1 Role and responsibilities of the management body

In accordance with Article 88(1) of Directive 2013/36/EU, the management body must have ultimate and overall responsibility for the institution and defines, oversees and is accountable for the implementation of the governance arrangements within the institution that ensure effective and prudent management of the institution.

Without prejudice to the overall responsibility of the management body, the duties and responsibilities of the management body should be clearly defined, distinguishing between the duties of the management (executive) function and the supervisory (non-executive) function. The responsibilities and duties should be described in a written document and duly approved by the management body as specified under paragraphs 71 and 75. Institutions should also draw up, maintain and update individual statements setting out the roles and duties of the members of the management body in its management function. All members of the management body should be fully aware of the structure and responsibilities of the management body, and of the division of tasks between different functions of the management body and its committees.

The management body in its supervisory function and in its management function should interact effectively. Both functions should provide each other with sufficient information to allow them to perform their respective roles. In order to have appropriate checks and balances in place, the decision-making within the management body should not be dominated by a single member or a small subset of its members.

The management body ’s responsibilities should include setting, approving and overseeing the implementation of:

• a. the overall business strategy and the key policies of the institution within the applicable legal and regulatory framework, taking into account the institution ’ s long-term financial interests and solvency;
• b. the overall risk strategy, the institution ’s risk appetite and its risk management framework and measures to ensure that the management body devotes sufficient time to risk and risk management issues;
• c. an adequate and effective internal governance and internal control framework, as defined in Title V, that:

• d. the amounts, types and distribution of both internal capital and regulatory capital to adequately cover the risks of the institution;
• e. targets for the liquidity management of the institution;
• f. a gender-neutral remuneration policy that is in line with the remuneration principles set out in Articles 92 to 95 of Directive 2013/36/EU and the EBA guidelines on sound remuneration policies under Directive 2013/36/EU, and promotes sound risk management taking into account the institution’s risk appetite regarding ESG risks ;
• g. arrangements aimed at ensuring that the individual and collective suitability assessments of the management body are carried out effectively, that the composition and succession planning of the management body are appropriate, and that the management body performs its functions effectively¹⁷ ;
• h. a selection and suitability assessment process for key function holders¹⁸ ;
• i. arrangements aimed at ensuring the internal functioning of each committee of the management body, when established, detailing the:

• j. a risk culture in line with Section 8 of these guidelines, which addresses the institution ’s risk awareness and risk-taking behaviour;
• k. a corporate culture and values in line with Section 9, which foster responsible and ethical behaviour, including a code of conduct or similar instrument, diversity and inclusion;
• l. a conflict-of-interest policy at institutional level in line with Section 10 and for staff in line with Section 11;
• m. arrangements aimed at ensuring the integrity of the accounting and financial reporting systems, including financial and operational controls and compliance with the law and relevant standards.

¹⁷ See also the joint ESMA and EBA guidelines on the assessment of the suitability of members of the management body and key function holders.

¹⁸ See also joint ESMA and EBA guidelines on the assessment of the suitability of members of the management body and key function holders.

When setting, approving and overseeing the implementation of the aspects listed in paragraph 23, the management body should aim at ensuring a business model, governance arrangements, including a risk management framework, that take into account all risks. When taking into account all risks institutions are exposed to, institutions should take into account all relevant risk factors, including financial and non-financial risks in the short, medium and long term.

The management body must oversee the process of disclosure and communications with external stakeholders and competent authorities.

All members of the management body should be informed about the overall activity, financial and risk situation of the institution, taking into account the economic environment, and about decisions taken that have a major impact on the institution ’s business.

The management body should monitor, periodically review and address any weaknesses identified regarding the implementation of processes, strategies and policies related to the responsibilities listed in paragraphs 23 and 24. The internal governance framework and its implementation should be reviewed and updated on a periodic basis, taking into account the proportionality principle, as further specified in Title I. A deeper review should be carried out where material changes affect the institution.