Two significant papers were issued on governance at the end of October. The European Banking Authority (EBA) published a consultation paper on a new version of its Guidelines on Internal Governance (last published in 2011). The EBA and ESMA issued jointly for consultation a set of draft guidelines on how a firm should itself assess the suitability of Board members and senior management, under the requirements of CRD4 and MiFID 2.
On 28 October 2016, EBA published a consultation paper (PDF 490 KB) on a new version of its Guidelines on Internal Governance (last published in 2011). To a large extent these Guidelines are yet another 50-page run-through of the fundamentals of corporate governance. However, it is always useful to note where new material is introduced, because this may provide some insights into likely areas of supervisory review:
Importance of the Board fostering a sound risk culture, and of the executive management implementing this culture. The draft guidelines (section 9.1) refer specifically to the four areas identified by the Financial Stability Board for supervisory attention in assessing a firm's risk culture, namely tone from the top, accountability, communication and challenge, and incentives.
Increased emphasis on the responsibilities of the Board to exercise oversight of the firm's activities and its risk management framework.
To ensure that the risks within a firm's change processes are properly considered and addressed.
Section 14 of the draft guidelines picks up on the oversight and governance responsibilities of product manufacturers and distributors, drawing on earlier EBA guidelines on this.
On the same day, EBA and ESMA jointly issued for consultation (PDF 913 KB) a set of draft guidelines on how a firm should itself assess the suitability of Board members and senior management, under the requirements of CRD 4 and MiFID 2.
These draft Guidelines set out criteria for the assessment by a firm of both the individual and collective knowledge, skills and experience of members of its Board and senior management, and of their good repute, honesty and integrity, and independence of mind.
In addition the Guidelines cover: