Governance memorandum

Regulatory framework

Governance memorandum at company level

Each credit institution should describe and document its entire internal governance structure in a governance memorandum. The management body should approve the governance memorandum.

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

The memorandum is primarily the responsibility of the credit institution. It should be updated whenever significant changes occur that affect the governance structure and organization of the credit institution. It should be assessed at least once a year by the management body. The credit institution should provide a detailed explanation if it does not comply with a best practice as 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.

Group governance memorandum

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

Besides any aspects of relevance relating to the subsidiaries which are part of the group, the group memorandum should cover the situation of the parent holding company and of the group as such, such as:

  1. a description of the objectives and interests of the group versus the areas of activity and interests of the subsidiaries;
  2. determination of the steering of the group and of the organization of the group supervision of the subsidiaries;
  3. the concrete distribution of tasks between the parent company and the subsidiaries, including a demarcation of the subsidiaries' own competences;
  4. an organization 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 centralized services and all prudentially relevant functions within the parent company and the subsidiaries (internal audit, compliance, risk management, appointed actuary, accounting, ...);
  5. the policy and rules taken into consideration by the group as regards intragroup 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.

After a dialogue with the credit institution, the supervisory authority should assess the memorandum in the light of the mandatory provisions of the supervision status of the credit institution and of the prudential conditions to which its authorization and operations are subject.

Where the credit institution's governance structure is inadequate, the supervisory authority will use its powers as determined by the Banking Law to induce that credit institution to set up an appropriate organization.