Response to consultation on draft Joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders
Question 1: Are subject matter, scope of application, definitions and date of application appropriate and sufficiently clear?
- Introductory comments
BIPAR welcomes the opportunity provided by EBA and ESMA to comment on the revision of the guidelines on the assessment of the suitability of members of the management body and key function holders under CRD and MiFID II.
BIPAR represents 48 national associations of insurance and financial intermediaries. Many of the financial intermediaries who are members of our national associations, are micro to SME-type companies. Under MiFID II, many of these firms fall under “opt-out” national regimes (according to Article 3 of MiFID II). Some of these small firms however, are investment firms that do not fall under an Article 3 exemption.
BIPAR believes that it is very important that the revised Guidelines take a proportionate approach when it comes to micro-size/small firms.
We support in this respect some of the changes proposed, for instance regarding diversity/ gender equality, but we believe that more could be done to enhance proportionality, especially for small firms.
In particular with regard to the addition of AML-related requirements we believe it is important not to go beyond the existing AML regime that is already burdensome for SMEs in particular.
Question 1: Are subject matter, scope of application, definitions and date of application appropriate and sufficiently clear?
BIPAR response:
It is expected that the amended Guidelines will enter into force 6 month after the publication of all translations of the Guidelines, but not later than 31 December 2026 (see p 36). This deadline of December 2026 seems very short, considering the consultation only closes at the end of May. There will be very little time to get acquainted with the final Guidelines.
With regard to Title I, we refer to our introductory remarks: it is important indeed that the revised Guidelines take a proportionate approach when it comes to micro-size/small firms.
Question 2: Are the changes made in Title II appropriate and sufficiently clear?
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Do you have any views on the provisions regarding these independence criteria? Please explain any aspects that may influence the effectiveness, clarity, or implementation of these independence criteria across different business models/types of institutions.
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Question 4: Are the changes made in Title III appropriate and sufficiently clear?
Question 4: Are the changes made in Title III appropriate and sufficiently clear?
BIPAR response:
- In Title III (Notions of suitability listed in Article 91(1211) of Directive 2013/36/EU (p 45), point 50 adds “and record” with regard to “sufficient time commitment of a member of the management body”.
At a time where burden reduction is a central concern and aim for the EU and national regulatory frameworks, we wonder why an additional recording requirement is added in the Guidelines. We suggest sticking to the monitoring requirement.
(“Entities should monitor (...) whether the members of the management body commit sufficient time to performing their functions. Preparation for meetings, attendance and the active involvement of members in management body meetings are all indicators of time commitment.)
- Adequate knowledge, skills and experience (p 49)
Members of the management body should have an up-to-date understanding. In point 62 reference is made to: “including all of the areas specified in paragraph 77”
Paragraph 77 now reads as follows:
a. the business of the entity and main risks related to it;
b. each of the material activities of the entity;
c. relevant areas of sectoral/financial competence, including financial and capital
markets, solvency and models, and risk factors;
d. financial accounting and reporting;
e. risk management, compliance and internal audit;
f. information and communication technology and security, including the RELEVANT requirements within Regulation (EU) 2024/168941 on artificial intelligence systems;
g. local, regional and global markets, where applicable;
h. the legal and regulatory environment;
i. managerial skills and experience;
j. experience in implementing a culture of probing and challenging MB decision
k. the ability to plan strategically;
l. the management of (inter)national groups and risks related to group structures,
where applicable.
m. ESG factors and ESG risks and and their impacts on the above mentioned areas, where relevant
n. RELEVANT Requirements under Regulation (EU) 2022/2554 42 regarding digital operational
resilience, including the respective delegated technical standards
We believe that in points f) and n), the word “relevant” should be added (as is already the case in some other points) in these points dealing with the AI Act and DORA.
See above proposed additions in bold and underlined of the word “relevant”.
Also in point 69 additional requirements are added, where we believe it may be good to add the words “where relevant”. See in particular:
“d. risk management (identifying, assessing, monitoring, controlling and mitigating the main types of risk of an entity including ESG risks and risk factors as well as information and communication technology risks);
(...)
h. anti money laundering and counter terrorist obligations;
i. data protection requirements and their implementation in light of other prudential requirements,
j. the ability to present their views, discuss strategies and business objectives;
- Collective suitability criteria (p 53)
On p 53, the list of aspects for appropriate understanding of the management body collectively has been amended and points have been added which we believe may not be proportionate for small players. We think in particular of new point j.): “experience in implementing a culture of probing and challenging MB decision”
- Reputation, honesty and integrity (p 57)
In this heading, a new part has been proposed with AML-related requirements. We believe it is important not to go beyond the existing AML regime that is already burdensome for SMEs in particular. Additional requirements are not justified.
Question 5: Are the changes made in Title IV appropriate and sufficiently clear?
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Question 6: Are the changes made in Title V appropriate and sufficiently clear?
BIPAR response:
We note that in Title V (Diversity within the management body), proportionality has been added, as some of these criteria would now only apply to “significant entities” (see in particular point 117: “The diversity policy of significant entities should ensure that the management body in its management function and in its supervisory function are having an appropriate gender balance.” And new point 119: “To ensure that a proportionate approach is applied, entities that are not significant may express the target in a qualitative way, if their management body has fewer than five members.”).
We support such addition of proportionality, which is important, in particular for smaller players. Due to their size, it may indeed be very difficult for very small firms to comply with diversity policy requirements for the management body.
Question 7: Are the changes made in Title VI appropriate and sufficiently clear?
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Question 8: Are the changes made in Title VII appropriate and sufficiently clear?
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Question 9: Are the changes made in Title VIII appropriate and sufficiently clear?
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Question 10: Are the changes made in Title IX appropriate and sufficiently clear?
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Question 11: Are the changes made to Annex 1 and Annex II appropriate and sufficiently clear?
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Question 12: Is the table on scope of application of the Joint Guidelines appropriate and sufficiently clear?
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