Response to consultation on Joint ESMA EBA Guidelines on suitability of management body
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In case of negative (subjective) reassessments for KFHs, it is our opinion that such situations could result in:
1. an increase in the number of legal disputes between employees and institutions (it could be difficult in certain cases for the institution to prove the incompetence of a person in court);
2. the negative reputation of the prospective KFH in the entire banking system, which may even lead to such a person becoming unemployable. This is a major issue when an FAP assessment is vague and subjective and is as such shared with the competent authority. In this regard there is a great risk/possibility of injustice being done to a particular person.
Considering our above reservations, we propose creating an indicative threshold for balance sheet size below which such ex-ante assessments (or reassessments) are not made/required by the competent authority even for CRD significant institutions (e.g. EUR 15 bn on a consolidated level), and an exemption for the subsidiaries of large international banks/groups that do not exceed EUR 5 bn. Namely, even the largest CRD significant institutions in Slovenia represent only a minor part of the EU banking system, most of them having fewer than 500 employees.
Question 1: Are there any conflicts between the responsibilities assigned by national company law to a specific function of the management body and the responsibilities assigned by the Guidelines to either the management or supervisory function?
NAQuestion 2: Are the subject matter, scope and definitions sufficiently clear?
NAQuestion 3: Is the scope of assessments of key function holders by CRD-institutions appropriate and sufficiently clear?
NAQuestion 4: Do you agree with this approach to the proportionality principle and consider that it will help in the practical implementation of the guidelines? Which aspects are not practical and the reasons why? Institutions are asked to provide quantitative and qualitative information about the size, internal organisation and the nature, scale and complexity of the activities of their institution to support their answers.
NAQuestion 5: Do you consider that a more proportionate application of the guidelines regarding any aspect of the guidelines could be introduced? When providing your answer please specify which aspects and the reasons why. In this respect, institutions are asked to provide quantitative and qualitative information about the size, internal organisation and the nature, scale and complexity of the activities of their institution to support their answers.
NAQuestion 6: Are the guidelines with respect to the calculation of the number of directorships appropriate and sufficiently clear?
Paragraph 48 is not sufficiently clear, particularly as regards situations where a member of the management board holds a number of directorships in different groups or undertakings (which do not belong to the same institutional protection scheme, i.e. directorships in a banking group along with a number of directorships in other groups, for example insurance groups, investment firms or firms from the real sector of the economy). Our question in this regard is should multiple directorships in such different groups be counted as a single directorship or multiple directorships?Question 7: Are the guidelines within Title II regarding the notions of suitability appropriate and sufficiently clear?
NAQuestion 8: Are the guidelines within Title III regarding the Human and financial resources for training of members of the management body appropriate and sufficiently clear?
NAQuestion 9: Are the guidelines within Title IV regarding diversity appropriate and sufficiently clear?
NAQuestion 10: Are the guidelines within Title V regarding the suitability policy and governance arrangements appropriate and sufficiently clear?
NAQuestion 11: Are the guidelines within Title VI regarding the assessment of suitability by institutions appropriate and sufficiently clear?
NAQuestion 13: Which other costs or impediments and benefits would be caused by an ex-ante assessment by the competent authority?
Indeed – as already noticed in the draft guidelines (Q12) – the ex-ante assessment by the competent authority would prolong the institution’s recruitment process, which will have to be accommodated within the institution’s succession planning. However, it should be pointed out that in particular jurisdictions/environments/institutions (particularly the institutions which do not belong to large international banking groups) this could represent a major issue due to limited resources. For example, the notice period for resignation in banks is usually around two months. If a person wants to apply for candidacy for a KFH in another bank, he/she has to resign from his/her previous position in this timeframe. In case the competent authority gives a negative FAP assessment (which could be subjective) for the new position (4 to 6 months), such a person could be left jobless in the end.In case of negative (subjective) reassessments for KFHs, it is our opinion that such situations could result in:
1. an increase in the number of legal disputes between employees and institutions (it could be difficult in certain cases for the institution to prove the incompetence of a person in court);
2. the negative reputation of the prospective KFH in the entire banking system, which may even lead to such a person becoming unemployable. This is a major issue when an FAP assessment is vague and subjective and is as such shared with the competent authority. In this regard there is a great risk/possibility of injustice being done to a particular person.
Considering our above reservations, we propose creating an indicative threshold for balance sheet size below which such ex-ante assessments (or reassessments) are not made/required by the competent authority even for CRD significant institutions (e.g. EUR 15 bn on a consolidated level), and an exemption for the subsidiaries of large international banks/groups that do not exceed EUR 5 bn. Namely, even the largest CRD significant institutions in Slovenia represent only a minor part of the EU banking system, most of them having fewer than 500 employees.