3.5.2 Differences in substantive requirements

As Table 3.1 shows, all relevant EU rules require the members of the management body in its managerial function, at the very least, to be of good repute. In most cases, members of the management body are also required to possess sufficient experience (and in some cases also sufficient skills and knowledge) to enable them to conduct sound and prudent management of the institution. For pension funds, however, no specific individual qualifications are stipulated. In IORP II, the requirement to be a ‘fit’ person is assessed collectively rather than at an individual level.

Quite a few directives and regulations (not only IORP II, noted previously) set requirements for the collective. In some cases, these requirements are merely designed to ensure that all necessary expertise is present in the management body, without expecting each individual member of the board to be accomplished in all the necessary fields of expertise. In other cases, collective requirements are set with regard to board composition. Relevant criteria in these cases are diversity (requiring the overall composition of the management body to reflect an adequately broad range of qualities and experiences, sometimes also extended to diversity in age, nationality and gender) and independence (underlining the need for a certain number of independent members of the management body, especially in its supervisory function).1 In some cases, no collective criteria apply at all.

The requirement to have ‘sufficient time’ to perform one’s functions is mentioned only in CRD IV, MiFID II and the AIFMD Delegated Regulation (EU) No 231/2013. The same is true of ‘independence of mind’.

The substantive fit and proper requirements may therefore differ considerably from one sector to another. Moreover, even when cross-sectoral consistency does exist (for example, the requirement of good repute2 and – with the exception of IORP II – the requirement of individual experience), the exact meaning of these terms may vary, sometimes widely, depending on the specific sector. This is because the fit and proper requirements in the EU legislation consist of open standards that can be interpreted in many different ways.

In recent years, delegated legislation and the ESA Guidelines have meant that there is now more certainty about the interpretation of these requirements. Today, the EBA, ESMA and EIOPA Guidelines cover a wide range of institutions, namely banks, investments firms, market operators, data reporting services providers, payment service providers, account information service providers, electronic money institutions and insurance companies.3

Moreover, the three ESAs have issued joint guidelines containing a detailed explanation of how to assess the suitability of a proposed acquirer interested in taking over a bank, investment firm, (re-)insurance company or CCP.4 The guidelines specify the meaning of the term ‘reputation’ of the proposed acquirer, covering both its integrity and its professional competence.

At the same time, these developments have not led to a harmonized set of interpretative rules for the assessment of the high level criteria used in EU financial regulation. Nor is any further guidance given about collective asset managers (UCITS and AIFMs), pension funds and CCPs. ESA Guidelines are absent, and even Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012, concerning AIFMs, and Implementing Directive 2010/43/EU of 1 July 2010, concerning UCITs, do not contain additional suitability provisions.

This brings about the remarkable situation that, in the case of CCPs, the suitability of a proposed acquirer is subject to detailed and comprehensive assessment, whereas there is little if any explanation of the assessment of the members of the management body itself.