3.5 Suitability assessment by the institution
3:116 The assessment of individual and collective suitability must take place before the position is taken up and, subsequently, on a regular basis in the course of the position.
3.5.1 Assessment before taking up the position
3:117 Before appointing an applicant, the institution must conduct a due diligence investigation, the specific level of which should depend on the intended position. This Manual and Guidelines EBA/GL/2021/06 contain concrete recommendations and guidelines for the institution to use when assessing a person’s suitability.
3:118 Where the institution has completed the investigation and wishes to consider the person’s application for the particular position, it is recommended to record this internal selection decision in writing. The decision should contain not only the selection decision itself but also any considerations upon which it is based (reasons for individual and, if applicable, collective suitability). Where appropriate, it should also mention any agreements that have been made to improve the expertise of the person concerned on certain points.
3:119 A well-documented suitability policy, carefully written job profiles and reasoned selection decisions on the part of the institution can be extremely useful for the subsequent suitability assessment by the NBB.
3.5.2 Reassessment in the course of the position
3:120 The suitability requirement is ongoing: in accordance with Article 19 of the Banking Law[1], the persons concerned must possess the appropriate expertise and act with the required professional integrity at all times.
1) Periodic reassessment
3:121 The institution must periodically assess the individual and collective suitability of the persons subject to suitability assessment. More specifically for banks, Article 31 of the Banking Law provides that the nomination committee should at least annually evaluate the structure, size, composition and performance of the statutory governing body, as well as the knowledge, skills, experience and degree of involvement (including regular attendance) of both the individual members of the statutory governing body and the statutory governing body as a whole. For small institutions, this periodic reassessment may take place every two years.
2) Reassessment based on specific events
3:122 Whenever the institution is informed of an event that may affect the assessment of the individual suitability of a person subject to suitability assessment or the assessment of the collective suitability of a decision-making body[2], it should consider whether an ad hoc reassessment is necessary in view of the impact of this event on the suitability of the person concerned, and document the underlying considerations in writing. If the institution concludes that a reassessment is necessary, it must notify the NBB immediately.
§1. Specific events requiring a reassessment of individual suitability
3:123 In accordance with Guidelines EBA/GL/2021/06, a reassessment of the individual suitability of a director, senior manager or person responsible for a control function should be carried out at least in the following cases:
- when there are concerns regarding the suitability of members of the statutory governing body, senior managers or persons responsible for independent control functions;
- in the event of new elements that have a material impact on the reputation of the person concerned;
- where there are reasonable grounds to suspect that money laundering or terrorist financing has been or is being committed or attempted or there is an increased risk thereof in connection with that institution and in particular in situations where the institution:
- has not implemented appropriate internal controls or oversight mechanisms to monitor and mitigate ML/FT risks (e.g. risks identified by supervisory findings from on-site or off-site inspections);
- has been found to be in breach of its AML/CFT obligations at home or abroad; or
- has materially changed its business activity or business model in a manner that suggests that its exposure to ML/FT risk has significantly increased;
- in any event that can otherwise materially affect the suitability of the person concerned.
§2. Specific events requiring a reassessment of collective suitability
3:124 In accordance with Guidelines EBA/GL/2021/06, institutions should reassess the collective suitability of decision-making bodies at least in the following cases:
- when there is a material change to the institution’s business model, risk appetite or strategy or structure at individual or group level;
- when there are material changes to the composition of the body (e.g. when new members are appointed as a result of a direct or indirect acquisition or increase of a qualifying holding in the institution, or when members are reappointed, if the requirements of the position have changed or if members are appointed to a different position within the statutory governing body);
- as part of the review of the internal governance arrangements by the statutory governing body;
- where there are reasonable grounds to suspect that money laundering or terrorist financing has been or is being committed or attempted or there is an increased risk thereof in connection with that institution and in particular in situations where information available suggests that the institution:
- has not implemented appropriate internal controls or oversight mechanisms to monitor and mitigate ML/FT risks (e.g. risks identified by supervisory findings from on-site or off-site inspections, supervisory dialogue or in the context of sanctions);
- has been found to be in breach of its AML/CFT obligations in the home or host Member State or in a third country; or
- has materially changed its business activity or business model in a manner that suggests that its exposure to ML/FT risk has significantly increased;
- in any event that can otherwise materially affect the collective suitability of the statutory governing body.
3) Procedures and processes for suitability reassessment
3:125 Procedures and processes should be in place to review the individual and collective suitability of persons covered by this Manual continuously, periodically and in response to specific events.
3:126 Periodic reassessments, the review of whether an ad hoc reassessment is necessary in case of specific events and the reassessments triggered by those specific events themselves should be documented in writing. This written document should include both the final assessment and the underlying considerations, including any weaknesses identified and the arrangements made to remedy them.
3:127 The outcome of the reassessment, the reason for the reassessment and any recommendations with regard to identified weaknesses should be documented and submitted to the statutory governing body.
3:128 Institutions must immediately inform the NBB of any significant shortcomings identified during periodic reassessments or reassessments triggered by specific events. To that end, they should submit the fit & proper form “New elements”.
3.5.3 Conclusion of the assessment or reassessment
3:129 If an institution’s assessment or reassessment concludes that a person is not suitable for the intended position, that person should not be appointed or, if he/she has already been appointed, this appointment should be revoked. If an institution’s assessment or reassessment identifies easily remediable shortcomings in the knowledge, skills or experience of the person concerned, with the exception of shortcomings related to the criteria relevant to the assessment of professional integrity, the institution should take appropriate corrective measures to overcome those shortcomings in a timely manner. Examples of such corrective measures are set out in paragraph 169 of Guidelines EBA/GL/2021/06.
3:130 In any event, the NBB should be notified without delay of any significant shortcoming identified[3]. This notification should include the measures taken or envisaged to remedy those shortcomings and the timeline for their implementation[4].
[1] A similar provision is included in the other supervisory laws.
[2] See in particular Article 60, § 4 of the Banking Law.
[3] Article 60, § 4 of the Banking Law.
[4] See in particular the explanatory memorandum to the Law of 5 December 2017 containing various financial provisions, Parliamentary Documents, Chamber, 2017-2018, Doc. 54 - 2682/001, p. 24, which provides that it is the primary responsibility of the person concerned and of the institution to immediately report to the supervisor any relevant new fact that may affect the suitability of the person concerned: they must provide the supervisor with accurate and complete information at all times to enable the latter to form an accurate opinion of the person’s suitability. Failure to do so may, where appropriate, result in the supervisor disqualifying the person concerned, with the implication that he/she is no longer considered suitable.