6 - 2013 04 16 (EBA Guidelines on Fit and Proper_FSA Malta_Bernd Rummel)

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© 2012 | EBA | European Banking Authority

EBA Guidelines on the assessment ofmembers of the management body andimplications of Art 87 (4) CRD IV

Bernd RummelPolicy Expert Regulation, EBA

16 April 2013 | Malta



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Legal Basis: current CRD III

Article 11 Directive 2006/48/EC as amended by CRD III

>The competent authorities shall grant an authorisation to the credit

institution only when there are at least two persons who effectively

direct the business of the credit institution.

>They shall not grant authorisation if these persons are not of

sufficiently good repute or lack sufficient experience to perform such

duties.

>EBA mandated to develop Guidelines



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Current national practices vs.GL fitness & propriety

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Current national practices: very wide ranging

EBA fit & proper guidelines

Limited

approachesExtensive

approaches

discretion

Guidelines will:

> enhance level playing field within EU

> keep sufficient flexibility to consider national law

> be applied in a proportionate way



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Impact assessment

European Commission conducted an Impact Assessment

for CDR IV –

EBA used this as a major input for its impactassessment

>The measure will enhance the oversight function

> A harmonised assessment of the management body ensures that

similar standards apply in all member states

>The number of suitable candidates will be reduced, but it can be

assumed that there is a sufficient number of candidates

>The costs for the assessment are insignificant compared to the

annual operating expenses

>There is no direct impact on the environment or third countries

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EBA GL on fitness and propriety – published 22.11.2012

Scope of the Guidelines

>Credit institutions

>Financial holding companies

>Competent Authorities

Assessment of>Management body; management and supervisory function

>Key function holders

Criterions

>Reputation

>Experience

>Governance



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Building Blocks of the Guidelines

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Who isassessed?

Who assesses?

Internal Policies / Notification of CA

Assessmentcriteria

Assessment process

Assessment Results

Measures Reassessments



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Assessment by Credit Institutions

Institutions to enforce a policy on the assessment of members of

the management body and key function holders>If possible assessment before the appointment, otherwise at the

latest 6 weeks after taking up the position

>Reassessment when circumstances change

–Either within the institution

–Or regarding the person

>Institutions should also assess key function holders

>If a nomination committee is established, it should actively contribute

to the implementation of the policy and the assessment of persons

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Notification

>Competent authorities will set out a notification process applicable

for appointments and re-appointments of members of themanagement body taking into account national company law.

>Documentation on the suitability shall be provided upon request

> A set of information to be provided for initial assessments is included

Annex I of the GL

>Institution and the person to verify the information

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Assessment by Competent Authorities

Competent authorities assess

>Members of the management body –When an application to authorise an institution is received

–When a notification regarding the appointment of a member is received

– As appropriate regarding already appointed members

> Assessment will be conducted in a proportionate way, taking intoaccount the position in question and the overall composition of the

management body

>Competent authorities will published details about the used process

and set a time period for the assessment (max 6 month)>Competent authorities may assess key function holders

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Measures in case of insufficient suitability

Institution

>Decision on appointment to be based on assessment results>Not appoint or replace not suitable members

>take appropriate measures re members of the management body to

ensure suitability (in particular experience/knowledge), while such

measures may be possible to tackle weaknesses in the

experience/knowledge, insufficient repute can not be mitigated

>Take appropriate measures re key function holders

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1111

Measures in case of insufficient suitability

Competent authority>Object in case documentation is not provided

>Request of measures to ensure the suitability of persons

>Request to not appoint a person or dismiss a person

> Adopt appropriate measures if needed

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Assessment criteria - Reputation

> A person shall be considered to be of good repute, if there is no

evidence to suggest otherwise and no reason to have reasonabledoubt about his or her good repute

> A person shall not be considered to be of good repute, if his or her

personal or business conduct gives rise to any material doubt about

his or her ability to ensure the sound and prudent management ofthe credit institution

>Competent authorities shall take into account at least the relevance

of administrative and criminal records

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Assessment criteria - experience

>The competent authority shall assess the experience of a person

considering both:

– the theoretical experience gained by education and

– the managerial experience gained by previous occupations

> A member of the management function should have sufficientpractical experience in a managerial position

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Assessment criteria - experience

> A member of the supervisory function of a credit institution should

have sufficient experience to enable the person to engage with andprovide constructive challenge to the decisions of the management

function.

>This experience may be gained from managerial, academic,

administrative or other activities related to the nature, size and

complexity of the credit institution.

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Governance Criteria

Assessment of:

> potential conflicts of interest

> possible time commitment

> composition of the board – collective knowledge

> Management function collectively needs to have sufficient practical

experience in credit institutions



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Article 84 CRD IV

Guidelines already considered the draft CRD IV

> broadens the legal basis to include the management body

> benchmarking of diversity practices

> EBA GL are mandated by end of 2015, but partly already in place: – sufficient time commitment

–

adequate collective knowledge, skills and experience – notion of honesty, integrity and independence of mind

– adequate human and financial resources for induction and training



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Areas where more harmonisation could be achieved

> a more uniform process for necessary notifications

> providing more detail how the criteria should be taken into account

> defining conditions when the competent authority should rely on theassessment done by other authorities

> Setting out in more detail the measures to be taken by credit

institutions and competent authorities



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Contact Information

Floor 18 | Tower 42 | 25 Old Broad Street

London EC2N 1HQ | United Kingdomt +44 (0)20 7382 1767

f +44 (0)20 7382 1771

[email protected]

www.eba.europa.eu

Documents

6 - 2013 04 16 (EBA Guidelines on Fit and Proper_FSA Malta_Bernd Rummel)