European Central Bank Updates Guide to Management Body Fit and Proper Assessments
05/28/2018The European Central Bank has published an updated Guide to Fit and Proper assessments for the suitability of members of the management body and key function holders in significant institutions. The ECB is responsible for direct prudential supervision of certain significant banks based in the Eurozone as part of the Single Supervisory Mechanism. The ECB Guide covers fit and proper assessments of members of management bodies, both in their management function (executives) and supervisory function (non-executives). It applies to all institutions under the direct supervision of the ECB, namely in-scope credit institutions, financial holding companies and mixed financial holding companies. In the context of licensing or qualifying holdings, the ECB Guide will also apply to less significant institutions.
The ECB Guide has been updated following the publication of the joint European Banking Authority and European Securities and Markets Authority Guidelines on the suitability of management body members and key function holders, which will apply from June 30, 2018, and the EBA Guidelines on Internal Governance.
The ECB Guide sets out the supervisory policies, processes and practices the ECB follows when conducting fit and proper assessments and is based on six Principles, namely:
(i) the primary responsibility of ECB-supervised institutions in carrying out due diligence and assessments;
(ii) the role of the ECB as a "gatekeeper";
(iii) the harmonization of assessments across the Euro area;
(iv) proportionality and case-by-case assessment;
(v) due process and fairness; and
(vi) interaction with ongoing supervision.
A fit and proper assessment can be triggered by a new appointment, a change of role, a renewal or a resignation, new facts (or any other issue) or a licensing or qualifying holding procedure. The ECB Guide sets out the criteria against which the ECB will assess the fitness and propriety of appointees to the management body. These are experience, reputation, conflicts of interest and independence of mind, time commitment and collective suitability.
The ECB Guide provides information on the purpose, scope and type of interviews conducted by the ECB of appointees. The ECB Guide then explains how a decision is taken by the ECB after every fit and proper assessment and the various types of decisions that may be taken.
The ECB Guide also notes that under the Single Supervisory Mechanism Regulation, the ECB has the power to remove, at any time, members from the management body of a significant supervised entity who do not fulfill the fit and proper requirements.
View the Updated Guide to Fit and Proper Assessments (May 2018).
View details of the joint EBA/ESMA Guidelines on the suitability of management body and key function holders.
View details of the EBA Guidelines on internal governance.
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