3.4.3 CRD IV

Documentgegevens:

mr. drs. I. Palm-Steyerberg, datum 01-03-2021

Datum: 01-03-2021
Auteur: mr. drs. I. Palm-Steyerberg
JCDI: JCDI:ADS268350:1
Vakgebied(en): Financieel recht / Europees financieel recht
Financieel recht / Financieel toezicht (juridisch)

In June 2013 CRD IV was adopted. In this directive the expression ‘persons who effectively direct the business’ has been replaced by ‘members of the management body’, in line with the EBA Guidelines referred to above.1CRD IV also enhances the suitability test by adding more criteria.2CRD IV requires that all members of the management body must (i) be of good repute at all times and possess (ii) individually and (iii) collectively sufficient knowledge, skills and experience to be able to understand the institution’s activities and main risks. Management bodies should, as a collective, be sufficiently diverse and reflect a broad set of qualities and competences. This is to stimulate the presentation of a variety of views and experiences in the decision-making process, and prevent the phenomenon of ‘groupthink’. Each member of the management body must (iv) act with honesty, integrity and independence of mind to effectively assess decisions of the senior management and oversee and monitor management decision-making. Members are also required (v) to commit sufficient time to fulfil their duties. The number of directorships that can be held at any one time is therefore limited.3 The ECB also applies these five criteria when assessing the suitability of members of the management bodies of credit institutions.4

The additions laid down in CRD IV were deemed necessary in the light of the global financial crisis of 2007-2008. One of the lessons learned from this crisis was that weaknesses in corporate governance, including the absence of effective governance checks and balances, had contributed to excessive risk taking and imprudent behaviour. This, in turn, had led to the failure of individual banks and to systemic problems. The suitability provisions stipulated in CRD IV are meant to remedy the weaknesses that were identified during the financial crisis regarding the functioning of the management body and the qualifications of its members.5

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Article 3(1)(7) of CRD IV defines ‘management body’, as meaning an institution’s body or bodies, which are appointed in accordance with national law, which are empowered to set the institution’s strategy, objectives, and overall direction, and which oversee and monitor management decision making, including the persons who effectively direct the business of the institution.

These criteria are in line with international standards as laid down by the Basel Committee on Banking Supervision (BCBS),’Guidelines: Corporate governance principles for banks’, July 2015, Principle 2.

Article 91 of CRD IV. See also EBA/GL/2011/116, 4, where it is stated that as lack of oversight was one of the most significant weaknesses identified in the financial crisis, it should be ensured that members of the management body (especially in its supervisory function) devote sufficient time to their functions.

ECB, ‘Guide to fit and proper assessments’, updated May 2018. The ECB assesses the suitability of the members of the management bodies of significant credit institutions. The ECB also takes decisions following fit and proper assessments during authorization procedures and procedures regarding declarations of no objection. These decisions see on both significant and less significant credit institutions. See Articles 4(1)(e) in conjunction with 16(2)(m); Article 4(1)(a) in conjunction with 6(4) in conjunction with 14, and Article 4(1)(c) in conjunction with Article 6(4); and Article 15 of Council Regulation (EU) No 1024/2013.

CRD IV, recital (53) and EBA/GL/2012/06, 3 and 5. See also the Organisation for Economic Co-operation and Development (OECD) report, ‘Corporate Governance and the Financial Crisis: Key Findings and Main Messages’ (June 2009) and ‘The Corporate Governance Lessons from the Financial Crisis’ (2009); Institute of Financial Finance, Reform in the Financial Services Industry, ‘Strengthening Practices for a More Stable System’ (December 2009); The Basel Committee on banking supervision, ‘Principles for enhancing corporate governance’, Bank for International Settlements (October 2010), and EC, Commission Staff Working Document, ‘Corporate Governance in Financial Institutions: Lessons to be drawn from the current financial crisis, best practices, which accompanies the Green Paper Corporate governance in financial institutions and remuneration policies’, July 2010, COM(2010) 284 final.