EBA and ESMA propose new suitability rules for bank management
The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have launched a consultation on revised guidelines for assessing the suitability of management body members and key function holders in banks and investment firms. The consultation, which also includes draft Regulatory Technical Standards from the EBA, runs until May 25, 2026.
New scrutiny for management and key roles
The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have launched a joint consultation on revised Guidelines concerning the suitability assessment of management body members and key function holders in banks and investment firms.
These updates are designed to enhance supervisory convergence and harmonize assessment practices across the EU.
The draft revised Guidelines integrate new requirements from the updated Capital Requirements Directive (CRD) for large institutions.
Key changes include the introduction of ex-ante applications for situations where competent authorities perform ex-post assessments, alongside mandatory suitability assessments for critical roles such as heads of control functions and chief financial officers.
The Guidelines also provide further clarity on CRD requirements for third-country branches.
A notable reinforcement is the explicit link with the anti-money laundering and countering the financing of terrorism (AML-CFT) framework, offering guidance on identifying reasonable grounds to suspect ML/TF risks during suitability evaluations.
This holistic approach aims to bolster governance standards and financial integrity.
Standardizing documentation and easing burden
The EBA's draft Regulatory Technical Standards (RTS) specify the documentation and information that large institutions must submit to competent authorities for suitability assessments.
These RTS aim to harmonize the minimum content of suitability questionnaires, curriculum vitae, and internal suitability assessments, ensuring submissions are consistent, complete, and comparable across the EU.
This standardization is vital for streamlining supervisory processes.
Additionally, the revised Suitability Package introduces targeted simplification and streamlining measures.
These are designed to reduce administrative burden and provide greater flexibility and clarity for both institutions and supervisors, fostering a more efficient and transparent assessment framework.
Enhancing oversight, balancing burden
This comprehensive suitability package marks a crucial advancement for governance and risk management within the EU financial sector.
While harmonization is essential, the challenge lies in balancing rigorous oversight with the administrative burden on diverse institutions.
Its success hinges on practical implementation that fosters convergence without stifling operational efficiency.