of customer derivative or FX transactions. • Market Risk in the Banking Book: Market risk on positions which are booked in the banking book. This risk is predominately made up of Credit Spread risk which arises primarily from the Groups bond holdings in its Liquid Asset portfolio, structural IRRBB which is intrinsic to a bank’s balance sheet or arises from its franchise or business mix and Structural FX risk which is the exposure of the Group’s principal capital ratios to changes in exchange rates. • Market Risks in the Life Business: Market risk on positions held in the life business. These risks arise naturally from the non unit-linked life business (interest rate risk), securities holdings (credit spread risk) and unit-linked business (equity risk and other market risks). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 177 3 Management of principal risks (continued) 3.7 Market risk (continued) Balance sheet linkage (audited) The table below classifies the balance sheet in terms of Banking Book, Trading Book (as defined above) and Insurance assets and liabilities. The principal risk factors which drive changes in earnings or value in relation to each line item are also outlined. Trading Book assets and liabilities were a small proportion of the balance sheet at 31 December 2023 and this is representative of the position throughout the year. Interest rates are the most significant risk factor. Market risk linkage to the balance sheet 2023 (audited) Total €m Trading €m Non- trading €m Insurance €m Primary Risk Sensitivity Assets Cash and balances at central banks 31,843 – 31,843 – Interest Rate Trading securities 72 72 – – Interest Rate, Credit Spread, Equity Derivative ﬁnancial instruments 4,341 766 3,575 – Interest Rate, FX, Credit Spread, Equity Other ﬁnancial assets at FVTPL 20,899 – 125 20,774 Interest Rate, FX, Credit Spread, Equity Loans and advances to banks 1,907 – 1,807 100 Interest Rate Loans and advances to customers 79,729 – 79,729 – Interest Rate Fair value changes due to interest rate risk of the hedged items in portfolio hedge (124) – (124) – Interest Rate Debt securities at amortised cost 5,715 – 5,715 – Interest Rate Financial assets at FVOCI 3,968 – 3,968 – Interest Rate, FX, Credit Spread Reinsurance contract assets 1,414 – – 1,414 Interest Rate Other assets 5,944 – 4,942 1,002 Interest Rate Total assets 155,708 838 131,580 23,290 Liabilities Deposits from banks 3,095 – 3,095 – Interest Rate Customer deposits 100,183 – 100,183 – Interest Rate Fair value changes due to interest rate risk of the hedged items in portfolio hedge (1,115) – (1,115) – Interest Rate Derivative ﬁnancial instruments 4,490 684 3,806 – Interest Rate, FX, Credit Spread, Equity Debt securities in issue 8,670 – 8,670 – Interest Rate Liabilities to customers under investment contracts 7,692 – – 7,692 Interest Rate, FX, Credit Spread, Equity Insurance contract liabilities 15,113 – – 15,113 Interest Rate, FX, Credit Spread, Equity Allowance provision on loan commitments and ﬁnancial guarantees 61 – 61 – Interest Rate Lease liabilities 404 – 404 – Interest Rate, FX Other liabilities 2,954 – 2,637 317 Interest Rate, FX Subordinated liabilities 1,600 – 1,600 – Interest Rate Total liabilities 143,147 684 119,341 23,122 Discretionary and residual market risk (audited) Discretionary risk is a risk that is carried in the expectation of gain from near-term movements in liquid financial markets. Davy is the Group's only business unit permitted to run discretionary market risk. Residual gap risk arises when hedging is completed on a portfolio basis rather than with back-to-back trades. It is Group practice to hedge IRRBB to de minimis levels wherever possible but as these hedges may not be perfectly matched this can result in small residual hedging gaps. Discretionary and residual market risk is subject to strict controls which set out the markets and instruments in which risk can be assumed, the types of positions which can be taken and the limits which must be complied with. These risks are managed by an approved framework of limits and controls, based on VaR (see below), scenario stress tests and sensitivities. Equity risk, interest rate risk and credit spread risk arises within Davy Capital Markets market making business from the potential impact of changes in equity prices, interest rates and credit spreads. Davy Institutional Equities is responsible for the underwriting, distribution, and trading of Irish, UK and European equities. At 31 December 2023, Davy Capital Markets held a long position of €2 million in listed equities. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 178 3 Management of principal risks (continued) 3.7 Market risk (continued) Davy Fixed Income team is responsible for the underwriting, distribution and trading of Irish Sovereign Bonds and Irish Financial Bonds. At 31 December 2023, Davy Capital Markets held a short position of €34 million in Irish Bonds, which are funded via repurchase agreements. Value at Risk (VaR) (audited) The Group employs a VaR approach to measure and set limits on discretionary and residual market risk. The Group utilises a Monte-Carlo simulation model approach for the calculation of the interest rate risk component at a 99% (two tailed) confidence level, using a one day holding period and based on one year of historic data. The volatilities and correlations which are used to generate these VaR numbers are estimated using the exponentially weighted moving average approach which gives more weight to recent data and responds quickly to changes in market volatility. Davy utilises historical simulation model for the calculation of equity risk, interest rate risk and credit spread risk at 99% confidence interval and based on one year of historic data. For the nature of risks assumed by the Group, VaR remains a reliable basis of risk measurement, supplemented by stress testing. The Group recognises that VaR is subject to certain inherent limitations and therefore VaR limits are supplemented by scenario-based stress tests. These are particularly important in periods of low market volatility when VaR numbers can understate the risks of loss from large adverse market moves. Total Davy VaR (audited) 2023 €m 2022 €m Total 0.4 0.2 The Group’s year-end VaR numbers for the Trading Book and Banking Book are shown in the ‘VaR’ table below at 31 December 2023 and 2022. Total Interest Rate VaR (audited) 2023 €m 2022 €m Trading book 0.1 0.3 Banking book 0.1 0.6 Group VaR 0.1 0.8 Structural and other risks (audited) Notwithstanding the overriding objective of running minimal levels of market risk, certain structural market risks remain and are managed centrally as part of the Group’s asset and liability management process. Structural interest rate risk (unaudited) Structural interest rate risk is predominantly the exposure of Group earnings to interest rate changes arising from the presence of non-interest bearing or behaviourally fixed-rate assets and liabilities on the balance sheet or variable rate deposits that are deemed insensitive to changes in market rates. The principal non-interest bearing liabilities are equity and non-interest bearing current accounts. It is Group policy to invest its net non-interest bearing liabilities (or free funds) in a portfolio of swaps with an average life of 3.5 years and a maximum life of seven years. The Group also has in place a hedge of deposits that are deemed insensitive to changes in market rates. This has the effect of helping to mitigate the impact of the interest rate changes on interest income. The table outlines the Group’s average volumes of structural hedges and contribution to interest income. Structural hedge (unaudited) 2023 2022 Average structural hedge volume (€bn) 65.2 43.9 Interest income from structural hedge (€m) 972.0 199.0 Other structural risks arise from credit-impaired loans and floored loans and deposits. The Group also has a portfolio of swaps which hedge fixed rate assets (including fixed rate lending) on the Balance Sheet. These swaps partially offset the Group’s structural hedge. Net interest income sensitivity analysis (unaudited) The Group uses net interest income sensitivity analysis to measure the responsiveness of earnings to scenarios for short and long-term rates. The following table shows the estimated sensitivity of the Group’s net interest income (before tax) to an instantaneous and sustained 1% parallel movement in interest rates. The estimates are based on management assumptions primarily related to the repricing of customer transactions; the relationship between key official interest rates set by Monetary Authorities and market determined interest rates; and the assumption of a constant balance sheet by size and composition. The sensitivities should not be considered a forecast of future performance in these rate scenarios as they do not capture potential management action in response to unexpected changes in the interest rate environment. Estimated sensitivity of Group income (1 year horizon) (unaudited) 2023 €m 2022 €m 100bps higher c.170 c.270 100bps lower (c.315) (c.380) Basis risk (unaudited) Basis risk is the exposure of the Group’s earnings to sustained changes in the differentials between the floating market related benchmark rates to which the Group’s assets, liabilities and derivative hedges are linked. In the Group’s case, the principal rates used for product and derivative repricing are one, three and six month Euro Inter Bank Offered Rate (EURIBOR), Sterling Overnight Index Average, EUR short-term rate, the ECB refinancing rate, and the BoE base rate. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 179 3 Management of principal risks (continued) 3.7 Market risk (continued) In addition, the Group funds an element of its sterling balance sheet in part from euro which creates a structural exposure to the cost of this hedging. The Group applies notional limits and stress scenario analysis to its basis positions. Credit spread risk (unaudited) Credit spread risk arises from the potential impact of changes to the spread between the bond yield and swap rates. Bonds purchased primarily as liquid assets and classified as fair value through other comprehensive income (FVOCI) are held at fair value on the balance sheet and as such, movements in the credit spreads can result in adverse impacts on the fair value of these holdings. At 31 December 2023, the Group held €4.0 billion in securities classified as FVOCI (2022: €4.3 billion). A 1% increase in the average credit spread of the book in 2023 would have reduced its value by €134 million (2022: €168 million). An analogous economic risk exists in relation to securities held by NIAC to match policyholder liabilities and to invest its capital. At 31 December 2023, NIAC’s bond portfolio had a market value of €1.7 billion (2022: €1.3 billion). At 31 December 2023, a 1% widening of all credit spreads (measured as bond yields minus the corresponding swap rate) would have had an impact on profit before tax of €90 million negative, while a 1% tightening would have a positive impact of €104 million (2022 restated for IFRS 17: €78 million negative and €91 million positive impact respectively). The Group also models the spread risk for both the FVOCI and NIAC portfolios over a one-year horizon using a delta-normal VaR model and deterministic spread stress model respectively. They approximate a potential one-year loss in portfolio value due to changes in credit spreads. Interest rate risk in New Ireland Assurance Company plc (unaudited) In managing the interest rate risk in its business, NIAC has regard to the sensitivity of its capital position, as well as its profit before tax, to market movements. NIAC follows a policy of asset / liability matching to ensure that the exposure of its capital position to interest rate movements remains within tolerances, while also managing the impact on IFRS profits. At 31 December 2023, a 1% increase in swap and yield rates would have reduced its excess own funds (own funds less solvency capital requirement (SCR)) by €2 million and reduced its IFRS profit by €47 million (2022 restated for IFRS 17: €2 million negative and €38 million negative respectively). Equity risk (unaudited) NIAC’s profit before tax are also indirectly exposed to changes in equity markets. This arises because a management fee is charged on the value of €7.1 billion of equities held for policyholders in insurance contracts in its unit-linked book. As equity markets move up and down, this gives rise to a change in current and discounted future streams of equity-related fees which is reflected in NIAC’s profits. Every 1% fall in equity markets applied to positions at 31 December 2023 would have reduced its IFRS profit by €1 million (2022 restated for IFRS 17: €1 million reduction). Every 1% increase in equity markets would have had a broadly equal and opposite impact. Structural FX (unaudited) The Group defines structural FX risk as the exposure of its key capital ratios to changes in exchange rates. Changes in exchange rates can increase or decrease the overall euro equivalent level of RWAs. It is Group policy to manage structural FX risk by ensuring that the currency composition of its RWAs and its structural net asset position by currency are broadly similar. This is designed to minimise the impact of exchange rate movements on the principal capital ratios. At 31 December 2023, the estimated sensitivity of the Group’s fully loaded CET1 ratio to a 10% depreciation of sterling and dollar combined against the euro was seven basis points. Use of derivatives in the management of market risk (audited) The activities set out above involve, in many instances, transactions in a range of derivative instruments. The Group makes extensive use of derivatives to hedge its balance sheet and service its customer needs. The Group’s participation in derivatives markets is subject to the requirements of the Group Market Risk Policy which is approved by the Board. The Group makes a clear distinction between derivatives which must be transacted on a perfectly hedged basis and those whose risks can be managed within broader interest rate or FX books. The approach to hedging and managing market risk is governed by policies explicitly designed to ensure that all hedging activities are risk reducing. Interest rate risk arising on customer lending and term deposit-taking is centralised by way of internal hedging transactions with BoIGM or Group Treasury. This exposure is, in turn, substantially eliminated through external hedges. Structural risk is managed by way of selective and strategic hedging initiatives which are executed under ALCO’s authority. Policy requires that, where behavioural optionality hedging relies on assumptions about uncertain customer behaviour and where material, it is subject to limits or other controls. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 180 3 Management of principal risks (continued) 3.8 Operational risk Deﬁnition Operational risk is the risk of loss resulting from suboptimal or failed internal processes, systems, human factors, or from external events. This risk includes information technology, change management, information security and cyber, TPRM and outsourcing, transaction processing, people, physical infrastructure, legal (a component being litigation and regulatory proceedings), data, model, financial and regulatory reporting and tax risks. Risk management Operational risk, Resilience and ESG are intrinsically related. In order to ensure positive overarching ESG outcomes, operational risk management considers ESG more broadly within the relevant policies, crisis management framework, data, processes, risk indicators, monitoring and reporting. The Group faces operational risks in the normal pursuit of its business objectives. The primary goals of operational risk management are ensuring the sustainability and integrity of the Group’s operations and the protection of its reputation by controlling, mitigating, or transferring the impact of operational risk. Operational risk cannot be fully eliminated. The Group has established a formal approach to the management of operational risk in the form of the RMF which defines the Group’s approach to identifying, assessing, managing, monitoring, and reporting the operational risks which may impact the achievement of the Group’s business objectives. This framework outlines, inter alia the following: • formulation and dissemination of operational risk policies specifying the risk management obligations of management and staff within the Group; • maintaining organisational structures for the oversight, monitoring and management of operational risk throughout the Group; • setting aside capital and maintaining a suite of insurance policies; • setting out the boundary conditions in which operational risks are to be managed, by way of Board approved Risk Appetite Statement; and • embedding formal operational risk management processes and standards throughout the Group. Operational risk policies and governance The Group continues to maintain its ongoing oversight and control of its exposure to operational risk. A critical component of operational risk management are the operational risk policies which set out the Group’s objectives and the obligations of management in respect of operational risk. Governance and oversight of operational risk forms part of the RMF which aims to ensure that risk management activities are adequate and commensurate with the Board approved risk appetite. The GORC is appointed by the ERC and is responsible for the oversight and monitoring of operational risk within the Group and material subsidiaries. Business units hold primary responsibility for the management of operational risk and compliance with internal control requirements. The Operational Risk function is accountable for the development and maintenance of operational risk policies to ensure a robust, consistent, and systematic approach is applied to managing operational risk exposures across the Group. Operational risk appetite The Board has set out its appetite for operational risk in terms of both qualitative factors and quantitative measures reflecting the nature of operational risks. As such, the monitoring of operational risk indicators is supplemented with qualitative review and discussion at senior management executive committees to ensure appropriate actions are taken to enhance controls. Risk assessment A systematic identification and assessment of the operational risks faced by the Group is a core component of the RMF. This is known as the Risk and Control Self Assessment (RCSA) and is a framework for capturing, measuring, and managing operational risk as well as providing a mechanism for consistent identification, monitoring, reviewing, updating, and reporting of risks throughout the Group. A key element of this process is the classification of risks in the Group's Risk Library. Risk mitigation and transfer In addition to business unit risk mitigation initiatives, the Group implements specific policies and risk mitigation measures for key operational risks including, but not limited to, information technology, information security and cyber, TPRM and outsourcing risks. This strategy is further supported by risk transfer mechanisms such as the Group’s insurance programme, whereby selected risks are insured externally. The Group Insurance programme is reviewed annually to ensure coverage remains appropriate to the Group’s risk management objectives. The Group’s capital requirements arising from operational risk are calculated for Pillar 1 using The Standardised Approach (TSA) and Pillar 2 as assessed under the Group’s ICAAP. Operating Resilience Operating resilience is the ability of the Group to identify and prepare for, respond and adapt to, recover and learn from an operational disruption. Operational resilience involves having forward looking plans that proactively prepares the Group to withstand and adapt to disruptions that will inevitably occur. Risk reporting Regular reporting of operational risk is a key component of the RMF. The current status of operational risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. At least four times a year, the Head of Operational Risk reports to GORC on the status of operational risk in the Group, including the status of the material operational risks, the progress of risk mitigation initiatives and programmes, significant loss events and the nature, scale, and frequency of overall losses. In addition, specified operational risk information is collated for the purposes of reporting to regulatory supervisors in the jurisdictions in which the Group operates. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 181 3 Management of principal risks (continued) 3.9 Regulatory risk Deﬁnition Regulatory risk is the risk that the Group does not identify legal or regulatory change or appropriately manage its relationships with its regulators. The Group is exposed to regulatory risk as a direct and indirect consequence from all the activities that the Group engages in during its normal conduct of its business. Regulatory risk may materialise from failure to identify new or existing regulatory and / or legislative requirements or deadlines, ensure appropriate governance is in place to embed regulatory requirements into processes, or the failure to appropriately manage the Group's regulatory relationships. Regulatory risk includes ineffective regulatory change governance and ineffective regulatory engagement. Ineffective regulatory change governance is the risk that regulatory change is not identified and / or there is an inappropriate approach adopted to implement the regulatory changes required. Ineffective regulatory engagement is the risk of inappropriate or unprofessional interaction with our regulators. Risk management and measurement The Group manages regulatory risk under the RMF. The framework establishes the common principles for the risk management process of identifying, assessing, monitoring, and mitigating risks to the Group. This is implemented by accountable executives and monitored by the GRCRC, the ERC, the BRC and Board in line with the overall Group risk governance structure outlined on pages 147 and 149. The effective management of regulatory risk is primarily the responsibility of business management and is supported by Group Compliance. The Group has no tolerance for knowingly failing to meet regulatory expectations. However, we recognise that mistakes and errors of judgement or failures of processes can and do lead to regulatory failings which we have limited tolerance for. Risk mitigation Risk mitigants include the early identification, appropriate assessment and measurement and reporting of risks. The primary risk mitigants for regulatory risk are the existence of appropriate procedures in place throughout the business. Risk reporting The current status of regulatory risk, including risk dashboards and risk appetite compliance, is reported through the Board Risk Report on a monthly basis. The Group Chief Compliance Officer reports on the status of regulatory risk in the Group, including the status of the top regulatory risks, assurance activity, the progress of risk mitigation plans, issues and breaches, and significant regulatory interactions to ERC and BRC by way of the quarterly Group Chief Compliance Officer report. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 182 BoI announced continued sponsorship of Irish golfer Shane Lowry. The deal extends a successful partnership that began in 2014. Shane will continue to represent BoI as a brand ambassador as he competes on the global circuit. Financial Statements Contents Statement of Directors’ responsibilities 185 Independent Auditor’s Report 186 Consolidated ﬁnancial statements 194 Notes to the consolidated ﬁnancial statements 202 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 184 S tatement of Directors’ responsibilities The following statement, which should be read in conjunction with the Independent Auditor’s Report set out on the following pages, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the Auditor in relation to the financial statements. The Directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with IFRS adopted by the EU and with those parts of the Companies Act 2014 applicable to companies reporting under IFRS, the EU (Credit Institutions: Financial Statements) Regulations 2015 and, in respect of the consolidated financial statements, Article 4 of the IAS Regulation. Company law requires the Directors to prepare Group and Company financial statements for each financial year. The Directors are responsible for preparing the Company financial statements in accordance with Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council of the UK, including Financial Reporting Standard 101 ‘Reduced disclosure framework’, and promulgated by the Institute of Chartered Accountants in Ireland and Irish law). Under Irish law, the Directors shall not approve the Group's and Company's financial statements unless they are satisfied that they give a true and fair view of the Group's and the Company's assets, liabilities and financial position at the end of the financial year and of the profit or loss of the Group for the financial year. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether the consolidated financial statements have been prepared in accordance with IFRS adopted by the EU, and the Company financial statements have been prepared in accordance with Financial Reporting Standard (FRS) 101, and ensure that they contain the additional information required by the Companies Act 2014; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to: • correctly record and explain the transactions of the Company; and • enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy. The Directors are also responsible under section 282 of the Companies Act 2014 for taking all reasonable steps to ensure such records are kept by its subsidiaries which enable them to ensure that the financial statements of the Group comply with the provisions of the Companies Act 2014, including Article 4 of the IAS Regulation and enable the financial statements to be audited. The Directors are responsible for monitoring the effectiveness of the Company’s systems of internal control in relation to the financial reporting process, and have a general responsibility for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and the requirements of the Listing Rules issued by the Irish and London stock exchanges, the Directors are also responsible for preparing a Directors’ Report and reports relating to Directors’ remuneration and corporate governance. The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007, as amended, and the Central Bank (Investment Market Conduct) Rules to include a management report containing a fair review of the business and a description of the Principal Risks and Uncertainties facing the Group. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors confirm that, to the best of each Director’s knowledge and belief: • they have complied with the above requirements in preparing the financial statements; • the consolidated financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities and financial position of the Group and of the profit of the Group; • the Company financial statements, prepared in accordance with FRS 101, give a true and fair view of the assets, liabilities and financial position of the Company; • the management report contained in the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the Principal Risks and Uncertainties that they face; and • the Annual Report and the financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 185 Patrick Kennedy Richard Goulding Myles O'Grady Chairman Deputy Chair Group Chief Executive Officer Signed on behalf of the Board by 23 February 2024 Indepe ndent A uditor’s Report to the members of Bank of Ireland Group plc Report on the Audit of the financial statements Opinion We have audited the financial statements of Bank of Ireland Group plc (the ‘Company’ and ‘Parent’) and its consolidated undertakings (the ‘Group’) for the year ended 31 December 2023 set out on pages 194 to 350, contained within the reporting package boigroupplc-2023-12-31-en.zip which comprise the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement, company balance sheet, company statement of changes in equity and related notes, including Group accounting policies set out in note 1 and the Company accounting policies set out on page 347. Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the financial statements. These are incorporated in the financial statements by cross-reference and are identified as audited. The financial reporting framework that has been applied in the preparation of the Group financial statements is Irish Law, including the Commission Delegated Regulation 2019/815 regarding the single electronic reporting format (ESEF) and International Financial Reporting Standards (IFRS) as adopted by the European Union and, as regards the Company financial statements, Irish Law and FRS 101 Reduced Disclosure Framework issued in the United Kingdom by the Financial Reporting Council. In our opinion: • the financial statements give a true and fair view of the assets, liabilities and financial position of the Group and Company as at 31 December 2023 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union; • the Company financial statements have been properly prepared in accordance with FRS 101 Reduced Disclosure Framework issued by the UK’s Financial Reporting Council; and • the Group and Company financial statements have been properly prepared in accordance with the requirements of the Companies Act 2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) (‘ISAs (Ireland)’) and applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our reporting to the Group Audit Committee (GAC). We were appointed as auditor by the Board of Directors on 19 April 2018. The period of total uninterrupted engagement is therefore six years ended 31 December 2023. We have fulfilled our ethical responsibilities under, and we remained independent of the Group in accordance with, ethical requirements applicable in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) as applied to public interest entities. No non-audit services prohibited by that standard were provided. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis of accounting included: • we used our knowledge of the Group and Company, the financial services industry, and the general economic environment to identify the inherent risks to the business model and analysed how those risks might affect the Group and Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group and Company’s available financial resources over this period were; – the availability of funding and liquidity in the event of a market wide stress scenario; and – the impact on regulatory capital requirements in the event of an economic slowdown or recession. • we also considered whether these risks could plausibly affect the availability of financial resources in the going concern period by comparing severe, but plausible, downside scenarios that could arise from these risks individually and collectively against the level of available financial resources indicated by the Group’s financial forecasts. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group or the Company’s ability to continue as a going concern for a period of at least twelve months from the date when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. In relation to the Group and the Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 186 Independent Auditor’s Report (continued) Detecting irregularities including fraud We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements and risks of material misstatement due to fraud, using our understanding of the Group's industry, regulatory environment and other external factors and inquiry with the Directors. In addition, our risk assessment procedures included: • Inquiring with management as to the Group’s policies and procedures regarding compliance with laws and regulations, identifying, evaluating and accounting for litigation and claims, as well as whether they have knowledge of non-compliance or instances of litigation or claims; • Inquiring of the Directors, the GAC and Group Internal Audit (GIA) and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s channel for 'whistleblowing', as well as whether they have knowledge of any actual, suspected or alleged fraud; • Inquiring of the Directors, the GAC and GIA regarding their assessment of the risk that the financial statements may be materially misstated due to irregularities, including fraud; • Inspecting the Group’s regulatory and legal correspondence, as applicable; • Reading minutes of meetings of the Board of Directors, the GAC and other relevant board sub-committees; • Considering remuneration incentive schemes and performance targets for management; and • Performing planning analytical procedures to identify any unusual or unexpected relationships. We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit team. This included communication from the Group audit team to component audit teams of relevant laws and regulations and any fraud risks identified at the Group level and requests to component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the Group. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including companies and financial reporting legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items, including assessing the financial statement disclosures and agreeing them to supporting documentation when necessary. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: regulatory capital and liquidity and certain aspects of company legislation, recognising the financial and regulated nature of the Group’s activities. Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and regulations to inquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. These limited procedures did not identify actual or suspected non-compliance. We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. As required by auditing standards, we performed procedures to address the risk of management override of controls. On this audit we do not believe there is a fraud risk related to revenue recognition. We identified fraud risks in relation to the Group’s impairment loss allowance – under IFRS 9 – post model adjustments, valuation of insurance contract liabilities, unobservable pricing inputs into Level 3 fair value derivatives and management override of controls. Further detail in respect of impairment loss allowance under IFRS 9 – post model adjustments and the valuation of insurance contract liabilities is set out in the key audit matter disclosures in this report. In response to the fraud risks, we also performed procedures including: • Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation; • Assessing significant accounting estimates for bias; and • Assessing the disclosures in the financial statements. As the Group is regulated, our assessment of risks involved obtaining an understanding of the legal and regulatory framework that the Group operates and gaining an understanding of the control environment including the Group’s procedures for complying with regulatory requirements. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 187 Independent Auditor’s Report (continued) Following the completion of the Group's acquisition of J&E Davy in 2022, IFRS 3 accounting and disclosure relating to the acquisition of J&E Davy is no longer considered to be a key audit matter for the Group. We continue to perform procedures over the recoverability of the Group's Deferred Tax Asset (DTA) and IT Operational Risk, however, owing to reduced estimation uncertainty associated with the recoverability of the Group's DTA in the current period and improvements in the Group's IT control environment as it relates to financial reporting, we have not assessed these as matters of most significance in the audit of the Group's financial statements and, therefore, these are not separately identified in our report this year. In arriving at our audit opinion above on the financial statements, the key audit matters, in decreasing order of audit significance, were as follows: Impairment loss allowance under IFRS 9 €1,222 million (2022: €1,295 million) Refer to pages 209 and 210 (accounting policy) and note 24 (financial statement disclosures) The key audit matter The calculation of credit provisions requires a high degree of judgement to reflect recent developments in credit quality, arrears experience and / or emerging macroeconomic risks. The key areas where we identified greater levels of management judgement and therefore increased levels of audit focus in the Group's compliance with IFRS 9 include but are not limited to: Accuracy of Probability of Default (PD) models Owing to the complexity, subjectivity and uncertainty in certain PD models, including the underlying assumptions, we have identified a significant risk in expected credit losses as a result of inaccurate PDs being generated by the PD models. Post model adjustments (PMAs) PMAs are raised by management to address known impairment model limitations or emerging trends. We have identified a significant risk associated with those PMAs with the greatest degree of management judgement. There is a possibility that management could increase or decrease PMAs to meet market expectations for the Group’s results. Economic Scenarios Economic scenarios have a direct impact on the loan staging classification and the resultant Expected Credit Loss (ECL). Significant management judgement is applied to the determination of the economic scenarios and the weightings applied to them. We have identified a significant risk with respect to management judgment applied in the selection of scenarios, the associated scenario probabilities and the material economic variables which drive the scenarios and the related weightings, particularly given the elevated economic and geopolitical uncertainty. Identification and quantification of Stage 3 loans There is a risk that individually assessed ECLs held against counterparties are incorrectly or inappropriately calculated by management. Management judgement is applied to value the collateral, in determining the probability weighting of scenarios used to calculate the level of provisioning required and the impact of the likely courses of action with borrowers on ECL. We have identified a significant risk due to error with respect to the measurement of impairment of stage 3 individually assessed assets / loans. How the matter was addressed in our audit Accuracy of PD models • We performed end-to-end process walkthroughs to identify the key systems, applications and key controls used in the ECL modelling processes. • In conjunction with our credit modelling specialists, we tested the design, implementation and operating effectiveness of key controls including: – model implementation, validation and monitoring for the PD models; – monitoring of staging effectiveness to assess whether the PD models are appropriately identifying assets which have experienced a significant increase in credit risk; and – controls over significant model inputs and outputs. • We tested the completeness and accuracy of identified critical data elements used within the PD models. • In conjunction with our credit modelling specialists, we performed reperformance of key aspects of the models underlying the calculation of ECLs, including: – Reperformance of ECL execution for a selection of SAS models; – ECL replication testing for a selection of IFRS 9 PD models; – Inspecting model validation and model monitoring reports to assess whether the findings have been appropriately considered and addressed by management / model developers; and – Inspecting the model development documentation to assess whether model updates in the period were reasonable. Post model adjustments • We performed end-to-end process walkthroughs and tested the design, implementation and operating effectiveness of the key controls over the identification, calculation, review and authorisation of PMAs. • In conjunction with our credit modelling specialists, we evaluated the conceptual soundness of the PMAs by critically assessing management’s methodology, including the limitation and / or risk that the PMA is seeking to address, and the PMAs compliance with the requirements of IFRS 9. • We inspected the PMA calculation methodology and tested the completeness and accuracy of key data inputs into the PMA calculation. • We tested the completeness and accuracy of the PMAs having regard for regulatory expectations, the risk profile of loan books, as well as known model / data limitations and by challenging management on their assumptions relating to the credit risk impact of prevailing macroeconomic uncertainty such as interest rates, inflation and performance of the relevant portfolios. • We challenged the overall reasonableness of PMAs by comparing the PMAs recognised by management to the various risks, model limitations and / or data limitations that we consider to exist in each loan portfolio. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 188 Independent Auditor’s Report (continued) • We assessed whether any PMAs identified for testing are indicative of fraud / management bias or other deficiencies. Economic scenarios • We performed end-to-end process walkthroughs, and tested the design, implementation and operating effectiveness of key controls relating to the estimation of macroeconomic forecasts used in measuring ECL including the economic scenarios and probability weightings applied to them. • In conjunction with our economic specialists, we held probing inquiries with the Real Estate Advisory Unit (REAU) and Economic Research Unit (ERU) and inspected related documentation to assess whether the basis for significant management assumptions and judgements are reasonable and consistent with independent consensus forecasts. • We challenged whether management’s forward-looking information ('FLI') upside / downside scenario weightings were reasonable, having regard to all relevant available information at year-end. • In conjunction with our economic specialists, we challenged and assessed the reasonableness of the significant assumptions underpinning management’s economic scenarios by comparing them to independent and observable economic forecasts, leveraging a number of external data points. Identification and quantification of Stage 3 loans • We performed end-to-end process walkthroughs and tested the design, implementation and operating effectiveness of key controls relating to the assignment of credit risk grades and overrides, the higher risk and watchlist categories and calculation of individual impairments. • For a selection of performing loans, we critically assessed, by reference to the underlying documentation and through inquiries with management, whether the trigger for an impairment had occurred. • For a selection of credit-impaired loans, we assessed the forecasts of future cash flows prepared by management to support the calculation of the impairment loss allowance by challenging the key assumptions through corroborating estimates to external support where available. Where appropriate, our work involved inspecting third party valuations of collateral, internal valuation guidelines derived from benchmark data and / or externally prepared reports to determine whether appropriate valuation methodologies and assumptions were employed. • As part of our iterative risk assessment procedures, we held probing inquiries with Divisional and Group management and reviewed relevant management information to understand the emerging and potential issues across the relevant portfolios. • We independently assessed emerging and potential areas where impairment indicators might have arisen based upon our knowledge and experience of emerging industry issues and the regulatory environment. We used this cumulative knowledge and expertise to challenge the completeness of the issues identified by management and assessed whether a loan was appropriately classified in stage 1, 2 or 3 and that the related ECL was reasonable. We found the significant judgements used by management in determining the ECL charge and provision, including the completeness and accuracy of PD models, application of PMAs, economic scenarios and identification and quantification of stage 3 loans, to be reasonable. Valuation of the insurance contract liabilities €15.133 million (2022: €13.410 million) Refer to pages 204 to 207 (accounting policy) and note 18 (financial statement disclosures) The key audit matter The Group adopted IFRS 17 'Insurance Contracts' from 1 January 2023. This had a material impact on the recognition, measurement, presentation and disclosure of the insurance contract liabilities in the Group’s financial statements. We consider the valuation of insurance contract liabilities to be a key audit matter owing to the use of detailed methodologies and significant judgements in the valuation of these amounts. How the matter was addressed in our audit In testing the valuation of insurance contract liabilities: • we performed end to end process walkthroughs and tested the design and implementation of key controls relevant to the valuation of the insurance contract liabilities; • in conjunction with our actuarial specialists, we: – Held inquiries with management to obtain an understanding of any significant developments during the reporting period, the actual versus expected experience and any changes to methods or assumptions; – Assessed the methodologies applied and significant assumptions and judgements used in the valuation of insurance contract liabilities; – Assessed and challenged significant assumptions, and the methodology and basis used to set the underlying assumptions with reference to IFRS 17; – Assessed the calculation of insurance contract liabilities through; – agreeing the relevant assumptions and key data inputs into the actuarial models to those we have evaluated; – evaluating the reports of the Group’s external actuarial expert in relation to the examination of management’s methodologies, significant assumptions and calculations; and – independently replicating the best estimate liability for a cohort of policies. – Recalculated the Contractual Service Margin (CSM) amortisation and other CSM movements for a selection of products during 2022 and 2023; – Tested the calculation for the opening balance of the CSM using the Full Retrospective Approach (FRA) and the fair value approach and related movements in the FRA approach over the periods; – Performed a reconciliation between source administration systems, actuarial systems, data warehouse, the CSM calculation tool and the general ledger; and – Tested on a sample basis, the completeness and accuracy of significant data used within the calculation of insurance contract liabilities. We found that the significant methods and assumptions used in the valuation of insurance contract liabilities to be reasonable. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 189 Independent Auditor’s Report (continued) Valuation of deﬁned beneﬁt pension net asset €682 million (2022: €700 million net asset) Refer to pages 217 and 218 (accounting policy) and note 41 (financial statement disclosures) The key audit matter The Group operates a number of defined benefit pension schemes which in total are significant in the context of both the overall balance sheet and the results of the Group. The valuations of the pension obligations are calculated with reference to a number of actuarial assumptions. We identified a significant risk relating to the assumptions which we consider to be the most subjective and to which the valuation of the defined benefit pension net asset is most sensitive, being the discount rate and the inflation rate. We regard the determination of the Group's defined benefit pension net asset as a key audit matter because its valuation is complex and requires judgement in the application of the appropriate actuarial assumptions. How the matter was addressed in our audit • We performed end to end process walkthroughs and tested the design, implementation and operating effectiveness of key controls related to the valuation of the defined benefit pension net asset. • In conjunction with our actuarial specialists, we held inquiries with management and the scheme actuary to understand any changes in the methodology. • We challenged the reasonableness of significant assumptions, being the discount rate and the inflation rate, used by the Group through developing an independent range using observable market data against which to compare significant inputs used in the Group’s valuation. • We obtained details of data provided to the Group's actuary and selected a sample of data for testing through vouching to underlying systems and reports. • We tested, on a sample basis, the valuation of the underlying pension scheme assets to third party sources. • We assessed the reasonableness of movements in the pension position including income statement and OCI elements with a focus on key drivers of the movements such as changes in assumptions adopted. • We assessed the reasonableness of management’s quarterly back testing analysis, which determines if remeasurement of liabilities is required in the event of a special event or curtailment. • We assessed the adequacy of the Group's disclosures relating to retirement benefit obligations having regard for IAS 19 requirements. Overall, we found the significant assumptions used by management in the valuation of the defined benefit pension net asset at 31 December 2023 to be reasonable. Recoverability of the carrying value of the investment by Bank of Ireland Group plc in the Governor and Company of the Bank of Ireland (Company only risk and key audit matter) €8,057 million (2022: €8,010 million) Refer to page 347 (accounting policy) and note c (financial statement disclosures) The key audit matter The Company balance sheet includes an €8,057 million investment in The Governor and Company of the Bank of Ireland (GovCo). The accounting policy followed by the Company is to carry the investment at cost less impairment. Impairment testing includes the comparison of the carrying value with its recoverable amount. The recoverable amount is the higher of the investment’s fair value less costs of disposal or its value in use. The assessment of the recoverability of the investment does not involve significant judgement due to the value of the underlying business at 31 December 2023. However, we consider this a key audit matter due to the significance of the investment based on its magnitude to the Company. How the matter was addressed in our audit • We performed an end-to-end process walkthrough over the recoverability of the carrying value of the investment by the Company in GovCo. • We evaluated management’s assessment that the carrying value of the investment in subsidiary was not impaired at year end. This was based on the market capitalisation of the Group both before and after year end and on external broker reports. • We assessed the adequacy of the financial statement disclosures in respect of the investment in GovCo within the Company financial statements. On the basis of the work performed, we found that the market capitalisation at year end exceeded the carrying value of the investment in GovCo and that management’s judgements were reasonable in assessing the carrying value. Our application of materiality and an overview of the scope of our audit We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality for the Group financial statements as a whole was set at €75.0 million (2022: €52.0 million), determined with reference to a benchmark of profit before taxation of €1,938 million, (of which it represents 3.9% (2022: 4.9%). Materiality for the Company financial statements was set at €87.3 million (2022: €87.3 million) which represents 1% (2022: 1%) of net assets. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 190 Independent Auditor’s Report (continued) In applying our judgement in determining the most appropriate benchmarks, the factors, which had the most significant impact were: • We consider profit before taxation to be one of the principal considerations for members of the Company in assessing the financial performance of the Group; • The Company is the ultimate holding company of the Group and its activities to date have been limited to its investment in GovCo and the issue of subordinated liabilities and debt securities. Hence a benchmark based on net assets reflects the focus of the users of the company financial statements; and • The stability of the Group, resulting from its nature, where the Group is in its life cycle, and the industry in which the Group operates. In applying our judgement in determining the percentages to be applied to the benchmarks, the following qualitative factors, which had the most significant impact to our assessment of materiality were: • The ownership structure of the Group and Company; • Debt arrangements; • Our understanding of the Group and Company and it's environment; and • Earnings sensitivities. We applied Group materiality to assist us determine the overall audit strategy. We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Performance materiality was set at 75% (2022: 75%) of materiality for the financial statements as a whole, which equates to €56.3 million (2022: €39.0 million) for the Group and €65.5 million (2022: €65.5 million) for the Company. In applying our judgement in determining performance materiality, we considered a number of factors including; the number and value of misstatements detected and the number and severity of deficiencies in control activities identified in the prior year financial statements audit. We reported to the GAC any uncorrected identified misstatements exceeding €3.75 million (2022: €2.6 million) for the Group financial statements and €4.4 million (2022: €4.4 million) for the Company financial statements, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit work addressed each of the Group’s five operating segments which are headquartered in Ireland and the UK: Retail Ireland, Wealth and Insurance, Retail UK, Corporate and Commercial and Group Centre. In planning the audit, we used materiality to assist in making the determination to perform full scope audits of the financial information of the Retail Ireland, Wealth and Insurance (excluding Davy), Retail UK, Corporate and Commercial and Group Centre. Davy was not individually significant to require an audit for Group purposes but was subject to an analytical review. We applied materiality to assist us determine what risks were significant risks and the Group audit team instructed component auditors as to the significant areas to be covered by them, including the relevant risks detailed above and the information to be reported back. The Group audit team approved the materiality for components which ranged from €26 million to €41 million (2022: €5 million to €29 million), having regard to the mix of size and risk profile of the Group across the components. The Group team undertook an assessment of the audit risk and strategy and regular video-conference meetings were held with component auditors. At these meetings, the findings reported to the Group team were discussed in more detail and any further work required by the Group team was then performed by the component auditor. Audit coverage for individual line items within the consolidated income statement and consolidated balance sheet falls above 90% (2022: 90%) in most instances. The work on one of the components was performed by a component auditor and the rest, including the audit of the parent company, was performed by the Group audit team. Other Information The Directors are responsible for the preparation of the other information presented in the Annual Report together with the financial statements. The other information comprises the information included in the Strategic Report on pages 3 to 49, the unaudited sections of the Risk Management Report on pages 134 to 182, the Financial Review on pages 50 to 73, the Governance section (including Report of the Directors) on pages 74 to 133 (except for the Remuneration Report on pages 127 and 128), the unaudited parts of Other Information on pages 351 to 363. The financial statements and our auditor’s report thereon do not comprise part of the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Based solely on our work on the other information undertaken during the course of the audit we report that, in those parts of the Directors’ report specified for our consideration: • we have not identified material misstatements in the Directors’ report; • in our opinion, the information given in the Directors’ report is consistent with the financial statements; and • in our opinion, the Directors’ report has been prepared in accordance with the Companies Act 2014. Corporate governance statement We have reviewed the Directors’ statement in relation to going concern and longer-term viability, that form part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code and the Irish Corporate Governance Annex specified for our review by the Listing Rules of Euronext Dublin and the UK Listing Authority. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement are materially consistent with the financial statements and our knowledge obtained during the audit: Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 191 Independent Auditor’s Report (continued) • Directors' statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 121; • Directors’ explanation as to their assessment of the Group's prospects, the period this assessment covers and why the period is appropriate set out on page 121; • Directors' statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities set out on page 121; • Directors' statement on fair, balanced and understandable and the information necessary for shareholders to assess the Group's position and performance, business model and strategy set out on page 185; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks and the disclosures in the annual report that describe the principal risks and the procedures in place to identify emerging risks and explain how they are being managed or mitigated set out on page 93 and 94; • Section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 93; and • Section describing the work of the GAC set out on pages 108 to 113. The Listing Rules of Euronext Dublin also requires us to review certain elements of disclosures in the report to shareholders by the Group Remuneration Committee. We have nothing to report in this regard. In addition as required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance Statement on pages 74 to 133 that: • based on the work undertaken for our audit, in our opinion, the description of the main features of internal control and risk management systems in relation to the financial reporting process and information relating to voting rights and other matters required by the European Communities (Takeover Bids (Directive 2004/EC) Regulations 2006 and specified for our consideration, is consistent with the financial statements and has been prepared in accordance with the Act; • based on our knowledge and understanding of the Group and its environment obtained in the course of our audit, we have not identified any material misstatements in that information; and • the Corporate Governance Statement contains the information required by the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017. We also report that, based on work undertaken for our audit, the information required by the Act is contained in the Corporate Governance Statement. Our opinions on other matters prescribed by the Companies Act 2014 are unmodified We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the financial statements are in agreement with the accounting records. We have nothing to report on other matters on which we are required to report by exception The Companies Act 2014 requires us to report to you if, in our opinion: • the disclosures of Directors' remuneration and transactions required by Sections 305 to 312 of the Act are not made; • the Company has not provided the information required by Section 1110N in relation to its remuneration report for the financial year ended 31 December 2022; • the Company has not provided the information required by section 5(2) to (7) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 for the year ended 31 December 2022 as required by the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) (amendment) Regulations 2018. We have nothing to report in this regard. Respective responsibilities and restrictions on use Responsibilities of Directors for the financial statements As explained more fully in the Directors’ responsibilities statement set out on page 185, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 192 Independent Auditor’s Report (continued) Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report, that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A fuller description of our responsibilities is provided on IAASA’s website at https://iaasa.ie/publications/description- of-the-auditors-responsibilities-for-the-audit-of-the- financial-statements/. The purpose of our audit work and to whom we owe our responsibilities Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 193 P Carroll for and on behalf of KPMG Chartered Accountants, Statutory Audit Firm 1 Stokes Place, St. Stephen's Green Dublin 2, D02 DE03 Ireland 23 February 2024 Consolidated financial statements Consolidated income statement ( for the year ended 31 December 2023) Note 2023 €m Restated1 2022 €m Interest income calculated using the eﬀective interest method 4 5,413 2,772 Other interest income 4 916 378 Interest income 6,329 3,150 Interest expense 5 (2,622) (663) Net interest income 3,707 2,487 Insurance service result 18 51 60 Insurance revenue 518 486 Insurance service expense (428) (401) Net expense from reinsurance contracts held (39) (25) Insurance investment and finance result 18 110 (19) Total investment gains / (losses) 1,198 (1,327) Finance (expense) / income from insurance contracts issued (1,182) 1,651 Finance income / (expense) from reinsurance contracts held 94 (343) Fee and commission income 6 673 579 Fee and commission expense 6 (219) (194) Net trading income 7 65 34 Other leasing income 8 92 71 Other leasing expense 8 (63) (45) Other operating income 9 44 141 Total operating income 4,460 3,114 Operating expenses 10 (2,094) (1,940) Cost of restructuring programme 11 (20) (17) Operating proﬁt before impairment losses on ﬁnancial instruments 2,346 1,157 Net impairment losses on ﬁnancial instruments 13 (425) (187) Operating proﬁt 1,921 970 Share of results of associates and joint ventures (after tax) 14 25 40 (Loss) / gain on disposal / liquidation of business activities (8) 1 Proﬁt before tax 1,938 1,011 Taxation charge 16 (337) (153) Proﬁt for the year 1,601 858 Attributable to shareholders 1,595 850 Attributable to non-controlling interests 45 6 8 Proﬁt for the year 1,601 858 Earnings per ordinary share 17 140.1c 72.9c Diluted earnings per ordinary share 17 140.1c 72.9c 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 194 Consolidated financial statements (continued) Consolidated statement of comprehensive income (for the year ended 31 December 2023) 2023 €m Restated1 2022 €m Proﬁt for the year1 1,601 858 Other comprehensive income, net of tax Items that may be reclassified to proﬁt or loss in subsequent years Debt instruments at FVOCI reserve, net of tax: Changes in fair value (5) (61) Transfer to income statement - asset disposal – (85) Net change in debt instruments at FVOCI reserve (5) (146) Cash ﬂow hedge reserve, net of tax Changes in fair value (297) 309 Transfer to income statement 285 (304) Net change in cash ﬂow hedge reserve (12) 5 Foreign exchange reserve Foreign exchange translation gains / (losses) 25 (93) Transfer to income statement 4 – Net change in foreign exchange reserve 29 (93) Total items that may be reclassiﬁed to proﬁt or loss in subsequent years 12 (234) Items that will not be reclassiﬁed to proﬁt or loss in subsequent years Remeasurement of the net deﬁned beneﬁt pension asset, net of tax (28) 91 Revaluation of property, net of tax (6) (3) Net change in liability credit reserve, net of tax (14) 15 Total items that will not be reclassified to proﬁt or loss in subsequent years (48) 103 Other comprehensive expense for the year, net of tax (36) (131) Total comprehensive income for the year, net of tax 1,565 727 Total comprehensive income attributable to equity shareholders 1,559 719 Total comprehensive income attributable to non-controlling interests 6 8 Total comprehensive income for the year, net of tax 1,565 727 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. The effect of tax on these items is shown in note 16. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 195 Consolidated balance sheet (for the year ended 31 December 2023) Note 2023 €m Restated1 31 Dec 2022 €m Restated1 1 Jan 2022 €m Assets Cash and balances at central banks 46 31,843 36,855 31,360 Items in the course of collection from other banks 126 140 159 Trading securities 72 – 20 Derivative ﬁnancial instruments 19 4,341 5,138 1,571 Fair value changes due to interest rate risk of the hedged items in portfolio hedges (124) (738) (76) Other ﬁnancial assets at FVTPL 20 20,899 18,553 20,078 Loans and advances to banks 21 1,907 3,044 2,750 Debt securities at amortised cost 22 5,715 4,472 6,008 Financial assets at FVOCI 23 3,968 4,254 9,457 Assets classiﬁed as held for sale – 2 5 Loans and advances to customers 24 79,729 71,961 76,422 Interest in associates 27 108 83 59 Interest in joint ventures 27 79 82 57 Intangible assets and goodwill 28 1,408 1,276 852 Investment properties 29 793 883 992 Property, plant and equipment 30 800 802 820 Current tax assets 3 36 38 Deferred tax assets 31 808 989 1,044 Other assets 32 1,127 769 776 Reinsurance contract assets 18 1,414 1,352 1,626 Retirement beneﬁt assets 41 692 736 740 Total assets 155,708 150,689 154,758 Equity and liabilities Deposits from banks 33 3,095 3,445 12,946 Customer accounts 34 100,183 99,200 92,774 Items in the course of transmission to other banks 322 232 207 Derivative ﬁnancial instruments 19 4,490 6,526 2,185 Fair value changes due to interest rate risk of the hedged items in portfolio hedges (1,115) (2,824) (20) Debt securities in issue 35 8,670 7,774 8,483 Liabilities to customers under investment contracts 7,692 6,859 7,860 Insurance contract liabilities 18 15,113 13,410 14,400 Other liabilities 36 2,480 2,250 2,087 Leasing liabilities 37 404 423 452 Current tax liabilities 23 8 18 Provisions 38 58 79 190 Allowance provision on loan commitments and ﬁnancial guarantees 40 61 55 48 Deferred tax liabilities 31 61 38 38 Retirement beneﬁt obligations 41 10 36 142 Subordinated liabilities 42 1,600 1,656 1,981 Total liabilities 143,147 139,167 143,791 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 196 Consolidated balance sheet (for the year ended 31 December 2023) (continued) Note 2023 €m Restated1 31 Dec 2022 €m Restated1 1 Jan 2022 €m Equity Share capital 43 1,057 1,070 1,079 Share premium account 456 456 456 Retained earnings 10,285 9,230 8,471 Other reserves (199) (257) (53) Own shares held for the beneﬁt of life assurance policyholders (7) (10) (20) Shareholders’ equity 11,592 10,489 9,933 Other equity instruments - Additional tier 1 44 966 966 966 Total equity excluding non-controlling interests 12,558 11,455 10,899 Non-controlling interests 45 3 67 68 Total equity 12,561 11,522 10,967 Total equity and liabilities 155,708 150,689 154,758 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 197 Patrick Kennedy Richard Goulding Myles O'Grady Sarah McLaughlin Chairman Deputy Chair Group Chief Executive Officer Group Secretary Consolidated statement of changes in equity (for the year ended 31 December 2023) Other reserves Share capital €m Share premium account €m Retained earnings €m Debt instruments at FVOCI reserve €m Cash ﬂow hedge reserve €m Foreign exchange reserve €m Capital reserve €m Other reserves3 €m Own shares held for beneﬁt of life assurance policyholders €m Attributable to equity holders of Parent €m Other equity instruments €m Non- controlling interests €m Total €m Balance at 1 January 2023 , as previously reported 1,070 456 9,640 (17) (31) (786) 527 50 (10) 10,899 966 67 11,932 Adjustment on initial application of IFRS 17, net of tax1 – – (410) – – – – – – (410) – – (410) Restated balance at 1 January 2023 1,070 456 9,230 (17) (31) (786) 527 50 (10) 10,489 966 67 11,522 Profit for the year – – 1,595 – – – – – – 1,595 – 6 1,601 Other comprehensive (expense) / income for the year – – (28) (5) (12) 29 – (20) – (36) – – (36) Total comprehensive income for the year – – 1,567 (5) (12) 29 – (20) – 1,559 – 6 1,565 Transactions with owners: Contributions by and distributions to owners of the Group Distribution paid on other equity instruments - AT1 Coupon – – (69) – – – – – – (69) – – (69) Dividends on ordinary shares – – (225) – – – – – – (225) – – (225) Share buyback - repurchase of shares2 (note 43) – – – – – – – (125) – (125) – – (125) Redemption and buyback of preference stock (note 45) – – (40) – – – – – – (40) – (64) (104) Changes in value and amount of shares held – – – – – – – – 3 3 – – 3 Dividends paid to NCI - preference stock (note 45 ) – – – – – – – – – – – (6) (6) Preference stock eliminated on acquisition of Davy – – – – – – – – – – – – – Share buyback - cancellation of shares2 (note 43 ) (13) – (125) – – – 13 125 – – – – – Total transactions with owners (13) – (459) – – – 13 – 3 (456) – (70) (526) Transfer from retained earnings to capital reserve – – (53) – – – 53 – – – – – – Balance at 31 December 2023 1,057 456 10,285 (22) (43) (757) 593 30 (7) 11,592 966 3 12,561 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 In H123, the Group completed the purchase of the €125 million share buyback programme whereby the Group repurchased 13.69 million shares for cancellation, c1.3% of the count outstanding at 1 January 2023, at a weighted average price of €9.131 per share. 3 Other reserves includes the amalgamation of the merger reserve €17 million, liability credit reserve €(5) million and revaluation reserve € 18 million. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 198 Consolidated statement of changes in equity (for the year ended 31 December 2022) Other reserves Share capital €m Share premium account €m Retained earnings €m Debt instruments at FVOCI reserve €m Cash ﬂow hedge reserve €m Foreign exchange reserve €m Capital reserve €m Other reserves3 €m Own shares held for beneﬁt of life assurance policyholders €m Attributable to equity holders of Parent €m Other equity instruments €m Non- controlling interests €m Total €m Balance at 1 January 2022 , as previously reported 1,079 456 8,842 129 (36) (693) 509 38 (20) 10,304 966 68 11,338 Adjustment on initial application of IFRS 17, net of tax1 – – (371) – – – – – – (371) – – (371) Restated balance at 1 January 2022 1,079 456 8,471 129 (36) (693) 509 38 (20) 9,933 966 68 10,967 Profit for the year1 – – 850 – – – – – – 850 – 8 858 Other comprehensive (expense) / income for the year – – 91 (146) 5 (93) – 12 – (131) – – (131) Total comprehensive income for the year – – 941 (146) 5 (93) – 12 – 719 – 8 727 Transactions with owners: Contributions by and distributions to owners of the Group Distribution on other equity instruments - AT1 Coupon – – (69) – – – – – – (69) – – (69) Dividends on ordinary shares – – (54) – – – – – – (54) – – (54) Share buyback - repurchase of shares2 (note 43) – – – – – – – (50) – (50) – – (50) Redemption and buyback of preference stock (note 45) – – – – – – – – – – – – – Changes in value and amount of shares held – – – – – – – – 10 10 – – 10 Dividends paid to NCI- preference stock (note 45 ) – – – – – – – – – – – (8) (8) Preference stock eliminated on acquisition of Davy – – – – – – – – – – – (1) (1) Share buyback - cancellation of shares2 (note 43 ) (9) – (50) – – – 9 50 – – – – – Total transactions with owners (9) – (173) – – – 9 – 10 (163) – (9) (172) Transfer from retained earnings to capital reserve – – (9) – – – 9 – – – – – – Restated balance at 31 December 2022 1,070 456 9,230 (17) (31) (786) 527 50 (10) 10,489 966 67 11,522 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 In H122, the Group completed the purchase of the €50 million share buyback programme whereby the Group repurchased 8.5 million shares for cancellation, c0.8% of the count outstanding at 1 January 2022, at a weighted average price of €5.885 per share. 3 Other reserves includes the amalgamation of the merger reserve €17 million, liability credit reserve €9 million and revaluation reserve €24 million. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 199 Consolidated cash flow statement (for the year ended 31 December 2023) Note 2023 €m Restated1 2022 €m Cash ﬂows from operating activities Proﬁt before tax1 1,938 1,011 Share of results of associates and joint ventures 14 (25) (40) Loss / (gain) on disposal / liquidation of business activities 15 8 (1) Depreciation and amortisation 8 , 10,18 273 237 Net impairment losses on ﬁnancial instruments, excluding cash recoveries 13 451 267 Impairment of property, plant and equipment 10 – 14 Impairment of intangible assets and goodwill 28 – 7 Reversal of impairment on property 11 (3) – Revaluation loss on property 10 4 – Revaluation of investment property 29 104 71 Interest expense on subordinated liabilities 5 82 84 Interest expense on lease liabilities 5 11 12 Charge for pension and similar obligations 41 19 58 Net change in accruals and interest payable 285 89 Net change in prepayments and interest receivable (56) 89 Charge for provisions 38 17 55 Non-cash and other items1 (26) (114) Cash inﬂows from operating activities before changes in operating assets and liabilities 3,082 1,839 Net change in items in the course of collection from other banks 104 44 Net change in trading securities (72) 20 Net change in derivative ﬁnancial instruments (1,694) 2,015 Net change in fair value changes due to interest rate risk of the hedged items in portfolio hedges 1,095 (2,142) Net change in other ﬁnancial assets at FVTPL (2,342) 1,545 Net change in loans and advances to banks (52) 123 Net change in loans and advances to customers (7,835) 3,056 Net change in other assets1 (311) 176 Net change in deposits from banks (406) (9,355) Net change in customer accounts 694 7,255 Net change in debt securities in issue 1,000 (570) Net change in liabilities to customers under investment contracts1 833 (1,001) Net change in insurance and reinsurance contracts1 1,641 (716) Net change in other operating liabilities1 (71) (588) Net cash outﬂows from operating assets and liabilities (7,416) (138) Net cash (outﬂows) / inflows from operating activities before tax (4,334) 1,701 Tax paid (58) (72) Net cash (outflows) / inflows from operating activities (4,392) 1,629 Investing activities (section a below) (960) 4,686 Financing activities (section b below) (811) (574) Eﬀect of exchange translation and other adjustments (38) 170 Net change in cash and cash equivalents (6,201) 5,911 Opening cash and cash equivalents 39,842 33,931 Closing cash and cash equivalents 46 33,641 39,842 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 200 Consolidated cash flow statement (for the year ended 31 December 2023) (continued) Note 2023 €m 2022 €m (a) Investing activities Additions to debt securities at amortised cost (1,273) (232) Disposal / redemption of ﬁnancial assets at FVOCI 23 486 4,785 Additions to intangible assets 28 (297) (264) Disposal / redemption of debt securities at amortised cost 228 1,003 Additions to property, plant and equipment - owned assets 30 (116) (104) Proceeds from disposal of property, plant and equipment 40 45 Additions to ﬁnancial assets at FVOCI 23 (36) (283) Dividends received from joint ventures 27 34 3 Net change in interest in associates 27 (28) (16) Proceeds from disposal of investment property 3 95 Additions to joint ventures 27 (1) – Acquisition of subsidiary, net of cash and cash equivalents acquired – (281) Additions to investment property 29 – (65) Cash (outflows) / inﬂows from investing activities (960) 4,686 (b) Financing activities Dividend paid to ordinary shareholders (225) (54) Redemption of subordinated liabilities 47 (128) (1,091) Share buyback - Repurchase of shares 43 (125) (50) Redemption and buyback of preference stock 45 (104) – Interest paid on subordinated liabilities 47 (99) (80) Distribution on other equity instruments - AT1 coupon (69) (69) Payment of lease liability 37 (44) (53) Interest paid on lease liability 37 (11) (12) Dividend paid to non-controlling interests - preference stock 45 (6) (8) Net proceeds from issue of subordinated liabilities 47 – 843 Cash outﬂows from ﬁnancing activities (811) (574) Net cash flows from operating activities includes interest received of €6,360 million (2022 : €3,237 million) and interest paid of €2,503 million ( 2022: €435 million ). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 201 N otes to the consolidated financial statements 1 Group accounting policies 203 2 Critical accounting estimates and judgements 221 3 Operating segments 232 4 Interest income 236 5 Interest expense 237 6 Fee and commission income and expense 238 7 Net trading income 239 8 Other leasing income and expense 240 9 Other operating income 240 10 Other operating expenses 241 11 Cost of restructuring programme 242 12 Auditor’s remuneration (excluding Value Added Tax) 242 13 Net impairment (losses) / gains on financial instruments 242 14 Share of results of associates and joint ventures (after tax) 243 15 (Loss) / gain on disposal / liquidation of business activities 243 16 Taxation 244 17 Earnings per share 245 18 Insurance contracts 246 19 Derivative financial instruments 257 20 Other financial assets at fair value through profit or loss 262 21 Loans and advances to banks 263 22 Debt securities at amortised cost 263 23 Financial assets at fair value through other comprehensive income 264 24 Loans and advances to customers 265 25 Credit risk exposures 278 26 Modified financial assets 292 27 Interest in associates and joint ventures 293 28 Intangible assets and goodwill 294 29 Investment properties 295 30 Property, plant and equipment 296 31 Deferred tax 298 32 Other assets 300 33 Deposits from banks 301 34 Customer accounts 301 35 Debt securities in issue 302 36 Other liabilities 303 37 Leasing 303 38 Provisions 304 39 Contingent liabilities and commitments 305 40 Loss allowance provision on loan commitments and financial guarantees 307 41 Retirement benefit obligations 308 42 Subordinated liabilities 314 43 Share capital 315 44 Other equity instruments - Additional tier 1 315 45 Non-controlling interests 316 46 Cash and cash equivalents 316 47 Changes in liabilities arising from financing activities 317 48 Related party transactions 318 49 Davy acquisition 322 50 Client property 323 51 KBCI portfolio acquisition 323 52 Principal undertakings 324 53 Interests in other entities 325 54 Liquidity risk and profile 328 55 Measurement basis of financial assets and financial liabilities 331 56 Fair values of assets and liabilities 333 57 Transferred financial assets 341 58 Offsetting financial assets and liabilities 342 59 Interest rate benchmark reform 343 60 Post balance sheet events 343 61 Approval of financial statements 343 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 202 1 Group accounting policies Basis of preparation These consolidated financial statements are the financial statements of the Bank of Ireland Group plc (‘BoIG plc’ or the ‘Company’) and its subsidiaries (collectively the ‘BoIG plc Group’ or the ‘Group’). The financial statements comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated and Company balance sheets, the Consolidated and Company statements of changes in equity, the Consolidated cash flow statement, the notes to the consolidated financial statements on pages 202 to 343 and the notes to the Company financial statements on pages 347 to 350. The financial statements include the information that is described as being an integral part of the audited financial statements contained in: • sections 3.2, 3.4, 3.5, 3.6 and 3.7 of the Risk Management Report as described further on the bottom of page 134; and • the Remuneration Report as described further on page 127. The amounts presented in the financial statements are rounded to millions. The consolidated financial statements of the Group are prepared in accordance with IFRS as adopted by the EU and with those parts of the Companies Act 2014 applicable to companies reporting under IFRS and with the EU (Credit Institutions: Financial Statements) Regulations 2015 and the Asset Covered Securities Acts 2001 and 2007. The financial statements have been prepared under the historical cost convention as modified to include the fair valuation of certain financial instruments and land and buildings. The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. A description of the critical estimates and judgements applied in the consolidated financial statements is set out in note 2. The accounting policies and critical accounting estimates applied by the Company are included in note a to the Company financial statements. FX rates used during the year are as follows: 2023 2022 Average Closing Average Closing € / Stg£ 0.8698 0.8691 0.8528 0.8869 € / US$ 1.0813 1.1050 1.0531 1.0666 References to the ‘State’ throughout this document should be taken to refer to the Republic of Ireland (RoI), its Government and, where and if relevant, Government departments, agencies and local Government bodies. Going concern The time period that the Directors have considered in evaluating the appropriateness of the going concern basis in preparing the financial statements for 2023 is a period of twelve months from the date of approval of these financial statements (the ‘period of assessment’). In making this assessment, the Directors considered the Group’s business, profitability projections, funding and capital plans, together with a range of other factors such as the economic outlook for the Irish economy and the current global macroeconomic and geopolitical environment. The matters of primary consideration by the Directors are set out below: Capital The Group has developed capital plans under base and stress scenarios and the Directors believe that the Group has sufficient capital to meet its regulatory capital requirements throughout the period of assessment. Funding and liquidity The Directors have considered the Group’s funding and liquidity position and are satisfied that the Group has sufficient funding and liquidity throughout the period of assessment. Conclusion On the basis of the above, the Directors consider it appropriate to prepare the financial statements on a going concern basis having concluded that there are no material uncertainties related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern over the period of assessment. Comparatives Comparative figures have been restated where necessary, to conform with changes in presentation or where additional analysis has been provided in the current period. Any adjustments to comparatives are disclosed in the relevant note or supplementary asset disclosures as appropriate. Adoption of new and amended accounting standards The following new standards and amendments to standards, have been adopted by the Group during the year ended 31 December 2023. There have been no other new standards or amendments to standards adopted by the Group during the year which have had a material impact on the Group. IFRS 17 'Insurance Contracts' IFRS 17 replaces IFRS 4 'Insurance Contracts'. Details of the nature of the change and the impact are detailed below. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 203 1 Group accounting policies (continued) Amendments to IAS 1 'Presentation of Financial Statements' and IFRS Practice Statement 2: 'Disclosure of Accounting Policies'. This amendment requires that an entity discloses its material accounting policies instead of its significant accounting policies. Further amendments are made to explain how an entity can identify a material accounting policy. To support the amendments, the IASB have also developed guidance and examples to explain and demonstrate the application of the 'four-step materiality process' described in IFRS Practice Statement 2. Amendment to IAS 12 'Income taxes' : International Tax Reform - Pillar Two Model Rules The amendment gives companies temporary relief from accounting for deferred taxes arising from the OECD's international tax reform. The Amendments introduce: • a temporary exception to the accounting for deferred taxes arising from jurisdictions implementing the global tax rules; and • targeted disclosure requirements to help users better understand a company's exposure to income taxes arising from the reform, particularly before legislation implementing the rules is in effect. Amendment to IAS 12 ‘Income Taxes’ Deferred tax related to assets and liabilities arising from a single transaction This amendment introduces an exception to the initial recognition exemption in IAS 12. Applying this exception, an entity does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences. The nature of the changes in the Group’s accounting policies as a result of these new and amended standards are set out below. The impact of the amendments to IAS 12 are disclosed in note 31. IFRS 17 'Insurance Contracts' Nature of change IFRS 17 replaces IFRS 4 'Insurance Contracts', which was introduced as an interim standard in 2004. IFRS 17 addresses the comparison problems created by IFRS 4 by requiring all insurance, including reinsurance contracts, to be accounted for in a consistent manner. IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance and reinsurance contracts, ensuring an entity provides relevant information that faithfully represents those contracts. The description for insurance contracts issued that follows also applies, with necessary changes, to reinsurance contracts held. Items relevant specifically to reinsurance contracts held are dealt with in a separate section. There are specific scope exemptions detailed within IFRS 17, however the Group has not applied any scope exemptions from the application of the standard to either insurance or reinsurance contracts. The Standard was endorsed by the EU on 19 November 2021, with an optional exemption from applying annual cohort requirements that relates to the timing of the recognition of the profit in the contract, the CSM, in profit or loss. The Group has not made use of this exemption. Impact The following impacts of the adoption of IFRS 17 are described below: • impact on operating segments and operations; • transitional provisions (including accounting policy elections on first-time adoption); • changes to the prior year accounting policies; • differences between IFRS 17 and Solvency II; • impact on Alternative Performance Measures; and • financial impact. Impact on operating segments and operations The Group issues insurance contracts through its subsidiary NIAC, which forms part of the Wealth and Insurance operating segment. The Group notes a material impact on the recognition, measurement, presentation and disclosure of the insurance business in the Group's financial statements. There are, however, no changes to the underlying fundamentals and operations of the Wealth and Insurance segment. Transitional provisions (including accounting policy elections on first-time adoption) IFRS 17 prescribes the transition approaches that must be applied. On transition to IFRS 17, entities must apply the FRA, unless impracticable. The Group has applied the FRA to contracts issued on or after 1 January 2019. The fair value approach has been applied to contracts which were issued before 1 January 2019, as it was considered impracticable to apply the FRA prior to this date as a result of material changes to cash flow models due to data limitations. Under the fair value approach, the CSM or loss component is calculated as the difference between the fair value of a group of insurance contracts, applying IFRS 13 (income approach), and the present value of the fulfilment cash flows (best estimate plus risk adjustment), applying IFRS 17, at the transition date. Contracts within the scope of IFRS 17 must now apply the prescribed measurement models. IFRS 17 permits three possible measurement models: the General Measurement Model (GMM), the Premium Allocation Approach (PAA) and the Variable Fee Approach (VFA). The GMM is the default measurement model in IFRS 17 and the PAA is a simplified approach which may be applied where certain eligibility criteria are met. The VFA must be applied to contracts with direct participation features. On transition to IFRS 17, the Group has measured insurance contracts issued and reinsurance contracts held using the GMM, except where the VFA is applied. The Group applies the VFA to insurance contracts in the unit- linked life and pension portfolio. Further detail is provided below as to how a portfolio is defined. As permitted by IFRS 17, the Group has elected to apply the following accounting policies on first time adoption of IFRS 17: • changes in the risk adjustment for non-financial risk have been disaggregated between the insurance services result and the insurance finance income or expenses (IFIE); • the IFIE has not been disaggregated between amounts included in profit or loss and amounts included in other comprehensive income; and • the financial performance of groups of reinsurance contracts held is presented on a net basis in net income / (expense) from reinsurance contracts held. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 204 1 Group accounting policies (continued) Changes to prior accounting policies IFRS 17 introduces new initial recognition, measurement models, presentation and disclosure requirements. The Group has identified the following key accounting policies which have been impacted by transitioning to IFRS 17: Investment components IFRS 17 requires the identification and separation of distinct investment components from contracts within the scope of IFRS 17, unless it is an investment contract with discretionary participation features. For contracts that include both insurance coverage and investment-related service the Group has separated distinct investment components that are not highly inter-related to the insurance component. The distinct investment components are measured in accordance with IFRS 9 and presented as financial instruments. Contract boundary The measurement of a group of insurance contracts includes all of the future cash flows within the boundary of each contract in the group. Cash flows are within the boundary of an insurance contract if they arise from substantive rights and obligations that exist during the reporting period in which the Group can compel the policyholder to pay the premiums, or in which the Group has a substantive obligation to provide the policyholder with services. The Group has determined that expected future single premium injections and regular premium increases for unit-linked life and pensions contracts, even though at the discretion of policyholders, are within the contract boundaries as the Group may not adjust the terms and conditions for such increases. Level of aggregation (LoA) IFRS 17 requires an entity to determine the LoA for applying its requirements. The LoA for the Group has been determined firstly by dividing the business written into portfolios. Portfolios as described by IFRS 17 comprise groups of contracts with similar risks which are managed together. Portfolios have been further divided based on expected profitability at inception into three categories: onerous contracts, contracts with no significant possibility of becoming onerous, and the remainder. Contracts issued more than one year apart have not been allocated to the same group, except for contracts measured using the fair value approach at transition to IFRS 17. Measurement Under IFRS 17 the carrying value of insurance contracts comprises the present value of future cash flows (separated into liability for remaining coverage (LRC) and liability for incurred claims (LIC)), a risk adjustment for non-financial risk, and the CSM, which is calculated retrospectively and represents expected future profits to be recognised over the lifetime of contracts. In estimating future cash flows, the Group has incorporated, in an unbiased way, all reasonable and supportable information that is available at the reporting date. This information includes both internal and external historical data about claims and other experience, updated to reflect current expectations of future events. The estimates of future cash flows reflects the Group's view of current conditions at the reporting date, as long as the estimates of any relevant market variables are consistent with observable market prices. GMM Changes in LIC and LRC are reflected in insurance revenue, insurance service expense, IFIE, or by adjusting the CSM. The amount of CSM recognised in profit or loss for services in the period is determined by the allocation of the CSM remaining at the end of the reporting period over the current and remaining expected coverage period of the group of insurance contracts based on coverage units. Services provided are estimated using coverage units, which reflect the quantity of benefits and the coverage duration. VFA For insurance contracts under the VFA there are adjustments that relate to future service which change the CSM. These include changes in the Group's share of the fair value of underlying items and changes in the fulfilment cashflows (FCF) that would not vary based on the returns of underlying items and relate to future service. Other changes in cashflows are reflected in profit or loss. Coverage units The Group determines coverage units applying equal weight to the expected benefits resulting from insurance coverage to which policyholders may become entitled, investment-return service and investment-related service. Coverage units for future years are discounted at rates determined at the inception of a group of contacts (locked-in rates), except for the unit-linked life and pensions portfolio, where current discount rates are used. Reinsurance The measurement of reinsurance contracts held follows the same principles as those for insurance contracts issued, with the exception of the following: • measurement of the cash flows includes an allowance on a probability-weighted basis for the effect of any non- performance by the reinsurers, including allowing for the effects of collateral and losses from disputes; • the Group determines the risk adjustment for non-financial risk so that it represents the amount of risk being transferred to the reinsurer; • the Group recognises both day 1 gains and day 1 losses at initial recognition in the balance sheet as a CSM and this is released to profit or loss as the reinsurer renders services, except for any portion of a day 1 loss that relates to events before initial recognition. The amount of the CSM recognised in profit or loss for services in the period is determined by the allocation of the CSM remaining at the end of the reporting period over the current and remaining expected coverage period of the group of insurance contracts based on coverage units, representing the proportion of insurance coverage and investment gains and losses of underlying contracts that is reinsured. Equal weights are applied to insurance coverage and investment- return service; • changes in the fulfilment cash flows are recognised in profit or loss if the related changes arising from the underlying ceded contracts have been recognised in profit or loss. Alternatively, changes in the fulfilment cash flows adjust the CSM; and • the VFA does not apply to reinsurance contracts. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 205 1 Group accounting policies (continued) Risk adjustment for non-financial risk The risk adjustment reflects the compensation that the Group requires to compensate for the risk in the level and timing of future cash flows arising from non-financial risks. The Group determines the risk adjustment for non-financial risk as follows: • a value at risk approach (also referred to as a confidence interval approach) is applied at a confidence interval of 90% over one year, which reflects the Group's risk appetite for insurance business. In addition to the disclosure of the one year confidence interval of 90% the Group discloses the approximate confidence interval over the run-off of the in force business (ultimate confidence interval of 70.4%); • the effect of assumed adverse experience is determined as a one-off sensitivity at the reporting date that persists for the duration of contracts; • the Group allows for diversification of non-financial risks with financial risks and with investment contracts, based on the Solvency II (the prudential regime for insurance and reinsurance undertakings in the EU) standard formula diversification factors; • the risk adjustment for contracts issued allows for the effect of sensitivities net of reinsurance plus the expected cost of reinsurance; and • the risk adjustment for reinsurance contracts held is based on the reinsured proportions of risks included in the risk adjustment for contracts issued. Value of in Force (VIF) In accordance with IFRS 17 there is no VIF asset recognised and as a result the estimated future profits are now included in the measurement of the insurance contract liability as the CSM, representing unearned profit, which is gradually recognised over the duration of the contract. The removal of the VIF asset and the recognition of the CSM, which is a liability, reduces equity on transition. Discount rates Discount rates are based on market information where available and are determined using the top-down approach for the annuity portfolios and the bottom-up approach for other contracts. For long durations where there is no observable market information interest rates are estimated applying a small excess return of between 0.5% and 1% above expected long-term inflation rates, based on the excess return above expected long-term inflation rates at long durations where the market is liquid. An illiquidity premium, depending on the nature of contracts, is included in discount rates except for contracts in the unit-linked life and pensions portfolio, as these contracts are considered to be liquid. The reference portfolios for the top down approach are based on assets backing the liabilities with characteristics similar to the liabilities. The implied investment gains and losses on these assets are adjusted to allow for credit risk based on the Solvency II fundamental spreads. The bottom-up risk-free discount rate curve is based on similar methodology as the Solvency II risk- free curve, but non-market constraints are removed and the ultimate forward rate reduced. Directly Attributable Expenses (DAE) DAE, which include both acquisition and maintenance costs, are incorporated in actual and estimated future cash flows and recognised in the result of insurance services. Acquisition costs are amortised, and for contracts not measured under the PAA, this amortisation is equal to the amount of insurance revenue recognised in the year that relates to recovering insurance acquisition cashflows. Costs that are not directly attributable remain in operating expenses. This results in a reduction in reported operating expenses compared to the prior accounting treatment. Presentation and disclosure IFRS 17 requires amendments to the Financial Statement Line Items (FSLI) that are presented in the primary statements. Previously, in the Group consolidated primary statements, in accordance with IFRS 4, net insurance premium income, insurance contract liabilities and claims paid and total operating income net of insurance claims have been presented as FSLI. These IFRS 4 FSLI's are replaced with an insurance service result (which comprises insurance revenue, insurance service expense and net income/expense from reinsurance contracts held). The IFIE is presented separately for both insurance and reinsurance in the notes to the financial statements, and aggregated together with total investment gains / (losses) as insurance investment and finance result in the income statement. IFRS 17 also requires increased disclosures with more granular information in relation to the amounts recognised from insurance contracts; significant judgements and their changes; and the nature and extent of risks that arise from insurance contracts. The changes in accounting policies mentioned above create an impact on either profit or equity as follows: • IFRS 17 has had a significant impact on the accounting for insurance contracts. The Group notes that profits pertaining to insurance contracts, within the Wealth and Insurance operating segment of the Group, are now gradually recognised over the life of the contract rather than being accelerated at inception. This results in a reduction in earnings in 2023; however the profit over the life of the insurance contracts will remain unchanged; • in accordance with IFRS 17, there is no VIF asset recognised. The future profit instead is now included in the measurement of CSM and this is gradually recognised in revenue as services are provided over the duration of the insurance contract. While the profit over the life of an insurance contract will be unchanged, the emergence of this profit will be later under IFRS 17. The removal of the VIF asset and the recognition of CSM, which is a liability, reduces shareholders' equity by €371 million and €410 million at the transition date and the date of initial application, respectively. Please refer to note 18 for a detailed reconciliation of this impact; and • DAE, in accordance with IFRS 17, are incorporated in the CSM and recognised in the result of insurance services as a reduction in reported revenue, as profit is recognised over the duration of insurance contracts. Costs that are not directly attributable remain in operating expenses. This results in a reduction in reported operating expenses compared to the prior accounting treatment. Difference between IFRS 17 and Solvency II Solvency II remains as NIAC's capital and regulatory framework and the Solvency II ratio of NIAC is unchanged as a result of the Group's transition to IFRS 17. NIAC's ability to pay dividends to its parent company within the Group will therefore not be affected. As a general principle the Solvency II cashflows and IFRS 17 best estimate of future cashflows are aligned to the extent appropriate. IFRS 17 best estimate of future cash flows deviate from the Solvency II best estimate mainly due to the following key differences: Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 206 1 Group accounting policies (continued) • level of aggregation of projected cash flows; • contract boundaries; and • directly attributable and non-directly attributable expenses. APMs IFRS 17 requires directly attributable expenses to be captured within the measurement model of insurance contracts. As a result, alternative performance measures that pertain to expenses are impacted by transitioning to IFRS 17. For further details on Alternative Performance Measures see from page 356. Financial impact of adoption of IFRS 17 A detailed reconciliation of the quantitative impact of the transition to IFRS 17 at transition date and date of initial application has been provided in note 18. The Accounting polices set out below are the Group's material accounting policies: Interest income and expense Interest income and expense are recognised in the income statement using the effective interest method for financial instruments measured at amortised cost and financial assets which are debt instruments measured at FVOCI, in accordance with IFRS 9. The Group presents interest resulting from negative effective interest rates on financial liabilities as interest income. The Group presents interest resulting from negative effective interest rates on financial assets as interest expense. The effective interest method is the method that is used in the calculation of the amortised cost of a financial asset or liability and in the allocation and recognition of interest revenue or interest expense in profit or loss over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the ECL (except, in accordance with IFRS 9 in the case of POCI financial assets where ECL is included in the calculation of a ‘credit-adjusted effective interest rate’). The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. In the case of a financial asset that is neither credit-impaired nor a POCI financial asset, interest revenue is calculated by applying the effective interest rate to the gross carrying amount. In the case of a financial asset that is not a POCI financial asset but is credit-impaired at the reporting date, interest revenue is calculated by applying the effective interest rate to the amortised cost, which is the gross carrying amount adjusted for any impairment loss allowance. In the case of a POCI financial asset, interest revenue is recognised by applying the credit-adjusted effective interest rate to the amortised cost. Where the Group revises its estimates of payments or receipts on a financial instrument (excluding modifications of a financial asset and changes in ECL), it recalculates the gross carrying amount of the financial asset or amortised cost of the financial liability as the present value of the estimated future contractual cash flows that are discounted at the financial instrument’s original effective interest rate (or credit-adjusted effective interest rate for POCI financial assets). The adjustment is recognised as interest income or expense. Interest income or expense on derivatives designated as hedging instruments are presented in net interest income, in line with the underlying hedged asset or liability. For portfolio fair value hedges of financial liabilities and portfolio fair value hedges and cash flow hedges of financial assets, the Group aggregates the interest income or expense on the hedged assets or liabilities with the interest income or expense on the related derivatives designated as hedging instruments. Where the resulting total is an expense, the amount is presented as interest expense on the assets or liabilities. Where the resulting total is income, it is presented as interest income on the assets or liabilities. For micro fair value hedges of financial assets or liabilities, the Group aggregates, for each hedged asset or liability separately, the interest income or expense on the asset or liability with the interest income or expense on the related derivative or derivatives designated as hedging instruments. Where the resulting total for an asset or liability is an expense, the amount is presented as interest expense on the asset or liability. Where the resulting total is income, it is presented as interest income on the asset or liability. Interest income or expense on derivatives that are held with hedging intent, but for which hedge accounting is not applied (economic hedges) is included in other interest income or expense. Interest income or expense on derivatives held with trading intent is included in trading income. Interest income on debt financial assets measured at FVTPL, excluding assets held for trading and those within the Group’s life assurance operations, is recognised when earned and presented within other interest income. Interest expense on debt financial liabilities measured at FVTPL, excluding liabilities held for trading, is recognised when incurred and presented in other interest expense. Modifications Where the contractual cash flows of a financial asset are modified and the modification does not result in derecognition of the financial asset, the Group recalculates the gross carrying amount of the financial asset as the present value of the modified contractual cash flows that are discounted at the financial asset’s original effective interest rate and recognises a modification gain or loss in the income statement. Where a modification is a forbearance measure which does not result in derecognition, the modification gain or loss is included in the income statement within net impairment gains or losses. Otherwise, the modification gain or loss is included within interest income. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 207 1 Group accounting policies (continued) As a result of the Interest Rate Benchmark Reform (BMR), on transition to an alternative benchmark rate, changes in the basis of determining the contractual cash flows of a financial instrument are treated in the same way as changes to market rates for a floating rate instrument by updating the effective interest rate, without the recognition of a modification gain or loss. This practical expedient was only applied where: • the change to the contractual cash flows was necessary as a direct consequence of the BMR reform; and • the new basis for determining the contractual cash flows was economically equivalent to the previous basis. Where additional changes to the basis for determining the contractual cash flows of a financial instrument were made at the same time as changes required by the BMR reform, the Group first applied the practical expedient noted above to the changes arising as a direct consequence of the BMR reform and then applied its existing policy to account for the additional modifications. Financial assets Recognition, classification and measurement A financial asset is recognised in the balance sheet when and only when, the Group becomes a party to its contractual provisions. At initial recognition, a financial asset is measured at fair value (plus, in the case of a financial asset not at FVTPL, directly attributable transaction costs) and is assigned one of the following classifications for the purposes of subsequent measurement: • financial assets at amortised cost; • financial assets at FVOCI; or • financial assets at FVTPL. The Group determines the appropriate classification based on the contractual cash flow characteristics of the financial asset and the objective of the business model within which the financial asset is held. In determining the business model for a group of financial assets, the Group considers factors such as how performance is evaluated and reported to key management personnel (KMP); the risks that affect performance and how they are managed; how managers are compensated; and the expected frequency, value and timing of sales of financial assets. In considering the contractual cash flow characteristics of a financial asset, the Group determines whether the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. In this context, ‘principal’ is the fair value of the financial asset on initial recognition and ‘interest’ is consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. In making the determination, the Group assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers contingent events, leverage features, prepayment and term extensions, terms which limit the Group’s recourse to specific assets and features that modify consideration of the time value of money. Financial assets at amortised cost Debt instruments A debt instrument is measured, subsequent to initial recognition, at amortised cost where it meets both of the following conditions and has not been designated as measured at FVTPL: • the financial asset has contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and • the financial asset is held within a business model whose objective is achieved by holding financial assets to collect contractual cash flows. Purchases and sales of debt securities at amortised cost are recognised on trade date: the date on which the Group commits to purchase or sell the asset. Loans measured at amortised cost are recognised when cash is advanced to the borrowers. Interest revenue using the effective interest method is recognised in the income statement. An impairment loss allowance is recognised for ECL with corresponding impairment gains or losses recognised in the income statement. Debt instruments at fair value through other comprehensive income A debt instrument is measured, subsequent to initial recognition, at FVOCI where it meets both of the following conditions and has not been designated as measured at FVTPL: • the financial asset has contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and • the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. Purchases and sales of debt instruments at FVOCI are recognised on trade date. Gains and losses arising from changes in fair value are included in other comprehensive income (OCI). Interest revenue using the effective interest method and FX gains and losses on the amortised cost of the financial asset are recognised in the income statement. The impairment loss allowance for ECL does not reduce the carrying amount but an amount equal to the allowance is recognised in OCI as an accumulated impairment amount, with corresponding impairment gains or losses recognised in the income statement. On derecognition, the cumulative gain or loss previously recognised in OCI is reclassified to the income statement. Regular way purchases and sales of financial assets measured at FVOCI are recognised on trade date. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 208 1 Group accounting policies (continued) Financial assets at fair value through profit or loss All other financial assets are measured, subsequent to initial recognition, at FVTPL. Financial assets at FVTPL comprise: Financial assets mandatorily measured at fair value through profit or loss Financial assets meeting either of the conditions below are mandatorily measured at FVTPL: • financial assets with contractual terms that do not give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding; and • financial assets held within a business model whose objective is achieved neither by collecting contractual cash flows nor both collecting contractual cash flows and selling financial assets. This includes financial assets held within a portfolio that is managed and whose performance is evaluated on a fair value basis, such as investments held by the Group’s life assurance business. It further includes portfolios of financial assets which are ‘held for trading’, which includes financial assets acquired principally for the purpose of selling in the near term and financial assets that on initial recognition are part of an identified portfolio where there is evidence of a recent pattern of short-term profit-taking. Financial assets designated as measured at fair value through profit or loss A financial asset may be designated at FVTPL only if doing so eliminates or significantly reduces measurement or recognition inconsistencies (an ‘accounting mismatch’) that would otherwise arise from measuring financial assets or liabilities or recognising gains and losses on them on different bases. The Group designates certain investments in associates at FVTPL as set out in note 27. Regular way purchases and sales of financial assets at FVTPL are recognised on trade date. They are carried on the balance sheet at fair value, with all changes in fair value included in the income statement. Reclassification When and only when, the Group changes its business model for managing financial assets, it reclassifies all affected financial assets. Reclassification is applied prospectively. Derecognition A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire or the Group has transferred substantially all the risks and rewards of ownership. Where the Group retains the obligation to service the transferred financial asset, the transferred asset is derecognised if it meets the derecognition criteria and an asset or liability is recognised for the servicing contract if the servicing fee is more than adequate (an asset) or is less than adequate (a liability) for performing the servicing. Where a modification results in a substantial change on a quantitative or qualitative basis, to the contractual cash flows of a financial asset, it may be considered to represent expiry of the contractual cash flows, resulting in derecognition of the original financial asset and recognition of a new financial asset at fair value. The Group reduces the gross carrying amount of a financial asset and the associated impairment loss allowance when it has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. Impairment of financial instruments Scope The Group recognises impairment loss allowances for ECL on the following categories of financial instruments unless measured at FVTPL: • financial assets that are debt instruments; • loan commitments; • lease receivables recognised under IFRS 16 ‘Leases’; • financial guarantee contracts issued and not accounted for under IFRS 4 ‘Insurance Contracts’; and • receivables and contract assets recognised under IFRS 15 ‘Revenue from Contracts with Customers’. Basis for measuring impairment The Group allocates financial instruments into the following categories at each reporting date to determine the appropriate accounting treatment. Stage 1: 12-month expected credit losses (not credit-impaired) These are financial instruments where there has not been a significant increase in credit risk since initial recognition. An impairment loss allowance equal to 12-month ECL is recognised. This is the portion of lifetime ECL resulting from default events that are possible within the next 12 months. Stage 2: Lifetime expected credit losses (not credit-impaired) These are financial instruments where there has been a significant increase in credit risk since initial recognition but which are not credit-impaired. An impairment loss allowance equal to lifetime ECL is recognised. Lifetime ECL are the ECL resulting from all possible default events over the expected life of the financial instrument. Stage 3: Lifetime expected credit losses (credit-impaired) These are financial instruments which are credit-impaired at the reporting date but were not credit-impaired at initial recognition. An impairment loss allowance equal to lifetime ECL is recognised. Purchased or Originated Credit-impaired financial assets These are financial assets that were credit-impaired at initial recognition. They are not subject to any initial impairment loss allowance but an impairment loss allowance is subsequently recognised for the cumulative changes in lifetime ECL since initial recognition. A POCI financial asset remains classified as such until it is derecognised, even if assessed as no longer credit-impaired at a subsequent reporting date. With the exception of POCI financial assets, a financial instrument may migrate between stages from one reporting date to the next. Significant increase in credit risk In determining if a financial instrument has experienced a significant increase in credit risk since initial recognition, the Group assesses whether the risk of default over the remaining expected life of the financial instrument is significantly higher than had been anticipated at initial recognition, taking into account changes in prepayment expectations where relevant. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 209 1 Group accounting policies (continued) The Group uses reasonable and supportable information available without undue cost or effort at the reporting date, including forward-looking information. A combination of quantitative, qualitative and backstop indicators are generally applied in making the determination. For certain portfolios, the Group assumes that no significant increase in credit risk has occurred if credit risk is ‘low’ at the reporting date. Credit-impaired A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows have occurred. Evidence that a financial asset is credit- impaired includes observable data about the following events: • significant financial difficulty of the issuer or the borrower; • a breach of contract, such as a default or past due event; • the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider; • it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; • the disappearance of an active market for that financial asset because of financial difficulties; or • the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses. It may not be possible to identify a single discrete event - instead, the combined effect of several events may have caused financial assets to become credit-impaired. Measurement of expected credit losses and presentation of impairment loss allowances ECL are measured in a way that reflects: • an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes; • the time value of money; and • reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. ECL are measured as follows: • financial assets that are not credit-impaired at the reporting date: the present value of the difference between all contractual cash flows due to the Group in accordance with the contract and all the cash flows the Group expects to receive; • financial assets that are credit-impaired at the reporting date: the difference between the gross carrying amount and the present value of estimated future cash flows; • undrawn loan commitments: the present value difference between the contractual cash flows that are due to the Group if the commitment is drawn and the cash flows that the Group expects to receive; and • financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover, discounted at an appropriate risk-free rate. Expected cash flows arising from the sale on default of a loan are included in the measurement of expected credit losses under IFRS 9 where the following conditions are met: • selling the loan is one of the recovery methods that the Group expects to pursue in a default scenario; • the Group is neither legally nor practically prevented from realising the loan using that recovery method; and • the Group has reasonable and supportable information upon which to base its expectations and assumptions. For financial assets, the discount rate used in measuring ECL is the effective interest rate (or ‘credit-adjusted effective interest rate’ for a POCI financial asset) or an approximation thereof. For undrawn loan commitments, it is the effective interest rate, or an approximation thereof, that will be applied when recognising the financial asset resulting from the loan commitment. Impairment loss allowances for ECL are presented in the financial statements as follows: Financial assets at amortised cost: as a deduction from the gross carrying amount in the balance sheet. Loan commitments and financial guarantee contracts: generally, as a provision in the balance sheet. Debt instruments at fair value through other comprehensive income: an amount equal to the allowance is recognised in OCI as an accumulated impairment amount. Utilisation of impairment loss allowances The Group reduces the gross carrying amount of a financial asset and the associated impairment loss allowance when it has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. Indicators that there is no reasonable expectation of recovery include the collection process having been exhausted or it becoming clear during the collection process that recovery will fall short of the amount due to the Group. The Group considers, on a case-by-case basis, whether enforcement action in respect of an amount that has been written off from an accounting perspective is or remains appropriate. Any subsequent recoveries are included in the income statement as an impairment gain. Forbearance Forbearance occurs when a borrower is granted a concession or agreed change to a loan (‘forbearance measure’) for reasons relating to the actual or apparent financial stress or distress of that borrower. Forbearance has not occurred if the concession or agreed change to a loan granted to a borrower is not related to the actual or apparent financial stress or distress of that borrower. Prior to any decision to grant forbearance, the Group performs an assessment of a customer’s financial circumstances and ability to repay and assesses whether the loan is credit- impaired. Where the loan is credit-impaired, it is allocated to Stage 3 (unless a POCI financial asset). If a forborne loan has a variable interest rate, the discount rate for measuring ECL is the current effective interest rate determined under the contract before the modification of terms. Financial assets to which forbearance has been applied continue to be reported as forborne until such time as they satisfy conditions to exit forbearance in line with EBA guidance on non-performing and forborne classifications. Forborne financial assets which are not credit-impaired are generally classified as Stage 2. A financial asset can only be reclassified from Stage 3 when certain conditions are met over a pre- defined period of time or probation period, in line with regulatory requirements. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 210 1 Group accounting policies (continued) Where the cash flows from a forborne loan are considered to have expired, due to the loan being restructured in such a way that results in a substantial modification, the original financial asset is derecognised and a new financial asset is recognised, initially measured at fair value. Any difference between the carrying value of the original financial asset and the fair value of the new financial asset on initial recognition are recognised in the income statement. The new financial asset may be initially allocated to Stage 1 or, if credit-impaired, be categorised as a POCI financial asset. Where a forbearance measure represents a modification of the contractual cash flows of a financial asset and does not result in its derecognition, the Group recalculates the gross carrying amount of the financial asset as the present value of the modified contractual cash flows that are discounted at the financial asset’s original effective interest rate (before any modification of terms) and a modification gain or loss is included in the income statement within net impairment gains or losses. Financial liabilities The Group classifies its financial liabilities as being measured at amortised cost unless it has designated liabilities at FVTPL or is required to measure liabilities mandatorily at FVTPL, such as derivative liabilities. Financial liabilities are initially recognised at fair value, (normally the issue proceeds i.e. the fair value of consideration received) less, in the case of financial liabilities subsequently carried at amortised cost, transaction costs. For financial liabilities carried at amortised cost, any difference between the proceeds, net of transaction costs and the redemption value is recognised in the income statement using the effective interest method. When a financial liability that is measured at amortised cost is modified without resulting in derecognition, a gain or loss is recognised in profit or loss. The gain or loss is calculated as the difference between the original contractual cash flows and the modified contractual cash flows discounted at the original effective interest rate. Preference shares which carry a mandatory coupon are classified as financial liabilities. The dividends on these preference shares are recognised in the income statement as interest expense using the effective interest method. A financial liability may be designated as at FVTPL only when: • it eliminates or significantly reduces a measurement or recognition inconsistency (an ‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or • a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis in accordance with documented risk management or investment strategy; or • a contract contains one or more embedded derivatives that significantly changes the cash flows of the contract and the separation of the embedded derivative(s) is not prohibited. The Group designates certain financial liabilities at FVTPL as set out in note 55 to the financial statements. The movement in own credit risk related to financial liabilities designated at FVTPL is recorded in OCI unless this would create or enlarge an accounting mismatch in profit or loss for the Group (in which case all gains or losses are recognised in profit or loss). Financial liabilities are derecognised when they are extinguished, that is when the obligation is discharged, cancelled or expires. Targeted Longer-Term Refinancing Operations Targeted Longer-Term Refinancing Operations (TLTRO), are Eurosystem operations which provide funding to credit institutions. TLTROs are targeted operations, as the amounts that banks can borrow are linked to their loans to non-financial corporations and households. The Group considers TLTRO funding provided by the ECB to be on market terms on the basis that the ECB has established a separate market with TLTRO programmes. They have specific terms which are different from other sources of funding available to banks, including those provided by the ECB. Consequently, the rate under TLTRO is considered to be a market conforming rate and TLTRO funding is recognised fully as a financial liability. The Group interpreted the rate set by the ECB under the most recent third series of TLTRO (TLTRO III which was repaid in full in 2022) as consisting of a floating rate element (average interest rate on the ECB’s deposit facility) and a fixed rate element (amount receivable for equalling or exceeding benchmark net lending targets) on the TLTRO financial liability. For floating-rate financial liabilities, periodic re-estimation of cash flows to reflect movements in the market interest rates alters the effective interest rate. Changes in the Group’s expectations of meeting the benchmark lending targets are treated as an adjustment of the amortised cost of the TLTRO financial liability, to reflect actual and revised estimated contractual cash flows. This adjustment is recognised in profit or loss as income or expense. Sale and repurchase agreements and lending of assets Assets sold subject to repurchase agreements (‘repos’) are retained on the balance sheet and reclassified as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral; the counterparty liability is included in deposits from banks or customer accounts, as appropriate. Securities purchased under agreements to resell (‘reverse repos’) are treated as collateralised loans and recorded as loans and advances to banks or customers, as appropriate. The difference between sale and repurchase price is treated as interest and recognised in the income statement over the life of the agreement using the effective interest method. Securities lent to counterparties are also retained on the balance sheet. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss included in trading income. The obligation to return the securities is recorded at fair value as a trading liability. Issued debt and equity securities The classification of instruments as a financial liability or an equity instrument is dependent upon the substance of the contractual arrangement. Instruments which carry a contractual obligation to deliver cash or another financial asset to another entity are classified as financial liabilities. The coupons on these instruments are recognised in the income statement as interest expense using the effective interest method. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 211 1 Group accounting policies (continued) Where the Group has absolute discretion in relation to the payment of coupons and repayment of principal, the instrument is classified as equity and any coupon payments are classified as distributions in the period in which they are made. If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of the liability and the consideration paid is included in other operating income, net of any costs or fees incurred. Derivative financial instruments and hedge accounting The Group has made the accounting policy choice allowed under IFRS 9 to continue to apply the hedge accounting requirements of IAS 39. Derivatives are initially recognised at fair value on the date on which the contract is entered into and are subsequently remeasured at their fair value at each reporting date. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Certain derivatives embedded in other financial instruments that are not financial assets are separated from the host contract and accounted for as derivatives, when their economic characteristics and risks are not closely related to those of the host contract and the entire host contract is not carried at FVTPL. Fair value gains or losses on derivatives are normally recognised in the income statement. However where they are designated as hedging instruments, the treatment of the fair value gains and losses depends on the nature of the hedging relationship. The Group designates certain derivatives as either: • hedges of the exposure to changes in the fair value of recognised assets or liabilities that is attributable to a particular risk (fair value hedge); or • hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecast transaction (cash flow hedge). Hedge accounting is applied to these derivatives provided certain criteria are met. The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Hedge relationships are concluded to be effective if the hedging instruments that are used in hedging transactions offset the changes in fair value or cash flow of the hedged items within a range of 80% to 125%. Where a hedging instrument is novated to a clearing counterparty, the Group does not discontinue hedge accounting where the following criteria are met: • the novation arises due to laws or regulations, or the introduction of laws and regulations; • the parties to the hedging instrument agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each of the parties; and • the novation does not result in changes to the terms of the original instrument except for those changes necessary to effect the change in counterparty. Hedges directly affected by the BMR reform All hedge accounting relationships subject to BMR reform were transitioned before 30 June 2023. When there was no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Group amended the formal hedge designations and documentation to reflect one or more of specified changes required by the BMR reform, without discontinuing those hedge accounting relationships. The hedge designations and documentations were amended by the end of the reporting period during which a change required by BMR reform was made to the hedged risk, hedged item or hedging instrument and only to make one or more of the following changes: • designating an alternative BMR as the hedged risk; • amending the description of the hedged item, including the description of the designated portion of the cash flows or fair value being hedged; or • amending the description of the hedging instrument. The description of the hedging instrument was only amended if the following conditions were met: • the Group makes a change required by the BMR reform using an approach other than changing the basis for determining the contractual cash flows of the hedging instrument; • the chosen transition approach is economically equivalent to changing the basis for determining the contractual cash flows of the original hedging instrument; and • the original hedging instrument is not derecognised. When performing retrospective hedge effectiveness assessment for hedge accounting relationships where hedge designations were amended as a direct result of the BMR reform, the Group elected on the amendment date to reset the cumulative fair value changes of the hedging instrument and the hedged item to zero. When the description of the hedged item designated in a cash flow hedge was amended to reference the alternative BMR, the amount accumulated in the cash flow hedge reserve in equity was deemed to be based on the alternative BMR on which the hedged future cash flows were determined. When an item in a group of items designated as the hedged items was amended as a direct result of the BMR reform, the Group allocates hedged items to subgroups based on the benchmark rate being hedged and designates the benchmark rate for each subgroup as the hedged risk. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The hedged item in a micro fair value hedge is a single specified item e.g. a fixed rate commercial loan or a FVOCI bond. The hedged item in a portfolio fair value hedge is a pool of assets or liabilities with similar risk characteristics and profiles, such as a pool of fixed rate mortgages. Unlike micro fair value hedge accounting, portfolio fair value hedge accounting is not discontinued if an individual asset or liability within the pool of hedged items is sold, so long as the overall pool of hedged items retains its characteristics as documented at inception of the hedge. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 212 1 Group accounting policies (continued) In addition, hedge effectiveness testing is performed on a portfolio basis rather than on an individual hedge relationship by hedge relationship basis. For micro fair value hedges, the hedge adjustment is presented as an adjustment to the carrying amount of the hedged item. For portfolio fair value hedges, the hedge adjustment is presented on the balance sheet as a separate line item "Fair value changes due to interest rate risk of the hedged items in portfolio hedges." Where the underlying hedged item is an asset, the portfolio hedge adjustment is presented separately within assets. Where the underlying hedged item is a liability, the portfolio hedge adjustment is presented separately within liabilities. The Group also avails of the relaxed hedge accounting provisions permitted by IAS 39 'Financial Instruments: recognition and measurement' as adopted by the EU. The Group applies these relaxed provisions to portfolio fair value hedges of interest rate risk on its demand deposit and mortgage lending books. The Group resets portfolio fair value hedges of its demand deposit book on a weekly basis and other portfolio fair value hedges are reset either fortnightly or on a monthly basis. If the criteria for hedge accounting cease to be met, no further adjustments are made to the hedged item for fair value changes attributable to the hedged risk. The cumulative adjustment to the carrying amount of a hedged item is amortised to profit or loss over the period to maturity using the straight line method for macro hedges and the effective interest method for micro hedges. When a hedged item held at amortised cost that is designated in a micro fair value hedge or included in a repricing time period of a portfolio hedge is derecognised, the unamortised fair value adjustment included in the carrying value of that hedged item is immediately reclassified to the income statement. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in OCI. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in OCI are reclassified to the income statement in the periods in which the hedged item affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in OCI at that time remains in OCI and is recognised in the income statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately reclassified to the income statement. Embedded derivatives An embedded derivative is a component of a hybrid contract that also includes a non-derivative host, with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. If a hybrid contract contains a host that is not a financial asset within the scope of IFRS 9, an embedded derivative is separated from the host and accounted for as a derivative if and only if, its economic characteristics and risks are not closely related to those of the host, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative and the hybrid contract is not measured at FVTPL. Financial guarantees Financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the original or modified terms of a debt instrument. Financial guarantees held by the Group A financial guarantee contract requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. Where the Group is the holder of such a guarantee and it is considered integral to the contractual terms of the guaranteed debt instrument(s), the guarantee is not accounted for separately but is considered in the determination of the impairment loss allowance for ECL of the guaranteed instrument(s). Financial guarantees issued by the Group The Group issues financial guarantees to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities and in connection with the performance of customers under payment obligations related to contracts and the payment of import duties. The Group’s liability under an issued financial guarantee contract is initially measured at fair value. The liability is subsequently measured at the higher of the amount of the impairment loss allowance for ECL determined in accordance with the requirements of IFRS 9 and the initial measurement less the cumulative amount of income recognised in accordance with the principles of IFRS 15. Any change in the liability is taken to the income statement and recognised on the balance sheet within provisions. Where the Group issues a financial liability which contains a financial guarantee, the liability is measured at amortised cost using the effective interest method. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is currently a legally enforceable right of set off and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. No impairment loss allowance for ECL is recognised on a financial asset, or portion thereof, which has been offset. Valuation of financial instruments The Group recognises trading securities, other financial assets and liabilities designated at FVTPL, derivatives and financial assets at FVOCI at fair value in the balance sheet. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, the most advantageous market to which the Group has access at that date. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 213 1 Group accounting policies (continued) The fair values of financial assets and liabilities traded in active markets are based on unadjusted bid and offer prices respectively. If an active market does not exist, the Group establishes fair value using valuation techniques. These include the use of recent arm’s length transactions, DCF analysis, option pricing models and other valuation techniques commonly used by market participants. To the extent possible, these valuation techniques use observable market data. Where observable data does not exist, the Group uses estimates based on the best information available. The best evidence of the fair value of a financial instrument at initial recognition is the transaction price in an arm’s length transaction, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique which uses only observable market inputs. When such evidence exists, the initial valuation of the instrument may result in the Group recognising a profit on initial recognition. In the absence of such evidence, the instrument is initially valued at the transaction price. Any day one profit is deferred and recognised in the income statement to the extent that it arises from a change in a factor that market participants would consider in setting a price. Straight line amortisation is used where it approximates to that amount. Subsequent changes in fair value are recognised immediately in the income statement without the reversal of deferred day one profits or losses. Where a transaction price in an arm’s length transaction is not available, the fair value of the instrument at initial recognition is measured using a valuation technique. For liabilities designated at FVTPL, the fair values reflect changes in the Group’s own credit spread. Transfers between levels of the fair value hierarchy The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred. Group accounts Subsidiaries Subsidiary undertakings are investees controlled by the Group. The Group controls an investee when it has power over the investee, is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Group reassesses whether it controls an investee when facts and circumstances indicate that there are changes to one or more elements of control. The existence and effect of potential voting rights are considered when assessing whether the Group controls an investee only if the rights are substantive. A structured entity is an entity designed so that its activities are not governed by way of voting rights. The Group assesses whether it has control over such entities by considering factors such as: the purpose and design of the entity; the nature of its relationship with the entity; and the size of its exposure to the variability of returns from the entity. Assets, liabilities and results of all Group undertakings have been included in the Group financial statements on the basis of financial statements or, where relevant, additional financial information, made up to the end of the financial year. Business combinations Except for where predecessor accounting applies, subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree, over the fair value of the Group’s share of the identifiable net assets acquired, is recorded as goodwill. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. In addition, FX gains and losses which arise on the retranslation to functional currency of intercompany monetary assets and liabilities are not eliminated. Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with the policies adopted by the Group. Associates and Joint Ventures Associates are all entities over which the Group has significant influence, but not control, over the entity’s financial and operating decisions, generally accompanying a shareholding of between 20% and 50% of the voting rights. A joint arrangement is an arrangement of which two or more parties have joint control. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Those parties are called joint ventures. Investments in associates and joint ventures are accounted for using the equity method of accounting and are initially recognised at cost. The Group utilises the venture capital exemption for investments where significant influence is present and the business operates as a venture capital business. These investments are designated at initial recognition at FVTPL. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in joint operations in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses. Accounting policies of associates and joint ventures have been changed, where necessary, to ensure consistency with the policies adopted by the Group. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 214 1 Group accounting policies (continued) Non-controlling interests Non-controlling interests comprise equity in a subsidiary that is not directly or indirectly attributable to the Parent. Transactions with non-controlling interests where the Group has control over the entity are accounted for using the Economic entity model. This accounting model requires that any surplus or deficit that arises on any transaction(s) with non-controlling interests to dispose of or to acquire additional interests in the entity that does not result in loss of control is recognised in equity. Securitisations Certain Group undertakings have entered into securitisation transactions in order to finance specific loans and advances to customers. All financial assets continue to be held on the Group balance sheet and a liability recognised for the proceeds of the funding transaction, unless: • the rights to the cash flows have expired or been transferred; • substantially all the risks and rewards associated with the financial instruments have been transferred outside the Group, in which case the assets are derecognised in full; or • a significant portion, but not all, of the risks and rewards have been transferred outside the Group. In this case the asset is derecognised entirely if the transferee has the ability to sell the financial asset. Otherwise the asset continues to be recognised only to the extent of the Group’s continuing involvement. Where the above conditions apply to a fully proportionate share of all or specifically identified cash flows, the relevant accounting treatment is applied to that proportion of the asset. Foreign currency translation Items included in the financial statements of each entity of the Group are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The consolidated financial statements of the Group and the financial statements of the Company are presented in euro. Foreign currency transactions are translated into functional currency at the exchange rates prevailing at the dates of the transactions. FX gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non- monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated into the appropriate functional currency using the exchange rate at the transaction date and those measured at fair value are translated at the exchange rate at the date the fair value was determined. Exchange rate differences on non-monetary items are recognised based on the classification of the underlying items. Assets, liabilities and equity of all the Group entities that have a functional currency different from the presentation currency (‘foreign operations’) are translated at the closing rate at the reporting date and items of income and expense are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). All resulting exchange differences are recognised in OCI and accumulated in a separate component of equity. On disposal of a foreign operation the amount accumulated in the separate component of equity is reclassified from equity to profit or loss. The Group may dispose of its interest in a foreign operation through sale, liquidation, repayment of share capital, abandonment or through loss of control or significant influence. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Fee and commission income The Group accounts for fee and commission income when the contract with the customer is agreed and each party’s rights under the contract, together with the payment terms, are identified. In addition it must be probable that the Group will collect the consideration to which it is entitled. Fee and commission income is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service to a customer. Fee income on the provision of current accounts to customers is recognised as the service is provided. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts usually on a time apportioned basis. Asset management fees related to investment funds are recognised rateably over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Loan syndication and arrangement fees are recognised at a point in time when the performance obligation is completed. Stockbroking commission income arising from the Davy Stockbroking business is recognised as earned in the period in which the related deals are executed on behalf of clients and the performance obligation is satisfied. Other fees including interchange income, ATM fees and FX fees are recognised on completion of the transaction and once the Group has completed its performance obligations under the contract. Leases Identifying a lease Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A Group company is the lessee The Group recognises a Right of Use (RoU) asset and lease liability at the lease commencement date. RoU assets are initially measured at cost and subsequently measured at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurement of lease liabilities. The recognised RoU assets are depreciated on a straight-line basis over the shorter of their estimated useful lives and the lease term. RoU assets are subject to impairment under IAS 36 ‘Impairment of Assets’. The Group has elected not to recognise RoU assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 215 1 Group accounting policies (continued) RoU assets, comprised of leases of buildings which do not meet the definition of investment properties and computer equipment, are presented in property, plant and equipment. RoU assets which meet the definition of investment properties are presented within investment properties. Lease liabilities are initially measured at the present value of lease payments that are not paid at the commencement date, discounted using the Incremental Borrowing Rate (IBR) if the interest rate implicit in the lease is not readily determinable. Lease payments include fixed rental payments. Generally, the Group uses its IBR as the discount rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured if there is a change in future lease payments, a change in the lease term, or as appropriate, a change in the assessment of whether an extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. When the lease liability is remeasured a corresponding adjustment is made to the RoU asset and / or profit or loss, as appropriate. The Group has applied judgement in determining the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and RoU assets recognised. The Group has a number of leases which contain break options and applies judgement in evaluating whether it is reasonably certain not to exercise the option. That is, on commencement of a lease the Group considers all relevant factors that create an incentive for it to exercise the option. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option. Under IFRS 16, where the Group is an intermediate lessor the subleases are classified with reference to the RoU asset arising from the head lease, not with reference to the underlying asset. Where the Group continues to retain the risks and rewards of ownership as the intermediate lessor, it retains the lease liability and the RoU asset relating to the head lease in its balance sheet. If the Group does not retain the risks and rewards of ownership as the intermediate lessor, these subleases are deemed finance leases. During the term of the sublease, the Group recognises both finance lease income on the sublease and interest expense on the head lease. A Group company is the lessor When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. When assets are held under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is included within net interest income and is recognised over the term of the lease reflecting a constant periodic rate of return on the net investment in the lease. Assets leased to customers under operating leases are included within property, plant and equipment on the statement of financial position and depreciation is provided on the depreciable amount of these assets on a systematic basis over their estimated useful lives. Depreciation on assets acquired for the purpose of leasing under operating leases is recognised in other leasing expense. Lease income is recognised on a straight line basis over the period of the lease unless another systematic basis is more appropriate. Property, plant and equipment Freehold land and buildings are initially recognised at cost and subsequently are revalued annually to fair value by independent external valuers. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from the open market value at the reporting date. RoU assets recognised as property, plant and equipment are measured at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurement of lease liabilities. All other property, plant and equipment, including freehold and leasehold adaptations, are stated at historical cost less accumulated depreciation. Increases in the carrying amount arising on the revaluation of land and buildings, are recognised in OCI. Decreases that offset previous increases on the same asset are recognised in OCI: all other decreases are charged to the income statement. The Directors consider that residual values of freehold and long leasehold property based on prices prevailing at the time of acquisition or subsequent valuation are such that depreciation is not material. Depreciation is calculated on the straight line method to write down the carrying value of other items of property, plant and equipment to their residual values over their estimated useful lives as follows: • adaptation works on freehold and leasehold property - 15 years, or the remaining period of the lease; • computer and other equipment - maximum of ten years; and • the recognised RoU assets are depreciated on a straight- line basis over the earlier of the end of the useful life of the RoU asset or the end of the lease term. The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset’s fair value less costs to sell or its Value in Use (VIU). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 216 1 Group accounting policies (continued) Gains and losses on the disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining profit before tax. If the asset being disposed of had previously been revalued then any amount in OCI relating to that asset is reclassified directly to retained earnings on disposal rather than the income statement. Investment property Property held for long-term rental yields and capital appreciation is classified as investment property, except where the property is used by the Group for administrative purposes or the supply of services, in which case it is classified as owner occupied property. Investment property comprises freehold and long leasehold land and buildings. It is carried at fair value in the balance sheet based on annual revaluations at open market value as determined by external qualified property surveyors and is not depreciated. Changes in fair values are recorded in the income statement. Rental income from investment properties is recognised as it becomes receivable over the term of the lease. Intangible assets Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful lives, which is normally five years. Costs associated with research activities or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group and which will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development, employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised using the straight line method over their useful lives, which is normally between five and ten years. Other intangible assets Other intangible assets are carried at cost less amortisation and impairment, if any and are amortised on a straight line basis over their useful lives, which range from five years to twenty years. Computer software and other intangible assets are assessed for impairment indicators annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If such indicators exist, the asset’s recoverable amount is estimated. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. The estimated recoverable amount is the higher of the asset’s fair value less costs to sell and its VIU. Goodwill Goodwill represents the excess of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree, over the fair value of the Group’s share of identifiable net assets acquired. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment or more frequently if there is any indication that it may be impaired and carried at cost less accumulated impairment losses. Goodwill is allocated to cash generating units (CGU) for the purpose of impairment testing. An impairment loss arises if the carrying value of the CGU exceeds the recoverable amount. The recoverable amount of a CGU is the higher of its fair value less costs to sell and its VIU, where the VIU is the present value of the future cash flows expected to be derived from the CGU. Client Property In the normal course of business, the Group (through Davy) provides the following services to certain of its clients: • investment of funds at the sole discretion of the Group in securities and the placing of deposits in separately designated accounts with recognised banks and building societies, the income from which accrues for the benefit of these clients, and • custodianship of securities held on behalf of clients. Client property placed with third parties is not recognised on the Group’s balance sheet as the Group does not have any rights to the benefits from this property nor have any control over the property and therefore the property is not considered an asset of the Group. Where the client property is placed on deposit with the Group, these are considered liabilities of the Group and are recognised in customer accounts Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provision is made for the anticipated costs of restructuring, including related redundancy costs, when an obligation exists. An obligation exists when the Group has a detailed formal plan for restructuring a business and has raised valid expectations in those affected by the restructuring by starting to implement the plan or announcing its main features. A levy payable to a Government is provided for on the occurrence of the event identified by the legislation that triggers the obligation to pay the levy. Contingent liabilities are not recognised but are disclosed unless the probability of their occurrence is remote. Employee benefits Pension obligations The Group operates both defined contribution and defined benefit plans. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees’ benefits relating to employee service in the current and prior periods. The asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the reporting date minus the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 217 1 Group accounting policies (continued) The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. Plans in surplus are shown as assets and plans in deficit are shown as liabilities. A surplus is only recognised as an asset to the extent that it is recoverable through a refund from the plan or through reduced contributions in the future. Where a plan amendment, curtailment or settlement occurs and the net defined benefit liability is remeasured to determine past service cost or the gain or loss on settlement, the current service cost and net interest for the remainder of the period are remeasured using the same assumptions. Service cost and net interest on the net defined benefit liability / (asset) are recognised in profit or loss, within operating expenses. Remeasurements of the net defined benefit liability / (asset) that are recognised in OCI include: • actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions; and • the return on plan assets, excluding amounts included in net interest on the net defined benefit liability / (asset). A settlement is a transaction that eliminates all further legal and constructive obligations for part or all of the benefits provided under a defined benefit plan, other than a payment of benefits to, or on behalf of, employees that is set out in the terms of the plan and included in the actuarial assumptions. For defined contribution plans, contributions are recognised as employee benefit expense when they are due. Short-term employee benefits Short-term employee benefits, such as salaries and other benefits, are accounted for on an accruals basis over the period in which the employees’ service is rendered. Termination payments Termination payments are recognised as an expense at the earlier of: • when the Group can no longer withdraw the offer of those benefits; and • when the Group recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. For this purpose, in relation to termination benefits for voluntary redundancies, the Group is considered to be no longer able to withdraw the offer on the earlier of the following dates: • when the employee accepts the offer; and • when a restriction (e.g. a legal, regulatory or contractual requirement) on the Group’s ability to withdraw the offer takes effect. Income taxes Current income tax Income tax payable on profits, using the tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date, is recognised as an expense in the period in which profits arise. Tax provisions are provided on a transaction by transaction basis using either the ‘most likely amount’ method or the ‘expected value’ method as appropriate for the particular uncertainty and by management assessing the relative merits and risks of tax treatments assumed, taking into account statutory, judicial and regulatory guidance and, where appropriate, external advice. A current tax provision is recognised when the Group has a present obligation as a result of a past event and it is probable that there will be a future outflow of funds to a fiscal authority to settle the obligation. Interest on tax liabilities is recognised as interest expense. The Group has determined that the global minimum top-up tax - which it is required to pay under Pillar 2 legislation - is an income tax in the scope of IAS 12. The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the top-up tax and accounts for it as a current tax when it is incurred. Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The tax effects of income tax losses available for carry forward are recognised as DTAs to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised and by reference to the expiry dates (if any) of the relevant unused tax losses or tax credits. DTAs and deferred tax liabilities are not discounted. Deferred income tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the difference will not reverse in the foreseeable future. Deferred tax on items taken to OCI is also recognised in OCI and is subsequently reclassified to the income statement together with the deferred gain or loss. Income tax on items recognised directly in equity is recognised directly in equity, except for the income tax consequences of dividends on a financial instrument classified as equity, which are recognised according to where the previous transactions or events that generated distributable profits were recognised. Uncertain tax positions The Group considers uncertain tax positions together or separately depending on which approach better predicts how the uncertainties will be resolved. Where the Group concludes it is not probable that a tax authority will accept its assessment of an uncertain tax position, it reflects the effect of the uncertainty using either the ‘most likely amount’ method or the ‘expected value’ method, as appropriate for the particular uncertainty. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 218 1 Group accounting policies (continued) Where the Group concludes it is probable that a tax authority will accept its assessment of an uncertain tax position, the taxable profit or loss, the tax bases, unused tax losses, unused tax credits and the tax rates are determined consistently with the tax treatment used or planned to be used in the income tax filing. Share capital and reserves Equity transaction costs Incremental external costs directly attributable to equity transactions, including the issue of new equity shares or options, are shown as a deduction from the component of equity in which the equity transaction is recognised, net of tax. Dividends on ordinary shares Final dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders on the recommendation of the Board of Directors, or approved by the Board of Directors, as appropriate. Interim dividends are recognised in equity in the period in which they are paid. Treasury shares Where the Company or its subsidiaries purchase the Company’s equity share capital, the consideration paid is deducted from total shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity. Any changes in the value of treasury shares held are recognised in equity at the time of the disposal and dividends are not recognised as income or distributions. Capital reserve The capital reserve represents transfers from share capital, retained earnings and other reserves in accordance with relevant legislation. The capital reserve is not distributable. Foreign exchange reserve The FX reserve represents the cumulative gains and losses on the translation of the Group's net investment in its foreign operations since the date of transition to IFRS (1 April 2004). Gains and losses accumulated in this reserve are reclassified to the income statement when the Group loses control, joint control or significant influence over the foreign operation or on disposal or partial disposal of the operation. Revaluation reserve The revaluation reserve represents the cumulative gains and losses on the revaluation of property occupied by Group businesses, included within property, plant and equipment and non-financial assets classified as held for sale. The revaluation reserve is not distributable. Share premium account Where the Company issues shares at a premium, a sum equal to the aggregate amount or value of the premiums on those shares is transferred to the share premium account. Where, pursuant to Section 84 of the Companies Act 2014, there has been a reduction of the Company’s share capital by the cancellation of share premium, the resulting profits available for distribution, as defined by Section 117 of the Companies Act 2014, are reclassified from the share premium account to retained earnings. Cash flow hedge reserve The cash flow hedge reserve represents the cumulative changes in fair value, excluding any ineffectiveness, of cash flow hedging derivatives. These are transferred to the income statement when hedged transactions impact the Group’s profit or loss. Merger reserve In the Company balance sheet, the merger reserve represents the difference between the carrying value of the Company’s initial investment in the Bank arising from the corporate reorganisation in 2017 and the nominal value of the shares issued as part of that reorganisation, less amounts capitalised as share premium. In the Consolidated balance sheet, the merger reserve also includes an adjustment to eliminate the capital stock, share premium, capital reserve and retained earnings of the Bank at the date of corporate reorganisation, which do not carry forward to the balance sheet of the Group. Debt instruments at fair value through other comprehensive income reserve The debt instruments at FVOCI reserve comprises the cumulative net change in the fair value of debt securities measured at FVOCI together with the impact of fair value hedge accounting, less the ECL allowance recognised in profit or loss. Liability credit reserve The liability credit reserve represents the cumulative changes in the fair value of financial liabilities designated as at FVTPL that are attributable to changes in the credit risk of those liabilities, other than those recognised in profit or loss. Collateral The Group enters into master agreements with counterparties, to ensure that if an event of default occurs, all amounts outstanding with those counterparties will be settled on a net basis. The Group obtains collateral in respect of customer liabilities where this is considered appropriate. The collateral normally takes the form of a lien over the customers’ assets and gives the Group a claim on these assets for both existing and future liabilities. The collateral is, in general, not recorded on the Group balance sheet. The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as stock borrowing contracts and derivative contracts, in order to reduce credit risk. Collateral received in the form of securities is not recorded on the balance sheet. Collateral received in the form of cash is recorded on the balance sheet, with a corresponding liability recognised within deposits from banks or deposits from customers. Any interest payable arising is recorded as interest expense. In certain circumstances, the Group pledges collateral in respect of liabilities or borrowings. Collateral pledged in the form of securities or loans and advances continues to be recorded on the balance sheet. Collateral placed in the form of cash is recorded in loans and advances to banks or customers. Any interest receivable arising is recorded as interest income. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 219 1 Group accounting policies (continued) Operating segments The Group’s reportable operating segments have been identified on the basis that the chief operating decision maker uses information based on these segments to make decisions about assessing performance and allocating resources. The analysis of results by operating segment is based on management accounts information. Impact of new accounting standards not yet adopted The following standards will be relevant to the Group but were not effective at 31 December 2023 and have not been applied in preparing these financial statements. There are no other standards that are not yet effective and that would have a material impact on the Group in future reporting periods. The Group’s current view of the impact of these standards is outlined below. Pronouncement: Amendments to IAS 1 ‘Presentation of Financial Statements’ - Classification of liabilities as current or non-current Nature of change The purpose of these amendments is to promote consistency in application and to clarify the requirements on determining whether a liability is current or non-current. The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists. Management expectations about events after the balance sheet date, for example on whether a covenant will be breached, or whether early settlement will take place, are not relevant. The amendments also clarify the situations that are considered to be the settlement of a liability. The amendments were endorsed by the EU on 19 December 2023. Effective date The effective date is for financial periods beginning on or after 1 January 2024, with early application permitted. Impact The amendments are not expected to have a significant impact on the Group. Pronouncement: Amendments to IFRS 16 ‘Leases - Lease liability in a Sale and Leaseback ’ Nature of change The amendments clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments were endorsed by the EU on 20 November 2023. Effective date The effective date is for financial periods beginning on or after 1 January 2024, with early application permitted. Impact The amendments are not expected to have a significant impact on the Group. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 220 2 Critical accounting estimates and judgements In preparing the financial statements, the Group makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in estimating the likelihood of future events, actual results could differ from those estimates, which could affect the future reported amounts of assets and liabilities. The estimates and judgements that have had the most significant effect on the amounts recognised in the Group's financial statements are set out below. Impairment loss allowance on ﬁnancial assets The measurement of impairment loss allowance requires significant judgement and estimation and is dependent on complex impairment models. In arriving at impairment loss allowances, accounting estimates which could change and have a material influence on the quantum of impairment loss allowance and net impairment charge within the next financial year include: • generation of forward looking macroeconomic scenarios and their probability weightings which are used in both the assessment of 'significant increase in credit risk' and in the measurement of impairment loss allowances; and • valuing property collateral (including residential property). Accounting judgements which could change and have a material influence on the quantum of impairment loss allowance and net impairment charge within the next financial year include determining if Group management adjustments may be necessary to impairment model outputs to address impairment model / data limitations or late breaking events. Other key accounting estimates which are not expected to change and materially influence the quantum of impairment loss allowance and net impairment charge within the next financial year, include: • determining the period over which to measure ECL for uncommitted RCFs; and • determining timeframes to realisation and likely net sale proceeds. Other key accounting judgements which are not expected to change and materially influence the quantum of impairment loss allowance and net impairment charge within the next financial year, include: • the Group's criteria for assessing if there has been a significant increase in credit risk since initial recognition such that a loss allowance for lifetime rather than 12 month ECL is required; • the selection of appropriate methodologies and model factors for internal risk rating and impairment models; • the approximation made at transition to IFRS 9 of the residual lifetime PD expectations for most exposures originated prior to adoption of IFRS 9; and • selection of the most relevant macroeconomic variables for particular portfolios and determining associations between those variables and model components such as PD and LGD. The Group's approach to measurement of impairment loss allowances and associated methodologies is set out in the credit risk methodologies section on pages 159 to 164. Changes in estimates Forward Looking Information FLI refers to probability weighted future macroeconomic scenarios approved semi-annually by the Executive Risk Committee and used in the assessment of 'significant increase in credit risk' and in the measurement of impairment loss allowances under IFRS 9. The Group has used four RoI FLI scenarios and four UK FLI scenarios at 31 December 2023, comprising a central scenario, an upside scenario, and two downside scenarios, all extending over a five year forecast period, with reversion to long run averages for property for years beyond the forecast period. The Group keeps under review the number of FLI scenarios and the need to produce projections for other jurisdictions. The central FLI scenario for year ending 31 December 2023 is based on internal and external information and management judgement and follows the same process as used in prior years. The alternative FLI scenarios for year ending 31 December 2023, comprising one upside and two downside scenarios, are narrative driven and have been constructed incorporating all available reasonable and supportable information. This follows the same process as used in prior years. The FLI methodology framework was leveraged to assign an initial set of probability weightings to the narrative driven scenarios. The FLI methodology is a simulation tool that uses recent actual observed values and historical data to produce a number of possible paths for the relevant economic variables based on their historical relationships and volatilities. The FLI model is used for scenario generation for a defined probability weighting and for assessing probability weights for a given scenario. The narrative-driven scenarios were assessed relative to the simulated distribution. The probability weightings attached to the scenarios are a function of their relative position on the distribution, with a lower probability weighting attached to the scenarios that were assessed to be more distant from the centre of the distribution. The final set of probability weightings used in ECL estimates reflected the application of management judgement to the initial probability weightings, with increased weight assigned to the central and downside 1 scenarios, with an offsetting decrease in the upside scenario. External forward-looking information (e.g. external forecasts and equity market indicators) informed the application of this management judgement, and reflected economic uncertainty at 31 December 2023 associated with a combination of factors including the potential impact of geopolitical risk and elevated inflation and interest rates in the Group’s key economies. The estimated ECL impact of this judgement was a c.€31 million (2022: c.€37 million) increase in reported impairment loss allowance. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 221 2 Critical accounting estimates and judgements (continued) The table below shows the mean average forecast values for the key macroeconomic variables under each scenario for the forecast period 2024 to 2028, together with the scenario weightings for both the RoI and the UK. Republic of Ireland United Kingdom Central scenario Upside scenario Downside Central scenario Upside scenario Downside 2023 Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario probability weighting 45% 20% 25% 10% 45% 20% 25% 10% Gross Domestic Product (GDP) - annual growth rate 3.6% 4.2% 2.8% 1.8% 1.3% 1.8% 0.5% (0.3%) Gross National Product (GNP) - annual growth rate 3.8% 4.2% 2.8% 1.7% n/a n/a n/a n/a Unemployment - average yearly rate 4.4% 3.8% 6.2% 8.3% 4.6% 3.8% 6.2% 7.9% Residential property price growth - year end figures 1.0% 2.4% (2.8%) (4.8%) 0.6% 1.8% (2.6%) (4.6%) Commercial property price growth - year end figures (1.2%) 1.6% (4.3%) (6.4%) (0.8%) 1.4% (4.1%) (6.0%) Republic of Ireland United Kingdom Central scenario Upside scenario Downside Central scenario Upside scenario Downside 2022 Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario probability weighting 45% 15% 25% 15% 45% 15% 25% 15% Gross Domestic Product (GDP) - annual growth rate 3.5% 3.9% 2.8% 1.9% 1.2% 1.6% 0.4% (0.3%) Gross National Product (GNP) - annual growth rate 3.1% 3.6% 2.5% 1.5% n/a n/a n/a n/a Unemployment - average yearly rate 4.8% 4.4% 6.4% 8.5% 4.4% 3.9% 6.1% 7.8% Residential property price growth - year end figures 1.2% 1.6% (3.0%) (5.6%) (1.2%) – (4.4%) (6.6%) Commercial property price growth - year end figures (0.6%) 0.8% (3.1%) (5.7%) (1.3%) – (3.8%) (6.5%) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 222 2 Critical accounting estimates and judgements (continued) The tables below set out the forecast values for 2024 and 2025 and the average forecast values for the period 2026 to 2028 for the key macroeconomic variables which underpin the above mean average values. Republic of Ireland United Kingdom 2024 2025 2026-2028 2024 2025 2026-2028 Central scenario - 45% weighting Gross Domestic Product - (GDP) - annual growth rate 3.3% 4.0% 3.6% 0.5% 1.1% 1.6% Gross National Product - (GNP) - annual growth rate 4.2% 4.0% 3.5% n/a n/a n/a Unemployment - average yearly rate 4.2% 4.3% 4.5% 4.7% 4.7% 4.6% Residential property price growth - year end figures – – 1.7% (4.0%) – 2.3% Commercial property price growth - year end figures (11.0%) (2.5%) 2.5% (9.5%) (2.0%) 2.5% Upside scenario - 20% weighting Gross Domestic Product - (GDP) - annual growth rate 4.4% 5.0% 3.9% 1.4% 1.8% 2.0% Gross National Product - (GNP) - annual growth rate 5.0% 4.7% 3.7% n/a n/a n/a Unemployment - average yearly rate 3.9% 3.8% 3.8% 4.1% 3.9% 3.7% Residential property price growth - year end figures 1.0% 2.0% 3.0% (1.0%) 2.0% 2.7% Commercial property price growth - year end figures (3.0%) 2.0% 3.0% (2.0%) 1.0% 2.7% Downside scenario 1 - 25% weighting Gross Domestic Product - (GDP) - annual growth rate 2.1% 2.6% 3.1% (0.7%) (0.3%) 1.2% Gross National Product - (GNP) - annual growth rate 2.7% 2.3% 2.9% n/a n/a n/a Unemployment - average yearly rate 5.1% 6.3% 6.6% 5.2% 6.1% 6.5% Residential property price growth - year end figures (12.0%) (4.0%) 0.7% (13.0%) (4.0%) 1.3% Commercial property price growth - year end figures (16.0%) (6.5%) 0.3% (15.5%) (6.5%) 0.5% Downside scenario 2 - 10% weighting Gross Domestic Product - (GDP) - annual growth rate (0.2%) 1.3% 2.6% (2.2%) (1.9%) 0.9% Gross National Product - (GNP) - annual growth rate 0.4% 1.0% 2.4% n/a n/a n/a Unemployment - average yearly rate 6.3% 8.1% 9.0% 6.4% 8.0% 8.4% Residential property price growth - year end figures (16.0%) (6.0%) (0.7%) (17.0%) (6.0%) – Commercial property price growth - year end figures (20.0%) (8.5%) (1.2%) (19.0%) (8.5%) (0.8%) The central, upside and downside scenarios are described below for both the RoI and the UK: Central scenario - RoI GDP growth has slowed sharply in 2023, mainly reflecting a decline in output growth in the multinational-dominated exporting sector from the rapid rates recorded over recent years. The domestic economy is faring better, though the post- Covid 19 bounce in activity has inevitably given way to more moderate growth, while capacity constraints, still relatively high albeit declining inflation, tighter monetary policy and a weak external environment are also weighing on economic activity. The Central Scenario envisages a pick-up in GDP growth in 2024-2025 supported by rising real incomes as inflation falls further, as well as some strengthening in investment and exports, while unemployment is expected to remain relatively low over the forecast period. The ECB is expected to ease monetary policy slightly as inflation declines. Central scenario - UK Following the post-Covid 19 rebound, UK GDP growth has slowed, with output up only modestly over the past year or so. Activity has been negatively impacted by elevated inflation and the tightening of monetary policy by the Bank of England. Unemployment has risen somewhat over recent quarters, and while inflation remains high it has reduced in line with an easing in energy prices. The Central Scenario envisages a gradual pickup in the rate of growth over the next few years. Consumer demand should recover and while investment and exports face headwinds, they should gradually pick up. Unemployment is expected to pick up slightly, though it will remain fairly low. Inflation is expected to continue to fall back towards target and this will allow the Bank of England to ease monetary policy slightly. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 223 2 Critical accounting estimates and judgements (continued) Upside scenario In the Upside Scenario, geopolitical tensions ease, leading to lower global energy prices. This contributes to a more pronounced fall in inflation in Ireland and the UK, boosting household incomes, confidence and spending. A similar effect is seen in the Ireland and the UK’s main trading partners, with global growth picking up. Receding uncertainty and initially lower interest rates support business investment, while the improvement in global demand contributes to a pickup in exports. Stronger growth momentum in both economies sees unemployment edge down in 2024 and 2025 and remain low in subsequent years. This in turn eventually leads to a pick-up in inflation pressures and a tightening of monetary policy by the ECB and Bank of England. Downside scenario 1 In Downside Scenario 1, heightened geopolitical tensions result in rising global energy prices, increased uncertainty and a further slowdown in world growth. Higher inflation and uncertainty weighs on confidence in Ireland and the UK, which together with tighter monetary and financial conditions (as the ECB and Bank of England initially keep interest rates higher for longer than previously anticipated, and strains in financial markets emerge) depresses consumer and business spending, while weaker global demand is a headwind for exporting sectors. GDP growth slows in 2024-2025 in Ireland and turns negative in the UK. Unemployment increases and stays relatively high out the forecast horizon in both economies. Eventually, as the inflationary shock fades, monetary policy is eased by the ECB and Bank of England and growth resumes. Downside scenario 2 In Downside Scenario 2, escalating and more severe geopolitical tensions leads to a sharp rise in global energy prices. This in turn triggers major disruption in financial markets and a sharp deterioration in global growth, though central banks initially keep interest rates elevated in response to higher inflation. Furthermore, in Ireland the multinational exporting sectors slow and this leads to a decline in corporate tax revenue, while in the UK the impact of the increase in the corporate tax rate and Brexit after-effects weigh on business investment. Amid heightened uncertainty, a collapse in consumer and business confidence, tighter monetary, financial and credit conditions, and significantly weaker global demand, the Irish and UK economies go into recession in 2024 (Ireland exits recession in late 2024, the UK in 2025), while unemployment moves up sharply in both economies and remains high over the entire forecast period. In this weak economic environment inflation eventually falls back quite sharply and monetary policy is eased significantly by the ECB and Bank of England. Property price growth, all scenarios In the central scenario, after stalling in 2023, residential prices in RoI remain flat with growth of 0% and negative growth remains in the UK at -4% in 2024. RoI continues its 0% growth in 2025, as UK prices recover from negative growth to also sit at 0%. From 2026 on we see a return to modest growth. Between 2026 and 2028 RoI growth per annum is 1% - 2% and for the UK 2% - 3%. The adjustment in the commercial property market that is underway is forecast to continue in 2023 and 2024, with conditions improving somewhat after that. In the upside scenario after stalled price growth in 2023 residential prices start to pick up in 2024. RoI sees growth of 1% and in the UK the negative growth improves from -5% to -1%. In both 2025 and 2026 the two territories see growth of 2% per annum. After that RoI prices grow between 3% - 4% per annum and UK prices grow 3% per annum. The adjustment in the commercial property market that is underway is forecast to continue into 2024, with conditions improving earlier than forecast in the central scenario. In the Downside 1 scenario residential prices are expected to be negative for the next few years before eventually recovering. RoI prices fall 12% in 2024 whereas for UK they fall by 13%. Reduced negativity occurs in 2025 with prices falling 4% in both economies before a further improvement in 2026 with negative growth of -1% in RoI and remaining flat in UK. By 2027 positive growth has returned with prices growing 1% in both RoI and UK and in 2028 both territories are in positive growth (2% and 3% respectively). Commercial prices are expected to stay in negative growth in both economies until 2027 when low digit growth returns. In the Downside 2 scenario negative price growth is deeper than in Downside 1, and the recovery is slower. For residential, negative growth peaks in 2024 (-16% in RoI and -17% in the UK), and while there is some recovery in 2025 this is less pronounced than in Downside 1 (-6% in both territories). Negative growth persists in 2026 (-3% in RoI and -2% in the UK) before finally ending in 2027 with no growth in either territory. By 2028 positive growth returns with growth of 1% in RoI and 2% in the UK. Commercial prices are expected to stay negative in both economies until 2028 with growth flat in RoI in 2028 and 0.5% in UK. The quantum of impairment loss allowance is impacted by the application of four probability weighted future macroeconomic scenarios. The following table indicates the approximate extent to which the impairment loss allowance at 31 December 2023, excluding post-model Group management adjustments (PMAs) to impairment loss allowances, was increased by virtue of applying multiple scenarios rather than only a central scenario. This analysis excludes PMAs, as such adjustments to impairment loss allowance are applied using management judgement outside of the macro-economic conditioned ECL model framework (refer to the Management Judgement in Impairment Measurement section below). The scenarios outlined in the following tables are based on the FLI weightings outlined on the previous page. Comparative figures at 31 December 2022 are also outlined below and in subsequent tables in this section. Changes in the figures at 31 December 2023 compared to the previous reporting date reflect a number of interrelated dynamics including changes in forward-looking scenarios and associated probability weights; impairment model methodology updates in the year; and the composition of the underlying portfolios at the respective reporting dates. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 224 2 Critical accounting estimates and judgements (continued) 2023 Impact of applying multiple scenarios rather than only central scenario Additional impairment loss allowance Stage 1 Stage 2 Stage 3 Total Impact €m Impact % Impact €m Impact % Impact €m Impact % Impact €m Impact % Residential mortgages 4 14% 20 70% 11 8% 35 18% Retail Ireland 2 11% 12 85% 6 6% 20 16% Retail UK 2 21% 8 55% 5 10% 15 21% Non-property SME and corporate 5 8% 28 22% 2 1% 35 7% Property and construction 3 24% 25 30% 2 3% 30 17% Consumer 3 6% 4 7% – – 7 4% Total 15 10% 77 26% 15 3% 107 10% 2022 Impact of applying multiple scenarios rather than only central scenario Additional impairment loss allowance Stage 1 Stage 2 Stage 3 Total Impact €m Impact % Impact €m Impact % Impact €m Impact % Impact €m Impact % Residential mortgages 3 21% 17 81% 6 6% 26 21% Retail Ireland 1 14% 11 94% 3 5% 15 18% Retail UK 2 28% 6 65% 3 12% 11 30% Non-property SME and corporate 6 9% 37 31% 8 2% 51 7% Property and construction 1 13% 19 58% 4 3% 24 16% Consumer 5 13% 6 15% – – 11 7% Total 15 12% 79 38% 18 2% 112 10% The following table indicates the approximate extent to which impairment loss allowance, excluding Group management adjustments, would be higher or lower than reported were a 100% weighting applied to the central, upside and downside future macroeconomic scenarios respectively: 2023 Impact of applying only a central, upside or downside scenarios rather than multiple probability weighted scenarios Multiple scenarios Central scenario Upside scenario Downside scenario 1 Downside scenario 2 Impairment loss allowance €m Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Residential mortgages 233 (35) (18%) (50) (22%) 158 68% 289 124% Retail Ireland 145 (20) (16%) (28) (19%) 84 58% 159 110% Retail UK 88 (15) (21%) (22) (25%) 74 86% 130 149% Non-property SME and corporate 535 (35) (7%) (84) (16%) 80 15% 290 54% Property and construction 200 (30) (17%) (63) (31%) 58 29% 191 95% Consumer 169 (7) (4%) (22) (13%) 15 9% 51 30% Total 1,137 (107) (10%) (219) (19%) 311 27% 821 72% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 225 2 Critical accounting estimates and judgements (continued) 2022 Impact of applying only a central, upside or downside scenarios rather than multiple probability weighted scenarios Multiple scenarios Central scenario Upside scenario Downside scenario 1 Downside scenario 2 Impairment loss allowance €m Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Impairment loss allowance €m Impact % Residential mortgages 146 (26) (21%) (32) (22%) 83 57% 170 116% Retail Ireland 100 (15) (18%) (17) (17%) 34 34% 72 72% Retail UK 46 (11) (30%) (15) (33%) 49 107% 98 213% Non-property SME and corporate 747 (51) (7%) (84) (11%) 65 9% 270 36% Property and construction 171 (24) (16%) (36) (21%) 17 10% 115 67% Consumer 171 (11) (7%) (15) (9%) 8 5% 38 22% Total 1,235 (112) (10%) (167) (14%) 173 14% 593 48% The following table indicates the approximate extent to which impairment loss allowances for the residential mortgage portfolios, excluding post-model Group management adjustments, would be higher or lower than the application of a central scenario if there was an immediate change in residential property prices as at the reporting date. Although such changes would not be observed in isolation, as economic indicators tend to be correlated in a coherent scenario, this gives insight into the sensitivity of the Group's impairment loss allowance to a once-off change in residential property values. 2023 Impact of an immediate change in residential property prices compared to central scenario impairment loss allowances Impairment loss allowance - central scenario €m Residential property price reduction of 10% Residential property price reduction of 5% Residential property price increase of 5% Residential property price increase of 10% Impact €m Impact % Impact €m Impact % Impact €m Impact % Impact €m Impact % Residential mortgages 198 39 20% 18 9% (13) (7%) (26) (13%) Retail Ireland 126 19 15% 8 6% (7) (6%) (13) (11%) Retail UK 72 20 28% 10 14% (6) (9%) (13) (18%) 2022 Impact of an immediate change in residential property prices compared to central scenario impairment loss allowances Impairment loss allowance - central scenario €m Residential property price reduction of 10% Residential property price reduction of 5% Residential property price increase of 5% Residential property price increase of 10% Impact €m Impact % Impact €m Impact % Impact €m Impact % Impact €m Impact % Residential mortgages 120 17 14% 8 7% (7) (6%) (13) (11%) Retail Ireland 85 8 9% 4 5% (3) (4%) (6) (7%) Retail UK 35 9 26% 4 11% (4) (11%) (7) (20%) The sensitivity of impairment loss allowances to stage allocation is such that, based on the respective impairment cover ratios, a transfer of 1% of Stage 1 balances at 31 December 2023 to Stage 2 would increase the Group’s impairment loss allowance by c.€15 million excluding Group management adjustments. Management judgement in impairment measurement Management judgement has been incorporated into the Group’s impairment measurement process for the year end. Management judgement can be described with reference to: • credit risk assessment for significant increase in credit risk; • management judgement in impairment model parameters; and • PMAs to impairment loss allowance and staging classiﬁcation. Credit risk assessment for significant increase in credit risk As outlined on page 162 of the Risk Management Report, the Group considers other reasonable and supportable information that would not otherwise be taken into account that would indicate that a significant increase in credit risk had occurred. In this regard, for the year ending 31 December 2023, the Group has assessed the impact of elevated inflation and interest rates on asset quality. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 226 2 Critical accounting estimates and judgements (continued) Credit risk assessments on the impact of elevated inflation rates and interest rates on debt affordability were implemented across the residential mortgage and consumer portfolios. Where appropriate, outputs have been utilised to identify significant increases in credit risk and the classification of assets in stage 2. The credit risk assessments, which leveraged qualitative information not already captured in impairment models, resulted in a management decision to classify €2.8 billion of stage 1 assets as stage 2 at the reporting date, with an associated €33 million increase in impairment loss allowance. Management judgement in impairment model parameters As outlined on page 161 of the Risk Management Report, the ECL model framework was updated in the year to reflect an enhanced approach to PD components for certain residential mortgages, Corporate and Property impairment models. The PD model calibration processes for certain Corporate and Property impairment models were enhanced to alleviate excessive sensitivity to a small change in the number of defaults and changes in asset quality. The combined impact of these changes resulted in c.€0.3 billion of assets migrating to stage 2 from stage 1 and a c.€32 million increase in impairment loss allowance. Following these updates the management judgement utilised in the PD model calibration process for these portfolios at 30 June 2023 is no longer considered to be required. The PD component of the model utilised for the Leveraged Acquisition Finance segment of the Corporate portfolio was updated in 2023 to address a deterioration in the performance of the macro-economic relationship in the PD model. The update resulted in c.€0.3 billion of assets migrating to stage 1 from stage 2 and a c.€23 million decrease in impairment loss allowance. The calibration of the Lifetime PD at initial recognition for Retail Ireland residential mortgage impairment models was refined in 2023. This change resulted in c.€0.8 billion of assets migrating to stage 1 from stage 2 and a decrease in impairment loss allowance of c.€7 million. The ECL model framework was also updated in the year to reflect an enhanced approach to Loss Given Default (LGD) components of the impairment models for the residential mortgages, Corporate Banking and Business Banking portfolios. The changes to the LGD component of the Corporate Banking and Business Banking impairment models, results in an increase in impairment loss allowance of c.€13 million. The ECL model framework was also updated with model factor updates to reflect recent observed information. This included the application of updated portfolio disposal data within the Retail Ireland residential mortgages LGD model, resulting in an increase in impairment loss allowance of c.€20 million. In addition an enhanced approach to estimating cure rates within the LGD component of the impairment models for Retail Ireland and UK residential mortgages was implemented. The changes to this aspect of the LGD component of Retail Ireland and UK residential mortgages impairment models results in an increase in impairment loss allowance of c.€22 million. A new LGD model was developed for a segment of the micro- SME portfolio resulting in a c.€10 million decrease in impairment loss allowance. Post-model Group management adjustments (PMAs) To ensure that the measurement of impairment reflects reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions, the need for a PMA to the outputs of the Group’s staging and impairment measurement methodologies is considered at each reporting date in arriving at the final impairment loss allowance. Such a need may arise, for example, due to a model / data limitation or a late breaking event. At 31 December 2023, the Group’s stock of impairment loss allowance of €1.2 billion (2022: €1.3 billion) includes a €85 million PMA (2022: €60 million). Details of the components of the PMAs, as well as the rationale for the removal and / or utilisation of previous management adjustments, are outlined on the following page with a table providing an overview of Group PMAs. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 227 2 Critical accounting estimates and judgements (continued) Impairment loss allowance- before PMAs €m Post - model Group management adjustments (PMAs) Total Impairment Loss Allowance €m Investment Property €m NPE Disposal €m Retail Ireland Residential Mortgage LGD €m KBCI potential affordability risk assessment €m UK PCP exposures1 €m Total PMAs €m 2023 Residential mortgages 233 – – 9 4 – 13 246 Retail Ireland 145 – – 9 4 – 13 158 Retail UK 88 – – – – – – 88 Non-property SME and corporate 535 – 14 – – – 14 549 Property and construction 200 48 1 – – – 49 249 Consumer1 169 – 9 – – – 9 178 Total loans and advances to customers 1,137 48 24 9 4 – 85 1,222 Other financial instruments 69 – – – – – – 69 Total Financial Assets 1,206 48 24 9 4 – 85 1,291 1 The table above includes a €0.4 million PMA for UK PCP exposures within the Consumer portfolio. Impairment loss allowance- before PMAs €m Post - model Group management adjustment (PMAs) Total Impairment Loss Allowance €m Investment Property €m NPE Disposal €m Retail Ireland Residential Mortgage LGD €m KBC potential affordability risk assessment €m UK PCP exposures €m Total PMAs €m 2022 Residential mortgages 146 – – – – – – 146 Retail Ireland 100 – – – – – – 100 Retail UK 46 – – – – – – 46 Non-property SME and corporate 747 – 36 – – – 36 783 Property and construction 171 – 24 – – – 24 195 Consumer 171 – – – – – – 171 Total loans and advances to customers 1,235 – 60 – – – 60 1,295 Other financial instruments 63 – – – – – – 63 Total Financial Assets 1,298 – 60 – – – 60 1,358 Group management adjustment for Investment Property As outlined on page 164 of the Risk Management Report, the impact of elevated inflation and interest rates on property loans have been separately considered within individual credit assessments in relationship managed commercial portfolios with the Group taking additional action by implementing PD downgrades on all US Commercial Real Estate Office property exposures. Notwithstanding the downgrade of US Commercial Real Estate Office exposures, a PMA to the Group’s impairment loss allowance of €48 million has been recognised at 31 December 2023 to reflect latent risk within certain cohorts of the wider Investment Property portfolio, including prevailing interest rates. The PMA also reflects the estimated impact of planned model enhancements to Investment Property impairment models in 2024 / 2025. The PMA has been quantified using scenario analysis to reflect the potential for latent risk in the Investment Property sector and with consideration to potential future model changes to Investment Property impairment models. All of this post model adjustment is recognised in the Property and the construction portfolio at 31 December 2023 and is allocated to stage 1 (€7 million) and stage 2 (€41 million) assets. Group management adjustment for NPE The impairment loss allowance at 31 December 2023 includes a €24 million post-model management adjustment to reflect the potential for the Group to utilise portfolio sales and / or securitisations in its resolution strategies for NPEs in the RoI SME, RoI consumer, and UK consumer portfolios. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 228 2 Critical accounting estimates and judgements (continued) The Group has identified cohorts of loans with certain characteristics within these portfolios that will likely form part of future portfolio sales and/ or securitisations. The quantum of the post-model adjustment was calculated with reference to independent external benchmarking, internal impairment cover for these cohorts and an assessment of the likelihood of the completion of future asset sales / securitisations. The requirement for PMAs reflects the fact that individually assessed impairment loss allowances for larger RoI SME assets are determined on a case-specific assessment and do not take account of discounts that may apply for a portfolio sale / securitisation. Similarly modelled LGD parameters for consumer and micro-SME portfolios are calibrated based on historical resolution strategies, which were more heavily reliant on case-by-case resolution (e.g. forbearance arrangements, voluntary sales or legal recovery processes). Almost all of the post-model adjustment is applied to Stage 3 assets. €14 million is recognised in the RoI SME portfolio, €9 million is related to the consumer portfolio (primarily RoI) and €1 million is related to the property and construction portfolio. The Group completed the disposal of €0.3 billion of NPEs in the second half of 2023. Accordingly the PMA of €60 million recognised at 31 December 2022 (reduced to €35 million at 30 June 2023) associated with this transaction was utilised in full and is no longer required. Group management adjustment for Loss Given Default in Retail Ireland Residential Mortgage portfolio A €9 million PMA has been recognised to reflect the estimated impact of enhancements to the Retail Ireland residential mortgage impairment models planned in 2024. Accordingly, the Group considers that it is appropriate to recognise the estimated impact of these enhancements at 31 December 2023. The adjustment is allocated to the Retail Ireland residential mortgage portfolio. The requirement for this adjustment will expire upon completion of impairment model updates in 2024. Group management adjustment for potential affordability risk assessment on acquired KBCI exposures As outlined on page 164 of the Risk Management Report credit risk assessments in relation to the impact of elevated inflation and interest rates were implemented across the residential mortgage and consumer portfolios with outputs utilised to identify significant increases in credit risk and classify stage 1 assets as stage 2. The KBCI mortgage portfolio acquired by the Group in 2023 has been included in the credit risk assessment at 31 December 2023. Due to lack of historic data on KBCI acquired RoI Mortgage exposures, exposure level identification of cases to transfer to stage 2 has not been possible. This limitation necessitates that the impact of affordability risk on this acquired cohort is quantified at a portfolio level and applied via a PMA. Accordingly, the Group considers that it is appropriate to recognise a €4 million PMA which will be applied to stage 1 assets in the Retail Ireland residential mortgage portfolio. The requirement for this adjustment will be assessed with reference to prevailing economic conditions and assessment of affordability risk in 2024. Taxation The current taxation charge of €118 million (note 16) accounts for amounts due to fiscal authorities in the various territories in which the Group operates and includes estimates, based on a judgement of the application of law and practice in certain cases, to determine the quantification of any liabilities arising. At 31 December 2023, the net DTA was €747 million (2022 restated for IFRS 17: €951 million), of which €845 million (2022: €1,026 million) related to trading losses. The closing DTA includes €783 million related to Irish trading losses, €58 million to UK trading losses, and €4 million to US trading losses. A significant judgement relates to the Group’s assessment of the recoverability of the portion of the DTA relating to trading losses. The recognition of a DTA relies on management’s estimate of the probability and sufficiency of future taxable profits, and the future reversals of existing taxable temporary differences against which the losses can be utilised. Under current UK and Irish legislation, there is no time limit on the utilisation of these losses. RoI deferred tax asset Judgement The Group’s judgement takes into consideration the impact of both positive and negative evidence in assessing the recoverability of the deferred tax asset. Positive factors which have been considered include: • as evidenced by the profitability of the current year, and with the exception of 2020 and the years of the financial crisis, the Group has a sustained history of Irish operating profits and a large market share and it is considered likely that the Group’s Irish activities will be profitable into the future; • the absence of any expiry dates for Irish and UK tax losses; and • external economic forecasts for Ireland and the UK which indicate continued economic growth and employment levels. The Group also considered the following in assessing the financial assumptions and projections: • the absolute level of deferred tax assets compared to the Group’s equity; • the quantum of profits required to be earned and the period over which it is projected that the tax losses will be utilised; • the challenges of projecting, taking account of the level of competition and the evolving interest rate environment; and • accelerated transformation of banking business models. Based on the Group's financial projections, the DTA in respect of tax losses is estimated to be recovered in full by the end of 2028 (2022: 2028). Based on the Group’s proven earnings history, its strong position within the Irish financial services market and its strategic priorities to deliver sustained future Irish profits, the Directors believe that the Group will continue to be profitable but acknowledge the external challenges facing the banking industry, in particular, the traditional, full service banks and the inherent uncertainties of financial projections. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 229 2 Critical accounting estimates and judgements (continued) There is a risk that the final taxation outcome could be different to the amounts currently recorded. If future profits or subsequent forecasts differ from current forecasts, an adjustment may be required to the DTA. UK deferred tax assets Judgement UK legislation restricts the proportion of a bank’s annual taxable profit that can be offset by carried forward losses to 25%. This restriction significantly lengthens the period over which the Group could use its UK trading losses and has been considered in the context of the measurement and recognition of the deferred tax assets at 31 December 2023. UK Branch Judgement Notwithstanding the absence of any expiry date for trading losses in the UK, the Group continues to conclude that, for the purpose of valuing its DTA, its brought forward trading losses within the Bank’s UK branch (the ‘UK branch’) will be limited by reference to a ten year period of projected UK branch profits at the prevailing UK tax rates. This ten year timescale is the period over which the Group believes it can conclude that it is probable that future taxable profits will be available in the UK branch. On this basis, the DTA of the Bank’s UK branch is currently €nil (2022: €nil). However, any remaining unutilised carried forward trading losses of the UK branch have been recognised for DTA purposes at the Irish tax rate, on the basis that it is expected that these will be utilised against future Bank profits in Ireland as permitted by current tax legislation. BoI (UK) plc Judgement The Directors believe that BoI (UK) plc will be profitable for the foreseeable future but acknowledge external challenges facing the UK banking industry and wider economy. In particular, during recent years, the economic environment in which the Bank operates became more uncertain with changing customer product and service expectations, accelerated transformation of the banking business models and increased volatility in interest rate projections. The DTA in respect of tax losses of BoI (UK) plc is estimated to be recovered in full by the end of 2030 (2022: 2032). There is a risk that the final taxation outcome could be different to the amounts currently recorded. If future profits or subsequent forecasts differ from current forecasts, a further adjustment may be required to the DTA. Sources of estimation uncertainty To the extent that the recognition of a DTA is dependent on sufficient future profitability, a degree of estimation and the use of assumptions are required to support the conclusion that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. The Group’s profitability projections are based on its strategic priorities where the focus will be to increase overall returns, improve cost efficiencies and grow sustainable profits. The projections also reflect the external challenges facing the banking industry. The Group's assessment of deferred tax recoverability is based on its financial projections covering its five year initial planning period. If the projections were decreased by two percentage points or increased by one percentage point, the Group estimates that this would have no impact on the DTA recovery periods. Retirement benefit obligations The Group sponsors a number of defined benefit pension schemes. In determining the actual pension cost, the actuarial values of the liabilities of the schemes are calculated by external actuaries. This involves modelling their future development and requires management to make assumptions as to discount rates, price inflation, salary and pensions increases, member mortality and other demographic assumptions. Sources of estimation uncertainty There are acceptable ranges in which these estimates can validly fall. The impact on the results for the period and financial position could be materially different if alternative assumptions were used. A quantitative analysis of the sensitivity of the defined benefit pension liability to changes in the key assumptions is set out in note 41. IFRS 17 'Insurance Contracts' The Group has adopted IFRS 17 at 1 January 2023. Accounting policies and key judgements relating to insurance contracts issued and reinsurance contracts held have been amended to comply with the requirements of the new standard. See note 1 and note 18 for further information. Life assurance operations The Group accounts for its insurance and reinsurance contracts in accordance with IFRS 17. Under IFRS 17, the expected future cash flows used to measure insurance contracts are estimated using best estimate and market consistent assumptions. The expected future profits are captured in the CSM and are then released over time in line with the provision of insurance contract services. Judgement Management have made judgements in applying IFRS 17 which have a significant effect on the amounts recognised in the financial statements. These key judgements are: • as IFRS 17 does not prescribe an approach to calculation of risk adjustment for non-financial risk, the Group has applied judgement to determine the most appropriate approach to the calculation of this key component of insurance contract measurement. Similarly, judgement has been applied to determine the confidence level to apply to this calculation; • judgement has been applied to the construction of an appropriate IFRS 17 discount rate for use in discounting insurance contracts. Furthermore, IFRS 17 does not prescribe an approach to the determination of an appropriate illiquidity premium and management have made judgements in calculating this premium; • determination of coverage units for each contract type, which influence the recognition of revenue for insurance contracts, is not prescribed by IFRS 17. Management have made judgements to determine a suitable approach to deriving coverage units; and • judgements were made during the assessment of directly attributable expenses for inclusion in estimates of future cash flows used in measuring insurance contracts. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 230 2 Critical accounting estimates and judgements (continued) Sources of estimation uncertainty The calculation of insurance contract liabilities relies on the estimation of future cash flows which depend on experience in a number of areas such as investment gains and losses, lapse rates, mortality and investment expenses. Also involved in the calculation of insurance contract liabilities are projections determined by making assumptions about future experience, having regard to both actual experience and projected long- term economic trends. Changes to these assumptions may cause the present value of future cash flows to differ from those modelled at the reporting date and could significantly affect the value attributed to the in force business. In addition, the extent to which actual experience is different from expectations will be recognised in the income statement for the period. A quantitative analysis of the sensitivity of insurance related liabilities and assets to changes in the key assumptions is set out in note 18. Impairment review of goodwill in relation to Davy acquisition On 1 June 2022, following receipt of all regulatory approvals, the Group acquired 100% of the voting equity interests of Amber Note Unlimited Company and its subsidiaries including J&E Davy Holdings (‘Davy’) and goodwill of €273 million was recognised. Goodwill is allocated to cash generating units (CGU) at a level which represents the smallest identifiable group of assets that generate largely independent cash flows. The Group has determined that Davy is the appropriate CGU and this was assessed for impairment at 31 December 2023. Goodwill is reviewed annually for impairment or more frequently if events or circumstances indicate that impairment may have occurred, by comparing the carrying value of goodwill to its recoverable amount. An impairment charge arises if the carrying value exceeds the recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its Value in Use (‘VIU’), where the VIU is the present value of the future cash flows expected to be derived from the asset. As it is not possible to estimate the recoverable amount of the goodwill recognised, the recoverable amount of the Davy CGU has been determined. The recoverable amount is based on VIU. The VIU of the Davy CGU was determined to be €64 million higher than the carrying amount. As a result, no impairment of the assets in the Davy CGU was recognised at 31 December 2023. Judgement Impairment testing inherently involves a number of judgemental areas: the preparation of cash flow forecasts for periods that are beyond the normal requirements of management reporting; the assessment of the discount rate and growth rate appropriate to the business. Sources of estimation uncertainty Cash flow forecasts Cash flow forecasts are based on internal management information for a period of up to five years, after which a long- term growth rate appropriate for the business is applied. The initial five years’ cash flows are consistent with approved plans for each business prepared under the Group’s ICAAP. Underpinning the ICAAP, the Group prepares detailed financial projections, with the base case projections prepared using consensus macroeconomic forecasts together with Group- specific assumptions. Growth rates Growth rates beyond five years are determined by reference to local economic growth rates. The assumed long term growth rate for the purpose of the impairment assessment is 2%. Discount rate The discount rate applied is the post-tax weighted average cost of capital for the Group which is 10.99% at 31 December 2023. A reasonably possible change in the above assumptions could result in the carrying amount of the Davy CGU exceeding its recoverable amount. The amount by which each assumption must change in order for the recoverable amount to equal the carrying amount is as follows: Key assumption Change in assumption Increase / (decrease) Cash flow projections (Year 5) (€8.3m) Growth rate (1.87%) Weighted average cost of capital (WACC) 1.34% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 231 3 Operating segments The Group has five reportable operating segments which reflect the internal financial and management reporting structure and are organised as follows: Retail Ireland Retail Ireland serves its customers delivering day-to-day services, products, propositions and a financial wellbeing programme tailored to meet customers’ individual needs. Customers use their preferred channels to request and fulfil their banking requirements. These channels include our branches, 24/7 ATMs, digital, contact centre and our post office partnership for day-to-day banking services. Wealth and Insurance Wealth and Insurance includes the Group's life assurance subsidiary NIAC and Davy, Ireland's leading provider of wealth management and capital markets services. NIAC distributes protection, investment and pension products to the Irish market, across three core channels made up of the Group’s distribution channels, independent financial brokers and its own financial advisor network as well as corporate partners. Wealth and Insurance also includes investment markets, and the Group’s general insurance brokerage, Bank of Ireland Insurance Services, which offers home, car and travel insurance cover through its agency with insurance providers. Retail UK Retail UK incorporates the UK residential mortgage business, the Group’s branch network and business banking business in Northern Ireland, as well as asset finance and contract hire, incorporating Northridge Finance. It also includes the financial services partnership and FX joint venture with the UK Post Office. In December 2023, Retail UK announced the conclusion of its financial services partnership with the AA and ceased the provision of unsecured personal loan products under the Bank of Ireland UK and Post Office brand. The Retail UK division includes the activities of BoI (UK) plc, the Group’s wholly owned UK licenced banking subsidiary. Corporate and Commercial In 2023, Global Markets and Corporate Banking (together formerly known as Corporate and Markets division) were consolidated with Business Banking into a single ‘Corporate and Commercial’ division, bringing together extensive expertise to efficiently and consistently deliver the highest service levels to all of the Group's Corporate and Commercial customers. The combined division provides a full range of lending, banking and treasury risk management services to the Group's national and international Corporate and Business customers, many of which are at the heart of the Irish economy. Our relationship teams are based in offices in Ireland and the UK with niche international businesses across Europe and in the US. These teams have a wealth of experience across a broad range of segments and sectors, including corporate and business banking, commercial real estate, acquisition finance, foreign direct investment and treasury solutions. Group Centre Group Centre incorporates the Group's central support and control functions. Core responsibilities of the function include overseeing the Group wide Customer Strategy, establishing clear governance and control frameworks with appropriate oversight, providing management services to the Group, and managing the key processes and IT delivery platforms for the trading divisions. Other reconciling items Other reconciling items represent transactions between operating segments which are eliminated upon consolidation and the application of hedge accounting at Group level. Basis of preparation of segmental information The analysis of results by operating segment is based on the information used by the chief operating decision maker to allocate resources and assess performance. The CEO and CFO are considered to be the chief operating decision makers for the Group. The Group’s operating segments reflect its organisational and management structures. The CEO and CFO review the Group’s internal reporting based around these segments to assess performance and allocate resources. Transactions between the business segments are on normal commercial terms and conditions. Internal charges and transfer pricing adjustments have been reflected in the performance of each business. Revenue sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis. The measures of segmental assets and liabilities provided to the chief operating decision maker are not adjusted for transfer pricing adjustments or revenue sharing agreements as the impact on the measures of segmental assets and liabilities is not significant. Capital expenditure comprises additions to property, plant and equipment and intangible assets. On an ongoing basis, the Group reviews the methodology for allocating funding and liquidity costs in order to ensure that the allocations continue to reflect each division’s current funding requirement. External revenue comprises interest income, insurance revenue, net income / (expense) from reinsurance contracts held, insurance investment and finance result, fee and commission income, net trading income / (expense), other operating income, other leasing income and share of results of associates and joint ventures. There were no revenues deriving from transactions with a single external customer that amounted to 10% or more of the Group’s revenues. The Group measures the performance of its operating segments through a measure of segment profit or loss which is referred to as ‘underlying profit or loss’ in its internal management reporting systems. Underlying profit or loss excludes the impact of non-core items outlined below: • acquisition costs; • gross-up for policyholder tax in the Wealth and Insurance business; • liability management exercises; • portfolio divestments (net); • loss on disposal / liquidation of business activities; • transformation programme costs; • customer redress charges; and • investment return on treasury stock held for policyholders. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 232 3 Operating segments (continued) In the tables below, 'Other reconciling items' represent inter segment transactions which are eliminated upon consolidation and the application of hedge accounting at Group level. 2023 Retail Ireland €m Wealth and Insurance €m Retail UK €m Corporate and Commercial €m Group Centre €m Other reconciling items €m Group €m Net interest income 1,409 (7) 619 1,667 (7) 1 3,682 Other income 146 368 (18) 257 (19) 12 746 Total operating income 1,555 361 601 1,924 (26) 13 4,428 Other operating expenses (374) (210) (249) (493) (481) 7 (1,800) Other operating expenses (before levies and regulatory charges) (374) (206) (245) (493) (319) 7 (1,630) Levies and regulatory charges – (4) (4) – (162) – (170) Depreciation and amortisation (111) (18) (21) (12) (70) 5 (227) Impairment of goodwill and intangibles – – – – – – – Total operating expenses (485) (228) (270) (505) (551) 12 (2,027) Underlying operating proﬁt / (loss) before impairment charges on ﬁnancial instruments 1,070 133 331 1,419 (577) 25 2,401 Net impairment losses on ﬁnancial instruments (109) – (84) (210) – – (403) Share of results of associates and joint ventures (7) – 28 4 – – 25 Underlying proﬁt / (loss) before tax 954 133 275 1,213 (577) 25 2,023 2023 Reconciliation of underlying profit before tax to profit before tax Group €m Underlying profit before tax 2,023 Acquisition costs (61) Gross-up for policyholder tax in the Wealth and Insurance business 26 Liability management exercises (22) Portfolio divestments (net) (18) Loss on disposal / liquidation of business activities (8) Transformation programme costs (2) Customer redress charges – Investment return on treasury stock held for policyholders – Profit before tax 1,938 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 233 3 Operating segments (continued) Restated 1,2,3 2022 Retail Ireland2,3 €m Wealth and Insurance 1 €m Retail UK €m Corporate and Commercial2,3 €m Group Centre3 €m Other reconciling items €m Group €m Net interest income 619 (8) 691 1,185 (5) – 2,482 Other income1 148 141 (25) 313 60 (2) 635 Total operating income 767 133 666 1,498 55 (2) 3,117 Other operating expenses1 (385) (139) (259) (450) (361) 2 (1,592) Other operating expenses (before levies and regulatory charges)1 (385) (137) (254) (450) (225) 2 (1,449) Levies and regulatory charges – (2) (5) – (136) – (143) Depreciation and amortisation1,3 (79) (7) (27) (25) (76) (4) (218) Impairment of goodwill and intangibles – – – – (7) – (7) Total operating expenses (464) (146) (286) (475) (444) (2) (1,817) Underlying operating proﬁt / (loss) before impairment charges on ﬁnancial instruments 303 (13) 380 1,023 (389) (4) 1,300 Net impairment gains / (losses) on ﬁnancial instruments 43 – (107) (130) 7 – (187) Share of results of associates and joint ventures – – 32 8 – – 40 Underlying proﬁt / (loss) before tax 346 (13) 305 901 (382) (4) 1,153 Restated1 2022 Reconciliation of underlying proﬁt before tax to proﬁt before tax Group €m Underlying profit before tax1 1,153 Acquisition costs (54) Gross-up for policyholder tax in the Wealth and Insurance business (2) Liability management exercises – Portfolio divestments 1 Loss on disposal / liquidation of business activities – Transformation programme costs (50) Customer redress charges (29) Investment return on treasury shares held for policyholders (8) Proﬁt before tax 1,011 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect the Business Banking transfer to Corporate and Commercial (formerly Corporate and Markets), resulting in a €470 million increase in the underlying profit before tax in Corporate and Commercial, with the corresponding decrease in Retail Ireland. 3 Comparative figures have been restated to reflect the reallocation of intangible assets and associated amortisation from Group Centre to the division deriving the economic benefits, as a result operating expenses have decreased by €48 million in Group Centre, with a corresponding increase of €30 million in Retail Ireland and €18 million in Corporate and Commercial. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 234 3 Operating segments (continued) 2023 Income statement analysis by operating segment Retail Ireland €m Wealth and Insurance €m Retail UK €m Corporate and Commercial €m Group Centre €m Other reconciling items €m Group €m Gross external revenue 1,365 848 1,384 3,314 886 20 7,817 Inter segment revenue 678 7 27 5,741 1,235 (7,688) – Total revenue 2,043 855 1,411 9,055 2,121 (7,668) 7,817 Capital expenditure 34 23 130 50 194 – 431 Restated 1,2,3 2022 Income statement analysis by operating segment Retail Ireland2,3 €m Wealth and Insurance 1 €m Retail UK €m Corporate and Commercial2,3 €m Group Centre1,3 €m Other reconciling items €m Group €m Gross external revenue1,2 595 607 917 1,857 399 82 4,457 Inter segment revenue2 624 (48) 171 573 207 (1,527) – Total revenue1,2 1,219 559 1,088 2,430 606 (1,445) 4,457 Capital expenditure3 26 231 106 58 298 – 719 2023 Balance sheet analysis by operating segment Retail Ireland €m Wealth and Insurance €m Retail UK €m Corporate and Commercial €m Group Centre €m Other reconciling items €m Group €m Total assets 112,262 24,683 26,215 248,207 91,921 (347,580) 155,708 Total liabilities 107,260 23,583 24,094 248,711 87,064 (347,565) 143,147 Investment in associates and joint ventures 29 – 77 79 2 – 187 Restated1,3,4 2022 Balance sheet analysis by operating segment Retail Ireland3,4 €m Wealth and Insurance1 €m Retail UK €m Corporate and Commercial3,4 €m Group Centre3 €m Other reconciling items €m Group €m Total assets1,3,4 95,617 22,041 26,944 216,071 68,664 (278,648) 150,689 Total liabilities1,4 90,670 21,063 24,797 217,066 64,171 (278,600) 139,167 Investment in associates and joint ventures4 18 – 81 65 1 – 165 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect the Business Banking transfer, resulting in an increase of €523 million to external revenue and an increase of €341 million to internal revenue in the Corporate and Commercial (formerly Corporate and Markets) division, with the corresponding decrease in Retail Ireland. 3 Comparative figures have been restated to reflect the reallocation of intangible assets from Group Centre to the divisions deriving economic benefits, resulting in a decrease of €313 million in Group Centre total assets, with a corresponding increase of €193 million in Retail Ireland and a €120 million increase in Corporate and Commercial. Capital expenditure was also restated resulting in a decrease of €12 million in Group Centre, with a corresponding increase of €7 million in Retail Ireland and a €5 million increase in Corporate and Commercial. 4 Comparative figures have been restated to reflect the Business Banking transfer, resulting in an increase of €36,013 million in total assets, an increase of €35,504 million in total liabilities and an increase of €65 million to investment in associates and joint ventures in the Corporate and Commercial division, with the corresponding decrease in Retail Ireland. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 235 3 Operating segments (continued) 2023 Geographical analysis Republic of Ireland €m United Kingdom €m Rest of World €m Other reconciling items €m Total €m Gross external revenue 5,991 1,678 148 – 7,817 Non-current assets1 1,804 398 6 – 2,208 Restated2 2022 Geographical analysis Republic of Ireland2 €m United Kingdom €m Rest of World2 €m Other reconciling items €m Total €m Gross external revenue2 3,288 1,061 108 – 4,457 Non-current assets1 1,731 341 6 – 2,078 1 Non-current assets comprise intangible assets and goodwill and property, plant and equipment. The disclosure of this line has changed from capital expenditure to non-current assets in line with IFRS 8 requirements. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 4 Interest income Interest income on loans and advances to customers In 2023 , interest income of €97 million (2022: € 70 million) was recognised and €76 million was received ( 2022: €93 million) on credit-impaired loans and advances to customers. In 2023 , interest income of €241 million ( 2022: €170 million) was recognised and €225 million (2022: €189 million) was received on total forborne loans and advances to customers. For 2023, interest income is reduced by €89 million (2022: €nil) relating to changes in the fair value of derivative financial instruments which economically hedge the performing mortgage book of KBCI acquired by the Group, which partly offsets interest income earned and recognised on these derivative financial instruments. Transferred from cash flow hedge reserve Interest income is presented net of a charge of €137 million (2022: €170 million) transferred from the cash flow hedge reserve (note 16). Interest income recognised on debt securities at amortised cost In 2023, no negative interest was recognised on derivatives that are in a hedge relationship with the relevant financial asset (2022: interest income on debt securities at amortised cost was recognised net of negative interest on derivatives of €15 million). Interest income recognised on debt securities at FVOCI In 2023, no negative interest was recognised on derivatives that are in a hedge relationship with the relevant financial asset (2022: interest income on FVOCI financial assets was recognised net of negative interest on derivatives of €11 million). Interest income recognised on customer accounts In 2023, no negative interest was recognised on customer accounts, due to increases in interest rates during the year (2022: €101 million of interest income, comprising interest income of €57 million resulting from negative effective interest rates and €44 million arising on related derivatives which are in a hedge relationship). Interest income recognised on non-trading derivatives Interest income on non-trading derivatives was earned principally on pay fixed, receive floating interest rate swaps which are held with hedging intent, but for which hedge accounting is not applied. The year on year movement is caused by an increase in interest rates. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 236 4 Interest income (continued) 2023 €m 2022 €m Financial assets measured at amortised cost Loans and advances to customers 3,901 2,365 Loans and advances to banks 1,155 212 Debt securities at amortised cost 194 18 Interest income on ﬁnancial assets measured at amortised cost 5,250 2,595 Financial assets at FVOCI Debt securities at FVOCI 163 29 Interest income on financial assets at FVOCI 163 29 Negative interest on ﬁnancial liabilities Customer accounts – 101 Deposits from banks – 39 Debt securities in issue – 8 Negative interest on financial liabilities – 148 Interest income calculated using the eﬀective interest method 5,413 2,772 Other interest income Non-trading derivatives (not in hedge accounting relationships - economic hedges) 676 194 Finance leases and hire purchase receivables 229 169 Loans and advances to customers at FVTPL 8 14 Other ﬁnancial assets at FVTPL 3 1 Other interest income 916 378 Interest income 6,329 3,150 5 Interest expense Interest expense recognised on customer accounts Interest expense on customer accounts includes interest expense of €837 million (2022: €44 million) arising on related derivatives which are in a hedge relationship with the relevant liability. The year on year movement is caused by an increase in interest rates. Interest expense recognised on debt securities in issue Interest expense on debt securities in issue is recognised on an Effective Interest Rate basis and includes €186 million of interest expense (2022: net of interest income of €5 million) on derivatives which are in a hed ge relationship with the relevant liability. Interest expense recognised on subordinated liabilities Interest expense on subordinated liabilities is recognised on an Effective Interest Rate basis and includes €39 million of interest expense (2022 : net of interest income of €6 million) on derivatives which are in a hedge relationship with the relevant liability. Interest expense recognised on debt securities at amortised cost In 2023, there was no interest expense recognised on debt securities at amortised cost, due to increases in interest rates during the year (2022: €2 million comprises interest expense of €1 million and interest expense on related derivatives which are in a hedge relationship of €1 million). Interest expense recognised on debt securities at FVOCI In 2023, there was no interest expense recognised on debt securities at FVOCI, due to increases in interest rates during the year (2022: €6 million comprises interest expense of €2 million and interest expense on related derivatives which are in a hedge relationship of €4 million). Interest expense recognised on non-trading derivatives Interest expense on non-trading derivatives was incurred principally on receive fixed, pay floating interest rate swaps which are held with hedging intent, but for which hedge accounting is not applied. The year on year movement is caused by an increase in interest rates. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 237 5 Interest expense (continued) 2023 €m 2022 €m Financial liabilities measured at amortised cost Customer accounts 1,122 55 Debt securities in issue 471 173 Deposits from banks 143 47 Subordinated liabilities 121 78 Lease liabilities 11 12 Interest expense on ﬁnancial liabilities measured at amortised cost 1,868 365 Negative interest on ﬁnancial assets Cash and balances at central banks – 74 Debt securities at FVOCI – 6 Loans and advances to banks – 3 Debt securities at amortised cost – 2 Negative interest on financial assets – 85 Interest expense calculated using eﬀective interest rate method 1,868 450 Other interest expense Non-trading derivatives (not in hedge accounting relationships - economic hedges) 747 208 Customer accounts at FVTPL 6 4 Other interest expense 1 1 Other interest expense 754 213 Interest expense 2,622 663 6 Fee and commission income and expense 2023 Income Retail Ireland €m Wealth and Insurance €m Retail UK €m Corporate and Commercial €m Group Centre €m Group €m Retail banking customer fees 198 – 34 203 – 435 Asset management fees – 139 – – – 139 Credit related fees 2 – 2 14 – 18 Insurance commissions – 10 1 – – 11 Other 11 21 6 32 – 70 Fee and commission income 211 170 43 249 – 673 Fee and commission income and expense includes €126 million arising from trust and other fiduciary activities. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 238 6 Fee and commission income and expense (continued) Restated1 2022 Income Retail Ireland1 €m Wealth and Insurance €m Retail UK €m Corporate and Commercial1 €m Group Centre €m Group €m Retail banking customer fees1 182 – 36 182 – 400 Asset management fees – 79 – – – 79 Credit related fees1 2 – 2 17 – 21 Insurance commissions – 11 1 – – 12 Other1 17 13 6 31 – 67 Fee and commission income 201 103 45 230 – 579 Expense Fee and commission expense of €219 million ( 2022 restated2: €194 million ) primarily comprises brokerage fees, sales commissions and other fees paid to third parties. 1 Comparative figures have been restated to reflect the Business Banking transfer to Corporate and Commercial (formerly Corporate and Markets), resulting in an increase of €136 million in fee and commission income in Corporate and Commercial and the corresponding decrease in Retail Ireland. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. As a result, comparative figures for fee and commission expense have been restated to reflect a reclassification to 'Insurance service expense' in line with IFRS 17 treatment. See note 1 for updated accounting policy and note 18 for transitional impact. 7 Net trading income Net trading income includes the gains and losses on financial instruments mandatorily measured at FVTPL and those designated at FVTPL (other than unit linked life assurance assets and investment contract liabilities). It includes the fair value movement on these instruments and the realised gains and losses arising on the purchase and sale. It also includes the interest income receivable and expense payable on financial instruments held for trading and €23 million of a net gain arising from FX (2022: €21 million). It does not include interest income on debt financial assets mandatorily measured at FVTPL, interest expense on financial liabilities designated at FVTPL and interest income or expense on derivatives that are held with hedging intent, but for which hedge accounting is not applied (economic hedges). Net income from financial instruments mandatorily measured at FVTPL includes dividend income from equities, realised and unrealised gains and losses. Non-trading equities and debt securities mandatorily measured at FVTPL are reported in the balance sheet under the caption 'other financial assets at fair value through profit or loss'. The income from life assurance investments which also comprise other financial assets at FVTPL is reported in note 20. N et fair value hedge ineffectiveness reflects a net charge from hedged items of €938 million (2022: net gain of €1,374 million) offsetting a net gain from hedging instruments of €935 million (2022: net charge of €1,365 million). Net income from financial instruments designated at FVTPL 2023 €m 2022 €m Financial liabilities designated at fair value (77) 63 Related derivatives held for trading 72 (59) (5) 4 Net income from ﬁnancial instruments mandatorily measured at FVTPL Other ﬁnancial instruments held for trading 48 7 Equities 18 13 Loans and advances 8 4 Non-trading debt securities (1) (3) 68 25 Net fair value hedge ineﬀectiveness (3) 9 Net trading income 65 34 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 239 8 Other leasing income and expense Other leasing income and expense relate to the business activities of Marshall Leasing , which is a car and commercial leasing and fleet management business based in the UK. This business was conducted through Marshall Leasing Limited until 1 April 2022, at which point the business transferred to N.I.I.B Group Limited. Both entities are wholly-owned subsidiaries of BoI (UK) plc, whose ultimate parent is BoIG plc. 2023 €m 2022 €m Other leasing income 92 71 Operating lease payments 53 44 Sale of leased assets 33 21 Other income 6 6 Other leasing expense (63) (45) Depreciation of rental vehicles (35) (25) Other selling and disposal costs (28) (20) Net other leasing income 29 26 9 Other operating income 2023 €m Restated1 2022 €m Other insurance income1 64 46 Loss on liability management exercises (22) – Dividend income 2 – Transfer from debt instruments at FVOCI reserve on asset disposal (note 23) – 98 Elimination of investment return on treasury shares held for the beneﬁt of policyholders in the Wealth and Insurance business – (3) Other operating income 44 141 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. In 2023, a loss of €22 million (2022: €nil) on liability management exercises was recognised, reflecting the repurchase of certain Group perpetual non-call instruments. Further details are disclosed in note 42 Subordinated liabilities. Transfer from debt instruments at FVOCI reserve on asset disposal in 2022 was driven by gains realised on bond sales. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 240 10 Other operating expenses Administrative expenses and staﬀ costs 2023 €m Restated1 2022 €m Staﬀ costs excluding transformation programme staﬀ costs1 924 812 Amortisation of intangible assets (note 28 ) 168 152 Levies and regulatory charges1 170 142 Irish bank levy 25 25 Other1 145 117 Depreciation of property, plant and equipment1 (note 30 ) 59 52 Impairment of property, plant and equipment (note 30 ) – 14 Lease expenses (note 37) 5 3 Revaluation loss on property (note 30) 4 – Impairment of intangible assets (note 28 ) – 7 Other administrative expenses1 764 758 Total 2,094 1,940 Total staﬀ costs are analysed as follows: Wages and salaries1 786 653 Social security costs1 83 75 Retirement beneﬁt costs (deﬁned beneﬁt plans) (note 41 )1 17 54 Retirement beneﬁt costs (deﬁned contribution plans)1 49 40 Other staﬀ expenses1 39 26 974 848 Staﬀ costs capitalised (50) (36) Staﬀ costs excluding transformation programme staﬀ costs 924 812 Other staff expenses included in transformation programme costs (note 11) 15 9 Total staﬀ costs recognised in the income statement 939 821 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. As a result, comparative figures for staff costs, levies, depreciation and other administrative expenses have been restated to reflect a reclassification to 'Insurance service expense' in line with IFRS 17 treatment. See note 1 for updated accounting policy and note 18 for transitional impact. Staff numbers At 31 December 2023 , the number of staff (full time equivalent s (FTE)) was 10,845 (2022: 10,153). The average number of FTE for the Group for the year ended 31 December 2023 was 10,562 (2022: 9,894 inclusive of seven months of Davy staff post acquisition on 1 June 2022). The following table outlines the increase in the average number of staff employed by the Group. Average number of staﬀ (full time equivalents) 2023 Restated2 2022 Retail Ireland2 3,458 3,008 Retail UK 1,270 1,172 Wealth and Insurance 1,755 1,643 Corporate and Commercial2 1,265 1,043 Group Centre 2,814 3,028 Total 10,562 9,894 2 Comparative figures have been restated to reflect the Business Banking transfer to Corporate and Commercial (formerly Corporate and Markets), resulting in an increase of 436 FTEs in Corporate and Commercial and a corresponding decrease in Retail Ireland. See page 61 for further details. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 241 11 Cost of restructuring programme In 2023, the Group recognised a restructuring charge of € 20 million ( 2022 : € 17 million ). 2023 €m 2022 €m Transformation programme costs: Staﬀ costs 15 9 Programme management costs 5 8 UK Strategic review costs / (gain) 3 (1) Property-related (gain) (3) – Other restructuring charges – 1 Total 20 17 12 Auditor’s remuneration (excluding Value Added Tax) Audit and assurance services Note RoI (i) €m Overseas (ii) €m 2023 €m 2022 €m Statutory audit of ﬁnancial statements 4.5 1.7 6.2 5.8 Other assurance services iii 1.1 0.1 1.2 1.4 Total Auditor's remuneration 5.6 1.8 7.4 7.2 Disclosure of Auditor's fees is made in accordance with Section 322 of the Companies Act which mandates the disclosure of fees in particular categories and that fees payable to the Group Auditor (KPMG) for services provided to the Group be disclosed in this format. All years presented are on that basis. The GAC has reviewed the level of fees and is satisfied that it has not affected the independence of the auditors. i. Fees paid to the Statutory Auditor, KPMG. ii. Fees paid to overseas auditors consist of fees paid to KPMG LLP in the UK. iii. Other assurance services consist primarily of review of the Solvency II return, J&E Davy assurance services, CSRD reporting, letters of comfort, ESG related reporting, fees in connection with reporting to regulators including the CBI and review of compliance with the Government Guarantee Schemes. 13 Net impairment (losses) / gains on financial instruments 2023 €m 2022 €m Loans and advances to customers at amortised cost (419) (188) Movement in impairment loss allowances (note 24 ) (445) (268) Cash recoveries 26 80 Loan commitments (9) (5) Guarantees and irrevocable letters of credit 2 (2) Other ﬁnancial assets 1 8 Net impairment losses on ﬁnancial instruments (425) (187) Cash recoveries of €80 million at 31 December 2022 includes additional recoveries of €47 million received between 2018 and 2021 in respect of loans that previously were subject to the utilisation of impairment loss allowance. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 242 13 Net impairment (losses) / gains on financial instruments (continued) Net impairment (losses) / gains on loans and advances to customers at amortised cost 2023 €m 2022 €m Residential mortgages (108) (22) Retail Ireland (71) 40 Retail UK (37) (62) Non-property SME and corporate (29) (124) Republic of Ireland SME 10 28 UK SME 1 (13) Corporate (40) (139) Property and construction (173) (18) Investment (168) (23) Development (5) 5 Consumer (109) (24) Total (419) (188) During 2023, the Group completed a transaction whereby it derecognised €0.1 billion (2022: €0.9 billion) of loans and advances to customers (after an impairment loss allowance of €0.2 billion). Expected cash flows arising from the sale of a loan are included in the measurement of expected credit losses under IFRS 9, where certain conditions are met. As the transactions satisfied these conditions, the cash flows have been included in the impairment calculation. As a result, net impairment (losses) / gains on financial instruments includes a net impairment loss of €6 million (2022: €9 million) arising on the transactions. See note 24 for further information. 14 Share of results of associates and joint ventures (after tax) 2023 €m 2022 €m First Rate Exchange Services (note 27) 28 32 Associates (note 27) (3) 8 Share of results of associates and joint ventures (after tax) 25 40 15 (Loss) / gain on disposal / liquidation of business activities As part of the Group’s focus on simplifying its corporate structure, the Group has an ongoing programme of winding up a number of wholly owned, dormant and non-trading companies, a number of which are foreign operations. During 2023, the Group voluntarily appointed a liquidator to manage the winding up of the foreign operation Bristol & West plc (B&W). Upon appointment of the liquidator, the Group is considered to have lost control of the foreign operations and has accounted for this loss of control as a disposal. In accordance with IAS 21, the Group has reclassified the net cumulative FX loss of €8 million relating to these foreign operations from the FX reserve to the income statement during 2023 (2022: €1 million gain). 2023 €m 2022 €m Transfer of foreign exchange reserve to income statement on liquidation of non-trading entities (8) – Other – 1 (Loss) / gain on disposal / liquidation of business activities (8) 1 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 243 16 Taxation The taxation charge for the year is €337 million (20221: €153 million) with an effective statutory taxation rate of 17% ( 2022 : 15%). The effective tax rate is influenced by changes in the jurisdictional mix of profits and losses and the re-assessment of certain tax losses carried forward in the prior year. Recognised in income statement 2023 €m Restated1 2022 €m Current tax Irish corporation tax Current year 19 16 Adjustments in respect of prior year – (2) Foreign tax Current year 92 60 Adjustments in respect of prior year 7 6 Current tax charge 118 80 Deferred tax Utilisation of brought forward tax losses 186 100 Adjustments in respect of prior year 5 12 Origination and reversal of temporary differences1 28 (29) Impact of corporation tax rate change – 5 Reassessment of value of tax losses carried forward – (15) Deferred tax charge 219 73 Taxation charge 337 153 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Reconciliation of tax on the proﬁt before taxation at the standard Irish corporation tax rate to actual tax charge 2023 €m Restated1 2022 €m Proﬁt before tax multiplied by the standard rate corporation tax in Ireland of 12.5% (2022: 12.5%)1 242 126 Eﬀects of: Reassessment of value of tax losses carried forward – (15) Foreign earnings subject to different rates of tax 67 39 Wealth and Insurance companies - different basis of accounting 10 (15) Adjustments in respect of prior year 12 16 Share of results of associates and joint ventures shown post tax in the income statement (4) (4) Impact of corporation tax rate change – 5 Other adjustments for tax purposes 10 1 Taxation charge 337 153 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 244 16 Taxation (continued) 2023 2022 Analysis of selected other comprehensive income Pre-tax €m Tax €m Net of Tax €m Pre-tax €m Tax €m Net of Tax €m Debt instruments at FVOCI reserve Changes in fair value (6) 1 (5) (68) 7 (61) Transfer to income statement - asset disposal – – – (98) 13 (85) Net change in debt instruments at FVOCI reserve (6) 1 (5) (166) 20 (146) Remeasurement of the net deﬁned beneﬁt pension asset (35) 7 (28) 84 7 91 Cash ﬂow hedge reserve Changes in fair value (338) 41 (297) 356 (47) 309 Transfer to income statement 326 (41) 285 (354) 50 (304) Net trading income / (expense) 189 (24) 165 (524) 75 (449) Net interest income 137 (17) 120 170 (25) 145 Net change in cash ﬂow hedge reserve (12) – (12) 2 3 5 Net change in foreign exchange reserve 29 – 29 (93) – (93) Net change in revaluation reserve (8) 2 (6) (4) 1 (3) Liability credit reserve Changes in fair value of liabilities designated at FVTPL due to own credit risk (14) – (14) 20 (5) 15 Other comprehensive income for the year (46) 10 (36) (157) 26 (131) 17 Earnings per share The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue excluding treasury shares. Diluted earnings per share is based on the profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue excluding treasury shares adjusted for the effect of all dilutive potential ordinary shares. For 2023 and 2022, there was no difference in the weighted average number of units of share used for basic and diluted earnings per share. 2023 €m Restated1 2022 €m Basic and diluted earnings per share Proﬁt attributable to shareholders1 1,595 850 Distributions on other equity instruments - AT1 coupon (69) (69) Adjustment for redemption of preference stock2 (40) – Proﬁt attributable to ordinary shareholders 1,486 781 Shares Shares Weighted average number of shares in issue excluding treasury shares (millions) 1,061 1,071 Basic and diluted earnings per share (cent) 140.1 72.9 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 As disclosed in note 45, in 2023 the Group paid consideration of €104 million in respect of the acquisition and redemption of certain Sterling and Euro preference stock of the Governor and Company of the Bank of Ireland. This consideration was in excess of the carrying value (c.€64 million) of the related preference stock, which was presented as non-controlling interest by the Group. Under IAS 33, the difference of €40 million has been reflected in the EPS calculation by reducing the profit attributable to ordinary shareholders of the Group. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 245 18 Insurance contracts Impact of transition to IFRS 17 As outlined in the Group accounting policies in note 1, from 1 January 2023, the Group adopted IFRS 17 'Insurance Contracts'. The impact on transition and date of initial application is summarised below: Impact of transition to IFRS 17, at 1 January 2023 Balance sheet line item Assets increase / (decrease) €m Liabilities (increase) / decrease €m Derecognition of IFRS 4 balances IFRS 4 reinsurance contract assets Other assets (1,090) – IFRS 4 VIF Other assets (738) – IFRS 4 premiums due and reinsurance recoverables Other assets (159) – IFRS 4 insurance contract liabilities Insurance contract liabilities – 14,280 IFRS 4 outstanding claims and reinsurance premiums due Other liabilities – 285 Deferred tax Deferred tax liabilities – 74 Recognition of IFRS 17 balances IFRS 17 reinsurance contract assets excluding CSM Reinsurance contract assets 1,215 – IFRS 17 CSM reinsurance contract assets Reinsurance contract assets 137 – IFRS 17 insurance contract liabilities excluding CSM Insurance contract liabilities – (12,720) IFRS 17 CSM insurance contract liabilities Insurance contract liabilities – (690) Deferred tax Deferred tax liabilities – (15) Recognition of IFRS 9 balances IFRS 9 investment contract liability Liabilities to customers under investment contracts – (989) Balance sheet impact (635) 225 Net reduction in shareholders' equity (410) Impact of transition to IFRS 17, at 1 January 2022 Balance sheet line item Assets increase / (decrease) €m Liabilities (increase) / decrease €m Derecognition of IFRS 4 balances IFRS 4 reinsurance contract assets Other assets (1,302) – IFRS 4 VIF Other assets (700) – IFRS 4 premiums due and reinsurance recoverables Other assets (134) – IFRS 4 insurance contract liabilities Insurance contract liabilities – 15,399 IFRS 4 outstanding claims and reinsurance premiums due Other liabilities – 277 Deferred tax Deferred tax liabilities – 69 Recognition of IFRS 17 balances IFRS 17 reinsurance contract assets excluding CSM Reinsurance contract assets 1,435 – IFRS 17 CSM reinsurance contract assets Reinsurance contract assets 191 – IFRS 17 insurance contract liabilities excluding CSM Insurance contract liabilities – (13,687) IFRS 17 CSM insurance contract liabilities Insurance contract liabilities – (713) Deferred tax Deferred tax liabilities – (17) Recognition of IFRS 9 balances IFRS 9 investment contract liability Liabilities to customers under investment contracts – (1,189) Balance sheet impact (510) 139 Net reduction in shareholders' equity (371) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 246 18 Insurance contracts (continued) Previously, in the Group consolidated income statement and in accordance with IFRS 4, 'net insurance premium income', 'insurance contract liabilities and claims paid' and 'total operating income net of insurance claims' were presented as financial statement line items (FSLI). These IFRS 4 FSLI's are replaced on transition to IFRS 17 with an insurance service result which comprises insurance revenue, insurance service expense and net income / (expense) from reinsurance contracts held. The insurance finance income or expense (IFIE), is presented separately for both insurance and reinsurance in the notes to the financial statements, and aggregated together with total investment gains / (losses) as insurance investment and finance result in the income statement. The following IFRS 17 disclosures provide a replacement for the previously disclosed 'net insurance premium income', 'insurance contract liabilities and claims paid', 'life assurance business' and 'liabilities to customers under investment and insurance contracts' notes. Disclosure is provided for both insurance contracts issued and reinsurance contracts held. Insurance investment and finance result The table below comprises the investment gains and losses, realised gains and losses and unrealised gains and losses which accrue to the Group on all investment assets held by the Wealth and Insurance division (excluding Davy), other than those held for the benefit of policyholders whose contracts are considered to be investment contracts. These instruments are mandatorily measured at FVTPL. Total investment gains of €1,198 million in 2023 (2022: losses of €1,327 million) are consistent with positive investment market performance during the year, due in large part to external economic environmental factors. The gains on the assets held on behalf of the insurance policyholders are consistent with the increase in the insurance contract liabilities. Insurance investment and finance result 2023 €m Restated 1 2022 €m Gains / (losses) on other financial assets held on behalf of Wealth and Insurance policyholders1 1,238 (1,298) Losses on investment property held on behalf of Wealth and Insurance policyholders1 (40) (29) Total investment gains / (losses) 1,198 (1,327) Finance (expense) / income from insurance contracts issued (1,182) 1,651 Effect of changes in interest rates and other financial assumptions (1,174) 1,642 Interest accreted using locked-in rate (8) 9 Finance income / (expense) from reinsurance contracts held 94 (343) Effect of changes in interest rates and other financial assumptions 91 (339) Interest accreted using locked-in rate 3 (4) Net insurance and reinsurance finance result (1,088) 1,308 Total insurance investment and finance result 110 (19) 1 As outlined in the Group accounting policies note 1, on 1 January 2023, the new insurance accounting standard, IFRS 17 ‘Insurance Contracts’ became effective, replacing IFRS 4 'Insurance Contracts'. Insurance revenue The table below provides a breakdown of the composition of insurance revenue for all insurance contracts issued. Key components of revenue are the release of expected incurred claims and expenses in 2023 of €394 million (2022: €375 million) and the release of CSM in 2023 €76 million (2022: €74 million). Insurance revenue 2023 €m 2022 €m Expected incurred claims and other expenses 394 375 CSM recognised in income statement for services 76 74 Recovery of insurance acquisition cash flows 23 19 Change in risk adjustment for non-financial risk expired 10 13 Premium variance 15 5 Total insurance revenue 518 486 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 247 18 Insurance contracts (continued) Insurance contract liabilities The table below provides a comprehensive reconciliation from opening to closing balance of insurance contract liabilities, disaggregated between the liability for remaining coverage (LRC) and the liability for incurred claims (LIC). Included in the total insurance service result is an allocation of depreciation expense of €11 million (2022: €8 million) and an allocation of defined benefit pension costs of €3 million (2022: €5 million) attributable to insurance contracts. 2023 2022 Liability for remaining coverage Liability for incurred claims €m Total €m Liability for remaining coverage Liability for incurred claims €m Total €m Insurance contract liabilities Excluding loss component €m Loss component €m Excluding loss component €m Loss component €m Opening liabilities (12,833) (48) (529) (13,410) (13,830) (40) (530) (14,400) Insurance revenue 518 – – 518 486 – – 486 Contracts measured using the fair value approach that existed at transition date 308 – – 308 315 – – 315 New business and all other contracts 210 – – 210 171 – – 171 Insurance service expense (23) 8 (413) (428) (19) (8) (374) (401) Incurred claims and other insurance service expenses – 10 (427) (417) – 9 (396) (387) Insurance acquisition cash flows amortisation (23) – – (23) (19) – – (19) Changes that relate to future service - losses on onerous groups of contracts and reversal of such losses – (2) – (2) – (17) – (17) Changes that relate to past service - adjustment to the LIC – – 14 14 – – 22 22 Total insurance service result 495 8 (413) 90 467 (8) (374) 85 Finance (expense) / income from insurance contracts issued (1,168) – (14) (1,182) 1,603 – 48 1,651 Investment components 1,177 – (1,177) – 1,012 – (1,012) – Total amounts recognised in comprehensive income 504 8 (1,604) (1,092) 3,082 (8) (1,338) 1,736 Cash flows Premiums received (2,239) – – (2,239) (2,141) – – (2,141) Claims and other directly attributable expenses – – 1,559 1,559 – – 1,339 1,339 Insurance acquisition cash flows 69 – – 69 56 – – 56 Total cash flows (2,170) – 1,559 (611) (2,085) – 1,339 (746) Closing liabilities (14,499) (40) (574) (15,113) (12,833) (48) (529) (13,410) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 248 18 Insurance contracts (continued) Reinsurance contract assets The table below provides a comprehensive reconciliation from opening to closing balance of reinsurance contract assets, disaggregated between the remaining coverage and the incurred claims components. 2023 2022 Assets for remaining coverage Assets for incurred claims €m Total €m Assets for remaining coverage Assets for incurred claims €m Total €m Reinsurance contract assets Excluding loss recovery component €m Loss recovery component €m Excluding loss recovery component €m Loss recovery component €m Opening assets 1,104 36 212 1,352 1,387 27 212 1,626 Net (expense) / income from reinsurance contracts held Reinsurance expenses (20) – – (20) (12) – – (12) Claims recovered and other directly attributable expenses (171) (6) 165 (12) (172) (4) 161 (15) Changes relating to past service - adjustments to incurred claims – – (5) (5) – – (11) (11) Changes in recoveries of losses on onerous underlying contracts – (2) – (2) – 13 – 13 Total net (expense) / income from reinsurance contracts held (191) (8) 160 (39) (184) 9 150 (25) Finance income / (expense) from reinsurance contracts held 89 – 5 94 (326) – (17) (343) Investment components (5) – 5 – (7) – 7 – Total amounts recognised in comprehensive income (107) (8) 170 55 (517) 9 140 (368) Cash flows Premiums paid net of ceding commissions and other deferred acquisition costs paid 162 – – 162 234 – – 234 Recoveries from reinsurance – – (155) (155) – – (140) (140) Total cash flows 162 – (155) 7 234 – (140) 94 Closing assets 1,159 28 227 1,414 1,104 36 212 1,352 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 249 18 Insurance contracts (continued) Analysis of insurance contracts by measurement component The analysis below provides a reconciliation from opening to closing balance for each of the key measurement components of insurance contract liabilities. Estimates of present value of future cash flows €m Risk adjustment for non- financial risk €m CSM Total €m 2023 Insurance contract liabilities Contracts measured using the fair value approach at transition date €m New business and all other contracts €m Opening liabilities (12,629) (91) (630) (60) (13,410) Changes relating to current services CSM recognised in income statement for services – – 67 9 76 Change in risk adjustment for non-financial risk expired – 11 – – 11 Experience adjustments (8) – – – (8) Changes relating to future services Contracts initially recognised in the year 37 (13) – (25) (1) Changes in estimates that adjust the contractual service margin 111 (1) (76) (34) – Changes in estimates that result in loss on onerous contracts 1 (3) – – (2) Changes relating to past services Adjustments to liabilities for incurred claims 14 – – – 14 Insurance service result 155 (6) (9) (50) 90 Finance expense from insurance contracts issued (1,180) (2) – – (1,182) Total amounts recognised in comprehensive income (1,025) (8) (9) (50) (1,092) Cash flows Premiums received (2,239) – – – (2,239) Claims and other directly attributable expenses 1,559 – – – 1,559 Insurance acquisition cash flows 69 – – – 69 Total cash flows (611) – – – (611) Closing liabilities (14,265) (99) (639) (110) (15,113) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 250 18 Insurance contracts (continued) Estimates of present value of future cash flows €m Risk adjustment for non- financial risk €m CSM Total €m 2022 Insurance contract liabilities Contracts measured using the fair value approach at transition date €m New business and all other contracts €m Opening liabilities (13,581) (106) (671) (42) (14,400) Changes relating to current services CSM recognised in income statement for services – – 68 6 74 Change in risk adjustment for non-financial risk expired – 13 – – 13 Experience adjustments (7) – – – (7) Changes relating to future services Contracts initially recognised in the year 28 (12) – (16) – Changes in estimates that adjust the contractual service margin 29 8 (29) (8) – Changes in estimates that result in loss on onerous contracts (15) (1) – – (16) Changes relating to past services Adjustments to liabilities for incurred claims 21 – – – 21 Insurance service result 56 8 39 (18) 85 Finance income from insurance contracts issued 1,642 7 2 – 1,651 Total amounts recognised in comprehensive income 1,698 15 41 (18) 1,736 Cash flows Premiums received (2,141) – – – (2,141) Claims and other directly attributable expenses 1,339 – – – 1,339 Insurance acquisition cash flows 56 – – – 56 Total cash flows (746) – – – (746) Closing liabilities (12,629) (91) (630) (60) (13,410) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 251 18 Insurance contracts (continued) Analysis of reinsurance contracts by measurement component The analysis below provides a reconciliation from opening to closing balance for each of the key measurement components of reinsurance contract assets. CSM 2023 Reinsurance contract assets Estimates of present value of future cash flows €m Risk adjustment for non- financial risk €m Underlying contracts measured using the fair value approach €m New business and all other underlying contracts €m Total €m Opening assets 1,209 6 164 (27) 1,352 Changes relating to current services CSM recognised in income statement for services – – (17) 3 (14) Change in risk adjustment for non-financial risk expired – (1) – – (1) Experience adjustments (17) – – – (17) Changes relating to future services Contracts initially recognised in the year 10 – – (10) – Changes in estimates that adjust the contractual service margin (49) – 35 14 – Changes in recoveries of losses on onerous underlying contracts that adjust the CSM – – – (2) (2) Changes relating to past services Adjustments to liabilities for incurred claims (5) – – – (5) Net expenses from reinsurance contracts (61) (1) 18 5 (39) Finance income from reinsurance contracts held 93 1 – – 94 Total amounts recognised in comprehensive income 32 – 18 5 55 Cash flows Premiums paid net of ceding commissions and other deferred acquisition costs paid 162 – – – 162 Recoveries from reinsurance (155) – – – (155) Total cash flows 7 – – – 7 Closing assets 1,248 6 182 (22) 1,414 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 252 18 Insurance contracts (continued) CSM 2022 Reinsurance contract assets Estimates of present value of future cash flows €m Risk adjustment for non- financial risk €m Underlying contracts measured using the fair value approach €m New business and all other underlying contracts €m Total €m Opening assets 1,426 9 207 (16) 1,626 Changes relating to current services CSM recognised in income statement for services – – (15) 5 (10) Change in risk adjustment for non-financial risk expired – (1) – – (1) Experience adjustments (16) – – – (16) Changes relating to future services Contracts initially recognised in the year 12 1 – (13) – Changes in estimates that adjust the contractual service margin 44 (1) (27) (16) – Changes in recoveries of losses on onerous underlying contracts that adjust the CSM – – – 13 13 Changes relating to past services Adjustments to liabilities for incurred claims (11) – – – (11) Net expenses from reinsurance contracts 29 (1) (42) (11) (25) Finance expense from reinsurance contracts held (340) (2) (1) – (343) Total amounts recognised in comprehensive income (311) (3) (43) (11) (368) Cash flows Premiums paid net of ceding commissions and other deferred acquisition costs paid 234 – – – 234 Recoveries from reinsurance (140) – – – (140) Total cash flows 94 – – – 94 Closing assets 1,209 6 164 (27) 1,352 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 253 18 Insurance contracts (continued) New business analysis The table below provides an analysis of the measurement components of insurance contracts newly issued or acquired during the year. There were no acquisitions of insurance contracts in current or prior year. 2023 2022 Contracts issued Total €m Contracts issued Total €m Insurance contracts issued during 2023 and 2022 Profitable €m Onerous €m Profitable €m Onerous €m Insurance acquisition cash flows (56) (13) (69) (42) (14) (56) Claims and other directly attributable expenses (266) (118) (384) (187) (232) (419) Total estimates of present value of future cash outflows (322) (131) (453) (229) (246) (475) Estimates of present value of future cash inflows 360 122 482 257 239 496 Risk adjustment for non-financial risk (13) (1) (14) (12) (2) (14) Contractual service margin (25) – (25) (16) – (16) Effect at initial recognition of contracts issued and acquired during the year – (10) (10) – (9) (9) The table below provides an analysis of the measurement components of reinsurance contracts which have been newly originated during the year. 2023 2022 Newly originated contracts Total €m Newly originated contracts Total €m Reinsurance contracts originated during 2023 and 2022 Net gain €m Net loss €m Net gain €m Net loss €m Estimates of present value of future cash outflows (128) – (128) (163) – (163) Estimates of present value of future cash inflows 136 – 136 175 – 175 Risk adjustment for non-financial risk 1 – 1 1 – 1 Contractual service margin (3) – (3) (7) – (7) Effect at initial recognition of contracts newly originated during the year 6 – 6 6 – 6 Expected recognition of contractual service margin The table below provides information on the expected release of the CSM over time. Expected recognition of CSM at 31 December 2023 Year 1 €m Year 2 €m Year 3 €m Year 4 €m Years 5-9 €m Years 10+ €m Total €m Insurance contracts issued 73 67 62 56 215 275 748 Reinsurance contracts held (14) (13) (12) (11) (43) (66) (159) Expected recognition of CSM at 31 December 2022 Year 1 €m Year 2 €m Year 3 €m Year 4 €m Years 5-9 €m Years 10+ €m Total €m Insurance contracts issued 68 62 56 51 194 258 689 Reinsurance contracts held (10) (10) (10) (9) (36) (62) (137) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 254 18 Insurance contracts (continued) The Wealth and Insurance division writes the following life assurance contracts that contain insurance risk: Non unit-linked life assurance contracts These contracts provide the policyholder with insurance in the event of death, critical illness or permanent disability (principally mortality and morbidity risk). Non unit-linked annuity contracts These contracts provide the policyholder with an income until death (principally longevity and market risk). Unit-linked insurance contracts These contracts include both policies primarily providing life assurance protection and policies providing investment but with a level of insurance risk deemed to be significant (principally mortality and market risk). Underwriting risk management The Group is exposed to different elements of insurance risk for life insurance policies: • mortality risk is the risk of losses arising from death of life insurance policyholders being earlier than expected; • morbidity risk is the risk of losses from medical claims occurring higher than expected; and • longevity risk is the risk of losses arising from longer life of policyholders than expected. For life assurance contracts where death is the insured risk, the most significant factors that could adversely affect the frequency and severity of claims are the incidence of disease and general changes in lifestyle. Where the insured risk is longevity, advances in medical care is the key factor that increases longevity. The Group manages its exposures to insurance risks through a combination of applying strict underwriting criteria, asset and liability matching, transferring risk to reinsurers and the establishment of insurance contract liabilities. Further details on life insurance risk can be found in the Risk Management Report on page 176. Regulatory risk The Solvency II framework came into effect from 1 January 2016 and introduced new capital, risk management, governance and reporting requirements for all European insurance entities. Under this regime, insurance entities are required to hold technical provisions to meet liabilities to policyholders using best estimate assumptions plus a risk margin as well as a risk based solvency capital requirement which is calculated by considering the capital required to withstand a number of shock scenarios. In addition, the Group's Isle of Man insurance entity is required to hold shareholder equity that exceeds the solvency requirements specified by the Isle of Man Financial Services Authority. As part of the disclosure requirements, the Group’s life assurance entity, NIAC, annually publishes a public document called the Solvency and Financial Condition Report setting out more detail on its solvency and capital management. Sudden or unexpected changes in the regulatory or legal environment may result in losses for the Group or an increase in solvency requirements. This may arise from a number of sources such as interpretations of, or changes to, the Solvency II Directive or other relevant obligations, changes in definitions of the risks that the Group insures or more structural impacts on the markets in which the Group participates, for example pensions regulations. It is likely that such changes would impact the insurance industry as a whole, as opposed to being necessarily specific to the Group. As the Group develops new products, processes and systems and employs new technologies, it is of increasing importance that the Group anticipates known regulatory developments in ensuring that it is sufficiently well placed to meet current and likely future regulatory demands. This is a key part, and base enabler, of the Group’s strategy. Concentration of insurance risk The Group monitors insurance risk relating to insurance contracts and for insurance contracts issued, insurance risk is geographically concentrated in the Republic of Ireland. Insurance risk is also highly concentrated along product lines, with 85% of insurance contracts being unit-linked and the remaining 15% non unit-linked. Concentrations of credit risk relating to insurance contracts can arise through the Group's reinsurance arrangements where the Group has a large exposure to a single counterparty. This credit exposure is mitigated by collateralisation agreements where the Company has access to assets which would compensate the Company should the reinsurer fail to meet its obligations. Please refer to note 25 for more information on credit risk exposures. Other information related to insurance contracts Additional information relevant to the understanding of insurance and reinsurance contracts, as well as their exposure to credit and liquidity risk, can be found in the following places: • assets underlying insurance contracts with direct participation features in notes 20, 21 and 29; • credit risk exposures in note 25; and • liquidity risk in note 54. Sensitivities The following table provides a downside sensitivity analysis or the key insurance and market risks, used for the purpose of risk management. Profit before tax and CSM have been selected as benchmarks due to contribution toward Group earnings. The sensitivity calculations are not cumulative, each is considered and calculated separately. The changes in the profit before tax and CSM incorporate the impact on the insurance related liabilities and assets of the Group and are net of reinsurance. The movement in CSM is after amortisation in the current reporting year and will impact profits in future reporting periods. The method used to calculate these sensitivities involves a recalculation of insurance related liabilities and assets at 31 December 2023 and 31 December 2022, incorporating one of the variable changes noted below in each recalculation. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 255 18 Insurance contracts (continued) 2023 2022 Sensitivities: impact net of reinsurance on annual proﬁt before tax and on the contractual service margin Profit before tax €m Contractual service margin €m Profit before tax €m Contractual service margin €m Insurance risks 10% increase in mortality rates (8) (14) (6) (15) 10% improvement in mortality rates for business exposed to longevity risk 2 (28) 5 (27) 10% increase in morbidity rates (6) (8) (6) (11) 10% deterioration in persistency stress (2) (22) (3) (23) 5% increase in maintenance expenses (2) (19) (1) (18) Market risks 10% unfavourable change in non-Euro currency exchange rates (12) (20) (9) (15) 1% increase in interest rates and unit growth rates1 (47) 2 (38) 2 10% decrease in equity and property markets (17) (32) (17) (25) 0.5% widening in bond yields (48) – (41) – 1 Excludes the impact of pension scheme. Discount Rates The discount rates provided in the table below represent the yield curves to discount insurance and reinsurance cash flows. Discount rates have been constructed through either the bottom-up or top-down approach as required by IFRS 17. Please refer to note 1 for more information on discount rates under IFRS 17. 2023 Discount rates Currency 1 year % 5 years % 10 years % 20 years % 30 years % Bottom-up rates Unit-linked products including unit-linked protection EUR 3.5% 2.4% 2.5% 2.5% 2.5% Other non-linked protection products EUR 3.6% 2.6% 2.6% 2.7% 2.6% Permanent health insurance claims EUR 3.7% 2.6% 2.7% 2.7% 2.7% Top-down rates Standard annuities EUR 3.9% 2.9% 2.7% 3.0% 3.0% Sovereign annuities EUR 3.7% 2.7% 2.7% 2.8% 2.8% 2022 Discount rates Currency 1 year % 5 years % 10 years % 20 years % 30 years % Bottom-up rates Unit-linked products including unit-linked protection EUR 3.2% 3.2% 3.2% 2.8% 2.5% Other non-linked protection products EUR 3.4% 3.3% 3.2% 2.9% 2.7% Permanent health insurance claims EUR 3.4% 3.4% 3.3% 3.0% 2.8% Top-down rates Standard annuities EUR 3.7% 3.6% 3.6% 3.3% 3.0% Sovereign annuities EUR 3.4% 3.4% 3.4% 3.0% 2.8% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 256 19 Derivative financial instruments The notional amounts and fair values of derivative instruments held by the Group are set out in the table below. 2023 2022 Contract notional amounts €m Fair values Contract notional amounts €m Fair values Assets €m Liabilities €m Assets €m Liabilities €m Derivatives held for trading Foreign exchange derivatives Currency forwards 4,942 41 43 4,245 50 94 Currency swaps 4,472 31 30 6,677 122 86 Over-the-counter currency options 212 4 4 283 6 6 Total foreign exchange derivatives held for trading 9,626 76 77 11,205 178 186 Interest rate derivatives Interest rate swaps 178,803 1,648 1,770 204,755 2,353 2,247 Over-the-counter interest rate options 19,494 176 161 18,506 241 503 Interest rate futures 1,006 3 4 2,541 8 8 Cross currency interest rate swaps 258 10 10 555 20 23 Forward rate agreements – – – 731 3 3 Total interest rate derivatives held for trading 199,561 1,837 1,945 227,088 2,625 2,784 Equity contracts, commodity contracts and credit derivatives Equity index-linked contracts held 2,211 87 19 2,264 22 36 Commodity contracts 32 2 2 60 4 4 Equity options 14 – – – – – Contract for differences 4 1 – 13 2 2 Total equity contracts and credit derivatives 2,261 90 21 2,337 28 42 Total derivative assets / liabilities held for trading 211,448 2,003 2,043 240,630 2,831 3,012 Derivatives held for hedging Derivatives designated as fair value hedges Interest rate swaps 93,458 2,240 2,323 75,217 2,080 3,391 Cross currency interest rate swaps 82 – 21 82 – 16 Total designated as fair value hedges 93,540 2,240 2,344 75,299 2,080 3,407 Derivatives designated as cash ﬂow hedges Cross currency interest rate swaps 7,637 98 76 7,731 227 77 Interest rate swaps 209 – 27 205 – 30 Total designated as cash ﬂow hedges 7,846 98 103 7,936 227 107 Total derivative assets / liabilities held for hedging 101,386 2,338 2,447 83,235 2,307 3,514 Total derivative assets / liabilities 312,834 4,341 4,490 323,865 5,138 6,526 The Group's objectives and policies on managing the risks that arise in connection with derivatives, including the policies for hedging, are included in the Risk Management Report. The notional amounts of certain types of derivatives do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group's exposure to credit risk. The derivative instruments give rise to assets or liabilities as a result of fluctuations in market rates or prices relative to their terms. Derivatives held for trading comprise derivatives entered into with trading intent as well as derivatives entered into with economic hedging intent to which the Group does not apply hedge accounting. Derivatives classified as held for hedging comprise only those derivatives to which the Group applies hedge accounting. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 257 19 Derivative financial instruments (continued) The Group uses netting arrangements and collateral agreements to reduce its exposure to credit losses. Of the derivative assets of €4.3 billion at 31 December 2023 (2022: €5.1 billion): • €4.2 billion (2022: €5.0 billion) are available for offset against derivative liabilities under master netting arrangements. These transactions do not meet the criteria under IAS 32 to enable the assets to be presented net of the liabilities; • cash collateral of €0.4 billion (2022: €0.6 billion) was held against these assets and is reported within deposits from banks (note 33); and • €0.1 billion (2022: €0.1 billion) are not covered by master netting arrangements or relate to counterparties covered by master netting arrangements with whom a net asset position was held at the reporting date. €0.5 billion (2022: €1.4 billion) of cash collateral was included in placements with other banks (note 21) and €0.05 billion (2022: €0.05 billion) in loans and advances to customers (note 24) was placed with derivative counterparties in respect of a net derivative liability position of €0.4 billion (2022: €1.2 billion). At 31 December 2023, the fair value of the Group's derivative portfolio was a net liability of c.€0.2 billion comprising assets of €4.3 billion and liabilities of €4.5 billion (2022: net liability of €1.4 billion, comprising assets of €5.1 billion and liabilities of €6.5 billion). The movement of c.€1.2 billion is primarily due to the impact of a falling long term interest rate environment on the revaluation of interest rate derivatives (€1.3 billion charge) offset by the move in cross currency swaps (€0.1 billion credit) as a result of euro weakening against sterling. Included within the Group's derivative financial liabilities of €6.5 billion at 31 December 2022 was €275 million relating to a derivative contract recognised as part of the commitment to purchase the performing retail book of KBCI. This transaction completed on 3 February 2023 with the derivative financial instrument de-recognised on that date and its value (liability of €247 million at 3 February 2023) reflected in the fair value of the assets and liabilities at recognition. See note 51 for additional information on the portfolio. Interest rate benchmark reform The transition of the Group's most significant benchmark interest rates, to which the Group's fair value and cash flow hedge relationships of interest rate risk are exposed, completed during 2023 as set out in note 59. The Group designates certain derivatives as hedging instruments in either fair value or cash flow hedge relationships. The Group applied judgement in relation to market expectations when determining the fair value of the hedging instrument and the present value of the estimated cash flows of the hedged item. The key judgement applied was that the cash flows for contracts indexing rates subject to the BMR reform were expected to be broadly equivalent to the cash flows when those contracts transitioned to alternative BMRs. However, if upon transition to an alternative benchmark rate, the new basis for determining contractual cash flows was not economically equivalent to the previous basis and the modification was deemed to be substantial, the hedging instrument and / or hedged item was derecognised and the corresponding hedge accounting relationship discontinued. Any subsequent re-designation of such hedge relationships may increase hedge ineffectiveness. The timing of the nominal amounts of hedging instruments (excluding those subject to a dynamic macro-hedging process) and the applicable average rates were as follows: Hedging strategy 2023 2022 Up to 1 year €m 1-2 years €m 2-5 years €m >5 years €m Up to 1 year €m 1-2 years €m 2-5 years €m >5 years €m Fair value hedge Interest rate risk Interest rate swap - notional amount 1,421 3,631 9,303 4,741 2,320 1,423 8,784 5,749 Average ﬁxed interest rate (0.05%) 1.34% 1.18% 1.15% 0.78% (0.04%) 0.88% 0.68% Foreign Exchange risk Cross currency interest rate swap - notional amount – – – 82 – – – 82 Average EUR - JPY foreign exchange rate – – – 0.01 – – – 0.01 Cash ﬂow hedge Interest rate risk Interest rate swap - notional amount – – 201 8 – – 197 8 Average ﬁxed interest rate – – 0.36% 4.00% – – 0.36% 4.00% Foreign exchange risk Cross currency interest rate swap - notional amount 794 1,736 5,107 – 3,792 794 3,145 – Average EUR - GBP foreign exchange rate 0.85 0.86 0.86 – 0.89 0.85 0.84 – Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 258 19 Derivative financial instruments (continued) Fair value hedges Certain interest rate and cross currency interest rate derivatives are designated as hedging instruments. These are primarily used to reduce the interest rate and FX exposure on the Group's fixed rate debt held, fixed rate mortgages, customer accounts and debt issued portfolios. The amounts relating to items designated as hedging instruments and hedge ineffectiveness for the year are shown in the tables below. In the tables below, all hedging instruments in scope for BMR reform have transitioned to the new risk-free rates prior to the USD London Inter Bank Offered Rate (LIBOR) cessation date of 30 June 2023. As of 31 December 2023, there are no hedging instruments remaining to be transitioned (2022: €548 million). All hedging instruments are included within derivative financial instruments on the balance sheet and ineffectiveness is included within net trading income on the income statement. 2023 Items designated as hedging instruments and hedge ineﬀectiveness Nominal amount of the hedging instrument €m Carrying amount of the hedging instrument Changes in value used to calculate hedge ineﬀectiveness €m Ineﬀectiveness recognised in proﬁt or loss €m Nominal amount of the hedging instruments aﬀected by BMR reform €m Risk category Hedging instrument Assets €m Liabilities €m Interest rate risk Interest rate swaps 93,458 2,240 (2,323) 942 (3) – Foreign Exchange Risk Cross Currency Interest Rate Swaps 82 – (21) (7) – – Total 93,540 2,240 (2,344) 935 (3) – 2022 Items designated as hedging instruments and hedge ineﬀectiveness Nominal amount of the hedging instrument €m Carrying amount of the hedging instrument Changes in value used to calculate hedge ineﬀectiveness €m Ineﬀectiveness recognised in proﬁt or loss €m Nominal amount of the hedging instruments aﬀected by BMR reform €m Risk category Hedging instrument Assets €m Liabilities €m Interest rate risk Interest rate swaps 75,217 2,080 (3,391) (1,359) 9 548 Foreign Exchange Risk Cross Currency Interest Rate Swaps 82 – (16) (6) – – Total 75,299 2,080 (3,407) (1,365) 9 548 The main cause of ineffectiveness in the Group’s fair value hedge relationships are differences in maturities between certain interest rate swaps and their related hedged items. The accumulated fair value adjustments on loans and advances to customers and customer accounts that are in portfolio fair value hedges of interest rate risk amounted to a net loss of €124 million and a net gain of €1,115 million respectively (2022: a net loss of €738 million and a net gain of €2,824 million respectively) and are presented separately on the balance sheet. In the table above, “changes in value used to calculate hedge ineffectiveness” include changes in the fair value of the hedging instruments in portfolio fair value hedges of interest rate risk, and in the table below, they include changes in value for loans and advances to customers and customer accounts that are hedged items in portfolio fair value hedges of interest rate risk. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 259 19 Derivative financial instruments (continued) 2023 Line item on the balance sheet in which the hedged item is included Carrying amount of the hedged item Accumulated amount of fair value adjustments on the hedged item included in the carrying amount of the hedged item Changes in value used for calculating hedge ineffectiveness €m Remaining adjustments for discontinued hedges €m Assets €m Liabilities €m Assets €m Liabilities €m Interest rate risk Loans and advances to customers 19,973 – (27) – 627 (1) Debt securities at amortised cost 4,969 – (401) – 259 – Debt instruments measured at FVOCI 3,884 – (293) – 189 – Customer accounts – (54,299) – – (1,726) – Debt securities in issue – (7,375) – 177 (236) (1) Subordinated liabilities – (1,634) – 40 (58) – Foreign exchange risk Debt securities in issue – (61) – 3 7 – Total 28,826 (63,369) (721) 220 (938) (2) Carrying amount of the hedged item Accumulated amount of fair value adjustments on the hedged item included in the carrying amount of the hedged item Changes in value used for calculating hedge ineffectiveness €m Remaining adjustments for discontinued hedges €m 2022 Line item on the balance sheet in which the hedged item is included Assets €m Liabilities €m Assets €m Liabilities €m Interest rate risk Loans and advances to customers 15,068 – (47) – (721) (1) Debt securities at amortised cost 3,982 – (659) – (703) – Debt instruments measured at FVOCI 4,070 – (482) – (569) – Customer accounts – (44,562) – – 2,780 – Debt securities in issue – (6,773) – 417 481 (1) Subordinated liabilities – (1,543) – 98 100 – Foreign exchange risk Debt securities in issue – (67) – 5 6 – Total 23,120 (52,945) (1,188) 520 1,374 (2) Cash ﬂow hedges The Group designates certain interest rate and currency derivatives in cash flow hedge relationships in order to hedge the exposure to variability in future cash flows arising from floating rate assets and liabilities and from foreign currency assets. The amounts relating to items designated as hedging instruments and hedge ineffectiveness for the year are shown in the tables below. All hedging instruments are included within derivative financial instruments on the balance sheet and ineffectiveness is included within net trading income on the income statement. There are no material causes of ineffectiveness in the Group’s cash flow hedges. In 2023 and 2022, there were no forecast transactions to which the Group had applied hedge accounting which were no longer expected to occur. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 260 19 Derivative financial instruments (continued) 2023 Risk category and hedging instrument Nominal amount of the hedging instrument €m Carrying amount of the hedging instrument Changes in value used for calculating hedge ineﬀectiveness €m Changes in the value of the hedging instrument recognised in other comprehensive income €m Ineﬀectiveness recognised in proﬁt or (loss) €m Amount reclassiﬁed from the cash ﬂow hedge reserve to proﬁt or (loss) €m Nominal amount of the hedging instruments aﬀected by BMR reform €m Assets €m Liabilities €m Interest rate risk Interest rate swaps 209 – (27) (9) 9 – 4 – Foreign exchange risk Cross currency interest rate swaps 7,637 98 (76) (176) 176 – 322 – Total 7,846 98 (103) (185) 185 – 326 – 2022 Risk category and hedging instrument Nominal amount of the hedging instrument €m Carrying amount of the hedging instrument Changes in value used for calculating hedge ineﬀectiveness €m Changes in the value of the hedging instrument recognised in other comprehensive income €m Ineﬀectiveness recognised in proﬁt or (loss) €m Amount reclassiﬁed from the cash ﬂow hedge reserve to proﬁt or (loss) €m Nominal amount of the hedging instruments aﬀected by BMR reform €m Assets €m Liabilities €m Interest rate risk Interest rate swaps 205 – (30) 17 (17) – 6 – Foreign exchange risk Cross currency interest rate swaps 7,731 227 (77) 516 (516) – (360) – Total 7,936 227 (107) 533 (533) – (354) – 2023 2022 Risk category Changes in the hedged risk used for calculating hedge ineffectiveness €m Cash ﬂow hedge reserve (gross) €m Remaining adjustments for discontinued hedges €m Changes in the hedged risk used for calculating hedge ineffectiveness €m Cash ﬂow hedge reserve (gross) €m Remaining adjustments for discontinued hedges €m Interest rate risk 9 24 12 (17) 32 8 Foreign exchange risk 176 17 – (516) – – Total 185 41 12 (533) 32 8 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 261 19 Derivative financial instruments (continued) Movement in cash ﬂow hedge reserve 2023 €m 2022 €m Changes in fair value Interest rate risk – (18) Foreign exchange risk (338) 374 Transfer to income statement Interest income Interest rate risk 8 2 Foreign exchange risk 129 168 Net trading income / (expense) Interest rate risk (4) 4 Foreign exchange risk 193 (528) Deferred tax on reserve movements – 3 Net (decrease) / increase in cash ﬂow hedge reserve (12) 5 20 Other financial assets at fair value through profit or loss Other financial assets at FVTPL include assets managed on a fair value basis by the life assurance business and those assets which do not meet the requirements in order to be measured at FVOCI or amortised cost. Fair values of assets underlying insurance contracts, with direct participation features, are also disclosed. A portion of the Group’s life assurance business takes the legal form of investment contracts, under which legal title to the underlying investment is held by the Group, but the inherent risks and rewards in the investments are borne by the policyholders. Due to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities due to policyholders and any change in the value of the assets results in an equal change in the value of the amounts due to policyholders. The associated liabilities are included in liabilities to customers under investment contracts and insurance contract liabilities on the balance sheet. At 31 December 2023, such assets were €18,746 million (2022: €16,666 million). Included in these assets are investments in unconsolidated structured entities which comprise investments in collective investment vehicles of €13,731 million (2022: €12,068 million) (note 53). Other financial assets of €2,153 million (2022: €1,887 million) include €2,028 million (2022: €1,747 million ) relating to assets held by the Group’s life assurance business for solvency margin purposes or as backing for non-linked policyholder liabilities. Further details on financial assets mandatorily measured at FVTPL is set out in note 56. Included in these assets are investments in unconsolidated structured entities which comprise investments in collective investment vehicles of €869 million (2022: €764 million) (note 53). Assets underlying insurance contracts with direct participation features, measured applying the variable fee approach (VFA), are €11,318 million (2022: €9,950 million). 2023 €m 2022 €m Assets linked to policyholder liabilities Equity securities 14,253 12,376 Debt securities 2,116 1,864 Unit trusts 1,451 1,482 Government bonds 926 944 18,746 16,666 of which: Assets underlying insurance contracts with direct participation features 11,318 9,950 Other ﬁnancial assets Equity securities 764 647 Government bonds 612 502 Debt securities 581 519 Unit trusts 196 219 2,153 1,887 Other ﬁnancial assets at fair value through proﬁt or loss 20,899 18,553 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 262 21 Loans and advances to banks Loans and advances to banks are classified as financial assets at amortised cost or financial assets mandatorily at FVTPL. The associated impairment loss allowance on loans and advances to banks is measured on a 12-month or lifetime ECL approach. Loans and advances to banks at FVTPL include assets managed on a fair value basis by the life assurance business and those assets which do not meet the requirements in order to be measured at FVOCI or amortised cost. At 31 December 2023, the Group’s loans and advances to banks includes €184 million (2022: €160 million) of assets held on behalf of Wealth and Insurance life policyholders. Assets underlying insurance contracts with direct participation features, measured applying the variable fee approach (VFA), are €111 million (2022: €88 million). Mandatory deposits with central banks includes €1.0 billion relating to collateral in respect of the Group’s issued bank notes in NI (2022: €1.0 billion). Placements with other banks includes cash collateral of €0.5 billion (2022: €1.4 billion) placed with derivative counterparties in relation to net derivative liability positions (note 19). There has been no significant change in the impairment loss allowance on loans and advances to banks held at amortised cost during the year. The composition of loans and advances to banks at amortised cost by stage is set out on page 279 and the asset quality of loans and advances to banks at amortised cost is set out on page 291. 2023 €m 2022 €m Mandatory deposits with central banks 1,033 1,076 Placements with banks 717 1,788 Securities purchased with agreement to resell 35 – Funds placed with central banks not on demand 23 34 1,808 2,898 Less impairment loss allowance on loans and advances to banks (1) (1) Loans and advances to banks at amortised cost 1,807 2,897 Loans and advances to banks at FVTPL 100 147 Loans and advances to banks 1,907 3,044 of which: Assets underlying insurance contracts with direct participation features 111 88 Loans and advances to banks at FVTPL are not subject to impairment under IFRS 9. 22 Debt securities at amortised cost The following table details the significant categories of debt securities at amortised cost. The composition of debt securities at amortised cost by stage is set out on page 279 and the asset quality of debt securities at amortised cost is set out on page 291. 2023 €m 2022 €m Government bonds 4,134 3,752 Ireland 3,886 3,655 UK 114 97 Other 134 – Other debt securities at amortised cost 1,540 671 Asset backed securities 42 50 Less impairment loss allowance (1) (1) Debt securities at amortised cost 5,715 4,472 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 263 23 Financial assets at fair value through other comprehensive income The impairment loss allowance of €1 million ( 2022: €1 million) on debt instruments at FVOCI does not reduce the carrying amount, but an amount equal to the allowance is recognised in OCI as an accumulated impairment amount, with corresponding impairment gains or losses recognised in the income statement. The composition of debt instruments at FVOCI by stage is set out on page 279 and the asset quality of debt instruments at FVOCI is set out on page 291. In 2023, the Group did not dispose of any debt instruments at FVOCI (2022: €4,201 million) and there was no transfer from the debt instruments at FVOCI reserve to the income statement (2022 : €98 million). At 31 December 2023, financial assets at FVOCI included €2,367 million (2022: €2,745 million) placed with Monetary Authorities as collateral, to access intraday and other funding facilities, if required. 2023 €m 2022 €m Debt instruments at FVOCI Other debt securities - listed 3,232 3,524 Government bonds 736 730 Total debt instruments at FVOCI 3,968 4,254 Impairment loss allowance on debt instruments at FVOCI (1) (1) Fair value 2023 €m 2022 €m Balance at 1 January 4,254 9,457 Additions 36 283 Redemptions and disposals (486) (4,785) Revaluation, exchange and other adjustments 164 (701) Balance at 31 December 3,968 4,254 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 264 24 Loans and advances to customers Loans and advances to customers at amortised cost Loans and advances to customers at amortised cost (after impairment loss allowance) at 31 December 2023 included cash collateral of €45 million (2022: €45 million ) placed with derivative counterparties in relation to net derivative liability positions. Also included is €191 million (2022: €257 million) of lending in relation to the UK government-backed Bounce Back Loan and Coronavirus Business Interruption schemes. At 31 December 2023, loans and advances to customers at amortised cost includes gross carrying amounts of €6.5 billion (2022: €4.0 billion) of RoI green mortgages, €1.3 billion (2022: €1.1 billion) of UK green mortgages, €1.7 billion (2022: €1.7 billion) of green commercial real estate lending, €1.2 billion (2022: €1.1 billion) of sustainability-linked loans, €0.3 billion (2022: €0.2 billion) of renewables project finance, and €0.1 billion (2022: €0.1 billion) of electric vehicles funding. During 2023, the Group completed one NPE disposal transaction whereby it derecognised €0.1 billion (2022: €0.9 billion) of loans and advances to customers (after an impairment loss allowance of €0.2 billion). The portfolios derecognised had a gross carrying value of €0.3 billion which consisted of non-performing Retail RoI business lending which had a gross carrying value of €210 million, UK business lending which had a gross carrying value of €48 million and RoI residential mortgages which had a gross carrying value of €29 million. All loans included in these transactions have been derecognised from the balance sheet. The Group has recognised an impairment loss of €6 million (2022: €9 million) relating to the disposal of these loans which has been reported through net impairment losses on financial instruments (note 13). Loans and advances to customers at FVTPL Loans and advances to customers at FVTPL are not subject to impairment under IFRS 9. At 31 December 2023, loans and advances to customers at FVTPL included €205 million (2022: €217 million) relating to the Life Loan mortgage product, which was offered by the Group until November 2010. The cash flows of the Life Loans are not considered to consist solely of payments of principal and interest and as such are classified as FVTPL. 2023 €m 2022 €m Loans and advances to customers at amortised cost 76,558 69,454 Finance leases and hire purchase receivables 4,188 3,585 80,746 73,039 Less impairment loss allowance on loans and advances to customers at amortised cost (1,222) (1,295) Loans and advances to customers at amortised cost 79,524 71,744 Loans and advances to customers at fair value through proﬁt or loss 205 217 Total loans and advances to customers 79,729 71,961 Amounts include: Due from joint ventures and associates 49 84 The following tables show the gross carrying amount and impairment loss allowances subject to 12 month and lifetime ECL on loans and advances to customers at amortised cost. The POCI assets of €143 million at 31 December 2023 (2022: €80 million) included €25 million (2022: €1 million) of assets which, while credit-impaired upon purchase or origination were no longer credit-impaired at the reporting date due to improvements in credit risk. These assets will remain classified as POCI until derecognition. The increase in POCI asset is due to the KBCI loan acquisition. 2023 Gross carrying amount at amortised cost (before impairment loss allowance) Residential mortgages €m Non- property SME and corporate €m Property and construction €m Consumer €m Total €m Stage 1 - 12 month ECL (not credit-impaired) 42,786 14,737 3,336 4,870 65,729 Stage 2 - Lifetime ECL (not credit-impaired) 3,574 4,632 3,518 801 12,525 Stage 3 - Lifetime ECL (credit-impaired) 770 1,080 369 130 2,349 Purchased / originated credit-impaired 142 1 – – 143 Gross carrying amount at 31 December 2023 47,272 20,450 7,223 5,801 80,746 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 265 24 Loans and advances to customers (continued) 2023 Impairment loss allowance Residential mortgages €m Non- property SME and corporate €m Property and construction €m Consumer €m Total €m Stage 1 - 12 month ECL (not credit-impaired) 40 65 25 50 180 Stage 2 - Lifetime ECL (not credit-impaired) 56 154 144 67 421 Stage 3 - Lifetime ECL (credit-impaired) 141 330 80 61 612 Purchased / originated credit-impaired 9 – – – 9 Impairment loss allowance at 31 December 2023 246 549 249 178 1,222 2022 Gross carrying amount at amortised cost (before impairment loss allowance) Residential mortgages €m Non- property SME and corporate €m Property and construction €m Consumer €m Total €m Stage 1 - 12 month ECL (not credit-impaired) 34,020 15,253 3,864 4,694 57,831 Stage 2 - Lifetime ECL (not credit-impaired) 3,546 4,665 3,922 510 12,643 Stage 3 - Lifetime ECL (credit-impaired) 450 1,534 355 146 2,485 Purchased / originated credit-impaired 4 16 60 – 80 Gross carrying amount at 31 December 2022 38,020 21,468 8,201 5,350 73,039 2022 Impairment loss allowance Residential mortgages €m Non- property SME and corporate €m Property and construction €m Consumer €m Total €m Stage 1 - 12 month ECL (not credit-impaired) 18 65 10 49 142 Stage 2 - Lifetime ECL (not credit-impaired) 38 153 53 41 285 Stage 3 - Lifetime ECL (credit-impaired) 89 563 102 81 835 Purchased / originated credit-impaired 1 2 30 – 33 Impairment loss allowance at 31 December 2022 146 783 195 171 1,295 The following tables show the changes in gross carrying amount and impairment loss allowances of loans and advances to customers at amortised cost for the year ended 31 December 2023. The tables are prepared based on a combination of aggregation of monthly movements for material term loan portfolios (i.e. incorporating all movements a loan in these portfolios has made during the year) and full year movements for revolving-type facilities and less material (primarily consumer) portfolios. Transfers between stages represent the migration of loans from Stage 1 to Stage 2 following a ‘significant increase in credit risk’ or to Stage 3 as loans enter defaulted status. Conversely, improvement in credit quality and loans exiting default result in loans migrating in the opposite direction. The approach taken to identify a ‘significant increase in credit risk’ and identifying defaulted and credit-impaired assets is outlined in the credit risk section of the Risk Management Report on pages 162 to 163 and the Group accounting policies note on page 209. Transfers between each stage reflect the balances and impairment loss allowances prior to transfer. The impact of re- measurement of impairment loss allowance on stage transfer is reported within ‘re-measurement’ in the new stage that a loan has transferred into. For those tables, based on an aggregation of the months transfers between stages, transfers may include loans which have subsequently transferred back to their original stage or migrated further to another stage. ‘Net changes in exposure’ comprise the movements in the gross carrying amount and impairment loss allowance as a result of new loans originated and repayments of outstanding balances throughout the reporting period. ‘Net impairment losses / (gains) in income statement’ does not include the impact of cash recoveries which are recognised directly in the income statement (note 13). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 266 24 Loans and advances to customers (continued) ‘Re-measurements’ includes the impact of remeasurement on stage transfers noted above, other than those directly related to the update of FLI and / other model and parameter updates, changes in management adjustments and remeasurement due to changes in asset quality that did not result in a transfer to another stage. ‘ECL model parameter and / or methodology changes’ represents the impact on impairment loss allowances of semi- annual updates to the FLI, and other model and parameter updates used in the measurement of impairment loss allowances, including the impact of stage migrations where the migration is directly related to the update of FLI and / or other model and parameter updates. ‘Impairment loss allowances utilised’ represents the reduction in the gross carrying amount and associated impairment loss allowance on loans where the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The utilisation of an allowance does not, of itself, alter a customer’s obligations nor does it impact on the Group’s rights to take relevant enforcement action. 2023 Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2023 57,831 12,643 2,485 80 73,039 Total net transfers (3,885) 2,732 1,153 – – To 12 month ECL (not credit-impaired) 8,481 (8,475) (6) – – To lifetime ECL (not credit-impaired) (12,096) 12,552 (456) – – To lifetime ECL (credit-impaired) (270) (1,345) 1,615 – – Net changes in exposure 11,190 (2,872) (768) 110 7,660 Impairment loss allowances utilised – – (526) (48) (574) Exchange adjustments 343 12 5 1 361 Measurement reclassiﬁcation and other movements 250 10 – – 260 Gross carrying amount at 31 December 2023 65,729 12,525 2,349 143 80,746 Impairment loss allowances utilised on loans and advances to customers at amortised cost during 2023 includes €203 million of contractual amounts outstanding that are still subject to enforcement activity. 2023 Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2023 142 285 835 33 1,295 Total net transfers 93 (120) 27 – – To 12 month ECL (not credit-impaired) 147 (145) (2) – – To lifetime ECL (not credit-impaired) (50) 133 (83) – – To lifetime ECL (credit-impaired) (4) (108) 112 – – Net impairment losses / (gains) in income statement (56) 254 226 21 445 Re-measurement (83) 255 356 26 554 Net changes in exposure 11 (73) (125) (15) (202) ECL model parameter and / or methodology changes 16 72 (5) 10 93 Impairment loss allowances utilised – – (526) (48) (574) Exchange adjustments 1 1 3 1 6 Measurement reclassiﬁcation and other movements – 1 47 2 50 Impairment loss allowance at 31 December 2023 180 421 612 9 1,222 Impairment coverage at 31 December 2023 (%) 0.27% 3.36% 26.05% 6.29% 1.51% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 267 24 Loans and advances to customers (continued) Total gross loans and advances to customers increased during the year by €7.7 billion from €73.0 billion at 31 December 2022 to €80.7 billion at 31 December 2023. The Group’s approach for identifying a significant increase in credit risk is outlined on page 162 of the Risk Management Report. Stage 1 loans have increased by €7.9 billion primarily reflecting the impact of net new lending of €11.2 billion, including the acquisition of KBCI loans, FX movements of €0.3 billion and other movements of €0.3 million, offset by net transfers to other risk stages of €3.9 billion. Total net transfers to other risk stages reflect the impact of elevated inflation rates and interest rates on the credit risk in the loan book, the application of an updated approach to identifying significant increase in credit risk for relationship managed commercial portfolios during 2023, and other portfolio activity (including net repayments / redemptions in the year). Impairment loss allowances on Stage 1 loans have increased by €38 million, resulting in an increase in cover on Stage 1 loans from 0.25% at 31 December 2022 to 0.27% at 31 December 2023. Net staging transfers (including acquisition of KBCI loans) resulted in an increase to impairment loss allowances (ILA) of €93 million with model parameter changes resulting in a further increase of €16 million in ILA during 2023. This was largely offset by remeasurement reclassifications of €83 million reflecting the impact of re-measuring net transfers from other stages of lifetime ECL to 12-month ECL. Stage 2 loans have decreased by €0.1 billion with transfers from other stages of €2.7 billion, more than offset by net repayments of €2.9 billion. Net transfers from other stages reflect the impact of elevated inflation and interest rates on credit risk in the loan book, the application of an updated approach to identifying significant increase in credit risk for relationship managed commercial portfolios during 2023, and other portfolio activity (including net repayments / redemptions in the year). Cover on Stage 2 loans has increased from 2.25% at 31 December 2022 to 3.36% at 31 December 2023, primarily due to remeasurement of €255 million, which includes the application of a post-model adjustment for latent risk in the Investment Property portfolio, see page 228; and ECL model parameter and methodology changes of €72 million. The increase was largely offset by the impact of net transfers of €120 million and net repayments of €73 million. Stage 3 loans have decreased by €0.1 billion with the key drivers being the impact of net repayments of €0.8 billion (including repayments from portfolio disposals and case specific resolution activities) and the utilisation of impairment loss allowances of €0.5 billion, largely offset by a net migration from other stages of €1.2 billion driven by the emergence of new defaults for case specific reasons. Stage 3 ILAs have decreased by €0.2 billion due to the utilisation of ILAs of €526 million from portfolio disposals and case specific resolution activities and the impact of net reductions in exposure of €125 million, largely offset by re- measurement of €356 million, which includes the application of a post-model adjustment for potential NPE portfolio resolutions (see pages 228 to 229), and measurement reclassification and other movements of €47 million. Cover on Stage 3 loans has decreased from 33.60% at 31 December 2022 to 26.05% at 31 December 2023. The decrease primarily reflects lower impairment requirements for assets migrating to stage 3 in the year combined with the impact of NPE resolution strategies. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 268 24 Loans and advances to customers (continued) 2022 Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2022 61,281 12,407 4,185 81 77,954 Total net transfers (3,762) 2,756 1,006 – – To 12 month ECL (not credit-impaired) 6,490 (6,478) (12) – – To lifetime ECL (not credit-impaired) (9,985) 10,586 (601) – – To lifetime ECL (credit-impaired) (267) (1,352) 1,619 – – Net changes in exposure 1,542 (2,427) (1,696) – (2,581) Impairment loss allowances utilised – – (927) – (927) Exchange adjustments (1,186) (108) (83) (1) (1,378) Measurement reclassiﬁcation and other movements (44) 15 – – (29) Gross carrying amount at 31 December 2022 57,831 12,643 2,485 80 73,039 2022 Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2022 170 416 1,347 25 1,958 Total net transfers 143 (164) 21 – – To 12 month ECL (not credit-impaired) 188 (185) (3) – – To lifetime ECL (not credit-impaired) (43) 126 (83) – – To lifetime ECL (credit-impaired) (2) (105) 107 – – Net impairment losses / (gains) in income statement (166) 34 391 9 268 Re-measurement (240) 68 529 7 364 Net changes in exposure 41 (97) (200) – (256) ECL model parameter and / or methodology changes 33 63 62 2 160 Impairment loss allowances utilised – – (927) – (927) Exchange adjustments (4) (3) (8) (2) (17) Measurement reclassiﬁcation and other movements (1) 2 11 1 13 Impairment loss allowance at 31 December 2022 142 285 835 33 1,295 Impairment coverage at 31 December 2022 (%) 0.25% 2.25% 33.60% 41.23% 1.77% Impairment loss allowances utilised on loans and advances to customers at amortised cost during 2022 includes €312 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 269 24 Loans and advances to customers (continued) Loans and advances to customers at amortised cost by portfolio The following tables set out the movement in both the gross carrying amount and impairment loss allowances subject to 12 month and lifetime ECL on loans and advances to customers at amortised cost by portfolio asset class. These tables are prepared on the same basis as the total Group tables as set out above. Residential Mortgages 2023 Residential mortgages - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2023 34,020 3,546 450 4 38,020 Total net transfers (1,130) 633 497 – – To 12 month ECL (not credit-impaired) 3,986 (3,986) – – – To lifetime ECL (not credit-impaired) (4,950) 5,076 (126) – – To lifetime ECL (credit-impaired) (166) (457) 623 – – Net changes in exposure 9,394 (627) (165) 140 8,742 Impairment loss allowances utilised – – (16) (2) (18) Exchange adjustments 288 22 4 – 314 Measurement reclassiﬁcation and other movements 214 – – – 214 Gross carrying amount at 31 December 2023 42,786 3,574 770 142 47,272 2023 Residential mortgages - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2023 18 38 89 1 146 Total net transfers 42 (58) 16 – – To 12 month ECL (not credit-impaired) 55 (55) – – – To lifetime ECL (not credit-impaired) (12) 23 (11) – – To lifetime ECL (credit-impaired) (1) (26) 27 – – Net impairment losses / (gains) in income statement (20) 74 47 9 110 Re-measurement (34) 75 46 (1) 86 Net changes in exposure 4 (9) (12) – (17) ECL model parameter and / or methodology changes 10 8 13 10 41 Impairment loss allowances utilised – – (16) (2) (18) Exchange adjustments – – – – – Measurement reclassiﬁcation and other movements – 2 5 1 8 Impairment loss allowance at 31 December 2023 40 56 141 9 246 Impairment coverage at 31 December 2023 (%) 0.09% 1.57% 18.31% 6.34% 0.52% Impairment loss allowances utilised on Residential mortgages at amortised cost during 2023 includes €2 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 270 24 Loans and advances to customers (continued) 2022 Residential mortgages- Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2022 38,708 2,779 1,773 2 43,262 Total net transfers (1,479) 1,346 133 – – To 12 month ECL (not credit-impaired) 3,028 (3,028) – – – To lifetime ECL (not credit-impaired) (4,350) 4,654 (304) – – To lifetime ECL (credit-impaired) (157) (280) 437 – – Net changes in exposure (2,230) (524) (1,053) 1 (3,806) Impairment loss allowances utilised – – (365) – (365) Exchange adjustments (1,002) (53) (37) – (1,092) Measurement reclassiﬁcation and other movements 23 (2) (1) 1 21 Gross carrying amount at 31 December 2022 34,020 3,546 450 4 38,020 2022 Residential mortgages Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired €m) Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2022 28 60 416 – 504 Total net transfers 61 (29) (32) – – To 12 month ECL (not credit-impaired) 68 (68) – – – To lifetime ECL (not credit-impaired) (7) 48 (41) – – To lifetime ECL (credit-impaired) – (9) 9 – – Net impairment losses / (gains) in income statement (70) 8 85 1 24 Re-measurement (68) (8) 90 1 15 Net changes in exposure (13) (14) (22) – (49) ECL model parameter and / or methodology changes 11 30 17 – 58 Impairment loss allowances utilised – – (365) – (365) Exchange adjustments (1) (1) (3) – (5) Measurement reclassiﬁcation and other movements – – (12) – (12) Impairment loss allowance at 31 December 2022 18 38 89 1 146 Impairment coverage at 31 December 2022 (%) 0.05% 1.07% 19.78% 25.00% 0.38% Impairment loss allowances utilised on Residential mortgages at amortised cost during 2022 includes €12 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 271 24 Loans and advances to customers (continued) Non-property SME and corporate 2023 Non-property SME and corporate - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2023 15,253 4,665 1,534 16 21,468 Total net transfers (1,356) 1,108 248 – – To 12 month ECL (not credit-impaired) 2,522 (2,518) (4) – – To lifetime ECL (not credit-impaired) (3,840) 4,117 (277) – – To lifetime ECL (credit-impaired) (38) (491) 529 – – Net changes in exposure 822 (1,130) (397) (15) (720) Impairment loss allowances utilised – – (307) – (307) Exchange adjustments (12) (21) 1 – (32) Measurement reclassiﬁcation and other movements 30 10 1 – 41 Gross carrying amount at 31 December 2023 14,737 4,632 1,080 1 20,450 2023 Non-property SME and corporate - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2023 65 153 563 2 783 Total net transfers 42 (30) (12) – – To 12 month ECL (not credit-impaired) 64 (63) (1) – – To lifetime ECL (not credit-impaired) (20) 76 (56) – – To lifetime ECL (credit-impaired) (2) (43) 45 – – Net impairment losses / (gains) in income statement (42) 31 56 (2) 43 Re-measurement (39) 53 157 – 171 Net changes in exposure 2 (34) (88) (2) (122) ECL model parameter and / or methodology changes (5) 12 (13) – (6) Impairment loss allowances utilised – – (307) – (307) Exchange adjustments – – 1 – 1 Measurement reclassiﬁcation and other movements – – 29 – 29 Impairment loss allowance at 31 December 2023 65 154 330 – 549 Impairment coverage at 31 December 2023 (%) 0.44% 3.32% 30.56% – 2.68% Impairment loss allowances utilised on Non-property SME and corporate during 2023 includes €164 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 272 24 Loans and advances to customers (continued) 2022 Non-property SME and corporate - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2022 14,430 5,100 1,305 15 20,850 Total net transfers (1,332) 641 691 – – To 12 month ECL (not credit-impaired) 2,131 (2,125) (6) – – To lifetime ECL (not credit-impaired) (3,394) 3,602 (208) – – To lifetime ECL (credit-impaired) (69) (836) 905 – – Net changes in exposure 2,218 (1,084) (283) – 851 Impairment loss allowances utilised – – (161) – (161) Exchange adjustments 3 (3) (19) 1 (18) Measurement reclassiﬁcation and other movements (66) 11 1 – (54) Gross carrying amount at 31 December 2022 15,253 4,665 1,534 16 21,468 2022 Non-property SME and corporate - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2022 67 247 439 2 755 Total net transfers 68 (105) 37 – – To 12 month ECL (not credit-impaired) 94 (93) (1) – – To lifetime ECL (not credit-impaired) (25) 57 (32) – – To lifetime ECL (credit-impaired) (1) (69) 70 – – Net impairment losses / (gains) in income statement (69) 12 236 (1) 178 Re-measurement (138) 41 248 (1) 150 Net changes in exposure 51 (51) (50) – (50) ECL model parameter and / or methodology changes 18 22 38 – 78 Impairment loss allowances utilised – – (161) – (161) Exchange adjustments (1) (1) (2) 1 (3) Measurement reclassiﬁcation and other movements – – 14 – 14 Impairment loss allowance at 31 December 2022 65 153 563 2 783 Impairment coverage at 31 December 2022 (%) 0.43% 3.28% 36.7% 12.5% 3.65% Impairment loss allowances utilised on Non-property SME and corporate during 2022 includes €63 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 273 24 Loans and advances to customers (continued) Property and construction 2023 Property and construction - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2023 3,864 3,922 355 60 8,201 Total net transfers (897) 608 289 – – To 12 month ECL (not credit-impaired) 1,743 (1,743) – – – To lifetime ECL (not credit-impaired) (2,636) 2,683 (47) – – To lifetime ECL (credit-impaired) (4) (332) 336 – – Net changes in exposure 358 (1,018) (194) (15) (869) Impairment loss allowances utilised – – (79) (46) (125) Exchange adjustments 10 4 (2) 1 13 Measurement reclassiﬁcation and other movements 1 2 – – 3 Gross carrying amount at 31 December 2023 3,336 3,518 369 – 7,223 2023 Property and construction - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2023 10 53 102 30 195 Total net transfers 4 (13) 9 – – To 12 month ECL (not credit-impaired) 13 (13) – – – To lifetime ECL (not credit-impaired) (9) 22 (13) – – To lifetime ECL (credit-impaired) – (22) 22 – – Net impairment losses / (gains) in income statement 9 105 44 14 172 Re-measurement 2 74 72 27 175 Net changes in exposure 1 (9) (19) (13) (40) ECL model parameter and / or methodology changes 6 40 (9) – 37 Impairment loss allowances utilised – – (79) (46) (125) Exchange adjustments – – 1 1 2 Measurement reclassiﬁcation and other movements 2 (1) 3 1 5 Impairment loss allowance at 31 December 2023 25 144 80 – 249 Impairment coverage at 31 December 2023 (%) 0.75% 4.09% 21.68% – 3.45% Impairment loss allowances utilised on Property and construction during 2023 includes €10 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 274 24 Loans and advances to customers (continued) 2022 Property and construction - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2022 3,280 4,299 970 64 8,613 Total net transfers (552) 438 114 – – To 12 month ECL (not credit-impaired) 1,145 (1,145) – – – To lifetime ECL (not credit-impaired) (1,696) 1,781 (85) – – To lifetime ECL (credit-impaired) (1) (198) 199 – – Net changes in exposure 1,165 (773) (349) (1) 42 Impairment loss allowances utilised – – (355) – (355) Exchange adjustments (27) (48) (25) (2) (102) Measurement reclassiﬁcation and other movements (2) 6 – (1) 3 Gross carrying amount at 31 December 2022 3,864 3,922 355 60 8,201 2022 Property and construction - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2022 10 78 416 23 527 Total net transfers 9 (18) 9 – – To 12 month ECL (not credit-impaired) 13 (13) – – – To lifetime ECL (not credit-impaired) (4) 12 (8) – – To lifetime ECL (credit-impaired) – (17) 17 – – Net impairment losses / (gains) in income statement (9) (8) 28 9 20 Re-measurement (10) (6) 149 7 140 Net changes in exposure 3 (9) (128) – (134) ECL model parameter and / or methodology changes (2) 7 7 2 14 Impairment loss allowances utilised – – (355) – (355) Exchange adjustments – – (1) (3) (4) Measurement reclassiﬁcation and other movements – 1 5 1 7 Impairment loss allowance at 31 December 2022 10 53 102 30 195 Impairment coverage at 31 December 2022 (%) 0.26% 1.35% 28.73% 50.00% 2.38% Impairment loss allowances utilised on Property and construction during 2022 includes €188 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 275 24 Loans and advances to customers (continued) Consumer 2023 Consumer - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2023 4,694 510 146 – 5,350 Total net transfers (502) 383 119 – – To 12 month ECL (not credit-impaired) 230 (228) (2) – – To lifetime ECL (not credit-impaired) (670) 676 (6) – – To lifetime ECL (credit-impaired) (62) (65) 127 – – Net changes in exposure 616 (97) (12) – 507 Impairment loss allowances utilised – – (124) – (124) Exchange adjustments 57 7 2 – 66 Measurement reclassiﬁcation and other movements 5 (2) (1) – 2 Gross carrying amount at 31 December 2023 4,870 801 130 – 5,801 2023 Consumer - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2023 49 41 81 – 171 Total net transfers 5 (19) 14 – – To 12 month ECL (not credit-impaired) 15 (14) (1) – – To lifetime ECL (not credit-impaired) (9) 12 (3) – – To lifetime ECL (credit-impaired) (1) (17) 18 – – Net impairment losses / (gains) in income statement (3) 44 79 – 120 Re-measurement (12) 53 81 – 122 Net changes in exposure 4 (21) (6) – (23) ECL model parameter and / or methodology changes 5 12 4 – 21 Impairment loss allowances utilised – – (124) – (124) Exchange adjustments 1 1 1 – 3 Measurement reclassiﬁcation and other movements (2) – 10 – 8 Impairment loss allowance at 31 December 2023 50 67 61 – 178 Impairment coverage at 31 December 2023 (%) 1.03% 8.36% 46.92% – 3.07% Impairment loss allowances utilised on Consumer during 2023 includes €27 million of contractual amounts outstanding that are still subject to enforcement activity. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 276 24 Loans and advances to customers (continued) 2022 Consumer - Gross carrying amount (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total gross carrying amount €m Opening balance 1 January 2022 4,863 229 137 – 5,229 Total net transfers (399) 331 68 – – To 12 month ECL (not credit-impaired) 186 (180) (6) – – To lifetime ECL (not credit-impaired) (545) 549 (4) – – To lifetime ECL (credit-impaired) (40) (38) 78 – – Net changes in exposure 389 (46) (11) – 332 Impairment loss allowances utilised – – (46) – (46) Exchange adjustments (160) (4) (2) – (166) Measurement reclassiﬁcation and other movements 1 – – – 1 Gross carrying amount at 31 December 2022 4,694 510 146 – 5,350 2022 Consumer - Impairment loss allowance Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total impairment loss allowance €m Opening balance 1 January 2022 65 31 76 – 172 Total net transfers 5 (12) 7 – – To 12 month ECL (not credit-impaired) 13 (11) (2) – – To lifetime ECL (not credit-impaired) (7) 9 (2) – – To lifetime ECL (credit-impaired) (1) (10) 11 – – Net impairment losses / (gains) in income statement (18) 22 42 – 46 Re-measurement (24) 41 42 – 59 Net changes in exposure – (23) – – (23) ECL model parameter and / or methodology changes 6 4 – – 10 Impairment loss allowances utilised – – (46) – (46) Exchange adjustments (2) (1) (2) – (5) Measurement reclassiﬁcation and other movements (1) 1 4 – 4 Impairment loss allowance at 31 December 2022 49 41 81 – 171 Impairment coverage at 31 December 2022 (%) 1.04% 8.04% 55.48% – 3.20% Impairment loss allowances utilised on Consumer during 2022 includes €49 million of contractual amounts outstanding that are still subject to enforcement activity. Finance leases and hire purchase receivables The Group’s material leasing arrangements include the provision of instalment credit and leasing finance for both consumer and business customers. Loans and advances to customers include finance leases and hire purchase receivables, which are analysed in the following table. The net investment in finance leases at 31 December 2023 was €4,188 million, an increase of €603 million since 31 December 2022. This was primarily driven by an increase in motor finance volumes in RoI and the UK. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 277 24 Loans and advances to customers (continued) 2023 €m 2022 €m Gross investment in ﬁnance leases Not later than 1 year 943 1,039 1 to 2 years 1,078 906 2 to 3 years 1,259 928 3 to 4 years 934 751 4 to 5 years 376 248 Later than 5 years 62 16 4,652 3,888 Unearned future ﬁnance income on ﬁnance leases (464) (303) Net investment in ﬁnance leases 4,188 3,585 The net investment in ﬁnance leases is analysed as follows: Not later than 1 year 841 956 1 to 2 years 968 835 2 to 3 years 1,135 857 3 to 4 years 840 691 4 to 5 years 347 232 Later than 5 years 57 14 4,188 3,585 Securitisations Loans and advances to customers include balances that have been securitised but not derecognised, comprising both residential mortgages and commercial loans. In general, the assets, or interests in the assets, are transferred to structured entities, which then issue securities to third party investors or to other entities within the Group. With the exception of Mulcair Securities No.2 DAC and Temple Quay No.1, all of the Group’s securitisation structured entities are consolidated. See note 53 for further details. 25 Credit risk exposures The following disclosures provide quantitative information about credit risk within financial instruments held by the Group. Details of the credit risk methodologies are set out on pages 159 to 164. In addition to credit risk, the primary risks affecting the Group through its use of financial instruments are: funding and liquidity risk, market risk and life insurance risk. The Group’s approach to the management of these risks, together with its approach to Capital management, are set out in sections 3.2 (capital adequacy risk), 3.4 (credit risk), 3.5 (funding and liquidity risk), 3.6 (life insurance risk) and 3.7 (market risk) of the Risk Management Report. The table below illustrates the relationship between the Group’s internal credit risk rating grades as used for credit risk management purposes and PD percentages, and further illustrates the indicative relationship with credit risk ratings used by external rating agencies. Internal credit risk ratings PD Grade PD % Indicative S&P type external ratings 1-4 0% ≤ PD < 0.26% AAA, AA+, AA, AA-, A+, A, A-, BBB+, BBB 5-7 0.26% ≤ PD < 1.45% BBB-, BB+, BB, BB- 8-9 1.45% ≤ PD < 3.60% B+ 10-11 3.60% ≤ PD < 100% B, Below B 12 (credit-impaired) 100% n/a Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 278 25 Credit risk exposures (continued) Financial assets Composition and risk proﬁle The tables below summarise the composition and risk profile of the Group’s financial assets subject to impairment and the impairment loss allowances on these financial assets. The tables exclude loan commitments, guarantees and letters of credit of €18,823 million at 31 December 2023 (20221: €17,052 million) that are subject to impairment (note 40). Loans and advances to customers excludes €205 million (2022: €217 million) of loans mandatorily at FVTPL at 31 December 2023 which are not subject to impairment under IFRS 9 and are therefore excluded from impairment related tables. 1 Comparative figures have been restated by €181 million from €16,871 million to €17,052 million to adjust for letters of credit which were incorrectly excluded in 2022. At 31 December 2023, POCI assets of €143 million (2022: €80 million) included €25 million of assets ( 2022: €1 million) which, while credit-impaired upon purchase or origination were no longer credit-impaired at the reporting date due to improvements in credit risk. These assets will remain classified as POCI until derecognition. At 31 December 2023, other financial assets (before impairment loss allowance) includes: cash and balances at central banks of €31,848 million (2022: €36,861 million) and items in the course of collection from other banks of €126 million (2022: €140 million). 2023 Financial assets exposure by stage (before impairment loss allowance) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total €m Financial assets measured at amortised cost Loans and advances to customers 65,729 12,525 2,349 143 80,746 Loans and advances to banks 1,808 – – – 1,808 Debt securities 5,715 1 – – 5,716 Other ﬁnancial assets 31,974 – – – 31,974 Total ﬁnancial assets measured at amortised cost 105,226 12,526 2,349 143 120,244 Debt instruments at FVOCI 3,968 – – – 3,968 Total 109,194 12,526 2,349 143 124,212 2023 Impairment loss allowance on ﬁnancial assets Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total €m Financial assets measured at amortised cost Loans and advances to customers 180 421 612 9 1,222 Loans and advances to banks 1 – – – 1 Debt securities 1 – – – 1 Other ﬁnancial assets 5 – – – 5 Total ﬁnancial assets measured at amortised cost 187 421 612 9 1,229 Debt instruments at FVOCI 1 – – – 1 Total 188 421 612 9 1,230 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 279 25 Credit risk exposures (continued) Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total €m 2022 Financial assets exposure by stage (before impairment loss allowance) Financial assets measured at amortised cost Loans and advances to customers 57,831 12,643 2,485 80 73,039 Loans and advances to banks 2,898 – – – 2,898 Debt securities 4,471 1 – – 4,472 Other ﬁnancial assets 37,001 – – – 37,001 Total ﬁnancial assets measured at amortised cost 102,201 12,644 2,485 80 117,410 Debt instruments at FVOCI 4,254 – – – 4,254 Total 106,455 12,644 2,485 80 121,664 2022 Impairment loss allowance on ﬁnancial assets Stage 1 - 12 month ECL (not credit- impaired) €m Stage 2 - Lifetime ECL (not credit- impaired) €m Stage 3 - Lifetime ECL (credit- impaired) €m Purchased / originated credit- impaired €m Total €m Financial assets measured at amortised cost Loans and advances to customers 142 285 835 33 1,295 Loans and advances to banks 1 – – – 1 Debt securities 1 – – – 1 Other ﬁnancial assets 6 – – – 6 Total ﬁnancial assets measured at amortised cost 150 285 835 33 1,303 Debt instruments at FVOCI 1 – – – 1 Total 151 285 835 33 1,304 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 280 25 Credit risk exposures (continued) Loans and advances to customers at amortised cost Composition and risk proﬁle The table below summarises the composition and risk profile of the Group’s loans and advances to customers at amortised cost, including POCI assets of €143 million (2022: €80 million). Credit-impaired includes Stage 3 and POCI assets of €118 million (2022: €79 million). €25 million of POCI assets (2022: €1 million) were no longer credit-impaired at the reporting date due to improvement in credit risk since purchase or origination. These loans will remain classified as POCI loans until derecognition. The increase in POCI assets is due to the KBCI loan acquisition. 2023 2022 Loans and advances to customers Composition and risk proﬁle (before impairment loss allowance) Not credit- impaired €m Credit- impaired €m Total Not credit- impaired €m Credit- impaired €m Total €m % €m % Residential mortgages 46,360 770 47,130 58% 37,566 450 38,016 52% Retail Ireland 31,719 383 32,102 40% 22,217 251 22,468 31% Retail UK 14,641 387 15,028 18% 15,349 199 15,548 21% Non-property SME and corporate 19,369 1,080 20,449 26% 19,918 1,534 21,452 29% Republic of Ireland SME 6,811 342 7,153 9% 6,614 561 7,175 10% UK SME 1,467 80 1,547 2% 1,457 121 1,578 2% Corporate 11,091 658 11,749 15% 11,847 852 12,699 17% Property and construction 6,854 369 7,223 9% 7,786 355 8,141 12% Investment 6,363 320 6,683 9% 6,685 339 7,024 10% Development 491 49 540 – 1,101 16 1,117 2% Consumer 5,671 130 5,801 7% 5,204 146 5,350 7% Total 78,254 2,349 80,603 100% 70,474 2,485 72,959 100% Purchased / originated credit-impaired 25 118 143 – 1 79 80 – Total 78,279 2,467 80,746 100% 70,475 2,564 73,039 100% ILA on loans and advances to customers (including POCIs) 598 624 1,222 2% 427 868 1,295 2% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 281 25 Credit risk exposures (continued) Asset quality - not credit-impaired The table below summarises the composition and impairment loss allowance of the Group’s loans and advances to customers at amortised cost that are not credit-impaired. Excluded from the tables below are POCI assets of €25 million (2022: €1 million) which were no longer credit-impaired at the reporting date due to improvement in credit risk since purchase or origination. These assets will remain classified as POCI until derecognition. 2023 Not credit-impaired loans and advances to customers Composition and impairment loss allowance Stage 1 Stage 2 Stage 1 Loans €m Loans as % of advances1 % Stage 1 ILA €m ILA % of Stage 1 loans % Stage 2 Loans €m Loans as % of advances1 % Stage 2 ILA €m ILA % of Stage 2 loans % Residential mortgages 42,786 90.8% 40 0.09% 3,574 7.6% 56 1.57% Retail Ireland 29,365 91.5% 28 0.10% 2,354 7.3% 32 1.36% Retail UK 13,421 89.3% 12 0.09% 1,220 8.1% 24 1.97% Non-property SME and corporate 14,737 72.0% 65 0.44% 4,632 22.7% 154 3.32% Republic of Ireland SME 5,667 79.2% 36 0.64% 1,144 16.0% 45 3.93% UK SME 1,154 74.6% 5 0.43% 313 20.2% 22 7.03% Corporate 7,916 67.4% 24 0.30% 3,175 27.0% 87 2.74% Property and construction 3,336 46.2% 25 0.75% 3,518 48.7% 144 4.09% Investment 2,934 43.9% 22 0.75% 3,429 51.3% 141 4.11% Development 402 74.4% 3 0.75% 89 16.5% 3 3.37% Consumer 4,870 84.0% 50 1.03% 801 13.8% 67 8.36% Total 65,729 81.4% 180 0.27% 12,525 15.5% 421 3.36% 2022 Not credit-impaired loans and advances to customers Composition and impairment loss allowance Stage 1 Stage 2 Stage 1 Loans €m Loans as % of advances1 % Stage 1 ILA €m ILA % of Stage 1 loans % Stage 2 Loans €m Loans as % of advances1 % Stage 2 ILA €m ILA % of Stage 2 loans % Residential mortgages 34,020 89.5% 18 0.05% 3,546 9.3% 38 1.07% Retail Ireland 19,733 87.8% 8 0.04% 2,484 11.1% 22 0.89% Retail UK 14,287 91.9% 10 0.07% 1,062 6.8% 16 1.51% Non-property SME and corporate 15,253 71.1% 65 0.43% 4,665 21.7% 153 3.28% Republic of Ireland SME 4,931 68.7% 39 0.79% 1,683 23.5% 63 3.74% UK SME 1,177 74.6% 4 0.34% 280 17.7% 12 4.29% Corporate 9,145 72.0% 22 0.24% 2,702 21.3% 78 2.89% Property and construction 3,864 47.4% 10 0.26% 3,922 48.2% 53 1.35% Investment 3,216 45.8% 7 0.22% 3,469 49.4% 47 1.35% Development 648 58.0% 3 0.46% 453 40.6% 6 1.32% Consumer 4,694 87.8% 49 1.04% 510 9.5% 41 8.04% Total 57,831 79.2% 142 0.25% 12,643 17.3% 285 2.25% 1 'Advances' refers to the portfolio loan balance (pre-impairment loss allowance) excluding POCI assets. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 282 25 Credit risk exposures (continued) Asset quality - credit-impaired Credit-impaired loans include loans where the borrower is considered unlikely to pay in full without recourse by the Group to actions such as realising security, and loans where the borrower is greater than 90 days past due and the arrears amount is material. All credit-impaired loans and advances to customers are risk rated PD grade 12. The table below summarises the composition and impairment loss allowance of the Group credit-impaired loans and advances to customers at amortised cost. Credit-impaired includes Stage 3 and POCI assets of €118 million (2022: €79 million). €25 million of POCI assets (2022: €1 million) were no longer credit-impaired at the reporting date due to improvement in credit risk since purchase or origination. These loans will remain classified as POCI loans until derecognition. The increase in POCI assets is due to the KBCI loan acquisition. Credit-impaired (CI) loans and advances to customers Composition and impairment loss allowance (ILA) 2023 2022 Credit- impaired (CI) loans €m CI Loans as % of advances1 % CI Impairment loss allowance €m CI ILA as % of CI loans % Credit- impaired (CI) loans €m CI Loans as % of advances1 % CI Impairment loss allowance €m CI ILA as % of CI loans % Residential mortgages 770 1.6% 141 18% 450 1.2% 89 20% Retail Ireland 383 1.2% 89 23% 251 1.1% 69 27% Retail UK 387 2.6% 52 13% 199 1.3% 20 10% Non-property SME and corporate 1,080 5.3% 330 31% 1,534 7.2% 563 37% Republic of Ireland SME 342 4.8% 161 47% 561 7.8% 269 48% UK SME 80 5.2% 22 28% 121 7.7% 45 37% Corporate 658 5.6% 147 22% 852 6.7% 249 29% Property and construction 369 5.1% 80 22% 355 4.4% 102 29% Investment 320 4.8% 69 22% 339 4.8% 97 29% Development 49 9.1% 11 22% 16 1.4% 5 31% Consumer 130 2.2% 61 47% 146 2.7% 81 55% Total credit-impaired 2,349 2.9% 612 26% 2,485 3.4% 835 34% Purchased / originated credit- impaired 118 82.5% 12 10% 79 98.8% 33 42% Total 2,467 3.1% 624 25% 2,564 3.5% 868 34% 1 'Advances' refers to the portfolio loan balance (pre-impairment loss allowance) excluding POCI assets. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 283 25 Credit risk exposures (continued) Asset quality - PD Grade of loans and advances to customers The table below provides analysis of the asset quality of loans and advances to customers at amortised cost based on mapping the IFRS 9 twelve month PD of each loan to a PD grade based on the table provided on page 278. Credit-impaired includes Stage 3 and POCI assets of €118 million (2022: €79 million). Not credit-impaired includes Stage 1 & 2 and POCI assets of €25 million (2022: €1 million), which were no longer credit-impaired at the reporting date due to improvement in credit risk since purchase or origination. These assets will remain classified as POCI until derecognition. 2023 Loans and advances to customers Asset quality - PD grade Residential mortgages Non-property SME and corporate Property and construction Consumer Total €m % €m % €m % €m % €m % Stage 1 1-4 9,522 20% 2,691 13% 147 2% 21 – 12,381 15% 5-7 28,645 61% 5,383 26% 1,571 22% 2,496 43% 38,095 47% 8-9 3,403 7% 5,822 29% 1,396 19% 1,263 22% 11,884 15% 10-11 1,216 3% 841 4% 222 3% 1,090 19% 3,369 4% Total Stage 1 42,786 91% 14,737 72% 3,336 46% 4,870 84% 65,729 81% Stage 2 1-4 540 1% 272 1% – – – – 812 1% 5-7 1,703 4% 1,549 8% 556 8% 339 6% 4,147 5% 8-9 472 1% 1,031 5% 1,265 18% 64 1% 2,832 4% 10-11 859 2% 1,780 9% 1,697 23% 398 7% 4,734 6% Total Stage 2 3,574 8% 4,632 23% 3,518 49% 801 14% 12,525 16% Not credit-impaired 1-4 10,062 21% 2,963 14% 147 2% 21 – 13,193 16% 5-7 30,348 65% 6,932 34% 2,127 30% 2,835 49% 42,242 52% 8-9 3,875 8% 6,853 34% 2,661 37% 1,327 23% 14,716 19% 10-11 2,075 5% 2,621 13% 1,919 26% 1,488 26% 8,103 10% Purchased / originated not credit-impaired 25 – – – – – – – 25 – Total not credit-impaired 46,385 99% 19,369 95% 6,854 95% 5,671 98% 78,279 97% Credit-impaired 12 770 1% 1,080 5% 369 5% 130 2% 2,349 3% Purchased / originated credit-impaired 117 – 1 – – – – – 118 – Total-credit-impaired 887 1% 1,081 5% 369 5% 130 2% 2,467 3% Total 47,272 100% 20,450 100% 7,223 100% 5,801 100% 80,746 100% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 284 25 Credit risk exposures (continued) Residential mortgages Non-property SME and corporate Property and construction Consumer Total 2022 Loans and advances to customers Asset quality - PD grade €m % €m % €m % €m % €m % Stage 1 1-4 8,838 23% 4,412 20% 200 2% 7 – 13,457 18% 5-7 22,072 58% 5,996 28% 2,870 35% 2,071 39% 33,009 45% 8-9 2,420 7% 3,603 17% 578 7% 1,289 24% 7,890 11% 10-11 690 2% 1,242 6% 216 3% 1,327 25% 3,475 5% Total Stage 1 34,020 90% 15,253 71% 3,864 47% 4,694 88% 57,831 79% Stage 2 1-4 479 1% 1,469 7% 140 2% – – 2,088 3% 5-7 1,874 5% 410 2% 1,845 23% 178 3% 4,307 6% 8-9 309 1% 1,423 7% 1,180 14% 103 2% 3,015 4% 10-11 884 2% 1,363 6% 757 9% 229 4% 3,233 4% Total Stage 2 3,546 9% 4,665 22% 3,922 48% 510 9% 12,643 17% Not credit-impaired 1-4 9,317 24% 5,881 27% 340 4% 7 – 15,545 21% 5-7 23,946 63% 6,406 30% 4,715 58% 2,249 42% 37,316 51% 8-9 2,729 8% 5,026 24% 1,758 21% 1,392 26% 10,905 15% 10-11 1,574 4% 2,605 12% 973 12% 1,556 29% 6,708 9% Purchased / originated not credit-impaired 1 – – – – – – – 1 – Total not credit-impaired 37,567 99% 19,918 93% 7,786 95% 5,204 97% 70,475 96% Credit-impaired 12 450 1% 1,534 7% 355 4% 146 3% 2,485 4% Purchased / originated credit-impaired 3 – 16 – 60 1% – – 79 – Total credit-impaired 453 1% 1,550 7% 415 5% 146 3% 2,564 4% Total 38,020 100% 21,468 100% 8,201 100% 5,350 100% 73,039 100% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 285 25 Credit risk exposures (continued) Loans and advances to customers - other credit risk information Segmental analysis The tables below provide an analysis of the risk profile of loans and advances to customers at amortised cost by division. Credit- impaired loans include Stage 3 and POCI assets which remain credit-impaired at the reporting period. Not credit-impaired figures include forborne loans that had yet to satisfy exit criteria in line with EBA guidance to return to performing. 2023 Risk proﬁle of loans and advances to customers (before impairment loss allowance) Retail Ireland €m Retail UK €m Corporate and Commercial €m Total Group €m Stage 1 - 12 month ECL (not credit-impaired) 30,723 17,402 17,604 65,729 Stage 2 - Lifetime ECL (not credit-impaired) 2,509 2,361 7,655 12,525 Stage 3 - Lifetime ECL (credit-impaired) 448 526 1,375 2,349 Purchased / originated credit-impaired 143 – – 143 Gross carrying amount at 31 December 2023 33,823 20,289 26,634 80,746 Restated 1 2022 Risk proﬁle of loans and advances to customers (before impairment loss allowance) Retail Ireland1 €m Retail UK €m Corporate and Commercial1 €m Total Group €m Stage 1 - 12 month ECL (not credit-impaired) 20,929 18,367 18,535 57,831 Stage 2 - Lifetime ECL (not credit-impaired) 2,644 1,900 8,099 12,643 Stage 3 - Lifetime ECL (credit-impaired) 301 457 1,727 2,485 Purchased / originated credit-impaired 4 60 16 80 Gross carrying amount at 31 December 2022 23,878 20,784 28,377 73,039 1 In 2023, commercial lending and associated business banking activities, previously in the Retail Ireland division were brought together into one centralised structure across Business and Corporate Banking. Comparative figures have been restated to reflect an increase of €9,331 million in Corporate and Commercial (formerly Corporate and Markets) and the corresponding decrease in Retail Ireland. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 286 25 Credit risk exposures (continued) Geographical and industry analysis of loans and advances to customers The following tables provide a geographical and industry breakdown of loans and advances to customers at amortised cost, and the associated impairment loss allowances. The geographical breakdown is primarily based on the location of the business unit where the asset is booked. The Non-property SME & corporate portfolio is analysed by Nomenclature of Economic Activities (NACE) code. The NACE code classification system is a pan-European classification system that groups organisations according to their business activities. Exposures to NACE codes totalling less than €400 million are grouped together as 'Other sectors'. The NACE codes reported in the table below can therefore differ period on period. Gross carrying amount (before impairment loss allowance) Impairment loss allowance 2023 Geographical / industry analysis RoI €m UK €m RoW €m Total €m RoI €m UK €m RoW €m Total €m Personal 34,633 18,440 – 53,073 242 182 – 424 Residential mortgages 32,244 15,028 – 47,272 158 88 – 246 Other consumer lending 2,389 3,412 – 5,801 84 94 – 178 Property and construction 6,889 334 – 7,223 236 13 – 249 Investment 6,375 308 – 6,683 221 11 – 232 Development 514 26 – 540 15 2 – 17 Non-property SME & corporate 17,721 1,709 1,020 20,450 458 54 37 549 Manufacturing 3,690 244 475 4,409 107 4 9 120 Administrative and support service activities 2,754 242 184 3,180 61 12 2 75 Wholesale and retail trade 2,060 155 43 2,258 42 2 – 44 Agriculture, forestry and fishing 1,526 213 – 1,739 47 4 – 51 Human health services and social work activities 1,310 173 68 1,551 42 14 1 57 Accommodation and food service activities 1,378 68 38 1,484 27 3 4 34 Other services 713 34 85 832 13 1 6 20 Transport and storage 664 87 77 828 25 2 12 39 Professional, scientific and technical activities 740 33 26 799 16 – 2 18 Real estate activities 537 117 – 654 34 4 – 38 Financial and Insurance activities 512 69 – 581 4 1 – 5 Education 416 9 24 449 6 – – 6 Electricity, gas, steam and air conditioning supply 429 14 – 443 3 – – 3 Other sectors 992 251 – 1,243 31 7 1 39 Total 59,243 20,483 1,020 80,746 936 249 37 1,222 Analysed by stage: Stage 1 47,614 17,520 595 65,729 126 51 3 180 Stage 2 9,744 2,437 344 12,525 297 108 16 421 Stage 3 1,742 526 81 2,349 504 90 18 612 Purchased / originated credit-impaired 143 – – 143 9 – – 9 Total 59,243 20,483 1,020 80,746 936 249 37 1,222 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 287 25 Credit risk exposures (continued) Gross carrying amount (before impairment loss allowance) Impairment loss allowance 2022 Geographical / industry analysis RoI €m UK €m RoW €m Total €m RoI €m UK €m RoW €m Total €m Personal 24,630 18,740 – 43,370 165 152 – 317 Residential mortgages 22,472 15,548 – 38,020 100 46 – 146 Other consumer lending 2,158 3,192 – 5,350 65 106 – 171 Property and construction 7,632 569 – 8,201 121 74 – 195 Investment 6,549 535 – 7,084 110 71 – 181 Development 1,083 34 – 1,117 11 3 – 14 Non-property SME & corporate 18,459 1,829 1,180 21,468 631 73 79 783 Manufacturing 3,997 289 536 4,822 111 10 53 174 Administrative and support service activities 2,624 298 227 3,149 82 14 2 98 Wholesale and retail trade 1,857 281 47 2,185 56 4 – 60 Agriculture, forestry and fishing 1,562 170 – 1,732 57 4 – 61 Human health services and social work activities 1,299 155 69 1,523 49 10 1 60 Accommodation and food service activities 1,475 82 40 1,597 63 8 4 75 Other services 643 39 85 767 18 2 13 33 Transport and storage 684 74 76 834 42 6 3 51 Professional, scientific and technical activities 750 18 61 829 29 – – 29 Real estate activities 602 132 – 734 55 8 – 63 Financial and Insurance activities 933 38 – 971 8 1 – 9 Education 408 38 24 470 5 – – 5 Electricity, gas, steam and air conditioning supply 458 8 – 466 5 – – 5 Arts, entertainment and recreation 388 29 13 430 23 1 3 27 Other sectors 779 178 2 959 28 5 – 33 Total 50,721 21,138 1,180 73,039 917 299 79 1,295 Analysed by stage: Stage 1 38,513 18,533 785 57,831 88 51 3 142 Stage 2 10,420 1,986 237 12,643 206 67 12 285 Stage 3 1,768 559 158 2,485 620 151 64 835 Purchased / originated credit-impaired 20 60 – 80 3 30 – 33 Total 50,721 21,138 1,180 73,039 917 299 79 1,295 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 288 25 Credit risk exposures (continued) Sectoral analysis of loans and advances to customers The following tables provide an analysis of loans and advances to customers at amortised cost, and the associated impairment loss allowances, by portfolio, sub-sector and stage. The Non-property SME & corporate portfolio is analysed by NACE code. The NACE code classification system is a pan-European classification system that groups organisations according to their business activities. Exposures to NACE codes totalling less than €400 million are grouped together as 'Other sectors'. The NACE codes reported in the tables below can therefore differ year on year. 2023 Sectoral analysis by stage Gross carrying amount (before impairment loss allowance) Impairment loss allowance Stage 1 €m Stage 2 €m Stage 3 €m POCI €m Total €m Stage 1 €m Stage 2 €m Stage 3 €m POCI €m Total €m Personal Residential mortgages 42,786 3,574 770 142 47,272 40 56 141 9 246 Other consumer 4,870 801 130 – 5,801 50 67 61 – 178 Motor lending UK 1,749 410 38 – 2,197 4 7 13 – 24 Loans UK 966 234 15 – 1,215 29 41 1 – 71 Motor lending RoI 798 3 12 – 813 6 – 5 – 11 Loans RoI 800 117 55 – 972 8 13 36 – 57 Credit cards RoI 557 37 10 – 604 3 6 6 – 15 47,656 4,375 900 142 53,073 90 123 202 9 424 Property and construction 3,336 3,518 369 – 7,223 25 144 80 – 249 Investment 2,934 3,429 320 – 6,683 22 141 69 – 232 Development 402 89 49 – 540 3 3 11 – 17 Non-property SME & corporate 14,737 4,632 1,080 1 20,450 65 154 330 – 549 Manufacturing 2,937 1,224 248 – 4,409 11 36 73 – 120 Administrative and support service activities 2,521 580 79 – 3,180 13 20 42 – 75 Wholesale and retail trade 1,719 482 57 – 2,258 8 10 26 – 44 Agriculture, forestry and fishing 1,332 323 84 – 1,739 8 9 34 – 51 Human health services and social work activities 933 405 213 – 1,551 4 24 29 – 57 Accommodation and food service activities 869 504 110 1 1,484 3 7 24 – 34 Other services 606 167 59 – 832 3 6 11 – 20 Transport and storage 592 169 67 – 828 2 7 30 – 39 Professional, scientific and technical activities 640 131 28 – 799 3 4 11 – 18 Real estate activities 421 171 62 – 654 4 7 27 – 38 Financial and Insurance activities 495 83 3 – 581 1 3 1 – 5 Education 366 82 1 – 449 1 5 – – 6 Electricity, gas, steam and air conditioning supply 390 52 1 – 443 1 2 – – 3 Other sectors 916 259 68 – 1,243 3 14 22 – 39 Total 65,729 12,525 2,349 143 80,746 180 421 612 9 1,222 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 289 25 Credit risk exposures (continued) Gross carrying amount (before impairment loss allowance) Impairment loss allowance 2022 Sectoral analysis by stage Stage 1 €m Stage 2 €m Stage 3 €m POCI €m Total €m Stage 1 €m Stage 2 €m Stage 3 €m POCI €m Total €m Personal Residential mortgages 34,020 3,546 450 4 38,020 18 38 89 1 146 Other consumer 4,694 510 146 – 5,350 49 41 81 – 171 Motor lending UK 1,553 225 27 – 1,805 3 4 9 – 16 Loans UK 1,216 126 45 – 1,387 31 25 34 – 90 Motor lending RoI 736 – 23 – 759 4 – 10 – 14 Loans RoI 686 137 40 – 863 8 9 21 – 38 Credit cards RoI 503 22 11 – 536 3 3 7 – 13 38,714 4,056 596 4 43,370 67 79 170 1 317 Property and construction 3,864 3,922 355 60 8,201 10 53 102 30 195 Investment 3,216 3,469 339 60 7,084 7 47 97 30 181 Development 648 453 16 – 1,117 3 6 5 – 14 Non-property SME & corporate 15,253 4,665 1,534 16 21,468 65 153 563 2 783 Manufacturing 3,388 1,114 320 – 4,822 11 36 127 – 174 Administrative and support service activities 2,544 428 161 16 3,149 12 17 67 2 98 Wholesale and retail trade 1,713 395 77 – 2,185 7 10 43 – 60 Agriculture, forestry and fishing 1,282 350 100 – 1,732 10 11 40 – 61 Human health services and social work activities 880 444 199 – 1,523 3 17 40 – 60 Accommodation and food service activities 608 794 195 – 1,597 3 16 56 – 75 Other services 579 91 97 – 767 2 6 25 – 33 Transport and storage 562 165 107 – 834 2 6 43 – 51 Professional, scientific and technical activities 643 154 32 – 829 3 5 21 – 29 Real estate activities 390 246 98 – 734 5 9 49 – 63 Financial and Insurance activities 921 40 10 – 971 1 3 5 – 9 Education 418 51 1 – 470 2 2 1 – 5 Electricity, gas, steam and air conditioning supply 416 46 4 – 466 1 1 3 – 5 Arts, entertainment and recreation 241 142 47 – 430 1 8 18 – 27 Other sectors 668 205 86 – 959 2 6 25 – 33 Total 57,831 12,643 2,485 80 73,039 142 285 835 33 1,295 Repossessed collateral Repossessed collateral is sold as soon as practicable, with the proceeds applied against outstanding indebtedness. At 31 December 2023, the Group held collateral as set out in the table opposite. Repossessed collateral 2023 €m 2022 €m Residential properties Ireland 5 3 UK and other 1 – 6 3 Non-residential properties Other 1 – Total 7 3 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 290 25 Credit risk exposures (continued) Asset quality - other ﬁnancial assets The tables below summarise the asset quality of debt instruments at FVOCI, debt securities at amortised cost and loans and advances to banks at amortised cost by IFRS 9 twelve month PD grade. Debt instruments at FVOCI Asset quality 2023 2022 Stage 1 Stage 2 Total Stage 1 Stage 2 Total €m % €m % €m % €m % €m % €m % PD Grade 1-4 3,910 99% – – 3,910 99% 4,172 98% – – 4,172 98% 5-7 58 1% – – 58 1% 82 2% – – 82 2% 8-9 – – – – – – – – – – – – 10-11 – – – – – – – – – – – – Total 3,968 100% – – 3,968 100% 4,254 100% – – 4,254 100% Debt securities at amortised cost (before impairment loss allowance) Asset quality 2023 2022 Stage 1 Stage 2 Total Stage 1 Stage 2 Total €m % €m % €m % €m % €m % €m % PD Grade 1-4 5,715 100% 1 – 5,716 100% 4,471 100% 1 100% 4,472 100% 5-7 – – – – – – – – – – – – 8-9 – – – – – – – – – – – – 10-11 – – – – – – – – – – – – Total 5,715 100% 1 – 5,716 100% 4,471 100% 1 100% 4,472 100% Loans and advances to banks at amortised cost (before impairment loss allowance) Asset quality 2023 2022 Stage 1 Stage 2 Total Stage 1 Stage 2 Total €m % €m % €m % €m % €m % €m % PD Grade 1-4 1,807 100% – – 1,807 100% 2,878 99% – – 2,878 99% 5-7 1 – – – 1 – 20 1% – – 20 1% 8-9 – – – – – – – – – – – – 10-11 – – – – – – – – – – – – Total 1,808 100% – – 1,808 100% 2,898 100% – – 2,898 100% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 291 25 Credit risk exposures (continued) Asset quality: other ﬁnancial instruments Other financial instruments as set out in the table below include instruments that are not within the scope of IFRS 9 or are not subject to impairment under IFRS 9. These include trading securities (excluding equity trading securities), derivative financial instruments, loans and advances to banks at fair value, loans and advances to customers at fair value and other financial instruments at FVTPL (excluding equity instruments). Reinsurance contract assets are excluded from this table as they are included in a separate table below under IFRS 17. The table summarises the asset quality of these financial instruments by equivalent external risk ratings. Other ﬁnancial instruments with ratings equivalent to: 2023 Restated1 2022 €m % €m % AAA to AA- 4,786 46% 3,330 30% A+ to A- 4,897 46% 5,720 52% BBB+ to BBB- 656 6% 1,683 15% BB+ to BB- 65 1% 67 1% B+ to B- 154 1% 199 2% Lower than B- 39 – 40 – Total 10,597 100% 11,039 100% 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. The table above has been restated to exclude reinsurance contract assets as their credit ratings are separately disclosed under IFRS 17 in the table below. Credit risk for reinsurance contract assets The Group has no significant credit risk exposures for insurance contracts issued as credit risk is spread across all policyholders and brokers. Credit risk for reinsurance contracts held arises as a result of exposure to a smaller group of reinsurance counterparties across insured product lines, with limits set for collateralised and non-collateralised credit exposure taking account of credit rating of reinsurer, protections such as collateral and other factors. This risk is mitigated by spreading exposures across a range of pre- approved counterparties. The table opposite provides information relating to the reinsurance contract assets with reinsurance counterparties split by credit ratings: Reinsurance contract assets with ratings equivalent to: 2023 €m 2022 €m AA- or higher 948 962 A / A+ 466 390 A- or below – – Total 1,414 1,352 26 Modified financial assets The following table provides analysis of financial assets for which the contractual cash flows have been modified while they had an impairment loss allowance measured at an amount equal to lifetime ECL, and where the modification did not result in derecognition. 2023 €m 2022 €m Financial assets modiﬁed during the year Amortised cost before modiﬁcation 844 517 Net modiﬁcation gains (i.e. net of impairment gains impact) – (4) Financial assets modiﬁed since initial recognition Gross carrying amount of ﬁnancial assets for which impairment loss allowance has changed from lifetime to 12 month expected credit losses during the year 1,425 1,249 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 292 27 Interest in associates and joint ventures The Group has availed of the venture capital exemption in accounting for a number of its interests in associates. In line with the accounting policy set out in note 1, these interests have been designated at initial recognition at FVTPL. Changes in the fair value of these interests are included in the share of results of associates (after tax) line on the income statement. The Group's other investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. In presenting details of the associates of the Group, the exemption permitted by Section 316 of the Companies Act 2014 has been availed of and the Group will annex a full listing of associates to its annual return to the Companies Registration Office. For further information on joint ventures refer to note 53 Interests in other entities. Interest in associates 2023 €m 2022 €m Balance at 1 January 83 59 Increase in investments 31 25 Decrease in investments (3) (9) Share of results after tax (note 14 ) (3) 8 Balance at 31 December 108 83 Interest in associates FVTPL 79 65 Interest in associates using equity method 29 18 Balance at 31 December 108 83 Interest in joint ventures 2023 €m 2022 €m Balance at 1 January 82 57 Share of results after tax (note 14) - FRES 28 32 Dividends received (34) (3) Exchange adjustments 2 (4) Additions 1 – Balance at 31 December 79 82 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 293 28 Intangible assets and goodwill 2023 2022 Goodwill €m Computer software externally purchased €m Computer software internally generated €m Other externally purchased intangible assets €m Total €m Goodwill €m Computer software externally purchased €m Computer software internally generated €m Other externally purchased intangible assets €m Total €m Cost At 1 January 308 76 2,724 235 3,343 36 72 2,475 197 2,780 Additions – 1 295 1 297 – – 264 – 264 Acquisitions – – – – – 273 5 – 48 326 Retirements – – (2) (27) (29) – – – – – Exchange adjustments 1 – 7 3 11 (1) (1) (15) (10) (27) At 31 December 309 77 3,024 212 3,622 308 76 2,724 235 3,343 Amortisation and impairment At 1 January (9) (72) (1,814) (172) (2,067) (9) (72) (1,677) (170) (1,928) Retirements – – 2 27 29 – – – – – Impairment – – – – – – – (7) – (7) Amortisation charge (note 10) – (2) (154) (12) (168) – (1) (142) (9) (152) Exchange adjustments – – (5) (3) (8) – 1 12 7 20 At 31 December (9) (74) (1,971) (160) (2,214) (9) (72) (1,814) (172) (2,067) Net book value 300 3 1,053 52 1,408 299 4 910 63 1,276 Computer software internally generated The category ‘computer software internally generated’ comprises assets with a carrying value of €1,053 million (2022: €910 million). This includes amortising assets with a carrying value of €737 million (2022: €531 million) with amortisation periods normally ranging from five to ten years, and reflects investment in technical infrastructure, applications and software licences primarily comprising of Payments and Regulatory assets, with remaining amortisation periods ranging up to 10 years. It also includes assets under construction of €316 million (2022: €379 million) on which amortisation will commence once the assets are available for use. Impairment review - computer software internally generated During 2023, the Group reviewed its internally generated computer software for any indicators of impairment and concluded that no impairment is required (2022: €7 million). Other externally purchased intangible assets The Group acquired the Davy business on 1 June 2022. As part of the acquisition, the Group identified intangible assets valued at €48 million relating to customer relationships and brand value at the date of acquisition. Impairment review – other externally purchased intangible assets During 2023, the Group reviewed other externally purchased intangible assets for any indicators of impairment and concluded that no impairment is required (2022: €nil). Goodwill At 31 December 2023, goodwill on the Group's balance sheet is €300 million (2022: €299 million) and relates to the acquisitions of Davy €273 million, Ireland’s leading provider of wealth management and capital markets services (note 49), and the Marshall Leasing business €27 million, a car commercial leasing and fleet management business in the UK. Impairment Review - Goodwill Goodwill is reviewed annually for impairment or more frequently if events or circumstances indicate that impairment may have occurred, by comparing the carrying value of goodwill to its recoverable amount. An impairment charge arises if the carrying value exceeds the recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its VIU, where the VIU is the present value of the future cash flows expected to be derived from the asset. Impairment reviews of Davy and Marshall Leasing were carried out during 2023 and 2022, and no impairment of goodwill was required. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 294 28 Intangible assets and goodwill (continued) Impairment testing of goodwill Goodwill is allocated to cash generating units (CGU) at a level which represents the smallest identifiable group of assets that generate largely independent cash flows. The calculation of the recoverable amount of goodwill for each of these CGU is based upon a VIU calculation that discounts expected pre-tax cash flows at an interest rate appropriate to the CGU. The determination of both requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasted cash flows are available and to assumptions underpinning the sustainability of those cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows reflect management’s view of future performance. The values assigned to key assumptions reflect past experience, performance of the business to date and management judgement. The recoverable amount calculations performed for the significant amounts of goodwill are sensitive to changes in the following key assumptions: Cash ﬂow forecasts Cash flow forecasts are based on internal management information for a period of up to five years, after which a long- term growth rate appropriate for the business is applied. The initial five years' cash flows are consistent with approved plans for each business prepared under the Group's ICAAP. Underpinning the ICAAP, the Group prepares detailed financial projections prepared using consensus macroeconomic forecasts together with Group-specific assumptions. Growth rates Growth rates beyond five years are determined by reference to local economic growth, inflation projections or long term bond yields. The assumed long term growth rate for Davy is 2% (2022: 2%). Discount rate The discount rates applied to Davy is the post tax weighted average cost of capital for the Group increased to include a risk premium to reflect the specific risk profile of the CGU to the extent that such risk is not already reflected in the forecast cash flows. A rate of 10.99% for Davy. Certain elements within these cash flow forecasts are critical to the performance of the business. The impact of changes in these cash flows, growth rate and discount rate assumptions has been assessed by the Directors in the review. The Directors consider that reasonably possible changes in key assumptions used to determine the recoverable amount of Marshall Leasing would not result in an impairment of goodwill. For an assessment of reasonably possible changes in key assumptions used to determine Davy's recoverable amount, refer to note 2 Critical accounting estimates and judgements. 29 Investment properties At 31 December 2023, the Group held investment property of €793 million ( 2022 : €883 million) on behalf of Wealth and Insurance policyholders. Assets underlying insurance contracts with direct participation features, measured applying the variable fee approach (VFA), are €479 million (2022: €527 million). Investment properties are carried at fair value as determined by external qualified Property Surveyors (the ‘Surveyors’) appropriate to the properties held. The Surveyors arrive at their opinion of fair value by using their professional judgement in applying comparable current trends in the property market such as rental yields in the retail, office and industrial property sectors, to both the existing rental income stream and also to the future estimated recovery value (ERV). Other inputs taken into consideration include occupancy forecasts, rent free periods that may need to be granted to new incoming tenants, capital expenditure and fees. As these inputs are unobservable, the valuation is deemed to be based on level 3 inputs. All properties are valued based on highest and best use. In 2023, rental income from investment property amounted to €52 million (2022: €55 million). Expenses directly attributable to investment properties generating rental income was €14 million (2022: €15 million ). In 2023, the Group reclassified €13 million (2022: €nil) from property, plant and equipment (note 30) to investment properties. 2023 €m 2022 €m Balance at 1 January 883 992 Revaluation (104) (71) Reclassification 13 – Exchange adjustment 5 (10) Disposals (4) (93) Additions – 65 Balance at 31 December 793 883 of which: Assets underlying insurance contracts with direct participation features 479 527 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 295 30 Property, plant and equipment Freehold land & buildings & long leaseholds (FV) Adaptations (at cost) Computer & other equipment (at cost) Payments on accounts & assets in the course of construction (at cost) €m Right of Use assets, excluding investment property 2023 of which; own-use €m of which; subject to operating lease €m of which; own-use €m of which; subject to operating lease €m of which; own-use €m of which; subject to operating lease €m Total owned assets €m Buildings €m Computer & other equipment €m Total right of use assets €m Total property plant and equipment €m Cost or valuation at 1 January 2023 143 18 157 9 246 201 13 787 516 60 576 1,363 Additions – – 5 – 6 96 9 116 17 1 18 134 Acquisitions – – – – – – – – – – – – Disposals / write-oﬀs – – (1) – (28) (53) – (82) (2) – (2) (84) Revaluation recognised in OCI (7) (1) – – – – – (8) – – – (8) Revaluation recognised in Income Statement (note 10) (4) – – – – – – (4) – – – (4) Reclassiﬁcations (13) (3) 9 1 5 – (15) (16) – – – (16) Adjustment of lease liability – – – – – – – – 9 – 9 9 Exchange adjustments 1 – – – 1 5 – 7 – – – 7 Balance at 31 December 2023 120 14 170 10 230 249 7 800 540 61 601 1,401 Accumulated Depreciation at 1 January 2023 – – (107) (4) (200) (40) – (351) (184) (26) (210) (561) Charge for the year (notes 8, 10 ,18) – – (9) – (14) (35) – (58) (35) (12) (47) (105) Impairment reversal for the year – – – – – – – – 3 – 3 3 Disposals / write-oﬀs – – 1 – 28 34 – 63 2 – 2 65 Reclassiﬁcations – – 1 (1) – – – – – – – – Exchange adjustments – – – – (2) (1) – (3) – – – (3) Balance at 31 December 2023 – – (114) (5) (188) (42) – (349) (214) (38) (252) (601) Net book value at 31 December 2023 120 14 56 5 42 207 7 451 326 23 349 800 At 31 December 2023, property, plant and equipment held at fair value was €134 million ( 2022 : €161 million ), the historical cost of which was €71 million (2022 : €72 million). During 2023, €3 million ( 2022: €13 million) of freehold land and buildings held for ow n-use were transferred to assets classified as held for sale. These were subsequently disposed of prior to 31 December 2023. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 296 30 Property, plant and equipment (continued) Freehold land & buildings & long leaseholds (FV) Adaptations (at cost) Computer & other equipment (at cost) Payments on accounts & assets in the course of construction (at cost) €m Right of Use assets, excluding investment property 2022 of which; own-use €m of which; subject to operating lease €m of which; own-use €m of which; subject to operating lease €m of which; own-use €m of which; subject to operating lease €m Total owned assets €m Buildings €m Computer & other equipment €m Total right of use assets €m Total property plant and equipment €m Cost or valuation at 1 January 2022 161 20 151 6 242 166 9 755 506 54 560 1,315 Additions 1 – 1 – 3 80 19 104 4 7 11 115 Acquisitions – – 2 – 3 – – 5 9 – 9 14 Disposals / write-oﬀs (14) – (2) (1) (4) (36) – (57) (3) (1) (4) (61) Impairment – – – – – – – – – – – – Revaluation recognised in OCI (4) – – – – – – (4) – – – (4) Revaluation recognised in Income Statement (note 10) – – – – – – – – – – – – Reclassiﬁcations 1 – 6 3 5 – (15) – – – – – Adjustment of lease liability – – – – – – – – 2 – 2 2 Exchange adjustments (2) (2) (1) 1 (3) (9) – (16) (2) – (2) (18) Balance at 31 December 2022 143 18 157 9 246 201 13 787 516 60 576 1,363 Accumulated Depreciation at 1 January 2022 – – (101) (2) (191) (38) – (332) (147) (16) (163) (495) Charge for the year (notes 8, 10 ,18) – – (9) (1) (14) (23) – (47) (27) (11) (38) (85) Impairment for the year – – – – – – – – (14) – (14) (14) Disposals / write-oﬀs – – 1 – 2 19 – 22 3 1 4 26 Reclassiﬁcations – – 1 (1) – – – – – – – – Exchange adjustments – – 1 – 3 2 – 6 1 – 1 7 Balance at 31 December 2022 – – (107) (4) (200) (40) – (351) (184) (26) (210) (561) Net book value at 31 December 2022 143 18 50 5 46 161 13 436 332 34 366 802 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 297 30 Property, plant and equipment (continued) Future capital expenditure This table shows future capital expenditure in relation to both property, plant and equipment and intangible assets. Future capital expenditure 2023 €m 2022 €m Contracted but not provided for in the ﬁnancial statements 120 141 Authorised by the Directors but not contracted 28 74 Total future capital expenditure 148 215 Group as lessor Computer and other equipment subject to an operating lease relates to the business activities of Marshall Leasing, which were conducted through Marshall Leasing Limited up until 1 April 2022, at which point the business transferred to N.I.I.B Group Limited. Both entities are wholly-owned subsidiaries of BoI (UK) p lc, whose ultimate parent is BoIG plc. The Marshall Leasing business enters into operating leases, as lessor, through its car and commercial leasing activities. The terms of the leases vary but the majority of the leases typically run for a non-cancellable period of two to four years through which the Group is exposed to residual value risk on the vehicles leased. The Group ensures that residual value risk is effectively managed to minimise exposure. The residual values used mirror those utilised in the creation of the original client contract. Residual values for the Marshall Leasing fleet of vehicles are benchmarked against industry standards using third party valuation tools. The residual values for the entire portfolio are reassessed using an independent vehicle valuation estimate on a regular basis throughout the life of the underlying contracts to determine if impairment is required. The process of realising asset values at the end of lease contracts is effectively managed to maximise net sale proceeds. The Group received operating lease income of €53 million in 2023 relating to the Marshall Leasing business (2022: €44 million) (note 8). The Group has also entered into a small number of operating leases and operating sub-leases as lessor which represent properties and components of properties surplus to the Group’s own requirements. The Group received no associated operating lease income in 2023 (2022: €nil). The table sets out the future undiscounted operating lease payments receivable. Operating lease receivables 2023 €m 2022 €m Not later than 1 year 43 34 1 to 2 years 29 22 2 to 3 years 16 11 3 to 4 years 6 4 4 to 5 year 2 1 Later than 5 years – – Total operating lease receivables 96 72 31 Deferred tax The DTA of € 808 million (2022: € 989 million) includes an amount of €845 million ( 2022: € 1,026 mi llion) in respect of operating losses which are available to shelter future profits from tax, of which €783 million relates to Irish tax losses carried forward by the Bank, €58 million relates to UK tax losses carried forward by BoI (UK) plc, and €4 million relates to US tax losses carried forward by the US branch of the Bank. As outlined in the Group accounting policies note 1, on 1 January 2023, the new insurance accounting standard, IFRS 17 ‘Insurance Contracts’ became effective, replacing IFRS 4 'Insurance Contracts'. The impact on transition is summarised in note 18 and includes a reduction in the Group’s deferred tax liability at 31 December 2022 of €59 million. The recognition of a DTA in respect of tax losses carried forward requires the Directors to be satisfied that it is probable that the Group will have sufficient future taxable profits against which the losses can be utilised. In considering the available evidence to support recognition of the DTA, the Group takes into consideration the impact of both positive and negative evidence including historical financial performance, projections of future taxable income and the impact of tax legislation. The key judgements and estimates applied in the recognition of DTAs on unused tax losses are set out in Critical Accounting Estimates and Judgements (note 2). The brought forward Irish tax losses are currently projected to be utilised in full by the end of 2028. DTAs at 31 December 2023 of €0.6 billion (2022: €0.8 billion) are expected to be recovered after more than one year. Deferred tax liabilities have not been recognised for tax that may be payable if distributable reserves of certain overseas subsidiaries and joint ventures were remitted to Ireland as the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Distributable reserves for overseas subsidiaries and joint ventures totalled €1.4 billion at 31 December 2023 (2022: €1.3 billion). The Group has not recognised a DTA of €164 million (2022: €164 million) in respect of unused tax losses of which €49 million (2022: €49 million) relates to US tax losses which are subject to a 20 year life and are scheduled to expire unused in the period 2028 - 2029 due to an annual limitation of use. The balance relates to UK tax losses which have no expiry date but are currently not projected to be recovered within 10 years. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 298 31 Deferred tax (continued) The Group is within the scope of the Organisation for Economic Co-operation and Development (OECD) 15% minimum effective tax rate Model Rules (Pillar 2) which have been enacted into Irish legislation as part of Finance (No.2) Act 2023 in December 2023, and UK legislation as part of Finance (No.2) Act 2023 in July 2023. The Pillar 2 rules are effective for financial periods beginning on or after 31 December 2023, in the Group's case the financial period ending 31 December 2024. Since the Pillar 2 legislation was not effective in respect of the Group at the reporting date, the Group has no related current tax exposure for the current year. Under the legislation, the Group will be liable to pay a top-up tax for the difference between its effective tax rate per jurisdiction, as computed under the new Rules, and the 15% minimum rate, subject to certain exemptions and conditions. The Group currently estimates that there could be a future top- up tax payable in Ireland on an element of Irish profits but, if the legislation was in place for the current year, the increase in the Group's effective tax rate would have been insignificant due primarily to the ability to take into account certain historic tax losses in the Bank at 15% and also due to profits arising in jurisdictions with an effective tax rate in excess of 15%. The Group applies the mandatory exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2 income taxes, as provided in the amendments to IAS 12 issued in May 2023. 2023 Net balance at 1 January1,2 €m Recognised in proﬁt or loss1 €m Recognised in OCI €m Other movements including foreign exchange €m Balance at 31 December Net €m Deferred tax assets1 €m Deferred tax liabilities1 €m Unutilised tax losses 1,026 (186) – 5 845 845 – Lease liabilities1 53 (4) – – 49 49 – Cash flow hedge reserve 9 – – 2 11 11 – Impact of adopting IFRS 9 10 (2) – – 8 8 – Debt instruments at FVOCI 2 – 1 – 3 3 – Other temporary diﬀerences - assets1 58 (7) – 1 52 52 – Pensions and other post retirement benefits2 (105) (5) 7 – (103) – (103) Assets used in the business (including right of use assets)1 (21) (4) – – (25) 18 (43) Wealth and Insurance - different basis of accounting2 – (20) – – (20) – (20) Property revaluation surplus (15) – 2 – (13) – (13) Liability credit reserve (3) – – (3) (6) – (6) Other temporary diﬀerences - liabilities (63) 9 – – (54) – (54) Tax assets / (liabilities) before set-oﬀ 951 (219) 10 5 747 986 (239) Set-oﬀ of tax – (178) 178 Net tax assets / (liabilities) 747 808 (61) 1 The Group applied the amendments to IAS 12 'Income Taxes': 'Deferred tax related to Assets and Liabilities arising from a Single Transaction' from 1 January 2023. Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in relation to its right of use assets within the above analysis of temporary differences. There is no change to the balance sheet presentation of the deferred tax balances in the current or comparative period which are netted as permitted under IAS 12. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 299 31 Deferred tax (continued) 2022 Net balance at 1 January1 €m Recognised in proﬁt or loss1 €m Recognised in OCI €m Other movements2 including foreign exchange €m Restated1,2 Balance at 31 December Net €m Deferred tax assets1 €m Deferred tax liabilities1 €m Unutilised tax losses 1,118 (92) – – 1,026 1,026 – Pensions and other post retirement beneﬁts2 (116) 3 7 1 (105) – (105) Assets used in the business (including right of use assets)1 (9) (12) – – (21) 25 (46) Impact of adopting IFRS 9 14 (4) – – 10 10 – Cash ﬂow hedge reserve 6 – 3 – 9 9 – Other temporary differences - assets1 64 1 – (7) 58 58 – Wealth and Insurance - different basis of accounting2 (70) 18 – 52 – – – Debt instruments at FVOCI (18) – 20 – 2 2 – Property revaluation surplus (18) 2 1 – (15) – (15) Lease liabilities1 56 (3) – – 53 53 – Liability credit reserve 2 – (5) – (3) – (3) Other temporary diﬀerences - liabilities (75) 14 – (2) (63) – (63) Tax assets / (liabilities) before set-oﬀ 954 (73) 26 44 951 1,183 (232) Set-oﬀ of tax – (194) 194 Net tax assets / (liabilities) 951 989 (38) 1 The Group applied the amendments to IAS 12 'Income Taxes': 'Deferred tax related to Assets and Liabilities arising from a Single Transaction' from 1 January 2023. Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in relation to its right of use assets within the above analysis of temporary differences. There is no change to the balance sheet presentation of the deferred tax balances in the current or comparative period which are netted as permitted under IAS 12. 2 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 32 Other assets 2023 €m Restated1 2022 €m Sundry and other debtors1,2 624 403 Interest receivable 280 234 Trade receivables 122 42 Accounts receivable and prepayments 94 83 Contract assets 7 7 Other assets 1,127 769 Other assets are analysed as follows: Within 1 year1 976 709 After 1 year1 151 60 1,127 769 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Reinsurance contract assets are now disclosed in note 18, Insurance contracts. 2 At 31 December 2023, an Escrow Account balance of €60 million arising from an agreement between the Group and the Trustees of the BSPF pension scheme is included within sundry and other debtors. See note 41 Retirement benefit obligations for further details. Interest receivable is subject to impairment under IFRS 9; the impairment loss allowance on interest receivable is presented in the balance sheet along with the financial asset to which it relates. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 300 33 Deposits from banks Deposits from banks include cash collateral of €0.4 billion ( 2022 : €0.6 billion ) received from derivative counterparties in relation to net derivative asset positions (note 19). At 31 December 2023, the Group held Monetary Authority secured funding of €2.5 billion (2022: €2.6 billion) under the Term Funding Scheme for Small and Medium-sized Enterprises (TFSME). Drawings under the TFSME from the Bank of England are projected to be repaid in 2024 and 2025 with the final residual amount repaid in October 2026. At 31 December 2023, the Group's Monetary Authority secured funding is secured by loans and advances to customers. 2023 €m 2022 €m Monetary Authority secured funding 2,475 2,594 Deposits from banks 620 851 Deposits from banks 3,095 3,445 34 Customer accounts The carrying amount of the customer accounts designated at FVTPL at 31 December 2023 is € 230 million, €12 million lower than the contractual amount due at maturity of €242 million (2022: the carrying amount was €414 million, €49 million lower than the contractual amount due at maturity of €463 million). This is set out in note 55. At 31 December 2023, the Group’s largest 20 customer deposits amounted to 2% (2022: 4%) of customer accounts. Deposit accounts where a period of notice is required to make a withdrawal are classified within term deposits and other products. Information on the contractual maturities of customer accounts is on page 173 in the Risk Management Report. At 31 December 2023 , customer accounts include client deposits of €1,614 million whereby Davy acts as a financial intermediary ( 2022: €2,346 million). Further details on client property are disclosed in note 50. Term deposits and other products include a number of term accounts that contain easy access features. These allow the customer to access a portion or all of their deposit notwithstanding that this repayment could result in financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the ‘demand’ category in note 54 Liquidity risk and profile. Under the European Communities (Deposit Guarantee Scheme) Regulations 2015, eligible deposits of up to €100,000 per depositor per credit institution are covered. Eligible deposits includes credit balances in current accounts, demand deposit accounts and term deposit accounts. The scheme is administered by the CBI and is funded by the credit institutions covered by the scheme. On 24 November 2015, the EC released a proposal, European Deposit Insurance Scheme (EDIS), designed to achieve a common European deposit protection scheme, which under the current proposal, when fully implemented, the EDIS would completely replace the national schemes and be the sole insurance scheme for deposits in the euro-area banks. Bail-in is a key resolution tool provided for in the BRRD. The bail-in tool enables a resolution authority to write down the value of certain liabilities or convert them into equity, to the extent necessary to absorb losses and recapitalise an institution. 2023 €m 2022 €m Current accounts 59,665 59,330 Demand deposits 30,392 29,511 Term deposits and other products 9,896 9,945 Customer accounts at amortised cost 99,953 98,786 Term deposits at FVTPL 230 414 Total customer accounts 100,183 99,200 Amounts include: Due to associates and joint ventures 50 46 Movement in own credit risk on deposits at FVTPL 2023 €m 2022 €m Balance at beginning of the year (13) 4 Recognised in other comprehensive income 11 (17) Balance at end of the year (2) (13) Deposit guarantee scheme eligible covered deposits (Up to 100,000 EUR) are outside the scope of the bail-in tool, thereby enjoying an exempted status. When applying the bail-in tool, the resolution authority would be required to respect a hierarchy of claims, where shareholders must bear first losses, followed by creditors in accordance with the applicable order of priority of their claims. For example, non-preferred senior unsecured debt ranks junior to, or has a lower priority than, certain other unsecured creditor claims. In addition to the deposits covered by these Regulations, certain other Group deposits are covered by the deposit protection schemes in other jurisdictions, chiefly the UK Financial Services Compensation Scheme (FSCS) (in respect of eligible deposits with BoI (UK) plc). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 301 35 Debt securities in issue The carrying amount of bonds and medium term notes has increased by €0.6 billion at 31 December 2023 ( 2022 : €0.6 billion) due to senior issuances of €2.3 billion in bonds (2022: €2.0 billion) and €0.1 billion of fair value hedge and other adjustments (2022: decrease of €0.5 billion), offset by €1.8 billion in redemption of bonds and notes ( 2022: €0.9 billion ). The carrying amount of the debt securities in issue designated at FVTPL at 31 December 2023 was €267 million , €21 million lower than the contractual amount due at maturity of €288 million (2022: the carrying amount was €250 million, €37 million lower than the contractual amount due at maturity of €287 million). This is set out in note 55. During 2023, €2.25 billion of green bonds were issued through the Group's Green Bond framework, bringing total issuances to date to c.€4.75 billion, which supports the Group sustainability- related finance targets. 2023 €m 2022 €m Bonds and medium term notes 7,363 6,807 Other debt securities in issue 1,040 717 Debt securities in issue at amortised cost 8,403 7,524 Debt securities in issue at FVTPL 267 250 Total debt securities in issue 8,670 7,774 Balance at 1 January 7,774 8,483 Issued during the year 2,785 3,859 Redemptions (1,930) (3,976) Repurchases (10) – Other movements1 51 (592) Balance at 31 December 8,670 7,774 1 Other movements primarily relates to fair value hedge adjustments in respect of debt securities in issue held at amortised cost, exchange adjustments and changes in fair value of debt securities in issue held at fair value. Movement in own credit risk on debt securities in issue at FVTPL 2023 €m 2022 €m Balance at 1 January – 3 Recognised in other comprehensive income 3 (3) Balance at 31 December 3 – Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 302 36 Other liabilities 2023 €m Restated1 2022 €m Notes in circulation 892 900 Sundry creditors 440 451 Operating expenses accrued 388 292 Accrued interest payable 324 139 Short position in trading securities 105 3 Accruals and deferred income 69 80 Other1 262 385 Other liabilities 2,480 2,250 Other liabilities are analysed as follows: Within 1 year1 2,435 2,152 After 1 year 45 98 2,480 2,250 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 37 Leasing Group as lessee The principal contracts where the Group is a lessee under IFRS 16 are in relation to property leases and computer equipment. Further qualitative information on the nature of the leases is set out in the Group accounting policies (note 1) and the undiscounted contractual maturity of total lease liabilities is set out in note 54 Liquidity risk and profile. Total cash outflows on leases amounted to €84 million in 2023 (2022: €87 million). Amounts recognised in the balance sheet and income statement The carrying amount of the Group's RoU assets and the movements during 2023 are set out in note 30. The carrying amount of the lease liabilities and the movements during 2023 is set out in the tables below. Group as lessor Accounting for lessors is outlined in the Group accounting policies (note 1). The Group is engaged in finance lease and operating lease activities. Finance leasing activity and a maturity analysis of the Group’s net investment in finance leases are included within Loans and advances to customers (note 24) along with a gross to net reconciliation of the investment in finance leases. Associated income on finance leases is included in Interest income (note 4). Operating leases where the Group is a lessor primarily relate to the Marshall Leasing business, which has been conducted through the subsidiary N.I.I.B Group Limited since 1 April 2022. Further detail on the nature of the company’s leasing activities, risks and risk management is outlined in note 30. In addition, the Group has also entered into a small number of operating leases and operating sub-leases as lessor which represent properties and components of properties surplus to the Group’s own requirements. T he Group received no associated operating lease income in 2023 (2022: €nil). Variable lease payments on RoU assets relate to computer equipment that has a varying cost dependant on usage with the contracts on which the payments arise maturing within two years. A maturity analysis of undiscounted operating lease receivables set out on an annual basis is included in note 30. Income and expense associated with the Group’s operating lease activities is included in note 8. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 303 37 Leasing (continued) Lease liabilities 2023 €m 2022 €m Balance at 1 January 423 452 Payment of lease liability and interest (55) (65) Additions (note 30) 18 11 Interest expense (note 5 ) 11 12 Lease liability adjustment 7 2 Acquisitions (note 30) – 9 Other movements – 2 Balance at 31 December 404 423 Summary of amounts recognised in the income statement under IFRS 16 ‘Leases’ 2023 €m 2022 €m Amounts recognised in interest expense Interest expense on lease liabilities (note 5) 11 12 Amounts recognised in interest income Finance lease interest (note 4) 229 169 Amounts recognised in other operating expense Depreciation of RoU assets 47 38 Impairment of RoU assets (note 10) – 14 Variable lease expenses (note 10) 4 2 Short-term lease expenses (note 10) 1 1 52 55 Amounts recognised in cost of restructuring Reversal of impairment of RoU assets (note 11) (3) – 38 Provisions 2023 2022 Restructuring €m Legal and other €m Total €m Restructuring €m Legal and other €m Total €m Balance at 1 January 28 51 79 55 135 190 Exchange adjustment – – – (1) (1) (2) Utilised during the year (18) (14) (32) (37) (131) (168) Charge to income statement 15 2 17 16 39 55 Unused amounts reversed during the year (2) (6) (8) (5) (6) (11) Acquisitions – – – – 17 17 Other – 2 2 – (2) (2) Balance at 31 December 23 35 58 28 51 79 The Group has recognised provisions in relation to restructuring costs, onerous contracts, legal and other. Such provisions are sensitive to a variety of factors, which vary depending on their nature. The estimation of the amounts of such provisions is judgemental because the relevant payments are due in the future and the quantity and probability of such payments is uncertain. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 304 38 Provisions (continued) The methodology and the assumptions used in the calculation of provisions are reviewed regularly and, at a minimum, at each reporting date. Restructuring provisions of €23 million at 31 December 2023 (2022: €28 million) largely relates to building exit costs of €13 million (2022 : €22 million) in line with the Group's property strategy and Voluntary Redundancy Programme costs of €9 million (2022 : €6 million) and other costs €1 million (2022: €nil). In 2022, acquisitions of €17 million relate to Davy. Expected utilisation 2023 2022 Restructuring €m Legal and other €m Total €m Restructuring €m Legal and other €m Total €m Less than 1 year 15 30 45 17 34 51 1 to 2 years 2 1 3 3 11 14 2 to 5 years 3 2 5 4 3 7 5 to 10 years 3 2 5 4 3 7 Total 23 35 58 28 51 79 39 Contingent liabilities and commitments 2023 €m Restated 1 2022 €m Contingent liabilities and guarantees / letters of credit Guarantees and irrevocable letters of credit1 901 776 Acceptances and endorsements 4 5 Other contingent liabilities1 179 162 1,084 943 Loan commitments Documentary credits and short-term trade related transactions 14 24 Undrawn formal standby facilities, credit lines and other commitments to lend 17,908 16,252 Revocable or irrevocable with original maturity of 1 year or less 9,727 8,805 Irrevocable with original maturity of over 1 year 8,181 7,447 17,922 16,276 Capital commitments 209 252 1 Comparative figures have been restated for contingent liabilities by €171 million from €772 million to €943 million to adjust for amounts which were incorrectly excluded in 2022. The table above gives the contract amounts of contingent liabilities and commitments. The maximum exposure to credit loss under contingent liabilities and commitments is the contractual amount of the instrument in the event of non- performance by the other party where all counter claims, collateral or security prove worthless. Loss allowance provisions of €61 million ( 2022: €55 million) recognised on loan commitments and guarantees and irrevocable letters of credit are shown in note 40. Similar to other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties. Guarantees and letter of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the customer's default, the cash requirements of these instruments are expected to be considerably below their nominal amounts. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 305 39 Contingent liabilities and commitments (continued) An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented, but reimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which have been paid and subsequently rediscounted. Other contingent liabilities Other contingent liabilities primarily include performance bonds and are generally short-term commitments to third parties which are not directly dependent on the customers’ credit worthiness. The Group is also party to legal, regulatory, taxation and other actions arising out of its normal business operations. The Group is currently reviewing its application of certain charges that have been applied in its Retail Ireland business and the appropriateness and completeness of reporting in relation to the Central Credit Register (CCR) requirements in Ireland. It is not currently practicable to estimate the amount or timing of any impact from these reviews. Additionally, the Group’s UK motor finance business, similar to industry peers, continues to receive, and is reviewing, a number of complaints and court claims in relation to its historical commission arrangements, some of which are with the Financial Ombudsman Service (FOS). There is significant uncertainty around the scope and / or nature of these issues, related complaints and of any remediation, if required, given the challenges to the interpretation and / or validity of complaints and the associated regulatory requirements. The FOS has found in favour of complainants in two decisions in January 2024 relating to other lenders. The FCA notes that this is likely to prompt a significant increase in complaints from consumers to firms and the FOS. Hence, the FCA are using their powers under s166 of the Financial Services and Markets Act 2000 to review historical motor finance commission arrangements and sales across several firms. The FCA have stated that if they find there has been widespread misconduct and customer harm, they will identify how best to remediate consumers through an appropriate settlement arrangement in an orderly, consistent and efficient way and, if necessary, resolve any contested legal issues of general importance. While it is possible that certain charges may be incurred in relation to existing or future complaints and court claims, it is not considered that a legal or constructive obligation has been incurred in relation to these matters that would require a provision to be recognised at this stage. Furthermore, given the inherent uncertainties relating to the scope and timing of any possible outflow, it is not currently practicable to estimate the extent of any potential financial impact. Loan commitments In 2022, as part of the KBCI portfolio acquisition the Group committed to support the growth of non-bank lenders in the Irish mortgage market, making €1 billion in total funding available to certain non-bank lenders through the purchase of securities issued by them, to increase their funding capacity and reduce their cost of funding. At 31 December 2023, €571 million remains available to the lenders (2022: €821 million). Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers. Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Included within total commitments is an amount of €181 million of undrawn loan commitments to the Group's joint ventures (2022: €187 million). Details of the Group's acquisition of Davy are set out in note 49. Capital commitments In the normal course of business, the Group sources investment opportunities for private clients principally in respect of private equity investments from leading international private equity groups who require the Group to enter into commitments in relation to meeting any future capital calls as investments are made. The total of such commitments at 31 December 2023 was €209 million (2022: €252 million). In turn, Davy obtain legally binding commitments from private clients to meet their share of potential future cash calls up to indicative levels as outlined in the individual investment memoranda. The total of such cash calls at 31 December 2023 was €55 million (2022: €54 million). At 31 December 2023, there were no unpaid cash calls in respect of third-party investment providers (2022: €nil). The amounts and timing of any future cash calls are uncertain and are dependent on the investment activities and funding requirements of the relevant third party private equity providers. The Directors believe that, based on conditions in existence at the balance sheet date, there is no potential liability that would result in a loss for Davy arising from future potential cash calls which may be made. When cash calls are made, the normal risk management procedures in relation to counterparty and settlement risk are applied. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 306 40 Loss allowance provision on loan commitments and financial guarantees The loss allowance on loan commitments are presented as a provision in the balance sheet (i.e. as a liability under IFRS 9) and separate from the impairment loss allowance. To the extent a facility includes both a loan and an undrawn commitment, it is only the impairment attributable to the undrawn commitment that is presented in this table. The impairment loss allowance attributable to the loan is shown as part of the financial asset to which the loan commitment relates. 2023 Restated 1 2022 Amount €m Loss allowance €m Amount €m Loss allowance €m Loan commitments (note 39 ) 17,922 57 16,276 49 Guarantees and irrevocable letters of credit1 (note 39 ) 901 4 776 6 18,823 61 17,052 55 Loss allowance of which are: Stage 1 25 22 Stage 2 29 19 Stage 3 7 14 61 55 1 Comparative figures have been restated by €181 million for Guarantees and irrevocable letters of credit from €595 million to €776 million to adjust for letters of credit which were incorrectly excluded in 2022. The following tables summarise the asset quality of loan commitments and financial guarantees by IFRS 9 twelve month PD grade which are not credit-impaired. 2023 Loan commitments and financial guarantees - Contract amount Loan commitments Guarantees and irrevocable letters of credit Stage 1 Stage 2 Total Stage 1 Stage 2 Total €m % €m % €m % €m % €m % €m % PD Grade 1-4 4,676 29% 60 4% 4,736 27% 312 39% 4 4% 316 35% 5-7 8,116 50% 993 58% 9,109 51% 476 60% 47 51% 523 59% 8-9 3,156 20% 453 27% 3,609 20% 9 1% 23 25% 32 4% 10-11 128 1% 193 11% 321 2% – – 18 20% 18 2% Total 16,076 100% 1,699 100% 17,775 100% 797 100% 92 100% 889 100% At 31 December 2023 , credit-impaired loan commitments are €147 million (2022: € 190 million) while credit-impaired guarantees and irrevocable letters of credit are €12 million (2022: €15 million). Restated1 2022 Loan commitments and financial guarantees - Contract amount Loan commitments Guarantees and irrevocable letters of credit 1 Stage 1 Stage 2 Total Stage 1 Stage 2 Total €m % €m % €m % €m % €m % €m % PD Grade 1-41 5,739 38% 673 58% 6,412 40% 267 38% 19 35% 286 37% 5-71 6,756 46% 156 13% 6,912 43% 435 61% 4 8% 439 58% 8-9 2,298 15% 279 24% 2,577 16% 4 1% 16 30% 20 3% 10-111 124 1% 61 5% 185 1% 2 – 14 27% 16 2% Total 14,917 100% 1,169 100% 16,086 100% 708 100% 53 100% 761 100% 1 Comparative figures have been restated by €181 million for Guarantees and irrevocable letters of credit from €580 million to €761 million to adjust for Stage 1 letters of credit which were incorrectly excluded in 2022. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 307 41 Retirement benefit obligations The Group sponsors a number of defined benefit and defined contribution schemes in Ireland and overseas. The defined benefit schemes are funded and the assets of the schemes are held in separate trustee administered funds. In determining the level of contributions required to be made to each scheme and the relevant charge to the income statement, the Group has been advised by independent actuaries, which in the case of the majority of the Group’s schemes is Willis Towers Watson. The most significant defined benefit scheme in the Group is the BSPF which accounts for c.74% of the total liabilities across all Group sponsored defined benefit schemes at 31 December 2023. The BSPF and all of the Group’s other RoI and UK defined benefit schemes were closed to new members during 2007 and a new hybrid scheme (which included elements of defined benefit and defined contribution) was introduced for new entrants to the Group. The hybrid scheme was subsequently closed to new entrants in late 2014 and a new defined contribution scheme, RetireWell, was introduced for new entrants to the Group from that date. Retirement benefits under the BSPF and a majority of the other defined benefit plans are calculated by reference to pensionable service and pensionable salary at normal retirement date. Regulatory Framework The Group operates the defined benefit plans under broadly similar regulatory frameworks. Benefits under the BSPF are paid to members from a fund administered by Trustees, who are responsible for ensuring compliance with the Pensions Act 1990 and other relevant legislation, including the EU directive on the activities and supervision of Institutions for Occupational Retirement Provision (the IORP II Directive). These responsibilities include ensuring that contributions are received, investing the scheme assets and making arrangements to pay the benefits and developing appropriate Risk Management and Internal Audit frameworks. Plan assets are held in trusts and are governed by local regulations and practice in each country. In order to assess the level of contributions required, triennial valuations are carried out with plan obligations generally measured using prudent assumptions and discounted based on the return expected from assets held in accordance with the actual scheme investment policy. The BSPF is also subject to an annual valuation under the Irish Pensions Authority Minimum Funding Standard (MFS). The MFS valuation is designed to assess whether a scheme has sufficient funds to provide a minimum level of benefits in a wind-up scenario. If the MFS valuation indicates a funding level of below 100%, action would be required. This generally takes the form of agreeing a ‘Funding Proposal’ with the Trustees with the aim of meeting the MFS by a specified future point in time. The responsibilities of the Trustees and the regulatory framework, are broadly similar for the Group’s other defined benefit schemes and take account of pension regulations in each specific jurisdiction. The Group works closely with the Trustees of each scheme to manage the plans. The nature of the relationship between the Group and the Trustees is governed by local regulations and practice in each country and by the respective legal documents underpinning each plan. IAS 19 - Financial Assumptions The signiﬁcant ﬁnancial assumptions used in measuring the Group’s deﬁned beneﬁt obligations under IAS 19 are set out in the following table. Financial assumptions 2023 % p.a. 2022 % p.a. Irish schemes Discount rate 3.40 3.60 Inﬂation rate 2.30 2.60 Rate of general increase in salaries 2.80 3.10 Rate of increase in pensions in payment 1 1.38 1.57 Rate of increase to deferred pensions 2.20 2.45 UK schemes Discount rate 4.75 5.00 Consumer Price Inﬂation 2.55 2.70 Retail Price Inﬂation 3.15 3.30 Rate of general increase in salaries 3.65 3.80 Rate of increase in pensions in payment 1 2.05 2.13 Rate of increase to deferred pensions 2.55 2.70 1 Weighted average increase across all Group schemes in the relevant jurisdiction. Actuarial Valuation of the BSPF The last formal valuation of the BSPF was carried out at 31 December 2021. The triennial valuation disclosed the fair value of the scheme assets represented 102% of the benefits that had accrued to members, after allowing for expected future increases in earnings and pensions. As a result, no deficit contributions were required following the valuation. In respect of future service benefits, as part of the actuarial valuation at 31 December 2021, it was agreed that if certain circumstances were met, an interim contribution calculation would take place each 1 October to determine the future service contribution for the following calendar year. At 1 October 2022, these circumstances were met as there was a substantial change in the long term (e.g. 20 year term) euro yields after allowing for inflation, over the agreed period. The interim contribution calculation resulted in a future service contribution of €44 million applicable for 2023 (decreased from €52 million for 2022). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 308 41 Retirement benefit obligations (continued) Since late 2022, there has been a substantial change to the BSPF’s investment strategy and the interim contribution calculation for future service for calendar year 2024 therefore applied at 1 October 2023. The calculation completed by the scheme actuary resulted in a future service contribution of €44 million for 2024 (in line with the contribution applicable for 2023). The Trustees agreed to enter into an Escrow Agreement with the Group, whereby future service contributions for the period from 1 October 2022 to 30 September 2025 are paid into an Escrow Account. The Group contributions in respect of that period will be held in the Escrow Account until certain conditions are met. These conditions primarily relate to the strength of BSPF's funding position. For example, if the BSPF funding position weakens and falls below agreed levels, the monies in the Escrow Account will be paid to BSPF over an agreed time period. If the funding position strengthens above agreed levels, payments will be made to the Group over an agreed time period. Under the exceptional circumstances where BSPF fails to satisfy its statutory funding requirements or if there is significant risk to the Group’s covenant, the monies in the Escrow Account would be paid immediately to BSPF. At 31 December 2023, the Escrow Account is included within other assets. See note 32, Other assets for further detail. The next formal triennial valuation of the BSPF will be carried out during 2025 based on the position at 31 December 2024. The actuarial valuations are available for inspection by members but are not available for public inspection. Plan details The table below sets out details of the membership of the BSPF. BSPF plan details at last valuation date (31 December 2021) Number of members Proportion of funding liability Active members 3,176 27% Deferred members 7,636 28% Pensioner members 5,891 45% Total 16,703 100% Negative Past Service Cost Following a review of the Life Balance defined benefit pension scheme, effective from 1 April 2023, discretionary increases to members' defined benefits ceased and an annual contribution to members' defined contribution plans became effective. This resulted in a negative past service cost of €17 million being recognised in 2023. During 2023 and 2022, negative past service cost of €1 million arising from the Group's restructuring programme was also recognised across a number of schemes. Financial and Demographic assumptions The assumptions used in calculating the accounting costs and obligations of the Group’s defined benefit pension plans, as detailed below, are set by the Directors after consultation with independent actuaries. Discount rates are determined in consultation with the Group’s independent actuary, with reference to market yields at the reporting date on high quality corporate bonds (AA rated or equivalent) issued in the relevant currency, with a term corresponding to the term of the benefit payments. The assumption for RoI price inflation is set by reference to the Eurozone Harmonised Index of Consumer Prices (HICP) inflation swap curve, as the HICP inflation swap curve is aligned to the duration of the Group’s RoI plans liabilities. The assumptions for UK price inflation are determined with reference to the Group’s independent actuary’s standard cash flow matching inflation assumption methodology, except for UK Consumer Price Index (CPI) inflation, which is set by reference to retail price index (RPI) inflation, with an adjustment applied, as there are insufficient CPI-linked bonds from which to derive an assumption. The salary assumption takes into account inflation, promotion and current employment markets relevant to the Group. Other financial assumptions are reviewed in line with changing market conditions to determine best estimate assumptions. Demographic assumptions are reviewed periodically in line with the actual experience of the Group’s schemes. Mortality assumptions The mortality assumptions adopted for Irish pension arrangements reflect both a base table and projected table developed from various Society of Actuaries in Ireland mortality investigations that are considered a best fit for the Group’s expected future mortality experience. Mortality assumptions 2023 years 2022 years Longevity at age 70 for current pensioners Males 18.5 18.4 Females 19.9 19.8 Longevity at age 60 for active members currently aged 60 years Males 28.0 27.9 Females 29.7 29.6 Longevity at age 60 for active members currently aged 40 years Males 30.2 30.1 Females 31.6 31.6 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 309 41 Retirement benefit obligations (continued) Amounts recognised in ﬁnancial statements The table below outlines where the Group’s defined benefit plans are recognised in the financial statements. The UK Pension Plans include a portion of the BSPF which relates to UK members. 2023 Restated1 2022 Irish Pension Plans €m UK Pension Plans €m Total €m Irish Pension Plans €m UK Pension Plans €m Total €m Income statement credit / (charge) Other operating expenses1 (13) (4) (17) (44) (10) (54) Insurance service expenses1 (3) – (3) (5) – (5) Cost of restructuring programme 1 – 1 1 – 1 Statement of OCI Impact of remeasurement (25) (10) (35) 165 (81) 84 Balance sheet obligations 558 124 682 571 129 700 This is shown on the balance sheet as: Retirement beneﬁt asset 692 736 Retirement beneﬁt obligation (10) (36) Total net asset 682 700 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 310 41 Retirement benefit obligations (continued) The movement in the net defined benefit obligation over the year in respect of the Group’s defined benefit plans is as follows: 2023 Restated1 2022 Present value of obligation €m Fair value of plan assets €m Surplus/ (deﬁcit) of plans €m Present value of obligation €m Fair value of plan assets €m Surplus/ (deﬁcit) of plans €m Balance at 1 January (6,206) 6,906 700 (9,004) 9,602 598 Income statement (273) 254 (19) (243) 185 (58) Current service cost (64) – (64) (85) – (85) Negative past service cost 18 – 18 1 – 1 Interest (expense) / income (227) 254 27 (159) 185 26 Return on plan assets not included in income statement – 117 117 – (2,601) (2,601) Changes in demographic assumptions (15) – (15) 49 – 49 Changes in ﬁnancial assumptions (21) – (21) 2,795 – 2,795 Experience losses (112) – (112) (163) – (163) Employer contributions – 36 36 – 76 76 Deﬁcit reducing – 4 4 – 4 4 Other – 32 32 – 72 72 Employee contributions (7) 7 – (7) 7 – Beneﬁt payments 241 (241) – 298 (298) – Changes in exchange rates (21) 17 (4) 69 (65) 4 Balance at 31 December (6,414) 7,096 682 (6,206) 6,906 700 The above amounts are recognised in the ﬁnancial statements as follows: (charge) / credit Other operating expenses1 (271) 254 (17) (239) 185 (54) Insurance service expenses1 (3) – (3) (5) – (5) Cost of restructuring programme 1 – 1 1 – 1 Total amount recognised in income statement (273) 254 (19) (243) 185 (58) Return on plan assets not included in income statement – 117 117 – (2,601) (2,601) Changes in demographic assumptions (15) – (15) 49 – 49 Changes in ﬁnancial assumptions (21) – (21) 2,795 – 2,795 Experience losses (112) – (112) (163) – (163) Changes in exchange rates (21) 17 (4) 69 (65) 4 Total remeasurements in OCI (169) 134 (35) 2,750 (2,666) 84 Total negative past service cost comprises Cost of restructuring programme 1 – 1 1 – 1 Other operating expenses 17 – 17 – – – Total 18 – 18 1 – 1 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 311 41 Retirement benefit obligations (continued) The retirement benefit schemes’ assets include one property occupied by Group companies to the value of €27 million (2022: €31 million). Sensitivity of deﬁned beneﬁt obligation to key assumptions This table sets out how the defined benefit obligation would have been affected by changes in the significant actuarial assumptions that were reasonably possible at the reporting date. While the defined benefit obligation sensitivity table shows the estimated impact of an individual assumption change, a change in one assumption could impact on other assumptions due to the relationship between assumptions. Some of the reasonably possible changes in defined benefit obligation assumptions may have an impact on the value of the schemes’ investment holdings. For example, the plans hold a proportion of their assets in corporate bonds. A fall in the discount rate as a result of lower corporate bond yields would be expected to lead to an increase in the value of these assets, thus partly offsetting the increase in the defined benefit obligation. The extent to which these sensitivities are managed is discussed further below. The table on the following page sets out the estimated sensitivity of plan assets to changes in equity markets, interest rates and inflation rates. The sensitivity analysis is prepared by the independent actuaries calculating the defined benefit obligation under the alternative assumptions and the fair value of plan assets using alternative asset prices. Future cash ﬂows The plans’ liabilities represent a long-term obligation and most of the payments due under the plans will occur several decades into the future. The duration or average term to payment for the benefits due, weighted by liability, is c.17.5 years (2022: c.18 years) for the Irish plans and c.15 years (2022: c.16 years) for the UK plans. Expected employer contributions for 2024 are €33 million. Expected employee contributions for 2024 are €7 million. Risks and risk management The Group’s defined benefit pension plans have a number of areas of risk. The risks are considered from both a funding perspective, which drives the cash commitments of the Group and from an accounting perspective, i.e. the extent to which such risks affect the amounts recorded in the Group’s financial statements. Changes in bond yields, interest rate and inflation risks, along with equity risk, are the defined benefit schemes’ largest risks. From an accounting liability perspective, the schemes are also exposed to movements in corporate bond spreads. As part of its risk management, the largest Group sponsored pension scheme, the BSPF has invested 50% of its assets in a Liability Driven Investment (LDI) approach to help manage its interest rate and inflation risk, in addition to a further 11% in a complementary cashflow matching portfolio of high quality bonds. Asset breakdown 2023 €m 2022 €m Liability Driven Investment (unquoted) 3,789 2,973 Property and infrastructure (unquoted) 820 1,053 Private equities (unquoted) 566 578 Cash and Other (quoted) 512 930 Equities (quoted) 439 335 Reinsurance (unquoted) 349 301 Hedge funds (unquoted) 305 354 Government bonds (quoted) 138 139 Corporate bonds (quoted) 92 217 Property and infrastructure (quoted) 86 26 Total fair value of assets 7,096 6,906 Impact on deﬁned beneﬁt obligations Increase / (decrease) 2023 €m Increase / (decrease) 2022 €m RoI schemes Discount rate Increase of 0.25% (214) (212) Decrease of 0.25% 228 226 Inﬂation rate Increase of 0.10% 57 57 Decrease of 0.10% (56) (56) Salary growth Increase of 0.10% 17 17 Decrease of 0.10% (17) (17) Life expectancy Increase of 1 year 153 146 Decrease of 1 year (153) (146) UK schemes Discount rate Increase of 0.25% (40) (39) Decrease of 0.25% 43 41 RPI inﬂation Increase of 0.10% 9 9 Decrease of 0.10% (9) (9) Salary growth Increase of 0.10% 2 2 Decrease of 0.10% (2) (2) Life expectancy Increase of 1 year 28 25 Decrease of 1 year (29) (25) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 312 41 Retirement benefit obligations (continued) Impact on plan assets Increase / (decrease) 2023 €m Increase / (decrease) 2022 €m All schemes Sensitivity of plan assets to a movement in global equity markets with allowance for other correlated diversiﬁed asset classes Increase of 5.00% 73 78 Decrease of 5.00% (73) (78) Sensitivity of liability-matching assets to a 25bps movement in interest rates Increase of 0.25% (269) (265) Decrease of 0.25% 285 281 Sensitivity of liability-matching assets to a 10bps movement in inﬂation rates Increase of 0.10% 70 82 Decrease of 0.10% (69) (80) The key areas of risk and the ways in which the Group has sought to manage them, are set out below: Asset volatility The defined benefit pension plans hold a proportion of their assets in equities and other return-seeking assets. The returns on such assets tend to be volatile. For the purposes of the triennial valuation, the defined benefit liabilities are calculated using a discount rate set with reference to government bond yields, with allowance for additional return to be generated from the investment portfolio. For measurement of the obligation in the financial statements under IAS 19, however, the defined benefit obligation is calculated using a discount rate set with reference to high-quality corporate bond yields. The movement in the asset portfolio is not fully correlated with the movement in the two liability measures and this means that the funding level is likely to be volatile in the short-term, potentially resulting in short-term cash requirements and a reduction in the net defined benefit surplus recorded on the balance sheet. In order to limit the volatility in asset returns, the pension plans’ assets are well-diversified by investing in a range of asset classes, including listed equity, private equity, hedge funds, infrastructure, reinsurance, property, government bonds and corporate bonds. To increase the correlation between the asset returns and the liabilities, the pension plans employ Liability Driven Investment (“LDI”) strategies that use a range of physical securities and financial derivatives, including government bonds and interest rate and inflation swaps. During the course of 2023, the BSPF continued the process of de-risking its investment strategy, and implemented further changes to improve the liquidity and diversification characteristics of the portfolio. Changes in bond yields The LDI approach invests in cash, government bonds, interest rate and inflation swaps and other financial derivatives to create a portfolio which is both inflation-linked and of significantly longer duration than possible in the physical bond market. It also provides a closer match to the expected timing of cash flow / pension payments. The portfolio broadly hedges against movements in long-term interest rates although it only hedges a portion of the BSPF’s interest rate risks. The portfolio does not hedge against changes in the credit spread on corporate bonds used to derive the accounting liabilities. During 2023, the BSPF introduced a cash flow matching portfolio designed to match some of the shorter-term liabilities directly, with income and capital paid from holding a range of high quality corporate and sovereign bonds. This provides some complementary interest rate hedging to that provided by the dedicated LDI portfolio, and also functions to reduce liquidity risk by ensuring there will be incoming cash flows to meet expected pension payments. Inflation risk The majority of the plans’ benefit obligations are linked to inflation and higher inflation will lead to higher liabilities, although, in most cases, caps on the level of inflationary increases are in place to protect the plans against high inflation and the 2013 Group Pensions Review changes have further limited this exposure. The LDI portfolio broadly hedges against movements in inflation expectations although it only hedges a portion of the BSPF’s inflation risks. Furthermore, the portfolio does not protect against differences between expectations for eurozone average inflation and the fund’s Irish inflation exposure. Life expectancy The majority of the plans’ obligations are to provide a pension for the life of the member, which means that increases in life expectancy will result in an increase in the plans’ liabilities. Investment decisions are the responsibility of the Trustees and the Group supports the efficient management of risk including through the appointment of a Group Pensions Chief Investment Officer. The role of Group Pensions Chief Investment Officer is to advise and support the Trustees of the Group sponsored pension schemes in the design, implementation and management of investment strategy to meet the various scheme liabilities. The duties include, but are not limited to, the identification and management of risks such as the risk of insufficient asset returns, changing interest rates, inflation, FX risk, counterparty exposures, geographical risk, asset concentration risk, liquidity risk, regulatory risk, manager risk and longevity risk. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 313 42 Subordinated liabilities Note 2023 €m 2022 €m Dated loan capital Bank of Ireland Group plc €500 million 6.750% Fixed Rate Reset Callable Subordinated Notes due 2033 (a) 502 485 €500 million 1.375% Fixed Rate Reset Callable Subordinated Notes due 2031 (b) 466 443 £300 million 7.594% Fixed Rate Reset Callable Subordinated Notes due 2032 (c) 342 326 €300 million 2.375% Fixed Rate Reset Callable Subordinated Notes due 2029 (d) 290 280 1,600 1,534 Undated loan capital The Governor and Company of the Bank of Ireland £75 million 13.375% Perpetual Subordinated Bonds (e) – 85 Bristol & West plc £32.6 million 8.125% Non-Cumulative Preference Shares (f) – 37 – 122 Total subordinated liabilities 1,600 1,656 Dated loan capital - principal terms and conditions Dated loan capital instruments, constitute unsecured obligations of the Group subordinated in right of payments to the claims of depositors and other unsubordinated creditors of the Group and rank pari passu without any preference among themselves. The table above provides a description of the dated loan capital, including the currency of the issue; if the issue is fixed, floating or a combination of both; and maturity. All of the dated notes in issue in 2023 were issued under the Group’s Euro Note Programme. a. €500 million 6.750% Fixed Rate Reset Callable Subordinated Notes due 2033 On 1 December 2022, the Company issued a €500 million 10.25 year (callable between 1 December 2027 and 1 March 2028) 'Green' Tier 2 capital instrument. The bond carries a coupon of 6.750%. b. €500 million 1.375% Fixed Rate Reset Callable Subordinated Notes due 2031 On 11 May 2021, the Company issued a €500 million 10.25 year (callable between 11 May 2026 and 11 August 2026) 'Green' Tier 2 capital instrument. The bond carries a coupon of 1.375%. c. £300 million 7.594% Fixed Rate Reset Callable Subordinated Notes due 2032 On 6 September 2022, the Company issued a £300 million 10.25 year (callable between 6 September 2027 and 6 December 2027) 'Green' Tier 2 capital instrument. The bond carries a coupon of 7.594%. d. €300 million 2.375% Fixed Rate Reset Callable Subordinated Notes due 2029 On 14 October 2019, the Company issued a €300 million 10 year (callable at the end of year five) Tier 2 capital instrument. The bond carries a coupon of 2.375%. These instruments are loss absorbing at the point of non- viability under the EU (Bank Recovery and Resolution) Regulations 2015, as amended and Noteholders acknowledge that the notes may be subject to the exercise of Irish statutory loss absorption powers by the relevant resolution authority. Redemption in whole but not in part is at the option of the Company upon (i) regulatory reasons (capital event), or (ii) tax reasons (additional amounts payable on the notes). Any redemptions before the maturity date is subject to such approval by the Competent Authority, namely ECB or SRB as may be required by the CRR and / such other laws and regulations which are applicable to the Company. Undated loan capital - principal terms and conditions e. The 13.375% Perpetual Subordinated Bonds were fully redeemed in August 2023 for a redemption consideration plus voting fee of €102 million as part of the Group's strategy to retire a number of its legacy instruments. f. The 8.125% Non-Cumulative Preference Shares were delisted from the FCA Official List on 27 December 2023 and the London Stock Exchange (LSE) cancelled the admission of trading of the shares on the Main Market for listed securities on the LSE. On the same date, Bristol & West Plc (B&W) entered a members' voluntary liquidation (MVL). No more dividends will be paid on the preference shares. As part of the Group's strategy to retire the legacy instruments, the Group invited holders to tender any and all of their 32,593,734 preference shares during 2023. At the time of the MVL, the Group held 18,688,138 shares (57.34%) of the B&W preference stock which the Group acquired during the year for a consideration of €26 million. At 31 December 2023, the liquidation distribution surplus and unclaimed dividends payable by the Group to the external holders of the B&W preference shares who did not complete the registration process amounted to €21 million and are included in note 36 Other Liabilities. A loss of c.€22 million was incurred in connection with the liability management exercises, which is recognised in Other operating income, note 9. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 314 43 Share capital Ordinary shares All of the company’s issued share capital comprising 1,056,636,305 ordinary shares of €1.00 each are listed on the Irish Stock Exchange trading as Euronext Dublin and the London Stock Exchange. All ordinary shares carry the same voting rights. There were no outstanding options on ordinary shares under employee schemes at 31 December 2023 or 2022. At 31 December 2023 , NIAC plc held 797,735 ordinary shares of BoIG plc as ‘treasury shares’ ( 2022: 1,270,095). The consideration paid for these shares amounted to €7 million (2022: €10 million). Share buyback In 2023, the Group completed the purchase of the €125 million share buyback programme whereby the Group repurchased 13.69 million shares for cancellation, c.1.3% of the count outstanding at 1 January 2023, at a weighted average price of €9.131 per share. Authorised 2023 €m 2022 €m Bank of Ireland Group plc 10 billion ordinary shares of €1.00 each 10,000 10,000 100 million preference shares of €0.10 each 10 10 Allotted and fully paid 2023 €m 2022 €m Bank of Ireland Group plc 1,056 million ordinary shares of €1.00 each ( 2022 : 1,069 million units) 1,056 1,069 0.8 million treasury shares of €1.00 each ( 2022: 1.3 million units) 1 1 1,057 1,070 Movement in ordinary and treasury shares 2023 2022 Ordinary shares Treasury shares Ordinary shares Treasury shares At the beginning of the year 1,069,056,556 1,270,095 1,075,587,020 3,235,852 Change in treasury shares held 472,360 (472,360) 1,965,757 (1,965,757) Share buyback - repurchase of shares (13,690,346) 13,690,346 (8,496,221) 8,496,221 Share buyback - cancellation of shares – (13,690,346) – (8,496,221) At end of year 1,055,838,570 797,735 1,069,056,556 1,270,095 44 Other equity instruments - Additional tier 1 In May and September 2020, BoIG issued Additional tier 1 (AT1) securities with a par value of €675 million and €300 million respectively at an issue price of 100%. The principal terms of the AT1 securities are as follows: • the securities constitute direct, unsecured, unguaranteed and subordinated obligations of BoIG, rank behind Tier 2 instruments and preference shareholders and in priority to ordinary shareholders; • the securities have no fixed redemption date, and the security holders will have no right to require BoIG to redeem or purchase the securities at any time; • BoIG may, in its sole and full discretion but subject to the satisfaction of certain conditions elect to redeem all (but not some only) of the securities at any time from and including the first call date (19 May 2025 for the €675 million issue and 1 September 2025 for the €300 million issue) to and including the first reset date (19 November 2025 for the €675 million issue and 1 March 2026 for the €300 million issue), or semi-annually on any interest payment date thereafter; • the €675 million securities bear a fixed rate of interest of 7.5% until the first reset date (19 November 2025), while the €300 million issue bear a fixed rate of interest of 6.0% until its first reset date (1 March 2026). After the initial reset date, in the event that they are not redeemed, the AT1 securities will bear interest at rates fixed periodically in advance for five-year periods based on market rates at that time; • BoIG may elect at its sole and full discretion to cancel (in whole or in part) the interest otherwise scheduled to be paid on any interest payment date for either set of securities; • both sets of securities will be written down and any unpaid interest will be cancelled if BoIG’s CET1 ratio falls below 7%; and • subsequent to any write-down event BoIG may, at its sole discretion, write-up some or all of the written-down principal amount of the AT1 instrument provided regulatory capital requirements and certain conditions are met. 2023 €m 2022 €m Balance at 1 January and 31 December 966 966 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 315 45 Non-controlling interests Preference stock The preference stock and related stock premium of the Bank are classified as non-controlling interests (NCI), to the extent they are not attributable to the owners of the parent BoIG plc. The preference stockholders are not entitled to vote at any General Court except in certain exceptional circumstances. Such circumstances did arise during 2023 when the Bank proposed resolutions to convert the preference stock into redeemable stock units and to amend the Bye-Laws to provide for the redemption of the preference stock which had been converted. An Extraordinary General Court (EGC) was held on 24 November 2023, along with class meetings of holders of each of the euro preference stock and the sterling preference stock, to vote on the resolutions. The preference stockholders were entitled to vote at that EGC. The resolutions were passed at the EGC and the class meetings. Euro preference stock held by holders who objected to conversion was not converted or redeemed and remains outstanding. As a result, all of the sterling preference stock (1,876,090 units) were converted to redeemable preference stock and subsequently fully redeemed on 11 December 2023. As at 31 December 2022, 1,876,090 units of sterling preference stock were in issue, of which 32,735 units were held by a subsidiary of the Group and were eliminated from the prior year’s consolidated balance of NCI. At 31 December 2022, there were 3,026,598 units of euro preference stock in issue (of which 34,966 units were held by subsidiaries of the Group and were eliminated from the prior year’s consolidated balance of NCI). 802,695 units were converted to redeemable preference stock and subsequently redeemed. Of the remaining 2,223,903 units in issue, 1,992,580 units were held by a subsidiary of the Group and are eliminated on Group consolidation from NCI, leaving 231,323 units of stock outstanding as NCI at 31 December 2023. The total consideration paid for the euro and sterling preference stocks that were either acquired or redeemed by the Group amounted to €104 million. 2023 €m 2022 €m Balance at 1 January 67 68 Proﬁt attributable to NCI 6 8 Dividends paid to NCI (6) (8) Repurchase / redemption of preference stock (64) – Preference stock eliminated on acquisition of Davy – (1) Balance at 31 December 3 67 The outstanding euro preference stock is non-redeemable. The holders of preference stock are entitled to receive at the discretion of the Bank a non-cumulative preferential dividend, which is payable in euro in a gross amount of €1.523686 per unit per annum, in equal semi-annual instalments, in arrears, on 20 February and 20 August in each year. On a winding up of, or other return of capital, by the Bank (other than on a redemption of stock of any class in the capital of the Bank) the holders of preference stock will be entitled to receive an amount equal to the amount paid up or credited as paid up on each unit of the preference stock held (including the premium) out of the surplus assets available for distribution to the Bank’s members. Subject to the Bank’s Bye- Laws, the preference stockholders may also be entitled to receive a sum in respect of dividends payable. 46 Cash and cash equivalents Cash and cash equivalents are classified as amortised cost financial assets. Impairment loss allowance on cash and cash equivalents is measured at amortised cost on a 12 month or lifetime ECL approach as appropriate. The composition of cash and balances at central banks by stage is included in other financial assets set out in note 25 on page 279. Cash and cash equivalents comprise cash in hand and balances with central banks and banks which can be withdrawn on demand. It also co mprises balances with an original maturity of less than three months. The Group is required to hold an average balance with the Central Bank over the published ECB reserve maintenance (six weeks) periods in order to meet its minimum reserve requirement, which at 31 December 2023 was €904 million (2022: €948 million). Cash and cash equivalents of €33.7 billion decreased by €6.2 billion since 31 December 2022 primarily due to the loan and deposit acquisitions from KBCI of c.€6.5 billion, lower customer deposit volumes of c.€1.1 billion (constant currency basis excluding the KBCI deposit acquisition), net bond purchases / maturities of €0.6 billion, partially offset by higher wholesale funding volumes of €0.6 billion, lower customer loan volumes of €0.6 billion (constant currency basis excluding the KBCI loan acquisition) and other items of €0.8 billion. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 316 46 Cash and cash equivalents (continued) For the purposes of the cash ﬂow statement, cash and cash equivalents comprise the following balances: 2023 €m 2022 €m Cash and balances at central banks 31,848 36,861 Less impairment loss allowance on cash and balances at central banks (5) (6) Cash and balances at central banks (net of impairment loss allowance) 31,843 36,855 Loans and advances to banks (with an original maturity of less than 3 months) 1,798 2,987 Cash and cash equivalents at amortised cost 33,641 39,842 Cash and balances at central banks (net of impairment loss allowance) of which are: Republic of Ireland (Central Bank of Ireland) 28,486 33,149 United Kingdom (Bank of England) 2,696 2,587 United States (Federal Reserve) 356 705 Other (cash holdings) 305 414 Total 31,843 36,855 47 Changes in liabilities arising from financing activities This table sets out the changes in liabilities arising from financing activities between cash and non-cash items. For more information on subordinated liabilities, see note 42. Interest accrued on subordinated liabilities is included within other liabilities. For more information on lease liabilities, see note 37 . 2023 2022 Subordinated liabilities €m Interest on subordinated liabilities €m Lease liabilities €m Interest on lease liabilities €m Subordinated liabilities €m Interest on subordinated liabilities €m Lease liabilities €m Interest on lease liabilities €m Balance at 1 January 1,656 51 423 – 1,981 47 452 – Cash ﬂows (128) (99) (44) (11) (248) (80) (53) (12) Proceeds from issue of subordinated liabilities – – – – 843 – – – Liability management exercises on subordinated liabilities (128) – – – – – – – Redemptions of subordinated liabilities – – – – (1,091) – – – Interest paid on subordinated liabilities – (99) – – – (80) – – Payment of lease liability – – (44) – – – (53) – Interest paid on lease liabilities – – – (11) – – – (12) Non-cash changes 72 82 25 11 (77) 84 24 12 Charge to income statement – 82 – 11 – 84 – 12 Exchange adjustments 16 – – – 26 – (1) – Lease liability adjustment – – 7 – – – 2 – Additions to lease liabilities – – 18 – – – 20 – Fair value hedge adjustments 58 – – – (105) – – – Other movements (2) – – – 2 – 3 – At end of year 1,600 34 404 – 1,656 51 423 – Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 317 48 Related party transactions Related parties to the Group include the parent company, BoIG plc, subsidiary undertakings, associated undertakings, joint arrangements, post-emp loyment benefits, KMP and connected parties. A number of banking transactions are entered into between the Company and its subsidiaries in the normal course of business. These include extending secured and unsecured loans, investing in debt securities issued by subsidiaries, taking of deposits and undertaking foreign currency transactions. Associates, joint ventures and joint operations The Group provides to and receives from its associates, joint ventures and joint operations, certain banking and financial services, which are not material to the Group, on similar terms to third party transactions. These include loans, deposits and foreign currency transactions. The amounts outstanding during 2023 are set out in note 27. Pension funds The Group provides a range of normal banking and financial services, which are not material to the Group, to various pension funds operated by the Group for the benefit of its employees (principally to the BSPF), which are conducted on similar terms to third party transactions. Details on the Group’s contributions to the pension funds are set out in note 41. The Group occupies one property owned by the BSPF. At 31 December 2023, the total value of this property was € 27 million (2022: €32 million). In 2023, the rental income paid to BSPF was €2 million (2022 : €2 million). Transactions with Directors and Key Management Personnel Loans to Directors The following information is presented in accordance with the Companies Act 2014. For the purposes of the Companies Acts disclosures, Directors means the Board of Directors and any past Directors who were Directors during the relevant period. Directors’ emoluments are set out in the Remuneration Report on pages 125 to 133. Where no amount is shown in the tables below, this indicates either a credit balance, a balance of €nil, or a balance of less than €500. The value of arrangements at the beginning and end of the financial year as stated below in accordance with Section 307 of the Companies Act 2014, expressed as a percentage of the net assets of the Group at the beginning and end of the financial year, is less than 1%. In the tables below, 'balances' include principal and interest and 'repayments' include principal and interest; revolving credit facilities are not included. The 'aggregate maximum amount outstanding' includes credit card exposures at the maximum statement balance. While the closing balance includes interest accrued and interest paid, the maximum balance includes interest paid only. Companies Acts disclosure Loans to Directors at 31 December 2023 Balance at 1 January 2023 €’000 Balance at 31 December 2023 €’000 Aggregate maximum amount outstanding during the year ended 31 December 2023 €’000 Repayments during the year ended 31 December 2023 €’000 E Bourke Credit card total 4 6 8 – P Kennedy Credit card total 13 – 14 – E Fitzpatrick Loan total 26 18 26 8 M Spain Mortgage total 300 277 300 34 Directors no longer in office at 31 December 2023 F Muldoon 5 3 11 – Total 5 3 11 – Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 318 48 Related party transactions (continued) G Andrews, I Buchanan, R Goulding, M Greene, M O'Grady, S Pateman and M Sweeney had no loans from the Group in 2023. No advances were made during the year. No amounts were waived during 2023. None of the loans were credit-impaired at 31 December 2023 or at 31 December 2022. There is no interest which having fallen due on the above loans has not been paid in 2023 (2022: €nil). All Directors have other transactions with the Bank. The nature of these transactions includes investments, pension funds, deposits, general insurance, life assurance and current accounts with credit balances. The relevant balances on these accounts are included in the aggregate figure for deposits on page 321. Other than as indicated, all loans to Directors are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for similar transactions with other persons unconnected with the Group and of similar financial standing and do not involve more than normal risk of collectability. Companies Acts disclosure Loans to Directors at 31 December 2022 Balance at 1 January 2022 €’000 Balance at 31 December 2022 €’000 Aggregate maximum amount outstanding during the year ended 31 December 2022 €’000 Repayments during the year ended 31 December 2022 €’000 E Bourke Credit card total 3 4 10 – P Kennedy Credit card total – 13 4 – F Muldoon Credit card total 7 5 12 – E Fitzpatrick Loan total 31 26 31 5 M Spain Mortgage total 322 300 322 31 Directors no longer in office at 31 December 2022 G Kelly 28 14 28 14 F McDonagh 750 724 751 46 Total 778 738 779 60 Loans to connected persons on favourable terms Connected persons of Directors are defined by Section 220 of the Companies Act 2014. On terms, including interest rates and collateral, similar to those available to staff generally. In the tables below, 'balances' include principal and interest. The 'maximum amounts outstanding' includes credit card exposures at the maximum statement balance. While the closing balance includes interest accrued and interest paid, the maximum balance includes interest paid only. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 319 48 Related party transactions (continued) 2023 Loans to connected persons on favourable terms Balance at 31 December 2023 €’000 Maximum amounts outstanding during 2023 €’000 Number of persons at 31 December 2023 Maximum number of persons during 2023 E Bourke 1 3 2 2 M Spain – 1 1 1 2022 Loans to connected persons on favourable terms Balance at 31 December 2022 €’000 Maximum amounts outstanding during 2022 €’000 Number of persons at 31 December 2022 Maximum number of persons during 2022 E Bourke 1 3 2 2 Loans to connected persons - Central Bank licence condition disclosures Under its banking licence, the Bank is required to disclose in its annual audited financial statements details of: • the aggregate amount of lending to all connected persons, as defined in Section 220 of the Companies Act 2014; and • the aggregate maximum amount outstanding during the year for which those financial statements are being prepared. Disclosure is subject to certain de minimis exemptions and to exemptions for loans relating to principal private residences where the total of such loans to an individual connected person does not exceed €1 million. The following tables are presented in accordance with this licence condition. In these tables, 'balances' include principal and interest. The 'maximum amounts outstanding' includes credit card exposures at the maximum statement balance. While the closing balance includes interest accrued and interest paid, the maximum balance includes interest paid only. 2023 Connected persons of the following Directors Balance at 31 December 2023 €’000 Maximum amounts outstanding during 2023 €’000 Number of persons at 31 December 2023 Maximum number of persons during 2023 Persons connected to P Kennedy 1,837 1,936 1 1 2022 Connected persons of the following Directors Balance at 31 December 2022 €’000 Maximum amounts outstanding during 2022 €’000 Number of persons at 31 December 2022 Maximum number of persons during 2022 Persons connected to P Kennedy 1,930 2,045 1 1 Key management personnel - loans and deposits (IAS 24) For the purposes of IAS 24 ‘Related party disclosures’, the Group has 25 KMP (2022: 23) which comprise the Directors, the members of the GEC and any past KMP who was a KMP during the relevant period. In addition to Executive Directors, the GEC comprises: • Group Secretary and Head of Corporate Governance; • Chief of Staff and Head of Group Corporate Affairs; • Interim Chief Executive - Retail UK; • Chief People Officer; • Chief Executive - Corporate and Commercial; • Chief Executive - Retail Ireland • Group Chief Risk Officer; • Interim Chief Technology Officer; • Chief Strategy and Transformation Officer; and, • Chief Customer Officer KMP, including Directors, hold products with Group companies in the ordinary course of business. Other than as indicated, all loans to NEDs are made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for similar transactions with other persons unconnected to the Group and do not involve more than the normal risk of collectability. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 320 48 Related party transactions (continued) Loans to KMP other than NEDs are made on terms similar to those available to staff generally and / or in the ordinary course of business on normal commercial terms. The aggregate amounts outstanding, in respect of all loans, quasi-loans and credit transactions between the Bank and its KMP, as defined above, together with members of their close families and entities influenced by them are shown in the following table. IAS 24 Disclosures 2023 Key management personnel Balance at 1 January 2023 €’000 Balance at 31 December 2023 €’000 Maximum amounts outstanding during 2023 €’000 Total number of relevant KMP at 1 January 2023 Total number of relevant KMP at 31 December 2023 Loans 2,170 1,780 2,171 13 9 Deposits 4,707 4,594 11,324 18 17 IAS 24 Disclosures 2022 Key management personnel Balance at 1 January 2022 €’000 Balance at 31 December 2022 €’000 Maximum amounts outstanding during 2022 €’000 Total number of relevant KMP at 1 January 2022 Total number of relevant KMP at 31 December 2022 Loans 3,338 2,170 2,688 14 13 Deposits 6,842 4,707 14,755 20 18 In the tables above, 'balances' include principal and interest. The 'opening balance' includes balances and transactions with KMPs who retired during 2022 and are not related parties during 2023. Therefore these key management personnel are not included in the maximum amounts outstanding. The 'maximum amounts outstanding' include credit card exposures at the maximum statement balance. In all cases key management personnel have not exceeded their approved limits. The maximum approved credit limit on any credit card held by KMP is €25,000 (2022: €25,000). The maximum amount outstanding was calculated using the maximum balance on each account. The highest maximum outstanding liability for any member of KMP, close family and entities influenced by them did not exceed €2 million during 2023 (2022: €2 million). In some cases with investment type products (i.e. funds based products, life assurance and other policies) the maximum balance amounts were not available, in which case the greater of the balance at the start of the year and the balance at the end of the year has been included as the maximum balance amount. While the closing balance includes interest accrued and interest paid, the maximum balance includes interest paid. KMP have other protection products with the Bank. The nature of these products includes mortgage protection, life assurance and critical illness cover. It also includes general insurance products which are underwritten by a number of external insurance companies and for which the Bank acts as an intermediary only. None of these products has any encashment value at 31 December 2023 (2022: €nil). In the above IAS 24 disclosures, there was no loan advancements to KMP and close family members of KMP on preferential staff rates (2022: €nil). None of the loans were credit-impaired at 31 December 2023 or at 31 December 2022. There is no interest which having fallen due on the above loans has not been paid in 2023 (2022: €nil). There are no guarantees entered into by the Bank in favour of KMP of the Bank and no guarantees in favour of the Bank have been entered into by KMP of the Bank. Compensation of KMP Details of compensation paid to KMP are provided in the table below: • 'Salaries and other short-term benefits' comprises gross salary, Employer Pay Related Social Insurance contributions, fees, cash in lieu of pension, car allowance and other short-term benefits paid in the year. • 'Post employment benefits' comprises Employer contributions paid to pension funds. • 'Termination benefits' include, inter alia, contractual payments due in lieu of notice periods. Remuneration 2023 €’000 2022 €’000 Salaries and other short-term beneﬁts 11,278 9,683 Post employment beneﬁts 640 523 Termination beneﬁts 300 238 Total 12,218 10,444 Number of KMP 25 23 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 321 49 Davy acquisition The accounting policy for business combinations is set out in note 1. On 1 June 2022, the Group acquired 100% of the voting equity interests of Amber Note Unlimited Company and its subsidiaries including J&E Davy Holdings (‘Davy’), Ireland’s leading provider of wealth management and capital markets services. Davy was acquired for an enterprise value of c.€427 million as of 1 June 2022. 75% (€320 million) was paid upfront on 1 June 2022 and 25% (€107 million) is accounted for as consideration and remuneration. The 25% (€107 million) value is subject to Davy's pre-existing shareholders meeting a number of agreed criteria and refers to deferred payment split as follows: • €63 million to non-employees which is shown as part of deferred and contingent consideration below; and • €44 million which is deemed remuneration, payable to certain Davy employees. The portion of deferred remuneration is accrued over a period of two years and will be paid after the completion of this term. Davy’s financial performance for the year ended 31 December 2023 is reported within the Wealth and Insurance operating segment. Consideration recognised for the acquisition of Davy A total consideration (before pre-existing relationships) of €513 million was recognised by the Group. The following table summarises the acquisition date fair value of each major class of consideration transferred: 1 June 2022 €m Upfront cash payment 320 Deferred consideration 37 Contingent consideration 32 Total consideration before excess cash 389 Payment for excess cash arising from sale of DGFM and Rize ETF Limited (excluding € 2 million included in deferred consideration) 124 Total consideration before pre-existing relationships 513 Pre-existing relationships (110) Total consideration transferred 403 Pre-existing relationships mainly consisted of current and savings deposit accounts balances, partly offset by a term loan and bank overdraft balance, which were held between Davy and Bank of Ireland Group entities at the date of acquisition. Deferred and contingent consideration The deferred consideration of €37 million was recognised at fair value on acquisition date and subsequently measured at amortised cost. It represents amounts payable to pre-existing shareholders two years after the acquisition date. The contingent consideration is made up of €32 million relates to a number of items, which depending on future events could result in further payments to the vendors. These amounts were recognised at fair value based on probabilities of expected payments and subsequently measured at fair value through profit or loss. They are payable to pre-existing shareholders of Davy within two years after acquisition date subject to certain criteria being met. At 31 December 2023 the carrying value of the deferred consideration was €37 million (2022: €37 million) and the fair value of the contingent consideration was €33 million (2022: €32 million). It should be noted that Management has applied judgements and assumptions in determining the fair values of certain items of contingent consideration. The key judgements relate to the probabilities of future specified events such as claims and specified tax liabilities occurring where such events affect the timing and amount of contingent consideration payable. Attributing 100% probability would increase both the consideration transferred and the goodwill by €16 million. Separate transactions Remuneration expense of €25 million (2022: €11 million) was incurred during 2023, which are recognised as separate transactions. This includes: • an employee remuneration charge of €4 million (2022: €nil) was recognised in relation to Special Incentive and Retention Plan (SIRP) during 2023. A maximum payment of up to €33 million (subject to certain performance conditions) will vest to certain employees of Davy in H1 2026. These awards are subject to deferral and will be released at relevant dates between H1 2026 and H1 2028; and • additionally, during 2023, the Group recognised an employee remuneration charge of €21 million (2022: €11 million). This is related to the incurred portion of deferred remuneration noted above and is payable to some employees of Davy on satisfaction of certain conditions. Goodwill in relation to Davy acquisition The following table summarises the goodwill on acquisition: 1 June 2022 €m Consideration transferred 403 Fair value of identifiable net assets 130 Goodwill arising on acquisition 273 Further information on impairment review of goodwill can be found in Critical accounting estimates and judgements (note 2) on page 231. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 322 50 Client property In the normal course of business, the Group (through Davy) provides the following services to certain of its clients: • investment of funds at the sole discretion of the Group in securities and the placing of deposits in separately designated accounts with recognised banks and building societies, the income from which accrues for the benefit of these clients; and • custodianship of securities held on behalf of clients. Client deposits placed with the Group whereby Davy acts as the financial intermediary amounted to € 1,614 million at 31 December 2023 (2022: €2,346 million) and have been included in customer accounts (note 34). All other client property whereby Davy acts as the financial intermediary has been excluded from the financial statements. 51 KBCI portfolio acquisition On 3 February 2023 ('completion date'), control of the assets and liabilities acquired from KBCI transferred to the Group. The total consideration was €6.5 billion. The Group has applied the optional concentration test under IFRS 3 Business Combinations, which permits a simplified assessment of whether an acquired set of activities and assets are not a business. Applying this test, the Group has concluded that substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets and liabilities. The transaction has therefore been treated as an asset acquisition under IFRS 3, and the costs of the acquisition have been allocated to individual assets and liabilities based on their relative fair values, calculated at the date of acquisition in line with the initial measurement requirements of IFRS 9 Financial Instruments. The Group acquired the performing and non-performing mortgages at 104.3% of nominal value and has included transaction costs and the effects of interest rate movements between the commitment date and date of recognition in the fair value of these assets recognised on the Group balance sheet. The table below shows the nominal value, consideration and fair value based on a balance sheet acquisition date of 3 February 2023. On completion of the acquisition, the derivative financial instrument recognised in respect of the agreement to acquire the assets and liabilities, the fair value of which was a liability of €247 million at 3 February 2023 (31 December 2022: €275 million), was de-recognised and reflected in the fair value of the assets and liabilities at recognition. KBCI assets and liabilities acquired at 3 February 2023 Nominal value €bn Consideration €bn Fair value €bn Performing and non-performing mortgages 7.9 8.2 8.1 Performing mortgages 7.6 8.0 7.9 Non-performing mortgages 0.3 0.2 0.2 Commercial and consumer loans 0.1 0.1 0.1 Deposits (1.8) (1.8) (1.8) Total 6.2 6.5 6.4 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 323 52 Principal undertakings The parent company of the Group is Bank of Ireland Group plc . The principal Group undertakings for 2023 were: Name Principal activity Registered oﬃce Country of Incorporation Statutory year end The Governor and Company of the Bank of Ireland Banking and ﬁnancial services 2 College Green, Dublin 2, D02 VR66 Ireland 31 December Bank of Ireland (UK) plc Retail ﬁnancial services Bow Bells House, 1 Bread Street, London, EC4M 9BE England and Wales 31 December New Ireland Assurance Company plc Life assurance business 87-89 Pembroke Road, Ballsbridge, Dublin 4, D04 X738 Ireland 31 December Bank of Ireland Mortgage Bank Unlimited Company Mortgage lending and mortgage covered securities 2 College Green, Dublin 2, D02 VR66 Ireland 31 December J&E Davy Holdings ('Davy') Wealth management, capital markets and related financial services Davy House, 49 Dawson Street, Dublin 2, D02 PY05 Ireland 30 December First Rate Exchange Services Limited Foreign exchange Great West House, Great West Road, Brentford, London, TW8 9DF England and Wales 31 March N.I.I.B. Group Limited Personal ﬁnance and leasing 1 Donegall Square South, Belfast, BT1 5LR Northern Ireland 31 December All the Group undertakings are included in the consolidated financial statements. Unless stated otherwise, the Group owns 100% of the equity of the principal Group undertakings and 100% of the voting shares of all these undertakings. First Rate Exchange Services Limited ('FRES') is a subsidiary of First Rate Exchange Services Holdings Limited ('FRESH'), a joint venture with the UK Post Office, in which the Group holds 50% of the equity of the business. In presenting details of the principal subsidiary undertakings, the exemption permitted by Section 316 of the Companies Act 2014 has been availed of and the Company will annex a full listing of Group undertakings to its annual return to the Companies Registration Office. Bank of Ireland Mortgage Bank Unlimited Company BoIMB's principal business activities are restricted to dealing in and holding Irish residential mortgage assets, engaging in activities connected with the financing and refinancing of such assets, entering into certain hedging contracts and engaging in other activities which are incidental or ancillary to the above activities, and issuing mortgage covered securities for the purpose of financing loans secured on Irish residential property, all in accordance with the Asset Covered Securities Acts 2001 and 2007 of Ireland. The mortgage covered securities issued by BoIMB can be purchased by Bank of Ireland and other members of the Group or third parties. In 2023, the total amount of principal outstanding in respect of mortgage covered securities issued was €3.5 billion (2022: €4.0 billion ). In 2023, the total amount of principal outstanding in the mortgage covered pool including mortgage assets and cash was €12.9 billion (2022: €9.1 billion). BoIMB issues other debt securities under BoIMB’s obligation to the CBI within the terms of the Special Mortgage-Backed Promissory Note programme. At 31 December 2023, BoIMB had no such debt securities in issue (2022: €nil). J&E Davy Holdings ('Davy') J&E Davy Holdings was acquired on 1 June 2022 (see note 49). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 324 53 Interests in other entities General The Group holds ordinary shares and voting rights in a significant number of entities. Management has assessed its involvement in all such entities in accordance with the definitions and guidance in: • IFRS 10 ‘Consolidated financial statements’; • IFRS 11 ‘Joint arrangements’; • IAS 28 ‘Investments in associates and joint ventures’; and • IFRS 12 ‘Disclosure of interests in other entities’. See note 1 Group accounting policies for additional information. Signiﬁcant restrictions on the Group’s ability to access or use the assets and settle the liabilities of the Group Regulated banking and insurance subsidiaries are required to maintain minimum regulatory liquidity and solvency ratios and are subject to other regulatory restrictions that may impact on transactions between these subsidiaries and the Company, including on the subsidiaries’ ability to make distributions. Certain transactions between BoI (UK) plc and the Group are subject to regulatory limits and approvals agreed with the PRA. Total assets of BoI (UK) plc at 31 December 2023 were €21.7 billion (2022 : €21.3 billion) and liabilities were €19.8 billion (2022: €19.4 billion). The activities of BoIMB are subject to the Asset Covered Securities Act 2001 to 2007 which imposes certain restrictions over the assets of BoIMB. Total assets of BoIMB at 31 December 2023 were €19.5 billion (2022: €20.3 billion) and liabilities were €18.0 billion (2022: €18.8 billion). The Group’s life assurance entity, NIAC, is required to hold shareholder equity that exceeds a solvency capital requirement, see note 18 on page 255 for details. In addition, the Group’s Isle of Man insurance entity is required to hold shareholder equity that exceeds the solvency requirements specified by the Isle of Man Financial Services Authority. Under Section 357 (1)(b) of the Companies Act 2014, the Bank has given an irrevocable guarantee to meet the liabilities, commitments and contingent liabilities entered into by certain Group undertakings. At 31 December 2023, the commitments of these undertakings amounted to €524 million (2022 : €454 million). Consolidated structured entities In the case of structured entities, in considering whether it controls the investee, the Group applies judgement around whether it has the ability to direct the relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power to affect the amount of its returns. The Group generally considers it has control over the investee in the following situations: • securitisation vehicles whose purpose is to finance specific loans and advances to customers; or • defeasance companies set up to facilitate big-ticket leasing transactions. In each case the Group generally considers that it has power over the entity, is exposed or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity, even though the Group normally owns less than half of the voting rights of those entities. The Group does not consider it controls an investee when: • the Group’s only involvement in the arrangement is to administer transactions, for which the Group receives a fixed fee, on the basis that the Group is acting as an agent for the investors; or • an entity is in the process of being liquidated, on the basis that the entity is controlled by the liquidator. In the case of some venture capital investments, in considering whether it controls the investee the Group applies judgement around whether it has the ability to direct the relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power to affect the amount of its returns. The Group has been considered to have significant influence, rather than control of the entity because the Group is not involved in directing the relevant activities of the entity and does not have the right to remove the manager of the entity. The Group holds interests in a structured entity (Bowbell No 3 plc which was issued in November 2023, replacing Bowbell No 2 plc which was called in October 2023) whose purpose is to acquire mortgage loans and other financial assets and issue mortgage backed securities. All of the assets and liabilities of this entity are restricted. At 31 December 2023 for Bowbell No 3 plc, total assets amounted to €0.4 billion and liabilities amounted to €0.4 billion. The Group has entered into a number of transactions transferring a portion of credit risk on reference portfolios of financial assets. The funded protection in respect of these transactions is held with Vale Securities Finance DAC (Vale), Vale Securities Finance No.2 DAC (Vale II), Glen Securities Finance DAC (Glen) and Mespil Securities No. 2 DAC (Mespil II). No assets or liabilities were transferred to Vale, Vale II, Glen or Mespil II as part of the transactions. All transactions have cash collateralised their exposure through the issue of credit linked notes to third party investors. Each transaction also includes unfunded protection. The protection provided by Vale matures in 2029, by Vale II in 2032, by Glen in 2036 and by Mespil II in 2032. In relation to these entities, there are no contractual arrangements that require the Group to provide financial support. In 2023 and 2022 the Group did not provide financial or other support, nor does it expect or intend to do so. In accordance with IFRS 10, all of these entities are consolidated in the Group’s financial statements. Treatment of changes in control of a subsidiary during the reporting period From time to time, the Group may wind up a wholly owned company. During this process, the Group voluntarily appoints a liquidator to manage the winding up of relevant entities. Upon appointment of the liquidator, the Group is considered to have lost control of the companies and accounts for this loss of control as a disposal. In accordance with IAS 21, the Group must reclassify net cumulative FX gains / losses relating to these companies from the FX reserve to the income statement. In 2023, €8 million of a loss was transferred (2022: €nil) (see note 15). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 325 53 Interests in other entities (continued) Joint arrangements A joint arrangement is an arrangement of which two or more parties have joint control i.e. contractually agreed sharing of control of an arrangement where decisions about the relevant activities require the unanimous consent of the parties sharing control. These arrangements are identified by reference to the power sharing agreements, ensuring that unanimous consent of all parties is a requirement. Where the arrangement has been structured through a separate vehicle, the Group has accounted for it as a joint venture. The table below shows the Group’s principal joint arrangements for the year ended 31 December 2023. All joint venture investments are unquoted and are measured using the equity method of accounting. All income from these investments has been included in profit or loss from continuing operations. There are no significant restrictions on the ability of these entities to transfer funds to the Group in the form of cash dividends, or to repay loans or advances made by the Group; nor is there any unrecognised share of losses either for 2023 or cumulatively in respect of these entities. Other than disclosed in note 39, the Group does not have any further commitments or contingent liabilities in respect of these entities other than its investment to date. Joint arrangement Holding Classiﬁcation Country of operation Nature of activities First Rate Exchange Services Holdings Limited 50% Joint venture UK Sale of ﬁnancial products through the UK Post Oﬃce relationship Enterprise 2000 Fund Limited 50% Joint venture Ireland Investment in venture capital companies Associates An associated undertaking is an entity for which the Group has significant influence, but not control, over the entity’s operating and financial policy decisions. If the Group holds 20% or more of the voting power of an entity, it is presumed that the Group has significant influence, unless it could be clearly demonstrated that this was not the case. There are no such cases where the Group holds 20% or more of the voting power of an entity, and is not considered to have significant influence over that entity. The Group holds a number of investments in associates, none of which is individually material. All income from these investments has been included in profit or loss from continuing operations. There are no significant restrictions on the ability of these entities to transfer funds to the Group in the form of cash dividends, or to repay loans or advances made by the Group; nor is there any unrecognised share of losses either for 2023 or cumulatively in respect of these entities. The Group does not have any contingent liabilities in respect of these entities other than its investment to date. Unconsolidated structured entities Unconsolidated collective investment vehicles The Group holds investments in unconsolidated structured entities arising from investments in collective investment undertakings, carried at fair value of €14,600 million (2022: €12,832 million). The value included in assets held to cover unit-linked policyholder liabilities is €13,731 million (2022: €12,068 million) and €869 million (2022: €764 million) is held for non-unit linked liabilities (note 20). At 31 December 2023, the total asset value of these unconsolidated structured entities, including the portion in which the Group has no interest, was €37.9 billion (2022: €39.2 billion). The Group’s maximum exposure to loss is equal to the carrying value of the investment. However, the Group’s investments in these entities are primarily held to match policyholder liabilities in the Group’s life assurance business and the majority of the risk from a change in the value of the Group’s investment is matched by a change in policyholder liabilities. The collective investment vehicles are primarily financed by investments from investors in the vehicles. During the year the Group has not provided any non- contractual financial or other support to these entities and has no current intention of providing any financial or other support. The Group does not sponsor any of these unconsolidated structured entities. Mulcair Securities No.2 DAC In June 2021, the Group entered into a securitisation arrangement for a portfolio of residential mortgage NPEs, through an unconsolidated special purpose vehicle, Mulcair Securities No. 2 DAC (Mulcair 2). The portfolio transferred had a gross carrying value of €339 million (before ECL allowance) and a net carrying value of €301 million (after ECL allowance). The Group transferred the beneficial interest in the loans to Mulcair 2 which in turn issued notes backed by these loans. The Group continues to act as servicer of the transferred assets and is in receipt of income from the provision of these services. Under the servicing agreement, the Group is required to make payments to Mulcair 2 if the weighted average variable rate is less than the variable rate floor. During 2023, the total payments were €2 million and at 31 December 2023 the current volume of the loans under management was €263 million (2022: €294 million). The Group holds 5% of the risks, rewards and cash flows in Mulcair 2 by way of a Vertical Risk Retention (VRR) loan. This is held in debt securities at amortised cost. Mulcair 2 is not consolidated but the associated income in relation to the services provided to the company is recognised in the Group’s financial statements as follows: 2023 €m 2022 €m Fee and commission income 1 1 Total income related to Mulcair 2 1 1 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 326 53 Interests in other entities (continued) The carrying amount of assets and liabilities in relation to this entity are listed as: 2023 €m 2022 €m Debt securities at amortised cost 13 15 Total carrying value of assets held related to Mulcair 2 13 15 The Group’s maximum exposure to loss in respect of Mulcair 2 is equal to the balance of the VRR which is €13 million at 31 December 2023 (2022: €15 million). There are no contractual arrangements that require the Group to provide financial support to Mulcair 2. In 2023 and 2022 the Group did not provide financial or other support, nor does it expect or intend to do so. Temple Quay No.1 PLC In November 2022, the Group entered into a securitisation arrangement for a portfolio of UK residential mortgage NPEs, through an unconsolidated special purpose vehicle, Temple Quay No. 1 plc. The portfolio transferred had a gross carrying value of €527 million (before ECL allowance) and a net carrying value of €462 million (after ECL allowance). The Group transferred the beneficial interest in the loans to Temple Quay No. 1 plc which in turn issued notes backed by these loans. The Group continues to act as servicer of the transferred assets and is in receipt of income from the provision of these services. Under the servicing agreement, the Group is required to make payments to Temple Quay No.1 plc if the weighted average variable rate is less than the variable rate floor. During 2023, the total payments were €nil and at 31 December 2023 the current volume of the loans under management was €440 million (2022: €513 million). The Group holds 5% of the risks, rewards and cash flows in Temple Quay No.1 plc by way of a VRR loan note. This note is held in debt securities at amortised cost. Temple Quay No. 1 plc is not consolidated but the associated income in relation to the services provided to the company is recognised in the Group’s financial Statements as follows: 2023 €m 2022 €m Fee and commission income 2 – Total income related to Temple Quay No.1 plc 2 – The carrying amount of assets and liabilities in relation to this entity are listed as: 2023 €m 2022 €m Debt securities at amortised cost 26 26 Total carrying value of assets held related to Temple Quay No.1 plc 26 26 The Group’s maximum exposure to loss in respect of Temple Quay No. 1 plc is equal to the balance of the VRR loan note which is €26 million at 31 December 2023 (2022: €26 million). There are no contractual arrangements that require the Group to provide financial support to Temple Quay No. 1 plc. In 2023 and 2022 the Group did not provide financial or other support, nor does it expect or intend to do so. Davy investment companies As part of the Davy acquisition on 1 June 2022, there are certain types of structured entities that the Group does not consolidate but in which it may hold an interest through the receipt of management fees and performance fees. These entities are constituted as open ended investment companies and unit trusts and invest in a range of asset classes as described in the relevant prospectuses. The total amount of management and performance fees recognised in the Group's income statement for the year ended 31 December 2023 amounted to €31 million (€18 million from 1 June 2022 to the period ended 31 December 2022) of which €5 million is receivable at 31 December 2023 (2022: €9 million). At 31 December 2023, the Group also held investments in relation to these entities amounting to €1 million (2022: €2 million), which are included in Other financial assets at FVTPL in the Group’s financial statements. The Group’s maximum exposure to loss at 31 December 2023 in respect of these unconsolidated entities is €6 million (2022: €11 million). Since the acquisition of Davy, the Group has not provided financial support to these unconsolidated structured entities and has no intention of providing financial or other support. BoIG investment companies The Group has incorporated certain entities to provide investment opportunities to clients in international commercial properties. The Group considers that it sponsors these entities where it continues to be involved in the entity or if it is in receipt of income from the entity during the year. At 31 December 2023, there were two entities (2022: two). At 31 December 2023, the total gross asset value of these entities was €nil (2022: €nil). With regard to the above unconsolidated structured entities, they are infrastructure fund managers whose principal activity is managing property investments. In 2023 and 2022, the Group did not receive asset management fees from these entities. The structured entities are not consolidated; the associated fee and commission income in relation to these entities was €nil for 2023 (2022: €nil). The carrying amount of assets and liabilities in relation to these entities in the Group’s financial statements is €nil (2022: €nil). The Group’s maximum exposure to loss in respect of these unconsolidated entities is €nil (2022: €nil). In relation to these entities, there are no contractual arrangements that require the Group to provide financial support. Coterminous year end dates The Group consolidates certain entities where the entity does not have the same year end reporting date as the Group. This is to ensure the reporting dates of these Group entities are kept consistent with the principal legal agreements used to engage in their core business. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 327 54 Liquidity risk and profile The tables below summarise the maturity profile of the Group’s financial liabilities (excluding those arising from insurance and investment contracts in the Wealth and Insurance division) at 31 December 2023 and 31 December 2022 based on contractual undiscounted repayment obligations. The Group does not manage liquidity risk on the basis of contractual maturity. Instead the Group manages liquidity risk based on expected cash flows. The Group’s approach to liquidity risk management is set out in section 3.5 of the Risk Management Report. Unit-linked investment liabilities and unit-linked insurance liabilities with a carrying value of €7,692 million and €15,113 million respectively ( 2022 restated for IFRS 17: €6,859 million and €13,410 million respectively) are excluded from this analysis as their repayment is linked to the financial assets backing these contracts. Customer accounts include a number of term accounts that contain easy access features. These allow the customer to access a portion or all of their deposit notwithstanding that this repayment could result in financial penalty being paid by the customer. For such accounts, the portion subject to the potential early access has been classified in the ‘Demand’ category in the table below. The balances in the table below will not agree directly to the consolidated balance sheet as the table incorporates all cash flows, on an undiscounted basis, related to both principal and interest payments. 2023 Contractual maturity Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m Deposits from banks 88 532 – – – 620 Monetary Authorities secured funding – 65 1,141 1,456 – 2,662 Customer accounts 92,443 4,775 2,418 822 – 100,458 Debt securities in issue – 75 207 6,853 4,230 11,365 Subordinated liabilities – 34 40 357 1,997 2,428 Lease liabilities – 14 43 169 218 444 Contingent liabilities 776 39 115 151 3 1,084 Commitments 16,554 43 911 623 – 18,131 Short positions in trading securities 1 – – 68 36 105 Total 109,862 5,577 4,875 10,499 6,484 137,297 Restated1, 2 Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m 2022 Contractual maturity Deposits from banks 143 708 – – – 851 Monetary Authorities secured funding – 41 68 2,698 – 2,807 Customer accounts1 92,012 4,965 1,404 618 170 99,169 Debt securities in issue – 78 1,400 6,430 1,715 9,623 Subordinated liabilities – 8 50 383 2,263 2,704 Lease liabilities – 15 48 193 247 503 Contingent liabilities2 451 31 297 157 7 943 Commitments 15,033 49 554 892 – 16,528 Short positions in trading securities – 3 – – – 3 Total 107,639 5,898 3,821 11,371 4,402 133,131 1 The contractual maturity of 'on demand' customer accounts has been restated from €94,836 million to €92,012 million to adjust for a fair value hedge adjustment of €2,824 million which from December 2022 should no longer have been included within customer accounts and is instead included as a separate balance sheet line item. 2 The contractual maturity of contingent liabilities due within '3-12 months' has been restated by €171 million from €126 million to €297 million to adjust for amounts which were incorrectly excluded in 2022. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 328 54 Liquidity risk and profile (continued) The following tables present the estimated amount and timing of the remaining contractual undiscounted cash flows arising from portfolios of insurance contract liabilities and associated reinsurance contract assets and matched investment assets. Unit-linked contracts payable on demand are €12,501 million (2022: €11,029 million) and do not present a liquidity risk due to backing unit funds. Liquidity risk is managed through matching assets of varying maturities, sufficient to meet current and near term liabilities and in compliance with all regulatory capital and liquidity requirements. 2023 Insurance contract cash flows (audited) Year 1 €m Year 2 €m Year 3 €m Year 4 €m Years 5-9 €m Years 10+ €m Insurance contract liabilities (121) (129) (133) (142) (667) (1,529) Reinsurance contract assets 75 78 79 80 380 767 Net insurance contract cash flows (46) (51) (54) (62) (287) (762) Matched assets 80 56 74 73 356 1,012 Net cash flows 34 5 20 11 69 250 2022 Insurance contract cash flows (audited) Year 1 €m Year 2 €m Year 3 €m Year 4 €m Years 5-9 €m Years 10+ €m Insurance contract liabilities (97) (121) (126) (130) (638) (1,559) Reinsurance contract assets 72 77 79 80 385 840 Net insurance contract cash flows (25) (44) (47) (50) (253) (719) Matched assets 45 73 73 61 333 890 Net cash flows 20 29 26 11 80 171 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 329 54 Liquidity risk and profile (continued) As set out in note 19, derivatives held for trading comprise derivatives entered into with trading intent as well as derivatives entered into with economic hedging intent to which the Group does not apply hedge accounting. Derivatives held with hedging intent include all derivatives to which the Group applies hedge accounting. The following tables summarise the maturity profile of the Group’s derivative liabilities. The Group manages liquidity risk based on expected cash flows, therefore the undiscounted cash flows payable on derivatives liabilities held with hedging intent are classified according to their contractual maturity, while derivatives held with trading intent have been included at fair value in the ‘Demand’ time bucket. 2023 Derivative ﬁnancial instruments Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m Derivatives held with hedging intent Gross settled derivative liabilities - outﬂows – 114 137 3,892 86 4,229 Gross settled derivative liabilities - inﬂows – (98) (87) (3,724) (65) (3,974) Gross settled derivative liabilities - net ﬂows – 16 50 168 21 255 Net settled derivative liabilities – 375 1,043 2,320 167 3,905 Total derivatives held with hedging intent – 391 1,093 2,488 188 4,160 Derivative liabilities held with trading intent 670 – – – – 670 Total derivative cash ﬂows 670 391 1,093 2,488 188 4,830 2022 Derivative ﬁnancial instruments Demand €m Up to 3 months €m 3-12 months €m 1-5 years €m Over 5 years €m Total €m Derivatives held with hedging intent Gross settled derivative liabilities - outﬂows – 1,068 1,565 14 90 2,737 Gross settled derivative liabilities - inﬂows – (1,037) (1,501) (3) (73) (2,614) Gross settled derivative liabilities - net ﬂows – 31 64 11 17 123 Net settled derivative liabilities – 252 1,279 3,602 442 5,575 Total derivatives held with hedging intent – 283 1,343 3,613 459 5,698 Derivative liabilities held with trading intent 980 – – – – 980 Total derivative cash ﬂows 980 283 1,343 3,613 459 6,678 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 330 55 Measurement basis of financial assets and financial liabilities The table below analyses the carrying amounts of the financial assets and financial liabilities by accounting treatment and by balance sheet heading. In the table below 'liabilities to customers under investment contracts' - Insurance investment contracts are accounted for as financial liabilities whose value is contractually linked to the fair value of the financial assets within the policyholders' unit-linked funds. FVTPL FVOCI Held at amortised cost €m Derivatives designated as hedging instruments €m Total €m 2023 Mandatorily €m Designated €m Debt Instruments €m Financial assets Cash and balances at central banks – – – 31,843 – 31,843 Items in the course of collection from other banks – – – 126 – 126 Trading securities 72 – – – – 72 Derivative ﬁnancial instruments 2,003 – – – 2,338 4,341 Other ﬁnancial assets at FVTPL 20,899 – – – – 20,899 Loans and advances to banks 100 – – 1,807 – 1,907 Debt securities at amortised cost – – – 5,715 – 5,715 Financial assets at FVOCI – – 3,968 – – 3,968 Assets classiﬁed as held for sale – – – – – – Loans and advances to customers 205 – – 79,524 – 79,729 Interest in associates – 79 – – – 79 Other ﬁnancial assets – – – 280 – 280 Total ﬁnancial assets 23,279 79 3,968 119,295 2,338 148,959 Financial liabilities Deposits from banks – – – 3,095 – 3,095 Customer accounts – 230 – 99,953 – 100,183 Items in the course of transmission to other banks – – – 322 – 322 Derivative ﬁnancial instruments 2,043 – – – 2,447 4,490 Debt securities in issue – 267 – 8,403 – 8,670 Liabilities to customers under investment contracts – 7,692 – – – 7,692 Other ﬁnancial liabilities 33 – – 2,342 – 2,375 Lease liabilities – – – 404 – 404 Loss allowance provision on loan commitments and ﬁnancial guarantees – – – 61 – 61 Short positions in trading securities 105 – – – – 105 Subordinated liabilities – – – 1,600 – 1,600 Total ﬁnancial liabilities 2,181 8,189 – 116,180 2,447 128,997 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 331 55 Measurement basis of financial assets and financial liabilities (continued) FVTPL FVOCI Held at amortised cost €m Derivatives designated as hedging instruments €m Total €m Restated1,2 2022 Mandatorily €m Designated €m Debt Instruments €m Financial assets Cash and balances at central banks – – – 36,855 – 36,855 Items in the course of collection from other banks – – – 140 – 140 Trading securities – – – – – – Derivative ﬁnancial instruments 2,831 – – – 2,307 5,138 Other ﬁnancial assets at FVTPL 18,553 – – – – 18,553 Loans and advances to banks 147 – – 2,897 – 3,044 Debt securities at amortised cost – – – 4,472 – 4,472 Financial assets at FVOCI – – 4,254 – – 4,254 Assets classiﬁed as held for sale 2 – – – – 2 Loans and advances to customers 217 – – 71,744 – 71,961 Interest in associates – 65 – – – 65 Other ﬁnancial assets – – – 234 – 234 Total ﬁnancial assets 21,750 65 4,254 116,342 2,307 144,718 Financial liabilities Deposits from banks – – – 3,445 – 3,445 Customer accounts – 414 – 98,786 – 99,200 Items in the course of transmission to other banks – – – 232 – 232 Derivative ﬁnancial instruments 3,012 – – – 3,514 6,526 Debt securities in issue – 250 – 7,524 – 7,774 Liabilities to customers under investment contracts 1 – 6,859 – – – 6,859 Other ﬁnancial liabilities1 32 – – 2,215 – 2,247 Lease liabilities – – – 423 – 423 Loss allowance provision on loan commitments and ﬁnancial guarantees – – – 55 – 55 Short positions in trading securities 3 – – – – 3 Subordinated liabilities – – – 1,656 – 1,656 Total ﬁnancial liabilities 3,047 7,523 – 114,336 3,514 128,420 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 As a result of IFRS 17, insurance contracts (previously included in the above table) are no longer measured under fair value and are now measured applying IFRS 17. These contracts have been removed from the fair value measurement table. See note 1 for updated accounting policy and note 18 for transitional impact. The fair value and contractual amount due on maturity of financial liabilities designated at fair value upon initial recognition are shown in the table below. For financial assets and financial liabilities which are measured at FVTPL or through OCI, a description of the methods and assumptions used to calculate those fair values are set out in note 56. 2023 Restated1 2022 Fair values €m Contractual amount due on maturity €m Fair values €m Contractual amount due on maturity €m Customer accounts 230 242 414 463 Liabilities to customers under investment contracts1 7,692 7,692 6,859 6,859 Debt securities in issue 267 288 250 287 Financial liabilities designated at fair value through proﬁt or loss 8,189 8,222 7,523 7,609 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 332 56 Fair values of assets and liabilities Fair value of assets and liabilities Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where possible, the Group calculates fair value using observable market prices. Where market prices are not available, fair values are determined using valuation techniques which may include DCF models or comparisons to instruments with characteristics either identical or similar to those of the instruments held by the Group or of recent arm’s length market transactions. These fair values are classified within a three-level fair value hierarchy, based on the inputs used to value the instrument. Where the inputs might be categorised within different levels of the fair value hierarchy, the fair value measurement in its entirety is categorised in the same level of the hierarchy as the lowest level input that is significant to the entire measurement. The levels are defined as: Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Inputs are unobservable inputs for the asset or liability. Transfers between different levels are assessed at the end of all reporting periods. Financial assets and ﬁnancial liabilities recognised and subsequently measured at fair value All financial instruments are initially recognised at fair value. The Group subsequently measures the following instruments at FVTPL or at FVOCI: trading securities, other financial assets and financial liabilities designated at FVTPL, derivatives, loans and advances to customers held at fair value, loans and advances to banks held at fair value, financial assets held at FVOCI, customer accounts held at fair value and debt securities in issue held at fair value. A description of the methods and assumptions used to calculate the fair value of these assets and liabilities is set out below. For fair value measurements categorised within level 3 of the fair value hierarchy, the valuation policies and procedures are developed by the management of the relevant business unit. The valuation process is documented before being reviewed and approved by senior management to ensure that the valuation method is consistent with market practice, that the output is reasonable and that the methodology is consistent both across the Group and compared to prior years. Loans and advances to customers held at fair value These consist of assets mandatorily measured at FVTPL, of which €205 million (2022: €217 million) are ‘Life loan mortgage products’. Unlike a standard mortgage product, borrowers do not make any periodic repayments and the outstanding loan balance increases through the life of the loan as interest due is capitalised. The mortgage is typically repaid out of the proceeds of the sale of the property. These assets are valued using DCF models which incorporate unobservable inputs (level 3 inputs). Using reasonably possible alternative assumptions would not have a material impact on the value of these assets. Loans and advances to banks held at fair value These consist of assets mandatorily measured at FVTPL and include assets managed on a fair value basis by the life assurance business and those assets that do not meet the requirements in order to be measured at FVOCI or amortised cost. The estimated fair value of floating rate placements and overnight placings is their carrying amount. The estimated fair value of fixed interest bearing placements is based on DCFs using prevailing money market interest rates for assets with similar credit risk and remaining maturity (level 2 inputs). Financial assets at fair value through other comprehensive income Financial assets at FVOCI predominantly consist of government bonds and listed debt securities. For these assets where an active market exists, fair value has been determined directly from observable market prices (level 1 inputs) or yields through a recognised pricing source or an independent broker, price-provider or investment bank (level 2 inputs). Financial assets and financial liabilities held for trading These instruments are valued using observable market prices (level 1 inputs), directly from a recognised pricing source or an independent broker or investment bank. Derivative financial instruments The Group’s derivative financial instruments are valued using valuation techniques commonly used by market participants. These consist of DCF and options pricing models, which typically incorporate observable market data, principally interest rates, basis spreads, FX rates, equity prices and counterparty credit (level 2 inputs). The base models may not fully capture all factors relevant to the valuation of the Group’s financial instruments such as credit risk, own credit and / or funding costs. The fair values of the Group's derivative financial liabilities reflect the impact of the cost of funding derivative positions (funding valuation adjustment (FVA)). The funding cost is derived from observable market data; however the model may perform numerical procedures in the pricing such as interpolation when market data input values do not directly correspond to the exact parameters of the trade. Credit valuation adjustment (CVA) represents an estimate of the adjustment to fair value that market participants would make to incorporate the counterparty credit risk inherent in derivative exposures. Debit valuation adjustment (DVA) reflects the impact of changes in own credit spreads. Certain derivatives are valued using unobservable inputs relating to counterparty credit such as credit grade, and own credit spread which are sourced from independent brokers. These unobservable inputs may be significant to their valuation. The effect of using reasonably possible alternative assumptions in the valuation of these derivatives at 31 December 2023 is immaterial. Where the impact of unobservable inputs is material to the valuation of the asset or liability, it is categorised as level 3 on the fair value hierarchy. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 333 56 Fair values of assets and liabilities (continued) In addition a small number of derivative financial instruments are valued using significant unobservable inputs other than counterparty credit (level 3 inputs). However, changing one or more assumptions used in the valuation of these derivatives would not have a significant impact as they are entered into to hedge the exposure arising on certain customer accounts (see below), leaving the Group with no net valuation risk due to the unobservable inputs. On 22 October 2021, the Group entered into a binding agreement with KBCI and KBC Group to acquire their mortgage, commercial loan, consumer loan and deposit portfolios. This agreement was considered to represent a derivative financial instrument, the fair value of which was a liability of €275 million at 31 December 2022. The derivative was subsequently derecognised when the acquisition completed on 3 February 2023, see note 51 KBCI portfolio acquisition. At 31 December 2022, the derivative was valued using unobservable inputs, in this case, the behavioural maturity and credit quality of the KBCI mortgages (level 3 inputs). Using reasonably possible alternative assumptions for behavioural maturity and credit quality would have resulted in an increase or decrease of up to €25 million in the liability at 31 December 2022. Interest rate swaps, with a fair value of €270 million at 31 December 2022, which were traded to economically hedge the interest rate risk on the acquisition of KBCI mortgages, substantially offset this derivative financial instrument within net trading income / (expense). Other financial assets at fair value through profit or loss These consist of assets mandatorily at FVTPL, which are predominantly held for the benefit of unit linked policyholders, with any changes in valuation accruing to the policyholders. These assets consist principally of bonds, equities and unit trusts, which are traded on listed exchanges, are actively traded and have readily available prices. Substantially all of these assets are valued using valuation techniques which use observable market data i.e. level 1 or level 2 inputs. A small number of assets have been valued using DCF models and discounted equity value method, which incorporate unobservable inputs (level 3). Certain private equity funds, which predominantly invest in properties, are valued with reference to the underlying property value which in itself incorporate unobservable inputs (level 3). Using reasonably possible alternative assumptions would not have a material impact on the value of these assets. Interest in associates Investments in associates, which are venture capital investments, are accounted for at FVTPL and are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’. This requires the use of various inputs such as DCF analysis and comparison with the earnings multiples of listed comparative companies amongst others. Although the valuation of unquoted equity instruments is subjective by nature, the relevant methodologies are commonly applied by other market participants and have been consistently applied over time. As the inputs are unobservable, the valuation is deemed to be based on level 3 inputs. Using reasonably possible alternative assumptions would not have a material impact on the value of these assets. Customer accounts Customer accounts designated at FVTPL consist of deposits which contain an embedded derivative (typically an equity option). These instruments are typically valued using valuation techniques which use observable market data. The Group incorporates the effect of changes in its own credit spreads when valuing these instruments. The Group sources own credit spreads from independent brokers (level 3 inputs) as observable own credit spreads are not available. Where the impact of unobservable inputs is material to the valuation of a customer account, that account is categorised as level 3 on the fair value hierarchy. A small number of customer accounts are valued using additional unobservable inputs (level 3 inputs). However, changing one or more assumptions used in the valuation of these customer accounts would not have a significant impact as these customer accounts are hedged with offsetting derivatives (see above), leaving the Group with no net valuation risk due to those unobservable inputs. Liabilities to customers under investment contracts In line with the accounting policy set out in note 1, the fair value of liabilities to customers under unit linked investment contracts is contractually linked to the fair value of the financial assets within the policyholders’ unit linked funds. The value of the unit linked financial liabilities is determined using current unit prices multiplied by the number of units attributed to the contract holders at the reporting date. Their value is never less than the amount payable on surrender, discounted for the required notice period where applicable. Debt securities in issue Debt securities in issue with a fair value of €267 million (2022: €250 million) are measured at FVTPL, in order to reduce an accounting mismatch which would otherwise arise from hedging derivatives. Their fair value is typically based on valuation techniques incorporating observable market data. The Group incorporates the effect of changes in its own credit spread when valuing these instruments. The Group sources own credit spreads from independent brokers (level 3 inputs) as observable own credit spreads are not available. Where the impact of unobservable inputs is material to the valuation of a debt security in issue, that issuance is categorised as level 3 on the fair value hierarchy. Where the impact of unobservable inputs is immaterial to the valuation of a debt security in issue, that issuance is categorised as level 2 on the fair value hierarchy. A small number of the debt securities in issue are valued using additional unobservable inputs (level 3 inputs). However, changing one or more assumptions used in the valuation of these debt securities in issue would not have a significant impact. Other liabilities Other liabilities carried at fair value consist of contingent consideration balances recognised for the acquisition of Davy, the payment of which is subject to certain criteria being met relating to indemnity claims, composite capital requirement and dividend withholding tax. The fair value is based on DCFs and probabilities of expected payment. As the probabilities of the set conditions for payment being met are unobservable and their impact is significant, the contingent consideration is categorised as level 3 on the fair value hierarchy. See note 49 for additional information. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 334 56 Fair values of assets and liabilities (continued) Financial assets and liabilities held at amortised cost For financial assets and financial liabilities which are not subsequently measured at fair value on the balance sheet, the Group discloses their fair value in a way that permits them to be compared to their carrying amounts. The methods and assumptions used to calculate the fair values of these assets and liabilities are set out below. Loans and advances to banks The estimated fair value of floating rate placements and overnight placings which are held at amortised cost is their carrying amount. The estimated fair value of fixed interest bearing placements which are held at amortised cost is based on DCFs using prevailing money market interest rates for assets with similar credit risk and remaining maturity (level 2 inputs). Loans and advances to customers held at amortised cost The fair value of both fixed and variable rate loans and advances to customers held at amortised cost is estimated using valuation techniques which include the discounting of estimated future cash flows at current market rates, incorporating the impact of current credit spreads and margins. The fair value reflects both loan impairments at the reporting date and estimates of market participants’ expectations of credit losses over the life of the loans (level 3 inputs); and recent arm's length transactions in similar assets. Debt securities at amortised cost For debt securities at amortised cost for which an active market exists, fair value has been determined directly from observable market prices (level 1 inputs). Debt securities at amortised cost consist mainly of government bonds, asset backed securities and other debt securities. Deposits from banks and customer accounts The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on demand. For the estimated fair value of fixed interest bearing deposits and other borrowings without quoted market prices, a DCF model is used based on a current yield curve appropriate to the Group for the remaining term to maturity. The yield curve used incorporates the effect of changes in the Group’s own credit spread (level 2 and level 3 inputs). Debt securities in issue and subordinated liabilities The fair values of these instruments are calculated based on quoted market prices where available (level 1 inputs). For those notes where quoted market prices are not available, a DCF model is used based on a current yield curve appropriate to the Group for the remaining term to maturity. The yield curve used incorporates the effect of changes in the Group’s own credit spread (level 2 and level 3 inputs). Fair value on oﬀsetting positions Where the Group manages certain financial assets and financial liabilities on the basis of its net exposure to either market risk or credit risk, the Group applies the exception allowed under paragraph 48 of IFRS 13. That exception permits the Group to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or paid to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the measurement date under current market conditions. Accordingly, the Group measures the fair value of the group of financial assets and financial liabilities consistently with how market participants would price the net risk exposure at the measurement date. Fair value of non-ﬁnancial assets Investment properties Investment properties are carried at fair value as determined by external qualified property surveyors (the ‘Surveyors’) appropriate to the properties held. The Surveyors arrive at their opinion of fair value by using their professional judgement in applying comparable current trends in the property market such as rental yields in the retail, office and industrial property sectors, to both the existing rental income stream and also to the future estimate of rental income (ERV). Other inputs taken into consideration include occupancy forecasts, rent free periods that may need to be granted to new incoming tenants, capital expenditure and fees. As these inputs are unobservable, the valuation is deemed to be based on level 3 inputs. All properties are valued based on highest and best use. Climate change, sustainability, resilience and related ESG risks are increasingly influencing investment approaches as they may affect prospects for rental and capital growth and susceptibility to obsolescence. Properties that do not meet the sustainability characteristics expected in the market may represent a higher investment risk. The valuations monitor market movement and sentiment on ESG and reflect, as appropriate, its effect on the fair value of each property held within the funds. Property A revaluation of Group property was carried out at 31 December 2023. All freehold and long leasehold commercial properties were valued by Lisney Ltd (or its partner, Sanderson Weatherall) as external valuers, with the exception of some select properties which were valued internally by the Group’s qualified surveyors. The valuations have been carried out in accordance with the Royal Institution of Chartered Surveyors Valuation - Global Standards. The valuers arrive at their valuation by using their professional judgement in applying market comparable methods of valuation such as the utilisation of comparable market rental values and rental yields. Other considerations taken into account include the individual property profile, lot size, layout and presentation of accommodation. As these inputs are unobservable, the valuation is deemed to be based on level 3 inputs. All properties are valued based on highest and best use. The following tables set out the level of the fair value hierarchy for assets and liabilities held at fair value. Information is also given for items carried at amortised cost where the fair value is disclosed. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 335 56 Fair values of assets and liabilities (continued) 2023 Restated1 2022 Level 1 €m Level 2 €m Level 3 €m Total €m Level 1 €m Level 2 €m Level 3 €m Total €m Financial assets held at fair value Trading securities 72 – – 72 – – – – Derivative ﬁnancial instruments 4 4,317 20 4,341 10 5,115 13 5,138 Other ﬁnancial assets at FVTPL 20,349 190 360 20,899 17,980 214 359 18,553 Loans and advances to banks – 100 – 100 – 147 – 147 Financial assets at FVOCI 3,968 – – 3,968 4,254 – – 4,254 Loans and advances to customers – – 205 205 – – 217 217 Interest in associates – – 79 79 – – 65 65 Non-ﬁnancial assets held at fair value Investment property – – 793 793 – – 883 883 Property held at fair value – – 134 134 – – 161 161 24,393 4,607 1,591 30,591 22,244 5,476 1,698 29,418 Financial liabilities held at fair value Customer accounts – 230 – 230 – 397 17 414 Derivative ﬁnancial instruments 4 4,469 17 4,490 10 6,224 292 6,526 Debt securities in issue – 267 – 267 – 250 – 250 Liabilities to customers under investment contracts1 – 7,692 – 7,692 – 6,859 – 6,859 Short positions in trading securities 105 – – 105 3 – – 3 Other liabilities2 – – 33 33 – – 32 32 109 12,658 50 12,817 13 13,730 341 14,084 Fair value of ﬁnancial assets held at amortised cost Loans and advances to banks 95 1,712 – 1,807 60 2,837 – 2,897 Debt securities at amortised cost 5,717 33 7 5,757 4,487 42 7 4,536 Loans and advances to customers 2 1 80,124 80,127 6 5 70,043 70,054 Fair value of ﬁnancial liabilities held at amortised cost Deposits from banks – 3,095 – 3,095 – 3,445 – 3,445 Customer accounts – 99,940 – 99,940 1 98,747 – 98,748 Debt securities in issue 7,418 402 640 8,460 6,731 88 614 7,433 Subordinated liabilities – 1,662 – 1,662 41 1,533 87 1,661 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 In the table above, 'Other liabilities' relates to the contingent consideration recognised for the acquisition of Davy (note 49). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 336 56 Fair values of assets and liabilities (continued) Movements in level 3 assets 2023 Loans advances customers at FVTPL €m Other ﬁnancial assets at FVTPL €m Derivative ﬁnancial instruments €m Interest in associates €m Investment property €m Property held at fair value €m Total €m Balance at 1 January 2023 217 359 13 65 883 161 1,698 Exchange adjustment – – – – 5 1 6 Total gains or (losses) in: Proﬁt or loss Interest income 8 – – – – – 8 Net trading income 7 5 22 – – – 34 Share of results of associates – – – 4 – – 4 Revaluation – – – – (104) (4) (108) Total investment losses – (26) – – – – (26) Other comprehensive income – – – – – (8) (8) Additions – 100 – 13 – – 113 Disposals – (5) – (3) (4) – (12) Redemptions (27) (46) – – – – (73) Reclassiﬁcations – (1) – – 13 (16) (4) Transfers out of level 3 from level 3 to level 2 – (26) (15) – – – (41) Transfers into level 3 from level 1 to level 3 – – – – – – – from level 2 to level 3 – – – – – – – Balance at 31 December 2023 205 360 20 79 793 134 1,591 Total unrealised gains / (losses) for the year included in proﬁt or loss for level 3 assets at the end of the year 14 (21) 18 4 (101) – (86) Net trading income 6 5 18 – – – 29 Interest income 8 – – – – – 8 Total investment losses – (26) – – (65) – (91) Share of results of associates – – – 4 – – 4 Other operating income – – – – (36) – (36) The transfer from level 3 to level 2 arose as a result of the availability of observable inputs at 31 December 2023. There were no transfers between levels 1 and 2, or from levels 1 and 2 to level 3. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 337 56 Fair values of assets and liabilities (continued) Movements in level 3 assets Loans advances customers at FVTPL €m Other ﬁnancial assets at FVTPL €m Derivative ﬁnancial instruments €m Interest in associates €m Investment property €m Property held at fair value €m Total €m 2022 Balance at 1 January 2022 426 336 74 55 992 181 2,064 Exchange adjustment – – (4) – (10) (4) (18) Total gains or losses in: Proﬁt or loss Interest income 14 1 – – – – 15 Net trading income / (expense) 4 13 (8) – – – 9 Share of results of associates – – – 8 – – 8 Revaluation – (1) – – (71) – (72) Total investment losses – (19) – – – – (19) Other comprehensive income – – – – – (4) (4) Additions 12 26 – 11 65 1 115 Disposals (219) (1) – (9) (93) (14) (336) Redemptions (20) (22) – – – – (42) Reclassiﬁcations – – – – – 1 1 Transfers out of level 3 from level 3 to level 2 – – (49) – – – (49) Transfers into level 3 from level 1 to level 3 – 20 – – – – 20 from level 2 to level 3 – 6 – – – – 6 Balance at 31 December 2022 217 359 13 65 883 161 1,698 Total unrealised gains / (losses) for the year included in proﬁt or loss for level 3 assets at the end of the year 12 (6) 9 8 (80) – (57) Net trading income 3 11 9 – – – 23 Interest income 9 – – – – – 9 Share of results of associates – – – 8 – – 8 Other operating income – – – – (23) – (23) Total investment losses – (17) – – (57) – (74) The transfer from level 3 to level 2 arose as a result of the availability of observable inputs at 31 December 2022. The transfer from level 1 and 2 to level 3 arose as a result of certain material inputs becoming unobservable. There were no transfers between level 1 and 2. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 338 56 Fair values of assets and liabilities (continued) Movements in level 3 liabilities 2023 2022 Customer accounts €m Derivative ﬁnancial instruments €m Other liabilities1 €m Total €m Customer accounts €m Derivative ﬁnancial instruments €m Other liabilities1 €m Total €m Balance at 1 January 17 292 32 341 15 60 – 75 Exchange adjustment – – – – – (3) – (3) Total (gains) or losses in: Proﬁt or loss Net trading (income) / expense 3 (19) – (16) – 285 – 285 Interest expense – – 1 1 – – – – Other comprehensive income 1 – – 1 (1) – – (1) Additions – – – – 17 – 32 49 Disposals – – – – – – – – Reclassification – (247) – (247) – – – – Transfers out of level 3 from level 3 to level 2 (21) (11) – (32) (14) (50) – (64) Transfer into level 3 From level 2 to level 3 – 2 – 2 – – – – Balance at 31 December – 17 33 50 17 292 32 341 Total unrealised (gains) / losses for the year included in proﬁt or loss for level 3 liabilities at the end of the year Net trading (income) / expense – 17 – 17 (2) 291 – 289 1 'Other liabilities' relates to the contingent consideration recognised for the acquisition of Davy (note 49). The transfers from level 3 to level 2 arose due to unobservable inputs becoming less significant to the fair value measurement of these liabilities. There were no transfers between levels 1 and 2, or from levels 1 and 2 to level 3. Quantitative information about fair value measurements using signiﬁcant unobservable inputs (Level 3) Fair value Range Level 3 assets Valuation technique Unobservable input 2023 €m 2022 €m 2023 % 2022 % Loans and advances to customers Discounted Cash Flow Discount market rate 205 217 4.5% - 7.25% 4.5% - 5.25% Collateral charges 0% - 5.6% 0% - 6.7% Other financial assets at fair value through profit or loss Discounted Cash Flow Discount rate 360 359 0% - 15% 0% -15% Equity value less discount Discount 0% - 70% 0% - 50% Market comparable property transaction Yield 2.85% - 12.17% 3.09% - 9.24% Derivative financial instruments Discounted Cash Flow / Option Pricing Model Counterparty credit spread 20 13 0% - 1.45% 0% - 0.7% Own credit spread 0.75% - 1.55% 0.87% - 1.75% Interest in associates Market comparable companies Price of recent investment 79 65 – – Earnings multiple Revenue multiple Investment property Market comparable property transaction Yield 793 883 2.85% - 12.17% 3.09% - 9.24% Property held at fair value Market comparable property transaction Yield 134 161 6.25% - 12.36% 5.60% - 11.89% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 339 56 Fair values of assets and liabilities (continued) Fair Value Range Level 3 liabilities Valuation technique Unobservable input 2023 €m 2022 €m 2023 % 2022 % Customer accounts Discounted cash ﬂow Own credit spread – 17 – 1.87% - 1.96% Option pricing model Derivative ﬁnancial instruments Discounted cash ﬂow / Option pricing model Counterparty credit spread 17 17 0% - 1.45% 0% - 0.7% Own credit spread 0.75% - 1.55% 0.87% - 1.75% Maturity profile and credit quality of the KBCI mortgages – 275 – – Other liabilities Discounted cash flow Probabilities of set conditions being met 33 32 50% - 100% 50% - 100% Note: 100 basis points = 1% Valuation techniques and unobservable inputs In the tables above: • discount market rates represent a range of discount rates that market participants would use in valuing these assets; • holdings in real estate property funds (within other financial assets at fair value through profit and loss) are valued through market comparable property transactions; • counterparty and own credit spreads represent the range of credit spreads that market participants would use in valuing these contracts; • earnings and revenue multiples represent multiples that market participants would use in valuing these investments; • the Group does not disclose the ranges for interests in associates. Given the wide range of diverse investments and correspondingly large difference in prices, the Group believes disclosure of ranges would not provide meaningful information without a full list of underlying investments which would be impractical; and • the Group did not disclose the ranges associated with the behavioural maturity and counterparty credit of the underlying cash flows of the binding commitment to purchase the KBCI mortgages, which had been recognised as a derivative liability in 2022 prior to completion of the acquisition in February 2023. Given the information available and the resulting variability in values, the Group believed disclosure would not provide meaningful information and would have been impractical to do so. The carrying amount and the fair value of the Group’s financial assets and liabilities which are carried at amortised cost are set out in the table below. Items where the carrying amount is a reasonable approximation of fair value are not included, as permitted by IFRS 7. Financial instruments 2023 2022 Carrying amount €m Fair values €m Carrying amount €m Fair values €m Assets Loans and advances to banks 1,807 1,807 2,897 2,897 Debt securities at amortised cost 5,715 5,757 4,472 4,536 Loans and advances to customers (including assets held for sale) 79,524 80,127 71,744 70,054 Liabilities Deposits from banks 3,095 3,095 3,445 3,445 Customer accounts 99,953 99,940 98,786 98,748 Debt securities in issue 8,403 8,460 7,524 7,433 Subordinated liabilities 1,600 1,662 1,656 1,661 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 340 57 Transferred financial assets Transferred financial assets not derecognised Carrying amount of transferred assets €m Carrying amount of associated liabilities €m Fair value of transferred assets €m Fair value of associated liabilities €m Net fair value position €m 2023 Securitisation - Loans and receivables Residential mortgages book (Bowbell No 3 plc Special Purpose Entity) 437 401 410 403 7 2022 Securitisation - Loans and receivables Residential mortgages book (Bowbell No 2 plc Special Purpose Entity) 126 89 152 89 63 Transferred financial assets not derecognised The Group has transferred certain financial assets that are not derecognised from the Group’s balance sheet. The Group is exposed to substantially all risks and rewards including credit and market risk associated with the transferred assets. The Group holds interests in a structured entity (Bowbell No 3 plc which was issued in November 2023, replacing Bowbell No 2 plc which was called in October 2023) whose purpose is to acquire mortgage loans and other financial assets and issue mortgage backed securities (note 53). For the purposes of this disclosure, 'associated liabilities' include liabilities issued by securitisation special purpose entities, held by other Group entities. For each securitisation the relevant loan book / pool is ring- fenced whereby the cash flows associated with these assets can only be used to repay the related notes holders plus associated issuance fees /costs. Transferred financial assets derecognised in full with continuing involvement Following the termination of the Mulcair Securities DAC securitisation in 2022 and the repayment of the Group’s holding of the notes in full, the Group was appointed as servicer to the refinanced securitisation, Mulcair Securities No.3 DAC (Mulcair 3). Under the servicing agreement, the Group is required to make payments to Mulcair 3 if the weighted average variable rate is less than the variable rate floor. During 2023, the total payments made were c.€6 million (2022: c.€1 million) and at 31 December 2023, the volume of loans being serviced was €258 million (2022: €307 million). The Group has not entered into any other agreements on the sale of assets that entail the Group’s continuing involvement in derecognised financial assets other than assets transferred to Mulcair 2 and Temple Quay No. 1 plc (note 53). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 341 58 Offsetting financial assets and liabilities The following tables set out the effect or potential effect of netting arrangements on the Group’s financial position. This includes the effect or potential effect of rights of set off associated with the Group’s recognised financial assets and recognised financial liabilities that are subject to an enforceable master netting arrangement, irrespective of whether they are set off in accordance with paragraph 42 of IAS 32. The ‘Financial Instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements such as an ISDA Master agreement. The agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities are settled on a gross basis; however each party to the master netting agreement has the option to settle all such amounts on a net basis in the event of default of the other party. Gross amounts of recognised ﬁnancial assets €m Gross amounts of recognised ﬁnancial liabilities set oﬀ in the balance sheet €m Net amounts of ﬁnancial assets presented in the balance sheet €m Related amounts not set oﬀ in the balance sheet Net amount €m Assets Financial instruments €m Cash collateral received €m 2023 Derivative ﬁnancial assets 4,334 – 4,334 (3,928) (305) 101 Loans and advances to customers 99 (99) – – – – Total 4,433 (99) 4,334 (3,928) (305) 101 2022 Derivative ﬁnancial assets 5,127 – 5,127 (4,696) (317) 114 Loans and advances to customers 207 (207) – – – – Total 5,334 (207) 5,127 (4,696) (317) 114 Included in the gross amounts of recognised derivative financial assets, are amounts of €3,928 million that do not meet the offsetting criteria (2022: €4,696 million). Cash collateral amounts disclosed reflect the maximum collateral available for offset. Cash collateral received is reported in deposits from banks. Gross amounts of recognised ﬁnancial liabilities €m Gross amounts of recognised ﬁnancial assets set oﬀ in the balance sheet €m Net amounts of ﬁnancial liabilities presented in the balance sheet €m Related amounts not set oﬀ in the balance sheet Net amount €m Liabilities Financial instruments €m Cash collateral pledged €m 2023 Derivative ﬁnancial liabilities 4,483 – 4,483 (3,928) (314) 241 Customer deposits 99 (99) – – – – Total 4,582 (99) 4,483 (3,928) (314) 241 2022 Derivative ﬁnancial liabilities 6,243 – 6,243 (4,696) (1,117) 430 Customer deposits 207 (207) – – – – Total 6,450 (207) 6,243 (4,696) (1,117) 430 Included in the gross amounts of recognised derivatives financial liabilities are amounts of €3,928 million that do not meet the offsetting criteria (2022: €4,696 million). Cash collateral amounts disclosed reflect the maximum collateral available for offset. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 342 59 Interest rate benchmark reform In keeping with Benchmarks Regulation and reform, a number of benchmark interest rates have been replaced with alternative or nearly risk free benchmarks. In line with regulatory guidance and now established market practice, Sterling Overnight Index Average (SONIA) has replaced GBP LIBOR, Secured Overnight Financing Rate (SOFR) and regulatory supported TERM SOFR has replaced USD LIBOR, and Euro Short term rate (€STR) has replaced Euro Overnight Index Average (EONIA). The transition of the Group's exposures to the above benchmark interest rates to the relevant risk free benchmarks has now completed and accordingly the Group wide Benchmark Reform Programme concluded during 2023. The Group will continue to monitor its exposure to other benchmark rates including c.€100m linked to Canadian Dollar Offered Rate (CDOR), the publication of which the Canadian Alternative Reference Rate working group (CARR) has recommended is ceased after June 2024. 60 Post balance sheet events Proposed distribution In respect of the 2023 financial year, the Board proposed a distribution of €1,154 million including an ordinary dividend of €634 million, equivalent to 60 cents per share, and representing c.40% of profits after tax subject to ordinary shareholder approval and a share buyback of €520 million which has been approved by the ECB. The ordinary dividend of 60 cents per share will be paid on 11 June 2024 to ordinary shareholders who appear on the Company’s register on 10 May 2024, the record date for the dividend, subject to shareholder approval. Retained Residential Mortgage-Backed Securitisation On 29 January 2024, the Group securitised c.€13.4 billion of its Irish residential mortgage portfolio held in two of its subsidiaries, GovCo and BoIMB. The beneficial interest in the mortgages was transferred to a securitisation vehicle, Luna Securities DAC (Luna). In order to fund the acquired mortgages, Luna issued two classes of notes to GovCo. BoIMB was allocated a portion of these notes by GovCo in the same proportion as the securitised mortgages. The transferred mortgages have not been derecognised as the Group retains substantially all the risks and rewards of ownership and continue to be reported in the Group’s financial statements. Luna will be consolidated into the Group’s financial statements in 2024 with all the notes being eliminated on consolidation. 61 Approval of financial statements The Board of Directors approved the consolidated and Company financial statements on 23 February 2024. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 343 Contents Company balance sheet 345 Company statement of changes in equity 346 Notes a. Accounting policies and critical accounting estimates and judgements 347 b. Loans and advances to banks 347 c. Shares in Group undertakings 347 d. Other assets 348 e. Subordinated liabilities 348 f. Debt securities in issue 348 g. Other liabilities 349 h. Share capital 349 i. Post balance sheet events 349 j. Other information 349 k. Directors and secretary 350 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 344 Company balance sheet (at 31 December 2023) Note 2023 €m 2022 €m Assets Loans and advances to banks b 8,413 8,452 Shares in Group undertakings c 8,057 8,010 Other assets d 174 90 Total assets 16,644 16,552 Equity and liabilities Debt securities in issue f 6,561 6,208 Subordinated liabilities e 1,640 1,632 Other liabilities g 121 62 Current tax liability – 1 Total liabilities 8,322 7,903 Equity Share capital h 1,057 1,070 Share premium account 456 456 Retained earnings 5,821 6,148 Other reserves 22 9 Shareholders' equity 7,356 7,683 Other equity instruments 966 966 Total equity 8,322 8,649 Total equity and liabilities 16,644 16,552 The Company recorded a profit after tax of € 92 million for the year ended 31 December 2023 ( 2022 : €89 million). Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 345 Patrick Kennedy Richard Goulding Myles O'Grady Sarah McLaughlin Chairman Deputy Chair Group Chief Executive Officer Group Secretary Company statement of changes in equity (for the year ended 31 December 2023) 2023 2022 Share capital €m Share premium account €m Retained earnings €m Other equity instru- ments €m Other reserves €m Total €m Share capital €m Share premium account €m Retained earnings €m Other equity instru- ments €m Other reserves €m Total €m Balance at 1 January 1,070 456 6,148 966 9 8,649 1,079 456 6,232 966 – 8,733 Profit for the year – – 92 – – 92 – – 89 – – 89 Total comprehensive income for the year – – 92 – – 92 – – 89 – – 89 Transactions with owners Distribution on other equity instruments AT1 coupon – – (69) – – (69) – – (69) – – (69) Dividends on ordinary shares – – (225) – – (225) – – (54) – – (54) Share buyback - repurchase of shares (note h) – – – – (125) (125) – – – – (50) (50) Share buyback - cancellation of shares (note h ) (13) – (125) – 138 – (9) – (50) – 59 – Total transactions with owners (13) – (419) – 13 (419) (9) – (173) – 9 (173) Balance at 31 December 1,057 456 5,821 966 22 8,322 1,070 456 6,148 966 9 8,649 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 346 a Accounting policies and critical accounting estimates and judgements The Company financial statements have been prepared in accordance with FRS 101 ‘Reduced dis closure frame work’ and in accordance with Section 290 (1) of the Companies Act 2014. These financial statements are financial statements of the Company only and do not consolidate the results of any subsidiaries. In preparing these financial statements the Company applies the recognition, measurement and disclosure requirements of IFRS as adopted by the EU (but makes amendments where necessary in order to comply with the Companies Act 2014). The Company has applied the exemptions available under FRS 101 in respect of the following disclosures: • statement of Cash Flows; • disclosures in respect of transactions with wholly-owned subsidiaries; • certain requirements of IAS 1 ‘Presentation of financial statements’; • disclosures required by IFRS 7 ‘Financial Instruments: disclosures’; • • disclosures required by IFRS 13 ‘Fair value measurement’; and • the effects of new but not yet effective IFRSs. The financial statements are presented in euro millions except where otherwise indicated. They have been prepared under the historical cost convention. The accounting policies of the Company are the same as those of the Group which are set out in the Group accounting policies section of the Annual Report on pages 203 to 220, where applicable. The Company’s investment in its subsidiary is stated at cost less any impairment. The preparation of financial statements in conformity with FRS 101 requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. b Loans and advances to banks Loans and advances to banks are classified as financial assets at amortised cost with the associated impairment loss allowance measured on a 12 month and lifetime ECL approach. The impairment loss allowance on loans and advances to banks is all held against Stage 1 (not credit-impaired assets) with a PD 1-4. 2023 €m 2022 €m Placements with banks 8,416 8,455 Less impairment loss allowance on loans and advances to banks (3) (3) Loans and advances to banks at amortised cost 8,413 8,452 Amounts include: Due from Group undertakings 8,413 8,452 c Shares in Group undertakings The Company’s investment in the Bank is reviewed for impairment if events or circumstances indicate that impairment may have occurred, by comparing the carrying value of the investment to its recovera ble amount. An impairment charge arises if the carrying value exceeds the recoverable amount. No impairment charge was recognised in 2023 or 2022. The recoverable amount of the investment is the higher of its fair value less costs to sell and its VIU. The subsidiary's fair value is calculated as the market capitalisation of the BoIG plc less the Company's net assets, excluding the investment in the Bank. At 31 December 2023, the mar ket capitalisation of BoIG plc less its investment in the subsidiary was €8.4 billion (2022: €8.8 billion). This was above the carrying amount of its investment of €8.0 billion and therefore the investment is not impaired and there is no requirement to estimate VIU. An investment in Group subsidiary of €47 million was recognised in 2023, when BoIG company acquired Nominee 3 for its carrying value from Bank. 2023 €m 2022 €m Balance at 1 January 8,010 8,010 Investment in Group subsidiary 47 – Balance at 31 December 8,057 8,010 Group undertakings of which: - Credit Institutions 8,057 8,010 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 347 d Other assets In 2017, the Bank declared and approved a €1 billion dividend payment to BoIG plc. A total of €973 million has been paid to date (€nil in 2023 and 2022), the balance remains outstanding and payable on demand by the company. As the declaration and approval of the dividend is an irrevocable commitment by the Bank, the full amount of the dividend has been accounted for by the Company. 2023 €m 2022 €m Dividend receivable from the Bank 27 27 Other assets 147 63 Total 174 90 Other assets are analysed as follows: Within 1 year 174 90 Amounts include: Due from Group undertakings 168 90 e Subordinated liabilities 2023 €m 2022 €m Dated loan capital €500m 1.375% Fixed Rate Reset Callable Subordinated Notes due 2031 499 498 €500 million 6.750% Fixed Rate Reset Callable Subordinated Notes due 2033 497 497 £300 million 7.594% Fixed Rate Reset Callable Subordinated Notes 2032 344 337 €300 million 2.375% Fixed Rate Reset Callable Subordinated Notes due 2029 300 300 Total subordinated liabilities 1,640 1,632 Further details on subordinated liabilities are contained in note 42 to the consolidated financial statements. f Debt securities in issue 2023 €m 2022 €m Bonds and medium term notes 6,561 6,208 Debt securities in issue at amortised cost 6,561 6,208 Debt securities are analysed as follows: Within 1 year – 1,218 After 1 year 6,561 4,990 6,561 6,208 Balance at 1 January 6,208 4,199 Issued during the year 2,250 2,001 Redemptions (1,807) – Other movements (90) 8 Balance at 31 December 6,561 6,208 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 348 g Other liabilities 2023 €m 2022 €m Accrued interest payable 110 53 Sundry creditors 11 9 Other liabilities 121 62 Other liabilities are analysed as follows: Within 1 year 118 62 After 1 year 3 – 121 62 Amounts include: Due from Group undertakings 11 9 h Share capital Ordinary shares All ordinary shares carry the same voting rights. There were no outstanding options on ordinary shares under employee schemes at 31 December 2023 or 2022. In 2023, the Group completed the purchase of the €125 million (2022: €50 million) share buyback programme whereby the Group repurchased 13.69 million shares for cancellation, c.1.3% of the count outstanding at 1 January 2023, at a weighted average price of €9.131 per share. Authorised 2023 €m 2022 €m 10 billion ordinary shares of €1.00 each 10,000 10,000 100 million preference shares of €0.10 each 10 10 Total 10,010 10,010 Allotted and fully paid 1,057 million ordinary shares of €1.00 each ( 2022 : 1,070 million ordinary shares) 1,057 1,070 i Post balance sheet events Proposed dividend On 21 February 2024, the Bank declared and approved a €1,154 million dividend, equivalent to c.4 cents per unit of ordinary stock, receivable from GovCo in respect of the year ended 31 December 2023. j Other information (i) BoIG plc is incorporated in Ireland as a public limited company with registration number 593672. Its registered office is situated at 2 College Green, Dublin, D02 VR66. (ii) The Company is domiciled in Ireland . (iii) Company income statement: In accordance with Section 304 of the Companies Act, the Company is availing of the exemption to not present its individual income statement to the AGM and from filing it with the Registrar of Companies. The Company's profit after tax for the year ended 31 December 2023 determined in accordance with FRS 101 is €92 m illion (2022: €89 million). (iv) Information in relation to the Company’s principal subsidiaries is contained in note 52 to the consolidated financial statements. (v) Auditor’s Remuneration: In accordance with Section 322 of the Companies Act 2014, the fees payable in the period to the statutory auditor for work engaged by the Company comprised audit fees of €nil (2022: €nil) and other assurance services of €nil (2022 : €nil). (vi) BoIG plc had no employees at any time during the year (2022: no employees). (vii) Post balance sheet events are shown in note 60 to the consolidated financial statements. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 349 k Directors and secretary The names of the persons who were Directors or Company Secretary of the Company at any time during the year ended 31 December 2023 and up to the date of the approval of the financial statements are set out in this note. Directors Giles Andrews , Akshaya Bhargava, Evelyn Bourke, Ian Buchanan, Eileen Fitzpatrick, Richard Goulding , Michele Greene, Patrick Kennedy, Fiona Muldoon, Myles O'Grady, Steve Pateman, Mark Spain and Margaret Sweeney Group Secretary Sarah McLaughlin (returned 13 July 2023) Interim Company Secretary Gabrielle Ryan Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 350 Other Information Contents Consolidated average balance sheet and interest rates 352 Shareholder information 353 Forward looking statement 354 Other disclosures 355 Alternative performance measures 356 Abbreviations 364 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 351 Consolidated average balance sheet and interest rates The followin g tables show the average balances and interest rates of interest earning assets and interest bearing liabilities for 2023 and 2022. The calculations o f average balances can be based on daily, weekly or monthly averages, depending on the reporting unit. The average balances used are considered to be representative of the operations of the Group and are presented on an underlying basis which excludes non-core items (see page 50 for further details). The explanation of the underlying business trends in the Group's NIM is outlined in the OFR. 2023 2022 Average Balance €m Interest €m Rate % Average Balance €m Interest €m Rate % Assets Loans and advances to banks 33,552 1,155 3.44% 39,727 135 0.34% Loans and advances to customers at amortised cost 79,384 3,276 4.13% 75,538 2,587 3.42% Debt securities at amortised cost, ﬁnancial assets at FVOCI and FVTPL 9,390 360 3.83% 11,119 40 0.36% Total interest earning assets 122,326 4,791 3.92% 126,384 2,762 2.19% Non interest earning assets 37,755 – – 36,208 – – Total assets 160,081 4,791 2.99% 162,592 2,762 1.70% Liabilities and shareholders’ equity Deposits from banks 3,114 143 4.59% 10,868 8 0.07% Customer accounts 40,676 290 0.71% 39,854 39 0.10% Debt securities in issue 8,556 471 5.50% 9,592 165 1.72% Subordinated liabilities 1,711 121 7.07% 1,887 78 4.13% Lease liabilities 368 11 2.99% 413 12 2.91% Total interest bearing liabilities 54,425 1,036 1.90% 62,614 302 0.48% Current accounts 60,213 1 – 55,600 (37) (0.07%) Total interest bearing liabilities and current accounts 114,638 1,037 0.90% 118,214 265 0.22% Other interest expense – 1 – – 1 – Non-trading derivatives (not in hedge accounting relationships - economic hedges) – 71 – – 14 – Non interest bearing liabilities 29,290 – – 28,454 – – Shareholders’ equity and non-controlling interests 16,153 – – 15,924 – – Total liabilities and shareholders’ equity 160,081 1,109 0.69% 162,592 280 0.17% Euro and sterling reference rates (average) ECB base rate 3.84% 0.61% 3 month Euribor rate 3.43% 0.34% Bank of England base rate 4.68% 1.46% Sonia rate 4.61% 1.40% 'Interest' represents underlying interest income or underlying interest expense recognised on interest bearing items net of interest on derivatives which are in a hedge relationship with the relevant asset or liability. Stra tegic portfolio divestment income of €25 million has been excluded as non-core items in 2023 (2022: €5 million credit to interest income was excluded as non-core items). In 2023, there was no interest expense arising from assets subject to negative interest rates (2022: €85 million was reclassified to interest income, whereas in the consolidated income statement it is presented as interest expense). In 2023, there was no interest income arising from liabilities subject to negative interest rates (2022: €148 million was reclassified to interest expense, whereas in the consolidated income statement it is presented as interest income). Average loans and advances to customers volumes are presented net of Stage 3 impairment loss allowances. The Group has availed of the relaxed hedge accounting provisions permitted by IAS 39 'Financial Instruments: recognition and measurement' as adopted by the EU. In order that yields on products are presented on a consistent basis year on year and are not impacted by the resulting change in hedge accounting designations, net interest outflows of €837 million (2022: €44 million net interest inflow) on all derivatives designated as fair value hedges of current accounts continue to be presented together with gross interest income on ‘Loans and advances to customers’ and is not included in ‘Customer accounts’. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 352 Shareholder information Holders of ordinary shares Listings BoIG plc is a public limited company incorporated in Ireland in 2016. Its ordinary shares, of nominal value €1.00 per share, have a primary listing on the Euronext Dublin (formerly the Irish Stock Exchange) and a premium listing on the London Stock Exchange. Registrar The Company’s Registrar is: Computershare Investor Services (Ireland) Limited, 3100 Lake Drive, Citywest Business Campus, Dublin 24, D24 AK82 Telephone: + 353 1 247 5414 Facsimile: + 353 1 447 5571 or Contact via website: www.computershare.com/ie/contact- us. Shareholders may view their shareholding on Computershare’s website at: www.investorcentre.com/ie, by registering their details with Computershare. Once registered, shareholders will be sent a Computershare activation code and will then be able to view and amend their account details using the above link. Amalgamating your shareholdings If you receive more than one copy of a shareholder mailing with similar details on your accounts, it may be because the Company has more than one record of shareholdings in your name. To ensure that you do not receive duplicate mailings in future and to reduce the cost and waste associated with this, please have all your shareholdings amalgamated into one account by contacting the Company’s Registrar (joint accounts cannot be merged with sole accounts or vice versa). Shareholder proﬁle 2023 % by value 2022 % by value Ireland 1% 2% UK 27% 31% North America 42% 36% Europe / other 20% 16% Retail 10% 15% Total 100% 100% Shareholder enquiries All enquiries concerning shareholdings should be addressed to the Company’s Registrar. Communication It is the policy of the Company to communicate with shareholders by electronic means or through the Group's website: www.bankofireland.com , in the interest of protecting the environment. Those shareholders who do not wish to receive documents or information by electronic means may request to receive the relevant information in paper form. Bank of Ireland website Further information about the Bank of Ireland Group can be obtained through the Group's website: www.bankofireland.com. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 353 Forward looking statement This document contains forward-looking statements with respect to certain of Bank of Ireland Group plc (the ‘Company’ or ‘BoIG plc’) and its subsidiaries’ (collectively the ‘Group’ or ‘BoIG plc Group’) plans and its current goals and expectations relating to its future financial condition and performance, the markets in which it operates and its future capital requirements. These forward-looking statements often can be identified by the fact that they do not relate only to historical or current facts. Generally, but not always, words such as ‘may’, ‘could’, ‘should’, ‘will’, ‘expect’, ‘intend’, ‘estimate', ‘anticipate’, ‘assume’, ‘believe’, ‘plan’, ‘seek’, ‘continue’, ‘target’, ‘goal’, ‘would’, or their negative variations or similar expressions identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Examples of forward-looking statements include, among others: statements regarding the Group’s near term and longer term future capital requirements and ratios, LDRs, expected impairment charges, the level of the Group’s assets, the Group’s financial position, future income, business strategy, projected costs, margins, future payment of dividends, future share buybacks, the implementation of changes in respect of certain of the Group’s pension schemes, estimates of capital expenditures, discussions with Irish, United Kingdom, European and other regulators, plans and objectives for future operations, and the impact of Russia’s invasion of Ukraine and the Israeli-Palestinian conflict particularly on certain of the above issues and generally on the global and domestic economies. Such forward-looking statements are inherently subject to risks and uncertainties, and hence actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those as set out in the Risk Management Report. Investors should also read ‘Principal Risks and Uncertainties’ in this document beginning on page 135. Nothing in this document should be considered to be a forecast of future profitability, dividend forecast or financial position of the Group and none of the information in this document is or is intended to be a profit forecast, dividend forecast or profit estimate. Any forward-looking statement speaks only at the date it is made. The Group does not undertake to release publicly any revision to these forward- looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. For further information please contact: Mark Spain Group Chief Financial Officer Email: [email protected] Eamonn Hughes Chief Sustainability & Investor Relations Officer Email: [email protected] Darach O’Leary Head of Group Investor Relations Email: [email protected] Damien Garvey Head of Group External Communications and Public Affairs Email: [email protected] Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 354 Other disclosures TARGET2 On 15 February 2008 a first floating charge (the Floating Charge) was placed in favour of the CBI over all The Governor and Company of the Bank of Ireland’s right, title, interest and benefit, present and future, in and to (i) the balances now or at any time standing to the credit of The Governor and Company of the Bank of Ireland's account held as a TARGET2 participant with the CBI; and (ii) certain segregated securities listed in an Eligible Securities Schedule kept by The Governor and Company of the Bank of Ireland for purposes of participating in TARGET2 ((i) and (ii) together the Charged Property) where TARGET2 is a real time gross settlement system for payments in euro with settlement in central bank money. This Floating Charge contained a provision whereby during the subsistence of the security, otherwise than with the prior written consent of the CBI, The Governor and Company of the Bank of Ireland shall: • not create or attempt to create or permit to arise or subsist any encumbrance on or over the Charged Property or any part thereof; or • not, otherwise than in the ordinary course of business, sell, transfer, lend or otherwise dispose of the Charged Property or any part thereof or attempt or agree to do so whether by means of one or a number of transactions related or not and whether at one time or over a period of time. On 14 September 2018, The Governor and Company of the Bank of Ireland entered into an Agreement in respect of Continued Participation in TARGET2 Ireland with the CBI to restate and modify the terms and conditions applicable to The Governor and Company of the Bank of Ireland’s existing participation in TARGET2 with effect from 14 September 2018. This Agreement provided that The Governor and Company of the Bank of Ireland would continue to participate in TARGET2 in accordance with the Agreement and the TARGET2 Ireland terms and conditions as published on the CBI’s website from time to time and that the Floating Charge would continue in full force and effect with respect to such continued and amended participation in TARGET2. In 2017, the ECB undertook a project to consolidate and optimise TARGET2 and TARGET2-Securities systems, benefiting from state-of-the-art approaches and technological innovation, enabling a decrease in the combined operational cost and enhancing liquidity management across the various services provided to participants. The result of this consolidation project is a new-generation Trans-European Automated Real- time Gross Settlement Express Transfer system settling in euro in central bank money (“TARGET”). The new TARGET component systems constitute the legal successors to the TARGET2 System and provides for the transition of participation in the TARGET2 System to the corresponding TARGET component system. TARGET-Ireland is a component part of the new-generation TARGET system. On account of this new TARGET-Ireland system, on 16 March 2023 The Governor and Company of the Bank of Ireland entered into a new Participation Agreement with the CBI and a first floating charge over all of The Governor and Company of the Bank of Ireland’s right, title, interest and benefit, present and future, in and to the balances now or at any time standing to the credit of The Governor and Company of the Bank of Ireland's account held as a TARGET-Ireland participant with the CBI. As a result of the Bank entering into the 2023 TARGET-Ireland documents the 2008 TARGET2 participation agreement and floating charge were terminated with effect from 20 March 2022. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 355 Alternative performance measures This section contains further information related to certain measures referred to in the Strategic Report, O FR and Financial Statements. The OFR is prepared using IFRS and non-IFRS measures to analyse the Group’s performance, providing comparability year on year. These performance measures are consistent with those presented to the Board and Group Executive Committee and include alternative performance measures as set out below. These performance measures may not be uniformly defined by all companies and accordingly they may not be directly comparable with similarly titled measures and disclosures by other companies. These measures should be considered in conjunction with IFRS measures as set out in the consolidated financial statements from page 194. Annual Premium Equivalent is a common metric used by insurance companies. The approach taken by insurance companies is to take 100% of regular premiums, being the annual premiums received for a policy, and 10% of single premiums. This assumes that an average life insurance policy lasts 10 years and therefore taking 10% of single premiums annualises the single lump sum payment received over the 10 year duration. Average cost of funds represents the underlying interest expense recognised on interest bearing liabilities, net of interest on derivatives which are in a hedge relationship with the relevant liability. See pages 51 and 352 for further information. Calculation Source 2023 €m 2022 €m Interest expense Income statement 2,622 663 Exclude impact of FV hedges of current accounts Average balance sheet (837) 44 Exclude interest on non-trading derivatives (not in hedge accounting relationships) Note 5 (747) (208) Exclude other interest expense Note 5 (1) (1) Exclude negative interest on ﬁnancial assets Note 5 – (85) Include negative interest on ﬁnancial liabilities Note 4 – (148) Underlying interest expense 1,037 265 Average interest bearing liabilities Average balance sheet 114,638 118,214 Average cost of funds % (0.90%) (0.22%) Business income is net other income before other gains and other valuation items. See page 52 for further details. Constant currency: to enable a better understanding of performance, certain variances are calculated on a constant currency basis by adjusting for the impact of movements in exchange rates during the year as follows: • for balance sheet items, by reference to the closing rate at the end of the current and prior period ends; and • for items relating to the income statement, by reference to the current and prior period average rates. Dividend per ordinary share is the final dividend issued by the Group in respect of the current year, divided by the number of ordinary shares in issue (excluding treasury shares). The 2023 dividend is proposed, subject to shareholder approval. Calculation Source 2023 €m 2022 €m Final dividend paid in respect of the year ended 634 225 Number of ordinary shares in issue excluding treasury shares (millions) Note 43 1,056 1,069 Dividend per ordinary share (cent) 60 21 Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 356 Alternative performance measures (continued) Growth in customer deposits on a constant currency basis The Group calculates growth in customer deposits on a constant currency basis. For this calculation the Group applies the prior year end rate in both years so that the impact of movements in FX rates are eliminated. Calculation Source 2023 €m 2022 €m Customer deposits Note 34 100,183 99,200 Impact of foreign exchange movements (245) 719 Customer deposits on a constant currency basis 99,938 99,919 Growth in customer deposits during the year 738 7,145 Gross yield represents the underlying interest income recognised on interest earning assets, net of interest on derivatives which are in a hedge relationship with the relevant asset. See pages 51 and 352 for further information. Calculation Source 2023 €m 2022 €m Interest income Income statement 6,329 3,150 Exclude interest on non-trading derivatives (not in hedge accounting relationships) Note 4 (676) (194) Include impact of FV hedges of current accounts Average balance sheet (837) 44 Exclude portfolio divestment Non-core items (OFR) (25) – Exclude negative interest on financial liabilities Note 4 – (148) Include negative interest on financial assets Note 5 – (85) Exclude customer redress charges Non-core items (OFR) – (5) Underlying interest income 4,791 2,762 Average interest earning assets Average balance sheet 122,326 126,384 Average gross yield % 3.92% 2.19% Gross yield - customer lending Calculation Source 2023 €m 2022 €m Interest income on loans and advances to customers Note 4 3,909 2,379 Include impact of FV hedges of current accounts Average balance sheet (837) 44 Interest income on ﬁnance leases and hire purchase receivables Note 4 229 169 Exclude portfolio divestments Non-core items (OFR) (25) – Exclude customer redress charges Non-core items (OFR) – (5) Underlying interest income on customer lending 3,276 2,587 Average customer lending assets Average balance sheet 79,384 75,538 Average gross yield on customer lending % 4.13% 3.42% Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 357 Alternative performance measures (continued) Gross yield - liquid assets Calculation Source 2023 €m 2022 €m Interest income on loans and advances to banks Note 4 1,155 212 Interest income on debt securities at amortised cost Note 4 194 18 Interest income on debt securities at FVOCI Note 4 163 29 Interest on other ﬁnancial assets at FVTPL Note 4 3 1 Include negative interest on ﬁnancial assets Note 5 – (85) Underlying interest income on liquid assets 1,515 175 Loans and advances to banks Average balance sheet 33,552 39,727 Debt securities at amortised cost, ﬁnancial assets FVOCI and FVTPL Average balance sheet 9,390 11,119 Average interest earning liquid assets 42,942 50,846 Average gross yield on liquid assets % 3.53% 0.34% Liquid assets are comprised of cash and balances at central banks, loans and advances to banks, debt securities at amortised cost, financial assets at FVOCI and certain financial assets at FVTPL (excluding balances in Wealth and Insurance). Liquidity Coverage Ratio (LCR) is calculated based on the Commission Delegated Regulation (EU) 2015/61 which came into force on 1 October 2015. Prepared on a regulatory group basis, in accordance with the Capital Requirements Directive (CRD IV), which comprises banking and other relevant financial institutions within the Group, but excludes non-banking related institutions such as insurance entities. For further information, see the Group’s Pillar 3 disclosures (tab 1.3), available on the Group’s website. Loan to deposit ratio is calculated as being net loans and advances to customers divided by customer deposits. Calculation Source 2023 €m 2022 €m Loans and advances to customers Balance sheet 79,729 71,961 Customer deposits Balance sheet 100,183 99,200 Loan to Deposit ratio % 80% 73% Net Impairment (losses) / gains on loans and advances to customers at amortised cost (basis points) is the net impairment (loss) / gain on loans and advances to customers at amortised cost divided by average gross loans and advances to customers at amortised cost. Net Impairment (losses) / gains on loans and advances to customers at amortised cost (basis points) excludes non-core. Statutory Underlying Source 2023 €m 2022 €m 2023 €m 2022 €m Net impairment (losses) / gains on loans & advances to customers at amortised cost Note 13 / OFR (419) (188) (419) (188) Exclude portfolio divestment Non-core items (OFR) – – 22 – (419) (188) (397) (188) Average gross loans and advances to customers 80,761 75,848 80,761 75,848 Net Impairment (losses) / gain on loans and advances to customers at amortised cost (bps) (52) (25) (49) (25) Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 358 Alternative performance measures (continued) Net interest margin (NIM) is stated on an underlying basis. See page 51 for further details. Calculation Source 2023 €m 2022 €m Net interest income Income statement 3,707 2,487 Exclude portfolio divestment income Non-core items (OFR) (25) – Exclude customer redress gain Non-core items (OFR) – (5) Underlying net interest income 3,682 2,482 Average interest earning assets Average balance sheet 122,326 126,384 Net interest margin % 3.01% 1.96% Net Stable Funding Ratio (NSFR) is prepared on a regulatory group basis, in accordance with the EU Capital Requirement Regulations and Directive, as amended, which requires the maintenance of a NSFR ratio greater than or equal to 100%, effective June 2021. For further information see the Group’s Pillar 3 disclosures (tab 1.3), available on the Group’s website. New lending volumes • Net new lending volumes represent loans and advances to customers drawn down during the year (including revolving credit facility activity) and portfolio acquisitions, net of repayments and redemptions. • Gross new lending volumes represent loans and advances to customers drawn down during the period and portfolio acquisitions. Non-performing exposures (NPEs) are: • credit-impaired loans which includes loans where the borrower is considered unlikely to pay in full without recourse by the Group to actions such as realising security, and / or loans where the borrower is greater than or equal to 90 days past due and the arrears amount is material; and • other loans meeting NPE criteria as aligned with regulatory requirements. NPE ratio is calculated as NPEs on loans and advances to customers at amortised cost (excluding loans and advances to customers measured at FVTPL) as a percentage of the gross carrying value of loans and advances to customers at amortised cost. Calculation Source 2023 €m 2022 €m Non-performing exposures Loans and advances to customers (OFR) 2,519 2,617 Loans and advances to customers Note 24 80,746 73,039 NPE ratio % 3.1% 3.6% Organic capital generation consists of attributable profit and movements in regulatory deductions, including the reduction in DTAs deduction (DTAs that rely on future profitability) and movements in the expected loss deduction. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 359 Alternative performance measures (continued) Return on assets is calculated as being statutory net profit / loss after tax divided by total assets, in line with the requirement in the EU (Capital Requirements) Regulations 2014. Calculation Source 2023 €m Restated 1 2022 €m Proﬁt for the year Income statement 1,601 858 Total assets Balance sheet 155,708 150,689 Return on assets (bps) 103 57 Return on Tangible Equity (RoTE) is calculated as being proﬁt attributable to ordinary shareholders divided by average shareholders’ equity less average intangible assets and goodwill. Return on Tangible Equity (adjusted) is calculated by adjusting the RoTE to exclude other gains and other valuation items (net of tax). The average shareholders tangible equity is adjusted for pension surplus and a CET1 ratio of 14.0% (2022: 14.0%), reﬂecting the Group's capital guidance. Reported Adjusted 2023 €m Restated1 2022 €m 2023 €m Restated1,2 2022 €m Proﬁt for the year attributable to shareholders1 1,595 850 1,595 850 Distribution on other equity instruments - AT1 coupon (69) (69) (69) (69) Other gains and other valuation items, net of tax2 – – (40) (9) Reported / adjusted proﬁt after tax 1,526 781 1,486 772 Shareholders’ equity 1 11,592 10,489 11,592 10,489 Intangible assets and goodwill (1,408) (1,276) (1,408) (1,276) Shareholders’ tangible equity 10,184 9,213 10,184 9,213 Average shareholders’ tangible equity 1 9,847 9,470 9,847 9,470 Adjustment for CET1 ratio at 14.0% ( 2022: 14.0%)1 – – (450) (749) Adjustment for pension surplus – – (828) (1,111) Adjusted Average shareholders tangible equity 9,847 9,470 8,569 7,610 Return on Tangible Equity 15.5% 8.2% 17.3% 10.1% 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect a reallocation of €2 million from Retail Ireland business income to 'other valuation items'. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 360 Alternative performance measures (continued) Statutory cost income ratio is calculated as other operating expenses and cost of restructuring divided by total operating income. Calculation Source 2023 €m Restated1 2022 €m Operating expenses1 Income statement 2,094 1,940 Cost of restructuring programme Income statement 20 17 Total operating expenses 2,114 1,957 Total operating income1 Income statement 4,460 3,114 Statutory cost / income ratio % 47% 63% Tangible Net Asset Value (TNAV) per share is calculated as shareholder equity less intangible assets and goodwill divided by the number of ordinary shares in issue, adjusted for treasury shares. Calculation Source 2023 €m Restated 1 2022 €m Shareholder equity1 Balance sheet 11,592 10,489 Less - intangible assets and goodwill Note 28 (1,408) (1,276) Adjust for own shares held for the beneﬁt of life assurance policyholders Balance sheet 7 10 Tangible net asset value 10,191 9,223 Number of ordinary shares in issue Note 43 1,057 1,070 Less - treasury shares held Note 43 (1) (1) 1,056 1,069 Tangible net asset value per share (cent) 965 863 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. Underlying excludes non-core items which are those items that the Group believes obscure the underlying performance trends in the business. See page 55 for further information. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 361 Alternative performance measures (continued) Underlying cost income ratio is calculated on an underlying basis (excluding non-core items), as operating expenses excluding levies and regulatory charges divided by operating income, excluding other gains and other valuation items. Calculation Source 2023 €m Restated1,2 2022 €m Operating expenses1 Income statement 2,094 1,940 Cost of restructuring programme Income statement 20 17 Total operating expenses 2,114 1,957 Exclude: Levies and regulatory charges1 Note 10 (170) (142) Acquisitions costs Non-core items (OFR) (61) (54) Portfolio divestments (operating expenses) Non-core items (OFR) (24) (1) Cost of restructuring programme Non-core items (OFR) (20) (17) Other transformation programme costs Non-core items (OFR) 18 (33) Customer redress charges Non-core items (OFR) – (34) Underlying costs 1,857 1,676 Operating income 1 Income statement 4,460 3,114 Exclude: Investment valuation movement Other income (OFR) (36) 97 Portfolio divestments (operating income) Non-core items (OFR) (28) (2) Gross up of policyholder tax in the W&I business Non-core items (OFR) (26) 2 Liability management exercises Non-core items (OFR) 22 – Financial instrument valuation adjustments (CVA, DVA, FVA) Other income (OFR) (7) (6) Other expenses / (income) Other income (OFR) 4 (100) Other valuation items2 Other income (OFR) – (2) Investment return on treasury stock held for policyholders Non-core items (OFR) – 8 Customer redress charges Non-core items (OFR) – (5) Underlying income 4,389 3,106 Underlying cost / income ratio % 42% 54% 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 Comparative figures have been restated to reflect a reallocation of €2 million from Retail Ireland business income to 'other valuation items'. 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. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 362 Alternative performance measures (continued) Underlying earnings per share is calculated as loss / proﬁt attributable to shareholders adjusted for non-core items, divided by the weighted average number of ordinary shares in issue, adjusted for average treasury shares. Calculation Source 2023 €m Restated1 2022 €m Profit attributable to shareholders1 Income statement 1,595 850 Non-core items, including tax Non-core items (OFR) 101 112 Distribution on other equity instruments - AT1 coupon Note 17 (69) (69) Adjustment for redemption of preference stock2 Note 17 (40) – Underlying profit attributable to ordinary shareholders 1,587 893 Weighted average number of ordinary shares in issue 1,062 1,073 Average treasury shares held (1) (2) Weighted average number of shares in issue excluding treasury shares Note 17 1,061 1,071 Underlying earnings per share (cent) 149.6 83.4 1 On 1 January 2023, IFRS 17 'Insurance Contracts' became effective, replacing IFRS 4 'Insurance Contracts'. See note 1 for updated accounting policy and note 18 for transitional impact. 2 As disclosed in note 45, in 2023 the Group paid consideration of €104 million in respect of the acquisition and redemption of certain Sterling and Euro preference stock of the Governor and Company of the Bank of Ireland. This consideration was in excess of the carrying value (c.€64 million) of the related preference stock, which was presented as non-controlling interest by the Group. Under IAS 33, the difference of €40 million has been reflected in the EPS calculation by reducing the profit attributable to ordinary shareholders of the Group. Wholesale funding is comprised of deposits by banks (including collateral received) and debt securities in issue. Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 363 Abbreviations 1LOD First Line Of Defence 2LOD Second Line Of Defence 3LOD Third Line of Defence AA Automobile Association AGC Annual General Court AGM Annual General Meeting AIB Allied Irish Banks Group plc and subsidiaries ALCO Group Asset and Liability Committee AML Anti-Money Laundering APE Annual Premium Equivalent APMs Alternative Performance Measures AT1 Additional tier 1 ATM Automated Teller Machine Bank / GovCo The Governor and Company of the Bank of Ireland BAU Business As Usual BCBS Basel Committee on Banking Supervision BEEL Best Estimate of Expected Loss BITCI Business In The Community Ireland BMR Benchmark Rate BoE Bank of England BoI Bank of Ireland BoIG plc Bank of Ireland Group plc BoIGM Bank of Ireland Global Markets BoIMB Bank of Ireland Mortgage Bank BoI (UK) plc Bank of Ireland (UK) plc bps Basis points BRC Board Risk Committee BRR Board Risk Report BRRD Bank Recovery and Resolution Directive BSPF Bank of Ireland Staff Pensions Fund BTL Buy to let B&W Bristol & West Plc CARR Canadian Alternative Reference Rate working group CB Corporate Bank CBI Central Bank of Ireland CBR Combined Buffer Requirement CCB Capital Conservation Buﬀer CCyB Countercyclical capital buffer CDEAs Cleared Derivatives Execution Agreements CDOR Canadian Dollar Offered Rate CDP Carbon Disclosure Project CEO Chief Executive Officer CET1 Common equity tier 1 CFO Chief Financial Oﬃcer CGU Cash generating units COP Conference of Parties CPI Consumer Price Index CR Credit Review CRD Capital Requirements Directive (EU) CRE Commercial Real Estate CRO Chief Risk Officer CRR Capital Requirements Regulation CSAs Credit Support Annexes CSIRO Chief Sustainability and Investor Relations Officer CSM Contractual Service Margin CSO Central Statistics Office CSRD Corporate Sustainability Reporting Directive CVA Credit Valuation Adjustment DAC Designated Activity Company DAE Directly Attributable Expenses DAFM Department of Agriculture, Food and the Marine DB Defined benefit DC Defined contribution DCF Discounted Cash Flow DETE Department of Enterprise, Trade and Employment DGFM Davy Global Fund Management DGS Deposit Guarantee Scheme DMA Double Materiality Assessment DTA Deferred tax asset DVA Debit Valuation Adjustment EAD Exposure at Default EBA European Banking Authority EC European Commission ECB European Central Bank ECL Expected credit losses EDIS European Deposit Insurance Scheme EGM Extraordinary General Meeting EIF European Investment Fund EIOPA European Insurance and Occupational Pensions Authority EONIA Euro Overnight Index Average EPC Energy Performance Certificate ERC Executive Risk Committee ERV Estimated recovery value ESEF European Single Electronic Format ESG Environmental, Social and Corporate Governance ESMA European Securities and Markets Authority EU European Union EURIBOR Euro Inter Bank Offered Rate FCA Financial Conduct Authority FCC Financial Crime Compliance FCF Fulfilment Cashflows FIRB Foundation Internal Rating Based FLI Forward looking information FRA Fully Retrospective Approach FRES First Rate Exchange Services Limited FRESH First Rate Exchange Services Holdings Limited FRS Financial Reporting Standards FSCS Financial Services Compensation Scheme FSLI First Statement Line Items FSA Fixed Share Allowance FVA Funding Valuation Adjustment FVOCI Fair Value through Other Comprehensive Income FVTPL Fair Value Through Profit or Loss FX Foreign exchange GAC Group Audit Committee GB Great Britain GCA Gross Carrying Amount GCIA Group Chief Internal Auditor Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 364 Abbreviations (continued) GCRC Group Credit Risk Committee GCTC Group Credit Transactions Committee GDP Gross Domestic Product GEC Group Executive Committee GHG Greenhouse gas GIA Group Internal Audit GMM Group Measurement Model GM&LR Group Market and Liquidity Risk GORC Group Operational Risk Committee GPS Group Profit Share GRC Group Remuneration Committee GRCRC Group Regulatory and Conduct Risk Committee GSC Group Sustainability Committee GTOC Group Transformation Oversight Committee I&D Inclusion and Diversity IAASA Irish Auditing Accounting Supervisory Authority IAS International Accounting Standard IBOR Inter Bank Offered Rate IBR Incremental borrowing rate ICAAP Internal Capital Adequacy Assessment Process IFIE Insurance Finance Income or Expenses IFRS International Financial Reporting Standards ILA Impairment Loss Allowance ILAAP Internal Liquidity Adequacy Assessment Process INED Independent Non-Executive Director IRB Internal Rating Based IRO Impact, Risk and Opportunity IRRBB Interest Rate Risk in the Banking Book ISDA International Swaps and Derivatives Association ISSB International Sustainability Standards Board IT Information Technology IVU Independent Validation Unit JST Joint Supervisory Team KBCI KBC Bank Ireland KFH Key Function Holders KMP Key management personnel KPIs Key performance indicators LCR Liquidity Coverage Ratio LDI Liability Driven Investment LDR Loan to deposit ratio LGD Loss Given Default LIBOR London Inter Bank Offered Rate LIC Liability for Incurred Claims LoA Level of Aggregation LRC Liability for remaining coverage LSE London Stock Exchange LTV Loan to Value MCEV Market Consistent Embedded Value MFS Minimum Funding Standard MREL Minimum Requirement for own Funds and Eligible Liabilities MRC Model Risk Committee MRT Material Risk Taker NACE Nomenclature of Economic Activities NAMA National Asset Management Agency NED Non-Executive Director NFRD Non-Financial Reporting Directive NGFS Network of Central Banks and Supervisors for Greening the Financial System NGO Non-governmental organisation N&G Group Nomination and Governance Committee NI Northern Ireland NIAC New Ireland Assurance Company plc NIM Net interest margin NPEs Non-performing exposures NSFR Net Stable Funding Ratio NTMA National Treasury Management Agency OCI Other Comprehensive Income OECD Organisation for Economic Co-operation and Development OKRs Objective and Key Results ORSA Own Risk and Solvency Assessment O-SII Other Systemically Important Institutions OTC Over the Counter P2G Pillar 2 Guidance P2R Pillar 2 Requirement PAA Premium Allocation Approach PBAF Partnership of Biodiversity Accounting Financials PCA Portfolio Coverage Approach PCAF Partnership for Carbon Accounting Financials PD Probability of Default PERC Private Equity Risk Committee PMA Post-Model Adjustment POCI Purchased or Originated Credit-impaired ﬁnancial asset PRA Prudential Regulation Authority RAROC Risk Adjusted Return on Capital RCF Revolving Credit Facility RCSA Risk and Control Self Assessment RFR Risk free rates RMC Risk Measurement Committee RMF Risk Management Framework RNPS Relationship Net Promoter Score RNS Regulatory News Services RoI Republic of Ireland RoTE Return on Tangible Equity RoU Right of Use RoW Rest of World RPI Retail Price Index RPPI Residential Property Price Index RSB Responsible and Sustainable Business RWAs Risk weighted assets SBT Science-Based Target SBTi Science-Based Targets initiative SBCI Strategic Banking Corporation of Ireland SCR Solvency Capital Requirement SDA Sector Decarbonisation Approach SDG Sustainable Development Goals SEAI Sustainable Energy Authority of Ireland Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 365 Abbreviations (continued) SFDR Sustainable Finance Disclosure Regulation SID Senior Independent Director SIP Stock Incentive Plan SIRP Special Incentive and Retention Plan SME Small and Medium Enterprise SOFR Secured Overnight Financing Rate SONIA Sterling Overnight Index Average SPE Special purpose entity SREP Supervisory Review & Evaluation Process SRB Single Resolution Board SRF Single Resolution Fund SSM Single Supervisory Mechanism S&P Standard and Poor's TCFD Task Force for Climate-related Financial Disclosure TFS Term Funding Scheme TFSME Term Funding Scheme for Small and Medium-sized Enterprises TLTRO Targeted Longer Term Refinancing Operation TNFD Taskforce for Nature-related Financial Disclosures TPRM Third party risk management TSA The Standardised Approach TtC Through-the-Cycle UK United Kingdom UN United Nations UNPRB United Nations Principles for Responsible Banking UNPRI United Nations Principles for Responsible Investment US United States VaR Value at Risk VCU Vulnerable Customer Unit VFA Variable Fee Approach VIF Value of in Force VIU Value in Use VRR Vertical Risk Retention WED Workforce Engagement Director €STR Euro Short term rate Strategic Report Financial Review Governance Risk Management Report Financial Statements Other Information Bank of Ireland Annual Report 2023 366 Bank of Ireland Group plc 2 College Green Dublin 2 D02 VR66 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