The European Banking Authority (EBA) has published the final version of its revised Guidelines on Internal Governance.
The European Banking Authority (EBA) has published the final version of its revised Guidelines on Internal Governance. These Guidelines aim at further harmonising EU banks' internal governance arrangements, processes and mechanisms.
The revised Guidelines will enter into force on 30 June 2018, and replace the EBA's 2011 guidelines. CRD4 requires banks to have robust governance arrangements, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility; effective processes to identify, manage, monitor and report potential risk exposures; adequate internal control mechanisms, including sound administration and accounting procedures; and remuneration policies and practices consistent with, and promoting, sound and effective risk management. The original Guidelines (GL 44) were the focus of several thematic reviews by the CBI.
The principles contained in the EBA Guidelines very much align, and indeed supplement, the Central Bank’s statutory code for credit institutions the Corporate Governance Requirements for Credit Institutions 2015. These principles include;
Banks are expected to comply with these Guidelines and therefore should take an early opportunity to inform, or refine, their risk strategy and strengthen their internal governance arrangements accordingly and proportionately. In particular, they should ensure that adequate internal governance provisions are in place in terms of a clearly defined and sufficiently well-articulated risk culture; the implementation of a robust risk management framework; demonstrable structures of risk oversight; effective risk assessment and monitoring mechanisms; and transparency of their broader organisational structure and commercial activities.
The ECB has already undertaken a significant amount of work in this area and it is anticipated that its supervisory framework will incorporate these revised Guidelines.