Assessment of suitability by the NBB

4.6.1 Moment of the assessment

The NBB shall assess the suitability of persons who wish to perform a function which falls within the scope of the Insurance Supervision Law prior to the actual taking up of the function. However, the NBB 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.

4.6.1.1 Before taking up a position

This assessment takes place either when the application for authorisation or registration of an undertaking is made or when an already authorised or registered undertaking has plans to appoint a person to a position which falls within the scope of the Insurance Supervision Law. In this latter case, it may be either a person who already works at the undertaking or a person from outside.

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

4.6.1.2 In the performance of duties

As part of the ongoing prudential supervision carried out by the NBB, an analysis is also carried out to ensure that the persons subject to the Insurance Supervision Law are fit and proper whenever there are new facts and/or changes in circumstances which provide reasonable grounds for a reassessment or on a periodic basis.

1) Reassessment on the basis of particular signals

The NBB must reassess fitness and propriety of the persons covered by the Insurance Supervision Law whenever there are new facts and/or changes in circumstances which provide reasonable grounds for a reassessment. It is incumbent upon the NBB to determine when there are reasonable grounds.

In practice, the NBB 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 undertaking’s results, concerns about the business model applied, concerns about the honest and controlled management of the undertaking, the extension of the undertaking’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, 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 will first of all approach the statutory governing body of the undertaking. 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 undertaking 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 NBB carries out a reassessment, it will essentially deal with the actions and operation of the person in question in practice. For this purpose, the NBB 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 NBB 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 undertaking 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 undertaking culture have provided grounds for a reassessment, it is possible that several members of the statutory governing body of the undertaking may be involved. If, on the other hand, the grounds for the assessment are concerns about specific activities in which the undertaking 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.

It has already been mentioned above that the arrival of a new director does not automatically lead to the reassessment of members who already sit on the undertaking’s board of directors. 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 NBB may also reassess the individual and collective suitability of the members of the managing bodies and the individual suitability of the responsible persons of independent control functions in the absence of specific signals in accordance with its general risk-based approach. In practice, such reassessment can take various forms: periodic checks at a frequency to be determined, reassessment during an inspection (governance or other), reassessment carried out as part of a horizontal thematic analysis, etc.

4.6.2 Assessment procedure

4.6.2.1 Before taking up a position

In accordance with the Insurance Supervision Law, undertakings must inform the NBB in advance of any proposed appointment, reappointment, or dismissal of the persons who fall within the scope of the Law. 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.

The NBB aims to provide its approval of the proposed appointment within a reasonable period of time, preferably and in principle within one month. However, given the fact that suitability assessments can, depending on the case, lead to additional verifications (e.g. conducting 1 or even several interviews, consulting other [foreign] supervisors, consulting specified references, requesting additional information from judicial or other authorities, etc.), which in turn involves additional analytical work for the supervisor, this may lead the specific examination of the file to also require more time. In such cases, the NBB applies the guideline that a decision must be communicated no later than within 4 months.

These indicative time frames start from the moment when the duly completed forms are sent to the NBB; they are suspended when the NBB requires additional information from the undertaking until the information is provided. Undertakings 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 NBB has made a ruling. The undertaking may contact the NBB through the usual channels shortly after sending the duly completed forms in order to find out whether or not the NBB 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 falls within the scope of the Law, the NBB first consults the FSMA. The FSMA sends any relevant factual information to the NBB within one week from receipt of the request for an opinion.

4.6.2.2 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 has an ongoing competence to carry out both a suitability reassessment of individual and collective skills.

Thus the NBB may decide to reassess the suitability of the managers concerned following findings or analyses made in the course of its supervision of a particular undertaking. 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.[1]

As has already been pointed out above, 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 to make the final appraisal.

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

When the NBB 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 first of all informs the undertaking 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 undertaking; in extreme cases, it may even order the undertaking to replace the person.

Depending on the specific circumstances, an undertaking'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] See inter alia the explanatory memorandum to the Law of 5 December 2017 containing various financial provisions, Parliamentary Documents, 2017-2018, Doc. 54 - 2682/001, p. 24.

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

4.6.3.1 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 undertaking 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 undertaking, including the assessment of the collective composition of the managing body concerned (see PartB of the suitability form and transmission of the minutes of the board of directors on the appointment concerned);
  • any information and background which the NBB, as a prudential supervisory authority, may have;
  • the undertaking’s suitability, the function profile which the undertaking has drawn up for the position, and the board of directors’ selection decision the minutes of which must be annexed to the suitability form;
  • the opinions of the FSMA and/or other supervisory authorities;
  • any information obtained from the judicial authorities;
  • where applicable, the periodic reassessment of the person carried out by the undertaking (and recorded in writing), on the basis of the applicable function profile, including any considerations which led to this reassessment;
  • any other information which the undertaking may have and which may be important for the purposes of assessing a person’s fitness and propriety;
  • any public information.

The NBB shall have the power to require any information that it considers necessary for the purpose of assessing the suitability of a person[2]. It is appropriate for undertakings to report important changes to their suitability / fit & proper policies to the NBB by default.

4.6.3.2 Deliberate withholding or incorrect transmission of information

The NBB expects the undertaking 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 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 fitness and propriety 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 considers any failure to send relevant, important information as a supervisory antecedent. The NBB 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.

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

4.6.4 Interview technique

For the purposes of an assessment of suitability, the NBB 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 will thus apply a risk-based approach and will take account of the undertaking’s nature, size and risk profile, the planned position and any other details which might raise questions about the information supplied by both the undertaking 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 significant undertaking. 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 in a significant undertaking, at least one member of the panel must have sufficient seniority or hierarchical level. In all other cases, the NBB shall decide on the exact composition of the interview panel on an ad hoc basis.During this interview, the supervisory authority will check whether the picture which the undertaking has given regarding the person’s fitness and propriety 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 undertaking 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 undertaking’s expectations. Where applicable, the NBB will draw the undertaking’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 undertaking concerned being present, although the NBB 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 will send this assessment of the interview in writing both to the chairman of the undertaking’s statutory governing body and to the interested party.

When a person leaves a position, it can be especially useful for the NBB 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 undertaking in general.

4.6.5 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 undertaking of the result of the assessment and, where applicable, any underlying conclusions. In the communication which it sends to the undertaking, the NBB 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.

Pursuant to the Insurance Supervision Law, the NBB decides whether to approve the proposal for appointment of the person concerned. The NBB may also decide that a positive decision is accompanied by recommendations, conditions or obligations. 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 4.6.1.2). Where concerns cannot be adequately addressed by means of these tools, a negative decision will need to be taken.

If the intended decision could adversely affect the rights of the appointees or the supervised entity, some fundamental principles and rights have to be observed:

  • The NBB shall base its decision only on objections on which the persons who are the subject of the proceedings are able to comment;
  • The NBB shall take into account all relevant circumstances and may hear witnesses and experts if it deems it necessary and take evidence;
  • The appointee has the right to be heard.

4.6.5.1 Positive decision with recommendation

Where all the fit and proper requirements have been met, but an issue has been identified and needs to be addressed, the NBB may include recommendations or set out expectations in the fit and proper decision itself. The use of such non-binding instruments is also meant to encourage best practices in the undertakings and point to desirable improvements.

4.6.5.2 Positive decision with condition

The NBB may also impose conditions. A condition is a requirement imposed on the supervised undertaking (while it may also have direct implications on the appointee) in place of what would otherwise be a negative decision.

The NBB shall only impose a condition where this is necessary to ensure that the appointee satisfies the applicable fit and proper assessment criteria. Imposing a condition in such cases will be a more proportionate and less intrusive measure.

The NBB may impose conditions only if:

  1. the NBB could adopt a negative decision but the shortcoming is easily remediable;
  2. the condition is well-defined and can be fulfilled in a well-defined and relatively short time frame;
  3. the content of the condition can be grounded on the basis of the assessment criteria as established in the Insurance Supervision Law and specified in this chapter.

The most common conditions include:

  • an undertaking to follow specified training;
  • divestiture of an external directorship or other function;
  • for responsible persons of independent control functions (who are at a lower level than the management committee), probationary period at the end of which the NBB may decide whether or not to validate its initial positive decision. This means that, in this case, the insurance undertaking will have to appoint the person under a suspensive condition or appoint the person provisionally so that it can dismiss the person concerned from the post in the case that the NBB’s assessment concludes that the person does not meet the suitability requirements for that post.

Where a conditional decision is issued, the undertaking must report to the NBB, in a timely manner, on the fulfilment of the condition.

Unlike non-compliance with an obligation or recommendation, non-compliance with a condition will automatically affect the fitness and propriety of the appointee, as failure to comply with a condition means that the appointee does not satisfy the applicable fit and proper assessment criteria.

4.6.5.3 Positive decision with obligation

The NBB decision can also include an obligation to provide specific types of information for the purposes of the ongoing fit and proper assessment or to take a specific action relating to fitness and propriety, affecting not the appointee but the whole supervised undertaking. Unlike a condition, non-compliance with an obligation will not automatically affect the fitness and propriety of the appointee.

The most common obligations include:

  • reporting on pending legal proceedings;
  • improvements required in written policies on conflicts of interest;
  • improvements required in terms of collective suitability.

4.6.5.4 Negative decision and appeal

Where the conclusion of the suitability assessment carried out by the NBB is that the expertise and professional integrity of the person being assessed has not been sufficiently demonstrated and that it is not possible to remedy the deficiencies, the NBB will oppose the appointment or not approve the appointment of that person. The decision shall be notified to the undertaking concerned.

Due grounds for any negative assessment by the NBB relating to a person’s fitness and propriety will always be given. In addition, the person concerned as well as the undertaking may contact the NBB for feedback. An appeal before the Council of State is also possible. 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 NBB may ‑ in the context of the institution's responsibility for assessing suitability (see point 4.3.1) 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.