Assessment of suitability by the supervisor

2.6.1 Moment of the assessment

The supervisor shall assess the suitability of persons who wish to perform a function which requires a suitability assessment prior to the actual taking up of the function. However, the supervisory authority will also carry out an assessment if facts and/or circumstances give cause to do so.

The effective scope and details of the assessment vary according to when it takes place.

2.6.1.1  Before taking up a position

This assessment takes place either when the application for authorisation or registration of an institution is made or when an already authorised or registered institution has plans to appoint a person to a position which requires a suitability assessment (including appointments that are subject to the approval procedure for qualified holdings ‑ see the SSM Guide). In this latter case, it may be either a person who already works at the institution or a person from outside.

The assessment of suitability before the position is taken up relates to a very specific stage in the process.

2.6.1.2 In the performance of duties

As part of the ongoing prudential supervision carried out by the NBB/ECB, an analysis is also carried out to ensure that the persons concerned are suitable whenever there are new facts and/or changes in circumstances which provide reasonable grounds for a reassessment. It is incumbent upon the supervisory authority to determine when there are reasonable grounds.

1) Reassessment on the basis of particular signals

In practice, the supervisory authority will rely on any signals which shed doubt about the way that a person operates and can thus provide grounds for checking whether the person in question is sufficiently suitable to hold the position in question. These signals can be very different. A few examples of possible signals are: the issuing of criminal, civil, administrative or disciplinary proceedings, or developments in proceedings which are already underway, an unexpected change in the company’s results, concerns about the business model applied, concerns about the honest and controlled management of the company, the extension of the company’s activities abroad, the subcontracting of (key) tasks, the systematic lack of a reaction or a delayed reaction to requests for information made by the supervisory authority, failure to comply with certain recommendations, conditions or obligations imposed by the supervisor, significant staff turnover, poor administration, (repeated) breaches of laws and regulations. Where applicable, it is a combination of signals which cause the supervisory authority to doubt a person’s suitability.

When criminal, administrative, civil or disciplinary proceedings are issued against a person who holds a position and this is likely to cast doubt upon whether this person is fit and proper, the NBB/ECB will first of all approach the statutory governing body of the institution. It will remind the latter of its responsibilities and will ask it – in the light of the accusations made against the person in question – if it wishes to maintain its trust in this person. The institution must obtain full transparency from the person in question with regard to the accusations against him or her. The supervisory authority will carry out its own assessment and will take account of the reasoning of the statutory governing body and of the nature of the accusations.

If the supervisory authority carries out a reassessment, it will essentially deal with the actions and operation of the person in question in practice. For this purpose, the supervisory authority uses factual data gathered over a given period of time (mode of operation), so that the assessment is less of a snapshot. Amongst other things, the supervisory authority will check how the person in question has applied his or her knowledge and skills, and to what extent the taking of decisions and the management of the company shows professional behaviour (or not).

A reassessment may relate to one or more people at the same time. It will be tailored to the specific circumstances, in the sense that it will depend upon the grounds for it. If concerns about the company culture have provided grounds for a reassessment, it is possible that several members of the statutory governing body of the institution may be involved. If, on the other hand, the grounds for the assessment are concerns about specific activities in which the institution engages (a specific product or market, or a particular internal control line) and which are part of a specific person’s tasks, it will probably focus on this person in particular.

As has already been mentioned above, the arrival of a new director does not automatically lead to the reassessment of members who already sit on the institution’s statutory governing body. A change to the composition of the statutory governing body, whether or not this follows the arrival of a new person, may on the other hand be reasonable grounds for a reassessment. Amongst other things, this may be the case if a person who has a certain expertise resigns and no (temporary) replacement is sought or found, or if the people sitting on the statutory governing body change their positions (e.g. if they switch from non-executive to executive director status).

2) Reassessment in the absence of particular signals

The supervisor may also reassess the individual and collective suitability of the members of the statutory governing body and of the responsible persons of independent control functions - in the absence of specific signals - in the context of its general risk-based supervision. In practice, such reassessment can take place as a result of various elements (e.g. reassessment as a result of elements that have come to attention as part of periodic checks, inspections related to governance, thematic or horizontal supervisory actions, etc.).

2.6.2 Assessment procedure

As already indicated in point 2.1, the application of the suitability requirements to institutions subject to direct supervision by the ECB shall be carried out in accordance with the rules of the SSM. Therefore, for more information on the specific procedural steps in the assessment process, reference is made to the SSM Guide. As indicated in this Guide, the national competent authorities, i.e. the NBB, act as the access point for initiating the procedure and assist the ECB in the actual assessment process. With the exception of the suitability procedures which are part of a procedure for authorisation or the assessment of a qualifying holding (both subject to the so-called 'common procedures' rules), the ECB is competent to decide on suitability.

2.6.2.1 Before taking up a position

In accordance with Article 60 of the Banking Law, institutions must inform the NBB/ECB in advance of any proposed appointment, reappointment or non-appointment, dismissal or resignation of the persons concerned. When a person changes position, this must be considered as a new appointment, and it is also considered to be a change of position when there is a significant new distribution of tasks within the statutory governing body.

In close cooperation with the NBB, the ECB aims to provide its approval of the proposed appointment within a reasonable period of time, preferably within 2 to 3 months, and for time-consuming cases within 4 months, as indicated in § 178 of Guidelines EBA/GL/2017/12.

These indicative time frames start from the moment when the duly completed forms are sent to the NBB. They are suspended when the NBB/ECB requires additional information from the institution until the information is provided. Institutions are asked to take these indicative time frames into account in order to send the written documentation using the standard forms in good time.

In principle, the appointment may not become effective and may not be made public until the ECB has made a ruling. The institution may contact the NBB/ECB through the usual channels shortly after sending the duly completed forms in order to find out whether or not the NBB/ECB considers the case as time-consuming. If the case is considered to be time-consuming, the appointment may, in exceptional circumstances, take place subject to a condition precedent, and may be made public provided that this condition is mentioned.

When a proposed appointment relates to a person who is being proposed for the first time for a position which requires a suitability assessment, the NBB/ECB first consults the FSMA[1]. The FSMA sends any relevant factual information to the NBB within one week from receipt of the request for an opinion.

2.6.2.2 In the performance of duties

An assessment must come with firm guarantees but it is up to the supervisory authority to examine whether a reassessment of a given person is appropriate. As a prudential supervisory body, the NBB/ECB has an ongoing competence to carry out both an individual and a collective reassessment.

Thus, in accordance with Articles 45, 134 and 135 of the Banking Law, the NBB/ECB may decide to reassess the suitability of the managers concerned following findings or analyses made in the course of its supervision of a particular institution. Such reassessment may, for example, result from reports or findings showing a negative or reluctant attitude towards generally accepted good practices (e.g. regarding the transparent and complete flow of information to the statutory governing body), repeated or deliberate non-compliance with supervisory recommendations, an established lack of availability to attend meetings, provision of incomplete or incorrect information to the supervisor or shareholders, a non-cooperative attitude towards the supervisor, etc.[2].

As has already been pointed out, the stage in the process and the grounds for a reassessment will always depend upon the specific circumstances, so it is impossible to provide an exhaustive list of the cases in which a reassessment may or may not take place; it is up to the NBB/ECB to make the final appraisal.

In the event of a reassessment of a person, the NBB/ECB shall indicate to the institution what information it wishes to receive. The NBB/ECB may request information on periodic reviews carried out by the institution.

When the NBB/ECB carries out a reassessment, it also calls upon the person to take part, and if the interested party refuses to accede to this request, the NBB/ECB first of all informs the institution of this. If this still does not lead to a satisfactory result, the supervisory authority may then order measures which are legally binding upon the institution. In extreme cases, it may even order the institution to replace the person.

As indicated in § 185 of Guidelines EBA/GL/2017/12, depending on the specific circumstances, an institution's breach of prudential or other regulation may support the supervisory finding that a person is no longer fit. This may be the case, for example, where it is established that the person has failed to take the necessary steps that may reasonably be expected to prevent, remedy or bring to an end the breach of the rules.

[1] Article 60, § 2, of the Banking Law.

[2] Explanatory memorandum to the Law of 5 December 2017 containing various financial provisions, Parliamentary Documents, 2017-2018, Doc. 54 - 2682/001, p. 24.

2.6.3 Information for the assessment to be carried out by the supervisory authority

2.6.3.1 Sources of information for the supervisory authority

In order to obtain as full a picture as possible of a person’s suitability, the supervisory authority will use a wide range of sources of information, such as inter alia:

  • the current standard form, duly filled in and signed by both the institution and the person (see the annexe), including any information which the supervisory authority may, if necessary, obtain from any references mentioned on it;
  • the suitability assessments carried out by the institution, including the assessment of the collective composition of the statutory governing body. This shall include the information and documentation set out in Annex III to Guidelines EBA/GL/2017/12, and the information to be provided on the time commitment as provided for in the SSM Guidelines;
  • any information and background which the NBB/ECB, as a prudential supervisory authority, may have;
  • the institution’s documented policy (processes and procedures) which is being used as a basis for the recruitment of the person and the function profile which the institution has drawn up for the position;
  • the opinions of the FSMA and/or other supervisory authorities;
  • any information obtained from the judicial authorities;
  • where applicable, the periodic assessment of the person carried out by the institution (and recorded in writing), on the basis of the applicable function profile, including any considerations which led to this assessment;
  • any other information which the institution may have and which may be important for the purposes of assessing a person’s fitness and propriety;
  • any public information.

The Supervisor shall have the power to require any information that it considers necessary for the purpose of assessing the suitability of a person[3]. It is appropriate for institutions to report changes to their abovementioned recruitment and periodic review policies to the supervisor by default, for example as an annex to the institution's internal governance statement. However, policy changes do not automatically lead to a reassessment.

2.6.3.2 Deliberate withholding or incorrect transmission of information

The NBB/ECB expects the institution and the person who is to be assessed to send full, accurate information using the standard forms. If there is any doubt as to the relevance or importance of a piece of information, the information must be sent, or contact must be made with the NBB/ECB through the usual channels. Any convictions, of any kind whatsoever, must nevertheless always appear on the forms, and it is up to the supervisory authority alone to judge the relevance or importance for the purposes of the suitability assessment.

If it is found that there has been a breach of this kind it will have a negative impact on the assessment by the supervisory authority. The NBB/ECB considers any failure to send relevant, important information as a supervisory antecedent. The NBB/ECB may detect this breach on the basis of other sources of information.

Any deliberate withholding of information will lead to an immediate refusal, given the inherent problem of trust relating to this breach.

[3] Article 36/19 of the Law of 22 February 1998 establishing the organic statute of the National Bank of Belgium.

2.6.4 Interview technique

For the purposes of an assessment of suitability, the NBB/ECB may choose to hold an interview with the person. It will do this, amongst other things, if it thinks that a discussion with the interested party is desirable or necessary in order to gain a full, accurate picture of his or her fitness and propriety. The NBB/ECB will thus apply a risk-based approach and will take account of the institution’s nature, size and risk profile, the planned position and any other details which might raise questions about the information supplied by both the institution and the person. As a rule, an interview will always take place for new appointments to the function of CEO (or equivalent function) or chairman of the board of directors of the institution. In all other cases, interviews can also be used as a tool for assessing fitness and propriety, depending on specific needs. If concerns remain after the initial interview, a second specific interview may be held around the remaining concerns.

The interview panel shall consist of a minimum of two members. The composition of the panel will depend on the nature of activities and function the individual wishes to exercise, as well as on the nature, scale and complexity of the institution’s risks and activities. If the post is CEO or chairman of the board of directors, at least one member of the panel must have sufficient seniority or hierarchical level.

During this interview, the supervisory authority will check whether the picture which the institution has given regarding the person’s suitability matches the way in which the person presents him or herself during the interview, where applicable taking into account any other supervisory information and background relating either to the institution or to the person. The interview also gives the supervisory authority an opportunity to make sure that the interested party has been properly informed of both its own and the institution’s expectations. Where applicable, the NBB/ECB will draw the institution’s attention to areas (e.g. a lack of knowledge about a specific subject) where additional efforts need to be made.

In principle, the interview shall take place without the institution concerned being present, although the NBB/ECB may decide otherwise.

If the interview should raise or confirm any doubts about the applicant’s suitability, or bring up a certain number of points which require improvement, the NBB/ECB will send this assessment of the interview in writing both to the chairman of the institution’s statutory governing body and to the interested party.

When a person leaves a position, it can be especially useful for the NBB/ECB to conduct an “exit interview” in order to obtain further details about the circumstances in which the person is leaving the position or the governance of the institution in general.

2.6.5 Result and consequences of the assessment

Once the assessment of suitability is complete (either before or during the holding of a very particular position, as the case may be), the supervisory authority informs without delay both the institution and the person of the result of the assessment and, where applicable, any underlying conclusions. In the communication which it sends to the institution, the NBB/ECB will make a clear distinction between the fit and proper parts of the assessment. If the assessment is negative, the person may contact the NBB for feedback.

The supervisor may also decide that a positive decision is accompanied by recommendations, conditions or obligations; in this respect, it will refer to the guidelines set out in the SSM Guide. In such a case, as indicated in the aforementioned Guide, the NBB/ECB will clearly define the conditions or obligations and determine a relatively short period of time within which they must be fulfilled. Because suitability is of an ongoing nature, the supervisor has the possibility to continuously monitor effective compliance with such recommendations, conditions or obligations and, if necessary, to carry out a reassessment (see point 2.6.1.2).

In the event of a negative assessment, the person concerned may contact the NBB/ECB for feedback. Due grounds for any negative assessment by the NBB/ECB relating to a person’s suitability will – as indicated in the SSM Guide ‑ always be given. As indicated in the SSM Guide, negative decisions can be appealed against before the Administrative Board of Review or before the Court of Justice of the European Union. The effective possibilities for appeal will always be specified in the notification letter.

Finally, it should be noted that the supervisor may also ‑ irrespective of any formal positive, negative or conditional suitability decision – contact the institution to provide feedback on a submitted application. For example, if the institution should withdraw its application in the course of the supervisory authority's examination of the file, the ECB/NBB may ‑ in the context of the institution's responsibility for assessing suitability (see point 2.3.2) on the one hand, and/or the broader governance perspective on the other ‑ provide feedback on identified issues. Where necessary, the supervisor may also impose appropriate prudential measures to remedy certain deficiencies in the institution’s suitability policy or governance.