On 5 July 2022, the Dutch Central Bank (De Nederlandsche Bank, DNB) and the Dutch Authority for Financial Markets (Autoriteit Financiële Markten, the AFM) jointly published a news article on the obligation for certain investment firms to establish a risk committee and a remuneration committee.
Risk committee
The Investment Firms Directive (Directive (EU) 2019/2034, IFD) requires Class 2 investment firms with a balance sheet total exceeding EUR 100 million to establish a risk committee. The members of the risk committee should not hold any executive function within the investment firm. The risk committee must therefore be composed of non-executive directors (in case of a one-tier board) or members of the supervisory board (in case of a two-tier board). DNB and the AFM point out that investment firms that do not currently have a supervisory board or non-executive board, are required to install such a body and to appoint its new members.
If the holding of the investment firm is subject to consolidated supervision, a risk committee must also be set up at the consolidated level (i.e. two risk committees must be set up). If the group capital criterion of Article 8 of the Investment Firms Regulation (Regulation (EU) 2019/2033, IFR) is used, there is no obligation to set up a risk committee on a consolidated basis. In that case, there is only an obligation to set up a risk committee at the level of the investment firm itself.
Remuneration committee
Investment firms that are required to establish a risk committee are also required to establish a remuneration committee. The rules for the risk committee also apply to the remuneration committee and this committee must therefore also consist of non-executive directors. Article 33 IFD does, however, provide that the remuneration committee may also be set up at the group level. In that case, it is not required to set up a remuneration committee at the level of the investment firm.
DNB and the AFM emphasise that they expect investment firms to meet these requirements as soon as possible and that there are no exceptions to these requirements. Investment firms should implement these obligations in an appropriate and proportionate manner. DNB and the AFM do note that they are available for investment firms to discuss sufficiently substantiated plans for meeting these obligations.
The news article is available here (in Dutch only).