Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders


The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) launched today a consultation on Guidelines on the Assessment of the Suitability of the Members of Management Body and Key Function Holders (the Guidelines). The draft Guidelines aim at further improving and harmonising suitability assessments within the EU financial sectors and so ensure sound governance arrangements in financial institutions.

Weaknesses in corporate governance  are widely acknowledged to have been one of the underlying causes of the financial crisis where inadequate oversight by, and challenge from, the management body in a number of credit institutions and investment firms contributed to excessive and imprudent risk-taking in the financial sector. In order to address those weaknesses, the EBA and ESMA have issued jointly these Guidelines in accordance with the new requirements introduced under the Capital Requirements Directive (CRD) and the Markets in Financial Instruments Directive (MiFID II). 

The draft Guidelines:
-  provide common criteria to assess the individual and collective knowledge, skills and experience of members of the management body as well as the good repute, honesty and integrity, and independence of mind of members of the management body;
- require members of the management body to commit sufficient time to perform their duties and specify how the number of directorships held by members of the management body  should be counted, for significant institutions; 
- set out how different aspects of diversity, educational and professional background, age, gender and geographical provenance should be taken into account in the recruitment process; and
- highlight the importance of induction and training to ensure the initial and ongoing suitability of members of the management body, and call for institutions to establish training policies and to allocate appropriate financial and human resources to induction and training.

The consultation closes on 28 January 2017 and a public hearing in London will take place on 5 January 2017 from 14:00 to 17:00 UK time. To respond to this consultation, please visit the EBA website here.

Legal basis and next steps

These draft Guidelines have been developed according to Article 91 (12) of Directive 2013/36/EU (CRD) and Article 9 of Directive 2014/65/EU.

These Guidelines take also into account the results of the EBA peer review of the Guidelines on the assessment of the suitability of members of the management body and key function holders of credit institutions, published on 22 November 2015.

The joint Guidelines will apply to Competent Authorities across the EU, as well as to credit institutions and investment firms. Once the revised Guidelines are enforced, the previous EBA Guidelines on the assessment of the suitability of the management body and key function holders from 2012 will be repealed.

Competent Authorities across the EU will be expected to implement the Guidelines by mid-2017.

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