Featured Product

    FSI Paper Reviews Fit and Proper Assessment Criteria at Banks

    March 17, 2020

    FSI published a paper that reviews the post-crisis "fit and proper" assessment criteria for bank directors, along with the related guidance on board composition and structure, in 19 jurisdictions. The paper identifies areas where additional guidance on aspects of board governance can help to further strengthen the quality of bank boards, which, in turn, may enhance confidence in the financial system. The stock-take also provides insights on the methods authorities use to enhance board composition and structure.

    The 19 jurisdictions reviewed in this assessment include the US, the UK, EU, Australia, Bahrain, Belgium, Brazil, Chile, China, Germany, Hong Kong, India, Malaysia, the Netherlands, Nigeria, the Philippines, Russia, South Africa, and Thailand. The paper finds that, while all jurisdictions prescribe the "fit and proper" criteria, some have no regulatory powers to approve board candidates or they do not require prior approval of all bank directors. Where prior regulatory approval is required, regulatory decisions are driven by the fitness criterion, which comprises a range of different factors. When it comes to board composition, nearly all authorities require the chair and the CEO roles to be separated and many prescribe an appropriate mix of executive directors, non-executive directors, and independent non-executive directors on the board. In this context, all jurisdictions provide guidance on what is not considered "independent," focusing on the relationship between a bank and a director. Several jurisdictions also impose tenure limits for non-executive directors and independent non-executive directors. As for board structure, most authorities require banks to establish risk, audit, and remuneration committees, while ethics and culture committees are rare. While regulatory guidance on corporate governance is applicable to all banks, authorities differentiate expectations through the use of proportionality.

    The review of fit and proper assessment approaches identifies practices that may be useful for supervisory authorities. Authorities might, where appropriate, seek regulatory powers to approve board candidates and determine whether aspects of the fitness criterion can be enhanced to help support desired outcomes. These include clarifying the “expertise” requirements of board candidates, particularly the board chair and the chair of board subcommittees; assessing the time commitment of board candidates, considering their outside obligations; incorporating the “independence of mind” concept, which goes beyond determining whether candidates have a conflict of interest; and outlining the role of interviews in the assessment process. In determining formal independence, supervisory assessments might be improved by defining more concrete attributes for an independent non-executive director, establishing maximum tenure limits for an independent non-executive director, and monitoring how often an independent non-executive director dissents from the majority opinion.

     

    Related Links

    Keywords: International, Banking, Operational Risk, Fit and Proper Criteria, Governance, Proportionality, FSI

    Related Articles
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Sets Out Plan to Transform Data Collection from Financial Sector

    BoE has set out a three-phased plan to transform data collection from the UK financial sector over the next decade.

    February 23, 2021 WebPage Regulatory News
    News

    BIS Issues Updates on Technology Initiatives on Cross-Border Payments

    BIS recently made a couple of announcements with respect to the planned and ongoing work in the area of financial technology.

    February 23, 2021 WebPage Regulatory News
    News

    ESRB Updates List of Macro-Prudential Measures in February 2021

    ESRB updated the list of national macro-prudential measures applied by each member state in the European Economic Area.

    February 22, 2021 WebPage Regulatory News
    News

    BoE Survey Shows Positive COVID Impact on Outsourced Banking Services

    BoE has set out results of a survey on the impact of COVID-19 events on the use of machine learning and data science.

    February 22, 2021 WebPage Regulatory News
    News

    ECB Issues Opinion on Proposal to Regulate Crypto-Asset Markets in EU

    In response to a request from the European Council and Parliament, ECB published an opinion on the proposed regulation on markets in crypto-assets.

    February 22, 2021 WebPage Regulatory News
    News

    APRA Announces Aggregate Committed Liquidity Facility for Banks

    APRA announced the updated aggregate amounts for the 2021 Committed Liquidity Facility (CLF) established between the Reserve Bank of Australia (RBA) and certain locally incorporated authorized deposit-taking institutions that are subject to the Liquidity Coverage Ratio (LCR).

    February 19, 2021 WebPage Regulatory News
    News

    ECB and UK Authorities Agree on Post-Brexit Supervisory Cooperation

    ECB published supervisory Memorandums of Understanding (MoUs) with UK as well as other European and non-European authorities.

    February 19, 2021 WebPage Regulatory News
    News

    EIOPA Outlines Strategic Supervisory Priorities for Insurance Sector

    EIOPA identified business model sustainability and adequate product design as the two EU-wide strategic supervisory priorities.

    February 19, 2021 WebPage Regulatory News
    News

    US Agencies to Revise FFIEC 031, FFIEC 041, and FFIEC 051 Reports

    After considering comments received on the November 2020 proposal, US Agencies (FDIC, FED and OCC) are proceeding with the proposed revisions to the reporting forms and instructions for Call Reports FFIEC 031, FFIEC 041, and FFIEC 051.

    February 19, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6618