3.3.5 Collective suitability

In principle, an assessment of expertise always relates to an individual. However, when the assessment relates to a position in a multi-member body, account must also be taken of the composition and operation of this body as a whole. This means that it must be checked whether the expertise within the body is sufficiently guaranteed with the person concerned, in view of his/her knowledge, experience and skills. The same applies to the senior management in cases where the institution does not have a management committee. Areas of collective suitability

3:84 The statutory governing body should collectively be able to understand the institution’s business, including the main risks to which it is exposed.

3:85 The collective knowledge, skills and experience that must be present in the relevant body depend on the characteristics of the institution. In determining the areas of collective suitability to be present in the statutory governing body and the management committee, account should be taken of the institution’s business model, strategy, risk appetite and risk profile and of the nature, complexity and location of its activities.

3:86 In general, collective suitability covers the following areas:

  1. the business of the institution and main risks related to it;
  2. each of the material activities of the institution;
  3. the governance of the institution;
  4. relevant areas of sectoral and financial competence, including financial and capital markets, solvency and internal models;
  5. managerial skills and experience;
  6. financial accounting and reporting;
  7. the ability to plan strategically;
  8. risk management, compliance and internal audit;
  9. information technology and security;
  10. climate and environmental risk;
  11. local, regional and global markets, where applicable;
  12. the legal and regulatory environment;
  13. money laundering and terrorist financing risk;
  14. the management of (inter)national groups and risks related to group structures, where applicable.

3:87 It should be noted that the NBB pays particular attention to the following components of the assessment of collective suitability:

  • Information technology and security: to ensure effective management, policy/strategy and oversight, it is essential that the management committee and the statutory governing body in its policy/strategy and supervisory function have sufficient understanding of the risks associated with information technology and security. Taking into account the proportionality principle and in particular the characteristics of the institution concerned (see introduction), it is considered a best practice to have at least one executive and one non-executive director with knowledge, skills and specific experience in information technology and security;
  • Environmental and climate risk: the institution’s statutory governing body is best placed to ensure that climate and environmental risks are taken into account in the development of the institution’s overall business strategy, business objectives and risk management framework, and to exercise effective oversight of climate and environmental risks. In this particular area, sound and effective management of the risks to which the institution is or may be exposed requires members of the management committee and the statutory governing body to have adequate collective knowledge, skills and experience.
  • Money laundering and terrorist financing (ML/FT) risk: the statutory governing body in its policy/strategy and supervisory function and the management committee should have a good understanding of ML/FT risks. As mentioned in paragraph 152 of Guidelines EBA/GL/2021/06, when assessing collective suitability, institutions should also assess whether the statutory governing body and senior management have, through their decisions, demonstrated a sufficient understanding of ML/FT risks and how these affect the institution's business, and have demonstrated appropriate management of these risks, including by taking corrective measures where necessary. Diversity

3:88 The decision-making process for strategies and risk-taking within an institution can be positively supported by a range of backgrounds, experiences, values, opinions and views in the institution’s decision-making bodies (statutory governing body and management committee). Diversity in all its facets bolsters institutions’ decision-making bodies.

3:89 For the credit institutions and stockbroking firms covered by this chapter, the promotion of diversity in decision-making bodies is enshrined in Article 31 of the Banking Law. The Banking Law requires these institutions to use diversity as one of the criteria for the composition of their statutory governing body and management committee, in order to improve their risk monitoring and resilience. The Banking Law also requires them to develop a diversity policy (see the point on organisational requirements), including a target for the representation of the under-represented gender in the statutory governing body.

3:90 For further information on diversity, please refer to the Governance Manual for the banking sector. Assessment

3:91 When assessing collective suitability, institutions should assess the composition of the management committee (or of senior management if no management committee has been established) and that of the statutory governing body in its policy/strategy and supervisory function separately.

3:92 While the management committee should collectively have a high level of managerial skills, the statutory governing body in its policy/strategy and supervisory function should collectively have sufficient management skills to organise its tasks effectively and to be able to understand and challenge the management practices applied and decisions taken by the management committee.

3:93 The collective suitability of the statutory governing body and the management committee should be assessed using a matrix. Institutions should use either:

  1. the suitability matrix template included in Annex I to Guidelines EBA/GL/2021/06. Institutions may adapt this template taking into account the above criteria; or
  2. their own appropriate methodology in line with the criteria set out in this Manual.

3:94 Based on the information provided by the institution in the annex to the fit & proper form, the NBB assesses the extent to which the applicant contributes to collective suitability.

3:95 Regarding diversity, institutions should specify in the fit & proper form whether the new appointment in question aligns with the established gender diversity target and their other internal diversity rules. The NBB assesses diversity as part of its analysis of the governance of the institution in question.

3:96 Guidelines EBA/GL/2021/06 provide further clarification on the information and motivation (in particular the self-assessment to be carried out and statement to be prepared in this context) to be provided by the institution to the NBB regarding the assessment of collective suitability. Guidelines EBA/GL/2021/06 also clarify the cases in which the institution should (re)assess the collective suitability of the statutory governing body, as well as the focus points in this respect. Paragraphs 123 to 127 of these Guidelines also specify the specific role of the nomination committee with regard to collective suitability.

3:97 Finally, it should be noted that institutions are required to inform the NBB of any distribution of tasks between members of the statutory governing body and of any significant changes thereto.