The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have co-published guidelines on the assessment of the suitability of members of the management body and key function holders under the CRD IV and MiFID II. Article 91(12) of the CRD IV and Article 9(1) of MiFID II mandate ESMA and the EBA to issue such guidelines.

The guidelines specify that institutions have to assess the members of their management body. Institutions that are subject to the CRD IV also have to assess all key function holders that have significant influence over the direction of the institution under the overall responsibility of the management body. Competent authorities are required to assess all members of the management body. For significant CRD-institutions, competent authorities should assess the heads of internal control functions and the chief financial officer, where they are not members of the management body. This should be done at the highest level of consolidation, for significant CRD-institutions that are part of a group, but not subject to prudential consolidation by a significant consolidating CRD-institution and at the individual level, if the significant CRD-institution is not part of a group.

The guidelines also provide common criteria concerning the assessment of individual and collective knowledge, skills and experience of members of the management body as well as good repute, honesty and integrity, and independence of mind.

To ensure that members of the management body commit sufficient time to performing their functions, the guidelines set a framework for assessing the time commitment expected of members of the management body and specify how the number of directorships should be counted. The guidelines also determine how diversity should be taken into account in the process for selecting members of the management body.

The guidelines will enter into force on 30 June 2018. The existing EBA guidelines, published on 22 November 2012, will be repealed at the same time.

View ESMA and EBA final guidelines on assessment of suitability of management body members, 26 September 2017