1. Introduction

1.1 Background

1:1 According to the various supervisory laws[1], directors, senior managers and persons responsible for independent control functions of financial institutions should have the expertise and professional integrity required for their positions. The assessment of these persons’ suitability is often referred to as the assessment of their fit & proper character.

1:2 Although it is primarily the responsibility of financial institutions to select and appoint suitable persons, the suitability assessment is part of the prudential supervision exercised by the National Bank of Belgium (hereinafter the "NBB") and, where applicable, the European Central Bank (hereinafter the "ECB").

1:3 The subject of fit & proper has become very topical in recent years, in particular because of the severe financial crisis in 2008, which highlighted the need to ensure optimal management of financial institutions. To guarantee their integrity and smooth functioning, it is indeed essential that financial institutions have the right people in the right places and that such people have the expertise and professional integrity required for their positions. A process of reflection has been launched on this subject and various actions have been undertaken at the international, European and national levels.

1:4 Several of these initiatives have meanwhile led to the adoption of legal and regulatory provisions and policies to be implemented in the national framework. Some form of codification is therefore needed to have a clear overview of the entire applicable framework.

1:5 In this context, the NBB decided in 2013 to create a better framework for its suitability policy, in the form of a circular. This 2013 circular was transformed in 2018 into a manual containing the different policy documents concerning suitability assessment. This Manual was revised in 2022 to incorporate the latest national and international developments in this area.

[1] Law of 25 April 2014 on the legal status and supervision of credit institutions, Law of 13 March 2016 on the legal status and supervision of insurance or reinsurance companies, Law of 20 July 2022 on the legal status and supervision of stockbroking firms, Law of 11 March 2018 on the legal status and supervision of payment institutions and electronic money institutions, access to the activity of payment service provider and the activity of issuing electronic money, and access to payment systems, Royal Decree of 26 September 2005 on the legal status of settlement institutions and equivalent institutions and Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories.

1.2 General principles of suitability assessment

1:6 In the context of prudential supervision, the concept of suitability covers two aspects. It may refer both to the requirement of "adequate organisation and internal control system" for the institution as a whole ("collective suitability"), and to the individual assessments of specific persons ("individual suitability").

1:7 This Manual focuses on five assessment criteria: (i) expertise, which covers knowledge, experience, and skills; (ii) professional integrity; (iii) independence of mind; (iv) time commitment; and (v) collective suitability. These standards are referred to by the generic terms "suitability" or "expertise and integrity"[1] (fitness and propriety).

1:8 A person is considered "suitable" or "fit and proper" for a specific function if he/she meets the following conditions:

  1. he/she has the necessary knowledge, experience and skills (expertise);
  2. he/she acts with professional integrity, i.e. there is no evidence to the contrary and no reason to reasonably question his/her good reputation;
  3. he/she is able to devote sufficient time to the performance of his/her duties (time commitment);
  4. he/she is able to make his/her own decisions in a reasoned, objective and independent manner and is free from conflicts of interest that could affect his/her conduct (independence of mind); and
  5. where the position involves membership of a multi-person management body, he/she contributes to the collective understanding and management of the institution's activities and risks (collective suitability).

1:9 From a legal perspective, it should be noted that the supervisory laws only use the terms "professional integrity" and "expertise". The concept of expertise as used in the supervisory laws should be understood sensu lato, as it covers not only expertise in the strict sense (knowledge, experience and skills) but also (i) "professional conduct"[2], from which the criteria of independence of mind and time commitment are derived and (ii) the criterion of collective suitability, which refers to the knowledge, experience and skills collectively present within a body. For the sake of clarity, this Manual uses five assessment criteria instead of two. The concept of expertise should therefore be understood sensu stricto, except when used in the context of the expression "fit & proper".

1:10 The suitability assessment is based on the following principles:

  • There should be a structured framework within the institution for assessing the suitability of directors, senior managers and persons responsible for independent control functions. This framework should be applied in a consistent manner;
  • The NBB or, where applicable, the ECB (hereinafter, the supervisor), in its capacity as prudential supervisor, exercises its discretion to assess the suitability of candidates. This power should be exercised on the basis of verified and complete factual data and of an assessment that takes into account, in particular, the principles of proportionality, impartiality and legal certainty, in order to reach an informed decision;
  • Both the institution and the supervisor should continuously monitor the individual and collective suitability of the persons concerned.

[1] The concept of “expertise and professional integrity” (fit & proper) should be understood in a broad sense in order to examine whether a person has the qualities required for a specific position. This is only the case if he/she has the necessary qualities and characteristics to fulfil all the tasks and obligations associated with that position with satisfaction.

[2] "Professional conduct" refers to observable behaviour that reflects the standards and values of professional practice (professional ethics) in day-to-day activities. In particular, it refers to the behaviour required to ensure compliance with financial sector regulations and, more broadly, to protect the interests of both the institution and its customers, counterparts, counterparties and other stakeholders, as well as the community at large.

1.3 Objectives of this manual and methodology

1:11 With this Manual, the NBB wishes, inter alia, to:

  • clarify what it understands by "adequate expertise" and "professional integrity", as defined in legislation. On this basis, institutions can further frame their own suitability assessments;
  • clearly state what it expects from institutions with regard to individual and collective suitability assessments;
  • communicate transparently about its suitability policy in order to provide legal certainty as far as possible about both the content and the procedure of suitability assessments;
  • where appropriate, provide details of how other relevant European and international regulations and policy documents should be integrated into suitability assessments. In this context, the role of the ECB is also further clarified, where appropriate.

1:12 Finally, this Manual also aims to make the persons subject to suitability assessment aware of the fact that they have an extremely important role to play and should help ensure that the institutions fulfil their obligations. They should be aware of their duties and social responsibilities, and should reflect this awareness in their professional performance.

1:13 The Manual aims to bring together[1] all applicable policy documents relating to suitability (European regulations, Belgian legislation, preparatory parliamentary work, regulations, circulars, international standards, etc.) and, where useful, provide additional explanations. In addition, the Manual also provides details on topics that are not as such covered by specific policy documents. Furthermore, it goes without saying that policy documents that are not covered by this Manual remain applicable, and that this Manual is without prejudice to the competences of other supervisors (e.g. the FSMA) as regards suitability.

1:14 The Manual does not replace the underlying policy documents. If the latter are amended, the Manual will be amended accordingly. As in principle the Manual is an online publication, it is a living document. Its reference and title will not be changed every time it is amended, as is the case with circulars, for example. Any amendments made will, however, always be notified to the institutions and explained in a separate section, indicating the date of amendment.

1:15 This Manual is structured in 5 chapters based on its scope ratione personae:

  • Chapter 1 contains the basic principles of suitability assessments and common elements for all sectors;
  • Chapter 2 explains the suitability requirements for significant credit institutions subject to direct supervision by the ECB and the (mixed) financial holding companies that head such institutions;
  • Chapter 3 concerns the suitability requirements for less significant credit institutions (“LSIs”) subject to direct supervision by the NBB, stockbroking firms, payment institutions, electronic money institutions, custodian banks, central securities depositories, institutions providing support to a central securities depository, central counterparties, certain (mixed) financial holding companies and certain branches;
  • Chapter 4 covers the suitability requirements for insurance and reinsurance companies, insurance holding companies and mixed financial holding companies;
  • Chapter 5 explains how to use the fit & proper forms currently in place.

1:16 Chapters 2, 3 and 4 of the Manual each address the following topics: (i) scope; (ii) delineation of responsibilities in the suitability assessment; (iii) guidelines on suitability criteria; (iv) organisational requirements for the suitability assessment, (v) suitability assessment by the financial institution; (vi) suitability assessment by the supervisor, (vii) individual accountability of directors and (viii) suitability assessment in the context of resolution.

[1] See the box at the beginning of Chapters 2, 3 and 4.

1.4 Definitions

1:17 The terms used in this Manual shall have the same meaning as in the respective sectoral regulations. For the sake of clarity, the most frequently used terms in this Manual are defined below[1]:

1:18 Supervisor: the National Bank of Belgium (NBB) or the European Central Bank (ECB), according to the division of competences with regard to the supervision of credit institutions established by or pursuant to the Single Supervisory Mechanism Regulation.

1:19 Financial institution (or institution for short): generic term for any company subject to supervision by the NBB (or, where applicable, the ECB) which falls within the scope of this Manual.

1:20 Independent control functions: the internal audit function, the compliance function, the risk management function and - for insurance companies - the actuarial function.

1:21 Directors: all members of the statutory governing body of a financial institution, both executive and non-executive directors, who together determine the overall policy and strategy of the institution (strategy function).

1:22 Executive directors: members of the statutory governing body who participate in the senior management of the institution (management function). In particular, the members of the statutory governing body who are also members of the management committee or to whom day-to-day management is assigned are executive directors.

1:23 Non-executive directors: members of the statutory governing body who exercise control over senior management (supervisory function).

1:24 Senior managers: persons who participate in the senior management of the institution[2], namely:

  1. where a management committee has been established, members of the management committee and any other persons at a hierarchical level immediately below that of the management committee, insofar as these persons can exercise a direct and decisive influence over the management of all or part of the institution's activities, including managers of branches abroad;
  2. where no such committee has been established, persons who can exercise a direct and decisive influence over the management of all or part of the institution's activities.

1:25 Diversity: the situation whereby the characteristics of the members of the statutory governing body, including their age, gender, geographical provenance[3] and educational and professional background, are different to an extent that allows a variety of views within the statutory governing body.

1:26 Small institution: institution that employs no more than 25 persons at the time of the suitability assessment.

[1] It is also noted that any references to “risks” in this Manual should include also money laundering and terrorist financing risks and environmental, social and governance risk factors.

[2] See the definition of "senior management" in the NBB Regulation of 9 November 2021 on external functions.

[3] Geographical provenance means the region where a person has gained a cultural, educational or professional background. This dimension should be taken into account in particular for institutions operating at international level.

1.5 Principle of proportionality

1:27 The proportionality principle aims to ensure that governance arrangements are consistently tailored to the nature of each institution's activities, size, risk profile and business model, taking into account the individual position for which the assessment is carried out, so that the objectives of the regulatory requirements are effectively achieved.

1:28 In the context of suitability assessments, the principle of proportionality may be taken into account for the assessment of the suitability criteria on the one hand and the organisational expectations with regard to suitability assessments on the other.

1.5.1 Variables in the assessment of suitability criteria

1:29 The proportionality principle should be applied when assessing three of the five suitability criteria, namely: (i) expertise (knowledge, experience and skills); (ii) time commitment and (iii) collective suitability. 

1:30 The proportionality principle should never be considered when assessing (i) professional integrity and (ii) independence of mind. In any case, all members of the statutory governing body and persons responsible for independent control functions should be of sufficiently good repute and demonstrate honesty and integrity. Furthermore, all members of the statutory governing body should be independent in mind, regardless of the institution's size and internal organisation and the nature, scope and complexity of its activities, and the duties and responsibilities of the specific position, including positions in committees of the statutory governing body.

1:31 As regards the three assessment criteria to which the proportionality principle does apply, this principle implies taking into account variables that allow for an assessment adapted to the situation and context in each specific case. This also means that a person who is deemed suitable for a specific position in a specific institution will not automatically be suitable for a similar position in another institution.

1:32 In any case, a distinction should be made based on the following two variables:

a) The characteristics of the institution concerned

1:33 With regard to the characteristics of the institution, the following should be taken into account in particular:

  1. the institution’s size in terms of balance sheet total, client assets held or managed, and/or the volume of transactions processed by the institution, the amount of technical provisions (for insurance companies) or the number of employees;
  2. the institution’s legal form, including whether it belongs to a group;
  3. whether the institution is listed or not;
  4. the type of activities and services exercised or provided by the institution;
  5. the institution's geographical location and the extent of its activities in each jurisdiction;
  6. the institution’s business model and strategy, the nature and complexity of its business activities, and its organisational structure;
  7. the institution’s risk strategy, risk appetite and actual risk profile, also taking into account the outcome of the annual capital adequacy assessment;
  8. the authorisation for institutions to use internal models to measure capital requirements, where relevant;
  9. the type of customers; and
  10. the nature and complexity of the products, contracts or instruments offered by the institution.

b) The (intended) position to be held by the person concerned

1:34 The institution first assesses the knowledge, experience and skills required for a particular position within the institution. The institution is expected to carry out this assessment meticulously, analysing as precisely as possible which responsibilities a particular position entails and which knowledge, experience and skills are required for it. To this end, the institution should identify the specific activities the position entails, without attaching importance to the formal job title. In certain cases, legislation imposes further requirements (e.g. for members of the audit committee or the member of the statutory governing body appointed as the senior officer responsible for combating money laundering and terrorist financing).

1.5.2 Adjustment factors for organisational expectations

1:35 The proportionality principle also applies with regard to the organisational requirements for suitability assessments. As mentioned in Guidelines EBA/GL/2021/06 and in the EIOPA Guidelines on System of Governance, small institutions and institutions considered “less significant” under the applicable supervisory law may apply simpler and less sophisticated policies, procedures and processes than institutions considered “significant”.

1:36 For more information on the organisational implications of applying the proportionality principle in suitability assessments, please refer to the sector-specific governance manuals. 

1.6 Weighting factors to be used in the suitability assessment process

1:37 The information available to support a suitability file is always used and weighted by the supervisor according to its relevance and materiality with respect to the current or future responsibilities of the person concerned. As weighting factors are used, the same importance does not need to be given to all elements of the dossier. Without prejudice to more specific weighing factors, the supervisor (NBB/ECB) always takes into account the following general weighting factors: 

1.6.1 The seriousness of the facts in light of the objectives of prudential supervision

1:38 The facts should be assessed in light of the public interest pursued by the supervisor as part of its supervisory task. To measure the impact of a fact, the concrete circumstances surrounding it should be taken into account, as well as the intrinsic seriousness of the facts, any proof of rehabilitation, etc.

1.6.2 Lapse of time since the facts

1:39 Passage of time may reduce the importance of the facts. Taking into account the lapse of time between the occurrence of the facts and the time when the suitability assessment is made, and depending on whether facts have occurred in the meantime that indicate a change in the suitability of the person concerned, less or little importance should in principle be given to facts that have since become obsolete. 

1:40 According to Article 20, § 2 of the Banking Law, professional disqualifications apply for a period of 20 years in case of imprisonment of more than 12 months and for a period of 10 years in case of other prison sentences or fines, as well as in case of a suspended sentence.

1:41 However, the information to be provided to the supervisor on criminal, administrative and civil proceedings should always include all proceedings relevant to the suitability assessment, even if they are more than 10 or 20 years old or if the person concerned has been rehabilitated. It is up to the supervisor to assess the relevance of the facts and information received in light of the purpose of its supervisory task and to decide whether or not to take these elements into account in its assessment. 

1.6.3 Attitude and/or motivation of the person concerned with regard to the facts

1:42 A proper attitude and a plausible, credible and substantiated motivation of the institution and the person concerned should be considered as pluses when weighing the information. From the person's attitude, motivation and explanations, it is possible to determine how he/she evaluates the facts, how he/she assesses the impact of his/her conduct on the suitability criteria and whether he/she has learned any lessons. If the information relates to facts that are not inherently linked to the person himself/herself (but, for example, to a company in which the person was previously employed), he/she should be able to properly explain his/her involvement in the facts concerned. 

1.6.4 Combination of available information

1:43 If several pieces of information about the same person are available, they should be weighted in the light of their combination with each other and/or the pattern of actions they reveal. 

1:44 A full overview of a person’s background and the available information helps to provide an accurate and less static picture of how the person concerned operates. Combining the information provides an insight into a person's pattern of actions and/or omissions and may lead to the conclusion that the person concerned is not (or is no longer) considered to be suitable or needs to improve his/her expertise in a specific area.