EBA and ESMA provide guidance to assess the suitability of management body members and key function holders


EBA and ESMA provide guidance to assess the suitability of management body members and key function holders

How prepared is the management body to be supervised? 30 September 2017

Introduction (EBA Website click here for full text)

“The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have published their joint Guidelines to assess the suitability of members of management bodies and key function holders. These Guidelines aim to harmonise and improve suitability assessments within EU financial sectors, and to ensure sound governance arrangements in financial institutions in line with the Capital Requirements Directive (CRD IV) and the Markets in Financial Instruments Directive (MiFID II).

The Guidelines highlight the importance for institutions to consider whether candidates have the knowledge, qualification and skills necessary to safeguard proper and prudent management of the institution. The Guidelines also foster more diverse management bodies and, therefore, contribute to improved risk oversight and resilience of institutions. “

Key Characteristics

These joint Guidelines specify the notions of:

(a) sufficient time commitment

(b) adequate collective knowledge, skills and experience

(c) honesty, integrity and independence of mind

(d) adequate human and financial resources for induction and training of members of the management body and

(e) diversity, which is to be considered in the selection process.

Additionally, the Guidelines provide further guidance on the scope of assessments to be made, the assessment process for institutions and competent authorities, and related policies. They provide for the heads of internal control functions and the Chief Financial Officer, when they are not members of the management body, to be always considered as key function holders, and therefore, subject to the institutions' assessment. 

How can Deloitte help

  1. Review of recruiting practices for members of the management body
  2. Assessment of suitability of individual members of the management body
  3. Assessment of collective effectiveness of the management body
  4. Individual or collective training programs for the management body (technical, professional conduct, professional ethics)

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