Management committee

 

Every institution, regardless of its legal form, is required to set up a management committee within the statutory governing body, unless exempted (see point 4.1.3.4 below)[1]. The management committee should enhance the efficiency of plural supervision and the collegial decision-making on the conduct of the institution’s activity.

Composition

Being a collegial body, the statutory governing body must in principle comprise at least three members. However, this number may be increased to take into account the nature, scale and complexity of the institution’s activities.

All executive members of the statutory governing body, and they alone, are required to be members of the management committee. Each member of the statutory governing body to whom the daily management of the institution is delegated should therefore be on the management committee. Thus, a clear distinction is made within the statutory governing body between the institution’s supervisory and control functions on the one hand, and the management function on the other.

Members of the management committee must be natural persons who meet the (individual and collective) suitability requirements set out in the NBB’s Fit & Proper Manual. They must exercise their mandate under the social status of self-employed (no exceptions possible)[2].

 

Chair of the management committee (Chief Executive Officer)

The appointment of a chair of the management committee (usually referred to as the Chief Executive Officer or CEO) to lead the management committee contributes to the efficient and coherent overall functioning of the institution and to an effective flow of information with the statutory governing body. In accordance with Article 24, § 3 of the Banking Law, this function may not be exercised by the chair of the statutory governing body.

 

Chief Financial Officer (CFO)

The Banking Law does not require the Chief Financial Officer (CFO) to be a member of the management committee. In practice, however, this is very often the case. When the CFO is a member of the management committee, he is usually responsible for managing financial resources, financial planning and financial reporting. In institutions where the CFO is not a member of the management committee,  he should be appointed at “N-1" level and be considered a senior manager.

 

Director responsible for the risk management function (Chief Risk Officer)

Pursuant to Article 37, § 3 of the Banking Law, the person responsible for the risk management function (usually referred to as Chief Risk Officer or CRO) must be a member of the management committee[3]. In principle, this person should only be responsible for the risk management function. However, by way of derogation from this principle, the supervisory authority may authorise the CRO to also be responsible for the compliance function, provided that these two functions are performed separately.

For credit institutions that are not significant institutions within the meaning of Article 3, 30° of the Banking Law, the supervisory authority may allow this function - taking into account the principle of proportionality - to be exercised by a senior member of staff (at “N-1” level), provided there is no conflict of interest on the part of this person.

Senior officer responsible for combating money laundering and terrorist financing (AML/CFT)

In accordance with Article 9, § 1 of the Law of 18 September 2017 on the prevention of money laundering and terrorist financing and on the restriction of the use of cash, the institution must appoint a senior officer responsible for AML/CFT from among the members of the management committee. The senior officer responsible for AML/CFT is expected to possess general AML/CFT-related knowledge so as to be able to critically review the measures taken by the AMLCO and to ensure compliance with the provisions of the above-mentioned law. It should also be ensured that the senior officer responsible for AML/CFT does not combine this task with other ML/FT risk-generating tasks (such as the commercial function).

 

Financial holding companies

Pursuant to Article 212 of the Banking Law, the management committees of (mixed) financial holding companies may have a mixed composition (directors and non-directors), provided that at least three members of the management committee are members of the statutory governing body. The reason for this separate arrangement is that the tasks and profile of the managers, as well as the debates and the decision-making process in the statutory governing body of the group are so different in nature and technicality from those of the management committee that at group level - unlike for the operational entities - it is not necessary for all members of the group’s management committee to sit on the statutory governing body. Moreover, for financial holding companies, there is no requirement that the majority of the members of the statutory governing body should not be members of the management committee.

Tasks

In accordance with, in particular, Article 59 of the Banking Law, the following tasks are the responsibility of the executive members of the statutory governing body, who sit on the management committee:

  1. managing the institution’s business and developing its management structure;
  2. supervising line management, monitoring compliance with the allocated competences and responsibilities, and overseeing financial reporting;
  3. making suggestions and giving advice to the statutory governing body regarding the definition of the institution’s general policy and strategy, and communicating all relevant information and data to enable the statutory governing body to take informed decisions;
  4. organising, steering and assessing the internal control mechanisms and procedures, in particular as regards the independent control functions, without prejudice to the supervision carried out by the statutory governing body;
  5. ensuring that the remuneration policy established by the statutory governing body is correctly implemented;
  6. taking the necessary measures to ensure that the institution controls its risks;
  7. organising an internal control system that provides reasonable assurance on the reliability of internal reporting and financial disclosure, in order to ensure that the annual accounts are in compliance with the applicable accounting regulations;
  8. reporting to the statutory governing body on the institution’s financial position and on all aspects required to fulfil its tasks correctly.

With regard to the last point, Article 59 of the Banking Law provides that the management committee should report at least once a year or every two years (depending on the size of the institution) to the statutory governing body, the accredited statutory auditor and the supervisory authority on the assessment of the effectiveness of the organisational requirements imposed by the Law and on any measures taken to tackle shortcomings[4].

Furthermore, the management committee should declare to the supervisory authority every six months that the periodic statements are in compliance with the accounting records and inventories (“declaration on periodic prudential reporting”). A copy of the declaration is to be submitted to the statutory governing body and the accredited statutory auditor.

For further details on the tasks of the management committee, please refer to paragraphs 28 to 31 of Guidelines EBA/GL/2021/05.

Functioning

The management committee is a collegial body.

Collegiality does not, however, preclude the allocation of specific areas of competence to members of the management committee. In this respect, it is recommended that the internal division of tasks between the members of the management committee:

  • avoids that one member of the management committee is entrusted with both an independent control function and a risk-generating operational function;
  • is balanced between the different members; and
  • ensures, to the extent possible, an appropriate separation between the members responsible for the second-line control functions and those responsible for internal audit as a third-line control function.

For institutions that are not significant within the meaning of Article 3, 30° of the Banking Law, the following restrictions must be complied with: (i) there must be a strict separation between "Risk Management" and "Investment" as well as between "Risk Management" and "Commercial", and (ii) the internal audit must be assigned to a member of the management committee who is not otherwise responsible for "Commercial".

The division of tasks among the members of the management committee and any significant changes thereto must be notified to the supervisory authority in accordance with Article 60, § 3 of the Banking Law and be included in the governance memorandum.

Decisions taken by the management committee should be minuted and all its members must be loyal to them. The minutes of the meetings of the management committee must summarise the discussions held, record the decisions taken and specify the divergent views expressed by its members, in accordance with the provisions of the Code on Corporate Governance published by Royal Decree of 12 May 2019.

The management committee must adopt internal rules of procedure[5] that describe its composition, tasks and functioning and which comply in particular with Article 59/1 of the Banking Law with regard to the management of conflicts of interest. The NBB recommends that these internal rules of procedure be annexed to the governance memorandum.

The management committee must meet regularly.

For the rules on induction and training, please refer to the section on the statutory governing body above and to the NBB’s Fit & Proper Manual.

Derogations

Based on the size and risk profile of the institution, the supervisory authority may authorise derogation from the requirement to set up a management committee, or, where applicable, a derogation as regards the composition of such a body, for example by allowing one or more persons who are not directors to become members of it.

The institution’s governance model should in any case meet the following general qualitative sound governance criteria:

  • there is an appropriate separation between the functions responsible for managing the institution’s activity and the functions in charge of its supervision;
  • the management function is entrusted to at least two persons who, without prejudice to an adequate distribution of tasks, act collegially; any delegation of competences relating to day-to-day management should be enshrined in a clear legal framework (e.g. the articles of association);
  • there is a structured dialogue between the functions responsible for managing the institution’s activity and the functions in charge of its supervision.

[1] In the case of (mixed) financial holding companies, the management committee does not have to be set up within the statutory governing body but may be composed of directors and managers who are not members of the statutory governing body.
[2] See in this respect Articles 19 and 62/1 of the Banking Law.
[3] When the Chief Risk Officer is a member of the management committee, he must ensure that this positioning does not jeopardise the independence of the risk management function.
[4] As specified in Circular NBB_2011_09, the management committee must submit two reports in this respect: a report on the assessment of the internal control and a report on the assessment of the internal control as regards investment services and activities.
[5] Internal regulations that do not necessarily have to meet the conditions of Article 2:59 of the CAC.