Response to consultation on Regulatory Technical Standards to specify the minimum content of the suitability questionnaire, curriculum vitae and internal suitability assessment
Question 1: Are the draft RTS appropriate and sufficiently clear?
The German Banking Industry Committee generally welcomes the European Banking Authority's (EBA) aim of strengthening governance standards within the European Union. However, we believe it is crucial that the final version of the guidelines and the Regulatory Technical Standards (RTS) adhere to the limits set by the Level 1 framework (CRD VI). Nevertheless, some of the proposed provisions exceed the mandate granted to the EBA in CRD VI. Furthermore, a principles-based approach should be adopted to a much greater extent than is currently foreseen.
Art. 2: In Article 2 of the RTS, a new second sentence should clarify that the provisions of the RTS apply in accordance with the overarching exemptions set forth in Article 91(13) and (14) of the CRD, without prejudice to the following requirements, which remain unaffected:
- Provisions of the Member States on the representation of employees in the management body
- Provisions of the Member States on the appointment of members of the management body in its supervisory function by regional or local elected bodies
- Provisions of the Member States on appointments where the management body does not have any competence in the process of selecting and appointing its members.
Art. 4: The requirement in Article 4(2) for non-material deficiencies to be remedied within a maximum period of six months would introduce an inflexible timeframe. There is also no equivalent maximum time limit in CRD VI. Instead of imposing a maximum time limit of six months, we believe that the focus should be on implementing remedial measures (e.g. training) within a reasonable and proportionate timeframe. This should take into account the nature of the non-material weakness and the responsibilities associated with the position.
Art. 5: The proposed requirements raise significant concerns with regard to the assessment of reputation, honesty and integrity. Firstly, the use of the term 'at least' in relation to the information to be collected should be reconsidered. In this context, a more appropriate formulation would be 'including', as this would avoid the need for exhaustive or cumulative documentation that may not be feasible in practice. Furthermore, this would better reflect the principles-based nature of the suitability assessment.
- Art. 5 para. 3 no. (c): Term “managed by them” to broad – specification to “managed as part of the management body in is management function” required.
- Art. 5 para. 3 no. (d): Investigations or enforcement proceedings are not necessarily publicly known. The institution can only take into consideration information received by the applicant. It should be clarified that only such information as is provided by the applicant or is publicly available shall be taken into account by the institution. A failure on the part of the applicant to disclose relevant information shall not give rise to a breach of duty on the part of the institution.
This is especially important with regard to the requirement regarding “indirect involvement” - also given that this is not clearly defined and is therefore – in itself – to broad. An indirect involvement could also be interpreted as a position as a mere witness that has never even been called to the stand. - Art. 5 para. 3 no. (f): “dismissal of employment” is disproportionally broad, also considering the exclusion of redundancies. If relevant at all, only termination for cause (e.g., a severe breach of duty) should be considered, as the normal termination of a private-law employment contract beyond cases of redundancy does not equate to the loss of a position of trust or fiduciary relationship. Instead, it is a common occurrence driven by a variety of reasons that may not include redundancies but could still be fully unrelated to misbehavior or any breaches of duty. Furthermore, private-law parties do not always clearly document whether a dismissal was due to redundancy, making it difficult to establish the background of a redundancy as being irrelevant. In any case, a maximum time period for considering dismissals, etc. should be included.
- Art. 5 para. 3 no. (g): The term "financial soundness” is highly indeterminate and overly broad and it is also unclear which kind and degree of detail of information is required. Beyond credit obligations owed to the institution, it remains unclear what additional information is expected to be disclosed under this provision. We would welcome further clarification as to the specific scope and type of financial information that applicants are required to provide. High financial obligations do not necessarily have an adverse effect on the integrity of the applicant.
- Art. 5 para. 3 no. (h): Please delete this point. The phrase “any other reliable internal or external resources available” may conflict with the provision in Art. 5 (3) sentence 1, which stipulates that “at least” the enumerated information must be included. This ultimately creates confusion about what needs to be provided, particularly if everything potentially relevant must anyways be included.
Art. 9: An entity’s conclusion regarding the individual and collective suitability required under Article 9 may not be provided, where applicable, for employee representatives on the management body in its supervisory function or for members of the management body in its supervisory function over whose selection and appointment the institution has no influence. These specific legal circumstances in Member States were taken into account by Art. 91(13) and (14) of the CRD, which explicitly clarify that Articles 91 and 91a apply without prejudice to the provisions of Member States regarding employee representation in the management body and regarding the appointment of members of the management body in its supervisory function by regional or local elected bodies, or regarding appointments in cases where the management body is not responsible for the selection and appointment of its members. To the extent that institutions have no influence on the selection and appointment pursuant to Art. 91(14) CRD, appropriate safeguards (e.g. training) must be put in place to ensure the suitability of these members of the management body.
The overarching exceptions in Article 91(13) and (14) of the CRD should therefore also be explicitly incorporated into the text of the draft RTS for clarity (see also our comment on Article 2 of the EBA RTS).
Art. 10
- Art. 10 para. 2 no (h): This is too extensive and should be deleted. In any case, “senior manager” and “associate” should either be removed or more clearly defined, as well as the vague term “alleged wrongdoing.” Otherwise, it remains unclear how meaningful evidence (including confirmation of non-occurrence) could reasonably be provided.
- Art. 10 para. 2 no (j): Provision is not fully clear. Please provide a clear definition, which persons are included in “close relatives”, and which is the refereed “relevant time”.
- Art. 10 para. 2 no (n): (1) Providing detailed suitability information on all members of the management body entails a considerable administrative burden for the institution. As a general rule, the competent authority already has knowledge of the composition and respective responsibilities of the existing management body. It should therefore be sufficient for the suitability questionnaire to request information solely in respect of the new candidate rather than requiring a comprehensive resubmission of information pertaining to all incumbent members. (2) It should also be clarified that information should only be provided with regard to the management body in its management function when the candidate is up for a position in the management body in its management function (vice versa for the management body in its supervisory function).