Governance memorandum

Contents

  1. Banking Law: Articles 21, § 3, 23 and 56, § 6
  2. Relevant thematic NBB circulars:

Governance memorandum at institutional level

Each institution should describe and document its entire internal governance structure in a governance memorandum. The statutory governing body should approve the governance memorandum and ensure that it is kept up to date[1].

The governance memorandum is a prudential document that is an integral part of the authorisation dossier and is, as such, confidential.

The memorandum is primarily the responsibility of the institution. It should be updated whenever significant changes occur that affect the institution’s governance structure and organisation and should be assessed at least once a year by the statutory governing body, in accordance with Articles 23 and 56 of the Banking Law. The institution should provide a detailed explanation if it does not comply with best practices provided for in circulars or international guidelines (comply or explain approach).

A governance memorandum outline is annexed to this Manual. The use of this outline is optional. It is also good practice to annex to the governance memorandum an inventory of governance policies (based on the list in point 4.4.1. of this Manual) and internal rules of procedure in force, if possible with links to the relevant documents or the documents themselves.

Group governance memorandum

Where the institution is part of a group that falls under the supervision of the supervisory authority, the governance memorandum drawn up for the institution may be part of the group memorandum[2]. Where this governance memorandum is integrated into a group memorandum, the statutory governing body of each institution subject to supervision to which the memorandum applies should approve the said memorandum.

Besides any relevant aspects relating to the subsidiaries which are part of the group, the group memorandum should cover the situation of the institution responsible for the group and of the group as such, and should contain in particular:

  1. a description of the objectives and interests of the group versus the areas of activity and interests of the subsidiaries;
  2. a description of the steering of the group and of the organisation of the group supervision of the subsidiaries;
  3. the concrete distribution of tasks between the institution responsible for the group and the subsidiaries, including a demarcation of the subsidiaries' own competences;
  4. an organisation chart including all corporate bodies and/or persons which carry responsibility for the policy and strategy, the operational management of the group and its entities, for the business lines and centralised services and all prudentially relevant functions within the institution responsible for the group and the subsidiaries (internal audit, compliance, risk management, appointed actuary, accounting, ...);
  5. the policy and rules taken into consideration by the group as regards intra-group outsourcing, management of diverging interests, ...

Assessment by the supervisory authority

The memorandum and any significant changes in it should be communicated to the supervisory authority.

 

[1] Articles 21, § 3, 23 and 56, § 6 of the Banking Law.
[2] Article 21, § 3, second paragraph of the Banking Law.