Consultation to revise EBA’s and ESMA’s guidelines on suitability assessments for members of the management body and key function holders

The European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) have launched a consultation to review their ‘Joint Guidelines for Assessing the Suitability of Members of the Management Body and Key Function Holders’. The Revised Guidelines, which build on the amendments introduced by the fifth Capital Requirements Directive CRD V (EU Directive 2019/878) and Investment Firms Directive IFD (EU Directive 2019/2034), aim to improve and harmonise suitability assessments within the EU financial industry, and ensure robust governance arrangements in financial institutions.

The Revised Guidelines confirm that the fundamental pillars of knowledge, experience and skill remain essential to the fit and proper test for management body members and key function holders. These qualities are also crucial to countering risks of money laundering and terrorist financing.

The Revised Guidelines also emphasise the importance of gender-balanced management structures. Institutions should respect the concept of equal opportunities, and apply measures to promote a more gender-balanced composition of staff in managerial positions.

Furthermore, the Revised Guidelines clarify that independence of mind is not necessarily compromised by being a member of an affiliated company or entity.

The Revised Guidelines also take into account the recovery and resolution framework established by the Bank Recovery and Resolution Directive (EU Directive 2015/59). As part of early intervention measures and during resolution, suitability assessments on new members of the management body, and of the management body collectively, are crucial.

The deadline for comments is 31 October 2020, following which a public hearing will be held.

The 2017 Guidelines will be repealed as soon as the Revised Guidelines enter into force.

The author would like to thank Luke Mifsud for his help in compiling this article.