10 Conflict of interest policy at institutional level

The management body should be responsible for establishing, approving and overseeing the implementation and maintenance of effective policies to identify, assess, manage and mitigate or prevent actual and potential conflicts of interest at institutional level, e.g. as a result of the various activities and roles of the institution, of different institutions within the scope of prudential consolidation or of different business lines or units within an institution, or with regard to external stakeholders.

Institutions should take, within their organisational and administrative arrangements, adequate measures to prevent conflicts of interest from adversely affecting the interests of their clients.

Institutions ’ measures to manage or, where appropriate, mitigate conflicts of interest should be documented and include, inter alia:

• a. an appropriate segregation of duties, e.g. entrusting conflicting activities within the processing of transactions or when providing services to different persons, or entrusting supervisory and reporting responsibilities for conflicting activities to different persons;
• b. establishing information barriers, e.g. through the physical separation of certain business lines or units.

In accordance with Article 88(1) of Directive 2013/36/EU, the simultaneous exercise within the same institution of the functions of chair of the management body in its supervisory function and CEO is prohibited. Where a CEO simultaneously holds a position as a member of the management body in its supervisory function (including chair) in different institutions within the same group, institutions should have measures in place to assess any potential conflicts of interest and, where identified, apply and document appropriate mitigation measures.

Without prejudice to national law, institutions should ensure that where a former CEO becomes chairperson within the same entity within two years after their executive mandate has ended, any potential conflicts of interest are appropriately identified, managed and mitigated as appropriate.

Where such a transition takes place without a cooling-off period of two years, institutions should put in place appropriate measures to address potential conflicts of interest, in particular where the individual would oversee, as a chairperson, decisions or actions taken during their former executive role. Such measures may include, but are not limited to, one or more of the following illustrative actions, without prejudice to national law:

• a. The chair who previously was a CEO will not chair the management body’s discussion when an item is being discussed which is identified as a conflict of interest.
• b. If deemed necessary, the chair who previously held the CEO role may be requested by the other members of the management body in its supervisory function to abstain from voting for such items where a conflict of interest has been identified.
• c. In cases when the discussion or decision refers to the evaluation of their former performance as CEO, or refers to remuneration resolutions for their previous function, the chair cannot participate in the discussion, or take part in the vote.