Guidelines on internal governance (revised)

Status: Final (awaiting translation into the EU official languages)

These draft Guidelines aim at further harmonising institutions’ internal governance arrangements, processes and mechanisms across the EU, in line with the new requirements in this area introduced in the Capital Requirements Directive (CRD) and also taking into account the proportionality principle.

EBA publishes guidance to further harmonise EU banks internal governance

EBA publishes guidance to further harmonise EU banks internal governance

26 September 2017

The European Banking Authority (EBA) has published today its revised Guidelines on Internal Governance. These Guidelines aim at further harmonising institutions' internal governance arrangements, processes and mechanisms across the EU, in line with the new requirements in this area introduced in the Capital Requirements Directive (CRD IV) and also taking into account the proportionality principle. Effective internal governance is fundamental if individual institutions and the banking system as a whole are to operate well.
 
Weaknesses in corporate governance in a number of institutions have contributed to excessive and imprudent risk-taking in the banking sector, which has led to the failure of individual institutions and systemic problems in Member States and globally. In order to address the potentially detrimental effects of poorly designed corporate governance arrangements on the sound management of risk, and to take into account the new requirements introduced in the CRD in this area, the EBA has updated its Guidelines on internal governance, originally published on 27 September 2011.
 
The Guidelines put more emphasis on the duties and responsibilities of the management body in its supervisory function in risk oversight, including the role of their committees. They aim at improving the status of the risk management function, enhancing the information flow between the risk management function and the management body and ensuring effective monitoring of risk governance by supervisors. The ‘know-your –structure' and complex structures sections, especially following the ‘Panama events', have been strengthened to ensure that the management body is aware of the risks that can be triggered by complex and opaque structures and to improve transparency. In addition, the framework for business conduct has been further developed and more emphasis is given to the establishment of a risk culture, a code of conduct and the management of conflicts of interest.
 

Legal basis and next steps

Article 74 (1) of Directive 2013/36/EU requires that institutions must have robust governance arrangements, which include a clear organisational structure with well- defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management. Paragraph (3) of that Article mandates the EBA to issue Guidelines on those arrangements, processes and mechanisms.
 
The EBA Guidelines will apply as of 30 June 2018 to competent authorities across the EU, as well as to institutions on an individual and consolidated basis. The previous EBA Guidelines on internal governance (GL44) will be repealed on the same date. 
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772

EBA reviews its guidelines on internal governance

EBA reviews its guidelines on internal governance

28 October 2016

The European Banking Authority (EBA) launched today a public consultation on its revised Guidelines on internal governance. These draft Guidelines aim at further harmonising institutions' internal governance arrangements, processes and mechanisms across the EU, in line with the new requirements in this area introduced in the Capital Requirements Directive (CRD) and also taking into account the proportionality principle. The consultation runs until 28 January 2017.
 
Weaknesses in corporate governance in a number of institutions have contributed to excessive and imprudent risk-taking in the banking sector, which has led to the failure of individual institutions and systemic problems in Member States and globally. In order to address the potentially detrimental effects of poorly designed corporate governance arrangements on the sound management of risk, and to take into account the new requirements introduced in the CRD in this area, the EBA is updating its Guidelines on internal governance, originally published on 27 September 2011.
 
These draft Guidelines put more emphasis on the duties and responsibilities of the management body in its supervisory function in risk oversight, including the role of their committees. They aim at improving the status of the risk management function, enhancing the information flow between the risk management function and the management body and ensuring effective monitoring of risk governance by supervisors. The ‘know-your –structure' and complex structures sections, especially following the ‘Panama events', have been strengthened to ensure that the management body is aware of the risks that can be triggered by complex and opaque structures and to improve transparency. In addition, the framework for business conduct has been further developed and more emphasis is given to the establishment of a risk culture, a code of conduct and the management of conflicts of interest.
 
Finally, more guidance is provided on the risk management framework, on how internal control functions are organised and how internal controls are implemented.

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 28 January 2017.
 
A public hearing will take place at the EBA premises on 5 January 2017 from 14: 00 to 17:00 UK time. 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 on the basis of Article 74 of Directive 2013/36/EU, which mandates the EBA to further harmonise institutions' governance arrangements, processes and mechanisms across the EU
 
Competent Authorities across the EU will be expected to implement the Guidelines by mid-2017. 
 
The EBA Guidelines will apply to Competent Authorities across the EU, as well as to institutions on a solo and consolidated basis. Once the revised Guidelines are enforced, the 2011 Guidelines will be repealed.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772