Suitability tests for directors of financial institutions are a hot topic in the Netherlands. Both the EBA/ESMA and the ECB have published new draft guidelines for these tests at banks and investment firms. As we regularly help prospective managing and supervisory directors to prepare for the assessment, we have contributed to the public consultation on the draft guidance. We hope that our suggestions will help to improve the process.
In October 2016, the EBA and ESMA published draft joint guidelines on suitability tests for both banks and investment firms under CRD IV and MiFID II. The draft document deals with the assessment of members of the management body (both executive and non-executive directors) and individuals in key positions. Supervisory authorities in member states should ensure that banks, mixed financial holding companies, financial holding companies and CRD IV-investment firms comply with these guidelines.
In November 2016, the ECB, as the supervisory authority for certain banks, published a draft guide to fit and proper assessments. The guide aims to provide practical information about the assessment process carried out by the ECB. As a member of the EBA, the ECB was also involved in drafting the EBA/ESMA guidelines. DNB chaired the ECB committee which drafted the ECB guide.
The consultations have now closed. The EBA, ESMA and ECB will take the responses to the consultations into consideration and publish their final reports. It is expected that the final guidance will enter into force in mid-2017.
What will change in the Netherlands?
The guidelines reflect the current practice in the Netherlands. Contrary to many other member states, we already have a legal framework and process of screening, including the required documentation (for example, the suitability matrix). The new guidance of the EBA/ESMA and the ECB was actually inspired by the Dutch practice. Therefore, not much will change in the Netherlands. However, the following changes do need attention as it may be necessary to update internal documentation (processes):
The Dutch Banking Code and the Dutch Corporate Governance Code also contain requirements regarding the diversity, evaluation and training of the management body. It is therefore likely that institutions already have certain policies and documents in place, but it may be necessary to update these.
What were our key suggestions during the consultation?
De Brauw has responded to the consultation of the ECB, which will be made public at a later date. Together with our Best Friends network we have also responded to the EBA/ESMA consultation on a jurisdiction-by-jurisdiction basis.
These are our most important suggestions:
How can we help you?
De Brauw regularly helps prospective managing and supervisory directors of financial undertakings and pension funds prepare for their integrity and suitability screening by the ECB, DNB and the AFM. We know from experience how important proper preparation is, and which topics deserve special attention for an interview. In addition, we give courses on financial markets regulation which can also be used to fulfil permanent education criteria.
See also our Legal Alert: Suitability and integrity screening – seven practical tips.
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