3.5.4 Limited cross-sectoral convergence

All in all, it may be concluded that cross-sectoral convergence is still limited, although the ESAs are taking important steps to harmonize the fit and proper requirements. It should also be noted here that there has been a further harmonization of fit and proper rules in the payment sector. For example, PSD 2 harmonizes authorisation criteria for electronic money institutions and payment service providers, including the introduction of fit and proper requirements for electronic money institutions.1 There is also greater convergence in the case of insurance companies and pension funds, where the legislation employs the same terms (‘fit’ ,‘proper’ and ‘key function holders’). Also, some sectoral regimes do provide for certain additional criteria such as independence or diversity and in many cases non-executive directors, at least in one-tier board structures, have been subjected to fit and proper requirements.

Clearly, it may also be concluded that the lessons of the financial crisis, which led in any event to the adoption of the five suitability criteria listed in Table 3.1 and recognition of the importance of the role of non-executive directors, were only really put into practice by CRD IV and MiFID II. As it currently stands, the CRD IV fit and proper rules have not served as a blueprint for fit and proper regulation in other sectors.

Although it could possibly be argued that the EU is currently in a transitional period and that more harmonization of fit and proper requirements will take place in due course, it sometimes seems as though policy-makers are already starting to forget the lessons learned from the financial crisis. Whatever the case, it can only be concluded that as of today there is an imbalance in fit and proper regulations across the different sectors. Whereas detailed and extensive rules and regulations have been adopted for banks and investment firms, fit and proper assessment for several other types of financial institution is mostly based on high-level criteria, which lack adequate interpretative guidance (e.g., collective asset managers (UCITS managers and AIFMs), pension funds and CCPs). This allows scope for widely varying supervisory practices not only in and between the different sectors but also among Member States.2

The obvious question, of course, is whether these differences can be adequately explained or whether more cross-sectoral harmonization is actually needed. This is discussed in section 3.7 below. First, however, the Dutch system is described, as an example of a harmonized, cross-sectoral approach to fit and proper assessment.