Governance rules applicable to Belgian credit institutions and Belgian (mixed) financial holding companies within a group where an institution governed by the law of another Member State is responsible
For Belgian credit institutions and Belgian (mixed) financial holding companies within a group where an institution governed by the law of another Member State is responsible, it should be ensured that the organisation and management of the group do not prejudice the responsibility of the statutory governing body and the management committee of the Belgian institution as regards the conduct of the institution concerned.
Basic principle
The prudential assessment of the group governance assumes that the institution governed by the law of another Member State responsible for the group and its subsidiaries, including the Belgian subsidiary(ies), are in agreement with each other and operate in a transparent and balanced manner, focusing on optimal management of the activities of the different supervised institutions and adequate monitoring of the risks faced by the individual institutions and the group as a whole.
In this respect, it is the institution responsible for the group, as the entity which defines the overall policy and strategy of the group, which should manage the group in the best possible way, while respecting the legal personality of the various subsidiaries, without prejudice to the measures that the institution responsible for the group may take to control the reputational risk that may arise from inappropriate behaviour by a subsidiary. In accordance with paragraph 86 of Guidelines EBA/GL/2021/05, the institution governed by the law of another Member State responsible for the group should consider the interests of all its subsidiaries, and how strategies and policies contribute to the interest of each subsidiary and the interest of the group as a whole over the long term.
Distribution of tasks between the institution governed by the law of another Member State responsible for the group and the Belgian subsidiary
It is the responsibility of the subsidiary not to undermine the necessary coherence within the group and to ensure that information can flow sufficiently upstream and downstream within the consolidated group.
Without prejudice to the role played by the institution responsible for the group in this respect, the Belgian subsidiary’s governing bodies should also ensure that the management of the group complies with the rules and obligations of the subsidiary as an independent legal person and as a regulated institution. The Belgian subsidiary’s statutory governing body and management committee should ensure in particular that the organisation of the group complies with the rules and obligations of this Belgian subsidiary as an independent legal person and as a regulated institution. They should ensure, inter alia, that decisions or practices at group level do not conflict with: (i) legal and regulatory provisions or prudential rules to which the subsidiary is subject; (ii) technical rules and regulations or codes regulating the supervised activity; (iii) the sound and prudent management and financial equilibrium of the subsidiary; or (iv) the interests of its own stakeholders and the protection of depositors.
Management of intra-group conflicts of interest
Conflicting interests at group level are identified, prevented or managed. These may include inter alia:
- conflicts of interest arising from the exercise of activities that could create mutual conflicts;
- intra-group transactions and capital distribution within the group;
- diverging interests between the institution responsible for the group and subsidiaries or between subsidiaries, e.g. regarding the allocation of corporate and regulatory opportunities;
- group decisions that have a different impact on the management of the financial position for the different metiers exercised by the various subsidiaries.
In the exercise of their corporate responsibility, the directors of the subsidiary should have appropriate resources to safeguard the institution’s corporate interest while keeping in mind its stakeholders. For this purpose, intra-group mechanisms should be put in place to allow certain decisions or practices at group level that could give rise to an intra-group conflict of interest to be identified in this light and brought to the attention of the governing bodies of the subsidiary and institution responsible for the group. In the case of intra-group operations or transactions that are potentially material to the subsidiary, it is proper to set up an ad hoc committee of independent directors in casu to issue an opinion, to be considered by the subsidiary's statutory governing body, on the subsidiary’s interest in the context of such intra-group operations or transactions.
Depending on the group’s governance model, these internal mechanisms should also rely for example on a robust supervisory function within the subsidiary’s statutory governing body, the presence in the subsidiary's statutory governing body of directors who are independent from the institution responsible for the group or subgroup, or the existence of effective independent control functions within the subsidiary.