EBA launched a consultation on revisions to the guidelines on internal governance of certain entities in EU. The guidelines will apply to competent authorities across EU as well as to credit institutions on a solo and consolidated basis. This review takes into account amendments introduced by the fifth Capital Requirements Directive (CRD5) and the Investment Firms Directive in relation to sound and effective governance arrangements of credit institutions. The consultation runs until October 31, 2020 and the amended guidelines are expected to enter into force on June 26, 2021.
The proposed guidelines clarify that identifying, managing, and mitigating money laundering and financing of terrorism risk is part of sound internal governance arrangements and risk management framework of credit institutions. The draft guidelines further specify and reinforce the framework regarding loans to members of the management body and their related parties. Such loans may constitute a specific source of actual or potential conflict of interest and, therefore, specific requirements have been explicitly included in CRD (Directive 2013/36/EU). Similarly, other transactions with members of the management body and their related parties have the potential to create conflicts of interest and, therefore, EBA is providing guidance on how to properly manage them. Finally, in line with the requirement to have a gender-neutral remuneration policy, the consultation paper contains new guidance on the code of conduct to ensure that credit institutions take all necessary measures to avoid discrimination and guarantee equal opportunities to staff of all genders.
The consultation paper indicates that the final guidelines would apply similarly to credit institutions and to investment firms that are subject to Title VII of CRD (Directive 2013/36/EU) in application of the Article 1(2) and (5) of Regulation 2019/2033/EU. The guidelines are based on an earlier set of guidelines on internal governance and add requirements that aim to foster a sound risk culture implemented by the management body, to strengthen the management body oversight of the activities of credit institutions and to strengthen the risk management frameworks of credit institutions. Additional guidelines have been provided to further increase the transparency of credit institutions’ offshore activities of credit institutions and to ensure the consideration of risks within change processes of credit institutions.
Comment Due Date: October 31, 2020
Effective Date: June 26, 2021 (Expected)
Keywords: Europe, EU, Banking, Internal Governance, Governance, Guidelines, CRD, IFD, AML/CFT, EBA
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