Subject matter, scope and definitions
Subject matter
These Guidelines specify further, in accordance with Article 91(12) of Directive 2013/36/EU(12) and Article 9(1) (opens EUR-Lex in a new tab) second subparagraph of Directive 2014/65/EU (opens EUR-Lex in a new tab)(13), the requirements regarding the suitability of members of the management body in particular, the notions of sufficient time commitment; honesty, integrity and independence of mind of a member of the management body; adequate collective knowledge, skills and experience of the management body; and adequate human and financial resources devoted to the induction and training of such members. The notion of diversity to be taken into account for the selection of members of the management body is also specified in accordance with the above-mentioned articles.
The Guidelines also specify elements regarding the suitability of the heads of internal control functions and the chief financial officer (CFO), where they are not part of the management body, and, where identified on a risk-based approach by those institutions, of other key function holders, as part of the governance arrangements referred to in Articles 74 and 88 of Directive 2013/36/EU and Articles 9(3) (opens EUR-Lex in a new tab), 9(6) (opens EUR-Lex in a new tab) and 16(2) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab), and on the related assessment processes, governance policies and practices, including the principle of independence applicable to certain members of the management body in its supervisory function.
Addressees
These Guidelines are addressed to competent authorities as defined in Article 4 (2) (i) of Regulation 1093/2010 and in Article 4(3) (opens EUR-Lex in a new tab) (i) of Regulation 1095/2010 (opens EUR-Lex in a new tab), to financial institutions as defined in Article 4(1) (opens EUR-Lex in a new tab) of that Regulation that are institutions for the purposes of the application of Directive 2013/36/EU as defined in point 3 of Article 3(1) of Directive 2013/36/EU also having regard to Article 3 (3) of that Directive, and to financial market participants as defined in Article 4(1) (opens EUR-Lex in a new tab) of Regulation 1095/2010 (opens EUR-Lex in a new tab) that are investment firms as defined in Article 4(1)(1) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab) (‘institutions’).
Scope of application
Unless otherwise specified as directly referring to either CRD institutions, or relevant institutions, these Guidelines apply to all institutions, as defined therein.
CRD institutions subject to Directive 2013/36/EU should comply with these Guidelines on an individual, sub-consolidated and consolidated basis, including their subsidiaries not subject to Directive 2013/36/EU, even if they are established in a third country, including offshore financial centres, in accordance with Article 109 of that Directive.
The Guidelines intend to embrace all existing board structures and do not advocate any particular structure. The Guidelines do not interfere with the general allocation of competences in accordance with national company law. Accordingly, they should be applied irrespective of the board structures used (unitary and/or a dual board structure and/or other structures) across Member States. The management body, as defined in points (7) and (8) of Article 3(1) of Directive 2013/36/EU, should be understood as having management (executive) and supervisory functions (non-executive)(14).
The terms ‘management body in its management function’ and ‘management body in its supervisory function’ are used throughout these Guidelines without referring to any specific governance structure and references to the management (executive) or supervisory (non-executive) function should be understood as applying to the bodies or members of the management body responsible for that function in accordance with national law.
In Member States where the management body delegates, partially or fully, the executive functions to a person or an internal executive body (e.g. chief executive officer (CEO), management team or executive committee), the persons who perform those executive functions on the basis of that delegation should be understood as constituting the management function of the management body. For the purposes of these Guidelines, any reference to the management body in its management function should be understood as including also the members of such an executive body or the CEO, as defined in these Guidelines, even if they have not been proposed or appointed as formal members of the institution’s governing body or bodies under national law.
In Member States where some responsibilities assigned in these Guidelines to the management body are directly exercised by shareholders, members or owners of the institution rather than the management body, institutions should ensure that such responsibilities and related decisions are exercised, as far as possible, in line with the Guidelines applicable to the management body.
The definitions of CEO, CFO and key function holder used in these Guidelines are purely functional and are not intended to impose the appointment of those officers or the creation of such positions unless prescribed by relevant EU or national law.
Any references to ‘risks’ in these Guidelines should include also money laundering and terrorist financing risks and environmental, social and governance risk factors.
Definitions
Unless otherwise specified, terms used and defined in Directive 2013/36/EU, Regulation (EU) 575/2013 and Directive 2014/65/EU (opens EUR-Lex in a new tab) have the same meaning in the Guidelines. In addition, for the purposes of these Guidelines, the following definitions apply:
Institutions | means institutions as defined in point 3 of Article 3(1) of Directive 2013/36/EU having also regard to Article 3(3) of that Directive, and investment firms as defined in Article 4(1)(1) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab). |
CRD institutions | means institutions as defined in point 3 of Article 3(1) of Directive 2013/36/EU and having regard to Article 3(3) of that Directive, and investment firms as defined in Article 4(1)(1) (opens EUR-Lex in a new tab) of Directive 2014/65 (opens EUR-Lex in a new tab) to which Article 2(2) (opens EUR-Lex in a new tab) of Directive 2019/2034 (opens EUR-Lex in a new tab) applies. |
Relevant institutions | means institutions as defined in point 3 of Article 3(1) of Directive 2013/36/EU having also regard to Article 3(3) of that Directive, and investment firms as defined in Article 4(1)(1) (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab) that do not meet all of the conditions for qualifying as small and non-interconnected investment firms under Article 12(1) (opens EUR-Lex in a new tab) of Regulation (EU) 2019/2033 (opens EUR-Lex in a new tab). |
Significant CRD institutions | Means CRD institutions referred to in Article 131 of Directive 2013/36/EU (global systemically important institutions (G-SIIs), and other systemically important institutions (O-SIIs), and, as appropriate, other CRD institutions determined by the competent authority or national law, based on an assessment of the institutions’ size and internal organisation, and the nature, scope and complexity of their activities, and for the purposes of Article 91 of Directive 2013/36/EU financial holding companies and mixed financial holding companies that meet one of the aforementioned conditions. |
Listed relevant institutions and listed institutions | means relevant institutions or respectively institutions whose financial instruments are admitted to trading on a regulated market as referred to in the list to be published by ESMA in accordance with Article 56 (opens EUR-Lex in a new tab) of Directive 2014/65/EU (opens EUR-Lex in a new tab), in one or more Member States.(15) |
Staff | means all employees of an institution and its subsidiaries within its scope of consolidation, including subsidiaries not subject to Directive 2013/36/EU, and all members of the management body in its management function and in its supervisory function. |
Suitability | means the degree to which an individual is deemed to have good repute and to have, individually and collectively with other individuals, adequate knowledge, skills and experience to perform his/her/their duties. Suitability also covers the honesty, integrity and independence of mind of each individual and his or her ability to commit sufficient time to perform his or her duties. |
Member | means a proposed or appointed member of the management body. |
Chief executive officer (CEO) | means the person who is responsible for managing and steering the overall business activities of an institution. |
Key function holders | means persons who have significant influence over the direction of the institution, but who are neither members of the management body nor the CEO. They include the heads of internal control functions and the CFO, where they are not members of the management body, and, where identified on a risk-based approach by relevant institutions, other key function holders. Other key function holders might include heads of significant business lines, European Economic Area/European Free Trade Association branches, third country subsidiaries and other internal functions. |
Heads of internal control functions | means the persons at the highest hierarchical level in charge of effectively managing the day-to-day operation of the independent risk management, compliance and internal audit functions. |
Chief financial officer (CFO) | means the person who is overall responsible for managing all of the following activities: financial resources management, financial planning and financial reporting. |
Prudential consolidation | means the application of the prudential rules set out in Directive 2013/36/EU and Regulation (EU) No 575/2013 on a consolidated or sub-consolidated basis, in accordance with Part 1, Title 2, Chapter 2 of Regulation (EU) No 575/2013. |
Consolidating institution | means an institution that is required to abide by the prudential requirements on the basis of the consolidated situation in accordance with Part One, Title II, Chapter 2 of Regulation (EU) No 575/2013(16) or by the prudential requirements on the basis of the consolidated situation in accordance with Article 7 (opens EUR-Lex in a new tab) of Regulation (EU) 2019/2033 (opens EUR-Lex in a new tab). |
Diversity | means the situation whereby the characteristics of the members of the management body, including their age, gender, geographical provenance and educational and professional background, are different to an extent that allows a variety of views within the management body. |
Geographical provenance | means the region where a person has gained a cultural, educational or professional background. |
Induction | means any initiative or programme to prepare a person for a specific new position as a member of the management body. |
Training | means any initiative or programme to improve the skills, knowledge or competence of the members of the management body, on an ongoing or ad-hoc basis. |
Shareholder | means a person who owns shares in an institution or, depending on the legal form of an institution, other owners or members of the institution. |
Directorship | means a position as a member of the management body of an institution or another legal entity. Where the management body, depending on the legal form of the entity, is composed by a single person, this position is also counted as a directorship. |
Non-executive directorship | means a directorship in which a person is responsible for overseeing and monitoring management decision-making without executive duties within an entity. |
Executive directorship | means a directorship in which a person is responsible for effectively directing the business of an entity. |
AML/CFT supervisor | means a competent authority responsible for the supervision of institutions’ compliance with provisions of Directive (EU) 2015/849 (opens EUR-Lex in a new tab). |