EBA Guidelines on the assessment of

members of the management body and

implications of Art 87 (4) CRD IV
Bernd Rummel
Policy Expert Regulation, EBA
16 April 2013 | Malta

2012 | EBA | European Banking Authority

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

Current national practices vs.GL fitness & propriety

Current national practices: very wide ranging
Limited
approaches

Extensive
approaches

EBA fit & proper guidelines

discretion

Guidelines will:
> enhance level playing field within EU
> keep sufficient flexibility to consider national law
> be applied in a proportionate way

Impact assessment
European Commission conducted an Impact Assessment
for CDR IV EBA used this as a major input for its impact
assessment
>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

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

Measures

Reassessments

Assessment Results
Assessment
criteria

Assessment process

Internal Policies / Notification of CA

Who assesses?

Who is
assessed?
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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 the
management 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

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 into

account 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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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 reasonable
doubt 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 of
the 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 sufficient

practical 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 and
provide 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 the
assessment 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 Kingdom
t +44 (0)20 7382 1767
f +44 (0)20 7382 1771
info@eba.europa.eu
www.eba.europa.eu

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