EBA and ESMA are proposing to revise the joint guidelines for assessing the suitability of members of the management body and key function holders. The proposed revisions reflect the amendments introduced by the fifth Capital Requirements Directive (CRD5) and the Investment Firms Directive in relation to the assessment of the suitability of members of the management body. The draft joint guidelines also take into account the recovery and resolution framework introduced by the Bank Recovery and Resolution Directive (BRRD) and provide further guidance in this regard. The joint EBA and ESMA guidelines will apply to competent authorities across EU as well as to institutions on a solo and consolidated basis. The consultation runs until October 31, 2020 and the finalized guidelines are expected to enter into force six months after their publication.
EBA points out that uncovering any involvement of credit institutions and investment firms in money laundering and terrorist financing can have an impact on the viability and trust in the financial system. In this context, the proposed revisions to the joint guidelines clarify that the knowledge, experience, and skill requirements are important aspects in the fit and proper assessment of members of the management body and key function holders, as they contribute to identifying, managing, and mitigating money laundering and financing of terrorism risks. The proposed revisions to the guidelines also clarify that being a member of affiliated companies or affiliated entities does not in itself represent an obstacle for a member of the management body to acting with independence of mind. The guidelines further specify that a gender-balanced composition of the management body is of particular importance. Institutions should respect the principle of equal opportunities for any gender and take measures to improve a more gender-balanced composition of staff in management positions. Annex I to the guidelines presents instructions and template for suitability matrix to assess the collective competence of members of the management body. The Annex has been amended to include compliance with the requirements related to anti-money laundering and combating of terrorist financing, but stays otherwise unchanged.
In accordance with the requirements introduced by the Capital Requirements Directive (2013/36/EU)—as amended by CRD5 (2019/878/EU)—and the revised Markets in Financial Instruments Directive or MiFID II (2014/65/EU), the joint guidelines of EBA and ESMA cover the notions of suitability and the assessment of suitability by institutions and competent authorities. Overall, the guidelines apply to all institutions, independent of their governance structures (unitary board, dual board, or other structures), without advocating or preferring any specific structure as set out in the defined scope of application. The guidelines specify that all institutions have to assess the members of the management body. Competent authorities should ensure that credit institutions, financial and mixed financial holding companies, and investment firms comply with these guidelines. Institutions that are subject to CRD also have to assess all key function holders that have a significant influence over the direction of the institution under the overall responsibility of the management body. For significant "CRD" institutions, competent authorities should assess the heads of internal control functions and the chief financial officer (CFO), where they are not members of the management body.
- Press Release
- Consultation with Tracked Changes (PDF)
- Suitability Matrix Template and Instructions (XLSX)
Comment Due Date: October 31, 2020
Keywords: Europe, EU, Banking, Securities, Governance, CRD, BRRD, Guidelines Suitability Assessment, IFD, Operational Risk, Basel, EBA, ESMA
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
The European Council published a draft Commission Delegated Regulation to amend the regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
The Monetary Authority of Singapore (MAS) published amendments to Notice 635, which sets out requirements that a bank in Singapore has to comply with when granting an unsecured non-card credit facility to individuals.
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.