EBA launches consultation on its new Guidelines on internal governance for investment firms

The European Banking Authority (EBA) launched today a public consultation on its new Guidelines on internal governance under the Investment Firms Directive (IFD), specifying the governance provisions that Class 2 investment firms should comply with, taking into account the proportionality principle. This governance framework aims at ensuring that investment firms have a clear organisational structure, effectively manage their risks  and have adequate internal control mechanisms in place. The consultation runs until 17 March 2021.

In line with the proportionality principle and to take account of the specificities of investment firms, the consultation paper specifies a number of governance provisions laid down in the IFD, including the tasks, responsibilities of the management body as well as the organisation of investment firms. The aim of these provisions is to ensure the sound management of risks across all lines of defence as well as the adoption of transparent structures to allow the supervision of all investment firms’ activities.

In addition, the consultation paper provides details on the establishment of a risk culture, a code of conduct and the management of conflicts of interest, also in relation to related parties’ transactions to ensure that firms have appropriate decision management and oversight processes for such transactions.

To ensure that investment firms groups take a holistic approach to their risk management, the draft Guidelines apply at both individual and consolidated level.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 17 March 2021.

A public hearing will take place on 17 February 2021 from 14: 00 to 16:00.

All contributions received will be published following the end of the consultation, unless requested otherwise.

Legal basis and next steps

These draft Guidelines have been developed in accordance with Article 26 of Directive 2019/2034/EU, which requires firms to have robust governance arrangements, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility, processes and mechanisms and mandates EBA to develop Guidelines in this area.

The EBA Guidelines will apply to competent authorities across the EU, as well as to investment firms (Class 2) on a solo and consolidated basis.