On 14 November 2016 the European Central Bank (“ECB”) launched a public consultation concerning the criteria and procedures for determining suitability of bank board members.

In the framework of the Single Supervisory Mechanism (“SSM”), the ECB Banking Supervision has submitted to public consultation a draft guide (the “Draft Guide“) on how it will evaluate the qualifications, skills and proper standing of a candidate for a position on the board of a bank (chief executive officer, supervisory board member, etc.).

The Draft Guide sets out six principles that should guide the assessment process:

1. Primary responsibility of the supervised entities for selecting and nominating individuals who comply with the requirements (“Primary responsibility of credit institutions”);
2. Obligation of supervised entities to prevent individuals who would pose a risk to the proper functioning of the management body from entering in the first place or from continuing in their role when an issue regarding their fitness and propriety has arisen (“Gatekeeper”);
3. Aim of ECB Banking Supervision to ensure a higher level of harmonisation in the assessments of management body members across the euro area (“Harmonisation”);
4. Application of the principle of proportionality throughout the whole process. In all cases the assessment will come down to an individual analysis and supervisory judgement (“Proportionality and case-by-case assessment”);
5. Submission of the process to the procedural guarantees included in the SSM Regulation and the SSM Framework Regulation, such as the right to be heard (“Principles of due process and fairness”);
6. Feeding of the assessment into the ongoing supervision of the governance of the institution, especially with regard to the composition and functioning of the management body (“Interaction with ongoing supervision”).

Assessments are carried out by applying the five fit and proper criteria included in the Capital Requirements Directive (“CRD IV”):

1. Reputation;
2. Experience;
3. Conflict of interest and independence of mind;
4. Time commitment and
5. Collective suitability of the management body.

The ECB will also hold a public hearing at its premises in Frankfurt am Main on 13 January 2017.

Responses to the public consultation may be submitted before 20 January 2017.

Please do not hesitate to contact us should you need any clarification on the Draft Guide or assistance in submitting your response.

Contacts:

Vito Vittore
Senior Partner

Massimiliano Silvetti
Senior Partner

Elena Pagnoni
Of counsel

Luigi Bonifacio
Associate